Temasek's Ravi Lambah on Manipal Hospitals IPO, impact of Hyundai India listing on MNCs and ongoing block deal frenzy

Ravi Lambah

Singapore investment giant Temasek, which holds a majority stake in Manipal Hospitals, may opt for the organic expansion route before it takes India's second-largest hospital chain by bed capacity public. That's the word coming in from the firm's India spearhead Ravi Lambah, who feels India's mouth-watering valuations are not the only factor which will nudge more global MNCs to follow Hyundai and list local operations. Lambah also weighs in on the ongoing block deal frenzy in India which has seen participation by multiple private equity funds and says there will still be players opting for the classical M&A route to get control premium.

Edited excerpts:

India’s stock market buoyancy has also led to several IPO aspirants and these are aspirants across a whole host of sectors which have accelerated their listing plants. It is not just Indian companies, but also big, global MNCs that are making a beeline towards India because of the better valuations/higher multiples, for example, Hyundai – the South Korean auto giant that filed recently for a $3-billion IPO – India's biggest ever. Do you think more global MNCs are likely to follow suit and start their IPO process in India, looking at Hyundai? Or do you think that they will wait and watch to see how the Hyundai listing fares later in the year?

It's a good question. But I think if you go back in time, it's not a new phenomenon for us to see in India, where global entities have listed their subsidiaries here and they have actually done quite well. The multiples in India, several of them I see, you know, are much higher than what their parents are trading at. But I don't think that's the only decisive factor. Of course, listing a company in another jurisdiction requires you to do a different level of governance. You have to make sure you cover for the right governance, framework for related party transactions, intercompany transactions that always exists in a situation like this. And then there's of course, the question of if you are not happy with it being listed, can you then take it private again, which is not that easy to do in India.

So there's a whole host of what I would call decision factors. Valuation is only one of them. Today, the valuations are higher. Tomorrow, they may not be for whatever reason. So in my view, I don't think that that's the way to drive the decision. I think the key question to ask is, what else does the IPO give you? Does it give you access to capital? Does it give you access to more talent? Can you grow a business more? Can it become more resilient if it's listed? Can it tackle challenges better? So all of those I think come into play? And if the answer to that is yes, then I think we will see more companies list in India.

Sticking to the topic of IPOs, some of your portfolio companies in India have started taking baby steps towards an IPO, namely Dr. Agarwal, Molbio Diagnostics. Niva Bupa recently filed draft papers. There's a jewel in the crown right, which is Manipal Hospitals. That has bulked up quite a bit and has executed a few acquisitions over the past few years. When can we expect Temasek to explore the listing of Manipal Hospitals in India since you are a majority stakeholder?

I think we will take Manipal public at the right time. I think there's good alignment with all the shareholders that the company can be listed. The decision-making is dependent upon a few things. One is the fact when we think it's ready, and there's a lot of work to be done still in terms of some of the greenfield and brownfield organic expansion that we're doing. Maybe there will be some areas where we're going to consolidate. We have recently consolidated the Medica Synergy business in West Bengal that has recently been acquired by Manipal. So there is work to be done. And then once we think we are kind of done with some of that, our sort of current framework for what needs to be completed, then we will explore this thing. But yes, this company – it will be listed.

The reason I am asking this question is because whenever it does list, perhaps it could be Asia's biggest hospital IPO, right? Because there's a lot of value there. You also came in at a premium. One quick question again on Manipal – so can we expect more M&A? Or will it be organic growth and then the IPO happening? Will you bulk up the portfolio even more? Because there are a lot of hospital assets that are up for grabs.

I think we will evaluate everything that's out there and then we take the decision on buy or build. And sometimes build makes more sense, especially when you have scale. And buy only makes sense if there's something really special that adds to the portfolio. Manipal hospital now is already, I would say in the top one or two hospitals by beds. So the scale is there. Now is the question of augmenting the business and making it more valuable business. So we will look at these deals one by one.

So no timeline as such?

No, because there's no reason to have a timeline. We have long-term capital. Our partners are also long term in that nature. They've just come in with us, some of the new ones. So there's a no rush. So the IPO, actually, to me, if I stepped back, the IPO is only one event in the company's timeline. There's a long journey after that. So we have to time the IPO well.

Alright. Let's shift focus to the block deal frenzy. I think a few months back, you exited PB FinTech (the parent of Policybazaar) with a block deal around Rs 4,200 crore. You also participated in the block for Cartrade. Some of your other peers in the past year have also struck big block deals, and these are $800 million to $1 billion block deals, exiting it. So that has now become a trend of sorts where there are PE's looking at striking block deals back-to-back and then completely exiting the company. Do you think this wave of block deals has perhaps dampened the classical old M&A auction route as more and more people seem to be opting for it?

Interesting analysis. I will look at it a little differently. I will say the capital markets in India have matured significantly, and they continue to mature. So India is now the fifth largest market by capitalization globally. And what does that mean? To me, that means that there are larger companies listed, larger market cap, better average volumes, and the ability to go in and out is much easier in large numbers, which wasn't there if you go back 5-10 years. So that effectively gives you the flexibility to do what you just outlined. But I don't think it takes away the fact that you will do things on the M&A or the private side as well. It comes down to what is the opportunity you're seeking?

So I think to your good question, if I want to sell a billion dollars of stock, and if I can do it on a date in the public markets when the company is listed and I included a small effect discount, it's a no brainer. If I want to get a premium to what I'm trading to what I want to get, and I'm selling control, then M&A makes more sense because then someone will pay me a premium for control. I will not get that premium in the public market. So I think it comes down to what kind of deal type, timing and what is the aspiration for value.