Life Healthcare, South Africa’s second-largest hospital chain, is acquiring a 26% stake in Analjit Singh-led Max Healthcare for Rs 516 crore, making this one of the largest foreign investment deals in the Indian healthcare sector.

The proposed transaction values the Max India subsidiary at around Rs 2,000 crore, which is almost two-and-a-half times the valuation at which private equity fund Warburg Pincus exited the healthcare company in June this year. The private equity player had sold a 16.37% stake in the unlisted hospital chain to Max India for Rs 140 crore at 29.40 a share, pegging the valuing of the company at Rs 855 crore.

In the last few years, healthcare chains such as Parkway and funds such as Avenue Capital, Apax Partners and Warburg Pincus have invested in the $65-billion Indian healthcare sector.
Rise in disposable incomes, penetration of health insurance, lifestyle changes and increased government expenditure on healthcare are driving growth in the sector.

The South African company will invest by subscribing to fresh shares of Max Healthcare, which will use the money to fund its expansion programme. At present, the north India-focused group operates eight hospitals, and is in the process of opening four more in the current financial year, taking its total capacity to 1,900 beds. The company plans to double its bed capacity in the next three years.

Max Healthcare has a total debt of around Rs 900 crore and some of the proceeds will also be used to retire high-cost loans.

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