Health care now largest item in private equity firm TPG India portfolio

Size of expected infusion into Manipal after Fortis deal dwarfs earlier flow, even with only one exit in India since its entry in 2004

One of the world’s largest private equity (PE) firms, TPG, had entered India through an investment in a pharmaceutical company in 2004. It has since widened the focus on health care here, the latest feather in the cap being the Fortis-Manipal Hospitals merger. The deal gives it 20 per cent stake in the combined hospital entity.
 
TPG’s investments in India have been largely in financial services and health care; the group has infused over $1.5 billion (Rs 97 billion) in different companies. Until now, financial services was the largest sub-category for investment and the private equity major had invested a little over $450 million in Shriram Group companies alone. The Fortis-Manipal merger is expected to change the equation. TPG and Manipal Hospitals will be investing Rs 39 billion in the combined hospital entity. With this, the health care space is tipped to be the largest segment for the PE major. 
 
A sector expert said TPG’s investment in Indian and regional health care, pre-Fortis transaction, was $550-600 million. That included stake purchase in Manipal Hospitals, Sutures India and the Asiri Hospital group of Sri Lanka. Beside, it invested a in mother and child care centre and cancer treatment centre under an investment platform called Asia Health care Holdings (AHH).
 
“The strategy has always been on acquiring leading assets and investing in good management teams. It is not a passive investor and has been lending its voice in strategy and inputs for operations,” the expert added. An e-mail query to TPG went unanswered.
 
TPG exited Matrix Laboratories (its debut investment in 2004) around 2006, with two-fold return. This is said to be its only exit in the health space.
 
AHH was carved out last year, as a sector-specific platform for its investment, spearheaded by Vishal Bali, former group chief executive of Fortis Health care. AHH has invested in Cancer Treatment Services International (CTSI), a network of single-speciality facilities.
 
In mid-2016, TPG Growth had taken majority stake in Rhea Health care, a Bengaluru-based company which operated mother and child care centres (under the Motherhood brand), for $33 million. Earlier that year, the firm had invested in CTSI. In 2013, TPG Growth also invested in Sutures India, a manufacturer and exporter of medical consumables. In 2015, it made a strategic investment in Manipal Health Enterprises, taking a 25 per cent stake. 
 
The India investments, however, are only a fraction of the group's exposure to health care globally. It has made $7.4 billion of such investment in the past decade alone, of total investment worth $11.5 billion. From pharmaceutical companies to technology and data providers, TPG’s investment in the sector includes names like EnvisionRx, Evolent Health, Healthscope, IMS Health, Par Pharmaceutical, Quintiles and Surgical Care Affiliates.
 
“The sector witnessed increased regulatory intervention (in the form of NPPA, clinical establishment Acts) in the past one year, which had an impact on performance/profitability of the sector and consequent PE interest. Additional price caps are expected in the next few months, likely to impact the profitability further. While ModiCare is likely to provide the demand boost, the governance mechanics of the scheme are yet to come out. We expect the PE players to be in wait-and-watch mode and let the regulatory framework and its consequent impact on the sector performance unfold before framing any view,” said Amit Gupta, partner at consultants EY India.