The Hindu Business Line : Pvt equity firms see healthy future in regional hospitals

Mumbai, Aug. 4 Jaipur’s Dr B.R. Soni wears his credentials as cricketer-cum-doctor with great pride. His Soni group of hospitals is locally popular, and private equity (PE) firms are now keen to help this first-generation entrepreneur grow his venture to neighbouring regions.

Having started with a 20-bed nursing-home in 1986, Dr Soni had corporatised it in 1995-96 when he tapped the capital market to raise Rs 1.8 crore, “when hospitals were a negative sector”, he recalls. But the tide has turned, he says, and PE companies are looking at investing in hospitals like his.

PE interest

Regional hospitals are becoming players in their own right, exploring funding options to grow, observes Mr Shiraz Bugwadia, with o3 Capital. And PEs are definitely excited about investing in healthcare projects, provided they identify the right target with quality assets, he adds.

No longer are brand names like a Hinduja or Lilavati Hospital, or national names like an Apollo, Wockhardt or Fortis required to attract funds. Regional hospitals in Coimbatore, Tiruchi, and Thiruvananthapuram are looking to progress from a secondary to a tertiary-care hospital, increasing beds or expanding to other regions. And as they come with no legacy or baggage, they seem attractive to investors, Mr Bugwadia observed. Tiruchi’s Kaveri Medical Centre, Jaipur’s Soni and Gujarat’s Sterling are some hospitals looking to take that leap, he said.

Expansion

From 300 beds in two hospitals, the Soni group is expanding to 600 beds in three years and 1,000 beds in five years, Dr Soni told Business Line. He also plans to spread into Rajasthan, western Uttar Pradesh, Haryana and Madhya Pradesh through tie-ups with nursing homes in these regions, he said.

Looking to dilute no more than 30 per cent equity, he expects to finalise funding plans by next year. With revenues of about Rs 30 crore, he insists that regional hospitals like his are not affected by large corporate hospitals coming into his backyard, as people are more comfortable with a locally known doctor.

Regional players will continue to hold their own despite competition, agrees Kaveri Medical Centre founder Dr Chandra Kumar, also a first-generation entrepreneur. In 10 years, his centre has grown from 30 beds to 425 beds, doing medium-size procedures, surgeries, joint replacements etc, he said. He is in discussion with PE firms to fund the expansion to 1,500 beds across Tamil Nadu in three years, he said.

The estimated Rs 30-crore hospital had about three months ago acquired controlling stake in Sea Horse Hospital, another local hospital, he said. Besides hospitals, Kaveri Medical Centre also has two 15-bed primary care centres, which are also looking at expansion, he said. About Rs 150 crore is being tied-up, through a mix of debt and equity, he said, to be invested over three years.

Corporate hospitals cannot ignore the emergence of regional hospitals as a standardised, quality entity. Although, the presence of corporates may also have triggered the upgrade by regional players, says the head of a large hospital network. Either way, the competition is good for the consumer, as it means more quality care at competitive rates, he added.

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