KKR earmarks up to $200 mn to scale up its India medtech bet

The firm has been proactively scouting for scalable and profitable assets it can merge under Healthium—acquired last year for about ₹7,000 crore—as a bolt-on strategy and has allocated capital and resources for this, the people cited above said, speaking on the condition of anonymity.

The company also has the firepower to invest significantly more if opportunities arise, one of the people cited above said, adding that the private equity firm is keen on expanding its product portfolio and entering new therapy areas, such as cardiology, orthopaedics, and diagnostics.

India’s medtech market is projected to grow from $12 billion in 2023-24 to $50 billion over the next five years, according to an EY report. For KKR, Healthium joins the growing list of other healthcare investments in India and Asia-Pacific. KKR, which acquired Healthium through its fourth Asian fund, has invested in JB Chemicals and Pharma Ltd, Baby Memorial Hospital, Max Healthcare Pvt. Ltd, Healthcare Global Enterprises Ltd, and Gland Pharma Ltd.

KKR declined to comment on Mint‘s emailed queries.

This is increasingly becoming a preferred strategy for private capital as it allows them to double down on recently acquired platforms and help achieve operational synergies to achieve growth, said Vivek Pareek, partner at Saraf and Partners. This is driven by the fact that several sectors, such as healthcare, financial services and technology-enabled services, remain fragmented, creating strong incentives for consolidation.

“Healthium is doing very well. We acquired it last year, and it continues to grow strongly. We are actively looking at consolidation opportunities, adding complementary products and leveraging its strong sales and distribution network to scale further,” Gaurav Trehan, KKR’s co-head of Asia Pacific and CEO of KKR India, said at a media roundtable in Mumbai last week. “For us, healthcare, including services, medical products, and pharmaceuticals is a major thematic area, and we’re playing it across multiple fronts.”

The company had adopted a similar bolt-on strategy in JB Pharma, acquiring four to five assets for growth before exiting with more than 5x gains. Baby Memorial Hospital, too, has made several acquisitions.

The bolt-on strategy involves acquiring smaller businesses to expand operations, diversify offerings, or reach new markets. PAG-backed Manjushree Technopack, Temasek-backed Haldiram Snacks and ChrysCap-backed Theobroma have also allocated capital for such deals, Mint reported earlier.

“A majority of private capital in the recent past has been deployed in control deals and then layering bolt-ons to institutionalize businesses and unlock scale,” Pareek said. Other elements like capital availability, regulatory clarity and fundraising by domestic general partners–or GPs who manage funds–with a strong sense of valuation discipline pave the way for such bolt-ons that make capital deployment in smaller and accretive deals more lucrative, he said.

Healthium ramp-up

KKR bought a controlling stake in Healthium in a ₹7,000 crore transaction from Apax Partners, which acquired the asset in 2018.

Founded in 1992, and formerly called Sutures India Pvt. Ltd, Healthium develops, manufactures and sells a broad range of surgical products globally, including wound closure, arthroscopy, and advanced wound closure products. The company and its subsidiaries have six manufacturing facilities with three R&D centres.

It acquired surgical needles maker Quality Needles from TPG Growth in 2017; it bought the gelatin sponge business of Sri Gopal Krishna Labs Pvt. Ltd as a going concern on a slump sale basis; and also acquired CareNow Medical, which designs, manufactures, and markets advanced wound-management and infection prevention products, in 2021.

Over the last few years, Healthium strengthened its portfolio of wound-closure devices and consumables, investing in new franchises such as arthroscopy and advanced wound care through in-house R&D and acquisitions. It also expanded its presence to more than 90 countries today. Its revenues have grown at an annualized rate of 15% over the last five years, with Ebitda growing at over 20% during the period. Ebitda is earnings before interest, tax, depreciation and amortization, a measure of operating income.

In FY24, the company’s revenue rose 14.7% on-year to ₹835.4 crore, driven by healthy demand for its products in India and overseas markets. But profits tumbled nearly 94% to ₹37.2 crore, according to an Icra Ltd report published earlier this year. The profit slump was attributed to a non-cash expense of approximately ₹171 crore related to Esops, and a one-time boost worth ₹490.3 crore in FY23 from the sale of its UK business.

KKR’s India play

Over the last five years, KKR has invested about $9 billion in India across private equity, private credit and other vehicles.

Through its insurance business in the US, it recently lent $600 million to India’s Manipal Group to acquire Sahyadri Hospitals. Globally, KKR has invested more than $20 billion in the healthcare sector since 2004.

The firm has also been disciplined in returning capital to its investors on a yearly basis. In recent years, the firm has sold a controlling stake in JB Chemicals to Torrent Pharmaceuticals Ltd for $1.4 billion, partially exited its stake in Vertis Infrastructure Trust for approximately $280 million, and exited Max Healthcare.

KKR is also planning public market exits through the initial public offerings (IPOs) from other Indian portfolio companies, such as LEAP India and Hero Future Energies. The firm intends to take its education bet, Euro Kids, public and plans to sell the enterprise business of Ramki Enviro, according to reports.

India is the best-performing market in Asia for the firm and has been the largest contributor to its private equity and infrastructure funds, Trehan had said at the media roundtable. The returns from India have been very strong and among the best compared to other peers and markets in the region, he added.