Baring Funds that began their investments in Indian entities in 1997, is looking for investment opportunities in the pharma space and could invest up to $ 75-100 million, said Amit Chander, head of investments (healthcare & pharma), Baring Private Equity Partners India.
Currently, Baring Private Equity Partners India (BPEP India) has around $50 million invested from active funds in the healthcare space that are spread across 7-8 companies in the country, he added. Some recent investments in the sector include Sphaera (a startup engaged in discovery and development of pharmaceutical drugs) and Shilpa Medicare (manufacturer and exporter of high-quality bulk drugs).
Chander, who previously worked in Accenture and Crisil, said that Baring would consider investing in pharma companies focussed on exports in lesser-developed markets, India-focussed businesses that are involved in branded generic products or special pharma businesses.
“Between 2004-2010, 65-70 per cent of private equity (PE) investments in India happened in hospital companies. However, returns have not been very attractive. Since hospitals are a capital-intensive businesses, returns may have not matched investor expectations. Internal rate of returns have been around 12-15 per cent while PE investors are expecting 20-25 per cent. There haven’t been too many exits also,” he said.
Talking about valuations in PE deals concerning healthcare sector, Chander noted that earlier there was a valuation gap between private and listed companies but off late, the discount in valuations for private (unlisted) companies has vanished.
“However, PE investor expectations have not changed at all,” he added. Baring, in line with its peers, provides long-term growth capital with average holding period of over 5 years.
Baring is in discussions with a few companies but does expect any of them to fructify soon.”We are always in dicussions. But no closure is expected soon. With the US generic market peaking off by 2015-16, other markets like Japan offer opportunities to pharma companies, “ Chander said.
Source: My Digital FC