Warburg Pincus exits pathology chain Metropolis; KKR backs Shah family in the buyback

Private equity major Warburg Pincus has sold its entire 27 per cent stake in pathology chain Metropolis Healthcare Ltd to the Shah family for an undisclosed amount, as per a company release.

The Shah family, co-promoters of Metropolis, have roped in alternative assets manager KKR among other unnamed industrialists as partners to back this transaction. It is not clear if these investors have picked a stake in Metroplis or in a private holding firm owned by the Shahs.

KKR has an active credit and quasi equity funding business in India and in October 2013 backed the promoters of hospital chain Apollo Hospitals Enterprises Ltd. In that deal, KKR lent to a promoter owned entity, which is the largest shareholder of Apollo Hospitals. KKR holds an option to convert the debt in that private holding arm into shares of the country's top hospital chain.

An email query to KKR did not immediately elicit a response.

When contacted, Ameera Shah, managing director & CEO of Metropolis and part of the promoter family, declined to share further details.

In a prepared statement, she said that Warburg Pincus has sold its shares for 'handsome returns'.

“The shares have been acquired by me and my family. The company is now supported by eminent independent directors and I am backed by other marquee investors including KKR and eminent industrialists. With the new shareholding structure, Metropolis will be on an even more aggressive path,” she added.

Warburg Pincus had announced an investment of $85 million (Rs 392 crore) in Metropolis in 2010 which also paved the way for an exit for previous investor ICICI Venture. ICICI had invested Rs 35 crore in the firm in 2006.

However, early this year The Economic Times said, citing a co-promoter of the company, that the PE firm ended up investing just around half of the money that too to buy ICICI Venture's stake.

This means, the deal size value could be anywhere between $50-100 million or even more.

Niten Malhan, managing director of Warburg Pincus India, said, “Thedecision to invest in Metropolis in 2010 was based on our thesis that demand for and growth trends in medical diagnostics will continue and that Metropolis was well positioned to benefit. Today it has metamorphosed into one of India’s leading pathology specialists and has created immense value for all its partners.”

The firm also did not comment on returns.

For Warburg Pincus this comes as the first significant exit in India in the last two years. In 2013 it had exited Havells with a profit. In that year it also sold Alliance Tire to KKR.

Meanwhile, the above-mentioned The Economic Times report had also said that the deal could also see the exit of co-promoter G S K Velu. It had said, citing sources, that the co-promoters are not getting along. However, this was denied by the company.

Founded in 1981, both Shah family and GSK Velu & family owned 36.5 per cent stake each as of September 30, 2014. The rest was with Warburg Pincus.

Ameera Shah told VCCircle that Velu remains a shareholder. A separate email query to Velu did not elicit a reply. Velu separately also owns medical device firm Trivitron.

Metropolis currently has 125 labs and 750 collection centres in India and overseas and plans to push it up to 150 this year. Besides India, it is present in UAE, Sri Lanka, South Africa, Kenya, Mauritius and Ghana.

Metropolis more than doubled its revenue and tripled its net profit between FY10 and FY14. The company's latest financials are not in public domain.

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