Mumbai: Private equity (PE) firm Kedaara Capital Advisors Llp has agreed to invest Rs430 crore in Hyderabad-based diagnostics chain Vijaya Diagnostic Centre Pvt. Ltd, two people aware of the development said.
“The two parties have recently signed agreements and the deal has been closed,” said one of the two people cited above, requesting anonymity.
“Talks between Kedaara and Vijaya Diagnostic were on for the last four-five months.”
Kedaara has acquired a “significant minority stake” in Vijaya Diagnostic through both a primary and secondary share sale, he added.
Mint had reported in September that Vijaya Diagnostic was in talks with Kedaara Capital to raise at least Rs350 crore.
According to the second person cited above, while initially Kedaara was looking to invest around Rs350 crore, it eventually agreed to invest around Rs430 crore, as the company has seen strong growth in operating profit in the current financial year. He also requested anonymity.
Kedaara Capital declined to comment. Calls and text messages to Sunil Reddy, deputy managing director at Vijaya Diagnostic did not elicit any response.
Founded in 1981 by Surendranath Reddy, the diagnostic chain has 30 centres in Hyderabad, according to the company’s website.
It also has centres in Kolkata, Bangalore, Gurgaon, Visakhapatnam, Kurnool, Nellore, Warangal and Nizamabad. Vijaya Diagnostic provides diagnostic services spanning radiology, imaging, nuclear medicine, conventional and specialty laboratory services and diagnostic cardiology.
The company reported revenue of Rs100 crore in 2013-14, compared with a revenue of Rs81.19 crore in the previous year, according to data from filings with the registrar of companies. In 2013-14, it reported a profit of Rs9.87 crore, compared with a profit of Rs7.5 crore a year earlier.
Kedaara was founded in 2011 by Manish Kejriwal— a former India head of Singapore’s Temasek Holdings Pte. Ltd, Sunish Sharma and Nishant Sharma, who were managing director and principal, respectively, of global PE firm General Atlantic in India.
Kedaara raised its debut fund with a corpus of $540 million in 2013, in one of the largest fundraisings by an independent, home-grown private equity platforms until then.
Kedaara’s investment in Vijaya Diagnostic comes at a time when private equity interest has been high in the healthcare sector. Recent initial public offerings of diagnostic chains have given successful partial exits to their existing PE investors.
PE funds WestBridge Capital and TA Associates sold part of their stake in Dr Lal PathLabs Ltd while CX Partners sold close to a 20% stake in Thyrocare Technologies Ltd in IPOs.
Since its listing last December, shares of Dr Lal PathLabs have jumped 96.6% from its issue price of Rs550. On Friday, shares of the firm closed at Rs1,081.30 on BSE.
Thyrocare’s share price has risen 53.3% since its listing in May, from its offer price of Rs446.
On Friday, the stock closed at Rs683.85.
From the fiscal year 2011-2012 to the fiscal year 2014-2015, the Indian diagnostic industry grew at a compounded annual growth rate of around 16% to approximately Rs37,700 crore (or about $5.5 billion), according to a 2015 research report by rating agency CRISIL.
CRISIL estimates that by the financial year 2017-18, the Indian diagnostics market will grow to Rs58,500-61,600 crore (or about $8.6-$9.1 billion), witnessing a growth rate of almost 16-18% annually.
A sizeable demand-supply gap, changing disease profiles, increase in health insurance coverage, growing attraction of India as a medical tourism destination and rising income levels are some of the drivers for the growth of the domestic diagnostics industry, CRISIL said.