KKR to Acquire 51% Stake in HCG from CVC Capital Partners

Despite the change in ownership, HCG's founding family, led by Dr BS Ajaikumar, will retain 10.87% of the company's shares.

Global investment firm KKR is set to acquire a controlling 51% stake in Bengaluru-based cancer care hospital chain Healthcare Global Enterprises (HCG) from private equity firm CVC Capital Partners, according to sources familiar with the matter.

The acquisition marks KKR's continued focus on India's rapidly expanding healthcare sector, which has witnessed significant private equity-led consolidation in recent years.

The definitive agreements are expected to be signed within the next few days, possibly as early as this weekend, as reported by ET.

KKR plans to acquire the 51% stake at INR 430-440 per share, representing a 14-16% discount to HCG's last recorded market price of INR 511.45 per share on the Bombay Stock Exchange (BSE). The deal is valued at approximately INR 3,128 Cr.

Following this, KKR will launch a mandatory open offer for an additional 26% stake at an expected INR 490 per share, following the formula set by the Securities and Exchange Board of India (SEBI).

If successful, KKR's total ownership in HCG will rise to 77%, bringing the overall transaction value to an estimated INR 4,900 Cr.

HCG's stock has surged 44% over the past six months, driven by improved financial performance and expectations of a sale.

HCG's Founding Family & CVC's Stake Retention

Despite the change in ownership, HCG's founding family, led by Dr BS Ajaikumar, will retain 10.87% of the company's shares.

However, Dr Ajaikumar, an oncologist-turned-entrepreneur, is expected to transition from his current role as Executive Chairman to a non-executive role, where he will continue steering the chain's research and development initiatives.

CVC Capital Partners, which currently holds a 60.36% stake, will retain a 9% shareholding post-transaction.

The Luxembourg-based firm originally acquired its majority stake in HCG in June 2020, investing approximately INR 1,049 Cr through the purchase of new shares and convertible warrants. It later increased its stake through a mandatory open offer.

KKR's Strategic Move in Healthcare

This acquisition reinforces KKR's renewed interest in India's healthcare sector. The firm had earlier exited Max Healthcare, securing one of its most profitable deals in India.

Last year, KKR re-entered the sector by acquiring Baby Memorial Hospital, signaling its strategy to strengthen its presence in specialty hospitals and healthcare services.

India's cancer care industry is growing at a compound annual growth rate (CAGR) of 17%, and HCG is outpacing the industry's expansion with its aggressive growth plans.

KKR and CVC Capital Partners began bilateral negotiations for this deal in October 2024.

Several global private equity players, including Bain Capital, were interested in acquiring HCG. However, KKR ultimately secured the agreement, concluding months of discussions.

Leading investment banks Goldman Sachs, JP Morgan, Allegro, and Ambit are advising on the deal.

HCG's Expanding Operations

Founded in 2005, HCG operates a network of 21 comprehensive cancer centers, three multispecialty hospitals across India, and an international facility in Kenya.

The company faced significant financial challenges during the COVID-19 pandemic, primarily due to debt-financed expansion and disruptions in cancer care services.

However, in recent years, HCG has improved its operational efficiency and undertaken strategic expansion initiatives.

In late 2024, HCG acquired MG Hospital in Vizag, a 196-bed comprehensive care provider with a substantial 35% operating margin. Additionally, the hospital chain inaugurated a 200-bed cancer care center in Ahmedabad and is adding 125 beds in North Bengaluru.

The company aims to add 900 more beds over the next four to five years to capture growing market opportunities.

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