Mumbai: Tata Capital Healthcare Fund (TCHF) expects to return cash to investors for over half of the companies in its recently launched ₹2,500 crore third fund through initial public offerings (IPOs), in a shift from the earlier funds that predominantly exited via strategic sales and secondary transactions, a top executive at the firm said.
“Our first fund, which primarily focused on early-growth companies, relied heavily on strategic acquisitions and secondary sales for exits, while the second fund is also expected to see secondary sales as the exit route, alongside a few IPOs,” Visalakshi Chandramouli, managing partner at the firm, told Mint in an interview. “In the third fund, we will see an evolution as we anticipate a bulk of liquidity (more than 50%) to come through public listings.”
The average cheque sizes for the third fund have also moved up to about $20-22 million from the $10-15 million in the previous rounds. “We have been the lead investor in all 20 investments we have done so far. As we now get into larger ticket sizes and source deals between $30-50 million, we will collaborate with other funds or co-invest with LPs (limited partners),” she said. “Importantly, most of the deals have been proprietary in nature, which has kept valuations attractive.”
While remains the sponsor and anchor investor, about 90% of the capital will be raised from domestic and global institutions, as well as family offices. Historically, 40-45% of the fund pool has been raised from healthcare and impact-focused investors, she said.
Evaluating new areas
The fund’s investment thesis typically relies on two core areas: consumption and competency. Beyond its core areas, it is evaluating new segments of , such as nutraceuticals, animal nutrition, medical devices, active pharmaceutical ingredients, regional multi-speciality hospitals, and senior care.
“We will certainly invest behind medical devices in the third fund as it weaves well with the India story, but remain cautious in spaces like health-tech where we may deploy smaller cheques as profitability can often be a challenge,” Chandramouli explained.
“We are also keen to do something in the senior care segment, but the market has not fully developed yet. There is a lot of interest as it is an important market with early movers bound to have an advantage, but I would look for some more evidence of the segment developing before making an investment,” she said.
“From a consumption standpoint, we evaluate companies that generate cash flows from the home market—these would be hospitals, diagnostics, branded pharmaceuticals, med-tech and health-tech that cater to a domestic market,” Chandramouli said.
The competence strategy targets top-tier Indian companies using their technical strengths and expertise to build products for global buyers. “This typically refers to those operating in the CDMO (Contract Development and Manufacturing Organisation), medical devices, export of pharmaceuticals or other similar plays,” she noted.
Broadly, the key is to identify spaces where there is an unmet healthcare need through disease, demographics, or geographical reach that the company’s offerings can solve for, Chandramouli said. “We aim to identify companies that are able to cater to the business model shift in healthcare and expand at double the growth of the sector with a preferred liquidity event through an IPO in a 5–6-year horizon going forward,” she added.
Investments across funds
With 20 companies and 8 exits, the firm is currently raising its third fund, with a corpus of ₹2,500 crore (around $260 million), including a green-shoe option, after making a first close this year. “The investment firm could deploy additional capital through co-investments from LPs (Limited Partners) and other investors,” Chandramouli said.
TCHF has raised over $400 million across two funds, including co-investments. From the first fund, it has invested in Intas Biopharmaceuticals, Novalead Pharma (a drug discovery platform), and Amanta (a sterile manufacturer), among others. It has exited all the investments except Brinton Pharmaceuticals, which operates in the domestic formulations space.
Through the second fund, it has invested in Linux Laboratories (domestic formulations), Atulaya Healthcare (pathology and radiology diagnostics), and Noble Plus Pharmacy (regional pharmacy chain), among others. It made its first investment from the third fund in Tenet Diagnostics last month.
Mint previously reported that and Linux Laboratories are raising a new round of capital through a mix of primary and secondary transactions, through which TCHF may monetize some of its stake.