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Business News/ Companies / Manipal Hospitals scouts for acquisitions
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Manipal Hospitals scouts for acquisitions

CEO Ajay Bakshi says firm ready to spend `800-1,000 crore for buying small hospitals in next 12-18 months

The group plans to expand its presence in India and abroad, and has appointed bankers to buy assets.Premium
The group plans to expand its presence in India and abroad, and has appointed bankers to buy assets.

Mumbai: Manipal Health Enterprises Pvt. Ltd, which runs the eponymous chain of super-speciality hospitals in South India, is scouting for acquisitions across the top five cities in India and in Malaysia.

In February, global private equity firm TPG Capital invested 900 crore in Manipal Hospitals. According to a 27 February VCCircle report, TPG Capital acquired about a 25% stake in return for its investment. At the time of investment, Swami Swaminathan, executive chairman of Manipal Health Enterprises, had said that the group would look to expand its presence in India and beyond.

The expansion process is now underway and bankers have been appointed to look for assets. “We want to expand our footprint and acquisition is one of the ways and for good targets we are ready to spend between 800 and 1000 crore. We are looking to acquire smaller hospitals but not distressed ones," said Ajay Bakshi, CEO and managing director, Manipal Health Enterprises. The acquisitions will be completed in the next 12-18 months, he added.

Manipal Health Enterprises or commonly known as Manipal Hospitals, is part of the Manipal Education and Medical Group (MEMG) and according to the company’s website, it has a network of 15 hospitals and three primary clinics. It currently has approximately 5,500 beds under its management across India and abroad. In India, it is present in Bengaluru, Salem, Goa, Mangalore, Visakhapatnam, Vijaywada and Jaipur. Outside India, it indirectly owns and operates a hospital in Malaysia and manages a clinic in Nigeria.

According to the company’s filings with the Registrar of Companies, Manipal Health Enterprises’ revenue rose to 789.6 crore for the financial year 2013-14 from 673.8 crore in the previous year. Net profit fell to 13.7 crore in 2013-14 from 15.2 crore a year ago.

The plan now is to expand the hospital network across the country and also look at some assets overseas, said a person familiar with the company’s plans, requesting anonymity.

“They are looking at four major cities—National Capital Region (NCR), Pune, Bengaluru, and Kolkata and one asset in Malaysia. They are keen to acquire a 200-bed hospital in these cities and have started early rounds of talks with a few hospitals," he said.

Bakshi said the company would be either looking at assets where they can acquire a majority stake or take controlling interest. “We want good assets which will strengthen our current Manipal network. We have capital available with us as we recently raised funds," said Bakshi, declining to specify any potential firms shortlisted for acquisition.

According to estimates by KPMG, the size of the healthcare delivery market was estimated at 3.4 trillion in 2013-14 and is forecasted to grow at a CAGR (compounded annual growth rate) of 13-15% to reach 6.2 trillion by 2018-19. Large private hospitals having more than 200 beds and providing tertiary care constitutes around 5-6% of the overall private hospital sector in India. This segment is dominated by corporate hospital chains such as Apollo Hospitals Enterprise Ltd and Fortis Healthcare Ltd.

“The super-speciality market in India remains unexplored today and holds a tremendous potential for growth. Moreover, the growing disease burden, rising population and increased government focus, and other factors are likely to provide an impetus to the growth of this segment," said Nilaya Varma, partner, healthcare, infrastructure and government services at KPMG India.

This potential for growth has attracted private equity investors to the sector.

Last year, the pharma, healthcare and biotech sector saw 50 private equity investments worth $632 million, even though deals in 2014 were lower than the 70 deals worth almost $1.37 billion closed in 2013, according to Grant Thornton India Llp, an advisory firm.

“Private equity funds are investing keenly in the healthcare segment as has been observed in the last few years. There are some funds now with a longer term view of staying invested for 8-10 years and they believe actual returns can be achieved if they stay invested for a longer period. This works better for providers also," said Abhishek Singh, associate director for healthcare at PwC India.

Singh, however, added that while a lot of hospitals are looking to grow via acquisitions, there is a dearth of good assets in the market.

“Most of the acquisitions in this stage are taking place where the assets are either standalone or regional players concentrated in a region. The market is still building up and and this should not be mistaken for consolidation yet," Singh said.

Apart from Manipal Health, others in this segments have also been looking to grow through acquisitions.

In April, Hyderabad-based multi-speciality chain Care Hospitals Pvt. Ltd acquired a new property in Hyderabad from the US-based Alexandria Medical Center for 200 crore. US-based private equity firm Advent International Corp. owns a majority stake in the hospital chain which has 2,400 beds under its portfolio across nine cities. Earlier in January, Apollo Hospitals Enterprise Ltd bought Nova Specialty Holdings for 135-145 crore. The deal followed Apollo’s September 2014 purchase of Hyderabad-based Hetero Med Solutions Ltd’s pharmacy business for 146 crore.

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Published: 11 May 2015, 12:33 AM IST
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