In a twist to the ongoing race for IPO-bound Manipal Health Enterprises, Temasek-owned Sheares Healthcare India has edged ahead of rival suitor KKR and emerged as the new frontrunner to pick up a significant stake with an aggressive binding bid valuing the country’s second-largest hospital chain at around Rs 40,000 crore to Rs 42,000 crore, multiple industry sources with knowledge of the matter told Moneycontrol.

Sheares, which manages a portfolio of healthcare delivery assets for Singapore headquartered investment major Temasek, is an existing shareholder in Manipal Health Enterprises and holds around 18 percent stake. Sheares is keen to acquire a majority shareholding and discussions are currently on with the Ranjan Pai-led promoter group for the same, the above sources added.

Other than Temasek-led Sheares, the other external shareholders in Manipal Health Enterprises include US private equity firm TPG which holds around 21 percent stake, and India’s sovereign wealth fund NIIF ( National Infrastructure Investment Fund) which has an 8 percent stake.

“ Unlike earlier when it was contemplating a full exit, TPG is now mulling if it should opt for a partial exit instead. A final call has not been taken but if they decide to stay back, then the plan is to sell half of their stake to Temasek and the balance stake will be rolled over from the original fund whose life is coming to an end to a new fund. On the other hand, NIIF is eyeing a complete exit,” said one of the persons cited above.

A second person familiar with ongoing negotiations added, “ If TPG continues, it can clock some returns now and then wait for the IPO. Remember, a listing is definitely on the cards in the next 12-24 months. Also, It would make sense for the promoter group to have a long gestation period investor like Temasek looking at the next 10 to 15 years.”

“Temasek-led Sheares has been looking to consolidate and when this opportunity came, they looked at it seriously. A potential controlling stake for them in Manipal Health Enterprises would mean more board seats, and more board rights. The Manipal promoter group is open to diluting a 12 percent to 15 percent stake, but that quantum hasn’t been frozen yet. Based on the outcome of the discussions, a final agreement may be signed in January,” a third person told Moneycontrol.

Other than Manipal Hospitals, Sheares India is also an investor ( majority stake) in the Kolkata-based hospital chain Medica Synergie. Separately, Temasek also holds around 16 percent stake in Global Health, the operator of Medanta Hospitals, which got listed recently on the domestic bourses.

A combination of half the TPG stake, the entire NIIF stake and a minority stake held by the promoters would help Temasek cross the 50 percent mark in Manipal Health Enterprises.

“These are early days, but depending on the outcome of this proposed transaction, it would be interesting to see if Temasek & Sheares India look to combine any of their healthcare assets and bring them under one platform,” a fourth person told Moneycontrol.

Incidentally, earlier this week, Advent International announced that it had sealed a deal to acquire a majority stake in Hyderabad-based listed player Suven Pharma. The private equity major also added that it was exploring a merger of Suven Pharma with its platform Cohance Lifesciences, which houses 3 portfolio firms from the CDMO and API segment, namely RA Chem, ZCL Chemicals, and Avra Labs.

All four persons above spoke to Moneycontrol on the condition of anonymity.

Moneycontrol has sent email queries and could not elicit an immediate response from Temasek, Manipal Health Enterprises, Dr Ranjan Pai, TPG & NIIF. Sheares Healthcare declined to comment. This article will be updated as soon as we hear from the other parties.

On 17th December 2022, Mint reported that Temasek-backed Sheares was set to buy TPG’s entire 21 percent stake. In the early stages of the deal, KKR, post its lucrative exit from Max Healthcare, was seen as the lead contender to buy out TPG’s stake, but later deal dynamics changed and the US private equity major slipped behind its Singaporean rival suitor and dropped out of the race.

Manipal, Temasek led Sheares & TPG : The M&A Action

In December 2021, Temasek platform Sheares Healthcare acquired a majority stake in Medica Synergie, a multi-specialty hospital. Since then it has been gradually exploring other domestic inorganic options.

On September 3rd, 2022, Moneycontrol reported that peers Manipal Health Enterprises and Max Healthcare were likely to express interest if a controlling stake was up for grabs in private equity firm True North backed KIMSHEALTH, Kerala’s largest corporate hospital chain.

Interestingly the plans of Manipal Hospitals to acquire Kolkata-based AMRI hospitals owned by the Emami Group have hit a hurdle and both parties are locked in litigation at the Delhi High Court.

The Manipal group, which has nearly 8,000 beds across 28 hospitals, has been on a consolidation drive. In November 2020, it acquired the Indian assets of Columbia Asia Hospitals for around Rs 2,100 crore, and later in June 2021, it purchased Bengaluru-based Vikram Hospitals from Multiple Private Equity for around Rs 350 crore.

TPG Capital picked up a significant minority stake in the Ranjan Pai-led hospital chain for Rs 900 crore in February 2015 and has been looking to clock returns on its 7 year old bet. As part of its India portfolio, TPG also backs Care Hospitals, Motherhood hospitals, and infertility chain Nova IVF.

Back in January 2022, Moneycontrol was the first to report that nearly three years after taking over the management of hospitals and clinics previously managed by a fund of failed private equity firm Abraaj, TPG-backed Evercare was looking to exit Hyderabad-based Care Hospitals.