Key Share­hold­ers Bat­tling it Out for Con­trol of SevenHills

JP Mor­gan’s PE fund & doc­tor-pro­moter Ji­ten­dra Das Ma­ganti at log­ger­heads

The Economic Times - - Companies: Pursuit Of Profit - Sneha.Shah@ times­

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

the de­vel­op­ment.

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-


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.

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