TPG-backed Care Hospitals has acquired a “significant majority” stake in Aurangabad-based United Ciigma Hospital in its third acquisition since April as part of a strategy to deepen its presence in fast-growing tier-2 markets, said top executives at the hospital chain.
Care Hospitals did not disclose the value of the transaction. A person close to the development pegged the deal size at ₹300-400 crore.
The executives cited above didn’t disclose the quantum of stake purchased by Care Hospitals in United Ciigma Hospital, which was entirely owned by Dr Unmesh Takalkar.
“United Ciigma Hospital’s founder Dr Takalkar will have an attractive enough stake for him to be motivated and continue to lead the hospital,” Jasdeep Singh, group chief executive at Care Hospitals said without elaborating.
Founded in 2013, United Ciigma Hospital has two centres with 300 beds and is known for gastroenterology and oncology specialities. “The idea of partnering with United Ciigma Hospital was to add more value to their offering by building a radiation therapy centre with which its oncology offerings will be complete,” said Singh.
He said Care Hospitals also plans to increase the number of beds at United Ciigma Hospital as it’s already running at full capacity, besides introducing new specialities there.
Care Hospitals has been on an acquisition spree this fiscal. In April, it bought Thumbay Hospital New Life in Malakpet, Hyderabad, and earlier this month, it bought Indore-based CHL Hospitals. With its latest acquisition, Care Hospital, founded in 1997 by cardiologists Dr B. Soma Raju and Dr N. Krishna Reddy and their associates in Hyderabad, has 17 centres across six states.
Vishal Bali, chairman, Care Hospitals, said the deal will grow its presence in Maharashtra where it will now have four centres. “Care’s overall strategy is consolidation in the tier-2 markets,” said Bali, who represents Evercare Health Fund owned by TPG.
He pointed that some of the smaller cities have been growing at a faster pace than metros, making them the right investment destinations from a business perspective.
He noted that there is a shortage of 40,000-50,000 beds in tier-2 markets, which will likely increase to 110,000-120,000 beds in the next five years. “So, given that these smaller cities are growing fast and the bed demand-supply gap is only going to grow, there is a big opportunity to enter into these markets,” said Bali, who is also executive chairman at TPG Growth’s single specialty healthcare platform Asia Healthcare Holdings.
The latest deal, however, does not mean that Care Hospitals will remain aggressive on acquisitions. Singh said its growth is not just limited to acquisitions but is also focussed on adding specialities in its hospitals. He also said that the company will focus on consolidation and integration of the acquired assets and will not look to add more centres this fiscal year “unless something lucrative comes up and is hard to resist”.
On fresh fundraising, Bali said the company has enough cash flow for future expansion and growth. He declined to comment on a Moneycontrol report earlier this year that TPG is planning to exit Care Hospitals.
Notably, TPG came in as investor in Care Hospitals after the US private equity firm signed a definitive pact to takeover the management of a healthcare fund, earlier managed by collapsed private equity firm Abraaj. Abraaj had previously agreed to buy a majority stake in Care Hospitals from another private equity firm Advent International in 2016.
Care Hospitals posted net sales of $211 million ( ₹1686 crore) and an earnings before interest, taxes, depreciation, and amortization (Ebitda) of $47 million ( ₹375 crore) in fiscal 2021-22, said Bali. This fiscal year, the company’s revenue is expected to grow in the 15-29% range, said Bali, breaking the single-digit growth it recorded in the previous three fiscal years. In FY21, the company clocked net sales of ₹1053 crore and Ebitda of ₹187 crore, according to VCCEdge, the data and intelligence platform of VCCircle. In FY20, Care Hospitals had posted net sales of ₹985 crore and Ebitda of ₹161 crore.
Mergers and acquisitions (M&As) in the hospital sector has been muted this year even as M&A deal value in the broader healthcare and pharmaceuticals space hit a record high of $4.32 billion in January-June, crossing the total deal value of $3.35 billion achieved in the whole of 2021. However, private equity and even strategic transactions in the hospital space is expected to remain robust in the coming months as hospital investors have lined up over $2 billion in exits to capitalize on abatement of the pandemic and a rebound in businesses of their portfolios, according to a VCCircle analysis in May.
