From adding beds to more high-end surgeries, Manipal's next health plan

Bengaluru-based hospital chain is focusing on adding beds - both organically and inorganically - and offering more high-end and complex surgeries for growth and profit

Bengaluru-headquartered hospital network Manipal Health Enterprises (MHE), now the second largest in the country after Apollo Hospitals in terms of the number of beds, is eyeing a deeper penetration into the Indian market with a five-year growth strategy in tow.

This week, PE firm Temasek raised its stake by 41 per cent, giving it a controlling stake of 59 per cent. Earlier investor TPG has also re-invested in MHE through its new Asia fund, TPG Asia VIII, and holds 11 per cent.

With Rs 4,600 crore revenues in FY23 and an Ebitda margin of around 26 per cent, Manipal ranks among the top five corporate hospitals in India now. It operates 8,300 beds across 29 locations.

It draws average revenue per occupied bed of Rs 54,794 per day, which is in line with Apollo Hospitals Enterprise and Fortis Healthcare (see chart).

As Ranjan Pai, promoter and chairman, Manipal Group, which holds 30 per cent in MHE, put it: “We started off from Karnataka, and we will continue to invest here. In every market where we are present, we will continue to invest in green-field facilities, for example, in Jaipur and Pune.” He added that they will continue to consolidate in India. Manipal sold its Malaysia hospital in 2021 to focus only on India.

The hospital chain has been expanding its footprint in the last few years — it acquired the Columbia Asia chain in April 2021 for Rs 2,100 crore, and then bought Bengaluru-based Vikram Hospital from Multiples PE for Rs 350 crore in June 2021. The Columbia Asia acquisition took its bed count from 6,000 to 7,300 in 2021 and Vikram Hospital added another 200 tertiary care beds in the central business district of Bengaluru. It was in the race to acquire Gurugram-headquartered Fortis Healthcare in 2018, but eventually dropped out.

The next leg of growth will come from adding beds — both organically and inorganically — and also offering more high-end and complex surgeries. Pai said that India needs more high-end surgeries happening here; more investments in technology. “People leave India for high-end surgeries, and we need to keep these people here,” he told Business Standard.

Manipal Hospitals also wishes to collaborate with smaller hospitals for providing tertiary and quaternary (an extension of tertiary level) care. Dilip Jose, MD and CEO of Manipal Hospitals, said, “The focus of Manipal Hospitals will continue to be tertiary and quaternary care, not only because that will be the best use of our clinical talent and infrastructure, but since it also allows us to collaborate with smaller hospitals outside of our network.”

He felt that instances of patients travelling out of the country for treatment are way below those in the past as India has the ability today to offer clinical outcomes comparable to the best in the world and at a fraction of the cost in other countries. He added that their medical services group is focused on enhancing clinical teams by attracting talent from within and outside the country. “It is core to our operating plans,” Jose said.

With a net debt of Rs 1,000 crore now, and an Ebitda of Rs 1,200 crore in FY23, Jose said, “We are very comfortably placed as far as our net debt-Ebitda ratio goes. Therefore, we can focus on expansion plans.”

Manipal Hospitals aims to add another 1,100 beds from green-field expansion in Bengaluru and Raipur for Rs 1,650 crore. It is close to acquiring Kolkata-headquartered AMRI Hospitals for Rs 2,300 crore, which will add 1,200 beds to the network in the east. On top of this, there is a plan to add 1,200-1,300 beds through acquisitions in the next three years, taking its bed count to around 12,000.

When looking for an acquisition target, a geographical fit is the first filter. “Does the potential transaction offer us an opportunity to go deeper in an existing location of ours or to enter a new territory that is of interest? Cultural fit is a very important consideration as the success of any acquisition will depend heavily on people integration,” Jose said. It now draws more than 50 per cent of its revenues from the Karnataka cluster; and acquisitions will give it a more even play across India.

Is the focus on high-end, complex surgeries like oncology and transplants for better margins?

Jose disagrees. “It is not necessary that the complex surgeries have higher margins than the rest. It is true that it might cost more for a patient, but the implants, consumables and ICU stays that are usually associated with complex procedures also drive up the cost of delivery of care. As many such items are price-controlled, the overall margin available to the hospitals is not necessarily high. Examples are cardiac procedures, orthopaedics and spine surgeries and so on,” he said.

Margins, as Pai puts it, are a factor of efficiency management. “Our pricing is not the highest. Margins in the hospital sector are under pressure, and margins will continue to be under pressure,” he added.

For the moment, all he sees are opportunities. “We will have to work harder. These are exciting times for Indian healthcare. Looking at the global headwinds, India is in a very good space,” Pai felt.