AMRI Hospitals M&A spat: Manipal Group offers revised bid; enters settlement talks with Emami Group

According to sources, Manipal Health has hiked its original offer of Rs 1,800 crore and submitted a fresh bid recently to Emami Group. Both the parties have entered into discussions and are exploring a settlement to end the current standoff. (Pic-Facebook)

In the latest twist to the ongoing tussle between Manipal Health Enterprises and Emami Group over the buyout of the latter's healthcare business AMRI Hospitals which sparked off litigation, the Ranjan Pai-led group has offered a fresh, revised bid and entered into settlement talks with the Kolkata- based diversified conglomerate, multiple industry sources with knowledge of the matter told Moneycontrol.

In late 2022, Manipal Health Enterprises had moved the Delhi High Court seeking to bar the Emami Group from selling or transferring its majority stake in AMRI Hospitals to a third party or alter the management. The move came on the back of protracted negotiations between both parties over a year which failed to fructify into a deal after differences over terms and conditions, including valuations.

"Manipal Health has hiked its original offer of Rs 1,800 crore and submitted a fresh bid recently to Emami Group. Both the parties have entered into discussions and are exploring a settlement to end the current standoff," said one of the persons cited above without elaborating on the new quantum.

Two other persons confirmed the initiation of settlement talks between Manipal and Emami.

"Whether the case filed at Delhi HC will be withdrawn or not will depend on the outcome of these discussions and the signing of final, binding agreements. It will be interesting to see how this deal pans out considering Manipal is also in the race for another hospital asset currently - KIMS Healthcare group based in Kerala," a fourth person told Moneycontrol.

On September 3, 2022, Moneycontrol reported that peers Manipal Health Enterprises and Max Healthcare were likely to express interest if a controlling stake was up for grabs in private equity firm True North backed KIMSHEALTH, Kerala’s largest corporate hospital chain.

Read: MC Exclusive | PE Fund True North launches sale process to exit Kerala’s KIMSHEALTH; IPO plans on hold

All the four persons cited above spoke to Moneycontrol on the condition of anonymity.

Interestingly, on December 1, 2022, the Economic Times reported that according to sources close to Emami Group, Max Healthcare had entered the fray for AMRI Hospitals and submitted a counter offer of Rs 2,700 crore which trumped the earlier bid of Manipal Health Enterprises (of Rs 1,800 crore) by as much as Rs 900 crore. However, the same report added that sources close to Max Healthcare had denied the news of making an offer for AMRI.

In response to an email query from Moneycontrol, an Emami Group spokesperson said, " We regret that we will not be able to share any comment to your queries since the case is subjudice." Manipal Group chairman Ranjan Pai declined to comment when contacted via email. An email query sent to Max Healthcare was left unanswered at the time of publishing this article.

IPO-bound Manipal Health Enterprises which has nearly 8,000 beds across 28 hospitals, has been on a consolidation drive in the past few years. In November 2020, it acquired the Indian assets of Columbia Asia Hospitals for around Rs 2,100 crore, and later in June 2021, it purchased Bengaluru-based Vikram Hospitals from Multiple Private Equity for around Rs 350 crore.

There are winds of change hovering over Manipal Health Enterprises as well. On December 27, 2022, Moneycontrol reported that existing Manipal Health shareholder Temasek-owned Sheares Healthcare India had edged ahead of rival suitor KKR and emerged as the new frontrunner to pick up a significant stake with an aggressive binding bid valuing the country’s second-largest hospital chain at around Rs 40,000 crore to Rs 42,000 crore.

Also Read: Temasek's top bid values Manipal Hospitals around Rs 40,000 crs-Rs 42,000 cr; Will TPG exit fully or hold on?

AMRI Hospitals: A Closer Look At The Target

According to its website, AMRI Hospitals is one of Eastern India’s leading private healthcare service providers, with three super specialty hospitals at Dhakuria, Mukundapur, and Salt Lake, in Kolkata, a state-of-the-art daycare centre in Kolkata's Southern Avenue and another super specialty hospital at Bhubaneswar, Odisha. The firm's staff serve more than 1,200 beds across four hospitals.

"Steady on a fast-track path of growth, AMRI Hospitals is set to add around 700 beds in the near future, including a tertiary care hospital at Kolkata’s Rajarhat, and a Speciality Cancer hospital at Bhubaneswar," the firm's website added.

According to a report on AMRI Hospitals by Care Ratings from January 2022, "The revenue stream of the company remains well diversified with no particular specialization contributing more than 25% of total revenue. Many experienced doctors specialized in their respective fields have been a part of AHL for a long period. As on March 31, 2021, AHL had a team of 3,617 medical professionals, nursing staff and other support staff (including 550 visiting doctors). AHL has maintained a decent doctors per bed ratio of around 1:4 during the last 3 years, i.e. FY19-FY21 and H1FY2 ."

In 8MFY22, the total operating income witnessed a healthy growth of 65 percent y-o-y aided by an increase in occupancy rate and ARPOB (average revenue per occupied bed). As on September 30, 2021, the total debt of the company stood at Rs.1,654 crore (Rs.1,587 crore as on March 31, 2021) with majority portion comprising unsecured loans from promoter group companies (Rs.1,352 crore as on September 30, 2021), the Care Ratings report added.

The Emami Debt Reduction Strategy

The Emami Group which backs popular brands like Boroplus and Navratna has diverse business interests, including FMCG, newsprint paper, writing instruments, edible oil and cultivation, biodiesel, hospitals, real estate, retail, cement, and contemporary art.

Debt issues engulfed Emami Group after the promoters pledged their shares in multiple entities, including Emami Ltd, to raise funds to invest in newer businesses like cement, paper and real estate. Over the last few years, the promoters have taken several steps to reduce the promoter level debt and the pledge of promoter shareholding.

In February 2019, the promoters offloaded 10 percent stake in Emami Ltd for Rs 1,600 crore. In June, in a bid to reduce the debt burden again, the promoters sold an additional 10 percent stake in the company for Rs 1,230 crore. The debt then was Rs 3,300 crore, which was brought down to about Rs 2,200 crore.

More debt reduction deals were struck later. In February 2020, the Emami Group announced the sale of its cement business to Nuvoco Vistas Corp Ltd, a Nirma group company, for an enterprise value of Rs 5,500 crore. Moneycontrol was the first to report the Emami Group’s plans to divest their cement assets on June 25, 2019.

On June 6, 2020, Moneycontrol was the first to report that Canadian investment giant Brookfield had struck a deal to buy out the solar power business of the group.

Also Read: Exclusive | Brookfield buys Emami Group’s solar business; deal part of conglomerate’s non-core asset sale strategy

In the last three months, the share price of Emami Group flagship Emami Ltd has slipped by 14 percent from Rs 483.4 to Rs 414.