Max Healthcare, the 1,100-bed hospital subsidiary of Max India Group, is likely to enter into an equity-cum-strategic alliance with a private equity (PE) firm-backed global hospital major. The company is in discussions with two global PE funds that have significant stake in two separate large hospital chains and is likely to conclude the deal with one of them shortly.
As a precursor to the proposed transaction, Max India decided to buy out 16.37% stake in Max Healthcare from private equity major Warburg Pincus last week to consolidate its holding in Max Healthcare to 91%. Max India is the flagship company which owns majority stake in life and health insurance ventures, besides the hospital chain.
One of two potential suitors is an Asian PE fund having significant investment in a large hospital chain in South East Asia, while the other fund is US-based and owns significant stake in a leading hospital chain. Under the proposed transaction, the potential strategic investors will pick up a significant minority stake, which will be over 26% in Max Healthcare.
Besides Max India's 91% stake, Washington-based International Finance Corporation owns 3.1% stake in the healthcare company, while the remaining 6% is owned by overseas corporate bodies. The proposed transaction is likely to be at an equity value of around 1,500 crore for Max Healthcare, which is a significant premium to the exit price that Warburg Pincus charged from Max India. Warburg had sold 16.37% stake for 140 crore, which puts an equity value to Max Healthcare at 855 crore.
The acquisition of Warburg's stake was the first leg of bringing in a strategic partner in the hospital chain. Max Healthcare network of hospitals registered revenue of 685 crore in 2010-11, a growth of 28% over the previous year. The company's business turned profitable in the last quarter of FY11 with its earnings before interest, taxes, depreciation, and amortization, or Ebitda, more than doubling to 52 crore.
| Company Name | CMP |
|---|---|
| Max Financial | 992.00 |
| Delphi World Money | 198.00 |
| SBFC Finance | 86.00 |
| Anand Rathi Wealth | 3992.80 |
| Prudent Corporate | 1871.45 |
| View more.. | |
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