An Emirati firm is set to purchase a controlling stake in one of India’s leading diagnostics service providers, anonymous insiders say.
The Abraaj Group is a private equity firm based in Dubai, which manages US$10 billion worth of assets globally. Livemint reported that the Group is “in advanced discussions” to buy out an 80% stake in Medall Healthcare (formerly Precision Diagnostics), which is based in Chennai and operates a multitude of diagnostics centres across southern India
The 80% stake is currently owned by the Indian private equity firm Peepul Capital, which Abraaj is looking to acquire, according to The Times of India. Peepul acquired Mendall in 2009 in partnership with Raju Venkataraman, who has been the company’s managing director and chief executive officer since.
One of the confidential insiders quoted by Livemint states that Mendall’s enterprise value is Rs 1,500 crore (US$220.8 million). Peepul has invested approximately Rs 300 crore (US$44.16 million) into Mendall thus far.
Peepul has been in talks with various private equity firms for a while to sell its stake in Mendall, conducting the transaction with the private venture firm Spark Capital. Though the Abraaj Group has been described as the “frontrunner”, it is not yet a done deal. Peepul Capital has stated that it is “in conversations with multiple suitors” according the ToI. However, the newspaper did quote an insider as saying that negotiations with the Group were “serious and extensive.”
In September last year, the Economic Times reported that private equity firms Apax Partners, Bain Capital, Barings Asia, and KKR India were in “initial talks” to acquire a 100% stake in Medall, buying out both Peepul and Venkataraman’s stakes. This deal now seems to have fallen through, with one of Livemint’s sources stating that Venkataraman is now retaining his share. An earlier deal with Manipal Education and Medical Group fell through because of a “valuation mismatch”, according to Livemint.
If the deal with Abraaj goes through, it will not be the group’s first foray into Indian healthcare. In January last year, it acquired a 76% stake in Care Hospitals – described by the ToI at the time as “possibly the largest acquisition deal in Indian healthcare delivery.”
Many think that India’s private doctors are much too ready to refer patients to diagnostics centres. Government has promised a new spotlight and new transparency. Investors are clearly confident that the industry can thrive in this environment.