Turnaround specialist Abhay Soi and KKR-promoted Max Healthcare poised for D-Street debut

Abhay Soi, a first-generation entrepreneur and dealmaker, has earned a standing as a restructuring expert in healthcare, having turned around legacy hospitals using innovative, asset-light operating and management models. Delhi’s BL Kapur Hospital (renamed Radiant Life Care) and Mumbai’s Nanavati Hospital are two good examples.

Soi will soon take a shot at creating a mark in the listed universe as the Chairman of the newly minted Max Healthcare, the country’s second largest healthcare chain by revenue. The combined Max Healthcare is a product of a court-approved scheme of amalgamation involving the merger and demerger of the healthcare assets and business of Radiant Life & Max Healthcare and the residual Max India (following the demerger of Max Bupa and Antara Living).

Kotak Mahindra Capital acted as the financial advisor for the restructuring process. Approvals from the NCLT (National Company Law Tribunal), market regulator Sebi and the exchanges have been secured and the healthcare chain is all set to start trading under the automatic listing route within a few days.

It has been a meteoric rise for Soi, a St Stephens College alumnus, who earlier led financial restructuring at EY and KPMG and entered the healthcare industry a decade ago as an outsider.

“What struck me most, soon after he started working at Arthur Anderson (it was his first job fresh out of college), was firstly his ability to form deep meaningful relationships and secondly the steadfast focus to get the job done,” recalled Munesh Khanna, Partner, Backbay Advisors. Khanna was earlier the head of corporate finance at Arthur Andersen.

A quick look at the firm’s financial performance since the Radiant Life-Max Healthcare deal (Radiant Life acquired a 49.7 percent stake in Max Healthcare by buying out South Africa’s Life Healthcare in June 2019) revealed that Soi’s Midas touch has worked yet again.

The restructured entity’s earnings before interest, taxes, depreciation and amortisation (EBIDTA) rose by more than 60 percent in FY20. According to the firm, it outperformed rivals such as Apollo Hospitals and Fortis Healthcare in Q2, Q3 and Q4 in terms of EBIDTA margin and in revenue growth in Q4.

Max Healthcare’s FY20 net revenue is pegged at Rs 4,026 crore and the hospital chain has 17 facilities with a bed capacity of around 3,400, 4,400 plus clinicians and more than15,000 employees. Its footprint is spread across NCR (National Capital Region), Mumbai, Mohali, Bathinda and Dehradun. Its super speciality hospitals have a complete range of high-end services including solid organ and bone marrow transplants. In terms of segment-wise revenue, 16 percent comes from the fast growing oncology vertical, 12 percent from cardiology and other specialities like neurology, orthopedics and nephrology contribute around 8 percent each.

“Max is a well-known name in the NCR market and location wise, they have got it right with their city-centric hospitals. The company has sufficient land parcels, which will facilitate brownfield expansion,” said Param Desai, VP, Elara Capital.

Post listing, Soi and private equity major KKR would be the promoters of Max Healthcare with stakes of 23.3 percent and 52 percent, respectively. The Max group will be re-classified as public shareholders.

Apollo Hospitals is the market leader based on revenue, with Fortis, Narayana Hrudayalaya and Manipal Hospitals occupying the third, fourth and fifth positions respectively.

“I think they have done well (after the takeover) by reducing costs and improving margins,” a rival industry executive weighed in on Max.

Post the entry of Soi and KKR, the twin pronged strategy of pre-determined structural cost savings and augmentation of the clinical programme was swung into action and later helped to combat the impact of COVID-19. But the road ahead is challenging for the sector, with the global pandemic hitting revenue and occupancy levels of peers during the initial phase and patients opting to defer surgeries.

Soi and team are optimistic. “Our occupancy has scaled up from the lows of 28 percent in April to more than 65 percent in August. Up to three-fourth of such occupancy is non-COVID and gradually increasing. We believe the worst may be behind us,” he told Moneycontrol.

Before taking the plunge into healthcare, Soi had also co-founded a $350 million special situations private equity fund for American billionaire Seth Klarman’s Baupostgroup. So will he scout for M&A targets? “If and when value accretive opportunities of a viable scale arise in metros, we will look at them on merit,” he added.