Deal focus: Patience pays off for True North

True North’s last foray into India’s health insurance space occurred in 2017 when it led a consortium to acquire Religare Health Insurance. It would have been the first private equity buyout of a health insurance firm in the country, but the buyers found they were still a bit too far ahead of their time.

“There were no guidelines from the insurance regulator about a PE firm taking control of a health insurance company. It wasn’t until nearly seven months after our signing that these regulations came out,” says Divya Sehgal, a partner at True North. “Unfortunately, that was too long, and we weren’t able to go through with the transaction.” 

No such obstacle blocked the firm in its return to the space with the acquisition of a 51% stake in Max Bupa Health Insurance for INR5.1 billion ($72 million). Now True North plans to use the company’s solid foundation to build it into one of India’s leading health insurance providers.

The groundwork for the acquisition of Max Bupa was prepared several years ago, when True North – then called India Value Fund Advisors – reached out to Analjit Singh, founder of Indian conglomerate Max Group. Singh was thinking about rebalancing Max Group’s portfolio, and eventually decided it was time to divest Max Bupa, the conglomerate’s joint venture with global insurance giant Bupa Group.

True North immediately put its name forward to acquire Max Group’s stake in the business. The company was appealing on a pure business level: it was already one of India’s largest health insurance providers, and growth still outpaced the industry average. In addition, Bupa could not simply buy the Max Group holding because insurance firms to be at least 51% Indian-owned.

“Brand, retail distribution, and the quality of the book are what we evaluated this platform on, and on these themes Max Bupa has perhaps the best pedigreed shareholders in the health insurance space today,” Sehgal says. “This is a platform that has been around for 10-12 years, it’s invested in each of these three factors, and we felt we could acquire it and take it to the next stage.”

The company will continue to use Bupa branding while the Max name is phased out over the next few years. True North plans to emphasize Max Bupa’s strengths to help it maintain leadership in a domestic insurance market that is underpenetrated yet expected to see rapid expansion in coming years as incidence of chronic diseases increases and customers become more familiar with the product.

“Health insurance is in a bit of a land grab phase right now. I expect that will settle down over a five or six-year period, and the growth rate of the industry will normalize, but while the tailwinds last this organization will continue its high growth rate,” says Sehgal. “One of the strengths of the platform is that it’s 97% retail. It doesn’t do that much group business, and we like that.”

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• Topics
• South Asia
• Financials
• Buyouts
• India
• True North
• insurance
• Financial Services