Ramdas Pai set up the first Manipal Hospital in 1991 in Bengaluru and it has grown into the second largest hospital chain in India over the next 32 years. Today, its promoters decided to cede its control to a global private equity fund, Singapore’s Temasek, at a valuation of Rs 40,000 crore. Ranjan Pai, the chairman of Manipal Group, an education and healthcare empire with 29 hospitals, speaks to Reghu Balakrishnan on the rationale behind the stake dilution and the plans of the group. Edited excerpts:

What was the rationale behind giving up the control?
The major rationale was to give a exit to the existing investors. That’s how the process was started. Then we realised Temasek was looking for a larger play in Indian healthcare. Simultaneously, we need to scale down our debt in the holding company. So, it was a combination of paring down debt, giving TPG an exit and sharing a larger role to Temasek. That’s how it got translated to a larger deal. There is nothing changed from our perspective – whether we own a 52% or 30% stake.

PE investors have been a part of Manipal’s growth for the last couple of decades. How was the experience?
We have had a great experience with all our private equity partners over the years. They have been instrumental in helping us scale, attract good talent and also have best-in-class governance. The fact that both Temasek and TPG (from their new fund) are further investing is a testament to the potential of this platform and the relationships that we have built.

Today, the healthcare industry is backed by a lot of PE money. How do you see the relevance of PE investors in Indian healthcare space?
Private healthcare in India needs a lot of capital. It will come in the form of either large conglomerates’ investments or from the private equity funds. In that sense, private equity money is a vital ingredient for the faster growth of the industry.

Manipal has been expanding through the inorganic route and has done several buyouts. What are the future expansion plans? New markets?
We keep expanding and looking for more opportunities. There are opportunities across India, and we are open to entering any market. We are also looking for greenfield opportunities. We’ll add 300 beds every 12-18 months through greenfield expansion.

Any plans to enter the public market?
No immediate plans for an IPO. It may take another 2-3 years for listing.

Several single hospitals in tier 2, 3 towns are forced to shut down due to tough competition and lack of funding. How healthcare facilities in rural areas will grow?
It has to grow stage by stage. Eventually, when metros and tier 1 cities start getting saturated, players will move to tier 2-3 towns. It’s part of our strategy. We are exploring one or two tier-3 towns. We will continue to explore; our idea is not to grow only in larger cities. Following the ongoing consolidation, and acquisition of the smaller players by large groups, healthcare facilities are becoming less affordable for common man. What are the solutions?
Consolidation doesn’t lead to an increase in market price because we will never have a high enough market share in this large country of ours. Consolidation can lead to more efficiencies in purchasing consumables and equipment, attract better talent, and also introduce state-of-the-art medical equipment. Good quality healthcare costs money.