MUMBAI: In order to tap the huge potential in healthcare and education sectors that are mostly unaffected by market meltdown, Religare Venture
Capital on Wednesday announced a 50:50 joint venture with Milestone Capital to manage a Rs 600 crore fund.
Religare would manage private equity player Milestone Capital’s current ‘India Build-out Fund I’.
The size of the fund is Rs. 600 crore with life time of five years, extendable by another two years. The PE fund registered under SEBI guidelines has already raised Rs 170 crore of which Rs 60 crore has been contributied by Religare.
“We will invest 80 per cent of the corpus in domestic healthcare and education companies equally. We are looking at private companies with an annualized growth record of 25-30 per cent. Of the balance 20 per cent AUM, we will look for opportunities in other domestic sectors like banking, finance, insurance,” said Rajesh Singhal, managing partner, Milestone Religare Investment Advisors, which will determine the investment strategy.
However, the fund will not invest more than 15 per cent in any single company. Fund managers expect 30 per cent internal rate of return from the fund investment over the period of time.
Explaining the rationale behind the sector selection, Sunil Godhwani, CEO and MD, Religare, said, “Healthcare and education are two sectors which we believe are poised for balanced growth and we have the requisite domain expertise on health care which we intend to leverage for larger benefit of investors of the fund.”
Currently the size of private education is $50 billion and it is expected to go up to $80 billion in next three years. Similarly, only 5.6% of India’s GDP constitutes healthcare spending, which is among the lowest globally.
The pharma sector has exhibited an interesting trend over the last three years. The Daiichi Sankyo-Ranbaxy deal has fueled value in the sector. The sector has, however, seen a dip in volumes possibly due to the effects of the economic downturn.
The average private equity (PE) deal size for pharma in 2008 was $15.34 million, up by 20% compared to $12.82 million in 2007. Narayana Hrudayalaya and Sahyadri Hospitals were two of the top PE deals of 2008, receiving $ 100 million and $36 million each respectively.
Milestone Capital has invested in projects worth $1 billion across its six funds. “Healthcare and education are recession proof sectors and would remain evergreen. The sector is still under invested, hence valuation would arrive as and when deals happen. However, the government is keen on public-private partnership in this sector, which will give it a big boost”, said Ved Arya, CEO and MD, Milestone.
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