WestBridge, Sequoia eyeing bumper returns from Vasan

Vasan Healthcare has expanded rapidly and is now present in 16 states in India. Recently, it opened centres in Dubai and Colombo

WestBridge Capital, a $1-billion India-focused private and public equity fund, along with Sequoia India, is eyeing a blockbuster exit of at least 5x (five times returns) on their investment of a little over Rs 200 crore in Chennai-based Vasan Healthcare, which runs a chain of eye-care and dental-care clinics.

According to sources, the funds are examining proposals from a large business house in India, besides a couple of global private equity funds and strategic overseas players who are keen to acquire a significant stake in Vasan Healthcare. In addition to WestBridge and Sequoia, Singapore government-backed GIC Investment is another private equity investor that had committed $100 million during mid-2012 and is unlikely to exit in the current round. WestBridge and Sequoia together have committed around $50 million over three rounds into Vasan.

Various groups have evinced interest and WestBridge is keenly looking at them, said senior private equity fund managers. While WestBridge management refused to comment on this impending transaction, Sequoia Capital said it continues to remain long-term partners in the firm and there is no immediate plan to exit Vasan Healthcare. The management of Vasan Healthcare could not be reached for comments.

According to PE fund managers, the enterprise valuation (EV) of Vasan is expected to be close to the tipping point of Rs 5,000 crore, given the last round of funding was executed at an EV of close to Rs 3,000 crore. If the EV crosses the Rs 5,000-crore mark, WestBridge must be sitting pretty with a good 7x exit from this, investment bankers told Business Standard.

The PE fund managers further indicated that after the publicly-held Apollo Hospitals, which has a market capitalisation of close to Rs 13,000 crore, Vasan will soon emerge as the enterprise with the second highest market capitalisation in the Indian healthcare sector as and when this transaction concludes. Vasan is understood to have revenues of upwards of Rs 1,000 crore, has 170 eye-care clinics, a rapidly expanding dental care chain and has healthy earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins.

Founded by A M Arun during 2002 at Tiruchi in Tamil Nadu, Vasan has expanded rapidly and is now present in 16 states. Recently, it opened centres in Dubai and Colombo. The healthcare and life sciences sector continued to be second-dominant segment in terms of attracting PE interest in India in 2013, fetching $1.2 billion across 57 transactions. The top-three transactions involved secondary purchases from existing investors - the $200-million investment in Gland Pharma (by KKR); the $161-million investment in Dr Naresh Trehan promoted hospital Medicity (by Carlyle); and the $113-million investment in Emcure Pharmaceuticals (by Bain Capital), according to data from Venture Intelligence.