Apollo Hospitals Enterprise Ltd, the country's top hospital firm, has acquired Nova Specialty Hospitals, the short-stay surgical centres unit of Nova Medical Centers Pvt Ltd, for around Rs 145 crore ($24 million).
This completes a deal which got mired into a controversy after one of the co-founders of Nova Medical objected to the sale of the unit to Apollo Hospitals and had even made a counter offer.
VCCircle had first reported last week that the proposed deal with Apollo Hospitals was back on track.
Under the transaction, Apollo Health and Lifestyle Limited (AHLL), a wholly owned subsidiary of Apollo Hospitals, is buying Nova Specialty Hospitals in a deal pegged at Rs 135-145 crore, subject to final closure.
Nova Specialty Hospitals is a chain of 11 short-stay surgery centres spread across eight cities. It has 45 modular OTs, over 350 patient beds, with an average 20,000 sq ft of built-up space in each centre. These centres provide both in-patient and OPD services with 60 per cent of the procedures currently being done as day procedures.
It is expected to generate revenues of around Rs 125-135 crore for the year ending March 31, 2015.
As per the agreement Nova Specialty Hospital's existing centres will be rebranded as Apollo. This acquisition will help Apollo in its growth strategy of providing a larger footprint, including in some markets where the company has no presence currently.
Sangita Reddy, joint managing director of Apollo Hospital Enterprises, said, "AHLL is currently present in the secondary care segment through the day surgery & cradle formats. Given the immense potential and the need for quality healthcare delivery closer to the home, this acquisition will enable AHLL to significantly expand its' footprint and will catapult it into a leadership position in this segment of healthcare.”
“There is strong synergy between NSH format and the tertiary care hospitals and we intend to capture these synergies to the benefit of the patients we serve, and doctors we partner with. This acquisition will also mark the entry of Apollo in new markets such as Mumbai, Jaipur and Kanpur,” she added.
Apollo Hospitals will strengthen the service offerings in these centres by introducing Apollo's Preventive Health Checks and also establishing sugar clinics.
The company is aiming to create a business of Rs 500 crore in five years in the space of multi-specialty short stay/day surgery centres, according to Neeraj Garg, chief executive officer of AHLL.
AHLL was started in 2002 to bring medical care closer to the home of the patient, bridging the gap between tertiary care and the home. It has established a network of day-to-day healthcare facilities with close to 100 centres across India and the Middle East. It has also expanded its primary care offering with the launch of Apollo Sugar Clinics, a diabetes disease management clinic chain and will be launching a national diagnostic chain in the next few months.
It also operates a women & child vertical under Apollo Cradle in the field of obstetrics, gynaecology, infertility treatment, neonatal and paediatrics.
Suresh Soni, chairman of Nova Medical Centres said, "Nova Specialty Hospitals was as early mover in the concept of short stay surgeries in India. The Apollo Group is now in a position to accelerate NSH's growth given its position as the pre-eminent hospital group with a well-established brand."
Nova Medical strategy and genesis of the deal
Nova Medical Centers is the parent company of Nova Specialty Hospitals and Nova IVI Fertility. It currently operates 10 specialty surgery hospitals and nine fertility centres, with one polyclinic in Muscat, Oman. The unit in Oman is run in JV with local Omzest Group.
It was co-founded by Suresh Soni and shoulder surgeon Mahesh Reddy, along with the GTI Group, based on a “doctor-owned and doctor-managed” concept enabling doctors to have a sense of ownership and a long-term association with the company.
Nova Medical has been in losses and was looking to divest the surgical unit to both raise cash and focus on its bigger IVF business.
It had raised around $85 million across several rounds with Goldman Sachs leading a $54 million round, along with existing investor NEA, two years ago. This made it one of the most funded new generation healthcare services firms in the country.
Most recently it raised $10.5 million more from existing investors in July this year. Goldman and NEA own majority stake in Nova Medical.
Earlier, Mahesh Reddy had approached the CLB to stop Nova's majority shareholders from executing a deal to sell the surgical unit to Apollo Hospitals. Reddy had claimed that the firm had received higher bids including one from a consortium which included PE giant TPG and UAE's VPS Healthcare, which runs Burjeel Hospital in Abu Dhabi and Oman. However, the majority shareholders had decided to sell the unit to Apollo Hospitals.
TPG has apparently now backed out of the proposed deal post which Reddy partnered VPS to make a competing offer. VPS Healthcare was to hold 90 per cent stake whereas the remaining was to be held by Reddy. VPS was started by Shamsheer Vayalil Parambath, an Indian origin entrepreneur who is now based in the UAE.
Besides the valuation being offered by Apollo Hospitals, Reddy had said he was opposed to the deal as some doctors were not keen to go under Apollo. However, Reddy was re-evaluating the proposal and later decided to agree to the transaction.
"There were a few issues with the Apollo deal initially, however, we have settled all concerns amicably. I feel Apollo, with the presence that it has in India today, is best suited to take the concept of short-stay surgery to all parts of our country," said Mahesh Reddy, the co-founder and executive director of Nova Medical Centers Pvt Ltd.
(Edited by Joby Puthuparampil Johnson)