New York-based OrbiMed Advisors plans to launch its second pan-Asia healthcare fund towards the end of 2013, setting aside $500 million to invest in the fast-growing markets of India, China and other Asian countries.
The OrbiMed Asia Partners II fund could invest up to 65 percent of its funds in India, OrbiMed's founder and Managing Partner Samuel Isaly said. The new fund would be more than double the size of its $188 million Asia fund launched in 2008.
"We're looking to make approximately 10 to 12 transactions," Isaly told Reuters. "We are running out of money in the existing fund."
Private equity funds quadrupled their investment in India's primary healthcare in 2012, betting on the country's rising consumer spending and massive requirement for quality primary healthcare, a market which is estimated at about $30 billion.
Goldman Sachs Group Inc (GS.N), Warburg Pincus LLC, Sequoia Capital, the Government of Singapore Investment Corp and others have already pumped $520 million into India's basic healthcare industry, according to Thomson Reuters data.
OrbiMed's first Asia-focused fund invested in mid-sized drug maker Shasun Pharmaceuticals Ltd (SHAS.NS), tertiary care hospital chain KIMS India, bio-pharmaceutical company Bharat Serums and vaccines and clinical research organization Ecron Acunova.
"I would say we have a couple more investments to go in the old fund," said Sunny Sharma, a senior managing director with OrbiMed, who will be managing the Indian portfolio.
By value, about 40 percent of the first fund's investments are in India. It also has eight investments in China and one in Korea.
An ageing population is leading China to encourage investment in healthcare services. In January 2012, it reclassified the sector as "permitted" rather than "restricted," meaning overseas companies can own 100 percent of an operation in China.
"We expect some of these companies to go public in 2013," Isaly said, without disclosing further details.
Isaly, who manages about $6.5 billion in healthcare assets worldwide, said he was confident of generating annual returns of more than 20 percent on investments in the new fund.
The FTSE Asian Sector Health Care Index, which tracks healthcare stocks in Asia, rose about 15 percent in the last year. About 45 percent of the stocks in the index are Indian.
"The portfolio is looking very good - with consistent performance across many companies," Sharma said, but declined to comment on returns from the current fund, OrbiMed Asia Partners.
Forty-eight transactions with a cumulative value of about $1.23 billion last year made the healthcare industry India's second-largest sector for investment after the information technology industry, according to a report by PricewaterhouseCoopers.
In 2011, the healthcare sector in India had attracted investments worth $418 million spread across 38 deals, PwC said.
This growth comes despite global private equity's hesitance to deploy their capital in India, across sectors, given the prevailing political uncertainty and ongoing regulatory opacity in the country. Overall, private equity investments in India fell 15 percent to $8.85 billion.
Most of OrbiMed Asia Partners' investments were in a range of about $5 million to $25 million and the new fund's investments could be slightly larger going up to about $30-$35 million, said Sharma.
"India is one of the most attractive emerging markets because of its size, its democratic institutions, and its rapid growth prospects," Isaly said.
(Roporting by Suzannah Benjamin in Bangalore, Editing by Saumyadeb Chakrabarty)