The country’s largest diagnostic chain operator Super Religare Laboratories Ltd (SRL) is looking to raise as much as Rs 160 crore as a pre-IPO placement ahead of its public issue that may scoop up to Rs 560 crore (including pre IPO transaction), according to VCCircle estimates.

The firm, owned by billionaire brothers Malvinder and Shivinder Singh who sold their flagship pharmaceutical business Ranbaxy Labs to Japan’s Daiichi Sankyo three years ago and is now focusing in expanding their healthcare business under Fortis and financial services business under Religare, plans to dilute as much as 35% of its equity through the public issue.

SRL had last year acquired diagnostics arm of drugmaker Piramal Healthcare for Rs 600 crore. It plans to use a portion of the proceeds of the public issue to repay/retire liabilities of both the acquired firm and debt on its books.

In particular, it plans to use Rs 150 crore to providing loan to the subsidiary (housing the business of Piramal Diagnostics) to repay its existing debt; redeem non-convertible debentures worth Rs 165 crore related to the aforesaid acquisition, redeem non-cumulative redeemable preference shares issued by SRL worth Rs 110 crore besides repaying debt on its books worth Rs 69.7 crore. This aggregates to around Rs 500 crore.

Although the company has not stated how much it plans to price the share, given its expectation from the pre IPO placement, it may be looking at an issue price of around Rs 200 that will allow it to raise up to Rs 560 crore in the IPO. This will value the firm at Rs 1,600 crore.


The promoters have exercised the call option to buy 10% stake in the company that was to be owned by Piramal Healthcare besides two other individuals(for a sum of Rs 135 crore) as a part of the stock-cum-cash funded acquisition of Piramal Diagnostics last year.

As per a disclosure in the DRHP of SRL, the promoters have acquired the 5.19 million shares of SRL owned by Piramal Healthcare and the two individuals on February 3.

While promoters & promoter group own over 85% stake in SRL, other shareholders include Logos Holding Co Ltd that is believed to be owned by Dhillon family associated with Gurinder Singh Dhillon who is a guru of the Radha Soami Satsang Beas, a spiritual group whose followers include Malvinder & Shivinder Singh. Logos owns 8.56% of SRL that will get diluted to 5.56% post IPO. Incidentally, Gurinder Singh Dhillon and family also own over 17% stake in financial services firm of the group, Religare Enterprises.


As of December 31, 2010, SRL’s diagnostic laboratory network comprised eight reference laboratories, seven centers  of excellence, 181 network laboratories (comprising 164 pathology and 17 radiology labs), 15 wellness centres and 888 collection centres. Out of 164 pathology laboratories, 53 are owned by SRL, 31 are managed by it (including 14 based in hospitals run by group firm Fortis Healthcare Limited), 55 are joint venture labs and 25 are franchisee labs.

As of December end, of its 17 radiology laboratories, 16 are owned by SRL and it operates and manages one radiology laboratory based in a hospital. Six of its reference laboratories are based in India, with the seventh reference laboratory located in Kathmandu, Nepal. It has entered into a service agreement for one reference laboratory in the Dubai Healthcare City.

SRL also has 23 collection centres, as well as representation and liaison offices, outside India in the United Arab Emirates, Oman, Qatar, Kuwait, Bahrain, Sri Lanka, Bangladesh, Nepal, the Maldives, Tanzania and Zambia.


In the fiscal years ended March’08, March’09 and March’10, SRL had consolidated income of Rs 94.39 crore, Rs 140.67 crore and Rs 169.94 crore respectively. In the same period, Piramal Diagnostics had total income of Rs 107.24 crore, Rs 169.61 crore and Rs 209.64 crore. For the six month period ended September 30, 2010, SRL had total income of Rs 153.14 crore with net loss of Rs 5.5 crore. Its accumulated losses (not counting Piramal Diagnostics loss making business) stood at Rs 42.3 crore as of September 30.


Diagnostics as a business has attracted private equity interest with two other large diagnostics chains having PE investors. The country’s second biggest diagnostics chain Dr Lal Pathlabs counts among its investors Sequoia Capital besides TA Associates. Sequoia had originally invested Rs 42 crore in Dr Lal PathLabs in June 2005 for a 26% stake valuing the firm at Rs 161 crore and sold a part of its stake to TA Associates in the recent transaction valuing the company at Rs 1,000 crore.

Last June, Warburg Pincus had invested $85 million (Rs 392 crore) in Metropolis Healthcare Limited paving a way for an exit for ICICI Venture. Warburg Pincus' investment was a combination of both a primary investment to fuel the company's growth and a secondary transaction to buy ICICI Venture's stake.

Other who raised funding in the recent times include MEDall (Peepul Capital) and Thyrocare Laboratries (CX Partners).

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