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Exclusive: TPG-backed surgical equipment firm Sutures explores IPO

Shah Junaid/VCCircle

Surgical equipment maker Sutures India Pvt. Ltd is meeting investment bankers to explore a possible initial public offering that could allow its majority stakeholder to partially exit, two people privy to the development told VCCircle.

Sutures India is likely looking to ride on the success of the IPOs floated in the past few months by several healthcare companies including diagnostics chains Dr Lal PathLabs Ltd and Thyrocare Technologies Ltd, drugmaker Alkem Laboratories Ltd and hospital chain Narayana Hrudayalaya Ltd.

The IPO plan comes at a time when private equity firm CX Partners, which has a 13% stake in Sutures India after selling a big chunk to global investment firm TPG last year, has been looking to sell its entire stake in the company. Another private equity firm Kedaara Capital was reportedly in talks to buy CX Partners’ remaining stake.

However, the deal has yet to be clinched as the documentation process has not been completed and that may take another month or so, said one of the persons cited above. “Yes, Sutures India has been casually meeting bankers to understand the IPO process but ideally the deal with Kedaara is what it should be first,” the person added.

The Bengaluru-based company is considering an IPO size of $120 million, the second person added. The IPO is driven more by the need to let TPG partially exit, the person said.

For TPG, Sutures India’s IPO could be a rare instance of one of its portfolio firms going public. Another TPG-backed company that had been looking to float an IPO was AGS Transact Technologies Ltd, which received regulatory approval for the issue last year and didn’t go through with the offering. 

Sutures India's CEO Dinesh Lodha did not respond to text messages on his phone. TPG declined to comment while emails sent to CX Partners and Kedaara did not elicit any response till the time of filing this article.

PE investment
CX Partners had originally invested Rs 193 crore ($38 million then) in Sutures India in September 2012 for a 37% stake. This was through a secondary deal in which it bought out the entire stake held by private equity firm India Life Sciences Fund, earlier known Evolvence India Life Science Fund.

In 2015, CX Partners along with the promoters of Sutures India sold some stake to the mid-market and growth equity platform of alternative investment firm TPG. The deal helped TPG to increase its holding in Sutures India to around 46% and become its biggest shareholder.

Sutures India was founded in 1992. It sells wound-closure products such as natural and synthetic sutures, surgical needles, staples, tapes, hernia meshes and disposable surgical gloves.

The firm sells its products in India and exports to countries across Europe, South America, Africa and Asia. It has an installed annual capacity to produce 20 million sterile sutures at its Bangalore plant.

The company's revenue fell to Rs 220 crore in the financial year ended March 2015 from Rs 239 crore the previous year, show data from VCCEdge, the research platform of News Corp VCCircle. Its profits grew 7% during the period.

Healthcare IPOs
India’s primary market, which opened up with the new government taking over in May 2014, has seen a number of companies go public, especially in the past year.

The IPO marathon for healthcare companies began with Syngene International Ltd, the research and development subsidiary of biopharmaceutical major Biocon Ltd, in July 2015. The company made a strong debut on the stock exchanges, listing at a premium of 18% to its issue price of Rs 250 in August last year.

Since then diagnostics chains Dr Lal PathLabs and Thyrocare, Alkem, Narayana Hrudayalaya and oncology chain Healthcare Global Enterprises (HCG) have gone public. Barring HCG, all the companies had a spectacular listing. The oncology chain listed way below its issue price but its shares have now surpassed the issue price.

On Thursday, pharmaceuticals company Laurus Labs Ltd’s IPO sailed through. Two more healthcare companies—hospital chain Aster DM Healthcare and eyecare chain New Delhi Centre for Sight—have received regulatory approval for IPOs. 

However, primary markets have remained volatile in the past weeks following the government's decision to demonetise high-value notes on 8 November. Chennai-based GreenSignal Biopharma Ltd fell prey to the market volatility after the government’s decision. The 30-stock benchmark BSE Sensex has dropped 3.25% since 8 November.

Following GreenSignal Bio's decision to withdraw its IPO, VCCircle spoke to some merchant bankers working on upcoming public issues and found that they were trying to shrug off the negative sentiment.

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