Change of heart

Private equity exits in healthcare have surged. Has the segment lost its allure?

Private equity investments into hospitals and diagnostic chains have nearly quadrupled from 2011 to 2013, according to a FICCI-KPMG report. Overall, the sector has attracted close to $1 billion from both domestic and foreign financing companies. But there have been 24 PE exits worth $720 million in 2015, the highest since 2011, according to Venture Intelligence. Many of the exits have been via IPOs. Is this prudent cashing in or a loss in appetite? 

IPOs galore
“Healthcare, especially the hospital sector, is a very capital-intensive sector, with a return profile that does not necessarily fit all private equity investors, who typically have a 4-5 year horizon. As there are very few listed healthcare assets and given that several investors had reached the end of their fund life, IPOs were a good solution for all stakeholders,” says Vikram Hosangady, partner and head, deal advisory, KPMG. 

For perspective, PE exits through IPOs have yielded returns as high as 4.53x — when Ridgeback Capital sold its stake in Granules India in 2015.Thyrocare Technologies, whose IPO in May this year yielded a return of 3.5x for CX Partners, seems like it was a matter of good timing. A person familiar with the development says, “There were significant strategic interests, but given the good IPO market, the company decided to go for it.” CX Partners had identified underpenetrated sectors such as diagnostics and medical consumable products in 2011-12, and consequently bought stakes in Thyrocare in the diagnostics space and Sutures India in the medical consumables space. 

Shomik Mukherejee Head, South Asia, ActisEven within the exits, ones via private transactions have fared much better than IPOs. The private sale of Intas Pharmaceuticals by ChrysCapital to Temasek Holdings got returns of 17.6x, much higher than


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