ChrysCapital no fair-weather friend to Intas
Back in 2005, the principal concern for much of India’s rural population was where their next meal was going to come from. Over the past seven years, however, the spoils of rapid economic growth have trickled down through the social strata. Rural residents have sufficient disposable income and – for the first time – they are spending money on healthcare, says Sanjiv Kaul, managing director at ChrysCapital.
This extension of pharmaceuticals market to encompass a broader range of customers has been instrumental in delivering annual growth of 15-16%, a marked increase on the 8-9% expansion of up to six years ago.
Ahmedabad-based Intas Pharmaceuticals, a ChrysCapital portfolio company since 2005, has seen a corresponding acceleration in its business, with profits rising about 40% year-on-year. The private equity firm first invested $11 million in Intas and followed up last week with further injection of INR3 billion ($57 million).
The latest cash infusion may have come as a surprise to some, as the last major news relating to Intas, in April 2011, claimed that ChrysCapital was planning to sell a portion of its shares - around half of its 12.5% stake - via an upcoming IPO. Bankers were confident the company would achieve a valuation upwards of $1 billion, and Kotak Mahindra and Morgan Stanley were hired to arrange the offering.
However, the planned flotation - which was also hoped to raise around $100 million in fresh equity for Intas - was cancelled due to difficult market conditions. "With the deferment of the IPO, the company obviously needed some money to create a war chest for its growth plans as well as inorganic acquisitions if and when they took place," Sanjiv Kaul, managing director at ChrysCapital, tells AVCJ.
The private equity firm stepped in and upped its shareholding to 15-20%.This time, though, it provided the capital via its $1.15 billion Fund V, whereas its original investment came through its $258 million third vehicle.
Despite its unsuccessful first attempt, Intas will reapply for regulatory approval to list its shares in the next 3-4 months, with an IPO penciled in for late 2013. At that point the company would like ChrysCapital III to exit as much as 75% of its holding. Intas will also seek a primary injection of around $100 million to help secure bolt-ons in Europe and the US.
What's clear from ChrysCapital's multi-fund involvement is that it plans to support Intas for the long-haul.
"Most people in India think private equity is about making money and leaving, but I can't recall of any instance where a company had invested about 5-6 years back at an X-valuation and decides to re-invest at a much higher valuation (more than 10x) without exiting from the previous one," says Kaul. "That demonstrates that PE is sticky capital and is not a fair-weather friend."
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