Fortis Healthcare Ltd said on Monday it will increase its stake in the country's largest pathology chain SRL Ltd by purchasing shares from mid-market private equity firm Sabre Capital and its related entities.
Fortis, operator of the country's second-largest hospital chain, said it will buy shares representing a 3.1 per cent stake in SRL for Rs 105.2 crore ($16 million). Sabre Capital will exit its four-year old investment in SRL, formerly known as Super Religare Laboratories, completely through this transaction.
The deal, which values SRL at Rs 3,395 crore ($513 million), will push up Fortis' stake in the pathology chain to 57 per cent from 53.9 per cent.
Fortis said it exercised its right of first refusal for sale of shares by the PE firm.
Sabre Capital did not comment on the deal but it will make a little over twice what it had invested in local currency terms, as per VCCircle estimates. The dollar returns will be marginally lower given the sharp slide in the value of the rupee against the greenback.
In 2011, Sabre Capital had invested Rs 50 crore in the firm in what was seen as a pre-IPO transaction.
In early 2011, Fortis had acquired 74.59 per cent of SRL from their common promoters, billionaire brothers Malvinder and Shivinder Singh, for Rs 803 crore. The deal came even as the firm had filed for its public float. At that time SRL was valued at Rs 1,076 crore. Subsequently, SRL scrapped its IPO plan.
SRL counts a string of other PE investors including Avigo Capital, which invested Rs 100 crore initially and later brought in more as the firm raised Rs 370 crore from IFC and Jacob Ballas in 2012.
SRL was also looking to revive its proposed public issue but is yet to make a formal move on that front. Given that one of its PE firms has chosen to sell its stake to the parent firm instead of waiting for an exit through the public issue, this could indicate that the firm is not immediately eyeing a public float.
Meanwhile, SRL's key competitor and the second-biggest player in the sector Dr Lal PathLabs, filed its documents early this month to go public. Dr Lal PathLabs is backed by PE firms TA Associates and WestBridge.
In another development in the diagnostics and pathology chain business, Metropolis Healthcare went through a couple of transactions this year. Most recently, PE firm Carlyle bought a 36.5 per cent stake in the firm from its GSK Velu, who was earlier a co-promoter. Early this year, KKR and others backed the other co-promoter of the firm Shah family to buy out PE investor Warburg Pincus.
Fortis shares fell 0.86 per cent to close at Rs 172.1 apiece on the BSE in a weak Mumbai market on Monday.