Sabre Capital, a mid-market private equity firm, is investing Rs 50 crore in diagnostics firm Super Religare Laboratories Ltd (SRL) in a pre-IPO deal, VCCircle has learnt from sources with the direct knowledge of the develpment. This comes just two weeks after Avigo Capital Partners, an SME focussed private equity fund, picked up 9.27% in SRL for Rs 100 crore.

Sources added that the latest round of funding is concluded at Rs 15 higher than the last round led by Avigo, which was done at around Rs 188 per share. The diagnostics services company has received the board approval for this investment and is currently finishing the associated documentation, sources close to the development said.

An email sent to SRL spokesperson did not elicit any response till the time of publishing this article. An email sent to Rajiv Mariwal, co-founder and managing partner of Sabre Capital, did not get a response either.

SRL, presently a privately held company of billionaire brothers Malvinder and Shivinder Singh who are selling their majority stake to a public listed group firm Fortis Healthcare (India), offers diagnostic testing (including pathology and radiology), preventive care testing and clinical research trial testing has a strong franchise.

SRL filed for an IPO on February 17, 2011, in which it proposed to issue upto 28 million equity shares of face value Rs 10 each (including a private placement of up to 8 million equity shares through a pre-IPO placement) through a book building process. The document is awaiting clearance from SEBI.

According to analysts, SRL has attracted a premium as it's going to be the first listed diagnostics services company as also because it is the largest player in the field. Last year SRL acquired Piramal Diagnostic Services Pvt Ltd for $128 million (Rs 600 crore) to strengthen its presence in the radiology services that also made it the biggest diagnostics chain in the country.

As of December, 2010, SRL had a network, either directly owned by it or operated through franchisees or joint ventures, of eight reference laboratories, seven Centres of Excellence, 181 network laboratories (comprising of 164 pathology and 17 radiology laboratories), 15 wellness centres and 888 collection centres (including 23 abroad).

Malvinder Singh and Shivinder Singh, the promoters of SRL, recently got a nod from the board to sell their 86% stake in SRL to the listed Fortis Healthcare (India), ahead of the proposed public issue. The buyout by Fortis is intended to be a consolidation exercise to bring SRL’s diagnostics business under the Fortis umbrella.

Sabre Capital, which began as as a specialist in the banking & finance space, is currently focussed on the healthcare sector through a special purpose vehicle called Spring Healthcare Ltd, through which it plans to make these investments. The mid-market private equity firm has got commitments of Rs 250 crore to invest in the sector.

Sabre has previously sold its stake in Centurion Bank (which merged with Bank of Punjab) to HDFC at an IRR of 103%. It had also set up Lotus India Asset Management with Singapore state investor Temasek, an investment which did not turn out well, and was sold to Religare Enterprises last year. It also floated private equity fund called Sabre-Abraaj Capital with Dubai-based Abraaj Capital, and has invested in companies like Ramky Infrastructure, ECI Engineering Construction, and Man Infraconstruction.

Although Avigo-SRL deal happens to be the first pre-IPO deal in a diagnostics services space, the sector has seen many private equity deals. Most recently, TA Associates acquired a little more than 16% stake in Dr Lal PathLabs for Rs 163 crore ($35 million). TA Associates bought the stake from Sequoia Capital India in a secondary deal pegging the valuation at around Rs 1,000 crore. CX Partners also recently bought stake in Thyrocare, another leading diagnostics company. Last year also saw Warburg Pincus buying out ICICI Ventures in Metropolis Healthcare.

The pathology market is currently 2.5 per cent of the overall healthcare delivery market. There are 40,000 independent path labs in the country and the industry is highly competitive and price-driven with kickbacks and business referral payments in the absence of a regulatory body. Around 70 per cent of treatment decisions in the country are based on lab results.


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