Investors with big cash and a roving eye seem to be getting interested in private equity deals in the retail pharmacy, wellness and healthcare companies. A deal or two have taken place already, while loads of enquiries seem to be pouring in.
Since these are early days, the numbers are far and few. Elaborating, a leading retail consultant Technopak Advisors chairman Arvind Singhal said: “Private equity players, who have been looking at investment in malls, are now looking at new gen retail ventures in pharma & healthcare services since they are much more lucrative, the turf is yet to get crowded and promises higher returns.”
Retailers and analysts alike claim modern retail, which is barely 3 per cent of total market size of about Rs 30,000 crore currently, is estimated to touch 10 per cent over the next two years. No wonder, PE firms are keen to have a slice of such growth prospects to get first mover advantage. Speculation is rife that institutional investors like Goldman Sachs and Warburg Pincus are closely watching the sector, but the names could not be confirmed.
“Healthcare and wellness segment is now the flavour. Apart from private equity investors, the investment community at large is keeping a hawk’s eye on the segment. It is an emerging industry and though investments in these segments are not large compared with those witnessed by realty and aviation industry, investors’ interest in these segments have been steadily increasing,” VLCC Personal Care CEO Sandeep Ahuja corroborates.
A private equity fund promoted by Future Group, Indivision has recently invested some Rs 50 crore in VLCC. VLCC has also received some Rs 46 crore as investment from a fund managed by the Hong Kong-based CLSA Private Equity. VLCC also has plans to set up residential medi-spa’s as part of their overall growth plan.
High disposable income, increasing lifestyle and stress related diseases and a huge spurious drug market — are some of the key drivers propelling growth in this segment. Organised players are, therefore, providing value-added services to cash in on the business opportunity.
The healthcare retail venture of Fortis Healthcare, Fortis HealthWorld too has received several offers from private equity firms. Elaborating, the company’s CEO Ashish Kripal Pandit said “since this segment is relatively virgin, there is a huge potential for growth. Till now, we have decided to fund our Rs 800 crore expansion plan involving opening of some 1,000 stores from internal accruals only.”
Manipal Cure and Care, however, has definite plans to tap private equity firms to raise fund after couple of years. The company plans to set up 50 stores over the next four years for a total outlay of about Rs 260 crore. “We expect to break-even in some three years when our topline should be about Rs 500 crore,” said Manipal Cure & Care finance controller Ramesh Rao.
“We have recognised a clear need gap that exists in health & beauty retail space in India, thereby, enabling us to have an early mover advantage in the market. We feel there is a growing need for quality service and store environment in the health & beauty retail market in India today and no major player has entered this space so far,” said Dabur India CEO Sunil Duggal.
Since Dabur India’s wholly-owned retail subsidiary —H&B Store— is still in the initial stages of being set up, Dabur India spokesperson said it would be premature and inappropriate to comment on PE investors interest in its pharma retail venture. The H&B Stores is expected to start generating profits by the fourth year of operations with revenue exceeding Rs 1,000 crore.
After FMCG, food and entertainment, pharma retailing could well be the next big hope in retail with an increasing number of corporates foraying into the segment, said Emami group director Harsha Vardhan Agarwal. Emami group company Frank Ross is looking to have some 100 outlets in the country over the next three years.
Source : Economic Times