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Analyst Corner: ‘Hold’ on Max India with target price of Rs 90

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New Delhi | Published: September 22, 2018 12:21:21 AM

Radiant Life (Radiant), KKR’s portfolio company, recently announced that it will acquire Life Healthcare’s 49.7% stake in Max Healthcare (MHC).

Analyst Corner: ‘Hold’ on Max India with target price of Rs 90

Radiant Life (Radiant), KKR’s portfolio company, recently announced that it will acquire Life Healthcare’s 49.7% stake in Max Healthcare (MHC).

Radiant will acquire 267 million shares at `80 each for `21.2 billion. The deal opens up the possibility of future merger of MHC (~2,400 beds) with Radiant (~1,000 beds). The deal values MHC at 4x P/B and 25x EV/EBITDA on trailing basis.

Hence, valuations are at ~10% discount to the recently concluded Fortis-IHH deal. As per SOTP valuation, Max Bupa and Antara contribute ~`20, pegging Max India’s overall valuation at ~`100.
However, this will also attract a holding company discount. Maintain ‘Hold’ and TP of `90.

Radiant commenced operations in 2010 with the redevelopment of 650-bed BLK Super Specialty Hospital (BLK) in New Delhi.

Later, the company also collaborated with the Nanavati Hospital Trust to take over operations of the 350-bed multi-specialty Nanavati Hospital in Mumbai.

In July 2017, KKR acquired 49% stake in Radiant Life Care for $ 200 million.

Radiant is expanding BLK into a 1,600-bed quaternary care hospital and planning to expand Nanavati Hospital in to a 1,000-bed quaternary care facility over the next four years.

Earlier, KKR-Radiant were also looking to acquire a stake in Fortis. They had placed an offer, which did not fructify. In our view, with this acquisition, KKR may in the future merge the MHC and Radiant entities, thus making Radiant a listed entity.

We await further clarity on this deal and its long term repercussions on MHC. Maintain ‘HOLD/SU’ with a target price of `90 per share (15x FY20EV/EBITDA).

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