There’s always that one kid on the playground waiting to be picked. The one kid who’s actually pretty good at most things, just not popular by association.

That one kid in healthcare today is the largest (by number of labs) Indian diagnostics chain, Super Religare or SRL diagnostics. It’s getting ready for sale.

But it hasn’t been able to find value in the public market.

SRL was founded in 1995 as a faction of Ranbaxy Laboratories—founded in 1961 by two brothers, Ranbir Singh and Gurbax. Ranbaxy was bought by their cousin, then passed down over two generations until 2008, when the family found an exit in a deal valued at $4.6 billion. With the proceeds, two brothers in the family—Malvinder and Shivinder Mohan Singh—grew Fortis Healthcare into India’s second largest hospital chain in terms of number of beds. Last year, Fortis, too, found a buyer in Malaysian healthcare group IHH Healthcare Bhd. Now, it is SRL’s time to find a buyer.

But SRL has a harder journey ahead of it than Ranbaxy and Fortis. First because, well, it failed at its only attempt to float an Initial Public Offering (IPO). Meanwhile, over the last few years, its peers Thyrocare, Dr Lal and Metropolis have all raised money in public markets.

Second, SRL carries a taint it can’t quite wash off. It carries the stench of the legal battle Malvinder and Shivinder Singh have been embroiled in for suppressing facts about Ranbaxy’s plants during its $4.6 billion sale to Tokyo-based pharma buyer Daiichi Sankyo. In fact, Daiichi told the Supreme Court last month that the Singhs still owe it Rs 4,000 crore ($576.9 million). As for Fortis, investors who considered buying it reportedly found money to the tune of Rs 900 crore ($129.8 million) siphoned off, leaving a possible ‘hole’ in the balance sheet.

While one would think this was enough, SRL’s problems don’t end with getting rid of its promoters’ legal legacy.

Its revenue—Rs 702 crore ($101.3 million) for the year ended March 2018—number of labs (368) and reach across India are indicative of its might against its competitors. It was valued at Rs 3,600 crore ($519.3 million) by American investor TPG Capital-backed Manipal Health last year. Dr Lal Path Labs, Thyrocare and Metropolis Healthcare floated IPOs in 2015, 2016 and last month, at valuations of Rs 4,400 crore ($634.7 million), Rs 2,400 crore ($346.2 million) and Rs 4,000 crore ($576.9 million), respectively. Since IHH Healthcare has bought out SRL’s promoter Fortis’ shares, it may even appear free of financial mismanagement. But IHH did not show enough confidence in SRL to buy the approximately 43% stake held by private equities and other shareholders. The stake that goes on sale soon. Fortis has decided to hire Kotak Mahindra Bank to aid the sale.

AUTHOR

Ruhi Kandhari

Ruhi writes on the impact of healthcare policies, trends in the healthcare sector and developments on the implementation of Electronic Health Records in India. She has an M. Sc. in Development Studies from the London School of Economics.

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