Manipal Health aims adding 3,600 beds yrs after Temasek controlling stake

Expansion and acquisitions to take hospital chain's total to nearly 12,000 beds

Temasek, which is buying a controlling stake in Manipal Health Enterprises (MHE), will add 3,600 beds in the next 18-36 months through greenfield expansion and acquisitions to take the hospital chain’s total to nearly 12,000 beds, said a senior official of the Indian company.

Singapore’s Temasek raised its stake in Bengaluru-based MHE by 41 percent, valuing the chain at Rs 40,000 crore. Senior officials at MHE have said there is no change in their strategy and growth outlook. Temasek now has a controlling stake of 59 percent in MHE.

“No new investor is coming in; only the proportions of shareholding change. Temasek, TPG and Ranjan Pai continue to remain the investors, who have been actively involved in the planning and strategy making,” Dilip Jose, managing director and chief executive officer of Manipal Hospitals, told 'Business Standard', referring to an existing shareholder of the hospital chain and Manipal Group’s chairman.

Jose added that Temasek has been an investor for the last six years and TPG for eight years. The growth plan for the next five years has been put in place and has also been approved by the Board, he added.

Jose said Manipal is building three greenfield hospitals in Bengaluru, and one in Raipur, together that would add another 1,100 beds in the next 18-36 months. This is coming at an investment of Rs 1.5 crore per bed or about Rs 1650 crore capex. Separately, MHE expects to add another 2,500 beds over the next three years through the inorganic route.

Temasek has signed agreements to acquire an additional 41 percent in MHE, which was founded in 1991 by Dr Ramdas Pai, its chairman emeritus. Following the closing of the transaction, Manipal Group will hold about 30 percent of MHE. Sheares Healthcare Group, a wholly-owned subsidiary and independently-managed portfolio company of Temasek, will retain its existing 18 percent stake.

TPG, a global alternative asset management firm which first invested in MHE through TPG Asia VI in 2015, will fully exit, but it will hold an interest of 11 percent in MHE, through its new Asia fund -TPG Asia VIII. National Investment & Infrastructure Fund (NIIF) will exit its holding from MHE.

TPG will hold 11 percent in MHE through its new Asia fund, which will get a longer horizon to stay on in Manipal. Market sources indicated that Temasek is known to remain invested for the long-term in assets where they see potential. “For example, Temasek holds 18 percent in Medanta and has not exited during the IPO,” the source added.

“We are very glad for Temasek’s acquisition of a significant stake in MHE and its support to the management team in building out the platform to its full potential. Investing in healthcare requires a long-term outlook as well as sensitivity to social responsibility. I am glad that we have partners like Temasek and TPG who resonate with these values and will continue to be a part of the journey ahead,” said Dr Ranjan Pai, chairman of Manipal Group.

"Since our investment in 2015, we have witnessed Manipal’s transformational journey of becoming one of the largest, best-managed and patient-centric healthcare networks in India. By re-investing through our new Asia fund – TPG Asia VIII, we look forward to continuing to support Manipal’s mission of bridging the quality healthcare infrastructure gap in the country,” said Puneet Bhatia, co-managing partner of TPG Capital Asia.

MHE closed FY23 at revenues of around Rs 4,600 crore at a consolidated level, and an EBITDA of Rs 1,200 crore, resulting in an EBITDA margin of over 25 percent, market sources said. It has average revenue per occupied bed of Rs 2 crore at a network level, which is at par with Fortis Healthcare and Apollo Hospital Enterprises, sources said.

Jose said that MHE has a comfortable debt-EBITDA ratio now, and its net debt was below Rs 1000 crore.

“We do not have any plans of going outside India now for expansion, as we think there are large underserved geographies in India. We are thus trying to enter into new geographies, especially tier-2 cities, which are underserved markets in terms of quality healthcare,” Jose said.

Eastern India is a focus for MHE now after having established presence through the acquisition of Columbia Asia earlier; MHE is eying to close a deal with AMRI Hospitals soon. Jose did not wish to comment on the upcoming AMRI deal.
 

The hospital chain currently serves over 5 million patients a year through its network of 29 hospitals covering 8,300 beds.