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Hinduja Global Services enters agreements to divest healthcare services biz

Hinduja Group’s business process management entity, Hinduja Global Solutions Limited (HGS) said Wednesday that it has entered into definitive agreements to divest its healthcare business in funds affiliated with Baring Private Equity Asia (BPEA), at an enterprise value of $1.2 billion.

The deal is subject to closing adjustments and is expected to be completed within 90 days, subject to regulatory and shareholder approvals.

“The cash that will come as a result of this transaction will be used to grow the business and also to seek to buy some capabilities ... where capabilities are essential to be able to do a good job transforming the customer experience. Therefore, HGS Global CEO Partha DeSarkar said in a call to discuss divestment and first quarter results.

He said the three areas in which HGS is looking to buy capacity are Three A’s- Analytics, Artificial Intelligence and Automation.

DeSarkar said that HGS is looking at changing the mix of the business and make it more dependent on technology. He added that the other part of the business is about $ 350 million in size and improving in profitability.

The healthcare sector has more than 20,000 employees in four geographies - India, the Philippines, the United States, and Jamaica) and posted revenue of nearly $ 400 million in FY2021.

HGS said it will focus on enhancing Consumer Engagement Solutions (CES), HGS Digital and the HRO / Payroll business that supports many of the top global brands in its 9 verticals.

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Services provided to healthcare clients through HGS Digital and HRO / Payroll will continue to be part of the HGS’ portfolio.

"Our healthcare business has grown steadily over the years. We have reached a point where we can recommend to the developer to liquidate their stake in this business to unlock value for all HGS stakeholders. We will use the funds generated to invest strategically for the future growth of the organization. We see long-term value and benefit for HGS in doing so, DeSarkar said in a statement earlier.

HGS 'Healthcare Services business supports payers, providers, laboratories, durable medical equipment companies, and pharmaceutical companies with solutions that augment clients' healthcare teams to deliver better outcomes for patients, members, and business and finance.

Services cover the full life cycle of the payment organization, including member acquisition, registration and billing, benefit setup, claim adjudication, vendor accreditation and data management, payment integrity and financial recovery, grievance and appeals, provider and member participation, prior authorizations, case management and population health management, and the various functions in the provider organization's revenue cycle.

Post completion of the transaction, HGS will transfer all client contracts, employees and assets, including infrastructure related to the healthcare business.

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“We have invested in the technology services industry for more than two decades and have great admiration for HGS as a leading specialty provider of healthcare services. We are now excited to have the opportunity to partner with CEO Ramesh Gopalan and his team to help take HGS's healthcare business to the next level as an independent startup. This will be our seventh investment in the sector and third in healthcare technology services after previous investments in CitiusTech and AGS Healthcare, and we remain excited about the digital transformation opportunity in the space,” said Jimmy Mahtani, MD, BPEA.

Barclays Bank Plc.acted as the sole financial advisor to HGS on the transaction.

Q1 Results

The company also announced its first quarter results on Tuesday. Revenue for the quarter ended June 30 was Rs 15,505 crore, with year-on-year growth of 25.5 percent, while net profit increased 137.7 percent to Rs 1,170 crore. Net margins stood at 7.5 percent.

HGS had 252 core BPM clients and 717 HRO / payroll processing clients at the end of the quarter, and employee headcount was 42,769, an increase of 2,880 from the previous quarter.

The firm had 55 global delivery centers in seven countries at the end of Q1.

For the year ended March 31, 2021, HGS had revenue of $753.9 million.

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