Private equity firm Everstone has initiated the process to exit Sahyadri Hospitals two years after backing the institution. It is targeting an internal rate of return (IRR) of 50-60%.
Private equity and venture capital firms typically look at a 5-6 year investment horizon and target an IRR of 20-30%. Seven to eight investors have shown interest to invest in the hospital chain, two people familiar with the development said, seeking anonymity.
However, they did not disclose the names of prospective investors, as it is “too early”.
An investment banker, who led several healthcare deals, said private equity-backed hospital chains are poised to command a higher valuation in this market over those that have just one or two units.
“Private equity-backed hospital which are one or two locations is at early double-digit multiple of Ebitda, whereas chains like Sahyadri, Paras Hospital and Asian Institute of Medical Sciences hospital are likely to command mid to late teen multiples,” he said, also seeking anonymity.
Everstone agreed to acquire a controlling stake in Sahyadri in April 2019 and completed the transaction a few months later. Founded by neurosurgeon Charudutt Apte in 1994, Sahyadri has eight hospitals with over 900 beds in Maharashtra.
