InvAscent Increases Pharma Investment Size as Costs Reset Capital Requirements
Private equity firm InvAscent is now writing significantly larger cheques in the pharmaceutical sector, its core focus area, as rising regulatory and manufacturing costs have compelled companies to seek more substantial capital infusions. This strategic shift reflects broader changes in India's healthcare investment landscape.
Larger Ticket Sizes in Pharma Deals
Founder and chairman Hari Buggana revealed that InvAscent now participates in $80 million to $100 million deals alongside limited partners, typically following a 50-50 split arrangement. This marks a substantial increase from their previous engagement in $30 million to $50 million transactions.
"It costs a lot more today to build a new facility to comply with regulations, so companies naturally need to raise a lot more money," Buggana explained, highlighting how compliance requirements have fundamentally altered capital needs in the pharmaceutical industry.
Expanded Investment Focus
The Hyderabad-based private equity firm has structured its current fund with three primary allocations:
- 50% to pharmaceuticals – The core focus area
- 30% to healthcare services – Including hospitals and clinics
- 20% to allied segments – Covering med-tech, health-tech, and animal health
"Another change that has happened compared to earlier funds is health-tech as a sector is now becoming an area that we are actively investing in," Buggana noted, indicating the firm's evolving investment thesis.
Growing Investor Interest and Fund Performance
This strategic evolution comes against a backdrop of increased investor interest in pharma and healthcare sectors, driven by multiple factors:
- Higher disposable income and healthcare spending
- Expanding healthcare coverage across India
- Growing medical tourism industry
- New demand pockets emerging from tier II and III cities
The firm recently closed its fourth fund with a $304 million corpus, which is expected to reach approximately $400 million with co-investments from limited partners. Notably, 40% of this capital has already been deployed across various investments including:
- Apex Hospitals
- ABI Health
- Fleming Laboratories
- Geri Care
- Maiva Pharma
- SRV Hospitals
Changing Exit Strategies and Market Evolution
InvAscent is increasingly viewing public markets as a prominent exit route, driven by attractive valuations as portfolio companies achieve sustainable scale. "We are now seeing greater receptivity towards high-quality healthcare and pharma assets to list in the public markets," Buggana observed.
The firm anticipates at least one IPO annually from its third fund, with several portfolio companies preparing for listings, including:
- Symbiotec Pharmalab
- Malladi Drugs and Pharmaceuticals
This shift toward public markets is partly driven by larger private equity firms being unable to match the multiples that public markets offer, although valuation differentials vary case by case.
Historical Growth and Future Outlook
InvAscent's fund sizes have consistently grown alongside evolving investment themes and increasing ticket sizes:
- Approximately $100 million (2007)
- Around $150 million (2014)
- About $300 million (2018, including co-investments)
- $304 million current fund (expected to reach $400 million)
Established in 2005, the life sciences-focused private equity firm has made approximately 39 investments and exited 20 companies, managing over $850 million in assets. The firm specifically targets small and medium enterprises, addressing a financing gap left by traditional banks that typically favor larger, established companies.
Buggana emphasized their comprehensive approach: "We try to work with them actively to get them ready to be a very profitable enterprise when we are ready to exit 5 years later." This involves assistance in capital allocation, scaling operations, improving profitability, and enhancing governance structures.
The firm's strategy reflects broader trends in India's healthcare investment landscape, where rising costs and regulatory requirements are reshaping how companies access capital and how investors structure their participation in this vital sector.
