Olympus Invests $100M In DM Healthcare; India Value Fund Part-exits

Olympus Capital Asia Investments Ltd has invested over Rs 500 crore ($100 million) for a significant minority stake in India Value Fund-backed DM Healthcare Pvt Ltd, in one of the single largest private equity investments in the healthcare business till date. DM Healthcare is a Kochi-based healthcare services provider with operations in India and the Middle East.

With this investment, Olympus Capital will become the company’s biggest external investor even as the existing promoters will continue to be the largest shareholders in the company.

The transaction is a combination of Olympus Capital’s primary investment into DM Healthcare for the growth and expansion of the company in India and secondary purchase of a portion of India Value Fund’s shareholding in the company.

India Value Fund had originally invested around $50 million in DM Healthcare four years ago and held around 22 per cent stake in the company, according to VCCedge, the financial research platform of VCCircle.

Assuming Olympus Capital acquired around 25-30 per cent in the company, the deal values DM Healthcare at around $400 million. In contrast, the two top-listed healthcare services firms in the country – Fortis Healthcare and Apollo Hospitals – command a market cap of around $755 million and $1.68 billion, respectively. Fortis Healthcare is backed by Singapore’s sovereign wealth fund GIC while Apollo Hospitals is backed by Apax Partners and Malaysian sovereign wealth fund Khazanah.

This also happens to be the single largest private equity deal in healthcare sector in India till date. Although Apax Partners had invested around a similar sum in Apollo Hospitals five years ago, the Indian currency was much stronger against the US dollar. The Apax-Apollo deal was for $104 million or around Rs 425 crore back then. The latest deal is around Rs 510 crore.

Gaurav Malik, managing director of Olympus Capital, said, “DM Healthcare is addressing the challenge of providing world-class healthcare services in the rapidly growing markets of India and the GCC countries. A combination of increased consumer spending and high prevalence of chronic diseases is expected to lead to significant growth in the healthcare industry in these markets.”

Established in 1987, DM Healthcare is one of the leading healthcare service providers in the GCC countries, with the largest network of medical centres, hospitals and pharmacies, and it owns and operates secondary and tertiary care hospitals in India.

The company, with revenues of over Rs 1,200 crore, owns and operates the largest network of hospitals, clinics and pharmacies in the UAE under Aster and Medcare brands. It also has significant operations in Qatar, Oman and Saudi Arabia. In Saudi Arabia, it operates through a joint venture with a conglomerate and has already acquired a large and reputed hospital in the country.

In India, DM Healthcare has over 900 operating beds, primarily in tier 2 and tier 3 cities. The company is setting up a large quaternary care hospital with complex and specialised care in Kochi (Kerala), which will attract patients, as well as doctors, from India and abroad. The project, named Aster Medcity, will have a core hospital and nine centres of excellence. The facility is expected to commence operations in 2013.

The outlay for the first phase of this project is approximately Rs 500 crore. In addition, DM Healthcare will set up greenfield projects and partner with smaller hospitals across other tier 2 and tier 3 cities in India, with a target of having close to 3,000 beds by 2015.

Azad Moopen, who continues to hold the majority stake in the company, said, “We remain optimistic about the business prospects of the healthcare sector and along with India Value Fund, are delighted to partner with Olympus Capital. With the strong support of our investors and our experienced management team, I am confident that DM Healthcare is positioned for continued growth in the healthcare sector in both India and the GCC region.”

Sunil Theckath, Partner at India Value Fund said, “India Value Fund has had a long and fruitful partnership with DM Healthcare over the last four years and we remain committed to the company. We believe the management team is capable of further expanding the company’s footprint aggressively and this partnership with Olympus Capital will strengthen the company’s ability to execute its growth plans.”

Veda Corporate Advisors Pvt Ltd was the exclusive advisor to DM Healthcare on the latest transaction. Veda had also advised the company in its previous round of fundraising from India Value Fund in 2008.

Olympus Capital, a regional Asian middle market private equity firm established in 1997, has been investing in India since 1999. Its current investments in India include Vishwa Infrastructure, Quatrro BPO Solutions and Orient Green Power.