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US PE firm in talks to buy 15% in Dr Lal PathLabs from Sequoia

US-based private equity (PE) firm TA Associates is in advanced talks to buy half of Sequoia Capital’s 30% stake in the country’s largest diagnostics and pathology services chain Dr Lal PathLabs for around Rs170 crore, two persons familiar with the matter said.

If the talks fructify into a transaction, it will value the Delhi-based diagnostic firm at over Rs1,100 crore. “Negotiations are at a fairly advanced stage,” said one of the persons privy to the talks.

The stake sale will fetch Sequoia almost six times the money it had invested. The venture capital firm had acquired close to a third of the diagnostics chain for around Rs50 crore in 2005. Sequoia will sell the remaining stake when Dr Lal PathLabs comes out with a public issue of shares, which is expected over the next one to two years, said the second person.

When contacted, Dr Arvind Lal, chairman & MD of the Delhi-based company declined to comment on the development. But in an earlier interaction he had said, “Sequoia has completed over five years in our firm and now it is only natural for it to look for an exit option.” Emails sent to executives in Sequoia and TA Associates did not elicit any response.

Established in 1949, Dr Lal PathLabs today runs over 60 laboratories across the country with over 1,000 employees and has a revenue of around Rs200 crore. The domestic diagnostic market size is pegged over $1 billion and is growing 15-20% every year. The sector is dominated by standalone regional players with organised chains holding 5-10% market share.

TA Associates that manages assets of around $16 billion is reportedly looking to expand its investment portfolio in the country. In India it has investments in companies such as BPO firm GlobeOp Financial Services, Idea Cellular and Micromax Informatics.

The diagnostics space in the country has been witnessing a lot of fund-raising and deal action in the recent past. Super Religare Laboratories (SRL) in July bought out Piramal Healthcare’s diagnostic chain for around Rs600 crore, while Warburg Pincus invested $85 million in Metropolis Healthcare in June.

Source: Economic  Times


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