Constellation Alpha To Acquire Ravi Venkataraman’s Medall Healthcare

Peepul Capital-owned Medall Healthcare is set to be acquired by special purpose acquisition company Constellation Alpha Capital for $212 Mn (INR 1,450 Cr).

Founded by Ravi Venkataraman, Medall Healthcare’s 80% stake is owned by Peepul Capital which has invested around INR 300 Cr in the company.

Formerly known as Precision Diagnostics, the Chennai-based chain of pathology labs was acquired in 2009 by Raju Venkataraman, who re-branded it as Medall Healthcare. With more than 40% market share in South India, Medall provided over 25 Mn diagnostic tests to over 8 Mn customers in its most recent fiscal year.

Post acquisition, Constellation Health Holdings, a wholly-owned Singapore subsidiary of Constellation, will acquire 93% of the outstanding shares of Medall for approximately $166 Mn in cash and the remainder of the outstanding shares of Medall on June 30, 2019.

“We are pleased to begin our consolidation strategy with a market leader like Medall. We look forward to growing the company through serial acquisitions and organic levers,” said Rajiv Sarman Shukla, chairman and CEO of Constellation.

Medall Healthcare claims to have a network of more than 45K doctors across its 176 Labs with a presence in eight states and 63 districts. The company claims to have done more than 21 Mn tests annually.

At the closing, Medall will become a subsidiary of Rajiv Sarman’s Constellation.

Constellation was formed as a public platform for acquiring Indian healthcare businesses and had raised $144 Mn in its initial public offering in June 2017 in NASDAQ.

Indian Diagnostics Market

India’s pharmaceutical industry was valued at $33 Bn in 2017. It is expected to expand at a CAGR of 22.4% over 2015–20 to reach $55 Bn.

At the same time, the market for diagnostic services has been growing in India over the past couple of years at a rate of 15%-20% and stood at nearly INR 40,000 Cr as of 2016.

Notably, the diagnostics sector in India accounts for nearly $10 Bn in annual revenue and is projected to continue growing at 20% compounded annual growth rate until 2025.

The Indian diagnostics industry is highly fragmented with the top two players accounting for only approximately 6% of revenues.

In the Indian healthtech diagnostics space, we have players like PharmEasy, NetMeds, Thyrocare, Dr Lal PathLabs among others.

As the Indian healthcare market is further expected to reach $280 Bn by 2020, from the current $100 Bn, diagnostics plays a crucial role in the industry.

[The development was reported by ET.]