Baring Private Equity Asia has signed a definitive agreement to acquire healthcare analytics company CitiusTech from its current PE backer and serial technology entrepreneurs Rizwan Koita and his fellow Indian Institute of Technology (IIT) alumnus Jagdish Moorjani, in a deal valuing the company at a little over $1 billion.
The formal agreement was signed on Thursday and a public announcement is expected within a few days, people with knowledge of the matter said. This will be the largest buyout in the healthcare tech space involving an Indian company till date.
ET reported in its July 8 edition that Baring was the frontrunner in the transaction.
The deal was signed after a highly-competitive bidding process that attracted some of the largest buyout PE funds, people aware told ET. Baring eventually outbid New York-based PE giant KKR.
The Hong Kong-based $17 billion fund also fended off two other groups — Goldman Sachs with New Mountain, and Chrys Capital along with Ontario Teachers’ Pension Plan. CitiusTech also drew interest from Blackstone, Bain Capital, Apax and CVC Capital Partners, among others.
The binding offers were submitted in the first week of July.
CitiusTech provides healthcare technology services and solutions to medical technology companies as well as healthcare and life sciences organisations. It employs over 3,000 people and has centres in India, Singapore, the UAE, the UK and the US.
The company posted $175 million in revenue with a 27-30% operating margin in fiscal 2019 and is expected to clock an estimated Ebitda of $55-60 million on a $200 million revenue in FY20. The company, therefore, was richly valued at 18x forward multiple.
PE firm General Atlantic (GA) had invested $111.25 million in CitiusTech in March 2014 and owns about 32% of the company, with Koita, Moorjani and employees holding the rest. GA had mandated JP Morgan in April to find a buyer. General Atlantic is expected to make in excess of a 3.5x return on its investment.
Baring will end up owning about 80% of CitiusTech through a combination of primary and secondary sales, but the founders and the management team will continue to run the business.
Baring, GA and CitiusTech were not immediately available for comments.
This would be Baring PE Asia’s first healthcare tech investment in India, after owning healthcare platforms and pharmaceutical companies in China and Japan.
The PE firm, the principal shareholder in Hexaware, acquired NIIT Technologies earlier this year after buying out the founder-promoters. Bullish on the Indian outsourcing and technology space, it was in negotiations with the Mindtree promoters to come in as a white knight against Larsen & Toubro.
CitiusTech is 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 with Moorjani.
The US is the biggest market for the company, contributing 90% of its revenue. It expects other international businesses to soon account for 20% of revenue, driven by organic and inorganic growth.
The US healthcare information technology market generated $61 billion in 2017, according to a report by consultants Allied Market Research. It is projected to reach $149.17 billion by 2025. Demand is driven by government mandates and support for healthcare IT solutions, the rising use of big data in healthcare, high returns on investment for healthcare IT solutions and the need to curtail escalating healthcare costs.