PE firm InvAscent writes bigger cheques in pharma as rising costs reset capital needs

“Our ticket sizes in the pharma industry have increased. We are now participating in $80 million to $100 million deals with our LPs (limited partners), where we have a roughly 50-50 split. Earlier, we were only handling $30 million to $50 million deals,” said founder and chairman Hari Buggana. Mint in an interview.

“It is much more expensive to build a new facility to comply with regulations today, so companies naturally need to raise much more money.”

The firm is also expanding its investment lens to include sub-segments such as health technology. “Another change compared to previous funds is health technology, as the sector is now becoming an area in which we are actively investing.”

This is due to increased investor interest in the pharmaceutical and healthcare sectors due to high revenue expenditures, expanding health care coverage, and growing medical tourism during World War II. and III. It comes as it creates new pockets of demand for innovation and growth from tier-1 cities.

Based in Hyderabad The private equity firm is focused on three main sectors: pharmaceuticals, which receives about 50% of the fund, followed by healthcare (about 30%) and other related sectors such as medtech, healthtech and animal health, which together make up about 20% of the fund.

This comment comes less than a year after the investment firm closed its fourth fund with a corpus of $304 million. When Fund IV is fully invested, it will likely approach $400 million through joint investments from limited partners, he said, adding that the firm has already used 40% of the capital from the existing fund.

Its investments in the fourth fund include Apex Hospitals, ABI Health, Fleming Laboratories, Geri Care, Maiva Pharma and SRV Hospitals.

The fourth fund also saw one-third of capital commitments come from domestic investors, a first for the investment firm. The remaining capital came from international LPs.

“Historically, we have always had LPs from the Americas, Europe and Asia looking to invest in the emerging market. But this time, we have seen a lot of inbound demand from domestic investors who want access to quality pharma and healthcare assets through our fund,” Buggana said. Buggana said, adding that its past funds have outperformed all India equity benchmarks..

larger funds

As specific themes evolved and ticket sizes grew, so did InvAscent’s fund sizes. Its previous funds were approximately $100 million (raised in 2007), approximately $150 million (2014), and approximately $300 million. [2018]including joint investments.

Recently, InvAscent has increasingly viewed the public markets as an important exit route, driven by attractive valuations, as many of its portfolio companies have reached sustainable scale.

“In the past, we have had several exits through sales to larger private equity firms or strategic companies, and in some cases promoters have decided to buy back shares of the fund,” he said.

Some of its past exits include the sale of Oliva Skin & Hair Clinic and Oasis Fertility to Kedaara Capital and the sale of shares in Comprehensive Prosthetics and Orthotics (CPO) to fellow PE firms NorthCreek and Parkway Partners. It also sold its shares in Biorad Medisys to the company promoters and its shares in Stericon Pharma to Nirma Group in 2023.

“We are now seeing greater sensitivity” “There are high-quality healthcare and pharmaceutical assets to list in the public markets,” Buggana said, adding that the private equity firm will see at least one IPO every year from its third fund.

“Since the pandemic, flows into the domestic equity market have increased and regulations have also improved. As a result, there is a huge demand for companies operating in this space to be listed so that retail investors have more options to invest in IPOs and enter at reasonable multiples and subsequently drive growth,” he said. Buggana added that this shift is also due to the inability of larger private equity firms to match the multiple offered by the public markets, although the exact valuation differences between the two may vary on a case-by-case basis.

Some of the portfolio companies planning to list this year include Symbiotec Pharmalab and Malladi Drugs and Pharmaceuticals. Other imminent exits in private markets include Ankura Hospitals, Alniche Life Sciences, Aizant and Sharp Sight Eye Hospitals, which are in various stages of dealmaking, Buggana said.

Earlier this month, mint reported Ankura assigned Alvarez and Marsal to assist in this regard. ₹Fundraising of ₹400-500 crore from which InvAscent may partially or fully exit its seven-year minority stake.

The private equity firm is also awaiting binding offers for its stake in Hyderabad-based Aizant Pharmaceutical Research Solutions Pvt. Ltd, Mint reported in July.

The life sciences private equity firm, founded in 2005, has made approximately 39 investments and exited 20 companies. According to its official website, it handles over $850 million in assets under management. InvAscent focuses on the capital needs of small and medium-sized businesses to fill the gap left by banks in favor of large and well-established companies.

The investment firm helps promoters in three key areas: capital allocation, scaling the organization to a larger scale and profitability, and employee safety and management. While capital allocation decisions include the amount of capital needed and how much to spend on R&D and product development, the other area involves getting the company ready to operate at a scale three to four times the size the private equity firm is entering into.

“Many companies have the staff to operate at a certain scale, but as they grow, many inefficiencies arise. So we are actively trying to work with them to prepare them to be a very profitable venture when we are ready to exit in 5 years,” Buggana said.