Mumbai: In a rare event, a private equity fund manager is looking to buy a company that is part of his own portfolio.
Sandeep Reddy, co-founder of India-focused private equity fund Peepul Capital Llc, is likely to acquire a controlling stake in diagnostics services provider Medall Healthcare Pvt. Ltd with backing from financial institutions, two people close to the development said on the condition of anonymity.
Reddy has been engaged in discussions with global investors (limited partners) of Peepul Capital to acquire the stake in Medall, according to one of the two people cited.
Global investment bank Moelis and Co. has been hired by Peepul to find a buyer for Medall.
The names of global investors in Peepul could not be ascertained.
Reddy has also been in discussions with large financial institutions to finance his buyout, the first person added. Chennai-based Medall Healthcare is a chain of diagnostic service providers.
Formerly known as Precision Diagnostics, the chain was acquired by Raju Venkataraman, a serial entrepreneur in 2009 and re-branded as Medall Healthcare. It has 60 centres across southern India, according to the company’s website.
Venkataraman will retain a minority stake even after control is transferred to a new buyer, said the second person.
Reddy’s plan to acquire the diagnostic chain took shape last month after Peepul’s discussions to sell Medall fell through in March.
Peepul Capital, which owns around 80% of the company, was in advanced talks with Dubai-based buyout fund Abraaj Group to sell its stake.
Mails sent to Reddy and a spokesperson for Medall did not elicit any response, while spokespersons for Abraaj and Moelis declined to comment.
The enterprise value of Medall is Rs1,000-1,300 crore, said the second person cited above. Peepul has invested around Rs300 crore in Medall so far. In 2015 end, Manipal Education and Medical Group (MEMG) backed out of talks to acquire Medall.
Prior to launching Peepul Capital in 2000, Reddy has 10 years’ experience in strategy consulting with PwC in San Francisco and with Andersen Consulting in London.
Peepul Capital is a sector-agnostic private equity firm with $700 million under management. Besides Medall, it has invested in personal care brand Banjara’s, healthcare services provider CURA Healthcare, logistics firm Ecom Express, pharmacy chain Medplus, childcare centre Klay Schools, advertising platform Komli Media, and organic food company Sresta Natural Bioproducts.
Peepul has been also looking for a buyer for its stake in Sresta since last year. The Hyderabad-based firm, which sells the 24 Mantra brand of rice, pulses and oil among other items, is in early talks with private equity funds and a deal is likely at Rs600-650 crore ($100 million),
The fast growing diagnostic sector in India has been attracting private equity investments in the past several years. In December, PE firm Kedaara Capital Advisors Llp invested Rs430 crore in Hyderabad-based diagnostics chain Vijaya Diagnostic Centre Pvt. Ltd. OrbiMed Advisors Llc, a US-based private equity fund, acquired a significant minority stake in Kolkata-based diagnostic chain Suraksha Diagnostic Pvt. Ltd.
The size of the highly fragmented domestic diagnostic market is estimated to be Rs37,700 crore. The business is expected to grow at a compound annual growth rate of 16-17% to reach Rs60,100 crore by 2017-18, according to Crisil Ltd. Stand-alone diagnostic centres hold about 48% of the market, it added.