Norwest Venture Partners said that it would invest Rs 120 crore or $22 million in Mumbai-based Thyrocare Technologies Ltd in a secondary transaction. Norwest is acquiring 10 per cent stake from the promoters of the medical diagnostics services provider, valuing the firm at Rs 1,200 crore or $220 million. The promoters are selling the stake to fund Thyrocare Group's new business.
VCCircle was the first to report that Norwest would acquire stake in Thyrocare from the promoter group earlier this month. Sohil Chand, managing director at NVP India, will join the board of Thyrocare as part of the deal.
Investment from Norwest comes after CX Partners picked up stake in Thyrocare in December 2010 for around Rs 188 crore, valuing the firm at around Rs 550 crore. The current valuation of Rs 1,200 crore implies over two times rise in less than 24 months.
Thyrocare's network of 20,000 service centres spans 1,000 cities across India, covers more than 100,000 doctors through 600 franchisees, and processes over 100,000 investigations each night.
"We like the promoter, Dr Velumani, as he has bootstrapped his company and grown Thyrocare into one of the largest diagnostics players in a relatively short period of time. We also like the business model as it is much more capital efficient," said Chand.
Thyrocare follows a B2B model with centralised testing laboratories, keeping the cost low. The company has also kept the capex low by not opening retail stores but franchising them.
Norwest said in a statement that the diagnostics market in India is Rs 10,000 crore in size and growing rapidly, as consumer awareness and education around preventive healthcare is leading to increased spending on higher quality testing.
"Diagnostics is the most attractive space in the healthcare industry which sees 20 per cent growth per year, which we see sustaining into the future," said Chand, adding that the India market is fairly under-penetrated as compared to the US. He also added that another macro factor working for this segment is shift from unorganised to the organised sector, which is currently only 10 per cent.
Thyrocare, Nueclear expansion plans
Thyrocare promoters plan to expand Nueclear Healthcare, the low-cost cancer diagnosis services business of the group, from the proceeds of this investment. Thyrocare itself plans to venture into global markets with this investment.
"When CX Partners invested, we were motivated and ventured into Nueclear (the in-vivo segment). Now with NVP investing, we will be exploring global markets. The enhanced management bandwidth will facilitate scaling up the in-vitro model globally and the in-vivo model nationally, to a desired size and with relative ease," said Dr A Velumani, MD and CEO of Thyrocare Technologies.
Nueclear Healthcare is planning to set up 120 molecular imaging centres for low-cost cancer diagnosis services. In an earlier interview, Thyrocare CFO Sunder Raju told VCCircle that immediate capital requirement of Nueclear is Rs 600 crore. The funds are expected to be used for booking land spaces to establish a network of medical cyclotrons in 16 major cities. The company requires total capital of up to Rs 1,500 crore in 5 years.
Nueclear Healthcare also has a strategic partnership with GE Healthcare to facilitate 120 advanced PET/CT imaging systems and 12 PET Trace Medical Cyclotrons for early detection of cancer.
"It is (Nueclear) an incredibly attractive segment and Dr Velumani is trying to establish a new business model in the space, which is also very under-penetrated in India," said Chand. When asked if Norwest would invest in Nueclear, Chand said they would evaluate the opportunities although there's currently no option on the table.
Norwest betting on healthcare, consumer sectors
This is the third investment by Norwest Venture Partners in the healthcare space in India. The Silicon Valley-based venture and growth capital firm invested Rs 25 crore in Bangalore-based primary care clinic chain NationWide Primary Healthcare Services Pvt Ltd earlier this month. It is also an investor in medical equipment firm Perfint Healthcare.
Norwest, which has $3.7 billion under management, hopes to close more transactions in the sector which is a focus for it globally. "Healthcare is a sector of huge focus and we are spending a lot more time on this. This is also aligned with our global strategy of making healthcare a major vertical for NVP," said Chand.
Norwest's portfolio companies in India include National Stock Exchange, digital media network Komli, lifestyle e-commerce firm Pepperfry.com and online travel agent Yatra.com.
"There are a lot of deals going around and in terms of quality, we are seeing some good transactions. Anything with a consumer focus is of interest to us like healthcare, FMCG, education, financial services and others," said Chand.
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