Goldman & NEA Invest in Indian Firm

The private equity arm of The Goldman Sachs Group Inc. ( GS - Analyst Report ) and New Enterprise Associates (NEA), an American venture capital fund, have come together with an investment of $54 million in Bangalore-based Nova Medical Centers, Reuters reported on Monday. Nova is a leading Indian healthcare firm for day/short-stay surgical care and fertility.

Although there are ongoing concerns among global buyout firms about investing in India as returns have gone down due to rupee depreciation, the prospects of the Indian healthcare sector is still attractive to private equity firms. As of the first half of 2012, private equity investments in India’s healthcare sector have surged 2.5 times to $630 million from $181 million recorded in the prior-year period.

Goldman will invest about $40 million in Nova, while NEA will make an additional investment of $14 million. Initially, NEA invested $15 million in the center.

The investment by Goldman and NEA will aid Nova in expanding its specialty surgery and fertility businesses. Moreover, Nova’s footprint across the country will increase both organically and through acquisitions.

To date, Nova has accumulated $90 million and is planning to set up 25 new specialty surgery centers across India and the Middle East in the next two years. Therefore, India’s healthcare delivery services industry, surgeons and patients will receive better services and amenities.

Moreover, Goldman has strategizes to collaborate with skilled management teams and owners to expand premium businesses in under-served sectors, which hamper India’s growth. On the other side, NEA has always focused on healthcare units globally as well as in India. Therefore, helping healthcare services platforms to improve quality, making it more accessible and trimming down costs is the strategy of the firm that it is utilizing with its investment in Nova.

Taking into account its investment in Nova, Goldman will be the holder of approximately 26% of the company. This marks the largest shareholding by a firm in Nova.

Goldman has vigorously invested in private equity in India. Previously, the company invested $115 million in Max India healthcare. Since 2006, the firm has endowed more than $2 billion funds in India, while globally it has come up with an investment of about $8 billion in the healthcare sector spread over more than 30 companies.

Therefore, yielding returns on such investments will accelerate Goldman’s profitability and instill investors’ confidence. Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Among Goldman’s peers, Citigroup Inc. ( C - Analyst Report ) also retains a Zacks #3 Rank.