Abraaj to buy India's CARE Hospitals from Advent

The size of the deal was not disclosed but LiveMint reported it as being in the region of INR17 billion ($255 million) for a 72% stake. Temasek Holdings is said to have been competing for the asset as well.

Founded in 1997 by Dr. B. Soma Raju and a group of healthcare professionals, CARE has 1,600 beds across 16 hospitals in nine cities. To date, it has treated more than six million outpatients and over one million inpatients. The company has a strong reputation for tertiary care in areas such as cardiac care and neurosciences.

Advent bought its controlling stake in CARE in April 2012 for around $105 million following a competitive process. The company founders did not initially envisage selling control; rather, they were looking for new capital from a minority shareholder who would replace two existing backers. However, Advent concluded that a cleaner shareholder structure was required to realize the growth potential.

It took out three major investors - a high net worth individual, a family office, and Ashmore Investment Management - and then acquired shares from another 100 very small investors to clean up the shareholding structure.

"Although they had a clear vision in mind, they were not sure as to how to get there in terms of the detailed plan. We spent 2-3 months working with them on this. We explained we had the operational capabilities and we are willing to partner with them, but not in a minority context," Avnish Mehra, who was a director at Advent but has since left the firm, told AVCJ in 2014.

"The question was then should they sell control to a PE firm or a strategic player. We said they would create more value by partnering with us today and then selling to a strategic in 4-5 years' time."

Advent built stronger systems and a management team around the founders and also introduced an expansion plan that primarily focused on adding beds to the best existing hospitals. However, expansion did not take place for the sake of it - CARE had 11 hospitals when Advent invested - because healthcare was shifting to an outpatient setting. Rather, emphasis was placed on improving patient experience and broadening clinical coverage.

Further investment took Advent's total commitment to $120 million. During the first two years of the holding period, revenue rose from $80-90 million to around $120 million, while EBITDA margins reached the mid-teens, up from 9-10%.

Abraaj will work with CARE on taking the business into under-penetrated regions of India as well as launching in other markets in which Abraaj operates. There are also plans to scale up CARE's outreach program that provides education and training in rural areas.

"Led by dedicated founders and a strong management team, CARE has been a pioneer in providing quality healthcare to middle and low income patients in India, and has the potential for further expansion domestically and internationally," Sev Vettivetpillai, partner and global head of Abraaj's thematic funds business, said in a statement.

The transaction is expected to close in the first quarter of 2016.

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• Topics
• Buyouts
• Trade sale
• Healthcare
• South Asia
• The Abraaj Group
• India
• Trade sale
• Advent International
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