South African Firm To Buy 26% In Max Healthcare For Rs 516Cr

By Madhav A Chanchani

  • 12 Oct 2011

South Africa’s Life Healthcare Group Holdings is acquiring 26 per cent stake in the healthcare arm of Analjit Singh’s Max India, valuing the unit at Rs 1984 crore ($405 million). Life Healthcare Group (Proprietary) Ltd has entered into a non-binding term sheet to invest Rs 516.5 crore in Max Healthcare Institute Ltd for the stake, according to a statement to the exchange.

The investment comes at over two times the Rs 855 crore valuation at which Max India has bought the stake of the private equity investor Warburg Pincus in the unit in June this year, and a little less than 2x pre-money valuation in the current transaction. Max India had picked up the 16.37 per cent stake held by Warburg Pincus in Max Healthcare for Rs 140 crore.

The stake of Max India, which also has interests in insurance, will go down from the current 91 per cent to somewhere around 70 per cent, given the deal with Life Healthcare in a fresh infusion. International Finance Corp is the other investor in Max Healthcare. Max India had also raised its holding in the subsidiary by around 5.4 per cent through a fresh issue of shares last year and held around 75.5 per cent stake before it bought the shares of Warburg Pincus.


Max India’s board has approved the deal although it is subject to completion of due diligence and necessary regulatory approvals to Life Healthcare in South Africa.

Life Healthcare Group has a market capitalisation of over $2 billion and reported group revenues of over Rs 5,500 crore or $1.1 billion in 2010. Its network includes 63 hospitals with more than 8,000 beds and 27 per cent market share in the South African healthcare industry, the Max India filing stated.

Life Healthcare also operates 12 long-term care facilities through a public-private partnership with the South African government besides a college that provides professional training in nursing, health sciences and management & leadership.


Max Healthcare reported 28 per cent increase in revenues at Rs 685 crore across the network of hospitals with EBITDA growing 121 per cent to Rs 51.9 crore in FY11, turning profitable in the last quarter of the fiscal.

The company’s audited financial numbers show a total income of Rs 453 with net profit of Rs 57 lakh for the year ended March 31, 2011. Going by these numbers, the current transaction values the firm (pre-money) at 3.2 times its last year’s revenues.

In comparison, Apax Partners-backed Apollo Hospitals is valued at 2.5 times its last annual revenues and Fortis Healthcare commands a market cap of around 3.3x its last annual income.


Max Healthcare’s average operational beds increased to 923 in the first quarter of FY12 from 910 in Q1FY11. Revenue across the network of hospitals for Q1FY12 grew 19 per cent year on year to Rs 190 crore while EBITDA shot up 133 per cent to Rs 11 crore during the same period.

Besides Max Healthcare, other group firms include life insurance JV Max New York Life, health insurance JV Max Bupa Health Insurance Ltd, clinical research firm Max Neeman Medical International and Max Speciality Films.

Private equity firms like Warburg Pincus, Goldman Sachs and International Finance Corporation hold around 25 per cent stake in Max India while its FII investors also include Temasek.


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