Nomura: Manipal’s Pais seeks to raise $500m, talks with Barclays, Deutsche, DBS, Nomura & Stanchart

Manipal hospital developers, the Pai family, are in talks with a group of banks led by Barclays to raise $400-500 million (₹3,158-3,948 crore), as they seek to buy out half of the Shares held by U.S. private equity investor TPG Capitale of India’s second-largest hospital chain, people familiar with the matter said. Deutsche Bank, DBS, Nomura and Standard Chartered Bank have also been approached, the people told ET.

The fundraising, which will be a syndicated acquisition financing facility, will be set after the Ranjan Pai-led group finalizes the terms of the takeover.

Discussions are ongoing on the price which will be spread over the global benchmark overnight secured funding rate, one of the people said. “It should be mostly a five-year setup,” he said.

Manipal Hospitals, TPGs and banks did not comment. TPG, which invested $146 million in Manipal in 2015, has a 21.5% stake.

“Likely valuation at around ₹18,000 Cr”

The proposed transaction is likely to value hospitals in Manipal at around ₹18,000 crore, a second person said. If the deal is successful, it will earn the US private equity firm a nearly triple return on its seven-year investment.

The deal aims to provide a partial exit for the Texas-based investment firm, one of India’s most aggressive healthcare investors.

India’s National Investment and Infrastructure Fund and Singapore’s sovereign wealth fund Temasek Holdings are the company’s other two external investors. The promoters hold almost 60% of the capital.

With US Treasury yields remaining high, offshore bank loans are gaining more and more traction as they are cheaper than raising funds through bonds.

Globally, sponsor funds or general partners of private equity firms enter into credit facilities to fund buyouts, primarily to lower the cost of capital.

India’s M&A funding tripled in FY22 to $32.5 billion. Acquirers raised a record $32.2 billion in 2021-22 to fund deals in 321 deals, data from analytics firm Dealogic shows. A year earlier, it was $10.9 billion.

Footprints and origins

In addition to its minority stake in Manipal Hospitals, TPG Growth owns a majority stake in Asia Healthcare Holdings, which operates India’s largest chain of maternal and child care hospitals, Motherhood Hospitals, and an infertility chain.

IVF. In India, TPG Growth also owns Hyderabad-based CARE Hospitals, which has a network of 15 healthcare facilities with over 2,400 beds.

In November 2020, Manipal Hospitals acquired the Indian assets of Columbia Asia Hospitals for around ₹2,100 crore and in June 2021 bought the Bengaluru-based Vikram Hospitals from the private equity firm Multiples for around ₹350 crore.

The Pai family, who founded India’s first private medical school, in the city of Manipal in Karnataka in 1953, established the Manipal Hospitals in 1991 in Bengaluru. Manipal has about 7,800 beds spread across the country.

The hospital industry will require investments of approximately $245 billion over the next 20 years, according to a recent PwC report. India needs to add 3.6 million beds, 3 million doctors and 6 million nurses over the next 20 years, he said.

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