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PE investments in healthcare space halve in H1 2013; deal volume remains almost flat 

The poor performance of PE investments in the first six months, however, masks both sequential and year-on-year increases in deal activity in the sector in Q2.

After a bumper 2012, private equity investments in the healthcare sector in India is facing a challenging year with the first half of 2013 seeing almost the same number of transactions compared with the year-ago period. Also, an absence of large size deals resulted in the overall investment value shrinking by almost half, as per data collated by VCCEdge, the financial research platform of VCCircle.

There were 30 deals in the healthcare space spanning pharma, services and medical equipment against 29 deals in January-June last year. The value of announced deals, however, shrank to just around $330 million against $647 million in H1 2012.

The single-largest investment in H1 2013 was International Finance Corporation (IFC) investing $100 million in Malvinder and Shivinder Singh-promoted Fortis Healthcare Ltd. This was through a mix of preferential allotment, subscription to FCCBs and participation in the institutional placement programme (IPP) of the healthcare firm.

Although IFC was to invest around $45 million through the preferential allotment route and rest through FCCBs, the size of preferential issue was cut to the extent it picked shares in the IPP. The shares were issued at a marginally lower rate in the IPP compared with the preferential allotment to IFC but in total it maintained its committed $100 million in investment. This was the only deal which scooped over $50 million in H1 2013.

Standard Chartered Private Equity and PremjiInvest, through PI Opportunities Fund I, also participated in the IPP, putting close to $10 million together.

The only other significant transaction was Chandler Corp’s $80 million deal to buy Fortis’ 65 per cent stake in its Vietnam business. Although Chandler is run as an investment firm, it also builds and operates some of its key businesses, including healthcare, and the deal can be seen as a strategic buyout rather than a PE investment. Chandler had entered healthcare business by setting its own firm Viva Healthcare in 2009, seeking to build a pan Asian healthcare firm with some operations in East Africa.

With most transactions being small-ticket-size deals, the overall PE investment quantum halved in the first six months of the year.

Compared to this, H1 2012 saw GIC Special Investments Pte Ltd investing $100 million in Vasan Healthcare Pvt Ltd and a slew of other big deals, including Olympus Capital Holdings investing around $98 million in DM Healthcare Pvt Ltd and IFC and NYLIM Jacob Ballas investing around $65 million in diagnostic chain SRL Ltd.

Poor performance in first half took forward a slow start to PE deals in the sector in the first quarter ended March 31, 2013 when both value and volumes of new PE deals shrank.

However, both in terms of volume and aggregate value of PE deals, Q2 2013 was better than Q1 2013 as well as Q2 2012. This could well bring some hope for the sector catching up in terms of PE interest in the second half to match or even surpass the record year 2012. The Indian healthcare sector recorded PE investments of whopping $1.07 billion in 2012, the highest ever in a single calendar year, spread across 58 deals.

In 2012, Manipal Health Enterprises, Quality Care India, Vasan HealthCare, DM Healthcare and Trivitron Healthcare were among those firms which scooped large amount of PE money. Big investors included Advent International, GIC, Olympus Capital Holdings Asia and Fidelity Growth Partners.

This year, till now, apart from the deal involving Fortis Healthcare, the sector has not seen any big-ticket deals. Other deals include Goldman Sachs investing $20.18 million in BPL Medical Technologies Pvt Ltd, TPG Capital investing $23 million in Sutures India Pvt Ltd and Temasek Holding investing $24 million in Healthcare Global Enterprise.

Single specialty healthcare segment accounted for 11 deals with firms such as Invictus Oncology, HealthCare Global Enterprise, Rhea Healthcare and ASG Eye Hospitals raising capital.


While PE deal activity has been less than spectacular, in terms of M&As, the healthcare sector saw a big jump in deal value as a few large size cross border deals skewed the overall picture. M&A volume was flat at 29 deals in H1 2013 compared with the same period last year even as Mylan’s deal to buy Agila Specialties and Cipla’s proposed plan to buy Cipla Medpro inflated the announced value of M&As in the sector almost four times to over $2.3 billion.

(Edited by Joby Puthuparampil Johnson)