US private equity firm TA Associates in talks for 15% stake acquisition in Dr Lal Pathlabs from Sequoia Capital

TA Associates is in discussions with Indian firm, Dr Lal Pathlabs for the acquisition of a 15% stake in Dr Lal Pathlabs from Sequoia Capital. The investment will see the US based TA Associates remit about Rs 170 crore for the acquisition. Sequoia Capital controls about 30% stake in Dr Lal Pathlabs and the deal now values Dr Lal Pathlabs at about Rs 1130 crore. US based TA Associates manages assets estimated at $16 billion with investments in firms such as business process outsourcing (BPO) GlobeOp Financial Services, Idea Cellular and Micromax Informatics.

The Indian diagnostics industry has recently experienced numerous fund raising and deal activities as companies seek to expand and grow their businesses. Last month, Super Religare Laboratories purchased Piramal Healthcare’s diagnostic chain for an estimated Rs 600 crore. Other than that deal, Warburg Pincus invested $85 million in Metropolis Healthcare in June. However, the latest acquisition plans will see the US firm acquire a stockholding in Dr Lal from Sequoia Capital, a venture capital firm that had put 15% of its 30% shareholding in Dr Lal up for sale.

Dr Lal Pathlabs is one of India’s biggest diagnostics and pathology services chain and Sequoia had placed the stake sale at about Rs 120 crore, subsequently valuing Dr Lal Pathlabs at about Rs 800 crore. According to Sequoia, its remaining 15% will be disposed off during Dr Lal Pathlabs initial public offering that is expected to be undertaken in the coming 1 to 2 years. Sequoia Capital had acquired about a third of Dr Lal Pathlabs for Rs 50 crore five years ago in two tranches from a fund set up in 2000.

Even though Sequoia did not reveal its reason for disposing the stake, analysts believe the firm is gearing up for investments and might be keen on reinforcing its funds portfolio. Dr Lal PathLabs runs over 60 laboratories across India with over 1,000 employees. The Indian diagnostics market is worth over $1 billion and is growing at 15-20% every year. It is dominated by standalone regional players while organized chains hold 5-10% of the market share.

TA Associates, Inc. is a private equity and venture capital firm specializing in seed investments, management buyouts, leveraged recapitalization or liquidity with leverage for shareholders, purchasing stocks from owners, technology buyouts, growth capital, and acquisitions transactions. The firm primarily invests in private companies with a focus on consumer and retail, technology, financial services, business services, and healthcare businesses.

25 Aug 2010.