Mumbai: KKR is close to acquiring Healthcare Global Enterprises Ltd (HCG), the country’s largest speciality cancer care hospital chain, from another private equity firm CVC Capital Partners, said people aware of the matter.
The development comes less than six months after KKR made a return to the Indian hospital sector, after a gap of two years The private equity firms are aiming to sign binding documents this month, latest early January.
HCG’s founding family, led by renowned oncologist BS Ajaikumar, owns 10.87% of the company. Founded in Bengaluru in 2005, HCG held its IPO in 2016. It’s present in 19 Indian cities and has 2,200 beds.
With the promoters — CVC and the founding family — owning a 71.23% stake, KKR is expected to launch an open offer for another 26% of the firm after the acquisition. Initially Ajaikumar may not sell, but if the new promoter group led by KKR crosses the 75% threshold, then the founding family may pare its stake leaving the US buyout group as the sole promoter. The transaction may involve an eventual delisting of HCG in case the open offer is fully subscribed to and after the takeover, KKR’s shareholding exceeds 90%, they added.
Bain had given CVC a firm offer in October but KKR is said to have bettered that with favourable terms for key shareholders. However, the KKR offer is subject to gaining control. CVC had acquired a controlling stake in the hospital chain in 2020 for Rs 1,049 crore. Its stake is worth Rs 4,663.12 crore at current value.
KKR has been negotiating a plan with Ajaikumar that involves him stepping down as executive chairman for a non-executive position. Raj Gore, a Fortis Healthcare and Apollo Hospitals veteran, is expected to continue as chief executive.
People close to Ajaikumar said he wants to remain chairman. The family is expected to retain a partial stake to ride the future upside. The stock currently trades at 15 times FY26 ebitda, which is amongst the lowest in the industry. Most analysts expect a significant rerating if KKR takes over. The prospect of a change in his executive role has been a sticking point, according to people familiar with the matter.
Ajaikumar told ET that talks were in the “works,” adding, “I made it clear, I am not selling.”
KKR declined to comment. CVC didn’t respond to queries.
KKR’s move comes amid a rush of PE-led consolidation in the hospital space. In July, the fund acquired a controlling 70% stake in Baby Memorial Hospital (BMH), a Kerala chain, with an investment of Rs 2,500 crore. The firm’s $2 billion exit from Max Healthcare in 2022 has been its most profitable exit thus far in the country. Moneycontrol was the first to write about KKR’s exclusivity pact. The final contours were hammered in recent weeks.
Stepping away from an operating role will allow Ajaikumar to focus on R&D and new business initiatives, fields he’s passionate about, according to analysts. A radiation and medical oncologist, Ajaikumar has invested in sophisticated medical hardware for cancer treatment. The company outlined an aggressive digital strategy two years ago and that has widened the patient funnel. The digital channel revenue accounted for 14% of the total in the September quarter, up from 4% a year ago.
Once the deal is complete KKR may put primary capital into the company to help bankroll investments in non-metro hospitals and create a war chest for further acquisitions. HCG completed the acquisition of a 51% stake in Visakhapatnam-based Mahatma Gandhi Cancer Hospital & Research Institute for an enterprise value of Rs 414 crore in October.
After several years of steady, organic growth, HCG is focusing on accelerating its expansion through strategic acquisitions. In the past year, the company completed two — one in Indore and the other in Vizag — reinforcing its stated position of adding 200 to 300 basis points of growth through acquisitions.
Allegro, Bain and JP Morgan are the advisers involved.
The cancer care industry is growing at a CAGR of 17%, with HCG outpacing industry growth.
“The company plans to add 900 incremental beds over the next four-five years to capitalise on emerging opportunities,” said Ankush Mohan, healthcare analyst at Axis Securities. “With most emerging centres now matured contributing above 20% margins and operating leverage improving, HCG is well-positioned for further margin enhancement.”
KKR is close to acquiring Healthcare Global Enterprises Ltd (HCG), the country’s largest speciality cancer care hospital chain, from another private equity firm CVC Capital, said people aware of the matter.
The development comes less than six months after KKR made a return to the Indian hospital sector. The two sides are aiming to sign binding documents this month, latest early January.
Trumping a rival bid by Bain Capital, KKR entered into an exclusivity pact in late October with CVC for bilateral negotiations to acquire CVC’s 60.36% stake at a price of Rs 425-450 per share. This is at a 10-15% discount to the Rs 509.85 of Tuesday closing price, which translates into a market value of Rs 7,106.63 crore. But the stock has surged 43% in the last six months on the back of a strong financial performance and expectations of a sale. In the past month alone, HCG shares have risen 14%.
HCG’s founding family, led by renowned oncologist BS Ajaikumar, owns 10.87% of the company. Founded in Bengaluru in 2005, HCG held its IPO in 2016. It’s present in 19 Indian cities and has 2,200 beds.
With the promoters — CVC and the founding family — owning a 71.23% stake, KKR is expected to launch an open offer for another 26% of the firm after the acquisition. Initially Ajaikumar may not sell, but if the new promoter group led by KKR crosses the 75% threshold, then the founding family may pare its stake leaving the US buyout group as the sole promoter. The transaction may involve an eventual delisting of HCG in case the open offer is fully subscribed to and after the takeover KKR’s shareholding exceeds 90%, they added.
Bain had given CVC a firm offer in October but KKR is said to have bettered that with favourable terms for key shareholders. However, the KKR offer is subject to gaining control. CVC had acquired a controlling stake in the hospital chain in 2020 for Rs 1,049 crore. Its stake is worth Rs 4,663.12 crore at current value.
KKR has been negotiating a plan with Ajaikumar that involves him stepping down as executive chairman for a non-executive position. Raj Gore, a Fortis Healthcare and Apollo Hospitals veteran, is expected to continue as chief executive.
People close to Ajaikumar said he wants to remain chairman. The family is expected to retain a partial stake to ride the future upside. The stock currently trades at 15 times FY26 ebitda, which is amongst the lowest in the industry. Most analysts expect a significant rerating if KKR takes over. The prospect of a change in his executive role has been a sticking point, according to people familiar with the matter.
Ajaikumar told ET that talks were in the “works,” adding, “I made it clear, I am not selling.”
KKR declined to comment. CVC didn’t respond to queries.
KKR’s move comes amid a rush of PE-led consolidation in the hospital space. In July, the fund acquired a controlling 70% stake in Baby Memorial Hospital (BMH), a Kerala chain, with an investment of Rs 2,500 crore. The firm’s $2 billion exit from Max Healthcare in 2022 has been its most profitable exit thus far in the country. Moneycontrol was the first to write about KKR’s exclusivity pact. The final contours were hammered in recent weeks.
Stepping away from an operating role will allow Ajaikumar to focus on R&D and new business initiatives, fields he’s passionate about, according to analysts. A radiation and medical oncologist, Ajaikumar has invested in sophisticated medical hardware for cancer treatment. The company outlined an aggressive digital strategy two years ago and that has widened the patient funnel. The digital channel revenue accounted for 14% of the total in the September quarter, up from 4% a year ago.
Once the deal is complete KKR may put primary capital into the company to help bankroll investments in non-metro hospitals and create a war chest for further acquisitions. HCG completed the acquisition of a 51% stake in Visakhapatnam-based Mahatma Gandhi Cancer Hospital & Research Institute for an enterprise value of Rs 414 crore in October.
After several years of steady, organic growth, HCG is focusing on accelerating its expansion through strategic acquisitions. In the past year, the company completed two — one in Indore and the other in Vizag — reinforcing its stated position of adding 200 to 300 basis points of growth through acquisitions.
Allegro, Bain and JP Morgan are the advisers involved.
The cancer care industry is growing at a CAGR of 17%, with HCG outpacing industry growth.
“The company plans to add 900 incremental beds over the next four-five years to capitalise on emerging opportunities,” said Ankush Mohan, healthcare analyst at Axis Securities. “With most emerging centres now matured contributing above 20% margins and operating leverage improving, HCG is well-positioned for further margin enhancement.”
