CDC and Abraaj Group invest $17.5M in Rainbow Hospitals

Hyderabad-based Rainbow Hospitals, which primarily focuses on paediatric and maternal care, has raised $17.5 million (Rs 107.3 crore) from the UK-based development financial institution CDC Group Plc and Dubai-based private equity investor Abraaj Group for the sale of an undisclosed stake.

Rainbow, which started as a 60-bed hospital in 1999, currently runs six hospitals in the country. Four of these hospitals are based in Hyderabad while the other two are in Vijayawada and Bangalore. 

The company plans to expand its number of beds from the current 450 to 1,000 by 2017. It will also look at expanding to Chennai, Pune, Visakhapatnam and Kurnool, among other cities.

“The patient investment approach taken by CDC and Abraaj gives us the space to focus on longer-term business quality and performance essential in multi-specialty paediatric care,” said Ramesh Kancharla, chairman and managing director of Rainbow Hospitals.

The hospital chain will also quadruple its workforce from the current 1,000 as it plans to increase its portfolio.

Rainbow Hospitals is the first direct investment in India by the CDC Group, which is a wholly owned development finance institution of the UK government’s Department for International Development.

CDC, which focused on fund-to-fund investment across Asia and Africa, changed its strategy to focus only on South Asia and sub-Saharan Africa. It also announced that it would make debt and direct investments in these geographies as opposed to a limited partner’s role in private equity/venture capital funds.

“This is an exciting first direct equity investment in India for CDC. We will work closely with the company to give it the long-term capital and support it needs to build the business,” said Srini Nagarajan, CDC’s regional director for South Asia.

For Abraaj Group, the other private equity player investing in Rainbow Hospitals, this is the 28th investment in India. The PE player manages $7.5 billion across 25 sector-specific and country-specific funds, and invests in growth markets such as the South-east Asia, West Asia, Africa, Latin America and Central Asia.

“There is a pressing requirement in the Indian healthcare sector for paediatric healthcare infrastructure due to the demographics of the country, which witness high fertility, maternal and infant mortality rates,” Balaji Srinivas, managing director of Abraaj Group, said in a statement.

Last year, Abraaj Group acquired Aureos Capital, a global private equity fund management group investing in small and medium-sized enterprises across Asia, Africa and Latin America.

Indian healthcare services space, which forms more than 60 per cent of the healthcare sector in the country, has seen a high number of PE investments this year. Some of the recent deals include DEG investing $12.21 million in Ivy Hospitals, IFC and Standard Chartered investing over $46 million in Fortis Healthcare and Multiples Alternate Asset Management investing $33.15 million in Vikram Hospitals, among others.

(Edited by Sanghamitra Mandal)

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