New Delhi, Oct. 30 -- Swedish private equity firm EQT, which has stepped up its activities in India over the past couple of years and struck several large deals, is partially harvesting its investment in a local company that it acquired about three years ago.

EQT, which acquired Baring Private Equity Asia in 2022 to expand its operations in the continent, is selling a 15% stake in Sagility India Ltd and is likely to generate modest returns on its investment.

The PE firm is selling the stake through the healthcare business process management company's initial public offering and will garner about 2,106.6 crore ($250 million) at the upper end of the price band of Rs 28-30 apiece. The IPO will hit the market on Nov. 5 and close two days later, according to Sagility India's red herring prospectus.

Sagility had filed its IPO papers with the Securities and Exchange Board of India on June 28. SEBI approved the IPO on Oct. 9. The IPO is entirely an offer for sale of up to 702.2 million shares, down from 984.46 million shares that EQT intended to sell earlier. Sagility is not issuing any fresh shares.

Sagility was earlier known as HGS Healthcare and was part of Mumbai-listed Hinduja Global Solutions Ltd. Baring PE Asia acquired HGS Healthcare in August 2021 for $1.2 billion and renamed it Sagility the following year.

Established in 2021, Bengaluru-based Sagility provides technology-driven services to both healthcare payers and providers, covering core benefits administration and clinical services. These include claims management, payment integrity, clinical management, and more. Sagility's consolidated net profit for FY24 jumped 59% year-on-year to Rs 228.3 crore. Revenue from operations climbed to Rs 4,753.6 crore from Rs 4,218.4 crore in FY23.

ICICI Securities, IIFL Securities, Jefferies India, and JP Morgan India are the book-running lead managers for the IPO.

VCCircle previously reported that EQT could seek a rich valuation for Sagility compared to some of its listed peers and may look to beat benchmark returns through the partial exit.

However, EQT has opted for a modest valuation target for Sagility. The company will command a valuation of about Rs 14,044 crore ($1.67 billion) at the upper end of the price band, back-of-the-envelope calculations show. This is far below the $3 billion valuation that the company was said to be targeting earlier.

At the targeted valuation, EQT's partial exit would yield an absolute increase of only 44% on its investment in Sagility over the three-year period. This would result in a realised internal rate of return (IRR), or annualised return of about 12-14% in rupee terms, according to VCCircle estimates. That misses the minimum 20% IRR that private equity firms typically chase in India.

While EQT's returns from Sagility may be modest, the PE firm has harvested big sums from a few other local bets. EQT last year signed off with $2.2 billion from IT services firm Coforge and wrapped up its over $500 million exit from CMS Info Systems. However, EQT missed the benchmark when it exited RBL Bank this year, VCCircle reported in July.

EQT has also stitched several large deals in India since last year. It acquired a controlling stake in healthcare technology services company GeBBS Healthcare Solutions from Indian PE firm ChrysCapital in September. Last year, the PE firm bought a majority stake in digital engineering company Indium Software in December, acquired Indira IVF in July and teamed up with ChrysCapital to purchase education finance company Credila from HDFC in June.

Published by HT Digital Content Services with permission from VC Circle.