These are tough times for promoters to raise money as capital market has lost appetite, so taking this into account consolidations in the healthcare space could be next big thing.
It is believed that Bangalore-based Manipal Hospital is in the process of discussing merger with leading healthcare provider Wockhardt Hospitals.
The merger talks between the two healthcare giants come on the back of the fund raising plans by both entities hitting a roadblock. Manipal Hospital's $100 million PE placement with ICICI Ventures is yet to close and on the other hand Wokhardt Hospital's deal with General Atlantic Partners is facing hurdles.
NDTV has learnt that the I-bankers involved in the deal have begun initial dialogues with the two promoters to consider a merger.
The merger could even be three-way because Apax Partners who hold 13 per cent in Apollo Hospitals is also talking to Manipal and Wockdart to explore a merger.
Apollo has a nationwide reach with 26 hospitals and 7000 beds that's expected to go up to 8500 by 2011. While Wockhardt is smaller in scale with over 1300 beds, Manipal Hospital is south centered having 20 hospitals and 7629 beds – that's due to go over 10,000 in the same 3 years.
While Wockhardt and Apollo did not respond to queries, but V Rangarajan, group CFO, Manipal Education & Medical Group said: "We are at this point not talking to anyone for any consolidation, but in the future it may be possible."
But the merger may be easier said than done because bankers say convincing promoters to agree on valuations.
Who will merge with whom and who controls the merged entity are sore points and with all parties targeting the same catchment areas there are chances of duplication?
"A consolidation makes sense. Wockhardt is a super specialty hospital so it should look for the mid segment and Manipal seems a good fit," said Ranajit Kapadia, pharma analyst, Prabhudas Liladhar.
The promoters need money and with IPOs not an option any more, the idea of a big bang merger is a good idea. But for this idea to work, the promoters need to swallow the bitter pill of giving up control.