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Blackstone, the US-based private equity fund, is set to acquire a controlling stake in two South-based hospital chains – CARE Hospitals and KIMS – creating India’s fourth largest hospital platform in the country for over $1 billion or over Rs 8,300 crore.

In a multi-phased transaction, Blackstone will be acquiring a 73% stake in Quality Care India Limited (QCIL), the holding company of CARE hospitals for a valuation of around Rs 6,640 crore from Evercare, which is part of the TPG RISE Funds platform. TPG will continue to hold around 25% stake in QCIL.

Simultaneously, Blackstone and TPG through CARE Hospitals are planning to acquire around 80% stake in Kerala-based hospital chain KIMS Health, with 61% purchased from homegrown PE fund True North which has exited. Blackstone is likely to invest around Rs 2,500 crore in KIMS with TPG investing a little over Rs 800 crore.

Once these transactions are completed, the combined healthcare platform which has an enterprise value of around Rs 11,000 crore will have more than 4,000 beds with a presence in 23 facilities across 11 cities in India making it one of the largest hospital platforms in the country.

This will be Blackstone's first investment in India's healthcare services sector creating one of India's largest hospital platforms in the country. The aim, as per the company, is to focus on the under-penetrated, emerging cities with potential for growth.

While the valuations remain undisclosed, Indian hospitals are likely to see the highest-ever investments this year. Investments in the hospital space especially from private equities have risen close to six times in the past six years with investments crossing the billion-dollar mark for the past two years. This year the figure is around $4 billion and counting.

Rising investments in Indian healthcare

Investors are bullish on factors such as increased patient awareness post-COVID-19 and have tapped into multi-speciality, regional, and super-speciality play. For example, Ontario Teachers bought out Everstone Capital’s stake in Maharashtra-focused multispeciality play Sahyadri hospitals to Temasek picking up a majority stake in Manipal Hospitals for ₹10,400 crore and IIFL PE buying a minority stake in regional play south-based Kauvery Hospitals.

In the single speciality healthcare space deals have ranged from TPG and Temasek doubling down their investment in eye care chain Dr Agarwals, Investcorp pumping in ₹545 crore in Clove Dental to Barings PE buying a majority stake in infertility chain Indira IVF.

The latest deals in the hospital space have been Piramal and Bain-backed IndiaRF investing in Ivy Health, Manipal hospitals buying an 84% stake in Kolkata-based AMRI for ₹2,400 crore and TPG-backed Asia Healthcare Holdings AHH buying nephrology and urology chain Asian Institute of Nephrology and Urology for ₹600 crore.

Future outlook

Investors are backing the pick-up in the lack of infrastructure to service the population that is looking for good quality affordable healthcare. Currently, India only has just over 0.5 beds to service 1,000 people compared to 4.3 in China and 2.8 in North America. PWC Estimates 12-14% annual growth in the private healthcare market which is worth around $48 billion.

Going forward investors expect growth to be fuelled by factors such as health insurance penetration rising which is currently still low at 0.4% to increasing focus on preventive care and expansion in smaller cities and towns.