Blackstone, Manipal, Sheares, Max eye KIMS Health stake

Manipal Health Enterprises, Max Healthcare, Temasek-owned Sheares Healthcare, and global buyout funds Blackstone and CVC Capital are among half a dozen potential buyers in initial talks to acquire about 65-70% in KIMS Health Management, valuing Kerala’s leading hospital chain at about Rs 3,500-3,700 crore ($450 million), multiple people aware of the talks told ET.

The due diligence process is currently on after first-round bids, and binding bids for the chain are expected by next month, sources told ET. At present, domestic private equity investor True North holds 61.06% stake in KIMS Health, with the remaining 38.94% held by the promoters. True North will exit its investment, while the promoter family will likely dilute an additional 5-10% equity, said sources.

However, any decision by the promoter family on further stake dilution will depend on the final valuation.

ICICI Securities is advising True North for the exit.

Several of the suitors – Blackstone and Sheares - are also in fray to acquire Hyderabad-based Care Hospital Chain.

KIMS Health has four operational hospitals in Kerala – in Trivandrum, Kottayam, Kollam and Perinthalmanna - with a total capacity of 1,378 beds.

KHML was set up in 2002 by a group of professionals in Trivandrum, led by Dr MI Sahadulla, the founder chairman and managing director. It is a tertiary-care hospital, with 40 specialty departments. The company also operates three medical centres and a nursing college in Trivandrum.

Spokespersons with Manipal, Max Health and True North declined to comment, while mails sent to MI Sahadulla, Blackstone, Sheares and CVC remained unanswered.

In 2017, True North invested about $200 million in KIMS to acquire a 40% stake held by existing investors — Ascent Capital Advisors & OrbiMed Advisors. There was also primary capital infusion to fund growth plans.

KIMS Health's Trivandrum facility contributed 72% to its operating income and 82.8% to its operating profit in FY 2022. With addition of 225 beds in Trivandrum in FY 2022 and higher ARPOB (average revenue per occupied bed), the company’s revenue climbed 61% to Rs826.2 crore in FY22, from Rs513.3 crore in FY21, said a recent ICRA report.

The company has a revenue mix from diverse specialties. The top three— general medicine (23% of consolidated 9M FY22 revenue), orthopaedics (8%) and gynaecology (7%) – therapeutic areas account for 35-40% of the total. KHML’s sizeable presence across multiple specialties helps it to minimise concentration risk, ICRA said.

Blackstone and Sheares Healthcare are also emerged as top contenders for buying Care Hospitals, valuing the TPG Growth-owned hospital chain at Rs 8,000-8,200 crore ($1 billion), ET reported last month. Others in the race include Max Healthcare, CVC and Torrent Group. Sheares also owns a minority stake in Manipal Hospitals.

India’s healthcare industry has been expanding at a compounded annual growth rate (CAGR) of about 22% since 2016. At this rate, it is expected to reach $372 billion by the end of 2022, said a 2021 Niti Ayog report.

A 2020 Human Development Report showed that India ranked 155th in bed availability with five beds and 8.6 doctors per 10,000 people.

The hospital industry will require an investment of around $245 billion over the next 20 years, according to a recent PwC report. India needs to add 3.6 million beds, 3 million doctors and 6 million nurses over the next 20 years, it added.