Gurgaon-based Dr Lal PathLabs is inching close to launch its long planned initial public offer (IPO). According to latest reports, the diagnostic and pathology laboratories chain aims to raise as much as INR 700 crore from the public offering and has appointed two investment banks while hunt for another one is on.
A report in the Mint business daily said the company has hired Kotak Mahindra Capital and Citibank to manage the issue. The IPO will offer an exit to existing investors but will also bring cash to the company which plans to expand its network by setting up more centres and acquiring competitors. At a post-issue valuation of nearly INR6,000 crore, the IPO is likely to see at least 10% equity sale. “We have nothing to share at this time. We are focused on continuing to build our business,” said Om Manchanda, chief executive officer at Dr Lal PathLabs.
The company counts private equity firms WestBridge Capital Partners and TA Associates among its investors. WestBridge made its first investment in the company in 2005 before being acquired by Sequoia Capital. However, a resurrected WestBridge, along with another PE player TA Associates, bought the original stake in February 2013 in a deal that valued Dr Lal PathLabs between INR1,500 crore and INR1,750 crore. At the midpoint of this valuation, WestBridge Capital Partners appears to be ready to part exit its position at a multiple of 3.7X. The management of WestBridge has, however, said it might remain invested in the company even after IPO.
Founded in 1949, Dr Lal PathLabs employs more than 3,000 people and serves almost 12 million customers a year. It is important to note that the company is not dependent on the IPO to expand its reach. As with several other issues in recent times, this issue could also end up largely as an exit opportunity for the investors. According to documents filed with the Registrar of Companies (RoC), Dr Lal PathLabs acquired Kolkata-based Medicave Medical Systems Pvt. Ltd and Ahmedabad-based APL Institute of Clinical Laboratory & Research Pvt. Ltd during the year ended March 2014.
With a buoyant stock market, it is easy for existing investors in companies to make exits at rich valuations through IPOs. Several other players in the sector have started the process to bring their IPOs. Important among these are HealthCare Global, Thyrocare Technologies Ltd, Narayana Health and Aster DM Healthcare although none of the companies have filed their prospectus with the Securities and Exchange Board of India (SEBI).