MedPlus in talks to raise $200 million from General Atlantic, True North

Mumbai: Private equity funds General Atlantic (GA) and True North are in advanced talks to jointly invest around $200 million in MedPlus Health Services Pvt. Ltd, the second-largest pharmacy retail chain in India, according to two people aware of the development.

“The deal will see the two funds buy out the stakes of the three existing investors in the company. The existing investors have been looking for an exit for a long time,” said one of the two people cited above, requesting anonymity as he is not authorized to speak to reporters.

Bringing in new investors will also help the company fund its future growth, he added.

MedPlus’s existing private equity investors are US-based Mount Kellett Capital Management LP, TVS Capital Funds Ltd and Ajay Piramal’s India Venture Advisors Pvt. Ltd. The three investors together hold a 69% stake in MedPlus, while founder and chief executive officer Madhukar Gangadi holds the rest.

Mount Kellett holds 49% in MedPlus through its arm MKCP Direct Investments (Mauritius) IV Ltd, TVS Capital’s TVS Shriram Growth Fund I owns 10.59% and Piramal-led India Venture Trust Fund-I holds 9.09%, according to regulatory fillings.

According to the second person cited above, the GA-True North partnership will help tide over the problem of foreign direct investment restriction of 51% in multi-brand retail, as True North also has a domestic investment vehicle and can bring in money through it, allowing the two to jointly acquire a controlling stake.

GA, True North (earlier India Value Fund Advisors) and Mount Kellett declined to comment. Emails sent to Gangadi, TVS Capital and Piramal group were not answered.

Gangadi, a physician with an MBA from the University of Pennsylvania’s Wharton School, set up his first medical store in Hyderabad in 2006. Today, MedPlus has over 1,400 stores across 12 states, employing around 10,000 people and serving over 250,000 customers daily.

Besides the pharmacy chain, MedPlus runs businesses such as diagnostics chain MedPlus Pathlabs, RiteCure, a distributor of medical and surgical supplies to hospitals, MedPlusMart.com, an online medical store, and MedPlusLens, an optical store. Most of them are co-located with the pharmaceuticals stores.

Among private drug retailers, Apollo Pharmacy, run by Apollo Hospitals Enterprise Ltd, is the largest, with more than 2,000 stores across the country. In September 2014, Apollo Pharmacy expanded its footprint by acquiring the pharmacy business of Hyderabad-based Hetero Med Solutions Ltd for Rs146 crore.

MedPlus itself has aggressive plans to expand its network. In March 2015, Mint reported that MedPlus plans to expand its pharmacy chain to 10,000 stores. “MedPlus has so far invested around Rs170-180 crore and will need another Rs2,000-2,200 crore to reach 10,000 stores,” Gangadi had said.

According to a 2016 report by healthcare- and pharma-focused management consulting firm Pharmaion, the pharmacy market in India is projected to expand at a compound annual growth rate of over 8% between 2016 and 2021.

“Rising sales of prescription, generic as well as over-the-counter drugs, increasing life expectancy, growing incidence of chronic diseases, ageing population base, increasing disposable income, rising health consciousness, and growing adoption of wellness and personal care products by a young population are the major factors propelling the country’s pharmacy market,” the report said.