PE firm Carlyle may exit India’s Metropolis Healthcare before IPO

Photo: Reuters

Private equity (PE) fund Carlyle Group is planning to sell its stake in Metropolis Healthcare Ltd ahead of a planned initial public offering (IPO), two people aware of the development said.

The diagnostics chain is in talks with investors to raise money to buy back the stake, the people added on condition of anonymity. Separately, the US-based private equity firm is also reaching out to outside investors including private equity firms to sell its stake. Metropolis has already received clearance from the Securities and Exchange Board of India (Sebi) for an IPO.

“While the firm has received a go-ahead by the markets regulator for the listing, the uncertainty around the timing of initial public offering has led to Carlyle seeking a buyback of stake by the promoters of Metropolis,” the first of the two people mentioned above said.

Metropolis spokesperson in an emailed statement said, “We refrain to comment on any market speculation. We have filed our DRHP and also got Sebi nod for the IPO. We will be guided by our bankers on the timing of the issue. However, if there is any new development on the IPO we will keep you posted on the same.”

Metropolis managing director Ameera Shah said the company will wait for the right time for an IPO. “We always have to time it (the IPO). Markets are not in the best of condition and are very volatile. We will wait and see. We are not in any hurry right now. There is no window in December,” Shah said in an interview earlier this week.

According to the company’s draft red herring prospectus (DRHP), most of the stake sale during the Metropolis IPO will be a secondary one with a minor primary dilution by the promoters of Metropolis—the Shah family. Carlyle, which holds around 31% stake in the firm, will be looking to pare its stake to 10% through the listing. Shah family will pare its shareholding by around 10% through the IPO. It currently holds around 67% stake in the company.

“It is largely a secondary sale. My family will dilute some stake as well to retire some of the debt at the holding company level,” said Shah.

Shah did not disclose the amount of debt that will be serviced through the funds raised. According to the information available in the DRHP, Carlyle through its investment arm CA Lotus Investments has signed a share buyback agreement with the promoters as on 27 September.

Ahead of listing, the promoters have agreed to buy back about 2% stake from Carlyle Group for a consideration of ₹53 crore. After the listing, Shah or a person nominated by her can buy back up to 8.75% equity shares held by the investor according to a pre-determined formula.

In the second case, however, there is no obligation for a buyback.

Through the listing, Carlyle will be looking to offload around 10.25 million shares. Meanwhile, Metropolis will be funding its expansion through mostly internal accruals. “We have mostly been growing through internal accruals. If you see, in the past also, most of the PE investments have happened through secondary deals. The primary component has been very small,” said Shah, adding the firm will also be looking at growing inorganically in the domestic and international markets.

In September 2015, Carlyle invested in Metropolis by acquiring the stake owned by G.S.K. Velu, former promoter at the firm.

Earlier, Warburg Pincus had invested $85 million in Metropolis in 2010 by buying ICICI Venture’s holding as well as new shares from the promoters. In 2015, Warburg sold its entire 27% stake in the company, Mint had reported.

Metropolis Healthcare focuses on west and south India, where it will seek to deepen its presence by setting up more centres. It also plans to enter unexplored markets in Africa. At the end of financial year 2018, the firm’s revenue from operations stood at ₹64.5 crore while profit stood At Rs 110 crore. For the same year, Metropolis’ revenues from overseas operations stood at Rs 52 crore.

The diagnostic chain services its customers through 251 patient centres, 1,130 touch points and 879 third-party patient service centres.

Also Read:

India: Private equity-backed Metropolis, Inventia get Sebi nod to launch IPO

This article was first published on livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.