Elara Capital to enter PE space with healthcare fund

Elara Capital, the UK-based financial services major with a strong Indian presence, is set to enter the private equity (PE) space. The company is in discussion with a Dubai-based financial major to launch a healthcare fund soon.

Elara Capital Plc, a registered foreign institutional investor (FII) in India, manages several funds including Elara India Gateway Fund, domiciled in Luxembourg, and Elara India Opportunities Fund Ltd (EIOF), domiciled in Mauritius.

The healthcare fund will have its focus on India, other south-east Asian countries, West Asian countries and Africa. According to sources, the size of the offshore fund could be between $250-300 million.
 

IN GOOD HEALTH Healthcare-focused funds currently in the market
Funds	Size ($ mm)	Amount raised  ($ mm)	Year of launch
India Venture Fund I	81	81	2008
Spring Healthcare Fund	67	67	2009
Access India Fund I	150	NA

 

2010 Tata Capital Healthcare Fund13024.462010 Asian Healthcare Fund200332010 Somerset Indus Healthcare Fund I40252011 Source: VCCedge

Raj Bhatt, vice chairman & CEO, Elara Capital, says, “Healthcare is one of the potential investment destinations in India. There is tremendous growth in the space and capital expenditure is still low in India”.

“We are in discussion with a Dubai-based firm for entering into a partnership and expect to start raising fund by March or April”, he added without disclosing further details. Following the healthcare fund launch, Elara has plans for another India-focused sector-agnostic fund in a similar range.

In order to tap the fast growing healthcare industry in India, a few sector-focused funds are active in the country. The latest entrant is Somerset Indus Capital partners, which launched Somerset Indus Healthcare Fund I, with a target of $40 million, last year.

However, unrealistic valuation and lack of proper exit routes made healthcare less attractive to the PE fraternity.

Sujay Shetty, executive director of pharma life sciences at PricewaterhouseCoopers, says, “PE players cannot match the valuation offered by strategic buyers keen on the pharma & healthcare space in India.” Lack of quality deals as well as promoters’ unwillingness to dilute significant minority stake also make the sector tough for PE firms, he added.

Against 42 deals worth $1.7 billion in 2010, 2011 witnessed 29 deals worth mere $331 million, according to data from VCCedge. 2012 appears to be lucky for the industry which has witnessed three deals worth $157 in January itself.

The second largest service-sector employer in the country, the $65-billion healthcare industry is growing rapidly. India has already emerged as an attractive global destination for medical tourism and research & development, a recent PWC study noted.