KKR picks up 54% stake in cancer hospital chain HCG for Rs 3,465 crore

PE firm to make open offer to buy additional 26% for Rs 1,600 cr

American private-equity giant KKR & Co will acquire up to a 54 per cent stake in hospital chain Healthcare Global Enterprises (HCG) from CVC Asia V for $400 million (approximately Rs 3,465 crore), according to a KKR statement.

 

KKR will purchase shares of HCG at Rs 445 apiece and make an open offer to the company’s shareholders to buy an additional 26 per cent, which will cost it an extra Rs 1,600 crore, depending on the shareholders’ response.

 

The open offer price will be in accordance with the relevant formula of the Securities and Exchange Board of India. 

   

HCG shares closed at Rs 499 on Friday.

 

The Karnataka cluster is HCG’s largest, followed by Gujarat and Maharashtra. The company has a presence in Africa.

 

B S Ajaikumar, founder of HCG, will be non-executive chairman.

 

Founded in 1989, HCG is one of India’s largest oncology hospital chains. It operates 25 medical care centres in 19 cities with 2,500 beds, nearly 100 operating theatres, and 40 linear accelerator machines.

 

This transaction marks KKR’s latest investment in India’s health care.

 

Past investment in the sector includes that in Baby Memorial Hospital, Healthium, Infinx, Max Healthcare, JB, and Gland Pharma.

 

Akshay Tanna, partner and head of India private equity, KKR, said: “As health care continues to be a thematic focus for KKR in India, our investment in HCG will support developing medical infrastructure and the delivery of critical oncology services.”

 

Ajaikumar said: “I want to thank CVC for its support through the years, helping the management to put HCG in the strong position it is in today. I am delighted to welcome KKR.” 

 

Siddharth Patel, managing partner, CVC, said: “We are proud to have supported HCG’s transformation at a critical juncture in time to build it into one of India’s leading health care organisations.”

 

Amit Soni, partner, CVC, said partnership with Ajaikumar and the management team was a testimony to the ability to combine clinical and professional acumen to increase the reach of cancer care in India.

 

In August 2022, in one of the biggest exits in health care, KKR had sold its stake in Max Healthcare for Rs 9,400 crore, realising a fivefold return on investment over four years.

 

Last year, KKR re-entered health care by buying a controlling stake in Kerala’s Baby Memorial Hospital (BMH). While the deal size was not disclosed, it is estimated to be around Rs 2,500 crore for a 70 per cent stake.

 

HCG works with more than 400 oncologists.

 

HCG posted revenues of Rs 558 crore in the quarter ended December 2024, with a profit after tax (PAT) of Rs 7 crore.

 

For the first nine months of FY25, revenue increased by 16 per cent to Rs 1,637 crore, with a 38 per cent year-on-year jump in PAT to Rs 37 crore. Average revenue per occupied bed in Q3 was Rs 44,284, reflecting a 3.5 per cent growth rate. The Kolkata and Nashik centres saw strong double-digit year-on-year growth of 40 per cent and 29 per cent, respectively.

 

The company is expanding in Bengaluru with two new state-of-the-art cancer care centres. However, despite overall expansion, 56 per cent of its revenue in the first half of FY25 was derived from Karnataka and Gujarat, leaving the company exposed to significant geographic concentration risks, as noted by Icra in a ratings rationale in December.

 

Ajaikumar had told Business Standard in an earlier interview several multi-specialty hospitals did not have exclusively designated cancer beds, and much of the treatment is provided through outpatient services. As a result, the capacity in the private sector could be as high as 8,000 beds, with HCG, the market leader, operating approximately 2,000 beds.

 

India is set to add over 4,500 cancer daycare beds in district hospitals over the next three years, bringing public sector capacity closer to that of the private sector. Union Finance Minister Nirmala Sitharaman has announced plans to establish day-care cancer centres in all district hospitals in three years, with 200 slated to open in 2025-26.

 

India is facing a critical need for expanded cancer treatment infrastructure with a crude incidence rate of 100.4 cases per 100,000 people. Approximately one in nine people in India will face a cancer diagnosis during their lifetime. The incidence of cancer is expected to increase by 12.8 per cent by 2025, compared to 2020. 

KKR’s India play 

> HCG transaction part of firm's focus on health care, digitisation of businesses, consumption upgrades, financial services, and export companies

  > KKR deployed over $13 bn across firms since 2006. More than $8.5 bn invested and committed in past 4 years

  2024 deals:

July: Kerala-based hospital chain Baby Memorial Hospital

May: Medical devices major Healthium; Tech-enabled health care revenue solutions provider Infinx