After dotcoms, it is now third-party adminstrators (TPAs) which are attracting higher valuations.
On a capital base of less than Rs 10 crore, most of the TPAs are valued between Rs 50 crore and Rs 108 crore.
The valuations are attracting corporates and hospital chains to pick up stakes in these operations. The trigger point is, however, the Insurance Regulatory and Development Authority's stipulation capping foreign equity at 26 per cent in TPAs.
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This has opened doors for leading corporate houses, pharmaceutical companies as well as high net-worth individuals to purchase stakes held by foreign investors.
Many TPAs such as Paramount Healthcare Management Company, Sedgwick Parekh, SOS International have foreign holding in excess of the stipulated cap.
Paramount Healthcare, valued at Rs 108 crore, is looking at options of divesting Munich Re's 33.3 per cent holding. One option is for Munich Re to sell its excess shares to an Indian partner. Paramount has been approached by leading corporate houses, pharmaceutical companies and hospital chains, as well as infotech companies to buy the holding.
Even as hospital groups are attracted to take up stakes in TPAs, this would see a conflict of interest as the idea behind engaging them is to control claims, while hospitals are keen on generating income, said industry sources.
Ican Medicare, valued at Rs 60 crore by Ernst & Young, has also drawn the attention of foreign risk companies. Incidentally the 26 per cent cap has put off many American companies, which are looking at least a 51 per cent stake.
The idea being to take over the entire operations once regulations permit, said industry sources. Munich Re when it signed the agreement with Paramount, agreed to the option of increasing its holding from 33.3 per cent to 51 per cent within five years.
Recently, the US-based United Healthcare International bought over Sedgwick's 80 per cent holding in Sedgwick Parekh for around Rs 47 crore, when it showed a valuation in the region of Rs 55 to 60 crore.
Indian private insurers have equally expressed interest in taking stake in TPA operations as they are keen to take over the entire operations three to five years down the road.