India Awards: Private Equity Firm of the Year – Actis
Actis' exit from Paras Pharmaceuticals was not the most predictable of home runs. Strategic investors have slipped into the Indian healthcare sector over the last few years, principally targeting service providers whose business models can be replicated nationwide, but private equity generally isn’t associated with domestic producers of over-the-counter treatments.
"It is a landmark deal in the sense that it comes from a segment in which few people believed this could happen," says Mahesh Chhabria, a partner at Actis.
The private equity firm invested about $42 million in Paras in 2006, taking a 63% stake in the company. Sequoia Capital came in as a minority investor, with a holding of approximately 7%, while the remainder was controlled by the founder, Girish Patel, and his family. All parties exited to the UK pharmaceuticals company Benckiser Group in December 2010 for INR32.6 billion ($726 million).
Actis' walked away with around $457.4 million, which equates to a 10x return on its initial investment.
The deal capped a productive 12 months for Actis, and these efforts were recognized by the firm being named Firm of the Year as well as winning the award for Private Equity Exit of the Year.
Chhabria told AVCJ that Actis was attracted by the growth prospects of the brands in the Paras portfolio. The company products an assortment of over-the-counter personal care and healthcare products, and the likes of GlaxoSmithKline, Sanofi-Aventis and Abbott Laboratories all reportedly expressed an interest when the asset was put up for sale.
Chhabria said that the Paras deal justified the firm's strategy of pursuing control transactions, which are generally difficult to come by in India. "It is important that you never allow the strategy to be diluted - we stick to $50 million stakes and we don't do anything smaller than that," he says.
Equally important was Patel's decision to give up control of the company, another area in which private equity firms have often run into trouble in India as well as in emerging Asia as a whole.
"Not many sponsors would get out of business on day one but if they find a credible partner who can scale the business they will allow you to run it," says Chhabria. "It is all about getting the right team. We put in place professionals to manage Paras for us and this ensured that the timing was right from an exit perspective."
Actis' principal India investment of note in the last 12 months was its participation in a $272.3 million round of funding for GVK Energy, a unit of GVK Power & Infrastructure and one of the country's leading private sector power developers. 3i Group, Actis and Government of Singapore Investment Corp. together hold a 21.1% stake.
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