Manipal Hospitals closes in to acquire Medanta stake at enterprise valuation 6000 crore

New Delhi: Manipal Hospital backed up by its investors TPG Capital and Temasek is heading closer to acquire Medanta Hospitals at a valuation of Rs 5800-6000 crore with some developement on the front expected in the coming few days.

A recent report in Economic Times has confirmed that Last week at Medanta's board meeting, the proposal was discussed. However, the meeting ended inconclusively. Having said that, both sides are expected to sign a time-bound exclusivity agreement to conduct due diligence early next week, possibly even as early as this weekend, said multiple sources aware of developments to the daily

Medanta, founded in 2009, operates super speciality hospitals and clinics across cities including Gurgaon, Lucknow, Indore, Ranchi and Sri Ganganagar. Founded by renowned cardiac surgeon Dr Naresh Trehan, Trehan and his family, along with co-founder Sunil Sachdeva own 55% of the share. US-based private equity fund Carlyle Group owns 27% in Medanta, while Singapore's Temasek Holdings Pte holds a share of 18%.

ET adds that Manipal-TPG and Temasek are close to buying 82% stake in Medanta. It is expected that with the deal, Carlyle Group will completely exit from the deal, and the original promoter will also divest majorly while retaining a small portion.

Also Read: Manipal eyes Medanta, Sets Valuation at Rs 6000 crore: Report

"Carlyle, which was looking for a higher valuation, has finally agreed on the proposal last week and the Manipal-Medanta deal will go through quickly. The term sheet is expected to be signed in the next 8-10 days," one of the people said on the condition of anonymity told Economic Times

Both TPG and Temasek will fund this transaction. They will invest a larger amount in Manipal Education & Medical Group(MEMG) to enhance their stake, which will in turn be invested in Medanta .TPG had invested about $146 million, or.Rs 900 crores, in February 2015 in MEMG and has a 22% stake while Singapore's investment company, Temasek, owns 18% of both Medanta and Manipal.

Two months ago, the TPG-Manipal was seen vying for AMRI Hospitals Ltd (Advanced Medical Research Institute) in Kolkata. Manipal Hospitals had revived talks with FMCG major Emami Group to acquire its AMRI Hospitals Ltd. Emami looking for a valuation of Rs 800-1,000 crore for the hospital chain.

Read Also: After losing Fortis Bid, Manipal vyes to buy AMRI for upto Rs 1,000 crore

In recent times, Medanta has been under pressure because of price controls imposed by National Pharmaceutical Pricing Authority (NPPA). The holding company of Medanta, Global Health posted sales of Rs 1,278 crore in fiscal 2017, down from Rs 1,384 crore the year before, according to company filings. Profit after tax fell to Rs 54 crore in FY17 from Rs 175 crore in FY16. The group had total debt of Rs 182 crore by FY17.

In August last year, the drug pricing regulator capped the prices of knee implants, reducing product prices by as much as 70% and had brought cardiac stents under price control in February to make them affordable. The price of drug-eluting stents drastically went down to about Rs 30,000 from over Rs 2 lakh, which evidently hit the revenues of all the hospitals in the country.

Similarly, Medanta also saw a cry off in its revenue after several of its top doctors quit to join rivals such as Fortis and Max Healthcare Ltd.