Enamored by the growth in the education and healthcare sectors, Religare Venture Capital has joined hands with private equity player Milestone Capital for managing a Rs 600 crore fund that would invest in the two sectors, which remain shielded from the global turmoil. Named India Build-Out Fund I, Religare has contributed Rs 60 crore to the corpus with some banks, insurance companies and high networth individuals already committing about Rs 110 crore. "The remaining Rs 430 crore is to be raised in the domestic market,'' said Milestone's MD Ved Prakash Arya. The fund has started working on six to seven deals and the average size of the deal will be between Rs 20-60 crore. The fund has a greenshoe option of Rs 200 crore and the life of the fund will be five years. Religare and Milestone equally own the education and healthcare fund.
According to Religare CEO & MD Sunil Godhwani, the association is to leverage each group's strengths. While Religare brings in its domain expertise on healthcare, Milestone has experience in the private equity space. The two- year old Milestone, floated by Arya, the former CEO of Pantaloons and Globus retail chains, manages 6 funds that invests in real estate and warehousing among other areas.
In recent years, the education and healthcare sector has seen several private equity deals. For example: Career Launcher, Educomp, NIIT, Veta, Eurokids and Mahesh Tutorials in the education arena. In the healthcare segment companies like Thyrocare, Dr Lal Path Labs, Apollo, Fortis, SRL and VLCC got funds from private equity players.
Both sectors are supply constraint in terms of infrastructure, good quality staff and services, according to Rajesh Singhal, managing partner of Milestone Religare Investment Advisors, and are price inelastic. As per the presentations made by the company, the Indian education sector is a large market worth about $80 billion in annual spends, of which the government accounts for $30 billion (3.7% of GDP) and private sector brings in $50 billion. This $50 billion is expected to increase to $80 billion in 2012.
The Indian healthcare segment is a $57 billion market. At 5.6% of GDP, India's healthcare spend is one of the lowest globally compared to other economies like China and Brazil. The private sector accounts for $34 billion and is expected to increase to $59 billion by 2012.
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