Deal focus: True North keeps healthcare ball rolling

India’s healthcare sector has been very good to True North. The PE firm, previously known as India Value Fund Advisors, has stakes in several hospitals across the country as well as medical technology manufacturer Trivitron Healthcare.

But when presented with the opportunity to invest in hospital chain Kerala Institute of Medical Sciences (KIMS) several years ago, True North turned it down. It wasn’t that the company was unsuitable for investment – rather, the GP preferred not to invest in a potential competitor to its portfolio company Aster DM Healthcare, which like KIMS operated both in India’s Kerala state and in the Middle East.

True North kept KIMS in mind, however, and when the chance arose earlier this year to take out positions held by Ascent Capital and OrbiMed Advisors, the private equity firm was ready. The feared competition had not materialized, since the two chains operated in separate countries in the Middle East and different areas of Kerala, and with Aster DM’s upcoming IPO providing a full exit for the firm it was unlikely to be a concern in the future.

Now, having invested $200 million for a 40% stake in KIMS, True North is ready to put what it has learned from its previous hospital investments to good use.

“We have experience in managing a portfolio across the Middle East and India, and in the Middle East even managing across the different formats of clinics and hospitals, handling insurance and looking at greenfield and brownfield expansion,” says Satish Chander, a managing director at the firm. “I think we can bring a lot of that experience from working with Aster DM to bear.”

True North’s investment came from its fifth fund, which closed two years ago at $700 million. The investment was supplemented by LP capital from a dedicated co-investment vehicle established alongside the main fund to give investors a chance to participate in deals above the normal threshold.

This LP participation is seen as a vote of confidence for True North, which expects private equity to play an increasing role in the hospital space in both India and the Middle East. Rising incomes and standards of living in both regions are fueling demand for quality healthcare, and PE will be indispensable in providing the financial support and technical expertise to help hospitals meet that demand.

True North plans to let the company’s existing management, headed by founder and Chairman M.I. Sahadulla, lead the way on domestic and international expansion. This is the GP’s preferred approach to healthcare investments, limiting itself to an advisory role.

“Our investments in other sectors mostly focus on control transactions, but in healthcare we believe that the promoters should play a really large role in terms of holding the doctor team together and in terms of their entire clinic management,” says Chander. 

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• Topics
• South Asia
• Healthcare
• Expansion
• Trade sale
• India
• True North
• Growth capital
• Exit