PEs continue to chase top-dollar valuations in health care sector

Eye-Q Vision latest to command high interest from private equity firms

A clutch of blue-chip private equity (PE) funds are understood to be in the race to pick up stake worth Rs 200 crore in Eye-Q Vision Pvt Ltd, which runs eye care hospitals in northern and western India. This move to go after specialised chain of clinics comes even as another eye-care chain, Vasan Healthcare, is understood to be in the midst of pushing for $1 billion valuation for its next fund raise.

Eye-Q has so far raised Rs 80 crore in three rounds of investments from Google and George Soros-backed SONG Fund as well as from Nexus Venture and Helion Venture Partners. While senior management officials of Eye-Q could not be reached for comments, it is understood that funds including Sequoia have shown keen interest in this hospital chain.

Established in 2007 by well-known ophthalmologist Dr Ajay Sharma and former Bausch & Lomb head Rajat Goel, Eye-Q has grown in the past few years by setting up new hospitals as well as acquiring existing ones. Eye-Q currently operates 30 super speciality eye hospitals and is planning to open 40 new hospitals in Tier-II and Tier-III towns in Punjab, Gujarat, Haryana and Uttar Pradesh. The company estimates it will have to invest about Rs 150 crore for this expansion across northern and western India. The company is looking to expand in Punjab with 10-12 hospitals, and also set up 15 hospitals in Gujarat and four to five hospitals in Uttar Pradesh and Haryana.

A senior manager with a PE fund told Business Standard that the asking valuations for this fund raise is getting stiffer given the context that a score of established specialised healthcare chains are pushing up the prices. He further added that the asking valuation is being discussed at as high as 4 times its revenues of close to Rs 90 crore.

Even as Radiant Lifecare recently picked up the management contract of the famous Nanavati Hospital in Mumbai with an upfront premium of Rs 50 crore and has committed an capital expenditure of around to Rs 300 crore, Bangalore-based healthcare chains - Manipal Healthcare and Dr Devi Shetty-promoted Narayana Healthcare are in advanced stages of cumulatively raising as much as $350 million to fuel their expansion plans.

According to corporate advisory firm Grant Thornton, healthcare services such as hospitals and diagnostics services continued to witness reasonable deal activity. "Majority of the deals were driven by the imminent domestic consolidation in these sectors and as such were small to mid-size deals. In terms of private equity/venture capital investments, the year has seen a number of interesting early stage investments in the tech-enabled healthcare delivery space. Chain of single-specialty centres such as eye care, dialysis care and primary care continues to be the most actively invested segment, while multi-specialty hospitals such as Aster DM Healthcare and Asian Institute of Medical Sciences and Thyrocare (diagnostics chain) attracted the larger investments," Grant Thornton officials said.

According to data from Venture Intelligence, there was some marquee deals during the second quarter of 2014 in healthcare. Aster DM Healthcare raised $66.4 million from existing investors Olympus Capital and India Value Fund, Vasan Eye Care raised further $50 million from existing investors GIC; Sequoia Capital and Westbridge Capital, and KIMS Hospital pocked $36 million from new investor ICICI Venture.