Warburg Pincus today completed its investment in the Max India group by bringing in an additional Rs 115 crore (Rs 1.15 billion) capital into Max Healthcare Institute, the group subsidiary.
This represents a 23 per cent stake in the fully diluted equity base of the subsidiary, having acquired 2.87 crore (28.7 million) shares at Rs 40 per share.Warburg Pincus made the first round of investment in January 2005 to the tune of Rs 25 crore (Rs 250 million) at Rs 13.25 per share.
The parent company, Max India holds 70 per cent stake in the fully diluted equity base of the healthcare company.
Further following the Government of India's approval to Warburg Pincus to acquire 28.75 per cent in Max India, the international private equity investor has a total exposure of Rs 340 crore (Rs 3.4 billion) in the Delhi-based group.
Warburg Pincus has invested in the parent company, Max India, at Rs 200 per share. Warburg Pincus got the shares in May last year through preferential allotment.
About 10 days back the government approved the proposal by the two investment arms of Warburg Pincus to pick up close to 50 per cent stake in Max India Ltd through preferential allotment and an open offer.
The latter was completed in March 2005, but received little response, said company sources.
"This induction of capital will take care of our future funding requirements for the next 5 years," said B Anatharaman, joint managing director, Max India.
Funding from Warburg Pincus will help support the capital intensive healthcare business and life insurance business. It has now fully tied up its long-term requirement for the Rs 600-crore (Rs 6 billion) healthcare project.
The capital for the insurance business will go up to Rs 1,000 crore (Rs 10 billion) in the next 3 years, he added.
With the induction of Warburg Pincus, the shareholding structure now changes with promoters holding 40 per cent stake, foreign institutional investors at 8 per cent, the general public at 24.3 per cent and Warburg Pincus at 28.7 per cent in Max India.
"With the induction of capital, we will be able to meet the needs of the life insurance business and repay the debt to the parent," said Anatharaman. Max India will be debt-free by the year-end, he added.
In Max Healthcare Institute, with the induction of additional capital from Warburg Pincus, the promoters will hold 70 per cent, the international private equity investor 23 per cent and two foreign institutional investors another 7 per cent.
Speaking on the hospital project, Anatharaman said the revised Rs 600-crore project cost would require no further private equity investment with equity now pegged at Rs 325 crore (Rs 3.25 billion).
Of this amount, Warburg Pincus has put in Rs 140 crore (Rs 1.4 billion), Max India Rs 165 crore (Rs 1.65 billion) and FIIs another Rs 20 crore (Rs 200 million).
