PE funds find healthcare sector a money-spinner
The healthcare sector has caught the fancy of private equity (PE) funds, with at least three deals in the pipeline.
US-Based PE fund NEA today completed a deal to invest up to Rs 100 crore in Bangalore-based Nova Medical Centers, a specialised daycare surgery company. Nova plans to set up 25 daycare surgery centres and is cashing in on the fact that as much as 30 per cent of surgeries done in the country do not require an overnight stay.
Bala Deshpande, senior managing director of NEA’s affiliate operations in India, said: “We expect about 30-40 per cent of our portfolio to be in the healthcare sector in India. We are looking for more deals in this sector, which includes pharma.” Deshpande added it was working on at least two to three more deals in the health care segment, which it hoped to close within a few months.
ICICI Venture is also in talks with European PE giant TA Associates to sell its 25 per cent stake in Mumbai-based Metropolis Healthcare Ltd. The deal, if it fructifies, is expected to be worth Rs 200 crore.
Metropolis has over 55 labs in India, Sri Lanka, UAE, South Africa, Bangladesh and Seychelles. It processes over 10 million tests annually, including referrals from over 10,000 labs and its own franchisee networks.
A spokesperson at ICICI Venture said it did not comment on specific transactions. However, according to sources close to the deal, the fund, which invested in the deal, is going in for redemption in a few years, so ICICI would be looking at an exit when the price is optimum.
Experts say the PE interest is not without any reason. “We have a $30-billion healthcare market and there are many sectors like diagnostic, hospitals, clinical trials, which are showing high growth opportunities. Obviously, everyone wants to get in. We expect deals in billions happening in this sector in the next few months,” said Paresh Vaish, managing director and head of India practice Alvarez & Marsal, a performance improvement and transformational consultant. The medical diagnostic market is estimated at over Rs 10,000 crore.
US venture capital giant Sequoia Capital is believed to be also in talks with unlisted Indian health insurer Star Health and Allied Insurance Company Ltd to invest about $54 million for a 20 per cent stake. ICICI Venture recently invested Rs 120 crore ($27 million) in it.