Medi Assist, India’s largest third-party administrator (TPA) on Monday said its wholly-owned subsidiary Medi Assist TPA has signed definitive agreement to acquire FairFax Asia-backed Paramount TPA for Rs 311.8 crore in an all-cash deal. Medi Assist’s CEO Satish Gidugu told ET that the deal will be funded through internal accruals and short term debt.
Medi Assist has Rs 270 crore net cash balance on the books as on June 30, 2024. The acquisition is expected to be completed by the end of FY2025, Gidugu said.
Dr. Nayan Shah, founder and managing director of Paramount TPA and FairFax Asia will be selling out. Fairfax Asia, a subsidiary of Toronto-based Fairfax Financial Holdings invested $11 million for 49% stake in 2020.
Nishith Desai Associates acted as legal advisor to Medi Assist and AZB & Partners acted as legal advisor to Fairfax Asia and the Shah family.
The Paramount deal will help Medi Assist to add market share of 6.2%, taking its overall share in the group segment to 36.6%. It also adds 4% taking Medi Assist overall health insurance industry market share by premium managed in India to 23.6%, as on FY24.
Paramount TPA is the 2nd largest TPA by premiums in the group health insurance segment as on FY24 basis.
It is managing Rs 3,866 crore of total premiums for the group and retail segment, with revenue from operations of Rs 153 crores in FY24. Paramount works with 30 insurers and over 3,000 group customers and retail policyholders.
Gidugu said it would take about four quarters to bring Paramount’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margins on par with Medi Assist by bringing automation and technology and drive efficiencies across teams.
Medi Assist has EBITDA margins of 21%, while Paramount has over 9%.
This is the second major acquisition by Medi Assist in the TPA space. It acquired Raksha TPA in March last year. Raksha acquisition gave Medi Assist firm footing in North and Central India markets.
A TPA provides operational services such as claims processing under a contract to another company. The crowded sector is seeing consolidation, as it requires scale, heavy investments in technology and high-quality customer service, operating under thin margins.
