Manipal Hospitals borrows Rs 5,300 crore from global banks to fund Sahyadri acquisition

Mumbai: Manipal Hospitals, part of Mangalore-based Manipal Education and Medical Group (MEMG), is borrowing nearly ₹5,300 crore from five foreign banks to fund its acquisition of Sahyadri Hospitals, four people familiar with the plans said.

The banks comprising European lenders Deutsche Bank and Barclays, Japan's Mitsubishi UFG Financial Group (MUFG) and Sumitomo Mitsui Banking Corp (SMBC), and Singapore's DBS Bank have agreed to provide the debt funding for the acquisition, the people said.

"The total deal size is around ₹5,900 crore, 90% of which is funded by debt raised from these foreign banks. The rest 10% has to be paid next fiscal year," one of the persons said. "The debt is being funded by bonds issued by Manipal, maturing in two years at a yield of around 9.5%."

Last week, Temasek-backed Manipal Hospitals signed an agreement to acquire Pune-based Sahyadri Hospitals from Ontario Teachers' Pension Plan (OTPP). The acquisition will make Manipal the largest private sector hospital chain in India, giving it 11 new hospitals across Pune, Nashik, Ahilya Nagar and Karad. Its total network will increase to 49 hospitals with bed capacity of 12,000.

"The banks will invest in these bonds through the foreign portfolio investment (FPI) route since the funds are raised to fund a foreign-owned company, and Reserve Bank of India (RBI) rules do not permit banks to lend onshore for mergers and acquisitions," said a second person aware of the details.

Barclays and MUFG declined to comment, while spokespersons for Deutsche and SMBC did not reply to emails seeking comment. "As a matter of principle, DBS Bank does not comment on specific transactions," said a spokesperson for DBS.

FPI entities floated by these banks, most likely based out of Singapore, will subscribe to these bonds. Manipal will redeem these bonds in the next two years from the proceeds of its planned initial public offering (IPO).

Singapore's $339 billion Temasek, one of the world's largest sovereign funds, owns 59% of Manipal Hospitals with promoter Ranjan Pai & family owning 30% and private equity investor TPG holding a 11% stake. An IPO is planned for 2026.

A Manipal spokesperson did not reply to ET's email seeking comment.

Foreign banks usually fund M&A deals in India through their overseas arms to tide over regulations in the country. The banks usually hold these bond investments to maturity showing them in the investment book in India. All five banks mentioned above have agreed to fund this deal with covenants signed on Monday, the people cited above said.