At least three large private equity (PE) players have made it to the last lap of the race to acquire a strategic stake in Apollo Health and Lifestyle (AHLL), a subsidiary of Apollo Hospitals Enterprise (AHEL). Apollo is looking to raise around R500 crore by selling a 30% stake in AHLL and use the funds to grow the business.
According to investment banking sources, KKR, Carlyle Group and UK-based PE firm Apax Partners are on the shortlist of bidders for a 30% stake in AHLL, which operates a network of primary care and specialty care clinics across India and West Asia. The sub-brands under Apollo Clinic include Apollo Sugar, Apollo Diagnostics, Apollo White and Apollo Dialysis. AHLL also runs specialty hospitals Apollo Cradle and Apollo Spectra Hospitals as part of its portfolio.
Apollo Hospitals had informed the stock exchanges in October last year about the prospective stake sale. According to sources, in the initial round Apollo saw interest from around 20 domestic and foreign PE funds.
KKR already has an existing relationship with Apollo Hospitals while Apax partners was one of the early backers of Apollo Hospitals. KKR has invested around R500 crore in PCR Investments, the holding company of the promoter Prathap Reddy and family. The transaction, which took place in 2013, was in the form a callable security which allowed KKR to convert the debt into equity after five years, while simultaneously allowing PCR investments the right to buy back the instruments at the end of two years. However, when contacted, S Obul Reddy, chief executive officer of PCR Investments, said that the there are no plans to buy back yet. “Our relationship with KKR is long-term and we are in no hurry to see them exit” Reddy told FE.
Again, Apax Partners which sold its 19% stake for R2,240 crore in Apollo Hospitals Enterprise in 2013, making good money on the the investment R680 crore is keen to invest in the business again.
Neeraj Garg CEO, AHLL, hinted the company would prefer a PE partner that brings it global reach. AHEL which clocked annual revenues R5,178 crore in FY15 with a net profit of R339 crore has has said that it plans to add an additional 10,000 beds in FY16.
A major chunk of the investment will go towards expanding the infant and maternity care chain, Apollo Cradle, which currently runs nine hospitals in India. “This year we will start another hospital in Hyderabad and a fertility clinic in Chennai and we plan to add between 3 to 4 hospitals every year going forward” Garg told FE.