<div><strong>By Paramita Chatterjee and CH Unnikrishnan </strong></div><div> </div><div>At a time when new age sectors such as e-commerce and mobile are emerging as hot investment destinations for private equity and venture capital funds, the traditional healthcare sector is witnessing an upswing and raking in huge moolah from the investor fraternity.</div><div> </div><div>Healthcare is considered a safe bet for fund managers as returns in this sector are relatively assured, said experts. It primarily caters to the domestic market and is independent of any slowdown gripping other sectors that are riding on the domestic consumption wave.</div><div> </div><div>Healthcare firm Portea Medical recently raised $37.5 million from a consortium of investors such as Accel Partners, International Finance Corp, Qualcomm Ventures and Ventureast. Venture firm Sequoia Capital infused $20 million in MedGenome Labs and Celon Laboratories, respectively, although in the latter the investment was done along with Fidelity Growth Partners. The list of investments by PE and VC funds in the sector is vast. While, many more established as well as startup healthcare players, including drug innovator NovaLead Pharma and primary healthcare chain HealthSpring, are planning to raise new round of funding through private equity route.</div><div> </div><div>According to data available with Grant Thornton, in the January-September period this year, as many as 36 deals were sealed in the pharma, healthcare & biotec companies where total amount invested in them stood at $1,015 million. While the number of investments is lesser this year than what it was in the corresponding period in 2014, what is noteworthy is the fact that in terms of total deal size, PE and VC funds invested more than double the amount they invested last year. In the first 9 months of 2014, risk capital investors infused $445 million.</div><div> </div><div>As demand for better healthcare is growing in the country, sectors within healthcare such as pharma, multi speciality hospitals, single specialty and day care centres, among others, too are witnessing significant growth opportunities and are in turn attracting investor interest. “There is immense potential in healthcare which is yet to be tapped specially in tier II and tier III cities across the country,” said Mark Britnell, chairman and partner, Global Health Practice, at KPMG.</div><div> </div><div>Drug researcher NovaLead Pharma and primary healthcare and wellness chain Healthspring Pvt Ltd are also currently in the process of raising another round of funding for further expansion.</div><div> </div><div>"We are in talks with a bunch of private equity funds, including our exiting investors, to raise at least $35 million, one of our largest tranches of funding so far and it will be closed by end of March next calendar year," said Supreet Deshpande, managing director NovaLead, in a Tuesday (November 2) interview. </div><div> </div><div>Family healthcare chain HealthSpring, which is planning to scale up its operations by taking the number of its centers from the existing 24 to 200 in the next five years, is also looking to raise a substantial amount of capital through private equity route in the next eighteen months. </div><div> </div><div>"We are talking to some large PE funds to raise next round of funding to back the expansion, although the existing investors will remain invested and are interested to put in more money," said Koushik Sen, co-founder and CEO, Healthspring. </div><div> </div><div> What’s more, significant M&A activity within the sector – both in terms of inbound and out bound deals – and the upcoming IPOs, too, make it attractive for fund managers to invest first and later cash out profitably. As per data available with Prime Database, as many as 4 companies have lined up their IPO plans this year. These include Aster DM Healthcare, Thyrocare Technologies, Dr. Lal Pathlabs and Narayana Hrudayalaya.</div><div> </div><div>The plan of Alkem Laboratories, India’s fifth largest drugmaker by domestic sales, to tap the capital market after 42 years of its active existence in the domestic pharma market, is yet another landmark healthcare IPO to hit the market shortly. The company, which was founded in 1973, has filed its draft red herring prospectus (DRHP), will offer 10.75 per cent of its equity (up to 12,853,442 equity shares) to public and list the company at leading stock exchanges. </div><div> </div><div>One of the oldest generic drug companies in the country, Alkem Lab never explored fund raising through equity market as the founders Samprada Singh and Basudeo Narayan Singh — doyens of Indian pharmaceuticals industry — didn’t want to go public and there weren’t any compelling reasons to raise money from public. </div><div> </div><div>"The equity market seems quite vibrant now and we feel it’s the right time to unlock the value that we have created over the period by offering a small percentage of the equity," said B N Singh, promoter and executive chairman B.N. Singh told BW Businessworld in a recent interview. </div><div> </div><div> Healthcare sector in India is poised for a rapid growth and is expected to be $280 billion in terms of size in another 5 years, growing at a compound annual growth rate of 16 per cent, as per a joint report by FICCI-KPMG.</div>
