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Khazanah-controlled IHH offloads over half of its stake in Apollo Hospitals

Shah Junaid/VCCircle

IHH Healthcare Berhad, majority owned by Malaysian sovereign wealth fund Khazanah Nasional Berhad, has sold over half of its holding in India’s largest hospital operator Apollo Hospitals Enterprise Ltd as it focuses on its independently owned businesses in the country.

IHH sold a little over 6% stake in Apollo Hospitals on Friday for Rs 1,070 crore ($160 million) through a secondary market transaction. It continues to own 4.8% stake that is currently worth around Rs 800 crore.

This comes less than two years after IHH bought a majority stake in two hospital firms in the country. It acquired control of Continental Hospitals and Global Hospitals in 2015 in back-to-back deals. Both the firms compete with Apollo Hospitals in their respective markets.

The Economic Times had reported in 2015 that IHH’s M&A strategy in India had irked the Reddy family that runs Apollo Hospitals.

IHH Healthcare also has a 50: 50 JV with Apollo Hospitals in two hospital assets operating Apollo Gleneagles Hospital in Kolkata and Apollo Gleneagles PET-CT Centre in Hyderabad.

IHH Healthcare had picked close to an 11% stake in Apollo Hospitals in 2011 through inter-se transfer from its parent Khazanah, after which IHH Healthcare listed on the Bursa Malaysia and the Singapore Exchange.

According to IHH, its accounting cost of investment in Apollo Hospitals was around $160 million and thereby it has taken out the principal amount and its remaining stake is worth $120 million.

“The disposal is part of an ongoing and regular review of IHH Group’s investment portfolio by the board to maximise return to its stakeholders. In addition, having acquired Ravindranath GE Medical Associates Pvt. Ltd (Global Hospitals) and Continental Hospitals Pvt. Ltd group in 2015, IHH Group is consolidating and rationalising its investment to these operating companies in India as its fourth home market,” IHH said in a separate regulatory disclosure.

Khazanah had initially picked up a stake in Apollo Hospitals for Rs 293 crore in 2005 through a secondary deal and later hiked its holding in 2008. It is estimated to have spent around Rs 400 crore to buy the stake.

Although the investment is no longer housed under Khazanah, on the blended cost of purchase of shares, the investor has made around five times and an internal rate of return (IRR) of close to 20%, including dividend earnings through the years, as per VCCircle estimates.

On Friday, following the share sale, Apollo Hospitals’ share price closed at Rs 1,246 each at the Bombay Stock Exchange, down 5.31% in a flat Mumbai market.

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Khazanah Nasional Berhad is the strategic investment and a private equity fund of the Government of Malaysia. It provides expansion and growth capital to companies operating in Malaysia, Singapore, Indonesia, Turkey, China, India, and the Philippines. The firm seeks to invest in agrifood, aviation, creative and media; education, financial services, healthcare, infrastructure, and construction; innovation and technology; leisure and tourism, life sciences, power, property, sustainable development, and telecommunications sectors. The company was founded in 1993 and is based in Kuala Lumpur, Malaysia with additional offices in Mumbai and China.

(IHH Healthcare Bhd)

IHH Healthcare Berhad (formerly Integrated Healthcare Holdings Berhad) owns and operates multispeacialty hospital. It offers ancillary services including diagnostic laboratories, imaging centers, ambulatory care, medical education facilities, hospital project management and other related services. The company is based in Kuala Lumpur, Malaysia with additional offices in Asia and Cental and Eastern Europe, the Middle East and North Africa.

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