Singaporean public investor Temasek Holdings acquired a 41% stake in Bangalore-based Manipal Hospitals on Monday, raising its stake to 59%. Temasek held an 18% stake in the company through its Sheares Healthcare platform. As part of the transaction, private equity firm TPG completed a partial exit. It will retain an 11% stake in Manipal, transferring the remaining stake from TPG Asia VI to another vehicle TPG Asia VIII. In an interview, Dr. Ranjan Pai, Chairman of Manipal Group, which has a 30% stake in Manipal Hospitals, said that he plans to complete another acquisition in FY24, but he may not opt for a public listing immediately. The group is expected to invest $50 million in UNext, its higher education platform in FY24 and may also explore raising capital for its health insurance platform. Edited excerpts:
Singaporean public investor Temasek Holdings acquired a 41% stake in Bangalore-based Manipal Hospitals on Monday, raising its stake to 59%. Temasek held an 18% stake in the company through its Sheares Healthcare platform. As part of the transaction, private equity firm TPG completed a partial exit. It will retain an 11% stake in Manipal, transferring the remaining stake from TPG Asia VI to another vehicle TPG Asia VIII. In an interview, Dr. Ranjan Pai, Chairman of Manipal Group, which has a 30% stake in Manipal Hospitals, said that he plans to complete another acquisition in FY24, but he may not opt for a public listing immediately. The group is expected to invest $50 million in UNext, its higher education platform in FY24 and may also explore raising capital for its health insurance platform. Edited excerpts:
Now that Temasek has taken control, what’s next for Manipal Hospital?
Now that Temasek has taken control, what’s next for Manipal Hospital?
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Manipal hospitals will continue to grow. We don’t go out and always have a large turnout. We appealed to long-term investors because patient capital is needed in this industry. We also had to give TPG a partial release, which is how the process began. When Temasek wanted to increase their stake as they wanted to invest more in health care in India, we had a perfect match.
Will Temasek lead the company?
Manipal Hospitals has always been a board-run company and it will continue to be. We will not change what has worked for us. (Dilip Jose is the General Manager). Manipal Education and Medical Group (promoters) have only been involved in acquisitions and some fundraising. Everyone, including our investors, will play a role.
What is the acquisition spend that Manipal Hospitals is considering for FY24?
In FY24 we will have another ₹3,000 to 4,000 crores for acquisitions. This excludes our agreement to acquire AMRI Hospitals.
Where will the money for acquisitions come from?
Mainly from the balance sheet, but there may also be borrowings.
Do you need to fill in some gaps?
Since India needs many more hospitals, we are planning to take over any hospital, upgrade the infrastructure and install more advanced equipment and strengthen clinical programs. We don’t really focus on any particular region because every region needs health care. We normally opt for the general specialty.
Will acquisitions like that of Care Hospitals also interest Manipal?
Right now we have our hands full. I don’t know if we can look at care hospitals.
When will Manipal consider a public list, given the previous delay of 24-36 months?
We will consider an IPO when the time comes. The timeline may be pushed back, but we’ll explore from time to time.
Can you give us an idea of Manipal’s growth for FY23?
Without any acquisitions, we should increase our turnover by 15%.
The promoters collected more than 20% of the shares thanks to this agreement. Do you plan to invest in other areas?
Part of the reason was to reduce some of the debt and branch out into new areas. But at this point, honestly, the main reason was also to get the right long-term partners for our healthcare business. With Temasek, we have found someone who can look to health care for the next 10-20 years. Nor are we considering giving up anything more in health care. We will look to reinvest in healthcare (via Manipal) at a later date.
In which new areas will the group invest?
We already have an edtech startup UNext, where we want to invest $50 million in FY24. We will also invest in our health insurance platform ManipalCigna Health Insurance. We may consider external capital for our health insurance platform.
Either we bring in outside investors or Manipal and Cigna will invest more. Currently it is a 51/49 joint venture.
Are you going to raise external capital for the insurance industry?
We haven’t decided on that, but it’s always good to have a different perspective that PE brings to the table. At Manipal Group, we have done well with PE partners. Over the past 15 to 17 years, we’ve seen so many rounds of private equity investments with good outflows. It has benefited both. We have a good track record with PE and partner with them to help us improve our business as well. We are exploring all options,
Would you like to invest more in your stem cell business (Stempeutics) that you have created with Cipla?
We already have another investor for Stempeutics. There are two products that have just been launched that look promising. We may consider fundraising in the future when we begin our trials in the United States. But for now, in Exercise 24, we don’t look at it.
How do you see the growth in the diagnostics sector?
It is under the hospitals of Manipal and it continues to develop well.
You mentioned that part of the money raised from the sale of secondary interest will be used to reduce the debt. Could you clarify this?
In the past, we have taken on debt to invest in our other businesses, some for hospitals, some for education. We had bought out some of our private equity investments in the past (using debt).
Apart from education, would you consider investing anything?
We will selectively review hospitals across the country.
What inorganic growth opportunities would you consider?
Our plans for inorganic growth would probably be limited to ₹3000-4000 crore unless we find and honestly if we have the appetite for more. We will continue to grow but who knows if a good opportunity arises and if all parties agree.
There have been comments about the high valuation at which the Temasek deal was struck at ₹40,000 crore- ₹42,000 crore. What do you have to say?
I don’t want to comment on the ratings, but I think it’s a fair value. Temasek has already invested in this unit over the past five to six years. So I think they are reassured about the governance standards and the growth pipeline that we have. So I think that’s a fair assessment, in and of itself.
Do you plan to invest more in the startup ecosystem, in areas other than education and health?
We have invested heavily in the Indian startup ecosystem. We believe in it. The kind of quality entrepreneurs coming out of the Indian ecosystem is very, very promising and yes we will be looking to keep investing in the ecosystem,
Would it be through funds or direct investments?
So we have investments in funds, but now we are going to do it directly.
How did your investments as an angel investor in startups go?
They did really well. We have been invested in Byju’s, Pharmaasy among others where we have now exited. There are other investments in companies such as Incred that we are excited about.
Would you consider investing more in Incred?
Right now it’s well capitalized, I think.
Have valuations in the startup ecosystem cooled?
Valuations are much more attractive right now in the startup ecosystem. They have certainly come off a bit. But like I said, it’s cycles and yes, it’s attractive. It’s important for the ecosystem not just to keep investing in something for people to invest in the ecosystem because you need the next rounds okay you need the next round for the business to survive . So, I hope the winter isn’t too long and people will come back.