Local stent companies catch fancy of PE players

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NEW DELHI / MUMBAI: One company's misery is another's fortune. This seems to be the case with stent manufacturers, too. 

As multinational stent makers ponder their prospects in India after price controls introduced this year, their local rivals, which had been struggling to make a mark, have popped up on the radar of private equity investors. Leading domestic stent manufacturers Sahajanand Medical Technologies (SMT) and Translumina Therapeutics are among those in the fray to raise funding. 

"We have been approached by quite a few PE players and have got a lot of interest from global investors after the price control," said Ganesh P Sabat, chief executive officer of SMT, based in Surat, declining to disclose more details. The company raised close to Rs 170 crore from Samara Capital last year and is looking for additional funding. New Delhi-based Translumina Therapeutics plans to double production capacity by March and acquire new technology overseas. 

"We are in preliminary talks with several funds to raise money. Our plan is to start manufacturing in Iran, Russia, Saudi Arabia and a few other countries where there are local incentives available," said Gurmit Singh Chugh, managing director of Translumina. 

What's making domestic stent makers attractive to PE investors are their growing sales and the strengthening of their relationships with hospitals, especially in the smaller towns. The National Pharmaceutical Pricing Authority slashed prices of cardiac stents — wire-mesh devices used to unblock arteries and prevent heart attacks — by over 75% in February. The move upset global manufacturer Abbott Boston Scientific and Medtronic, the market leaders in the business. The regulator also capped distributor margins, which analysts said almost levelled the prices of domestic and MNC stents. 

"Domestic players have generally seen an increase in their pricing realisation, principally on account of distributor margin compression. This increased realisation and gross margin has enabled the domestic players to continue spending on brand-building, promotions and channel initiatives, especially in the lower town tier markets where they already had strong hospital relationships," said Kaustav Ganguli, managing director at advisory firm Alvarez & Marsal. 

The pricing regulation put the viability of distributor business models under significant pressure. This stress has been relatively less for distributors of domestic manufacturers as volume growth and an expanded portfolio have partially offset margin losses on account of price curbs.