Jacob Ballas supports Indian diagnostics chain
The $40 billion Indian healthcare market is growing rapidly and has seen numerous PE investments into hospital chains and pharmaceutical companies. However, the country’s diagnostic expertise and infrastructure still lag behind.
Jacob Ballas Capital India has made its latest bet by committing INR2.5 billion ($44.7 million) to Super Religare Laboratories (SRL), the diagnostic unit of Fortis Healthcare.
According to a report from consultancy firm RNCOS, the Indian diagnostic market is set for compound annual growth of 26% between 2012 and 2015, on the back of increasing investment, expansion into smaller cities and government support. Meanwhile, the industry is shifting from small, unorganized laboratories into sizeable institutions that provide reliable quality services with a larger range of diagnostic tests.
SRL is one of the notable examples. As of March 2012, the diagnostic chain had a network of eight reference laboratories, eight centers of excellence, 208 network laboratories, 21 wellness centers and in excess of 1,088 collection centers.
"SRL is the largest company within the corporate sector in India's diagnostic market, of which 90% is still in the hands of local neighborhood laboratories run by doctors and medical professionals," Srinivas Chidambaram, managing director of Jacob Ballas Capital India, tells AVCJ. "We were attracte by the company's growth dynamics, its strong presence across India and its institutional background."
The dialog between Fortis and Jacob Ballas started last year, when the healthcare group suspended its IPO plans for SRL due to the depressed state of the capital markets. As Jacob Ballas had already backed Religare Finvest, a non-banking finance company run by the Singh family, the founders of Fortis Healthcare, the private equity firm was invited to make an investment into Fortis' diagnostic unit.
This is the third round of private equity investment into the diagnostics company. In 2011, Sabre Partners and Avigo Capital Partners invested a total amount of INR1.5 billion.
Jacob Ballas' cash injection took the form of compulsorily convertible preference shares, with a conversion price of INR201-220. The International Finance Corporation (IFC) also participated in the round, contributing another INR1.2 billion. The funding will be used to strengthen the balance sheet of SRL to expand its consolidation strategy, in a move to improve market share and create sector leadership.
After the conversion, Fortis Healthcare will retain 55-56% of SRL. The company will not be listed immediately after this latest funding round, but it IPO are likely to be revived in 2-3 years' time.
The investment was channeled through Jabob Ballas India fund III, a $400 million country-focused vehicle that closed in 2008. It has so far made 12 investments, of which four closed in 2012.
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