Mumbai/New Delhi: Ranjan Pai, the 45-year-old promoter of Manipal Education and Medical Group, recalls that assets of Fortis Healthcare held little interest for him initially.
That initial reluctance has since faded. On Tuesday, the board of Manipal Education approved the merger of its hospital assets with that of Fortis Healthcare.
“It is an asset that came to us when TPG Capital brought it up. They initially wanted to do it on their own because I was not interested and I told them please carry on. Because when there is going to be another promoter, that would have made it difficult," Pai said in a phone interview following the announcement of the deal.
But TPG Capital was persistent; not surprising, given the experience the US-based buyout firm has had with Pai over the years as an investor in Manipal Hospitals.
“But, down the road, they said would you want to do this together? I sort of saw merit to it when I walked through the whole proposal. Like I said, it is a great asset. I have a lot of regards for how they (promoters of Fortis) have built that. There is a compelling case to build India’s largest healthcare chain," Pai added.
The Fortis-Manipal deal will catapult TPG-backed Manipal Health Enterprises Pvt. Ltd to India’s largest hospital chain with a combined revenue of Rs5,400 crore.
The combined entity will also become the largest hospital chain in terms of the number of beds (around 5,600 against Apollo’s 4,550) and number of doctors (more than 5,000, against Apollo’s 3,400).
But, these numbers do not do full justice to the efforts made by billionaire Ranjan Pai—who is also a serial entrepreneur and angel investor.
The Fortis-Manipal deal puts him right on top of the list of India’s most successful entrepreneurs and adds to the successes of the Manipal family, which took a hit after the death of family patriarch T.M.A. Pai in 1979.
This sparked a succession row (and, later, a family split) between his nephew (Ramesh Pai) and his son (Ramdas Pai); the families’ non-banking financial firms went bust.
The flashpoint to the row between the cousins and their families came in 1993 when Manipal University received deemed university status and Ramdas Pai was made chancellor. Ranjan is Ramdas’s son.
After a bitter four-year feud—and public washing of dirty linen—the family business was split between the Ramdas Pai and Ramesh Pai factions.
The family trusts couldn’t be split up because the law doesn’t allow them to be.
Then Ranjan Pai met T.V. Mohandas Pai, the then chief financial officer of Infosys Ltd in 1997. The Bengaluru-based firm had just completed a successful listing at Nasdaq.
“He (Mohan) would give me 100 ideas to do something. May be after a month or two, I would get scared of meeting Mohan because he would then remember every little thing. Over the years, I have really got to know him well and he has become a really great friend and mentor. We really enjoyed working together," Pai said.
Together, Mohandas Pai and Ranjan Pai set up Aarin Capital in 2011. The fund, into which Ranjan Pai invested $50 million of his personal wealth, has so far infused $80 million into more than 30 start-ups and other venture funds in India and abroad, according to Forbes India magazine.
But, that was not the direction Ranjan Pai had taken a decade ago when he had started to take charge at the Manipal-based group.
Ranjan Pai set up the entire corporate structure of Manipal Education and Medical Group (MEMG), separating Manipal University and Sikkim Manipal University from the rest of the businesses.
Under the corporate arm come four main businesses: Manipal Universal Learning, which has in its fold distance education and the global campuses; Manipal Health Systems; Manipal Cure and Care Pvt. Ltd, which provides health check-ups and beauty care; and Stempeutics Research Pvt. Ltd, set up to develop stem cell therapies.
Manipal Cure and Care and Stempeutics were both Ranjan’s creations.
The corporate structure soon drew private equity (PE). In the latter half of 2006, IDFC Private Equity Fund put Rs90 crore in Manipal Health Systems Pvt. Ltd.
Indian PE firm IDFC Private Equity, along with US investment firm Capital Group, pumped Rs300 crore into Manipal Universal Learning, making an initial public offering inevitable.
PremjiInvest, the investment fund owned by Wipro’s Azim Premji, invested $125 million in the group’s education business in 2015 just 18 months after a profitable exit from the same business.
IDFC Private Equity, too, returned to invest four times across MEMG’s education, health care, student housing and service businesses.
The two firms remain invested in MEMG along with TPG Capital, which has invested in the group’s healthcare vertical.
“Manipal Health stands proudly as one of the largest healthcare groups and Ranjan Pai has taken it to a different level," Pradeep Chowbey, executive vice-chairman, Max Healthcare, said, adding the move is yet another step toward consolidation in the sector that will bring better healthcare services for patients.
“He has done an excellent job of taking the family business to new heights. This is the next big step and he has surely taken it up the ladder," Dr Naresh Trehan, chairman and managing director of Medanta—The Medicity, said.
But, the job is only half done.
“When done well, M&A can achieve valuable outcomes," Chowbey said.
That will be something that Pai will now have to ensure.