Deal focus: Creador writes Indonesia health prescription

By the time Creador first encountered Medikaloka Hermina in 2013, the hospital chain was already an institution in Indonesia. From its start with a single maternal and childcare facility in Jakarta, the company had grown to 25 hospitals nationwide with 2,600 beds, providing primary and secondary care.

But management was not inclined to rest on their laurels. They believed the chain had more room to grow, and over their four-year relationship Creador came to agree with them.

“We found that their aspirations were really aligned: they believed their business could grow sustainably and in a healthy way, with good governance,” says Cyril Noerhadi, a senior managing director at Creador. “That core philosophy is very important for us, because we need to have an alignment of mindset in terms of what they think of their business could be five or ten years down the road.”

Now Creador has placed a IDR600 billion ($45 million) vote of confidence in Hermina. The firm plans to continue supporting Hermina as it grows its network to 40 hospitals by 2020.

Indonesia’s healthcare sector is a relatively new space for Creador, which normally makes consumer-focused investments in growth markets and had done relatively few healthcare deals. But it believed a chonic space shortfall – the country has 12 hospital beds per 10,000 people, while the global average is 30 per 10,000 – along with the government’s new universal healthcare regulations would drive demand. With Hermina’s undeniable competence and focus on the country’s growing middle class, the potential for expansion was clear.

“If you look at Indonesia’s healthcare industry over the last five years, it’s grown at double the rate of the economy overall, which fulfilled our criteria of growth,” says Noerhadi. “And hospitals are definitely needed by consumers. We will all need to be hospitalized at some point.”

Hermina’s expansion plans place a strong focus on building good will on a local level. Before entering a new area the chain pursues partnerships with local doctors in order to build understanding of the population and its healthcare needs. If it decides to build a new hospital the local partners form the core management, gaining a modern healthcare facility for their previously underserved patients in the process.

As a minority shareholder Creador plans to support to the company as it grows, while leaving purely medical matters to the existing management. The firm believes it has more to offer by providing working capital and structural improvements.

“Of course the doctors are professionals; it’s really their business,” says Noerhadi. “Our priority is organization – human resources, human capital, how they transform their organization from where they were to where they are going to be, becoming more institutionalized and consistent across 25 hospitals, and growing to 30, 35 and more.”

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• Topics
• Southeast Asia
• Healthcare
• Expansion
• Indonesia
• Creador
• Growth capital