Actis raises stake in Paras Pharma, to appoint new CEO

Private equity fund Actis has increased its equity holding in Ahmedabad-based Paras Pharmaceuticals to almost 60 per cent and decided to bring in an outside professional as CEO.

Confirming the latest move, sources close to the development said the CEO-designate is likely to take charge in a couple of months.

The new CEO, who has had stints in Dabur and ITC, is expected to be the Actis point-person in this unlisted fast moving consumer goods (FMCG) company with a mandate to improve its performance and regain its reputation as a small Indian company that challenged multinationals like Hindustan Unilever (HUL), GlaxoSmithKline (GSK) and Johnson & Johnson (J&J).

Actis' move to bring in a seasoned FMCG executive is its first major attempt at pulling back Paras as a serious contender in the ultra-competitive Indian FMCG market.

Paras Pharma was founded and managed by the Ahmedabad-based Patel family. Actis initially bought 23 per cent in Paras in 2006 for $43 million (roughly Rs 172 crore at today's exchange rate) from a handful of investors including the second Patel brother Darshan.

The recent rise in stake follows a deal with Devendra Patel, the youngest brother.

Actis has around 60 per cent in Paras, Girish Patel and family hold 30 per cent and the remaining 10 per cent is held by other investors including Sequoia Capital.

Sources say Girish Patel, chairman of Paras Pharma and the eldest sibling, will continue to have a role in the company as executive chairman.

JM Trivedi, who heads Actis' South Asian business and oversees the firm's investments in the western region, refused to comment on the developments.

Girish Patel also declined to comment but said: "I will continue to control the company."

Sources close to the development said the three brothers were on cordial terms. "The company has been looking for a new CEO and Girish Patel has been involved in the recruitment process," the source said.

Actis also has a stake in Sterling Addlife, a Paras group company that manages Sterling Hospital in Ahmedabad.

Until a year ago, Paras Pharma had a string of successes in personal care products. Dermicool talcum powder, Krack skincare cream, pain relief gel Moov, skin "repair" cream Recova and D'Cold (for cold and cough relief) are some of its recent successful brands.

Darshan Patel briefly started his own company, Vini Consumer Products, in the fourth quarter of calendar 2007 and managed to pull in 30-odd Paras Pharma executives.

This year, however, Darshan returned to Paras for unexplained reasons and some of the executives who moved with him also rejoined.

Historically Actis takes a medium-term position in growing companies. Recent acquisitions and exits by Actis in India, such as Punjab Tractors, have had an investment tenure of three to five years.