Separately, Temasek and KKR are also in initial talks to buy a part of the promoter group stake from Pai, the two people said, requesting anonymity. To be sure, Pai may continue to hold a majority stake in the company, they added.
Bengaluru-based investment bank Allegro Capital is advising Manipal on the stake sale.
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“KKR has had great success in the healthcare sector, making huge returns on the Max Healthcare investment, and thus they are very keen on deploying large sums of capital in the healthcare sector and have been pursuing this investment in Manipal aggressively," one of the two people cited above said.
KKR sold its remaining 27.5% stake in Max Healthcare for around ₹9,200 crore in August in a deal that marked the investor’s biggest exit from an Indian investment, as well as the biggest private equity exit through a block trade on the Indian stock markets.
Investor interest in healthcare companies soared after hospital operators swiftly bounced from the losses during the pandemic when patients deferred non-emergency care. Patients are, however, returning to hospitals for elective surgeries and other treatments after putting them off for nearly two years for fear of contracting covid.
“As of now, it’s only TPG and NIIF stake sale that investors are looking at," said Manipal Health promoter Ranjan Pai in a text response to Mint’s queries. “Not planning to step back from any of my companies," Pai added.
Spokespeople for KKR, TPG and Temasek declined to comment. Emails sent to a spokesperson for NIIF did not elicit a response.
The Pai-led promoter group owns 50.4% stake in Manipal Health, with TPG owning 21.52%. Temasek owns 18.13%, and India’s quasi-sovereign wealth fund NIIF holds 8.45%. As of 30 June, Manipal Health operated 23 hospitals, with 14 in the south across Bengaluru, Mangaluru, Mysuru, Vijayawada, and Salem; six in the north across Delhi, Jaipur, Ghaziabad, and Patiala; two in Pune and one in Kolkata.
“The investors have shown an interest in picking up a part of the promoter stake in the company. Those talks are still at a preliminary stage, and there is a chance that a promoter stake sale may not happen along with the investor (TPG, NIIF) stake sale but may happen at a later date," the second person said.
Manipal Health’s revenue more than doubled to ₹4,010.6 crore in the year ended 31 March from ₹1,813.3 crore in the previous year, which was more severely impacted by the pandemic-related lockdowns, according to an 18 August report by rating agency IndiaRatings. The hospital chain’s operating profit nearly tripled to ₹977.1 crore in FY22 from ₹330.2 crore in the previous year, the IndiaRatings report added.
“During FY22, Manipal Health’s management undertook strong efforts to bolster profitability, employing various measures such as enhancing operating efficiencies, costs optimization, reduction in corporate overheads, removal of duplication headcounts, improvement in processes, and improvements in the medical equipment in the newly acquired units of Manipal Hospitals Pvt. Ltd (formerly Columbia Asia Hospitals) and Manipal Hospitals (Bengaluru) Pvt. Ltd. Furthermore, the Dwarka hospital, which had been incurring losses until FY21, saw a turnaround in FY22, thereby making all of Manipal Health’s units profitable," IndiaRatings said.
In the June quarter, Manipal Health recorded a revenue of ₹1,099.8 crore and an operating profit of ₹277.4 crore, with occupancy levels at 64%.
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