Mumbai: US-based private equity firm TPG Capital and India’s Manipal Group have jointly entered into exclusive negotiations with heart surgeon Dr Naresh Trehan and other investors to buy a controlling stake in hospital operator Medanta, said two people aware of the development, requesting anonymity.
“The TPG-Manipal combine is in advanced stages of negotiations and they recently entered into exclusive talks. They are currently conducting a due diligence on the asset. They have a three-month exclusivity period, so Medanta will not be talking to any other buyer during this period," said the first person cited above.
In October, Mint reported that TPG and Manipal had begun exploratory talks to acquire a controlling stake in the hospital chain, for a valuation of around ₹6,000 crore. Earlier, Malaysian hospital operator IHH Healthcare Berhad, too, had shown interest in buying Medanta.
“We don’t comment on media/market speculations," said a Medanta spokesperson in an email response to Mint’s queries on the stake sale process. TPG Capital declined to comment. Text messages sent to Ranjan Pai, promoter of Manipal Education and Health Group, did not elicit any response.
TPG Capital has sharpened its focus on healthcare investments in India since 2016.
Last year, it was involved in an extended battle for control of Fortis Healthcare, India’s second-largest hospital chain. The deal was finally clinched by IHH Healthcare, which offered to invest ₹4,000 crore in the hospital chain.
TPG’s healthcare portfolio in India includes Cancer Treatment Services International, Bengaluru-based Rhea Healthcare Pvt. Ltd, an operator of hospitals for women and children under ‘Motherhood’ brand; and Sai Life Sciences, a drug discovery and manufacturing firm.
US-based private equity firm Carlyle Group owns 27% in Gurugram-based Medanta, which was founded in 2009. Singapore’s Temasek Holdings Pte. has 18% while Trehan, his family and Medanta co-founder Sunil Sachdeva own the rest.
In 2013, Carlyle had acquired a 27% stake in Global Health Pvt. Ltd, which owns, manages and operates Medanta, while Temasek bought its 18% stake in Global Health in 2015 from Punj Lloyd Ltd. Medanta operates hospitals and clinics across Gurugram, Lucknow, Indore, Ranchi and Sri Ganganagar.
Hospital chains have been under pressure because of price controls imposed by the National Pharmaceutical Pricing Authority (NPPA), the drug pricing regulator. In August 2017, NPPA had capped the prices of knee implants, reducing product prices by as much as 70%. The regulator also brought cardiac stents under price control in February 2017 to make them affordable.
The healthcare sector has seen some major private equity investments in recent years.
In December, Radiant Life Care Pvt. Ltd, backed by private equity firm KKR and Co., agreed to buy a controlling stake in Max Healthcare Institute Ltd.
In June 2018, General Atlantic invested $130 million in Hyderabad-based Krishna Institute of Medical Sciences to acquire a significant minority stake. In 2017, home-grown PE firm True North had invested $200 million in Kerala Institute of Medical Sciences.