CDC and Abraaj Group invest $17.5 million in AP-based Rainbow Hospitals chain

New Delhi: Global development finance institution CDC Group and Dubai-based private equity investor Abraaj Group have jointly invested Rs. 107.3 crore ($17.5 million), for an undisclosed stake, in Rainbow Hospitals, the UK-based government-owned institution announced on Tuesday.

Proceeds from the investment will be used by the Hyderabad-based Rainbow Hospitals to expand its presence beyond Andhra Pradesh.

The 450-bed paediatric and maternity healthcare-focused hospital chain will set up hospitals in Chennai, Pune, Visakhapatnam and Kurnool, and increase its number of beds to 1,000 by 2017. The capital infusion is also expected to support the creation of as many as 3000 new jobs, up from its present employment figure of about 1,000.

"In parallel, we would also like to develop tertiary paediatric care in tier-2 like Vizag and Kurnool," said Ramesh Kancharla, chairman and managing director, Rainbow Hospitals.

Established in 1999, Rainbow Hospitals is India's largest specialized paediatric and maternity care company with four maternity, paediatric and neonatal intensive care units, and one outpatient clinic in Hyderabad. The business has expanded with four centres added in the last six years.

"With employment in the group currently at around 1,000 people, we expect this to grow as much as four times over the course of our investment, led by the rapid growth in the Indian healthcare market," pointed out Srini Nagarajan, regional director for CDC's South Asia operations.

He also added that with demand expected to grow at around 15% per annum over the next decade, it was clear that the gap in provision of healthcare in India will need to be plugged by the private sector.

The latest transaction is CDC's first direct equity investment in India since the launch of its new investment strategy in late 2012.

Under its new strategy, announced in September last year, CDC now provides direct debt and equity investment to businesses in South Asia and Africa, while continuing to act as a fund-of-funds investor.

From 2004 to 2010, it operated primarily as a fund-of-funds investor, investing in companies through intermediary fund managers.

The Rainbow Hospitals investment also builds upon Abraaj Group's long-standing partnerships with healthcare institutions in South Asia and represents its sixth healthcare investment in the region.

"The Abraaj Group has been an early and committed investor in the healthcare space and this transaction represents our 28th investment globally in this sector," said Balaji Srinivas, managing director at the Abraaj Group.