KKR to Acquire Kerala's Baby Memorial Hospitals for $300 Mn

The buyout fund plans to acquire a 70% controlling stake in Kerala's Baby Memorial Hospital (BMH) with an investment of $300 million (INR 2500 Cr).

KKR & Co has planned to acquire a 70% controlling stake in Kerala's Baby Memorial Hospitals (BMH) for $300 million (INR 2500 Cr).

With this move, the buyout fund plans to re-enter the Indian hospital sector after a profitable exit from Max Healthcare two years ago. 

BMH, based in Kozhikode, is one of the largest hospitals in Kerala, with 500 beds across three hospitals. 

The hospital, founded in 1987 by KG Alexander, offers tertiary care services across multiple specialties. It employs over 2000 staff members, including over 300 doctors, and has over 40 medical and surgical departments.

"KKR plans to ramp up BMH and use it as a hospital platform in India to acquire and build assets," sources said. 

Reportedly, KKR's investment aims to expand BMH's operations across India. The investment includes a primary infusion to fund growth and a secondary investment to dilute the current promoters, who will continue to run the hospital.

Return of KKR in the Indian Healthcare Sector

KKR's return to the Indian healthcare sector follows its successful investment in Max Healthcare, from which it exited in 2022 with a fivefold return. 

KKR's affiliate, Kayak Investments, sold its remaining stake in Max Healthcare for approximately INR 9,186 Cr, the largest single block deal by a private equity firm in India.

In 2019, KKR provided BMH with an INR 200 Cr debt for expansion, which is now due for repayment. Over the past two years, BMH has been in discussions with several private equity funds as part of the repayment process.

KKR's planned acquisition of BMH follows Quality Care India's recent acquisition of Kerala's KIMS Health Management by Quality Care India Ltd (QCIL). 

QCIL, backed by Blackstone and TPG, acquired an 85% stake in KIMS at a valuation of INR 3500 Cr, with founder Dr M.I. Sahadulla retaining a 15% stake.

PE-Driven Consolidation

The Indian hospital industry has seen significant private equity-led consolidation in recent years, with acquisitions of large chains such as Manipal Health. Private equity firms typically build a platform, grow it organically and inorganically, and then benefit from high public market multiples upon exit.

A 2020 Human Development Report highlighted India's low hospital bed availability, ranking 155th globally with five beds and 8.6 doctors per 10,000 people. 

According to a PwC report, the hospital industry will need around $245 billion in investments over the next 20 years to meet demand, requiring the addition of 3.6 million beds, 3 million doctors, and 6 million nurses.

Additionally, BMH contributes to medical education, offering postgraduate DNB courses for doctors. The hospital runs the Baby Memorial School of Nursing and the College of Nursing, which provide various nursing degrees under the Indian and Kerala Nursing Councils and University.