Tata Capital Healthcare Fund increases investment size to $25 million

The fund also bets on domestic pharmaceutical companies targeting global markets.

The healthcare and life sciences-focused private equity fund has raised a total of $200 million across its two funds, TCHF I (2012) and TCHF II (2022). So far, it has deployed 90% of its $130 million second fund. Chandramouli told Mint that TCHF II has so far invested in nine companies in different sectors of the healthcare industry and is in the process of finalizing its tenth investment in the medical consumables sector.

“The macro theme of the industry is essentially the localization story in India, we are looking at local production of global products,” said Chandramouli. He added that local players in global markets are a major shift happening in the Indian medtech space. “This is A company that is a leader in the select medical consumables category, has very strong regulatory knowledge, exports to more than 50 countries, and has reasonable growth and profitability,” she said. Chandramouli declined to name the company or reveal more details, but said they planned to close the investment soon.

increase capital

Going forward, TCHF is considering increasing capital deployed to address unmet healthcare needs in India. “The size of the funding we have deployed so far has been in the $10-18 million range… given the greater need, now we should probably look at larger funding sizes in the future,” Chandramouli said. , adding that it will exceed $25 million in the future.

The fund constructs its portfolio with an eye on bridging the disparity in healthcare in India. One of the key focuses of the fund is demographics, Chandramouli said. “There is a large population here over 60 years old, close to 160-170 million people, and there is no formal institutional care,” she said.

Health care spending will also increase. “Even for middle-income households…health care spending is going to increase at least three to four times. So we need to address that,” she added.

The healthcare industry in India has been growing rapidly. The 2023 NITI Aayog paper said that between 2016 and 2022, its compound annual growth rate (CAGR) was 22%. This growth is driven by a variety of factors, including an aging population, a growing middle class, rising rates of lifestyle diseases, an increasing emphasis on public-private partnerships and the accelerating adoption of digital technologies, including telemedicine. In addition, The newspaper noted that investors.

According to data from the India Brand Equity Foundation (IBEF), private equity and venture capital investment in the Indian healthcare industry exceeded US$1 billion in the first five months of 2024, a 220% increase from the previous year.

Bet local, think globally

Pharmaceutical companies make up a large portion of the company’s portfolio. In the second fund, pharmaceuticals account for 50% of the fund, healthcare services 30%, and the remaining 20% ​​for health technology and medical technology, Chandramouli said. One of the key areas the fund focuses on within the pharmaceutical space is companies that cater to regulated markets.

Of the four existing pharmaceutical companies in its portfolio, two are India-focused — Noble Plus Pharmacy and Skin Care and Linux Laboratories, which focus on domestic formulations — while two are focused on global markets. These include Sakar Healthcare, which specializes in branded exports and contract manufacturing, and Orbular Pharmaceutical Technologies, a maker of complex generic drugs.

TCHF invested up to $20 million in Orbular in May 2024. Orbular is a contract development and manufacturing company focused on supplying complex generic drug formulations to regulated markets such as the United States.

Complex and specialty generics are a key focus for the industry, and Chandramouli expects long-term growth in this area over the next decade, “given the large number of patents in the complex generics space that are about to expire,” she said. “Specifically generics in the area of ​​GLP (glucagon-like peptide) analogues are one of the complex generics that Orbular is targeting, both for diabetes and weight loss products,” she added.

Glucagon-like peptide-1 (GLP-1) drugs are used to treat type 2 diabetes and obesity. The patent on semaglutide, a GLP-1 receptor antagonist, will expire in 2026 in several countries. Semaglutide is patented by Danish drugmaker Novo Nordisk, which sells semaglutide under the brands Ozempic and Wegovy, and demand is staggering. According to JPMorgan Chase, the GLP-1 market is expected to exceed $100 billion by 2030.

With patents expiring, Indian pharmaceutical majors such as Dr. Reddy’s, Cipla, Zydus, Lupine and Sun Pharma are gearing up to launch generic versions of GLP-1 drugs to cash in on the emerging market.

She said the fund would continue to focus on companies with the potential to scale and target regulated markets.

Health technology progress is slow

Mint reported earlier this year that TCHF was cautious about investing in health technology. The fund has one medical technology investment in its portfolio – in 2022, the fund injected $10 million into Deeptek Inc, an AI-powered radiology imaging company.

“Healthtech, by the nature of the business itself, at least at the investment level, is not going to be positive Ebitda,” said Chandramouli. “If you look at our Fund Two, nine out of 10 of our investments are mid-cap Companies with strong investment income growth and stable EBITDA margins Even though our health technology portfolio has very strong growth, it is the only company that has not yet reached positive EBITDA margins,” she added. Ebitda is earnings before interest, taxes, depreciation and amortization and is a key indicator of a company’s profitability.

Chandramouli reiterated that they have not changed their stance, especially for online pharmacies, which is the largest segment in health tech. “This is still a model that hasn’t evolved in a very sustainable way,” she said. “We’re looking at how some of the larger players are going to scale, how they’re going to be profitable… so they’re all watching and waiting. and observing patterns,” she said.