Fortis in talks with investors to facilitate exit for PEs in SRL

Fortis Healthcare Ltd on Friday said that it is in talks with a "number of investors" to facilitate exit for existing private equity investors in the country's largest pathology chain SRL Ltd. It did not name any particular suitor.

SRL, which is a subsidiary of Fortis Healthcare, had hired investment bank Moelis & Co last year to advise on a deal to give exit to existing investors, several media reports had said earlier.

The Economic Times that reported early in the day that Baring Private Equity Asia, Bain Capital and Capital International among others are in talks to buy the stake from existing investors, said that the firm is looking at a $200 million deal as talks for its potential initial public offer (IPO) became uncertain.

"However, as on date there is no firm proposal under consideration of the management," Fortis Healthcare said in a filing to the stock exchanges.

Expectations were high on SRL reviving its IPO plans after sector rival Dr Lal PathLabs' IPO was oversubscribed 32 times and made a spectacular stock market debut in December.

Another player in the business, Thyrocare Technologies Ltd has also filed draft papers with the markets regulator Securities and Exchange Board of India  (SEBI).

An email sent to SRL on why the management is not exploring the IPO route to give exit to the private equity players went unanswered till the time of the filing of this article.

In early 2011, mid-market private equity firm Avigo Capital had invested in the IPO bound firm. Soon thereafter it roped in Sabre Capital as another investors in what was seen as a pre-IPO transaction.

But soon thereafter, Fortis acquired 74.59 per cent of SRL from the common promoters, 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.

A year later, IFC and Jacob Ballas came as new investors while Avigo put in fresh capital in the firm.

Last September, Fortis said it will increase its stake in SRL by purchasing shares from mid-market private equity firm Sabre Capital and its related entities.

This left Avigo, IFC and Jacob Ballas as three existing PE investors in the firm.

Avigo Capital is separately facing trouble as its Limited Partners or LPs have taken over the control of the PE fund and are effectively looking to exit the portfolio firms.

SRL had 264 laboratories (including 12 reference labs and 90 labs in hospitals) and over 6,400 collection points as of March 31, 2015. It was present in more than 450 cities/towns covering substantial districts of India and offers a service portfolio of over 3,500 tests as of FY15.

During last financial year it undertook a total of over 13.7 million accessions for pathology and radiology, up 7 per cent over FY14. It performed approximately 30.4 million tests in FY15 as compared to 28.7 million tests in FY14.

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