Private equity firm India Equity Partners (IEP) and the promoters of RG Stone Urology Research Institute, a chain of urology and laparoscopy hospitals, plan to sell their controlling stake in the firm, said two people familiar with the development.
At present, IEP holds close to 40% in RG Stone while the rest is held by the promoters—Bhim Sen Bansal and family. Along with all of IEP’s stake, the promoters will dilute another 10-15% in RG Stone, they said.
Boutique bank Lincoln International is advising IEP in the stake sale process. Financial details are not known.
IEP has been looking to exit RG Stone for the past year. Interest was low as it was a minority stake. Now that a controlling stake is up for sale, it is expected that it will generate more interest from private equity funds as well as strategic investors, said one of the people cited above, on condition of anonymity.
Started in 1986 as a small clinic by Bansal, RG Stone today has a pan-India presence with 15 hospitals in Delhi, Kolkata, Chennai, Mumbai, Goa, Faridabad and Ludhiana and a bed capacity of 600.
RG Stone secured its first round of funding worth Rs.41 crore from ICICI Venture in 2008. In 2010, ICICI Venture sold its stake back to the promoter and exited the company. In 2011, IEP acquired a stake with an investment of Rs.90 crore.
Emails sent to Bansal, chairman and managing director of RG Stone, and Sid Khanna, chairman and managing director of IEP, did not elicit any response.
IEP, which raised its first fund of $350 million in 2006, has been unable to raise a second fund and differences have cropped up between the fund and founders of some of the firms it invested in. For instance, differences have surfaced between Jayaram Banan, founder of Sagar Ratna Restaurants Pvt. Ltd, and IEP in the last couple of years as Banan has sought to acquire the fund’s 73% stake in the South Indian cuisine chain back from IEP.
“Banan filed an FIR against the restaurant’s current management led by private equity firm India Equity Partners over allegations of ‘cheating, fabrication and forgery of documents’,” said an August 2014 report by The Economic Times.
In 2013, IEP also took on portfolio company Fourcee Infrastructure Equipments Pvt. Ltd by filing a petition with the Company Law Board alleging “extensive forgery and willful deceit”.
IEP has seen returns of three to six times on its investments in Ikya Human Capital and Manappuram Group. It made investments in Amtek Auto, A2Z Maintenance and Engineering Services, Bharti Infratel, Ikya Human Capital, Manappuram Group and TNT Express. In healthcare, besides RG Stone, IEP also owns a majority stake in Axiss Dental, a multi-speciality dental chain.
In the recent past, several private equity investors have been in a rush to exit their three-to-eight-year-old investments in the pharmaceuticals and healthcare sectors in India.
In May, ChrysCapital sold its eight-year-old investment (about 11% stake) in Mankind Pharma Ltd to Capital International Private Equity Funds for $200 million, about 10 times the value of its original investment.
In April, private equity firm Warburg Pincus sold its five-year-old investment in diagnostic chain Metropolis Healthcare Ltd to the promoter family.
Ascent Capital Pvt. Ltd and OrbiMed Advisors Llc, private equity investors in Kerala Institute of Medical Sciences, a hospital chain, also plan to exit their three-year-old investment.
Mint reported last month that CX Partners planned to sell its 20% stake in surgical equipment maker Sutures India Pvt. Ltd. “Healthcare continues to be an area of strong interest for PE funds in India. Having said so, it is also allowing first round investors to make profitable exits on businesses which have matured to late-stage growth. As a sector, it has a larger proportion of successful first round exits,” said Sanjeev Krishan, leader (transaction services and private equity), PwC India.
Data from financial research platform VCCEdge show 2015 has seen 18 private equity exits from pharma and healthcare investments worth $394 million, as against 15 exits worth $308 million in 2014. Private equity/venture capital investments in the sectors remained flat at $1.2 billion in 2014 (88 deals) and 2015 (62 deals).
