Is India IHH Healthcare Bhd’s Next Big Growth Story?

Last Friday, IHH Healthcare Bhd (SGX: Q0F), one of the largest healthcare groups in the world by market capitalisation, announced that it had bought a 73.4% interest in India-based healthcare operator Ravindranath GE Medical Associates Private Limited for RM819 million (approximately S$280 million).

Ravindranath GE Medical Associates runs a chain of private hospitals in India under the Global Hospitals brand. Currently, IHH Healthcare only has two hospitals in operation in India with one more to be opened. Beyond this, IHH Healthcare also has a 10.85% stake in Apollo Hospital Enterprise Ltd, one of India’s largest hospital groups.

Meanwhile, Global Hospitals has five hospitals under its wing – in cities like Hyderabad, Bangalore, Chennai, and Mumbai – with a total of around 1,100 beds. Global Hospitals has plans to increase the number of its beds to 1,900 within the next five years. The investment by IHH Healthcare would thus significantly increase its business presence in India.

Global Hospitals’ plan can go a long way in helping IHH Healthcare meet its target of reaching a bed capacity of 10,000 before 2017. According to IHH Healthcare’s latest earnings press release , it’s operating more than 7,000 licensed beds at the moment.

On the surface, the deal seems logical and presents benefits to shareholders of IHH Healthcare. But, as there is limited information released about the deal, it is not possible to know the full impact of the Global Hospitals acquisition.

Given that Global Hospitals is not a small operator (as I already mentioned, it has roughly 1,100 beds at the moment), it’d pay for investors to watch how IHH Healthcare integrates Global Hospitals into the fold.

Foolish Summary

IHH Healthcare’s latest deal gives investors some inkling into management’s thinking behind the opportunities present in India. Given the potential of India’s healthcare industry with the country’s growing population and economy, the Global Hospitals investment may not be the last India-related investment that IHH Healthcare makes.

But, it could also be a subtle hint to investors that growth in IHH Healthcare’s key markets like Singapore, Malaysia, and Turkey may be maturing. That’s something for investors to keep their eyes on.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any company mentioned.