WestBridge makes first PE investment from new fund

To invest $36 million in Dr Lal Pathlabs

WestBridge Crossover Fund, which raised $500 million as its corpus within a record time of eight weeks during early 2011, is making its first private equity investment. WestBridge is investing $36 million in Gurgaon-headquartered Dr Lal Pathlabs in a secondary round.

Prior to this, WestBridge has been investing in the public markets and is understood to have committed around $250 million in that segment.

WestBridge Ventures-I had earlier invested $10 million in Dr Lal Pathlabs in two tranches during 2005-07. It exited a part of this two years ago when another private equity fund - TA Associates acquired the stake. This time too WestBridge’s new fund and TA Associates are picking up the stake from WestBridge as the earlier fund is coming to a close. It is understood that TA Associates is investing $9 million in the fresh round. The investment suggests that WestBridge is backing the company for the long term.

Dr Lal Pathlabs is among the top three players in the growing pathology and diagnostics market in India. The company was founded decades ago by Dr Lal, but really started in its present avatar in early 2000s. The company has since expanded from 10 labs to over 100 satellite labs around the country and thousands of collection centres. The company also set up India’s and possibly Asia’s largest central laboratory a few years ago in Delhi.

Sandeep Singhal, MD at WestBridge and a board member of Dr Lal Pathlabs, confirmed the investment to Business Standard and said Dr Lal Path Labs has been doubling its revenues every 2-3 years. WestBridge had first invested in this pathology labs in 2005 when the revenues was Rs 40 crore and it has grown over ten times in the past eight years. Singhal added that the Indian healthcare segment is pretty underserved and it will continue to grow irrespective of downturns in the economy.

With this move, WestBridge Ventures I has now exited most of its investments and has given a healthy return to investors. WestBridge declined to comment on the exact returns, but sources suggest that they may have made 8-10X from their investment in Dr Lal Pathlabs alone. WestBridge Ventures II has also exited many investments though there are several years left in the life of that fund.

The WestBridge Advisors team, comprising K P Balaraj, Sandeep Singhal, Sumir Chadha and S K Jain, have been together for the past 12 years and have raised about $2 billion across funds, and in the past decade backed spectacular success stories such as Cafe Coffee Day, Vasan Healthcare, marketRx, Indecomm, Just Dial and Naukri.com among others.

In 2000, Balaraj, Singhal, Chadha and Jain had come together to launch the first WestBridge fund, with a corpus of $135 million. Subsequently, they raised another fund, of $200 million. Later, through their partnership with global venture capital fund Sequoia in India, they raised $1.4 billion across three funds. However, during 2011, the quartet exited Sequoia to focus on WestBridge with an emphasis on public markets.

WestBridge’s new fund has a unique fund structure. It is a sort of evergreen fund in which their investors bank on the team to increase the value of the asset. It is not a typical limited partner (LP) arrangement who would look at taking out their returns after a certain fund life. The fund has a notional life of 20 years and the LPs have the option to press for liquidity after an initial five-year lock-in period.