OTPP's First Control Private Equity Buyout in India
The Ontario Teachers’ Pension Plan Board said it has agreed to acquire a significant majority stake in Sahyadri Hospitals chain from the Everstone Group is the Canada-based investor’s first control private equity buyout in India.
Everstone and Sahyadri Hospitals’ key management and founders will continue to retain minority stakes in the healthcare firm, said Ontario Teachers’ in a statement without disclosing the financial details of the transaction.
The deal is expected to be completed by the end of this year, it added.
VCCircle reported in August last year had reported that Everstone had initiated the process to exit Sahyadri Hospitals just a little over two years after its investment in the company. Everstone had agreed to acquire a controlling stake in Sahyadri in April 2019. The transaction was concluded later in the year.
Founded by neurosurgeon Charudutt Apte in 1994, Sahyadri Hospitals has eight hospitals with 900 operating beds and 300 critical-care beds in Maharashtra, concentrated in the Pune city.
The healthcare company aims to grow its bed capacity by over 500 in the next five years, the statement said.
The hospital chain clocked nets sales of ₹544 crore in fiscal 2020-21 compared with ₹467 crore a year ago, according to VCCEdge, the data and intelligence platform of VCCircle. Operating profit rose to ₹130 crore from ₹84 crore in the previous year.
Sahyadri Hospitals previously counted homegrown private equity firms firms IDFC Alternatives and ICICI Venture as its investors.
Raju Ruparelia, senior managing director, private capital, Asia-Pacific at Ontario, said the investor believes that it can leverage its significant global experience in the healthcare sector to help scale Sahyadri Hospitals into a national healthcare provider in the coming years.
Ontario Teachers had net assets of C$242.5 billion as of 30 June. It has investments in more than 50 countries across equities, real estate, infrastructure and also provides venture growth capital.
In its recent India bet, Ontario Teachers committed $175 million to boost alternative investment company KKR & Co’s road platform in April. The transaction marked its third infrastructure investment in India following purchase of 25% stake in the National Highways Infra Trust late last year and an anchor investment in the National Investment & Infrastructure Fund (NIIF).
According to a VCCircle analysis in May, several private equity firms are preparing to exit hospital investments to capitalize on the easing of the coronavirus pandemic and a rebound in businesses in their portfolios.
Earlier this week, private equity giant KKR sold its entire estimated stake of 27% in hospital chain Max Healthcare Institute for around ₹9,400 crore via block deals.
In another recent transaction in India, TPG-backed Care Hospitals acquired a “significant majority" stake in Aurangabad-based United Ciigma Hospital in its third acquisition since April.
India Blooms News Service also reports Canadian fund OTPP to buy majority stake in Sahyadri Hospitals:
Canada's leading investor Ontario Teachers' Pension Plan Board (OTPP) will acquire a significant majority stake in Sahyadri Hospitals Group, the largest hospital chain in Maharashtra, OTPP said in a statement.
"We are pleased to acquire a majority stake in Sahyadri Hospitals, which is our first control private equity buyout in India, and our fourth major investment in the country over the last 12 months.
"We believe we can leverage our significant global experience in the healthcare sector to help scale the company into a national healthcare provider in the coming years," said Raju Ruparelia, Senior Managing Director, Private Capital, Asia-Pacific at Ontario Teachers'.
This is OTPP's first private equity buyout in India, after which existing stakeholders Everstone Group, along with key management and founders will retain minority holdings in the business.
OTPP is the administrator of Canada's largest single-profession pension plan, with $189 billion in net assets as of December 31, 2021.
The sell-out process had been going on for some time, and it entered the last phase after Max Healthcare Institute and OTPP emerged as the frontrunners in May, ET reported.
Though the deal size is not disclosed, the deal has valued the hospital chain, owned by private equity fund Everstone Capital, at Rs 2,500 crore - Rs 2,700 crore, ET reported citing people aware of the matter.
Sahyadri has eight hospitals with 900 operating beds and 300 critical-care beds and plans to grow its capacity by 500 beds in the next five years. It has 2,000 clinicians along with 2,600 supporting staff across its network of hospitals, said the ET report.
Its facilities are concentrated around the city of Pune, which is the second largest city in Maharashtra by population.
OTPP put out a press release announcing an agreement to acquire a significant majority stake in Sahyadri Hospitals from the Everstone Group:
Ontario Teachers' Pension Plan Board (“Ontario Teachers'”), today announced an agreement to acquire a significant majority stake in Sahyadri Hospitals Group (“Sahyadri”), the largest private hospital chain in the state of Maharashtra, from the Everstone Group. Existing sponsor, Everstone Group, along with key management and founders will retain minority stakes in the company.
Sahyadri has 8 hospitals with c. 900 operating beds and 300 critical-care beds. In addition, the hospital chain has plans to grow capacity by over 500 beds during the next five years. With 2,000 clinicians along with 2,600 supporting staff across its network of hospitals, Sahyadri’s facilities are concentrated around the city of Pune, which is the second largest city in Maharashtra by population.
"We are pleased to acquire a majority stake in Sahyadri Hospitals, which is our first control private equity buyout in India, and our fourth major investment in the country over the last 12 months. We believe we can leverage our significant global experience in the healthcare sector to help scale the company into a national healthcare provider in the coming years," said Raju Ruparelia, Senior Managing Director, Private Capital, Asia-Pacific at Ontario Teachers’. "We look forward to partnering with the company’s founders, Dr. Charudutt Apte, Sadanand Bapat and Nitin Desai, as well as the management team and Everstone to support the business as it enters its next stage of growth."
“It has been a great experience partnering with Everstone and executing the playbook of consolidation and growth. We look forward to working with Ontario Teachers’ to further build on this base and expand into other parts of the Western India region. Sahyadri as a brand is all set to take up a larger role in the Indian healthcare delivery ecosystem, not only in footprint, but in setting up some of the most advanced and exemplary clinical practices in India. We believe that Ontario Teachers’ is an ideal partner to help us achieve this,” said Abrarali Dalal, Chief Executive Officer of Sahyadri Hospitals.
“We welcome Ontario Teachers’ and look forward to our partnership as we work toward our objective of making healthcare more accessible and affordable. This objective has been our guiding principle in establishing the brand Sahyadri. Today, not only are we known as the brand with the largest footprint in Maharashtra, but our clinical credentials continue to remain unparalleled,” said Dr. Charudutt Apte, Founder of Sahyadri Hospitals. He further adds, “I want to express my thanks to Everstone for walking shoulder to shoulder and supporting us in taking Sahyadri to where we are. It has been a wonderful journey.”
“Sahyadri is the largest multi-specialty healthcare service provider in the West India corridor. Sahyadri's unique hub and spoke model and best-in-class clinical capabilities have truly touched patient lives. It is yet another demonstration of Everstone's partnership model and playbook, executing on several operational improvements for patients and doctors, transforming the business and creating significant value for all stakeholders,” said Puncham Mukim, Managing Director of Everstone.
Sahyadri is the latest investment by Ontario Teachers’ Private Capital team in high-performing healthcare businesses. Recent investments include Asia Pacific Healthcare Group, New Zealand’s largest pathology network, Abano Healthcare, the operator of one of the largest trans-Tasman dental groups, and Acorn Health, a leading U.S. provider of Applied Behavior Analysis therapy for children diagnosed with Autism Spectrum Disorder.
The transaction is expected to close in Q4 2022 and is subject to customary closing conditions.
About Ontario Teachers’
Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of $242.5 billion as at June 30, 2022. We invest in more than 50 countries in a broad array of assets including public and private equities, fixed income, credit, commodities, natural resources, infrastructure, real estate and venture growth to deliver retirement income for 333,000 working members and pensioners.
With offices in Hong Kong, London, San Francisco, Singapore and Toronto, our more than 350 investment professionals bring deep expertise in industries ranging from agriculture to artificial intelligence. We are a fully funded defined benefit pension plan and have earned an annual total-fund net return of 9.6% since the plan’s founding in 1990. At Ontario Teachers’, we don’t just invest to make a return, we invest to shape a better future for the teachers we serve, the businesses we back, and the world we live in. For more information, visit otpp.com and follow us on Twitter @OtppInfo.
About Everstone Group
Singapore headquartered Everstone, is a premier investment manager with assets of ~ US$7 billion across private equity, climate impact, logistics, digital and venture capital. Everstone has a significant resource base across its seven offices in Singapore, Mumbai, Delhi, Bengaluru, New York, Dubai and Mauritius, comprising best-of-breed investing, operations and strategic resources with significant experience and skills. For more information, visit www.everstonecapital.com and LinkedIn.
This acquisition of a significant majority stake in Sahyadri Hospitals Group from the Everstone Group is OTPP’s first control private equity buyout in India.
Teachers' Private Capital has a long history of investing in healthcare, a more defensive sector with steady earnings and this investment fits very nicely in its global healthcare portfolio.
Everstone bought a majority stake in Sahyadri Hospitals Group back in 2019 for an undisclosed sum and it is is one of the largest India and South East Asia focused healthcare investors.
Along with key management and founders, it will retain minority holdings in the business.
This deal shows how OTPP is building its relationships in the country and looking to do more deals in the future.
Back in May, CEO Jo Taylor told Bloomberg News that they are likely going to open an office in India as soon as next year:
“If you are looking at a geography which is the most likely next location for us, I think its going to be India. We are already quite active there,” Taylor said. In April, OTPP agreed to invest up to $175 million in KKR & Co’s India road investment platform.
OTPP is still deliberating the asset classes it will target in India, according to Taylor. It may initially look to recruit about 10 people in the country, depending on strategy, but won’t bring people in “just for the sake of hiring,” he said.
Deal activity in India has been accelerating amid a rising stock market and a push by the government to monetize some state assets. Mergers and acquisitions involving Indian companies have jumped 166% this year to $127 billion, according to data compiled by Bloomberg.
Clearly India will be a major focus country for OTPP as it is for other large peers in Canada.
Back to this deal. While some private equity firms are preparing to exit hospital investments to capitalize on the easing of the coronavirus pandemic, others are investing in the sector because the fundamentals remain very strong.
In the statement, Raju Ruparelia, Senior Managing Director, Private Capital, Asia-Pacific at Ontario Teachers’, said they believe they can leverage their significant global experience in the healthcare sector to help scale Sahyadri Hospitals Group into a national healthcare provider in the coming years.
And Abrarali Dalal, CEO of Sahyadri Hospitals, said "Sahyadri as a brand is all set to take up a larger role in the Indian healthcare delivery ecosystem, not only in footprint, but in setting up some of the most advanced and exemplary clinical practices in India."
When you are buying a majority stake in a business, you want to have the founders and senior managers on board to help you realize on your value creation plan, and Teachers' Private Capital has executed on these type of deals plenty of times before.
This first control private equity buyout in India represents another great investment in a country that is growing fast.
Buying a significant majority stake in a business in India isn't something you'll see most other pensions do but Teachers' went ahead and did it.
They are pioneers at going direct and are looking at doing more direct deals to save significantly on fees.
Lastly, I recently spoke to Jo Taylor and Ziad Hindo on their positive mid-year results and while Private Equity's returns were neutral during that difficult time, I would be curious to see how it ends the year because it looks really good to me.
Below, learn why Sahyadri Hospitals received the diamond status from the World Stroke Organization which is a worldwide organization that has devised a grading system for various hospitals into silver, gold, platinum and diamond, depending on the level of competence of the hospital and the ability to treat stroke in the prescribed formats.
Dr. N R Ichaporia (Neurologist and Stroke Specialist, Director of Neurology at Sahyadri Hospital, Nagar Road) and his team have been working in stroke management for the last few decades and over the last few years, they have developed a stroke protocol to treat stroke efficiently.
Sahyadri Hospitals is very happy to announce it received the highest award that is the Diamond Award for stroke care, recognized by the World Stroke Organization. This includes quality stroke care right from prevention, management of acute stroke, doing imaging transferring to the ICU, giving emergency stroke treatment, followed by rehabilitation within the hospital premises and speech therapy.
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