Exclusive: Paramount acquisition to boost market share: Medi Assist CEO Satish Gidugu

In one of the largest acquisitions in third party administrator (TPA) to insurance companies in India, Bengaluru-based Medi Assist Healthcare Services recently signed an agreement with Fairfax Asia and Nayan Shah & family to fully acquire Paramount Health Services and Insurance TPA in a deal valued at over ₹400 crore. The deal, which follows Medi Assist's previous acquisitions of Raksha TPA and Medvantage TPA in 2023, is expected to boost the market share and accessibility of the country’s largest TPA.

The acquisition of Paramount will help Medi Assist expand its TPA market share to 36% in group insurance premium segment from the current level of 31%, says Satish VN Gidugu, Chief Executive Officer and Whole-Time Director, Medi Assist Healthcare in an interaction with Fortune India. 

“The company manages 31% of India's group insurance premiums and expects this to increase to 36% post-Paramount acquisition. The retail market share is at 5.6%, which is expected to grow slightly with Paramount's inclusion,” he said. 

On the timeline for completion of the deal, he said, “We are writing a regulatory approval right now. Historically, it took us about four months from the time we have filed for an approval, so we are hoping to receive the approval in similar timelines.”

On August 26, 2024, Medi Assist, through its subsidiary Medi Assist TPA, inked a pact to buy 100% stake in Mumbai-based Paramount Health Services and Insurance TPA Pvt. Ltd at an enterprise value of about ₹311 crore, and around ₹110 crore of cash equivalents to be paid as part of the acquisition. The deal is subject to approval from the Insurance Regulatory and Development Authority of India (IRDAI) and the completion of customary closing formalities.

He further said that the previous four acquisitions of other TPAs (DHS, Medicare, Medvantage, and Raksha) helped in plugging geographic gaps, enhancing relationships with insurers and marquee corporate customers, and strengthening market position.

“With the acquisition of Paramount, our objective is to increase health insurance penetration and accessibility, aiming for "insurance for all" by 2047. We aim to create a scalable platform that supports insurers in areas such as fraud prevention and abuse prevention,” he said.

Paramount is the fourth-largest TPA by total revenues, and also the second-largest TPA in the group segment by premiums in India after Medi Assist, owned by Fairfax Asia and the Shah family. Fairfax Asia Ltd, a Hong Kong-based insurance company, is the largest shareholder in the company with a 51% stake. As of FY24, Paramount administered ₹3,400 crore of premium in the group segment and ₹450 crore of premium in the retail space.

When asked about the current slowdown in the health insurance industry, he said the growth in employee-sponsored insurance has historically been driven by an increase in formal employment, especially in the IT sector. As more individuals entered the workforce, they brought their families into corporate insurance plans, which expanded both membership and the value of these plans.

“Recently, there has been a slowdown in group insurance growth, particularly in the IT sector, where employee headcounts have stagnated. This has affected the underlying membership growth, which is not as strong this year as it historically was, right in terms of the employment count. Adding to it, there has been a fair bit of inflation related pricing adjustment changes also,” he explained.

Despite the current challenges, he expects a rebound in group insurance growth as the economy continues to develop. As the employment numbers will see some amount of stability and with some innovation in the products, group insurance will return to its historical growth rates.”

On business performance, the Medi Assist CEO said that the group delivered steady growth in a seasonally soft September quarter, while the synergies from acquisitions continued to accrue. The company's premium under management rose 18.1% year-on-year (YoY) to ₹10,583 crore in H1 FY25, with group growth at 15.6% and retail at 41.2%. The total income grew 15.4% YoY to ₹360 crore, while the profit after tax stood at ₹40 crore, up 65% YoY. The revenue per average headcount (on non-government contracts) was ₹7 lakh, while the return on capital employed was 9.6% for H1 FY25. As of September 30, 2024, Medi Assist’s net worth was ₹498.5 crore, with net cash balance of ₹300.9 crore.