Key Shareholders Battling it Out for Control of SevenHills
JP Morgan’s PE fund & doctor-promoter Jitendra Das Maganti at loggerheads
Mumbai: With the Supreme Court deadline of March 31 to repay its lenders drawing closer, the two principal sets of shareholders of SevenHills chain of hospitals are trying to buy each other out from the company in yet another example of souring of relationships between a private equity investor and an investee company.
Both JP Morgan’s private equity fund — that invested $72 million in the company in May 2008 — and doctor-promoter Jitendra Das Maganti are at crosshairs trying to get full control of the operations. This comes after exploring a strategic sale of the chain for more than two years. But the talks have remained inconclusive over valuation differences, according to multiple people aware of the ongoing negotiations. JP Morgan now owns a significant minority stake in the company.
The bone of contention is the ₹ 1,800 crore valuation demand of Maganti, said three people with direct knowledge of the development as most are not willing to pay beyond ₹ 1200-1400 crore. Meanwhile, lenders of the chain led by Axis Bank had moved court to seek repayment of dues of about ₹ 900 crore. Maganti has assured the court that he will make the payment in two tranches by May 2017, said officials in the know. “Since JP Morgan has been trying to sell the stake for the last two years, they have now decided to buy out the promoter and then exit the company after streamlining the business,” said one of the persons with direct knowledge of 2 principal sets of shareholders trying to buy each other out
Firm earlier explored strategic sale options
Talks remain inconclusive over valuation differences
In the past, a diverse set of potential suitors such as the Reliance Group, Africa’s Netcare and other financial sponsors have held talks to acquire controlling stake in the company. However, none yielded any result.
Calling the story speculative and misleading, a spokesperson for SevenHills in an emailed response said, “We would like to state that both Dr Maganti and JP Morgan are committed to the long term success of SevenHills Hospital.” A spokesperson for JP Morgan did not respond to emailed queries.
According to another source, Maganti, who is the controlling shareholder, is also in parallel talks with investors to help him buy out JP Morgan and settle with his lenders.
Founded in 1982, SevenHills owns two hospitals, in Vishakhapatanam and Mumbai. The Mumbai hospital, a 1,500bed one, has been billed as Asia's largest private sector hospital built over 2 mil-
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lion square ft. “Most of the value demand comes from the prime real estate that the company holds in Mumbai,” one of the persons quoted above said.
Seven Hills has been encountering debt woes for the last few years. In 2013, the promoters and the PE investor pumped in more money to tide over the debt crisis. JPMorgan alone pumped in an additional round of $50 million.
However, the debtors have been pressurizing the management for repayment or sellout.
JPMorgan, through its Asia fund, had invested heavily in Indian healthcare companies. The fund had invested more than $1.1 billion since 2007 in companies such as Apollo Health Street, M Modal, Narayana Hrudayalaya and Western Hospitals, data from Venture Intelligence, an M&A and PE data provider, shows.
Healthcare assets are generally valued at around12-15 times their earnings before interest, tax, depreciation and amortisation, or EBITDA.