July 25, 2011

Vasan Healthcare may sell 15% to GIC for $100 million

Specialist eye hospitals chain Vasan Healthcare is in advanced talks to sell up to 15% stake to Singapore sovereign wealth fund GIC for around $75-100 million ( 337-450 crore), two people familiar with the negotiations said.

GIC is the frontrunner among 4-5 investors the Chennai-based company is negotiating with, the two persons said, although the Singapore fund declined to comment. Vasan, which runs the country's largest chain of eye hospitals, said it was talking to 4-5 investors. "We expected to close the deal in eight weeks," Chairman Dr C M Arun told ET. He did not name the parties the company was talking to.

The company, which was born as a pharmacy and now counts venture capital firms Sequoia Capital and Westbridge Capital among its investors, hopes to use the funds from the latest round of fund raising to fund its expansion plans ahead of a proposed public flotation next year.

Vasan operates 80 eyecare centers across south India now and plans to add 55 more this year, which it expects will make it the world's largest eye care provider. Its expansion plans also include setting up 20 new dental clinics, adding to its network of such clinics, pharmacies and diagnostic centres.

The company had earlier raised about $50 million from Sequoia and Westbridge in three rounds of investments in the last two years. KP Balaraj, MD at WestBridge Capital Partners said the latest round of fund raising would involve the issue of fresh equity and existing investors did not have any immediate plans to exit.

"Vasan has received significant interest from PE investors, but nothing has been finalised," he said. If the deal goes through, this will be GIC's first investment in India's healthcare sector after a Rs 380 deal with Fortis Healthcare was aborted last year after the Indian hospital chain got into a takeover battle for Singapore's Parkway Health with Malaysian fund Khazanah.

In the last year or so, investors have shown significant investors interest in India's $2-3 billion a year eyecare market that is dominated by individual ophthalmologists, government hospitals and charitable trusts.

Analysts and corporate financiers say the eyecare business is booming due to changing lifestyles. "Consumers would be willing to pay premiums for quality service offerings," says Navroz Mahudawalan, founder of Mumbai-based investment banking boutique Candle Partners. He added that the sector also had huge potential for medical tourism because eye surgery procedures such as laser, glaucoma and cataract cost a fourth in India compared with developed countries.

Vasan's chairman Dr Arun said he expected his company to double sales this year and report EBITDA or core earnings of 200 crore. Last year, the company posted annual sales of 350 crore with an EBIDTA of 110 crore.

The huge business potential is attracting potential investors into picking up stakes in these companies. Two Delhi-based specialist eyecare providers - Eye Q and Centre for Sight - received funding from private equity firms last year and are in talks for more.

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