After blockbuster Max exit, KKR now frontrunner to enter IPO bound Manipal Hospitals

IPO

After selling its balance 27.5 per cent stake in Max Healthcare for more than Rs 9,000 crore in August, the single largest block deal ever by a private equity firm in India, KKR is close to making its next big-bang bet in the Indian healthcare space.

The US private equity giant is gearing up for a proposed entry into the country’s second largest hospital chain Manipal Health Enterprises, multiple industry sources with knowledge of the matter told Moneycontrol.

“KKR has edged ahead of other private equity suitors and is in advanced stage of negotiations to buy out the stake of TPG Capital in Manipal Health Enterprises. TPG is now in exit mode and is looking to clock returns after spending 7 years in the firm,” said one of the persons mentioned above.

A second person told Moneycontrol that an exclusivity agreement had been signed between KKR and TPG and that the former was the lead contender to proceed with the stake buy and bag the deal .

“KKR has got a punchy exit at a punchy valuation from Max Healthcare and hence they are well placed to strike another deal in the hospital space. They have proven their mettle in the segment,” this person added.

Both the persons mentioned above spoke to Moneycontrol on the condition of anonymity.

When contacted, KKR and TPG declined to comment. Moneycontrol has sent an email query to the Manipal Group but could not elicit an immediate comment from them.

On March 15, Moneycontrol had reported that the promoter group of Manipal Health Enterprises was is in talks to raise funds and buy back part stake from TPG and give the private equity giant a partial exit ahead of a proposed listing. Those discussions did not eventually fructify into a transaction.

Max Healthcare Chairman and Managing Director Abhay Soi (who held 23.09 per cent stake as of the quarter ending June 2022) and KKR were earlier co-promoters of the firm. Soi has now become the sole promoter after the US private equity firm’s exit. In 2018, KKR acquired shares in Max Healthcare along with Radiant Life Care. In September 2021, KKR sold 84.4 million shares of Max Healthcare for Rs 2,956 crore via the block deal route. Later, KKR also sold an additional 10 percent in Max Healthcare for nearly Rs 3,300 crore in March. In the domestic healthcare and pharma space, KKR also backs listed firm JB Chemicals and Pharmaceuticals.

TPG Capital picked up a significant minority stake in the Ranjan Pai led hospital chain for Rs 900 crore in February 2015. The leading global investment firm holds around 21 per cent stake. Singapore’s Temasek owns an 18 percent stake, NIIF ( National Infrastructure Investment Fund) holds 8 per cent while the remaining is held by the promoter family.

As part of its India portfolio, TPG also backs Care Hospitals, Motherhood hospitals, and infertility chain Nova IVF.

Back in January 2022, Moneycontrol was the first to report that nearly three years after taking over the management of hospitals and clinics previously managed by a fund of failed private equity firm Abraaj, TPG-backed Evercare was looking to exit Hyderabad based Care Hospitals.

The Manipal group, which has nearly 8,000 beds across 28 hospitals, is expected to pursue a listing on Dalal Street in the next 1-2 years and has been on a consolidation drive. 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.

According to reports, it is also believed to be close to acquiring the AMRI Hospital chain in Kolkata from the Emami Group. In August 2022, Dilip Jose, MD & CEO of Manipal Hospitals, told the Times of India that the firm was planning more acquisitions in locations like NCR, Kerala and Hyderabad.

The domestic hospital space has been buzzing with deal activity as the economy gradually recovers from the impact of Covid-19.

Here’s a snapshot of all the M&A action in the segment since the beginning of the year which has been closely tracked by Moneycontrol:

On September 20, Moneycontrol reported that Dr Azaad Moopen-led healthcare conglomerate Aster DM Healthcare had roped in Moelis and Credit Suisse as advisors to unlock value via an internal rejig exercise, which would involve splitting its Middle East and India business.

On September 3, Moneycontrol broke the story of private equity firm True North looking to exit Kerala’s KIMSHEALTH after listing plans were put on hold.

Canadian pension fund Ontario Teachers Pension Plan Board (OTPPB) recently announced that it had picked up a significant majority stake in Sahyadri Hospitals from the Everstone Group.

On July 12, Moneycontrol was the first to report that OTPPB was the lead suitor in the sale process of Sahyadri Hospitals.

Recently Arpwood Capital also announced the acquisition of the largest hospital chain in Gujarat, Sterling Hospitals.

On April 4, Moneycontrol reported that private equity investors were looking to exit north-focused super speciality hospital chain Asian Institute of Medical Sciences.

Moneycontrol also broke the news of Barings PE Asia emerging as the front-runner to pick up a significant minority stake in AIG Hospitals.