There have been several such deals in the past year and a half where strategic investors have acquired stressed assets.
In mid-December, the bankruptcy court in Mumbai approved Reliance Strategic Business Ventures Ltd’s Rs 202 crore bid to acquire Karkinos Healthcare Ltd under the Insolvency and Bankruptcy Code (IBC). Karkinos is building a 150-bed multispecialty cancer hospital in Imphal, Manipur. Reliance Industries Ltd owns Reliance Strategic Business Ventures.
In October, the National Company Law Appellate Tribunal closed the insolvency proceedings against Jaypee Healthcare Ltd after hospital chain Max Healthcare settled the dues of financial creditors by paying Rs 1,035.29 crore.
In August, Nishkala Healthcare announced the acquisition of Suash Health Care Foundation, which runs a 400-bed multi-speciality hospital in Navi Mumbai, for Rs 189 crore through an insolvency resolution process. Large healthcare chains such as Narayana Healthcare too had shown interest in Suash Health.“We are seeing an increasing interest from some of our clients to acquire functioning hospitals, diagnostic firms or other ancillary healthcare firms through the insolvency resolution process,” said Nishith Dhruva, managing partner of law firm MDP & Legal. “In a post-pandemic era, people have realised the importance of healthcare and further penetration of mediclaim and insurance have drawn investors’ interest in the sector.”In July, Chennai-based MGM Healthcare acquired 300-bed SevenHills Hospital in Visakhapatnam for over Rs 170 crore. Investors and strategic buyers are also closely observing the resolution process of SevenHills Healthcare Pvt Ltd’s 1,500-bed Mumbai hospital as well as that of Mumbai-based Four Care Hospital Pvt Ltd and Uttung Health & Wellness Pvt Ltd.
“The clean slate theory (the acquirer doesn’t have to worry about previous claims) and promising returns of the healthcare industry are attractions for the desired,” said Nipun Singhvi, managing partner of law firm NSA Legal. “Further, a large number of schemes launched by the government have also given impetus for buying in this sector.”
“We have M&A teams that closely look at each and every hospital asset, including those under IBC,” said an executive at a large South Indian hospital chain.
The executive, who didn’t want to be named, said the assets under IBC could be turned around through infusion of capital, branding and operational efficiencies of a large hospital chain.
On the flipside, not all assets under the IBC come cheap. Max has agreed to acquire Jaypee Healthcare at an enterprise valuation of Rs 1,660 crore which was 24 times of Ebitda.
“We stay away from auction processes. Auctions can lead to what is called the winner’s curse. You may end up paying a valuation which is not justified,” said Abhishek Kabra, chairman, Marengo Asia Healthcare and Partner, Samara Capital.
“Our model is very clear, we look for existing hospitals in good locations, doing good clinical work but not running to full potential,” he added. Marengo Asia is a hospital platform built on a string of acquisitions.
The healthcare sector, particularly hospitals, witnessed major expansion during the Covid-19 pandemic. However, after the situation eased, it became difficult for many standalone hospitals to sustain their businesses. Now, such hospitals are seeing interest from two sets of bidders — those already in the industry and seeking to expand and those who want to turn around such entities before they sell to someone else.
Last year, the bankruptcy court’s Chennai bench approved ASG Hospital’s Rs 520 crore revival plan for debt-laden Vasan Eye Care, a chain of eye care hospitals across the South. Vasan’s other suitors included MGM Healthcare, Maxivision Eye Hospital and Dr Agarwal’s Health Care.
