
The Indian healthcare landscape has been witnessing major consolidation, with bigger players buying hospitals to increase their reach. Manipal Hospitals’ or MHEPL’s recent acquisition of Khubchandani Hospitals in Mumbai for a price of ₹415 crore valued this acquisition at ₹0.83 crore per bed. This transaction presents an interesting case for analysis. This transaction, coupled with its previous acquisitions, demonstrates an aggressive expansion strategy by Manipal. But the question remains whether this deal is a good deal for Manipal. Let’s go into the details.
Mumbai Acquisition Value Unwrapped
At ₹0.83 crore per bed, the Khubchandani Hospital acquisition would seem to be a steal, especially for a city like Mumbai that has one of the highest real estates and operational costs in the country. This looks all the more attractive when compared to other hospital acquisitions in Tier-I cities. For example, Manipal’s 2019 buy of Kolkata-based Medica Super-specialty Hospital came at ₹0.5 to 0.6 crore per bed. On the other hand, most of the group hospitals associated with Medica were located in Tier-2 cities like Siliguri, Patna, Ranchi, and Kalinganagar, which are cheaper in terms of land price and all other operation costs compared to a metro city like Mumbai.
In that context, it is highly competitive to acquire a hospital in Mumbai at ₹0.83 crore a bed, and one may even say that Manipal secured an asset worth a good deal fairly cost-effectively.
Comparison with AMRI and Apollo Hospitals: A Wider Perspective
This deal needs to be compared with other acquisitions in major cities. An earlier acquisition by Manipal of AMRI Hospitals-a premium hospital chain in Kolkata-was much bigger and more premium. AMRI had been valued at ₹2.28 crore per bed, which works out to a total valuation of ₹2,738 crore for 1,200 beds. The significantly higher valuation reflects AMRI’s established brand presence and operational efficiency. In contrast, Khubchandani Hospitals is in a premium market, sans the brand equity or operational history of the others, and hence would have merited a lower valuation. This deal helps Manipal get a presence in the Mumbai market, which it had lacking all this while. But the bigger question remains as to whether Manipal can bring in the operational efficiencies and the power of branding to lift the performance of the hospital.
Efficiency and Brand Presence: The Gap between Manipal and Apollo
The Manipal Hospitals have been expanding their presence aggressively through buyouts, and the latest purchase would bring the chain closer to Apollo Hospitals in terms of overall bed count. But Manipal remains substantially behind Apollo in terms of revenue per bed. Manipal has revenue at ₹0.58 crore per bed per annum, while Apollo Hospitals generate ₹0.86 crore a bed annually.
This gap reflects the better operational efficiency of Apollo, its better reputation, and an ability to attract high-paying customers.
Why is Apollo more effective?
- Established Brand Acceptance: Apollo Hospitals have a stronger and more established brand, especially among the affluent classes of patients and international clientele. Because of their long-standing reputation for high quality care, they are able to command premium prices for their services, as reflected in their revenue per bed. Manipal, although fast-growing, is yet to be that big on brand awareness, particularly in major metros like Mumbai.
- Operational Excellence: Operational efficiency at Apollo, on aspects such as better management practices, investments in technology, and strategic location of hospitals, translates into better revenue per bed. Manipal has been rapidly expanding but needs to enhance internal efficiencies to match up with Apollo on key performance indicators.
Challenges and Opportunities for Manipal Hospitals
The Khubchandani Hospitals acquisition propels Manipal into a rather competitive market. Though this deal, on paper, appears economical at ₹0.83 crore per bed, there are several minefields that Manipal will have to negotiate:
- Building Brand Equity in Mumbai: For Manipal entering Mumbai-arguably one of the fiercest health care markets in India-it needs to get past established brands like Kokilaben Dhirubhai Ambani Hospital, Hinduja Hospital, and Lilavati Hospital, all with formidable reputations. The acquisition was only the beginning. How Manipal can integrate Khubchandani into its network and build a trusted brand in Mumbai resonating with patients is the challenge.
- Operational Efficiency: As highlighted earlier, Manipal has a far lower revenue per bed when compared to Apollo. This would suggest that while the chain of hospitals has been able to expand its presence, the revenue realization from each bed remains to be fully leveraged. A continuous focus on fine-tuning its internal processes, integrating technology, and concentrating resources on high-margin specialties becomes essential if Manipal has to narrow the gap in revenue per bed with Apollo.
- High Cost of Operations in Mumbai: The city remains notorious for high real estate and licensed operational costs, which may pressurize the profitability of the hospital. Manipal will have to work out strict cost control while continuing heavy investments in high-end specialties and services to ensure strong financial returns from this acquisition.
- Extracting Synergies: Manipal has successfully integrated hospitals in Tier-2 cities through its earlier acquisitions of Medica and AMRI. Considering growth in Mumbai, the moot question will be whether Manipal can replicate the same success here. The challenge would be creating synergies between its Mumbai operations with its existing network by applying strengths from the corporate infrastructure to drive down costs and improve patient outcomes.
Conclusion: A Potentially Highly Rewarding Strategic Move
Manipal’s acquisition of Mumbai-based Khubchandani Hospitals at ₹0.83 crore per bed may prima facie look fine because they are hospitals in Mumbai, where valuations continue to remain high. How Manipal finally assimilates Khubchandani into its extended network by surmounting glaring challenges relating to operational efficiency and brand building is, of course, a different story. Manipal can turn this acquisition into a grand success with the proper strategy that involves leveraging technology, improving management efficiencies, and offering more patient-centric services. However, unless this mismatch in its rising revenue-per-bed gap and building a strong brand presence in Mumbai gets closed, this hospital may struggle to realize its full potential. Only time will tell if this acquisition indeed places Manipal in the leading position in India’s healthcare sector, or whether it will face operational obstacles on its way to dominance.
Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh).
MBA (BITS, Pilani), MHA,
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru).
Senior Professor and former Head,
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery.
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India.
My Vision: I don’t want to be a genius. I want to be a person with a bundle of experience.
My Mission: Help others achieve their life’s objectives in my presence or absence!
My Values: Creating value for others.
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Yes Prahlada Sir,
Manipal Hospitals has acquired Khubchandani Hospitals in Mumbai for ₹415 crore, or ₹0.83 crore per bed, marking its entry into the city's healthcare market. Experts deem this a smart and cost-effective deal, given Mumbai's high real estate values.
This acquisition follows Manipal's expansion strategy:
– Entering new markets
– Enhancing operational efficiency
– Building brand recognition
With previous successful acquisitions, such as AMRI Hospitals in Kolkata (₹2.28 crore per bed), Manipal Hospitals is poised for continued growth. This strategic move strengthens its position in India's healthcare market.
ReplyThanks for circulating market intelligence
ReplyVery informative article.kindly post some info for those who are just starting their pvt practice
ReplyVery nice analysis Sir.
ReplyI think we, the doctors, should be aware about the Healthcare acquisitions to learn where the economy and Indian Healthcare is moving towards.