Deal focus: Mandaya targets shifting healthcare demand

Indonesia’s economic boom is lifting millions up the financial ladder, but it’s also creating a major headache for local healthcare professionals. Prosperity brings changing habits, leading to diseases with which Indonesian doctors have little experience – and the universal healthcare law is expected to raise the burden on doctors considerably when it takes effect next year.

“There’s a large, rising middle class that’s coming on stream, and as with any increasingly affluent population you’re going to see a lot more lifestyle-related diseases such as cancer and cardiovascular disease,” says Chris Chia, a managing partner at Kendall Court. “We’re talking about a population where over 60% of the men still smoke, so we expect to see a rising need for good healthcare.”

With public hospitals already showing signs of strain, Indonesian policy makers have encouraged the private sector to fill the gap. Among the companies that have taken up the invitation is hotel developer Selaras Group and its subsidiary Mandaya Medical, in which Kendall Court recently invested $55 million. 

Mandaya was the brainchild of Dr. Benedictus Widaja, a UK-trained physician and son of Selaras co-founder and CEO Edhijanto Widaja Taufik. Widaja moved home a few years ago and saw the potential fallout of the developing demographic issues. He partnered with his father to launch Mandaya, a hospital platform focused on cancer, cardiovascular diseases and neuroscience.

Selaras had picked an opportune time to enter the healthcare space: soon after Mandaya’s launch, the government introduced a slew of regulatory reforms opening up several sectors of the economy, including healthcare, to foreign majority ownership. Kendall Court’s investment was structured to take advantage of this development. It invested via convertible preference shares that can either be converted to a majority stake in Mandaya or redeemed by the owners to take the GP out.

“We’re not at a stage where you could have a hospital that’s fully owned by foreigners,” says Chia. “Some of the regulatory obstacles have been lowered, but it’s still highly critical to have a local partner, because whether they own 30% or 51%, you can’t do it without their influence.”

Mandaya operates a single hospital in West Java, but the company plans to build three new facilities over the next five years for a total of up to 2,500 beds. The first of these is under construction in Jakarta. Kendall Court plans to keep backing these projects with an additional $100 million earmarked for deployment. It sees Selaras’ experience in hospitality as a crucial edge in an often-overlooked aspect of healthcare.

“They are experienced hotel operators, and hospitals are a combination of hospitality and healthcare,” Chia says. “Obviously doctors are important, but the experience of patients and their families, the supporting infrastructure, and the construction and renovation of the facility all come into play as well.”   

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• Topics
• Southeast Asia
• Healthcare
• Buyouts
• Indonesia
• Kendall Court Capital Partners