File photo of Ranjan Pai
Bengaluru-based hospital chain Manipal Health Enterprises may look at listing on the bourses in the next two years in order to give its investors TPG Capital and Temasek exits and raise funds for growth, said sources.
The 6,000-bed hospital chain has not made any acquisitions since 2013. It has decided to back out from buying Gurugram-based Naresh Trehan's Medanta Medicity for a Rs 5,800-crore deal, which was valuing Medanta at roughly 26 times its earnings before interest, taxes, depreciation and amortisation (Ebitda). Ebitda is an indicator of a company's profitability. Earlier, Manipal had lost out to Malaysia’s IHH Healthcare in the race to acquire another Delhi-headquartered hospital chain, Fortis Healthcare.
A source close to the development said Manipal was open to making smaller acquisitions to expand its footprint, besides growing organically. It would not be making an acquisition to augment its north India footprint unless it sees value in the deal, the source added.
Ranjan Pai, who leads Manipal Education and Medical Group, holds 60% in Manipal Health Enterprises
While private equity player TPG holds 22%, another PE investor Temasek holds 18%
The hospital chain had a turnover of Rs 1,800 crore in FY19
“Manipal did not see value in buying Medanta for 26 times its latest Ebitda and this would have also delayed its plans for an initial public offering (IPO) by another four to five years as before that the synergy benefits would not kick in," said a source close to the development. He said market multiples today were around 18-20 times Ebitda, and so Temasek wanted a reset of the valuation.
“Manipal may now look at listing Manipal Health Enterprises on the bourses in the next two years, not only to offer exits to existing investors but also to raise funds for growth,” said a source on grounds of anonymity.
One of the largest private equity players, TPG, had invested in Manipal around four years back and roughly holds 22 per cent, while Temasek, which invested two years back, holds around 18 per cent. These investors can wait for another two to three years within which Manipal expects to have more scale. Manipal Health Enterprises had a turnover of around Rs 1,800 crore in 2018-19.
Ranjan Pai-led Manipal Education and Medical Group, the holding company for Manipal Health Enterprises, has raised over $500 million (since 2006) in 16 funding rounds and has offered 14 exits. Pai holds around 60 per cent in Manipal Health Enterprises.
Size is important in the hospitals business as one gets more leverage in terms of cost, said an industry insider. Manipal Hospitals
is, thus, expanding its footprint organically. It has a few greenfield hospitals coming up, for example, a 250-bed one at Bengaluru.
The group has 10 operational hospitals with a capacity of around 3,000 beds. In an earlier interaction with Business Standard, Pai had indicated it planned to add another 2,000 beds in India and around 750-1,000 beds overseas over the next five years.
Rough estimates show that at a rate of Rs 1 crore per hospital bed, the investment in India alone would be around Rs 2,000 crore. Investments could vary if the expansion is through the inorganic route.
Overseas, Manipal has presence in Malaysia, with a 220-bed hospital in Klang. There are plans to set up a 300-350 bed greenfield hospital in Malaysia besides expanding the existing one.
“We are looking for a local developer who will build and lease the building to us. In Malaysia, we are looking at an asset-light model. We would invest in equipment, interiors, manpower etc,” Pai, chairman of the Manipal Education and Medical Group had said last year. As for India, Manipal, which is strong in southern India, might put together a couple of regional chains to build a national presence.