Carlyle buys 37% stake in Metropolis

Mumbai: The US-based private equity firm Carlyle Group has acquired about a 37% stake owned by G.S.K. Velu, former promoter in diagnostic chain Metropolis Healthcare Ltd, for an undisclosed amount.

The deal size could be in the range of Rs.850-900 crore, said two people in the know of the development.

At present, the controlling stake in Metropolis is held by the Shah family that consist of chairman Sushil Shah and his daughter Ameera Shah, managing director and chief executive.

In April, the Shah family acquired the 27% stake in Metropolis from private equity (PE) firm Warburg Pincus for Rs.550 crore with the backing of KKR India, the Indian arm of global private equity firm KKR and Co. LP. This raised their family stake in the company to 63% from 36%.

Warburg had invested $85 million in Metropolis in 2010 by buying ICICI Venture's holding as well as new shares from the promoters.

Initially, founder-promoter Velu held 37% while the Shah family held 36% and the rest was with PE and other investors.

Metropolis delivers over 15 million medical tests a year through 10,000 laboratories, hospitals and nursing homes, and 200,000 consultants. It has 130 laboratories in India and six other emerging markets, 750 collection centres and over 3,500 employees.

Avendus Capital and Chennai-based Veda Corporate Advisors served as financial advisors for the deal.

"With an experienced management team, a wide range of test menu and a focus on superior quality and clinical output, Metropolis has developed a strong brand name and established a broad retail franchise in India," said Neeraj Bharadwaj, managing director of the Carlyle Asia buyout, the group's India investment team.

With this transaction, the ongoing power battle between Sushil Shah and Velu has come to an end.

According to a report in The Economic Times in April, Velu was upset after the Shah family acquired Warburg's stake as he was allegedly not informed about it.

Besides Metropolis, Velu runs several other healthcare services firms such as Chennai-based medical technology company Trivitron Healthcare, Maxivision Eye Care Hospitals, Alliance Medicorp India Ltd and Alliance Dental Care Ltd.

Carlyle already has exposure to the Indian healthcare sector. In 2013, it acquired a strategic minority investment in Naresh Trehan-owned Global Health Pvt, Ltd, which manages and operates the super-specialty hospital Medanta the Medicity.

"While healthcare as a segment has been of great interest to private equity investors, its less capital intensive sub-segments which are of greater focus—diagnostics and similarly asset light healthcare businesses have seen huge interest and will continue to attract a lot of attention," said Sanjeev Krishan, partner and leader, PE and transaction services, PricewaterhouseCoopers Pvt. Ltd.

Through Carlyle Asia Partners IV, it had acquired retail financial services firm Destimoney Enterprises (formerly Dawnay Day AV Financial Services) from New Silk Route Advisors (NSR) for Rs.1,200 crore. Destimoney holds a 49% stake in Punjab National Bank Housing Finance Ltd.

The Carlyle Group manages $193 billion of assets. Founded in 1987 in Washington DC, Carlyle has more than 1,700 professionals operating in 35 offices in North America, South America, Europe, West Asia, Africa, Asia and Australia.