Telangana and Andhra Pradesh-based Krishna Institute of Medical Sciences has entered into a definitive agreement to acquire a majority stake in SPANV Medisearch Lifesciences Pvt. Ltd. on Monday, August 30.
SPANV runs a multi-speciality hospital in Nagpur in the name of Kingsway Hospitals, which has a capacity of 332 beds and is the largest private hospital in the city. KIMS will acquire a 51 percent stake as per the proposed deal, while existing promoters and shareholders of SPANV will continue to hold the remaining stake. The combined entity will be named KIMS Kingsway Hospitals.
Shares of KIMS were trading 1.7 percent higher at Rs 1,209.15 on BSE, up 1.6 percent after correcting from the highest point of the day.
The deal will be done through an infusion of funds worth Rs 80 crore. The fund will be used in repaying existing debt and strengthening the balance sheet. "The existing hospital premises has scope to scale up the bed capacity as and when required with minimal capex," the company said in an exchange filing.
This is KIMS' second such acquisition in Maharashtra. It earlier signed a shareholders agreement in June to acquire a 51 percent stake in KIMS Manavala Hospitals, which was to construct a 325-bed multi-speciality hospital in Nashik.
After establishing its presence in Andhra Pradesh and Telangana, KIMS is looking to expand its footprint across Maharashtra. "We are looking to expand to Karnataka and Tamil Nadu as well. We have an eye on inorganic as well as organic growth," KIMS Managing Director B Bhaskara Rao told CNBC-TV18 earlier in the day.
He added that the company was looking at a few more opportunities, but it remains unclear as to when they would materialise.
Rao is unperturbed about costs increasing as the company makes more acquisitions. "We always believe in having our own (assets) so that in the long run, they will give a good return on capital and good return on investments for everyone. That is our strategy from day one," he said.
KIMS currently runs a network of 13 hospitals, with its flagship hospital in Secunderabad having a capacity of over 1,000 beds. The company went public in June last year, selling shares at Rs 825 apiece. Since the IPO, the stock has returned 44 percent to shareholders.
According to Nischal Maheshwari, CEO of institutional equities and advisory at Centrum Broking, this sector is in for consolidation.
"If somebody is invested into this, they have to remain invested for a long term. This is how it will happen because these are all heavy capex industries. We do not cover it, but I think this is one of the good hospital chains, and consolidation is the way to go forward in the industry," he said.
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