IHH Healthcare sold over half its holding in Apollo Hospitals Enterprise for Rs10.7 billion ($160 million) on Thursday, paving the way for it to enter into fresh partnerships with other Indian healthcare providers.
IHH, which is majority-owned by Malaysian state investment fund Khazanah Nasional, sold 8.4 million shares in Mumbai-listed Apollo Hospitals at Rs1,267 per share – the lowest end of the marketing range, implying a 4.1% discount to the stock’s Rs1,320.55 closing price on Thursday.
The shares were sold through an accelerated bookbuild after the close late on Thursday.
Bankers said the deal attracted very good demand, particularly from US long-only funds, which ended up taking over 60% of the shares on sale. The deal was launched as early indications showed about two-thirds covered and was eventually allocated to about 20 accounts.
One source familiar with the situation told FinanceAsia that the move put into practice IHH’s plan to cash out of its long-term investment in the Indian hospital operator at a decent price. Apollo Hospitals' share price has risen by 10.3% over the last two months.
The selldown also provides IHH with greater flexibility to collaborate with other Indian healthcare providers, the source familiar with the situation said.
Committed to India
IHH chief executive officer Tan See Leng has previously said that the company wants to develop India as another key market in addition to the company’s existing operations in Malaysia, Singapore, and Turkey.
IHH made two acquisitions in the India healthcare sector in 2015 – a 51% stake in India’s Continental Hospitals and a 73.4% stake in Global Hospitals. It is also collaborating with local conglomerate Khubchandani group to build a 450-bed hospital in Mumbai.
The proceeds from the stake sale could provide IHH with further firepower to engage in acquisitions, having already been armed with cash and equivalents of $548 million and short-term borrowings of just $2.5 million.
IHH held 10.85% of Apollo Hospitals before the transaction, which it inherited from Khazanah when it was formed in 2010. The equity stake is one of IHH’s four major external investments alongside Malaysia’s International Medical University, Singaporean private healthcare operator Parkway Pantai, and a 60% stake in Turkey’s Acibadam Healthcare Group.
IHH's Apollo Hospitals equity stake has come down to 4.85% as a result of the share sale, meaning it is no longer the Indian group's second-biggest shareholder. PCR Investments – an entity jointly-owned by the founding Reddy familiar and private equity firm KKR – owns 19.6% of Apollo Hospitals, followed now by US insurer Massachusetts Mutual Life with a 8.7% stake.
Deutsche Bank was the sole bookrunner of the block trade.