Manipal Health Enterprises Ltd is evaluating a bid to acquire a stake in the company that operates Gurugram-based super-specialty hospital Medanta—The Medicity, according to two people familiar with the development.
The proposed transaction will enable private equity firm The Carlyle Group to exit Global Health Pvt. Ltd, which operates Medanta. Carlyle owns a significant minority stake in Medanta, the people said, asking not to be named.
One of the persons said that Singapore state investment firm Temasek Holdings isn’t likely to exit Medanta immediately.
Temasek, which also holds a stake of about 18% in Manipal Health, will be able to consolidate its shareholding should a merger go through. Manipal also counts private equity firm TPG Capital as a key investor.
A report by The Times of India earlier this year said that Malaysia’ss IHH Healthcare Berhad and Temasek were both evaluating separate control bids for Medanta.
Earlier on Wednesday, the Mint newspaper reported details of TPG Capital and Manipal’s talks with Medanta though it said Manipal was yet to make a formal bid.
Executives at Manipal Health and Medanta didn’t immediately respond to VCCircle’s requests for comment.
For Manipal, a majority stake in Medanta would help boost revenue and improve profitability. An eventual acquisition would help the South India-based hospital network gain a toehold in the northern region.
For TPG, this is the quickest way to scale Manipal Health given that the hospital chain lost an opportunity to acquire North India-based Fortis Healthcare Ltd and Max Hospitals.
While IHH Healthcare emerged successful in its bid for Fortis Healthcare, KKR-backed Radiant Life Care acquired a 49.7% stake in Max Hospitals.
Medanta has been facing growth challenges. In December 2017, VCCircle reported that Medanta’s profit margins had dropped for two years. Its earnings before interest tax, depreciation and amortisation halved in 2015-16. In 2016-17, Medanta reported a profit margin of 3.72%, about one-fourth of what it was the previous year.
To be fair, Medanta is not the only company facing growth pangs. The entire hospitals industry has been facing headwinds because of price controls and regulatory disruptions, which are prompting some of them to consider consolidation as a way forward.
Should this deal go through, Carlyle could secure another exit from a healthcare asset. The PE firm has already charted a path to exit diagnostics chain Metropolis Healthcare Pvt. Ltd via an initial public offering.
Medanta founder Naresh Trehan is said to have held talks with various PE firms and other hospital groups over the past year to strike a deal. The company has pursued various options, including a listing, and had held discussions with merchant banks for an IPO. However, market volatility in recent months may have deterred the company from going ahead on its IPO plan.
