the india proposition - Mosaic Capital Services

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india

-

a destination for cross
-
border m&a
opportunities


a discussion document



march, 2008

private and confidential

change your perspective

see what makes

the difference

mosaic
capital


mergers & acquisitions | private equity


pharma & healthcare

image

2

private and confidential

mosaic
capital


mergers & acquisitions | private equity


the india proposition


select economic criteria


4th largest economy in the world; 2
nd

largest GDP among the developing countries (based on purchasing
power parity)



over the past 15 years, has been the second fastest growing economy in the world, after China, with an
average annual growth rate exceeding 6.5%



displaced the US as the second
-
most favoured destination for foreign direct investment (FDI) in the
world after China.


(source: AT Kearney's FDI Confidence Index)


key metrics


probably the most preferred country for
future R&D investments, with slightly
more than 40 percent of CEOs indicating
they will likely make such investments
over the next three years



most mature and well developed capital
markets amongst developing countries



3
-
4 years of unabated “bull
-
run” based on
record corporate growth & earnings have
provided Indian companies the necessary
foundation for expansion with minimal
leverage



modest inflation despite spiraling crude
prices

2005
2006
2007
Real GDP (% change)
9.2
8.6
7.9
Nominal GDP (US$ bil.)
808.9
897.8
1035
Nominal GDP Per Capita (US$)
738
808
918
Consumer Price Index (% change)
4.2
5.8
5.7
Wholesale-Producer Price Index (% change)
4.7
4.9
5.4
Policy Interest Rate (%)
6
6
7.25
Short-term Interest Rate (%)
10.75
10.94
10.82
Broad Money Supply (LCU bil.)
25291.9
29424.2
37114.7
Fiscal Balance (% of GDP)
-4.1
-3.7
-3.6
Unemployment Rate (%)
12.8
12.2
11.9
Current Account Balance (US$ bil.)
-9.2
-15.6
-22.4
Current Account Balance (% of GDP)
-1.1
-1.7
-2.2
Trade Balance (US$ bil.)
-40.2
-53.9
-65.7
Trade Balance (% of GDP)
-5
-6
-6.3
Exchange Rate (LCU/US$, end of period)
45.06
44.24
45.12
Exchange Rate (LCU/Euro, end of period)
53.16
58.27
62.26
3

private and confidential

mosaic
capital


mergers & acquisitions | private equity


the india proposition


availability of funds

Foreign Capit al Inf low (net )
10184
8814
8551
10840
16736
28022
23400
0
5000
10000
15000
20000
25000
30000
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
US$ Million
FDI Inf lows
2167
4031
6125
5036
4322
5987
7661
19000
0
5000
10000
15000
20000
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
US$ Million
4

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mergers & acquisitions | private equity


the india proposition


availability of funds

Acquirer
Target
Sector
%Stake
Value - USD Mn
Temasek Holdings
Bhart i Airt el
Telecom
4.99%
1,906.74


Consort ium
GMR Inf rast ruct ure
Real Est at e & Inf ast ruct ure Mgt
9.00%
1,000.00


Consort ium
Bhart i Inf rat el
Telecom
10.00%
1,000.00


ICICI Vent ure Funds
Jaypee Inf rat ech
Real Est at e & Inf ast ruct ure Mgt
N.A.
800.00


Carlyle Group
HDFC
Banking & Financial Services
5.60%
650.00


Avenue Capit al
SKIL Inf rast ruct ure
Real Est at e & Inf ast ruct ure Mgt
26.00%
500.00


USD 500 Mn Plus PE Deals - India
Sect or Wi se Break-up - Vol ume
60
67
31
35
61
151
0
40
80
120
160
Banking &
Financial
Services
IT & ITES
Media,
Entertainment &
Publishing
Pharma,
Healthcare &
Biotech
Real Estate &
Infrastructure
Management
Others
No. of Deals
Sect or Wi se Break-up - Val ue
17%
4%
5%
2%
36%
36%
Banking & Financial Services
IT & ITES
Media, Ent ert ainment & Publishing
Pharma, Healt hcare & Biot ech
Real Est at e & Inf rast ruct ure Management
Ot hers
5

private and confidential

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the india proposition


pharmaceutical sector


the

Indian

pharmaceutical

sector

is

currently

the

largest

amongst

the

developing

nations
.

Given

its

current

momentum

of

growth

the

Indian

pharmaceuticals

market

is

expected

to

expand

to

US
$

25

billion

by

2010
.

It

is

rightly

considered

to

be

one

of

the

flagship

sectors

of

the

Indian

economy,

as

Indian

pharmaceutical

companies

continue

to

move

to

the

center

stage

of

the

global

pharmaceutical

market
.

There

is

a

worldwide

structural

trend

evolving

in

pharmaceuticals

and

Indian

companies

play

a

key

role

in

this

framework,

driven

by

their

superior

biotech

and

drug

synthesis

skills,

high

quality

and

vertically

integrated

manufacturing

assets,

differentiated

business

models

and

significant

cost

advantages
.



Even

at

home,

Indian

pharmaceutical

companies

reign

supreme

compared

to

their

multinational

counterparts
.

Profit

margins

of

Indian

companies

are

consistently

on

the

rise

and

the

recent

trend

of

mergers

and

acquisitions

by

Indian

pharmaceuticals

are

likely

to

provide

an

upside

to

the

growth

numbers
.

Total

Indian

Pharmaceutical

Market

is

valued

at

US
$

8790

million

with

a

growth

rate

of

exceeding

8
%


Indian

pharmaceutical

companies

have

adapted

to

the

changing

industry

dynamics

and

increasing

regulatory

and

competitive

pressures

and

have

evolved

distinctive

business

models

to

take

advantage

of

their

core

competencies

in

R&D,

Manufacturing,

Marketing

and

the

niche

opportunities

offered

by

the

changing

global

pharmaceutical

environment
.

These

differentiated

business

models

provide

the

pharmaceutical

companies

the

necessary

competitive

edge

for

consolidation

and

growth

6

private and confidential

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mergers & acquisitions | private equity


the india proposition


pharmaceutical sector

7

private and confidential

mosaic
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the india proposition


pharmaceutical sector

8

private and confidential

mosaic
capital


mergers & acquisitions | private equity


the india proposition


the global indian: cross border acquisitions

* list excludes the take
-
over of Arcelor by Mittal Steel (essentially Indian promoter and management team)

China
38,406.40


1,913.00


Hong Kong
26,930.20


765.00


India
26,676.80


1,141.00


Malaysia
25,956.60


873.00


Sout h Korea
24,493.80


255.00


Taiwan
21,396.30


175.00


Singapore
15,713.80


465.00


Philippines
7,754.50


128.00


Thailand
7,555.10


268.00


Indonesia
5,117.70


117.00


Industry Total
201,531.40


6,216.00


Any Involvement Asia M&A By Target Nation - CY 2006
Target Nation
Deal Value (US$ Mil)
Number of
Deals
Acquirer
Target
Sector
Value - USD Mn
Deal Type
Tat a St eel
Corus
St eel
12,201.60


Acquisit ion
Vodaf one
Hut chison Essar
Telecom
10,830.00


Majorit y
Hindalco Indust ries
Novelis Inc
Aluminium
6,000.00


Acquisit ion
Suzlon Energy
REpower
Power & Energy
1,700.93


Cont rolling St akr
Essar St eel Holdings
Algoma St eel Inc
St eel
1,580.00


Acquisit ion
Unit ed Spirit s
Whyt e & Mackay
Breweries & Dist illeries
1,112.99


Acquisit ion
Tat a Power
PT Kalt im Prima Coal
Power & Energy
1,100.00


Signif icant St ake
Billion Dollar Plus M&A Deals
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mergers & acquisitions | private equity


the india proposition


the global indian: cross border acquisitions

Amtek Auto

Zelter GmbH, Germany, GWK Group, UK, Lloyds (Brierly Hill), UK,
Midwest Mfg. Co., USA, Tiplex
-
Kelton Group, JL French’s (Witham) Limited

Asian Paints

Delmege Forsyth (Sri Lanka), Pacific Paints (Australia), Berger International,

SCIB Chemical (Egypt), Taubmans Paints (Fiji)

Bharat Forge

CDP Aluminiumtechnik, Germany, Federal Forge, USA, Imatra Forging
Group,

Sweden and Scotland

Havell’s India
Ltd

SLI Sylvania lighting business, acquisition price USD 300 million

Indian Hotels

Hotels in Zambia and Australia

Marico

Sundari LLC, USA, consumer division of Enaleni Pharmaceuticals

MindTree
Consulting

TES
-
PV Electronic Solutions

Motherson Sumi

Reiner Präzision GmbH and G+S Kunststofftechnik GmbH in Germany,
Empire Rubber

Reliance
Communications

Yipes Holding Inc, acquisition price USD 300 million

Reliance
Industries

Gulf Africa Petroleum Corporation (GAPCO)

Reliance Life
Science

GeneMedix Plc, acquisition price USD 28.80 million for a 74% stake

Sterlite

Monte Cello Corporation, Netherlands, the holding company of copper mines
in Australia

Sundaram
Fastners

Dana Spicer, UK, Peiner Umformtechnik GmbH, Germany, PUT
Grundstucks GmbH

Tata Tea

Tetley, Good Earth, JEM_A, Glaceau

VSNL

Teleglobe International Holdings, Tyco Global Network

Wipro

Spectramind, GE’s healthcare software arm, global Energy practice of
American Management Systems, Nervewire, US, Ericsson's Indian R&D arm,
OkI Techno Centre Singapore

10

private and confidential

mosaic
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mergers & acquisitions | private equity


why indian companies acquire ?


build critical mass in terms of marketing, manufacturing
and research infrastructure


establish front end presence


tap other geographies / therapeutic segments /
customers


enhance product, technology and intellectual property
portfolio


catapulting market share


barrier to entry


Indian pharmaceutical companies have now moved up a
step in the value chain and are looking at inorganic route
to growth through acquisitions. Many top and mid tier
Indian companies have gone on a global "shopping
spree" to build up critical mass international markets



Indian pharmaceutical companies, given their reverse
engineering skills have evolved superior chemistry,
regulatory and
manufacturing skills at low cost




Availability of
skilled labor at low cost

(labor costs in India are
around 1/7th the levels in developed countries)




Capital efficiency
: Indian companies are able to reduce the
upfront capital cost of setting up a project by 25
-
50% due to
access to locally fabricated equipment and high quality local
technology/engineering skills. This benefit can be passed on to
customers




Regulatory expertise
: India has around 75 plants approved by
the US
-
FDA (the highest in any country outside USA)

the India advantage

the india proposition


the global indian: cross border pharma acquisitions

The total value of merger & acquisitions transactions done by the Indian pharma companies exceeds
US$4 billion in value terms (last 24
-
30 months)

11

private and confidential

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industry dynamics and deal preferences


innovation vs. generics / commodity products


the company group has products ranging across the spectrum (and the geographical reach);
thus would be a suitable investment target for a number of Indian pharma product
companies

the india proposition


the global indian: cross border pharma acquisitions

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the india proposition


the global indian: cross border pharma acquisitions

Target
Acquirer
Deal Size
Stake
GeneMedix Plc
Reliance Lif e Science
28.80


74%
Medicament a
Glenmark Pharmaceut icals
N.A.
90%
Hollist er-St ier Laborat ories
Jubliant Organosys
122.50


100%
Nippon Universal
Cadila Healt hcare
N.A.
100%
Taro Pharma
Sun Pharmaceut icals
454.00


100%
BMS
Ranbaxy Laborat ories
26.00


100%
Diaspa SpA f erment at ion asset s
St rides Arcolabs
N.A.
100%
Negma Lerads
Wockhardt
253.49


100%
CBK-MPR Pharma
Lambda Therapeut ics
6.50


76%
Biosciences Co Lt d
Dabur Pharma Lt d
N.A.
100%
Undisclosed
Avest hagen
11.00


100%
Nikkho Pharma
Cadila Healt hcare
25.00


100%
GSR Syst ems
Accent ia Technologies
N.A.
100%
Neut ra Healt h Plc
Elder Pharmaceut icals
10.93


20%
Solvay Pharmaceut icals
Dishman Pharmaceut icals
N.A.
100%
New Biological Ent it ies
Glenmark Pharmaceut icals
N.A.
100%
SaveMart Pharmacy
Nat co Pharma
N.A.
100%
Biomeda Group
Elder Pharmaceut icals
6.51


51%
Formulat ion manuf act urer
Ipca Laborat ories
N.A.
100%
Mort on Grove Pharmaceut icals
Wockhardt
N.A.
100%
Kyowa Pharmaceut icals
Lupin Lt d
N.A.
80%
Siegf ried Biologics
Avest a Biot herapeut ics
N.A.
100%
Lukaps
ACG Worldwide
N.A.
100%
Gene Logic
Ocimum Biosolut ions
10.00


100%
CMS-Kat ra
Kerala Ayurveda Lt d
N.A.
51%
ECRON GmbH
Manipal AcuNova
N.A.
100%
Nat rol
Plet hico Pharmaceut icals
80.80


100%
Enaleni Pharmaceut icals
Marico Lt d
12.09


100%
Hale Group
Marksans Pharma
N.A.
100%
Indian Cross Border Pharma Deals - CY 2007 (USD Mn)
13

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the india proposition


the global indian: cross border pharma acquisitions

14

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the global indian: cross border pharma acquisitions

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the global indian: cross border pharma acquisitions


sample mergers & acquisitions inked by the Indian industry participants in 2005
-
06 in the pharma sector

16

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the global indian: cross border pharma acquisitions


mergers & acquisitions inked by the Indian industry participants in 2005 in the pharma / biotech sectors

17

private and confidential

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mergers & acquisitions | private equity


the india proposition


the global indian: cross border pharma acquisitions


mergers & acquisitions inked by the Indian industry participants in 2005 in the pharma / biotech sectors

18

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mergers & acquisitions | private equity


the india proposition


the global indian: management philosophy


apart from the “generic products space”, the innovation space acquisitions would be an optimal tool
for Indian companies while building on their capabilities given the industry’s relative inexperience
with basic & applied research and product development. The advantages of acquiring a company
strong in research & development for innovation are many and obvious; a few broad ones include:


fewer challenges in turning around the acquisition considering the scale of operations of an R&D driven service
provider in comparison to a marketing and sales driven “generic products” company


fewer challenges in merging acquired research projects or capabilities in the absence of multiple well established
in
-
house research programs and capabilities


gaining an existing alliance portfolio of the acquired company thereby creating an immediate entry into the
innovation and its related space to be consolidated further


ability to synergize existing and acquired capabilities to seek new vistas of opportunity



the bottom line


since M&A provides a potential advantage to succeed for Indian companies on their
way to harness external capabilities in the absence of existing competencies and strengths of in
-
house
research projects and many untapped geographies


the key elements of the incumbent management
team essentially be integrated into a bigger roles, in a larger organisation with larger budgets and
targets

19

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the india proposition


the global indian: a case study


Wockhardt

is a global, pharmaceutical and biotechnology company that has grown by leveraging
two powerful trends in the world healthcare market
-

globalization and biotechnology.



has a market capitalization of US$ 1.3 billion and an annual turnover of US$ 285 million (Rs. 12.39
billion). Wockhardt has a strong and growing presence in the world’s leading markets, with half of its
revenue coming from Europe and the United States.



key strengths


manufacturing capabilities: manufacturing facilities in India and UK have the approval of major regulatory
bodies, including US FDA and UK's MHRA, with capabilities for both Finished Dosage Formulations and APIs


biotechnology: Wockhardt has developed comprehensive ‘concept
-
to
-
market’ strengths in all facets of
recombinant biotechnology. These include gene
-
cloning, development of production strains, expertise in all
three major expression systems, purification, downstream processing and testing


set up the Wockhardt Biotech Park, amongst India’s largest biopharmaceuticals complex, with six dedicated
plants built to international standards with capacities to meet 10
-
15% of global demand for important
biopharmaceuticals


sound regulatory infrastructure has been set up for its biogenerics pipeline with registrations in developing
markets. The company has also set up front
-
end offices in the identified markets
-

either owned organizations,
strategic joint ventures or distribution arrangements



acquisition management


the company has a strong track record in acquisition management, with three successful acquisitions in the
European market and two in the domestic space.


the acquisitions in Europe and the subsequent integration of their operations have strengthened Wockhardt’s
position in the high
-
potential markets of UK and Germany, and have expanded the global reach of the
organization


the growth drivers for Wockhardt’s European business include exports, new product launches, penetration in
the European Union through mutual recognition, and strategic acquisitions

20

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the india proposition


the global indian: a case study

…continued



Wockhardt UK Limited: (Erstwhile CP pharmaceuticals) is amongst the 10 largest generics companies
in UK and the second largest hospital generics supplier. The Company has a comprehensive, FDA
-
approved manufacturing facility. Wockhardt UK has built up a critical mass in the segments of Retail
Generics, Hospital Generics, Private Label GSL / OTC Pharmaceuticals, etc



Esparma GmbH: The acquisition of Esparma GmbH in 2004, has given Wockhardt a strategic entry
point into Germany, the largest generics market in Europe. Esparma has a strong presence in the high
-
potential segments of urology, neurology and diabetology, assisted by a dedicated sales & marketing
infrastructure



key to Wockhardt’s successful acquisition management is the management’s ability to turnaround the
acquired company, in active participation with the incumbent management team, in record time and
thus create value out of the acquisition.



the company believes in value buys that would have a tactical fit with its core competencies and key
strategic objectives



the company has plans for further acquisitions in the developed markets of Europe and US to further
consolidate and strengthen their positions in these geographies


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the

Indian

healthcare

sector

has

been

growing

at

a

frenetic

pace

and

is

undergoing

phenomenal

expansion
.

Private

hospitals

and

continued

investment

in

the

public

health

programmes

are

driving

the

boom




healthcare

industry

includes

different

segments
:

healthcare

delivery,

medical

equipment

and

diagnostics,

medical

outsourcing

and

medical

education



revenues

from

the

healthcare

sector

account

for

5
.
2

per

cent

of

the

GDP

and

it

employs

over

4

million

people

(source
:

CII
-
Mckinsey

study

on

'Health

in

India'

)
.

By

2012
,

revenues

can

reach

6
.
5

to

7
.
2

per

cent

of

GDP

and

direct

and

indirect

employment

can

double




India

will

spend

US
$

45
.
76

billion

on

healthcare

in

the

next

five

years

as

the

country,

on

an

economic

upsurge,

is

witnessing

changes

in

its

demographic

profile

accompanied

with

lifestyle

diseases

and

increasing

medical

expenses

(source
:

CII
-
Mckinsey

study

on

'Health

in

India'

)


private

healthcare

will

continue

to

be

the

largest

component

in

2012

and

is

likely

to

double

to

US
$

35
.
7

billion



could

rise

by

an

additional

US
$

8
.
9

billion

if

health

insurance

cover

is

extended

to

the

rich

and

middle

class



coupled

with

the

expected

increase

in

the

pharmaceutical

sector,

the

total

healthcare

market

in

the

country

could

increase

to

US
$

53
-
73

billion

(
6
.
2
-
8
.
5

per

cent

of

GDP)

in

the

next

five

years


the india proposition


healthcare sector

22

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the india proposition


healthcare sector: key drivers & trends


changing

demographic

and

socio
-
economic

profile


proportion

of

the

country's

population

in

the

15
-
54

and

the

55

and

above

age

groups

is

increasing

owing

to

improvement

in

life

expectancy

levels



large

geriatric

population

(
55

and

above),

estimated

to

be

the

largest

in

the

world,

will

form

a

major

consumer

segment

in

the

near

future







rising

demand

for

quality

health

care


growth

in

affluence

of

over

300

million

strong

middle
-
income

consumers

is

creating

demand

for

higher

standards

of

healthcare



between

1993
-
94

and

2001
-
02
,

aggregate

household

expenditure

on

health

services

increased

at

an

annual

compounded

rate

of

9
.
3
%


multi
-
specialty

private

hospitals

are

preferred

even

if

the

consumers

bear

this

expense

personally



increasing

penetration

of

private

health

insurance


with

growing

awareness

levels

and

increasing

affordability

arising

out

of

the

growth

of

private

health

insurance,

the

demand

for

quality

healthcare

services

in

India

is

growing

faster

than

ever

before



estimates

project

an

insured

base

of

160

million

by

2010


institutional

customers

have

emerged

as

an

important

customer

segment

for

private

health

insurers


changing

lifestyle

patterns


incidence

of

lifestyle

diseases

such

as

diabetes

and

cardio
-
vascular

diseases

is

on

the

rise


trend

is

driving

the

demand

for

multi
-
specialty

and

super
-
specialty

healthcare

services,

covering

key

therapeutic

areas

like

cardiology,

nephrology,

oncology,

orthopedics,

geriatrics,

maternity

and

critical

care


Age wise population distribution


1991 (%)

2001 (%)

2010 (%)

0
-
14

36

35

29

15
-
54

55

55

59

55 & above

9

10

12


23

private and confidential

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mergers & acquisitions | private equity







healthcare

sector

posted

a

42
%

rise

in

earnings

in

the

year

to

March

2007

(source
:

Reuters)


at

the

current

pace

of

growth,

medical

tourism,

currently

pegged

at

US
$

350

million,

has

the

potential

to

grow

into

a

US
$

2

billion

industry

by

2012



private

healthcare

will

form

a

large

chunk

of

this

spending,

rising

from

US
$

14
.
8

billion

to

US
$

33
.
6

billion

in

2012
.

This

figure

could

rise

by

an

additional

US
$

8
.
4

billion,

if

health

insurance

cover

is

available

to

the

rich

and

the

middle

class


the

voluntary

health

insurance

market,

which

is

estimated

at

US
$

86
.
3

million

currently,

is

growing

fast
.

Industry

estimates

put

the

figure

at

US
$

2
.
8

billion

by

2005



with

the

expected

increase

in

the

pharmaceutical

market,

the

total

healthcare

market

could

rise

from

US
$

22
.
2

billion,

currently

(
5
.
2

per

cent

of

GDP)

to

US
$

50

billion

-

69

billion)

(
6
.
2
-
8
.
5

per

cent

of

GDP)

by

2012



the

sector

is

providing

a

host

of

opportunities

including


medical

tourism


preventive

health

care


health

care

BPO


tele
-
medicine


laboratory

and

diagnostic

services


medical

devices

the india proposition


healthcare sector: key drivers & trends

24

private and confidential

mosaic
capital


mergers & acquisitions | private equity









Indian

healthcare

is

all

set

to

go

global

with

a

host

of

domestic

hospital

chains

busy

scripting

overseas

expansion

plans



Apollo

Hospitals

has

drawn

up

plans

to

set

up

or

manage

hospital

projects

in

Mauritius

and

Fiji
.

Besides,

it

is

bidding

for

a

diagnostic

facility

in

the

UK

and

plans

to

try

for

a

hospital

project

in

that

country

later
.

These

would

be

in

addition

to

the

group's

existing

overseas

facilities

in

Colombo,

Bangladesh,

Nigeria

and

the

Middle

East


Max

Healthcare,

another

leading

hospital

chain,

is

trying

to

enter

the

US,

UK

and

far
-
east

markets
.

This

is

besides

the

expansion

of

its

operations

in

neighbourhood

countries

like

Bangladesh

and

Afghanistan


Wockhardt

is

also

eyeing

markets

in

Europe,

particularly

the

UK,

as

part

of

its

growth

strategy
.

The

company

is

already

building

its

brand

presence

through

tie
-
ups

with

leading

healthcare

insurance

providers

in

the

US,

UK

and

Singapore



the

government

is

also

providing

able

support

to

help

promote

smaller

health

care

providers


till

now,

only

a

few

big

private

healthcare

providers

such

as

Apollo,

Fortis,

Wockhardt

and

Max

were

creating

their

individual

brand

awareness

in

overseas

markets

through

tie
-
ups

with

insurance

companies

and

patient

facilitation

centres


the

government

is

launching

a

comprehensive

programme

to

promote

medical

tourism


putting

in

place

an

accreditation

system

for

domestic

hospitals

and

healthcare

providers,

drawing

up

a

price

band

for

superspeciality

services

offered

by

Indian

hospitals,

adoption

of

country
-
specific

marketing

strategies,

opening

of

overseas

facilitation

centres

and

tie
-
ups

with

overseas

insurance

companies


the

National

Accreditation

Board

for

Hospitals

and

Healthcare

Providers

(NABH)

set

up

by

the

Ministry

of

Health

under

the

aegis

of

the

Quality

Council

of

India

is

currently

finalising

the

guidelines

for

accreditation

of

hospitals

and

other

healthcare

service

providers

the india proposition


the global indian: cross border healthcare acquisitions

25

private and confidential

mosaic
capital


mergers & acquisitions | private equity









the

biomedical

devices

market

in

India

is

unofficially

estimated

at

around

US
$

2

billion

and

of

which

about

80
-
85
%

is

met

through

imports


driving

forces

that

are

creating

the

demand

for

medical

equipment

include
:


establishment

of

a

number

of

super
-
specialty

hospitals

and

specific

diagnostic

centres


urban

private

sector

hospitals

upgrading

their

equipment

and

instruments

to

remain

competitive



favourable

government

policies

such

as

a

reduction

in

import

duties

on

medical

equipment


off
-
shoring

medical

devices


as

an

example
:

the

US

market

for

medical

devices

is

expected

to

reach

$
89

billion

in

2007
,

representing

a

promising

opportunity

for

manufacturers

and

service

providers

(source
:

Medical

Device

&

Diagnostic

Industry



"Opening

the

doors

to

India
:

Off
-
shoring

Medical

Devices)


with

this

opportunity

comes

the

added

pressure

for

medical

device

companies

to

stay

ahead

of

the

competition


to

compete

in

this

attractive

market,

many

medical

device

makers

are

successfully

partnering

with

offshore

outsourcing

firms

and

collaborating

on

device

development

and

manufacturing



they

are

off
-
shoring

processes

such

as

application

development,

systems

engineering,

hardware

design,

software

solutions,

and

manufacturing


benefits

of

outsourcing

to

India


Impressive

pool

of

well

educated,

highly

qualified,

english

speaking

professionals


With

more

than

380

universities,

11
,
200

colleges,

and

1500

research

institutions,

India

has

the

second
-
largest

pool

of

scientists

and

engineers

in

the

world
;

more

than

2
.
5

million

graduates

are

added

to

the

workforce

every

year,

including

300
,
000

engineers

and

150
,
000

technology

professionals


among

Brazil,

Russia,

India,

and

China,

India

is

expected

to

stay

the

youngest
;

its

working
-
age

population

is

estimated

to

represent

70
%

of

the

total

population

by

2030



the

largest

in

the

world


economic

&

political

stability


partners

that

specialize

in

finished
-
device

manufacturing,

can

help

a

company

improve

quality

while

shortening

the

product

development

cycle

and

reducing

time
-
to
-
market

and

reducing

the

lifecycle

costs

by

as

much

as

40
-
50
%

the india proposition


medical devices sector

26

private and confidential

mosaic
capital


mergers & acquisitions | private equity


the india proposition


the global indian: a case study


Opto Ciruits


(BSE Code: 532391; NSE Symbol:
OPTOCIRCUI) is a leading manufacturer of non
-
invasive
healthcare equipments headquartered in Bangalore, India. The
product profile includes digital thermometers, sensors, probes,
pulse oxymeters, patient monitoring systems and innovative
products in the pipeline. OCIL has two lines of businesses


(a) OEMs


direct supplier to GE and other large MNCs


(b) MediAid (100% US
-
based subsidiary)


markets OCIL’s brands



grown in
-
organically over the past few years:


Advanced Micronic Devices, a listed company engaged in
manufacturing and marketing of health care equipments in India :
2001



Digital Clinical Thermometer division from Unilever in India :
2002



Acquisition of the patient monitoring division of Palco Labs, USA :
2003



continuing its goal of aggressive growth and diversification in
the healthcare segment recently (Dec 2005) completed its
acquisition of EuroCOR GmbH


transaction valued at

11 million


EuroCOR manufactures Cardiac and Peripheral Stents of various
types, including Drug Eluting Coronary Stents used in Critical
Cardiac Care. It is one of the largest manufacturers of Stents. By
acquiring EuroCOR, OCIL gets to access the existing as well as
potential market for Stents globally



strong
foothold

in the global arena for Stents
(total global market for Stents expected to be
US$10billion by 2008)




strong R&D base

of EuroCOR will lead us in the
direction of greater market share and also better
margin business




help improve
shareholder value

Why OCIL acquired EuroCor ..



though present in more than 26 countries
worldwide including in India, this acquisition by
Opto Circuits gives




a great opportunity

to access the vast potential
offered by India




excited by the prospect of
tapping

latent potential

in developing countries

What EuroCor had to say ..

27

private and confidential

mosaic
capital


mergers & acquisitions | private equity


key contact information


Sanjay Krishnan


London


sanjay@mosaiccap.com


hand phone: +44 (0) 7738321449


facsimile: +44 (0) 208 711 3943



Vinay Shah & Ashutosh Ghanekar


Mumbai


vinay@mosaiccap.com


hand phone: +91 (0) 9967642785


facsimile: +44 (0) 20 66325631



Vikram Bihani


Bangalore


vikram@mosaiccap.com


hand phone: +44 (0) 9886409387


facsimile: +44 (0) 80 25091532