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Monday, December 5, 2011

Life Healthcare may raise stake in Max Healthcare to 50%

NEW DELHI: South Africa's Life Healthcare Group has the option to increase its stake to 50% in the Analjit Singh-led hospital chain Max Healthcare if it meets certain internal targets, a top company executive said.

Life Healthcare, which picked up a 26% stake for Rs 516 crore in October, can add another 24% if the operating performance continues to improve, Max Healthcare CEO Ajay Bakshi told ET in an interview.

Life Healthcare is a longterm partner and not just an investor, he said. "We have agreed on certain numbers which will allow us to go for an IPO in the next two-three years, depending on market conditions," Bakshi said, without revealing the targets.

The plan is to list the company, which dropped its rights issue recently due to the stake divestment, by 2014, he said. Life Healthcare, South Africa's second-largest hospital chain, had paid a hefty premium of about two-and-a-half times the valuation at which private equity Warburg Pincus exited the venture four months ago.

Max Healthcare, India's third-largest hospital chain, is a wholly-owned subsidiary of the listed Max India. The South African group has joined global hospital chains and investors such as Malaysia's Khazanah, which runs Parkway Hospital chain, and Singapore's GIC and Apax Partners that have invested in India's healthcare industry in recent years.

Driven by the expanding economy and increasing government expenditure, the $65 billion domestic healthcare industry is growing at around 20% a year. According to ratings agency Fitch, the sector will swell to $100 billion by 2015. Delhi-based Max Healthcare plans to set up new hospitals across North India and more than double its total bed capacity to 1,900 from the current 900 by the next fiscal.

Its strategy is in contrast to some of its competitors, such as Fortis Healthcare, that are equally focused on expansion through operational and management contracts to reduce capital investments on building assets.

Bakshi said the idea is to standardise and control the look and feel in each of the chain's hospitals. Last month, the company revamped its leadership team by appointing three top executives, including Bakshi, to strengthen the top management that will drive the next phase of growth.

Abha Agrawal, appointed chief operating officer, relocated to India after 19 years in the US where she was the chief medical officer and chief medical informatics officer at Kings County Hospital Center, New York. Ranvir Bhandari, who recently joined Max Ventures, a private firm of Analjit Singh, has been given additional role of chief services officer at Max Healthcare.

The top three priorities are to improve the quality of clinical outcome, services experience and business process, Bakshi said, adding that the company is in the process of appointing heads of three verticals.