This year has truly been transformative in the journey of Max India as we embarkedupon a corporate restructuring exercise of your company in our two significant businessesnamely Max Healthcare (MHC) and Max Bupa. The key objective behind this restructuring hasbeen to reinvigorate the Max India growth story by seeking new horizons and seeding newbusinesses with fresh growth potential.
Referring to MHC first the regulatory landscape has become extremely challenging andinevitably led to shrinking margins and profitability. Further with advances in medicineand science the way forward requires huge infusion of capital for updating technology andequipment thereby putting pressure on capital allocation. Decreasing length of stay inhospitals has also led to stagnating revenues per bed per night adding to profitabilitychallenges.
To counterbalance and mitigate the impact of the above trends significant capitalinfusion will be required for both organic and inorganic growth. Hence it was prudent toinduct a leading private equity firm such as KKR into the fold which apart from capitalwill bring scale through their existing hospital platform of Radiant Life Care.
The transaction when completed will create a listed entity that will become one ofthe top three hospital chains in India attractively positioned in two large healthcaremarkets with well-recognised local brands and a vintage mix of hospitals. In addition itwill lead to significant cost benefits as MHC and Radiant possess complementary set ofcapabilities in running healthcare establishments while KKR brings its extensiveexperience and expertise in healthcare investments.
Coming to Max Bupa our Health Insurance business we announced the divesture of ourmajority stake in Max Bupa to the private equity firm True North as Max Bupa alsorequired significant capital infusion in the immediate future to break-even and sustainits rapid growth in a highly competitive health insurance market. True North has deepknowledge and expertise on Indian markets having invested in more than 40 businesses overthe past 19 years through six funds with a corpus of over US$ 2.8 billion across financialservices and healthcare. Max Bupa's divesture will provide a cash inflow of over Rs. 500crore to Max India in addition to freeing up the future capital commitment for thebusiness.
As a result of the two above mentioned transactions the current shareholders of MaxIndia Limited will be entitled to corresponding shares in Max Healthcare-Radiant MergedEntity once it becomes listed. Max India will thereafter remain the parent company ofAntara Senior Living and Max Skill First. The plan thus far is to deploy funds from MaxBupa divesture for growing Max India's existing businesses as well as for seeding newinitiatives which will have adjacencies to the Group's focus areas of life insurance realestate hospitality and senior living. In addition we also plan to offer an exitopportunity through a capital reduction process to those shareholders who may not be keenabout Max India's investment in such new growth businesses. This will be subject torequisite approvals.
Our other two businesses Antara and Max SkillFirst have continued to perform wellduring the year and our growth focus for these businesses will continue in the future.
Antara has gained valuable institutional learning during the process ofoperationalising its first community in Dehradun which as per our belief is India's bestsenior living commune. Antara is now well positioned not just to start additional seniorliving communities in Delhi-NCR and North India but also to experiment with innovativeservice formats to cater to India's seniors; a segment which will see rapid growth in ourotherwise young country.
Max SkillFirst has identified innovative opportunities through its partnership withCohen Brown an international leader whose courseware and tools have been utilised in morethan 50 countries and translated into 15 languages. The company will also initiate worktowards tech-led skilling in the customer-facing sector.
Since the time we went public our choice of businesses and sharp capital managementhave resulted in a 23% IRR for Max India investors. As we progress with the beginning of anew era for Max India we look forward to your unwavering support through this phase oftransformation which will provide a fresh impetus to growth and shareholder returns. Weare confident that by the time the above restructuring is complete it will be anappropriate time to share details about the new business plan that will power the growthin the next decade for Max India.
We thank each and every one of you for your continued belief in the Company and itsvision. We are grateful to all our employees across the Group our business partnersinvestors as well as the government and its various agencies with whom we engage activelyfor their support.
|With Best Wishes || |
|Analjit Singh ||Mohit Talwar |
|Founder & Chairman ||Managing Director |