TA Associates, one of the oldest private equity firms in the world, has acquired a little more than 16% stake in one of the country's diagnostics and pathology services firm 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.
Sequoia Capital India, which invested in 2005 (then still WestBridge Capital), continues to hold a 16% stake in Dr Lal PathLabs, according to a source familiar with the development. According to sources, the deal size is close to Rs 163 crore as the overall valuation of Dr Lal PathLabs comes at Rs 1,000 crore. One executive from TA’s India office will join Dr Lal PathLabs board. JM Financial is the sole advisor to the deal.
WestBridge Capital, which was acquired by Sequoia Capital in May 2006, had invested Rs 42 crore in Dr Lal PathLabs in June 2005 for a 26% stake. The deal was one of the first in diagnostic chains and valuation of Dr Lal Pathlabs has since increased by more than six times from Rs 161 crore to Rs 1,000 crore.
Another recent exit in a diagnostic chain was when Warburg Pincus invested $85 million in Metropolis Healthcare to buy out ICICI Venture's stake. The deal also included a fresh infusion.
On August 9th, VCCircle first reported that TA Associates, which manages $16 billion globally, was in advanced talks with two firms--in the healthcare services and pharma space---and the deals are expected to be closed soon. As reported by VCCircle later, TA Associates is
believed to be in initial stages of talks with Ahmedabad-based Claris Lifesciences to acquire a minority stake in the company. TA is likely to acquire a part of the stake held by global PE major Carlyle in Claris Life.
OP Manchanda, CEO, Dr Lal PathLabs, told VCCircle, “This will be an exciting deal for TA Associates as Dr Lal PathLabs grows annually at 40-45% rate which is 2 times higher than India’s pathology business, which is growing at 20% annually.” However, he declined to disclose the size of the deal. Before joining Dr Lal PathLabs in 2005, Manchanda led the International & Innovation group of the Consumer Healthcare Division at Ranbaxy.
Mails sent to Sandeep Singhal, MD, Sequoia Capital and Naveen Wadhera, director, TA Associates did not elicit any response till the report is published.
Established in 1949, Dr. Lal PathLabs offers more than 1,650 different types of tests and has a pan India presence, in the form of state-of-the-art laboratories and patient service centres. It has employee strength of over 1,000 serves around 4 million customers every year, according to the company website.
In an earlier interview with VCCircle, Naveen Wadhera, director, TA Associates, had said, “Healthcare, more broadly, is an area we are very bullish on and eager to participate in. We are today in discussions for advising on two healthcare investments and hoping to execute on both deals in the coming months.”
According to VCCEdge data, since 1996, 137 PE deals worth $2.3 billion took place in Indian healthcare& pharmaceuticals space. Till date in 2010, about 13 PE deals worth $366 million took place in healthcare& pharma space.
This year, TA Associates has invested $45 million (Rs 200 crore) in Gurgaon-based Micromax Informatics Ltd., which develops mobile phone solutions and wireless technologies. It has also invested in companies like Idea Cellular Ltd and GlobeOp Financial Services, a specialist
BPO company. TA Associates last year closed its new $4-billion fund, TA XI, L.P.
So far, TA Associates, which has invested in 400 companies, invested in about 28 healthcare service firms globally such as Twin Med LLC, Quotient Bioscience Ltd, Youth and Family Centered Services, Inc. and American Access Care while 16 investments were made in healthcare technology companies such as Alma Lasers, Ltd, Cypress Pharmceutical Inc.