Medi Assist’s Group Insurance Market Share To Rise After Paramount Health Deal, Says CEO

Medi Assist Insurance TPA, a wholly-owned subsidiary of Medi Assist Healthcare Services, announced earlier this week the signing of a definitive document of purchasing a 100% stake in Paramount Health Services and Insurance TPA. While the new business will take four quarters to get close to Medi Assist’s margins, the company will continue to be opportunistic in acquiring more businesses.

Medi Assist Healthcare Services is currently the biggest player in the industry. The company will be acquiring more businesses in the future and continues to be opportunistic, said Chief Executive Officer and Whole-time Director Satish VN Gidugu. “Clearly for us, it has to make sense from a synergy of revenues perspective and our ability to acquire the business and continue to grow."

The Paramount Health Services deal worth Rs 311.8 crore is expected to close towards the end of this fiscal. Paramount has operating revenue of Rs 153 crore and a margin of about 9.5%, Gidugu said. “Typically it takes us four quarters to turn the business around, move them to our operating model and then have the consolidated margins showing up. We expect Paramount to start getting close to our margins in about four quarters from the date of closing,” he said.

The new acquisition will also help Medi Assist take its group insurance market share from 30% to 37%, as per the top executive. He also opined that the customer retention rates will improve as well. “As an example from our acquisitions last calendar year, on a consolidated basis we have improved our retention rates from 92% annum to 94%. So Paramount coming in further strengthens our growth story,” Gidugu said.

The Paramount acquisition is also set to bring Medi Assist Rs 3,800 crore premium, since the corporate accounts of both the companies rarely overlap. This gives Medi Assist an additional over 3,000 corporate accounts as well. 

With the TPA fees of Paramount being similar to Medi Assist Insurance's, Gidugu expects the company’s accretion to improve over time. 

The acquisition is set to be funded mostly by internal accruals, the CEO said. “From a consolidated group perspective, we have around Rs 270 crore of cash as of Q1. The enterprise value is Rs 311.8 crore. Given that we expect the closing to happen sometime in the end of the fiscal, we should be able to fund this mostly through internal accruals and as needed maybe a short term debt,” he explained.

Despite the acquisition, Medi Assist will continue to grow at a 20% rate on a higher topline of Rs 800 crore in fiscal 2025, Gidugu said. “On premium, we expect to continue on track with industry growth because the industry itself is expanding very rapidly. We would like to think that a 20% growth rate on a higher topline is doable as long as the industry expands. We will grow at par or above industry growth rates,” he said.