Treating over three million patients every year, Apollo
Hospitals is the largest private healthcare provider in Asia.
Apollo was established as a public company in 1979 by Dr P C Reddy,
and has been a pioneering force in Indian healthcare ever since.
Today it operates a network of 53 hospitals with around 8,000
beds. In addition to its hospitals business, Apollo owns and
operates one of the largest pharmacy chains in India as well as
primary care clinics, nursing homes, a health insurance business
and one of India's largest medical outsourcing businesses.
Identify
The deal
In mid 2007, Apollo was looking to raise equity capital in order to
expand. Suneeta Reddy, Apollo's Finance Director, explains the
rationale: "We had a very clear sense that Apollo was poised for
growth. Demand in the Indian healthcare sector was, and still is,
far greater than supply, the stock markets were doing well and we
wanted to capitalise on the opportunity."
Why Apax Partners?
As part of this sales process, the Apollo Management team met with
five or six other investors and ultimately chose Funds advised by
Apax Partners. Apax was always well placed due to its knowledge of
the healthcare sector in general and specific experience with
hospital investments such as Capio and General Healthcare Group in
Europe. It also benefited from a strong prior relationship with the
company and with the Reddy family stretching back to an initial
meeting in the US in 2004.
Reddy continues: "We were looking for a strategic partner that
could really help the business maximise the opportunities that we
saw. Most of the others could provide the financing, but we felt
that Apax understood the hospital business much better and would
also have the strategic know-how that we were looking for. In terms
of process, they were extremely thorough; they had commissioned an
external study and had a deep understanding of the market. They
were also able to complete the diligence very quickly and with a
very high level of understanding."
Support
Since the deal completed in October 2007, Apax Funds' deal team
has advised management on a number of initiatives such as budgeting
and performance monitoring in the group, operational improvements
and assessment of potential acquisition targets. "We haven't seen
eye-to-eye on everything", says Reddy, "but they have been a
surprisingly useful sounding board for the business and their
questioning approach has helped to get the best out of our team
and, at the end of the day, our interests are very closely
aligned.
"They have also been effective at benchmarking our business
against performance in their European investments and have
challenged us to drive through operational improvements without
compromising on clinical excellence. The team have risen to this
challenge and, as a consequence, the business has become more
profitable."
What about the future?
As more people demand a higher standard of medical care, the growth
potential for Apollo remains strong. The private hospitals market
is diverse and there is scope for further consolidation as well as
organic growth.