NEA may invest 15% of new fund In India, to focus on healthcare, PIPEs
After raising one of the largest venture capital funds globally last month, New Enterprise Associates Inc. (NEA) has already started deploying capital from this vehicle in India. The PE firm invested Rs 84 crore in Trishe Developers, which provides a gamut of services to wind-power infrastructure developers.
NEA 14, which raised $2.6 billion in two months, may end up investing 15 per cent of its corpus or $390 million in the country, said Bala Deshpande, senior managing director at New Enterprise Associates (India) Pvt. Ltd. The fund is upbeat about investing more capital in healthcare besides looking at emerging sectors in economy. It continues to invest in sectors like education, pharmaceuticals and infrastructure services.
NEA, which has typically focused on the mid-market growth equity space since setting shop in 2008, will also look to push its investment range, which, on an average, is $25-30 million. It will also look to add earlier stage deals and is also eyeing PIPE (private investment in public equity) deals.
Being a global fund, it has flexibility and does not follow any formal allocations. "NEA follows a loose allocation policy essentially with the view that we should allow money to follow opportunity and not the other way round," said Deshpande.
NEA's last two funds have raised $2.5 billion. Its fund 13 being was raised in 2009 after the Lehman Brothers collapse. "We continue to look at investments in the country and NEA 14 has already started investing in India. With 33 years of experience and having invested 13 funds, we have essentially been able to raise this fund due to LP confidence in us," said Deshpande.
NEA 13 has invested approximately $225 million in India in companies like aviation maintenance, repair and overhaul (MRO) services provider Air Works and Hyderabad-based Vishwa Infrastructure. NEA, which has offices in Mumbai and Bangalore, now has 14 portfolio companies in the country.
Globally, healthcare is one of the three major focus areas for NEA besides information technology and energy technology. But in India the sector is gaining a special focus as it has already backed two firms in the space and is looking to invest in more.
"There are a lot lifestyle-related issues and genetic deficiencies besides paucity of healthcare services in India, which would need a significant amount of capital to flow into this sector," said Deshpande.
In 2010, NEA invested in Nova Medical Centers, a specialised day care surgery chain. Earlier this year it teamed up with DaVita, Inc., one of the largest kidney care companies in the US, to invest $25 million in NephroLife Care (India).
While healthcare services dominate opportunities in the market, NEA is also seeing opportunities in devices, manufacturing and pharmaceuticals. "There is a level of localization and customization in products being done for the Indian market, from the material and cost perspective. There could be significant amount of cost arbitrage in India as has been in China," added Deshpande.
Local R&D teams in India are also slowly now starting to "build IP through new applications or significant modification in existing devices," said Deshpande.
This year has seen several funds like Advent International, Olympus Capital Asia, GIC Singapore and India Value Fund sign mega deals in the healthcare space. Private equity investments in healthcare equipment & services stood at $584 million across 20 deals till date in 2012, according to VCCEdge, compared with just 22 deals worth $274 million in the entire calendar year 2011.
The Indian healthcare market is likely to double by 2015 and reach $100 billion, says ratings agency Fitch. According to the 12th Five-Year Plan, the Indian government will boost public spending in healthcare sector to 2.5 per cent of the GDP from the current 1.4 per cent, over the next five years.
(Edited by Prem Udayabhanu)