Rajneesh De, Consulting Editor, APAC News Network
M&As looks to be the flavor of the season for the Indian healthcare sector in 2023 with most hospital chains looking to expand inorganically. These acquisitions helped the hospital chains to expand geographically as well as access pan-India multi-specialty beds quickly. In fact, a detailed look over the last two years shows a marked preference for M&As by hospitals over starting Greenfield operations.
For most hospital chains, M&As mean steady and viable business from day one by acquiring the established hospitals. On the other hand, it takes quite a while for the Greenfield hospitals to start generating sustainable business. Acquisition of hospitals in hitherto uncharted geographies helps in expansion of the hospital chains too. Nevertheless, hospital chains prefer Greenfield operations in locations where they are already well established.
Understanding Manipal’s M&A Story
The healthcare M&A background in the last two years holds particular significance for the Manipal Group of Hospitals. Thanks to quite a few acquisitions since the last few years coupled with organic expansion, Manipal has already leapfrogged others to become India’s second largest hospital chain. To add to this, if industry reports are to be believed, Manipal Hospitals might soon upstage Apollo Hospitals to become India’s #1 hospital chain.
Before analyzing the cause and impact of Manipal’s inorganic growth, it would perhaps make sense to relook at the chronology of M&As Manipal has undertaken in the last few years. From 2020 onwards, Manipal Health has increased its national footprint inorganically. It acquired the Indian assets of Columbia Asia Hospitals in 2020 for approximately Rs 2100 crore. Subsequently, Manipal Health acquired Bengaluru-based Vikram Hospital for Rs 350 crore in June 2021.
Recently, in September 2023 Manipal Health acquired an 84% stake in Kolkata’s AMRI Hospitals for around Rs 2300 crore. Earlier in 2023 itself Manipal had tried to acquire Kerala-based hospital chain KIMS for approximately Rs 3500-4000 crore, though ultimately it lost out to the PE fund Blackstone-owned hospital platform Quality Care (QCIL).
There are also talks about Manipal’s impending merger with Kolkata-based super specialty hospital Medica in the next few months. By mid-2024, Manipal plans to open another three hospitals in Bengaluru and one in Raipur. Manipal Health group is also ramping up its greenfield assets across India, expected to be ready by FY25.
The Temasek Backing: Money Matters
What has definitely helped Manipal Health go on this inorganic splurge has been the backing of the Singapore-based investment company Temasek. While PE major Temasek was already holding 18% stake in Manipal Health (for 6 years), in 2023 itself it acquired a majority stake with another 41% for Rs 16,400 crore, at a valuation of Rs 40,000 crore.
“We are excited about the growth prospects in the healthcare services sector in India, and Manipal hospitals is an important part of this sector,” claims Ravi Lambah, Head of Investment Group and Head-India at Temasek. Industry analysts compare the Temasek-Manipal deal as part of a burgeoning trend of global PEs acquiring controlling stakes in the Indian healthcare sector. This though mirrors the global trend mostly prevalent in the US and Europe, with PE majors such as Blackstone, Apollo, Carlyle, KKR & Co. and Warburg Pincus being some of the largest investors.
However, as per the industry within one year of acquiring a controlling stake, Temasek is now looking to offload another 8-9% stake to Abu Dhabi-based Mubadala and Brunei Investment Authority (BIA) for about Rs 40,000 crore. This would still leave Temasek with a controlling stake of 51% in Manipal Health and its pillar of strength in its M&A spree. With Temasek holding 90% controlling stake in Medica Hospital’s parent company too, another merger with Manipal is now also in the offing.
From Columbia Asia to Vikram: The Beginning
Manipal Health is currently the second largest network with 33 hospitals spread across 17 cities and with a capacity 9,500 beds. While it initially focused on Bengaluru and the south, the Columbia Asia acquisition in 2020 helped Manipal Health become the second largest hospital chain in India. The acquisition helped Manipal Health with the perfect geographical and cultural fit that Columbia Asia then offered to reach a larger national footprint.
Post Columbia acquisition, the new entity immediately had 26 hospitals across 14 cities with 7,000+ beds, and a talented pool of 4,000+ doctors and 10,000+ healthcare professionals. Columbia Asia used to operate 11 hospitals in Bengaluru, Mysore, Kolkata, Gurugram, Ghaziabad, Patiala and Pune with over 1,300 beds, 1200 clinicians and 4,000 employees. “We are now bigger, stronger and uniquely positioned to meet the growing expectations of the communities we serve across the country,” opined Ranjan Pai, Group Chairman of Manipal Education and Medical Group at that time.
Even as the excitement of the Columbia Asia acquisition was settling down, Manipal paid another Rs 350 crore to Multiple Private Equity for Vikram Hospitals located in Bengaluru. Vikram Hospital used to be a 200-bed high-end tertiary care facility known for its clinical expertise in the fields of cardiac and neuro sciences. “Manipal Hospitals has been the top ranked healthcare provider in Bengaluru for over two decades and the Vikram addition is reiteration of our commitment to meet the healthcare needs of the city and the region,” added Ranjan Pai at that time.
Manipal though had an eye always for the eastern market. The target was patients from the east, north-east and even Bangladesh. The Columbia Asia acquisition not only helped Manipal grow nationally but also boosted its foray into the east. The Columbia Asia Hospital, located in Kolkata’s Salt Lake, marked Manipal’s initial foray into the east. The eastward progress of Manipal got further catalyzed through the AMRI acquisition this year.
AMRI and Medica: The Culmination
Thanks to the AMRI acquisition, Manipal chain’s bed capacity increased to 9500. AMRI Hospitals has been operating in four locations—Dhakuria, Mukundapur, and Salt Lake in Kolkata, as well as in Bhubaneswar with a combined capacity of over 1,200 beds, and 800 plus doctors, and over 5,000 healthcare professionals. With the AMRI branding likely to change to Manipal over the next few months, the group now with Columbia Asia and AMRI in its kitty is a serious name to contend with in the healthcare stakes in the east.
According to Ranjan Pai, the Manipal Health hospitals in the south always had patronage from patients in the east as well as Bangladesh. The double acquisitions of Columbia Asia and AMRI had further expanded the primary and tertiary areas for this hospital chin further. The future merger plans with Medica might just act as another booster to Manipal’s Go East journey.
The merger is being accentuated due to Teamsek itself holding controlling stake (around 90%) in Medica Synergie (the parent company of Medica Hospitals). The natural corollary of this is to amalgamate the Manipal and Medica brands under the Manipal entity and operate as a single hospital chain. Medica already has a presence in Kolkata, Siliguri and Ranchi and is now building a cancer hospital in Asansol. Therefore, post the merger Manipal Health could well become the largest corporate hospital chain in India upstaging Apollo especially now as in the upcoming two quarters, the hospital chain intends to invest over Rs 1,500 crore to add 1,400 beds.
In Kolkata, Medica currently operates around 600 beds and is in the process of adding beds in both Siliguri and Ranchi. “We are also looking at locations like Guwahati and even Varanasi,” informs Ayanabh Debgupta, Group President & Director of Medica. Overall with Medica too planning to add 450-500 beds in the next 2-3 years, a possible amalgamation with Manipal will only bolster its position as the largest hospital chain in India.
Acquiring the #1 Epithet
True to its stature then, Manipal further plans to open three hospitals in Bengaluru with a combined bed capacity of 1,000 and one hospital in Raipur with 400 beds by mid-2024. “The significant investment is already underway in four greenfield quaternary-care hospitals and this is a testimony to our belief that the need for high-quality healthcare will continue to grow,” asserts Dilip Jose, MD & CEO, Manipal Hospitals.
The average revenue per occupied bed in Manipal Health currently was pegged at Rs 2 crore at network level, almost at par with Fortis Healthcare and Apollo Health. While in bed capacity, Manipal Health is competing strongly with Apollo, it stands on strong grounds on financial terms. With a formidable network of 8,300 beds, Manipal Hospitals had attained a valuation of Rs 4.82 crore per bed earlier after the Temasek infusion.
In CY2023, Manipal reported revenues of Rs 2,473 crore, while AMRI reported revenues of Rs 899 crores. On the other hand, Manipal’s PAT was pegged Rs 194 crore, whereas AMRI reported a negative PAT of Rs 139 crore. Manipal’s EBITDA at Rs 738 crore with an EBITDA margin of 29.84% already scored over AMRI’s EBITDA at Rs 162 crore, with an EBITDA margin of 18.02%.
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