US-Headquartered Sutherland Global Services, a business process and technology management services company, has acquired 100% stake in PE funds backed Apollo Health Street Limited (AHS), a BPO arm of health care major Apollo Hospitals Enterprises Limited (AHEL). According to sources, the deal value was around Rs 1,000 crore and it was all cash transaction. The company acquired the entire stake of promoters and private equity funds.
The transaction is expected to close by February 2013, subject to customary regulatory and other conditions.
While refusing to comment on the acquisition cost Dilip Vellodi, founder chairman, Sutherland Global Services said that the company has acquired the entire stake of AHEL (which was holding 39.4%), promoters and promoters family stake (13%) and the rest of the stake held by PEs, including Temasek Holdings, JPMorgan established One Equity Partners and Schroder Cap.
It may be noted in January 2005 Temasek and One Equity invested $7.5 million and again infused another $25 million in September 2007.
Senior official from AHEL, who has direct knowledge in the deal, said that the enterprise value of the deal is around Rs 1,000 crore and AHEL would get around Rs 210-220 crore. The money will be used to fund AHEL's Rs 2,000 crore expansion.
In 2011-12, Apollo Health clocked Rs 490.9 crore revenue as compared to Rs 447.6 crore, a year ago, an increase of around nine%. The company had around 3,200 professionals in its facilities at Hyderabad and Chennai and one centre in New York and provides services to more than 150 healthcare partners.
Vellodi said combined organisation as a leading Healthcare service provider with information technology and business process integrated solutions will consolidate company's presence as a dominant player in the $38 billion US Healthcare BPO market, which is supporting the US health care industry which has been mandated to reduce cost and increase efficiency.
Apollo Health currently focused on US market and going forward it will expand to Europe, Asia Pacific including India, Middle East and Africa and will be part of Sutherland's healthcare vertical. The company which is likely to close the next fiscal with a $900 million revenue said 15% of it will come from its health care vertical. In 2011, company's revenue was around $534 million and this year may end with $700 million.
Prathap C Reddy, founder chairman, Apollo Hospitals said, in order to drive Apollo Health growth to the next stage, it was essential to find a right Strategic partner. The combined capabilities of both companies will create a compelling value proposition for the clients.
The deal augusts well for AHEL's long term growth trajectory, says Manoj Garg of Edelweiss Securities Ltd. The BPO business was a non core business for AHEL and it was a loss making. The utilisation of the proceedings has better return over the ROC, ROE perspective accretive business, he said.
The total commitment by Apollo Hospitals in the BPO firm was of around Rs 180 crore, including Rs 120-125 crore they have invested at the time of acquiring the stake and another Rs 60 crore as loan.