KKR-led investor consortium in talks to invest in Apollo Hospitals promoter’s private arm

The promoters of India’s largest healthcare firm by market cap Apollo Hospitals Enterprises are in talks with a consortium of investors led by private equity major KKR to raise funding in their private holding arm PCR Investments Ltd, according to chairman of the company Prathap C Reddy.

Speaking on the side lines of an event in Chennai, he said the promoters are not looking at diluting direct stake in their flagship company and would rope in the investors in PCR, as per a Business Standard report.

This follows a news report by The Economic Times which said the group is looking to raise around Rs 500-600 crore through a structured deal by a consortium led by KKR which also includes an unnamed sovereign wealth fund. It added that this money will be used by Apollo Hospitals to part fund its expansion worth Rs 2,400 crore over the next three years besides cutting debt.

However, if the funds are raised by PCR it would be the promoters who would get the money possibly to invest in their personal capacity, rather than Apollo Hospitals raising money for its own investment. The promoters have previously invested in telecom firm Aircel in their personal capacity.

KKR India chief Sanjay Nayar declined to comment on the development.

PCR owns around 17 per cent stake in Apollo Hospitals Enterprises and its holding is worth Rs 2,000 crore given the current market price of the listed firm. If the deal is struck at current valuations, the investors may potentially pick around 30 per cent of PCR Investments provided the investment amount is indeed Rs 600 crore.

Total promoters stake in Apollo Hospitals is around 34.6 per cent and any significant equity dilution in the listed company could weaken promoters hold in the blue chip firm. This could also be a reason why Reddys do not want to dilute direct holding in the flagship firm.

Prathap Reddy controlled Apollo Hospitals is one of the oldest and biggest hospital chains in the country. It would not be the first time it is partnering a PE firm. Earlier, Apax Partners had invested over $100 million in the listed company in 2007-08. It is in the process of exiting the investment and has churned out around 3x returns on its original investment.

It also counts Malaysian sovereign wealth fund Khazanah as an investor.

KKR has been active in striking structured deals in the past. Besides a few buyouts, it has been involved in it and also has set a debt investment arm for India. It has also struck deals in holding companies of Indian business groups. One such case was Coffee Day Resorts, the parent company of Café Coffee Day chain. That deal too involved KKR investing through a consortium.

(Edited by Joby Puthuparampil Johnson)

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