Private equity major Advent International is investing $105 million in CARE Hospitals in one of the largest private equity deals in the healthcare sector in the last five years. Advent will buy the shares from some of the existing investors and also inject additional capital into the business.

“This will help the business consolidate its position in the healthcare sector and capitalise on the growth opportunities. The business will continue to be run by the founders, following Advent’s investment,” Advent said in a statement.

Financial investors in CARE include Rakesh Jhunjhunwala, Matrix Laboratories’ founder Nimmagadda Prasad and UK-based emerging markets fund Ashmore. According to Advent India PE Advisors director Avnish Mehra, the firm is in talks to buy stakes from some of these investors, but declined to provide further details. The current management will continue to remain in control after the transaction.

According to data from VCCEdge, the financial research platform of VCCircle, the deal is the second largest investment by a PE firm in the Indian healthcare services space. The largest deal came when Apax Partners acquired stake in India's largest hospital chain Apollo Hospitals Enterprises for $118 million. The deal took place in 2007 and was done in two tranches.

CY2012 has witnessed a flurry of deal-making in the healthcare segment, with large investments in Tamil Nadu-headquartered eye care chain Vasan Healthcare and Kochi-based hospital chain DM Healthcare.

Expansion Plans

CARE is the largest multi-specialty hospital chain in South India, with focus on cardiac care, neurology, nephrology and general medicine. The hospital chain is ranked No. 5 in the country in terms of revenue and number of beds, and has a significant market position in the state of Andhra Pradesh. Besides Hyderabad, it has facilities in Vishakhapatnam, Raipur, Bhubaneswar, Nagpur, Surat and Pune.

Focus will continue on being a multi-specialty chain providing tertiary healthcare services. CARE will also expand into areas like gastronomy, orthopaedics, oncology and paediatrics.

Under this expansion plan, CARE will add 1,000 more beds to the current 1,590 across the cities where it already has a presence. While it will look at inorganic opportunities for growth across the country, its priority will be strengthening existing specialties and geographies.

According to Advent's Mehra, CARE will focus on becoming a stronger regional player rather than a quick pan-India rollout. "Rather than just being a pan-India group which does not bring much advantage, one should concentrate on a region. Another focus will be deepening the presence in the cities where you are already present, which will give you a lot more benefit."

CARE Hospitals was founded in 1997 by senior doctors and medical professionals. It has grown its capabilities and footprint organically, as well as with help from a number of important JV partners. These partners will be a part of the team that will continue to develop and grow the business.

“From a 100-bed single specialty facility focusing on cardiac care, CARE has become a multi-specialty hospital group comprising 1,590 beds across 11 hospitals. Our partnership with Advent provides us with the required resources and support to expand our presence, and reiterates our commitment in providing the best in healthcare to more people in India,” said Dr B. Soma Raju, founder of CARE Hospitals.

Advent worked on the investment in CARE Hospitals with its operating partner Dr Vikram Chhatwal, the ex-CEO of Reliance Health. Chhatwal will join the board as a nominee of Advent, along with other nominees from the investment team of the PE firm.

This deal marks Advent’s third investment in India. Other two investments include CAMS, a leading Indian provider of outsourced transaction processing for mutual funds & insurance, and Element-K, a corporate e-learning business acquired by SkillSoft, a North American portfolio company of Advent.

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