Singapore-based healthcare-focused private equity firm Quadria Capital aims to raise up to $700 million, including a $100-200 million co-investment pool, for its fourth fund, managing partner Amit Varma told this portal.
“Based on the active deal flow we are seeing across the region and the fact that ticket sizes have gone up from the initial $30-50 million to almost $75 million now, we expect to be able to deploy that capital on the ground,” Varma said.
Quadria had raised $300 million for its Fund I in 2015. The fund had a total investment capacity of $425 million after it accumulated an additional $125 million in co-investments. To capture the potential of the healthcare sector at an early stage, the two promoters of Quadria floated Healthquad which closed at $12 million last year.
The latest fund, Quadria Capital Fund II, is expected to see most of Fund I LPs return to inject capital, Varma added.
This portal had earlier reported that Quadria was planning to raise a new fund and fully deploy its Fund I this year. According to Varma, the PE firm will also be looking to exit one or two of its investments from Fund I by the end of the year.
“Our LPs have not been pushing us to do an exit for the sake of raising another fund. They have been very supportive of holding on and creating further value. The reason they support our new fundraising is that they’ve looked at our deal flow and realised the value of not sitting this out and continuing to put in capital,” he said.
Having said that, he clarified that the firm is not extending the tenure of Fund I as the 2014 vintage fund has a runway up to 2020-2021.
Competition for healthcare deals has heated up as sector-agnostic funds vie for a slice of the action, pushing up valuations. Varma said Quadria prefers to look at proprietary deals and avoid participating in a bidding process that might result in overpaying for a deal.
“Out of the nine deals that we have done so far, we have never had a high-teen multiple valuation. Most of our deals, if not all, are proprietary. We have a bunch of healthcare guys who have only run healthcare companies, so we are able to convince the companies to take up a saner valuation,” he added.
Quadria was founded in 2010 by Varma and Abrar Mir, both former senior executives at India’s Religare Group. Varma is a physician with over two decades of clinical experience and has previously led the international expansion initiatives at India-based Fortis Healthcare. Law graduate Mir has spent an equal amount of time in the PE, investment banking and healthcare spaces.
On healthcare as a platform, Varma said the approach is certainly “easier said than done” as Quadria believes in investing in the fundamentals of a company with a proven business model.
“And if the proven business case is in the platform model, we’ll be happy to do it. If not, there is enough scope to build tangible businesses which have the right scale and size. We invest in key market leaders which could become a regional platform but having said that, we also have standalone cases in our portfolio where these single assets are growing into requisite sizes [to create exits],” he said.
Varma also shared that for a GP to be successful in Asia, a certain level of autonomy must be in place. In other words, Quadria would prefer not to have a single investor overriding the fund.
“There are larger investors who have suggested us with larger checks but in Quadria, we believe in having a diversified LP base to retain our independence and freedom in investments and exits,” he added.
Quadria has invested in Malaysian diagnostics provider Lablink (M) Sdn Bhd, and India’s Strand Life Sciences earlier this year. It has also invested in FV Hospital (FV) in Vietnam and acquired a significant stake in Singapore’s MWH Holdings, the holding company for the Singapore Heart, Stroke and Cancer Centre.
Currently, Quadria has over $1.5 billion worth of assets under management and 18 investments across Asia. It is also managing over 70 hospitals across the region.
Overall, Asia has seen a record of dry powder pouring into the region, as larger buyout firms including Greater Pacific Capital and Japan’s SoftBank Group are increasing their fund sizes, where the former is said to have recently made the first close of its $700-million India fund while the latter is said to be mulling a $5-billion Asia-focused fund.
Other Asia-focused vehicles on the road include CVC Capital Partners, which is raising a $4-billion fund, and Baring Private Equity Asia, which is seeking up to $6 billion for its seventh fund and has hit the first close at $4.5 billion.
Beyond global firms, the region is also mushrooming with smaller PE firms that are increasingly raising larger vehicles. Singapore-based Altair Capital has made the first close of its $150-million maiden ASEAN fund that is targeting healthcare, among other sectors, for investments. Esco Group has also announced its plan to raise up to $100 million for a spin-off fund to invest in life sciences companies.