Dr Agarwal’s Healthcare Ltd said on Thursday it is raising Rs 160 crore ($24.6 million) in debt from Edelweiss Financial Services Ltd’s special opportunities fund to expand its listed eye-care hospital chain.
Edelweiss Special Opportunities Fund II will sanction the funds in the form of structured debt, the Chennai-based company said in a statement.
The debt funding comes just one-and-a-half years after the company, in February 2016, raised $45 million (around Rs 305.7 crore) from Hong Kong-based private equity firm ADV Partners in a round that paved the way for the exit of Evolvence India Life Sciences Fund.
“For a company of our size we have already gone for two rounds of equity funding. So now doing a structured debt or mezzanine financing gives us the flexbility to access capital on preferential terms without having to dilute equity,” Adil Agarwal, CEO at Dr Agarwal’s Healthcare, told VCCircle.
Retaining equity is important for the company at this point in time because it may eventually have to go to the market later for another equity funding round, he added.
The company will use the funds to expand in India and launch its first hospital overseas, in the Middle East. It also plans to invest in research and development.
In India, the company aims to start operations in Madhya Pradesh, Uttar Pradesh, Bihar and Jharkhand. It also plans to strengthen its presence in its existing markets, especially in Maharashtra, West Bengal, Gujarat and Kerala.
“This will allow us to plan for sustainable development in the sector so that we can continue to deliver high-quality care for generations to come,” said Agarwal. “Additionally, it will foster investments in new and innovative models of care.”
FirstRand Bank acted as the exclusive financial adviser to Dr Agarwal’s Healthcare for this transaction.
Agarwal also said that the company aims to establish its presence in the northern region after stabilising its hold in western eastern and central regions. The company also plans to invest in research and development.
The eye-care chain, founded by Jaiveer Agarwal in 1957, has a network of 70 centres and aims to grow that to 150 by 2020. It has major presence in Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Odisha, Rajasthan and the Andaman islands. It has 14 centres in Africa and expects to add two more centres in Kenya and Tanzania to strengthen its presence there.
“Our hospitals in Africa are larger than our Indian centres as they are built to cater to an entire country. The tier II and III towns there are not well connected, so it is feasible to have spokes in there,” he said.
He also said that the company will continue to grow through a combination of greenfield and brownfield projects. “It will be a 60-40 model where 60% growth will come from small-play acquisition,” he added.
The company, Agarwal said, has been growing at a compound annual rate of at least 25% over the past five years. It clocked revenue of Rs 400 crore in the fiscal year ended 31 March 2017 and expects to touch Rs 500 crore this year.
Dr Agarwal’s operates in a growing market for eye-care treatment that ratings firm Crisil estimates will touch $3 billion by 2020 from about $2 billion in 2013-14. The segment has seen a lot of investor activity in recent years.
In June, VCCircle reported that Eye-Q Vision Pvt. Ltd had struck an investment deal with a Japanese optical products maker.
In 2012, Singapore sovereign wealth fund GIC Pte Ltd invested $100 million for a minority stake in Chennai-based eye-care chain Vasan Healthcare.
Matrix Partners-backed New Delhi Centre for Sight Pvt. Ltd, which operates eye-care chain Centre for Sight, had been preparing to go public but shelved its plans for an initial public offering citing market volatility.
Edelweiss Special Opportunities Fund II, which invests via privately negotiated collateralized credit transactions, had marked the final close of the fund early this year at $350 million. It had made the first close at $205 million in June 2015.