Max Health to cut debt, expand after stake sale

Max Healthcare Institute, the hospital chain controlled by Analjit Singh-led Max India, will use the proceeds of its 26% stake sale to South African hospital operator Life Healthcare Group for expansion and debt repayment.

Max would get Rs516.5 crore for the stake under the deal sealed on Tuesday.

In a conference call, Mohit Talwar, director, corporate development, Max India, said the sale proceeds will go towards repaying the debt of Max Healthcare, which is around Rs1,000 crore.

“Proceeds will be used to bring down the debt to the levels of Rs800 crore. It will also be used towards expansion of Max hospitals.”

The deal is said to be a very large foreign direct investment in the $40 billion healthcare segment in India.

Max Healthcare, which has about eight hospitals in New Delhi, Noida and Gurgaon, will increase its capacity to 2,000 beds by December from the current 1,450.

Talwar said Max is looking at hospitals in towns such as Dehradun and Mohali and the focus of the chain will primarily be north India.

“We don’t have plans as of now to go pan-India.”

With this deal, the share of Max India, which has interests in insurance, contract research, hospitals and specialty products, in Max Healthcare will fall to about 70% from the earlier 91%.

Washington-based International Finance Corporation and some overseas based corporate bodies also hold some stake in Max Healthcare.

Private equity fund Warburg Pincus exited Max Healthcare in June this year, selling 16.37% stake to Max India for `140 crore.
Talwar said Life Health has strengths in IT systems, human resource, nursing, hospital administration, etc, which can add value to Max Healthcare.

“We can get their best practices by setting up taskforces. We will capitalise on their operational efficiencies.”

Industry experts say this deal signifies the maturing of the Indian healthcare sector, like the pharmaceutical industry.

“With rising disposable income levels and a willingness to do regular check-ups, the consumer patterns for healthcare are changing. Thus overseas players see huge opportunity in the country,” said a healthcare consultant from a consultancy firm.

According to a Bangalore-based healthcare expert, such a deal gives the South African player direct access to Max’s ready infrastructure and can be a beginning towards its future India plans.