India: Paras Healthcare raises $42m from Creador

Panacea Venture

Hospital operator Paras Healthcare has raised $42 million (approximately Rs275 crore) from private equity (PE) fund Creador to finance expansion, a top company executive said.

Creador is a South-East Asia- and India-focused PE firm. In December, it said it raised its third fund of almost $415 million. Founded in 2006, Gurgaon-based Paras Healthcare has 730 beds across hospitals in Delhi NCR, Bihar, Chandigarh and Panchkula, near Chandigarh.

“We currently have under construction a 225-bed project in Panchkula and a 50-bed mother and child care facility in Noida. These were planned earlier and also funded. The fundraising is for the next 1,000 beds that we want to create. This is the first external equity fund-raise for Paras,” Paras Healthcare founder and managing director Dharminder Nagar said.

The healthcare chain has two divisions—Paras Hospitals at Gurgaon, Patna and Darbhanga providing specialized tertiary care, and Paras Bliss at Panchkula and New Delhi providing specialized mother and child care.

Paras Healthcare will consider building new hospitals, leasing and acquisitions for expansion. The company plans to remain focused on Uttar Pradesh, Jharkhand, Haryana, Punjab, Rajasthan and Madhya Pradesh.

“We see immediate opportunities in Uttar Pradesh and Jharkhand. We also want to add around 100-200 beds to our Gurgaon facility,” Nagar said.

Northern states present a significant opportunity, given their huge population and the lack of sufficient healthcare services especially for the middle class, Nagar said.

“North India constitutes 60% of the country’s population but unfortunately, it only constitutes 40% of healthcare provision… Even in larger cities, we see there is a gap for middle class. There is a private provision for upper class and there is a provision for poor by the public sector, but for middle class, there is a huge gap and not many providers are focusing on that,” said Nagar.

Paras Healthcare wants to deliver accessible, affordable and quality healthcare, said Nagar, adding these attributes are missing to some extent even in metro cities. The firm expects to clock over Rs500 crore in revenue this financial year, said Nagar.

“Our Ebitda (earnings before interest, taxes, depreciation and amortization) is in 18% range. We believe there is some upswing that can come in Ebitda, as volumes increase, service lines increase and our hospitals increase,” he said.

The Creador fund-raise values the hospital chain at around Rs1,100-1,200 crore in pre-money valuation, added Nagar. Investment bank Avendus Capital and law firm Khaitan & Co acted as advisers for the fund raising.

According to a report by Crisil Research, the Indian healthcare delivery market is expected to expand at a compounded annual growth rate (CAGR) of 12% to reach Rs6.8 trillion by 2019-20.

According to Crisil’s estimates, the size of the Indian healthcare delivery industry in 2014-15 was Rs3.8 trillion.

According to the report, change in age demographics and rising incomes, improvement in health awareness, changes in the disease profile (towards life-related ailments), rising penetration of health insurance and increasing opportunities from medical tourism will propel demand for healthcare facilities in India. Supply side constraints are also fuelling investor interest, the report said.

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