Home >companies >ChrysCap plans to exit Eris with 4x returns

Mumbai: Private equity fund ChrysCapital is set to make another profitable exit from its portfolio of pharmaceutical investments. The fund, which manages $2.5 billion worth of investments, is set to generate a four-fold return when it sells its investment in Ahmedabad-based drug maker Eris Lifesciences Pvt. Ltd, according to two people familiar with the plans.

ChrysCap plans to sell its stake in Eris by next year and an investment banker for the sale will be appointed soon, they said, requesting anonymity.

In 2011, the private equity fund had acquired around 16% in Eris for about 160 crore, according to the one of the two people cited above. The proposed sale will likely value ChrysCap’s stake at 600-650 crore, the person said.

Founded in 2007, Eris has a presence in cardiovascular, diabetes, gynecology, paediatrics and gastro-intestinal segments. Eris’ sales grew 25% to about 600 crore in the year ended 31 March.

The stake sale in Eris Lifesciences, if concluded, will be yet another profitable exit for ChrysCap which manages a wide portfolio of pharmaceuticals and healthcare investments.

In May, ChrysCapital sold its entire 11% stake in Mankind Pharma Ltd to Capital International Private Equity Funds at close to 10 times the value of its original investment.

The deal was closed at $215 million. ChrysCapital had invested $24 million in 2007 for the stake.

In November 2014, ChrysCapital sold a 10.2% stake in Intas Pharmaceuticals Ltd to Temasek at close to 10 times its original investment.

While the fund did not disclose the details of the transaction at the time, Mint had reported that the stake was sold for 880 crore.

In 2010, the fund sold its holding in Zydus Wellness Ltd at 4.7 times its original investment, Reuters reported on 11 March 2010.

A email sent to Amit Bakshi, founder and managing director of Eris Lifesciences, did not elicit any response. When contacted, Sanjiv Kaul, managing director at ChrysCapital, declined to comment specifically on Eris.

Kaul, however, said that pharmaceutical and healthcare investments continue to be a good bet.

“Pharma will continue to be a high growth sector with good earning per share sustainability and high return on capital employed. However, the current P/E (price/earnings) multiples have raced ahead significantly over its last 10-year mean and so one has to be very selective in picking the right pharma stocks to back with a 3-7 years horizon of investment," said Kaul.

The exits in Intas and Mankind were triggered by the shelf life of the investing funds, while the exit from Torrent Pharmaceuticals Ltd is a partial exit only, Kaul added.

In October 2015, ChrysCapital had raised 200 crore by selling about 1% in Torrent Pharmaceuticals through open market transactions at three times the price of its original investment. ChrysCap’s investment arm Lavender Investments Ltd currently holds about 1.8% stake in Torrent Pharmaceuticals.

“Funds like ChrysCapital have demonstrated a strong exit track record over time. Their high-quality returns from Mankind Pharma and Intas show their ability to pick winners early in the lifecycle of their businesses and their ability to hold these investments until market conditions are right for an exit," said Vikram Utamsingh, managing director at advisory firm Alvarez & Marsal India Pvt. Ltd.

PE exits from pharmaceuticals and healthcare sector jumped 25% in 2015 at $428 million as against $343 million in 2014, according to data from VCCedge. The amount of fresh investments in the sector remained flat at $1.3 billion in 2015.

Exiting Indian investments with strong returns hasn’t been easy for private equity firms in recent years.

“Up until 2007, average gross returns to private equity investors were 21% compared to an average of 18% for public market returns. After 2008, average returns dropped to 7% when exiting investments, while public market returns dropped to 11%," McKinsey & Co. said in a June report.

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