Baring Private Equity Asia has emerged as the frontrunner to acquire healthcare analytics company CitiusTech from its current PE backer and serial technology entrepreneurs Rizwan Koita and his fellow Indian Institute of Technology alumnus Jagdish Moorjani.
The deal is expected to be sealed at a valuation of $1 billion, after a highly competitive bid process that saw some of the largest buyout PE funds participate, people aware of the ongoing discussions told ET.
The Hong Kong-based $17-billion fund is competing with US buyout group KKR, another strong contender, and two other bidding groups — Goldman Sachs together with New Mountain, and homegrown Chrys Capital along with Canadian pension fund Ontario Teachers Pension Plan.
The binding offers were submitted in the first week of July. The last round of negotiations are on, and a final decision is expected later this week, the sources said.
CitiusTech is a provider of health-care technology services and solutions to other medical technology companies, as well as healthcare and life sciences organisations.
Private equity firm General Atlantic had invested $111.25 million in CitiusTech in March 2014 and owns around 32% of the company, with Koita, Moorjani and employees holding the rest. GA had in April mandated JP Morgan to find a suitor for its five-year investment.
The highly competitive bidding saw interests from Blackstone, Bain Capital, Apax and CVC Capital Partners among others.
If successful, the new investor will end up owning around 80% of the company through a combination of primary and secondary sale, but the founders and the management team will continue to run the business.
When contacted GA, Baring Asia, and KKR declined to comment.
ET was the first to report about the impending transaction, back in April, and about five PE funds being shortlisted after the initial cut, on June 6.
This would be the first healthcare tech investment for Baring PE Asia in India, after owning healthcare platforms and pharmaceutical companies in China and Japan.
The PE, the principal shareholder in Hexaware, had earlier this year acquired NIIT Technologies after buying out founder promoters.
Bullish on the Indian outsourcing and technology space, it was also in negotiations with the Mindtree promoters to come in as a white knight against L&T. CitiusTech, with 3,000 employees and having centres in India, Singapore, the UAE, the UK and the US, posted $175 million in revenue with a 27-30% operating margin in fiscal 2019. It clocked an estimated Ebitda of $55-60 million on $200 million revenue.
It is primarily focused on providing digital services such as cloud analytics and data management. Its clients include US-based Geisinger Health, DaVita and Centra Health.
Koita was the founder and CEO of Transworks BPO, which he sold to the Aditya Birla Group in 2003. He then set up CitiusTech in 2005 with Moorjani.
Currently, the US is the biggest market for the company, contributing 90% to its total revenues. But it expects other international business to soon account for 20% of its revenues, driven by organic and inorganic growth.
In terms of business segments, enterprise application has traditionally been the biggest, with data management and data science also starting to record rapid growth, given the impact, these have in improving healthcare delivery.
“We have been growing at 25% annually over the last few years, so even if we continue to grow at this rate, we would reach our goal of becoming a $500 million company in five years,” Koita had told ET in an interview in November.
According to a report by consultants Allied Market Research, the US healthcare information technology (HCIT) market generated $61.01 billion in 2017, and is projected to reach $149.17 billion by 2025, growing at a CAGR of 11.7% from 2018 to 2025.
The demand is driven by government mandates and support for healthcare IT solutions, rising use of big data in healthcare, high returns on investment for healthcare IT solutions, and the need to curtail escalating healthcare costs.
Source: Economic Times