Bengaluru-based entrepreneur Ranjan Pai’s Manipal Health Enterprises Pvt Ltd (MHEPL) is proving to be a sweet spot with investors and shareholders once again. Already an established healthcare player in south India, Pai’s MHEPL has now acquired Gurugram-based Fortis Healthcare’s hospital business, making Manipal Hospitals a formidable rival to the current industry leader Apollo Hospitals.

Along with private equity firm TPG Capital, Pai’s long-term investor in MHEPL, the 45-year-old chairman of Manipal Education and Medical Group (MEMG) cracked the Fortis deal after months of negotiations. To be precise, it was a deal that was in the works for about a year.

With the demerger of Fortis Hospital (Rs 3,727 crore by revenue) into Manipal Hospitals, the resultant entity (Manipal Hospitals) will be a publicly traded company on the Indian stock exchanges. The combined entity would boast of revenue of about Rs 5,230 crore.

Manipal Hospitals, part of Manipal Education and Medical Group, is owned by Pai and has been backed by TPG since 2015. In the merged entity, Pai will hold a 37.9% stake while TPG will control 20.7%.

“The growth of Manipal Hospitals has been nothing short of phenomenal and Ranjan Pai and his team have been trailblazers in India’s healthcare domain,” said Meena Ganesh, managing director and CEO, Portea Medical, the home healthcare partner for both Manipal Hospitals and Fortis.

This latest development, she adds, would enable the Manipal Hospitals’ brand to quickly expand across the country. “It will help Manipal be at the forefront of healthcare in India and comprehensively manage the varied and expanding healthcare needs of the country,” she said.

The combined Fortis-Manipal entity will have 41 hospitals in India and 4 hospitals overseas and over 11,000 installed bed capacity (this includes teaching hospital beds of Manipal Hospitals).

Chennai-headquartered Apollo had 10,000 beds across 70 hospitals as on March 31, 2017. Bengaluru-based Narayana Health has 24 hospitals followed by Delhi-NCR-based Max healthcare with 14 hospitals.

As part of the deal, Pai and TPG Capital will invest Rs 3,900 crore in Manipal Hospitals. Besides the sale of its hospital business, Fortis Healthcare Limited (FHL) on March 27 also announced the sale of its 20% stake in its diagnostics business (SRL Diagnostics) to Manipal Hospitals. According to the transaction FHL investors will receive 10.83 shares of Manipal Hospitals for every 100 shares they own of FHL.

MHEPL, the hospitals and health care services arm of MEMG currently has ten hospitals across India and one in Malaysia and a clinic in Nigeria. Fo the nine months ended December 2017, Manipal Hospitals recorded a revenue of Rs 1,503 crore. The hospital chain has over 8,850 employees including doctors and nurses.

Pai started Bengaluru-based MEMG in 2000 with an initial capital of $200,000 from a rented house near Bengaluru’s central business district. Over the last 18 years, he has grown the business to over a billion dollars in revenue, diversifying from his family’s Manipal Academy of Higher Education, a not-for-profit education trust, and built MEMG, which todays runs education and healthcare services.

Despite Pai’s pedigree and the backing of private equity major TPG Capital, the deal has not enthused the market. Shares of Fortis Healthcare were trading at Rs 127.75 per share, down 10.32% in late afternoon trade on Wednesday.

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