Mount Kellet, others to buy 35 per cent stake in MedPlus

US private equity group Mount Kellett Capital Management is leading a Rs410 crore ($90 million) investment in one of India's top medical and pharmaceutical chains, MedPlus Health Services. Along with Mount Kellett, TVS Capital and Ajay Piramal Group's healthcare fund are reported to be the other investors to acquire a little over 35 per cent stake in the Hyderabad-based firm.

The sellers are two of the original investors, India-focused venture capital funds NEA-IndoUS and Peepul Capital, which are reportedly preparing to exit MedPlus after making large profits. MedPlus promoters, led by Madhukar Gangadi, will continue to hold a majority stake.

The five-year-old MedPlus operates a network of over 800 pharmacies besides diagnostic labs and clinics, mostly across five states - Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra and West Bengal. It competes with Apollo Pharmacy and Guardian Lifecare, which are vying for the top three slots in India's still emerging organised pharma retail.

MedPlus is known for giving a 10 per cent discount on medicines and up to 30 per cent discount on lab testing. The company serves around 100,000 customers daily – the majority in South India, with an expanding presence in Maharashtra and West Bengal. Bankers indicate that the MedPlus is on course to be present in 1,200 locations over the next one year.

The $5 billion Indian pharmacy retail business has seen a lot of activity in the past few years with large hospital chains ranging from Apollo to Fortis all having significant presence in this sector and further expanding their presence in the pathology labs segment. Interestingly, last year Piramal Healthcare had divested its diagnostics business to Super Religare Laboratories of Shivinder and Malvinder Singh.

Mount Kellett is making the first Indian investment and others will buyout existing financial investors, including Peepul Capital, NEA IndoUS Ventures and Arcapita. Srinivas Koppulu, the managing director of Microsoft India who invested seed money in the company, is also being bought out. The deal-making is at an advanced stage, reports suggested.