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True north in talks to buy 80% in Max Bupa

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MUMBAI: Private equity firm True North is in advanced talks to buy a large stake in Max Bupa Health Insurance, a joint venture between Max India and the UK-based healthcare services expert, Bupa, said two people aware of the development.

The deal is likely to value Max Bupa at Rs 1,700 crore. “The talks are in an advanced stage between True North and Max Bupa, where True North is looking to invest around Rs 1,400 crore for around 80 per cent stake,” said a source close to the development. Max India did not respond to an email query.

Max India owns 51 per cent while Bupa owns 49 per cent in the venture.

After the transaction, Bupa will own 20 per cent stake in the company. True North was earlier in discussions to buy another health insurance company, Religare Health, but the deal did not fructify. Max Bupa has a paid up capital of Rs 941 crore at the end of September 30, 2018.

It had posted a loss of Rs 30 crore during the first half of financial year 2018-19.

Total premium income had gone up 24 per cent to Rs 404 crore in the first half against Rs 327 crore a year ago.

Max Bupa’s focus has been on the business to the corporate segment since inception.

Last year, the company has grown at 27 per cent, faster than market growth of 23 per cent.

It has a market share of 0.50 per cent in the general insurance space. This is the second transaction in the standalone health insurance space.

Safecrop Holdings, a consortium of WestBridge AIF, Rakesh Jhunjhunwala and Madison Capital, had bought Star Health Allied Insurance Co. There is talk of consolidation in the general insurance space, given the number of players and the challenges on scaling the business, especially for small-sized players. Private equity companies are showing interest in companies with niche capabilities. The sector has been expanding 25-30 per cent annually for the past five years, and needs fresh capital to write new business.

There are six standalone companies with less than 6 per cent share in the overall health insurance business.

The latest to enter the sector is Aditya Birla Health.

HDFC is looking to buy another health insurance company Apollo Munich to enter the standalone health insurance space. “The health insurance industry has seen tremendous growth and is a very attractive area for investors like PE/VCs and also strategic investors,” said Joydeep Roy, partner, PwC. “Most of the incumbent companies do not have scale and capital demands will be there.

So they may remain open to the idea of either mergers or accepting investors vis-a-vis going to the bourses.”




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