Sutherland, Genpact eye Apollo BPO
MUMBAI: Back office majors Sutherland Global Services and Genpact are in the final race to acquire Apollo Health Street, the healthcare business process outsourcing (BPO) arm of Apollo Hospitals, in a deal valued at over Rs 1,100 crore ($220 million), said two separate sources briefed on the matter.
Sutherland, which has put in a higher bid, may be the front-runner to buy the asset even though both contenders are completing the due diligence process. Apollo Hospitals and associates hold about 54% stake, while Temasek Holdings, One Equity Partners and other financial investors have the remaining shares in the 12-year-old BPO firm. Barclays and Kotak Mahindra Capital are advising the promoters on the potential sale process.
The transaction is expected to value Apollo Health Street at about two times revenue , which is estimated at a little over $100 million. Apollo counts the BPO unit as a noncore investment and has been open to divesting its interest, though in the past it has stated intention to retain part of the shareholding. "We are open to strategic partnerships but there is nothing as yet," said a top Apollo executive, who didn't want to come on record. One of the sources mentioned earlier said Apollo may decide to fully exit or retain a stake.
"It can still swing both ways," he added.
Apollo Health Street takes up the outsourced financial and technology work for the big healthcare service providers , helping them to run profitable and efficient operations . It has 12 delivery locations , including four in India. The Prathap C Reddy family owned Apollo Hospitals is India's largest healthcare service provider with a network of 54 hospitals.
A Genpact spokesperson declined to comment on speculation, while an emailed query to Sutherland remained unanswered at the time of going to press.
The acquisition may help players like Sutherland and Genpact to scale up in the healthcare BPO market, which is expected to benefit from US president Barack Obama's reforms extending insurance cover to more Americans and the transitioning to an advanced classification of disease coding. The combined opportunity pool could be as big as $20 billion in the next five years.
BPO biggies like the $1.6-billion Genpact have been on the prowl for buyouts to bolster business verticals like healthcare and insurance. Last year, the NYSE-listed firm acquired Headstrong and EmPower Research, as part of a plan to expand consulting and business research practices.
The privately-held Sutherland , backed by Standard Chartered Private Equity and Oak Investment Partners, was founded by ex-Xerox employee Raj Vellodi in 1986. Its clients are from the retail, banking, insurance, healthcare, telecommunications and travel & hospitality sectors, and have global delivery centres in United States, Canada, Mexico, Philippines, United Kingdom and India, employing 25,000 people.