IPO-bound Manipal Hospitals, which is backed by Singapore investment giant Temasek and billionaire Dr Ranjan Pai, has entered final stage negotiations to acquire a substantial majority stake in Kolkata-based hospital chain Medica Synergie, multiple industry sources in the know told Moneycontrol.
Manipal Hospitals is currently the second largest hospital chain in the country and if the above transaction fructifies, there is a possibility that the combined entity may edge ahead of current market leader Apollo Hospitals in terms of total bed capacity and become India's largest hospital chain.
"The proposed transaction is at an advanced stage and should be sealed within the next two months. It won't be a merger and Manipal Hospitals is likely to pay between Rs 1,200-Rs 1,400 crore to acquire more than 90 percent of the stake in Medica Synergie from Sheares Healthcare and a few of the other minority shareholders, including the remaining founders and doctors," said one of the persons above.
In December 2021, Temasek's healthcare platform Sheares had acquired a majority position in Medica Synergie by purchasing the stake held by private equity firm Quadria Capital.
On April 17, Moneycontrol reported that Sheares Healthcare was looking to raise its stake to 90 percent in Medica by providing an exit to the Chairman & key Founder Dr Alok Roy and related entities. The transaction materialised later.
As of January, the Medica Synergie group operated four hospitals with a total of around Rs 1,200 beds.
"Via this deal, Sheares will get an opportunity to exit its two-year-plus investment. Once Medica comes under the Manipal umbrella, the total bed capacity is likely to be more than the capacity of Apollo Hospitals depending on the southern firm's pace of expansion," a second person said.
According to Manipal Hospital's website, it currently has more than 9,500 beds across the country, making it the second largest chain. The addition of Medica would push that number in excess of 10,700.
In comparison, as of March 31, 2023, Apollo Hospitals had a total capacity of 9,957 beds. Reports in January have pegged the figure at 10,000 beds with plans to add 2,000 beds during the next three years, according to the firm's top management.
"Paharpur Cooling Towers is the other minority shareholder in Medica Synergie beyond the founder, doctors and related entities. They hold around 5-6 percent stake, intend to stay on and are not likely to be a part of the proposed majority stake buyout," a third person elaborated.
A fourth person familiar with ongoing negotiations told Moneycontrol that Sheares Healthcare was likely to make returns of 2x to 2.5 x on its 2021 investment in Medica Synergie via the deal.
All the four persons above spoke to Moneycontrol on the condition of anonymity.
Email queries to Ranjan Pai, Manipal Hospitals, Medica Synergie and Paharpur Cooling Towers were left unanswered at the time of publishing this article. Reminders have been sent and this article will be updated as soon as we hear from the parties.
When contacted, Sheares Healthcare said, " We do not comment on market speculations."
When asked about the possibility of a merger between Manipal Hospitals and Medica Synergie, after the Manipal Group ceded control of the healthcare provider to Temasek in April 2023, Ranjan Pai had told Moneycontrol: " No discussions regarding this have happened at this point in time."
Pai added, "We see consolidation as net positive for all the stakeholders in the sector. Larger hospital players are able to acquire regional assets and add lot of value in form of expanding clinical programs, standardisation of clinical protocols and upgrading medical infrastructure, thereby providing quality healthcare services over the longer period. Apart from acquisitions, we will continue to pursue greenfield expansion for our growth and are we looking to add few greenfield assets over the next 2-3 years."
Later, on December 3, Business Standard reported that Manipal Hospitals and Medica Synergie were likely to 'merge' operations and operate as one entity.
The Temasek India playbook
Incidentally, Sheares also holds around 2 percent stake in Global Health Ltd, the listed operator of Medanta Hospitals and an 18 percent stake in Manipal Hospitals.
In April 2023, in the largest private equity deal in the Indian healthcare segment, Temasek signed definitive agreements to acquire an additional 41 percent stake in Ranjan Pai-led Manipal Health Enterprises for around $2 billion, taking its total stake (Temasek + Sheares) in the firm to 59 percent. The transaction valued Manipal Hospitals between Rs 40,000 crore to Rs 42,000 crore, according to sources.
Following the mega acquisition, Ravi Lambah, Temasek's India head, elaborated on the firm's healthcare strategy in an exclusive interview to Moneycontrol.
Lambah said, "At Temasek, across our global portfolio, we are open to increasing our stakes in investments during our holding period, as we get more comfortable with the businesses and if they suit our long-term portfolio construction objectives. There are, of course, many other considerations at play, and all investment decisions are also subject to our intrinsic value tests."
He added, "We are optimistic about the healthcare space in India and may increase our exposure if the right opportunities arise."
In July 2023, Temasek senior executives Vishesh Shrivastav, MD, Investment (India) and Mohit Bhandari, MD, Investment (India) shared that the firm is planning to invest up to $10 billion in India over the next three years.
The Manipal M&A strategy
Manipal Hospitals, which is set to explore a mega public listing in the next 2-3 years, has bolstered its pan-India footprint via the inorganic route.
In September, it purchased a majority stake in Emami Group-led AMRI Hospitals for Rs 2,300 crore to expand its presence in East India.
Earlier in 2020 and 2021, the chain acquired Colombia Asia Hospitals for around Rs 2,200 crore and Bengaluru-based Vikram Hospitals for around Rs 350 crore, respectively.
The firm was also in the race for private equity firm True North-backed KIMS Kerala, a sale process which eventually saw Blackstone emerge as the winning suitor.
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