India-focused private equity (PE) firm CX Partners is in talks with four global PE firms to sell its 20% stake worth some Rs.400 crore in surgical equipment maker Sutures India Pvt. Ltd, according to two people familiar with the development.
Malaysian sovereign wealth fund Khazanah Nasional Bhd, Singapore’s sovereign wealth fund GIC, Temasek Holdings Pte and Baring Private Equity Asia are in talks with CX Partners to acquire the stake, said the first person. The enterprise value of Sutures is $300 million (around Rs.2,000 crore), the second person said. Both declined to be named.
Investment bank O3 Capital is advising CX Partners to exit its three-year-old investment.
US-based PE fund TPG Growth owns 52% in Sutures, CX Partners holds 20%, and the rest is held by the promoters.
Founded in 1992, Bengaluru-based Sutures makes surgical and wound-closure products such as natural and synthetic absorbable and non-absorbable sutures, surgical needles, staples, tapes, bone wax, surgical meshes, catheters and disposable surgical gloves.
Sutures is the largest Indian surgical sutures manufacturer. In surgical equipment, Sutures competes with Smith and Nephew Plc, Ethicon Inc. and ConvaTec. Sutures’ products are exported to about 91 countries in Europe, South America, Africa and Asia, and supplied to more than 10,000 hospitals across the country.
Set up by former Citi Venture Capital International’s India head Ajay Relan, CX Partners had acquired about 37% stake in Sutures India for about Rs.200 crore in 2012 through a secondary deal where it bought out the entire stake held by India Life Sciences Fund.
In 2013, TPG Growth, a growth equity fund of TPG Capital, acquired about a 23% stake in Sutures from CX Partners as well as from promoters for Rs.145 crore. Over the next two years, TPG acquired additional stake from CX Partners, promoters and now holds majority stake.
Emails sent on Friday to Ajay Relan, managing partner, CX Partners, and Y.S. Prabhakar, chief executive officer at Sutures India, did not elicit any response. Spokespersons of Temasek and Baring PE Asia declined to comment. Emails sent to GIC and Khazanah on Friday remained unanswered.
Besides Sutures India, CX Partners had part exited two more investments this year—Natco Pharma Ltd and information technology consulting firm KPIT Technologies Ltd. CX Partners is also looking to part-exit Matrix Cellular International Services Pvt. Ltd through a proposed initial public offer.
CX Partners, founded in 2009, manages a fund with a corpus of $500 million and has portfolio companies including Barbeque Nation Hospitality Ltd, Sapphire Foods India Pvt. Ltd, Ujjivan Financial Services Pvt. Ltd, South Indian Bank, Karur Vysya Bank, Thyrocare Technologies Ltd and Minacs.
The timing is right for exiting healthcare investments and PE interest in the sector remains high due to the future potential of the sector.
“The interest in healthcare businesses is being driven by the overall macroeconomics of the sector, where penetration of healthcare is still low in India compared to other countries,” said Dilip Dusija, leader, private equity services, at advisory firm BDO India Llp. “Medical devices manufactured in India have a strong cost advantage over imported devices, which makes these businesses attractive.”
Khazanah, an active investor in the Indian healthcare sector, holds a minority stake in Mumbai-based drug maker Ipca Laboratories. Khazanah also has its investment in India’s second largest hospital chain operator Apollo Hospitals.
Temasek has a presence in the Indian healthcare sector with its investments in HealthCare Global Enterprises and multi-specialty hospital Medanta-The Medicity.