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A hospital-private equity deal is always in the works in India. Entrepreneurs prefer to buy, not build. For obvious reasons. Borrowing is limited for acquisitions, owners need equity financing. Why not. A mid-to-large size hospital is a 15-20 year business, yet it’s being grown with funds on 5 to 8-year exit plans. It’s a necessary evil.

By these measures, if Manipal Group CEO Ranjan Pai has been looking at every hospital worth buying in India in recent years, it’s understandable. Why hasn’t he closed any deal is the million dollar question. For Fortis Healthcare, last year, he made three bids but eventually lost to IHH Healthcare Bhd of Malaysia. His focus then shifted to Medanta Medicity in Gurgaon, which, as we wrote, has been up for acquisition because both its promoter, Dr Naresh Trehan, and investors want an exit. Pai, a trained medical doctor, has bid for it. In fact, left to the two doctor promoters, he says, “they’d have closed the deal a year ago”.

Backed by Manipal Hospitals’ existing investors TPG and Temasek, Pai has reportedly made a binding offer of Rs 5800 crore for Medanta. At 24X Ebitda (earnings before interest, tax, depreciation and amortisation multiple) valuation measure for this sector, Medanta is a prime asset whose founder is as worried about his exit as he is about leaving the hospital in the right hands.

Will Pai close the deal this time?

Situated on the 15th floor of the JW Marriott Hotel in central Bengaluru, the Manipal Education and Medical Group office is spacious, plush and quiet. There’s an air of discomfort about Pai. He has been reading The Ken prior to our meeting on Thursday; he has a question: “Your stories are good, analytical, but they mostly are… negative.”

“Is it so? I think we write truth,” I counter.

Pauses, again. “That’s right, it’s truth,” he says, easing up.

Perhaps more than any entrepreneur, 46-year-old Pai has raised 16 rounds of private equity with 14 exits across his healthcare and education businesses. Excluding the current round for Medanta. Buying assets at a certain price is his imperative. “If you buy expensive, you will have to take the hit for somebody else,” he argues. It isn’t blitzscaling. Even for his upcoming digital health business, he’s clear the traditional manner in which health tech startups burn cash to acquire customers is not his thing. He’d prefer external capital for a business which, he thinks, can be built on the back of a mere one-tenth of the clinical base of his hospitals. With Medanta in their fold, they’d have 5 million patients passing through their gates.


Seema Singh

Seema has over two decades of experience in journalism. Before starting The Ken, Seema wrote “Myth Breaker: Kiran Mazumdar-Shaw and the Story of Indian Biotech”, published by HarperCollins in May 2016. Prior to that, she was a senior editor and bureau chief for Bangalore with Forbes India, and before that she wrote for Mint. Seema has written for numerous international publications like IEEE-Spectrum, New Scientist, Cell and Newsweek. Seema is a Knight Science Journalism Fellow from the Massachusetts Institute of Technology and a MacArthur Foundation Research Grantee.

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