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Manipal deal raises bar for hospital valuations...

ICICIdirect Research 11 Apr 2023 DISCLAIMER

What's Buzzing? 

Singapore based Temasek Holdings has acquired a controlling share in Bengaluru-based Manipal Health Enterprises after purchasing an additional 41% of the hospital network for Rs 16,500 crore. The deal values the hospital chain at Rs 40,000 crore ($5 billion) of enterprise value, making this transaction one of the biggest in the Indian healthcare sector. 


Manipal Health Enterprises is a Bengaluru based hospital chain established in 1991. Ranjan Pai is the chairman of the Manipal group. Over the years, the hospital has grown as the second largest chain with 29 hospitals across India with total bed count of 8,300 beds. Manipal Health Enterprise acquired Kolkata based Amri Hospital for Rs 2,400 crore. The buyout has taken Manipal's bed count to 9,500. The KIMS acquisition would be the third deal post Columbia Asia Hospitals and Amri if it materialises. The deal is expected to fetch ~Rs 3,500-4,000 crore valuation. This will add four operating hospitals with ~2000 beds making Manipal the largest hospital chain in India with ~11,000 beds. 

Our Perspective: 

Temasek's acquisition deal value is by far the highest among recent deals (last five years) involving significant control premium. The said deal is expected to bring down the promoter holding from the current 52% to 30%. Manipal Health’s aggressive plans to target additional 2,500 beds in the next three years via the inorganic route should aid growth for the hospital chain. It is also constantly looking for greenfield opportunities with focus on exploring one or two tier-III towns where markets are not yet saturated. We believe even after stripping out the same, the valuation at which the deal was consummated (~25x FY25E EV/EBITDA at 15% growth assumption) is still at the higher end against industry valuations of ~15x EV/EBITDA. This may lead to significant pegging effect for sector valuation. This deal also epitomises growing preference for hospitals in the healthcare space.

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