Gujarat-focussed Sterling Hospitals, backed by private equity major Actis, is investing Rs 100 crore to expand its capacity.

The Rs 150-crore hospital chain, which has a bed strength of 700, aims to touch 1,100 beds by March 2011. The group is expected to use internal accruals to fund the expansion. Following the expansion, the group will be able to add Rs 50 crore to its top line. In 2006, Actis invested $15.5 million to acquire 41% in Add Life Medical Institute Ltd, which owns Sterling Hospitals.

Currently, the group has four hospitals spread in Gujarat at Ahmedabad (300 beds), Baroda (110 beds), Rajkot (190 beds) and Mundra SEZ (100 beds). It has already invested Rs 50 crore to set up a hospital in Bhavnagar with a capacity of 100 beds which will be operational by October 2010. It is setting up another greenfield project in Rajkot with a 160-bed capacity and will set up another radiotherapy centre with 110 beds in Ahmedabad. Sterling will also lease a 90-bed hospital in Gandhidham.

Rajiv Sharma, chief executive officer, Sterling Addlife India Limited, told VCCircle, “Gujarat as an industrial state is growing rapidly. But there is still lack of better healthcare facilities and hence enough room for growth for a group like us. Instead of expanding to other states, at present, our focus is on the state of Gujarat.”

But, the group is open to inorganic opportunities in other states such as Maharashtra, Rajasthan and Madhya Pradesh. “Our inorganic growth depends on better opportunities. There are many patients from neighbouring states coming to our Gujarat hospitals. We plan to expand into those states couple of years later, he added.

The non-cyclical nature of the business coupled with changing demographics, greater awareness of wellness and higher incidence of lifestyle diseases has made this sector very attractive for private equity investments.  

According to VCCircle's earlier reports, Hyderabad-based hospital Krishna Institute of Medical Sciences (KIMS) was eyeing a second round of private equity funding in the range of Rs 100 crore to meet its expansion plans targeting a 1000-bed capacity. And, Spring Healthcare Pvt. Ltd., the Rs 300-crore wholly owned subsidiary of Sabre Capital, is close to investing about Rs 100 crore in two hospital groups, and likely to acquire stake in the range of 26-40% in each group.

In 2010, about eight PE/VC deals have taken place till date with an overall investment of $277 million. In contrast, 2009 witnessed about four deals with an overall investment of $176 million in healthcare service space with the highest investment being Goldman Sachs in Max India.

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