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Last Updated : Sep 18, 2019 11:01 AM IST | Source:

Exclusive | TPG Capital still in hunt to buy hospitals in India after Medanta deal fell through

The private equity firm plans to invest $500 million-$1 billion yearly

Viswanath Pilla @viswanath_pilla
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With talks to acquire Naresh Trehan-led Medanta falling apart, US private equity firm TPG Capital, which is backing Manipal Hospitals, said it will continue to scout for other hospital assets, including regional hospital chains to build scale.

"In the last four years, we built a very strong management team in Manipal, which has a lot of bandwidth. We have institutionalised a lot of processes. Now, we can really create a lot of operating leverage by doing some inorganic acquisitions. We are open to standalone hospitals and regional chains," said Mitesh Daga, Managing Director at TPG Capital Asia.

TPG had invested about $146 million (Rs 900 crore) in February 2015 for 22 percent stake in Manipal Education & Medical Group.


Manipal along with TPG and Temasek have entered into negotiations with Medanta Chairman and heart surgeon Naresh Trehan, as well as other investors, in October 2018 to acquire their stake in Manipal Hospitals in a deal valued around Rs 5,800 crore. But the deal didn't materialise, dashing the hopes of Manipal to build a pan-India hospital chain.

Daga said 'valuation mismatch' was one of the reasons.

Manipal, led by Ranjan Pai, was in race to buy Fortis Healthcare, but Malaysia's IHH Healthcare outbid rivals to buy the troubled healthcare provider.

Manipal owns 10 multi-speciality hospitals, five teaching hospitals and several fertility clinics.

Daga opined that economic slowdown will only hasten the healthcare industry consolidation.

"(Last) couple of years have been tough for the hospital sector with the regulatory headwinds, especially the pricing caps, etc. This will weed out smaller operators and those who are inefficiently running operations, and eventually lead to consolidation. But it will happen gradually, it won't happen overnight," Daga said.

TPG pharma bets

TPG has so far invested about $2.5 billion in India, especially in pharma, healthcare and financial services. Daga said the private equity firm plans to invest $500 million-$1 billion yearly, and added that most investments in India have yielded good returns.

Along with hospitals, TPG in India is betting on pharmaceutical services and active pharmaceutical ingredient (API) companies.

The company in July had acquired a significant minority stake in Hyderabad-based Sai Life Sciences for undisclosed sum. It had invested $135 million for buying 33 percent stake held by Tata Capital in the company, sources told The Economic Times. Sai Life Sciences is an integrated provider of drug discovery, development and manufacturing solutions for innovator pharmaceutical and biotechnology companies.

In February TPG invested Rs 200 crore in Solara Active Pharma, a spun-off division of Strides API business.

So, what's the road ahead for the sector and company going forward?
"One, pharma companies will get more and more specialised and will stick to their core. So for  big generic pharma manufacturing is not going to be their core. Two, with increasing regulatory accountability, they will be premium for high quality manufacturing, which over the last few years had got commoditised. Everyone had set up their own plants and were manufacturing but there was no premium and no differentiation. But now with USFDA getting more stringent, a good quality player will command a premium and I think the short term window is the China opportunity and their blue sky policy," Daga said.

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First Published on Sep 18, 2019 10:37 am
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