Motilal Oswal Alternates (MO Alts), the private equity arm of Mumbai-based Motilal Oswal Financial Services Ltd, has sealed the fourth transaction from its new fund by investing Rs 400 crore in Rajkot-based hygiene products maker Pan Healthcare for an undisclosed minority stake.

Incorporated in 2016, Pan Healthcare manufactures products such as baby diaper pants, adult diapers and sanitary napkins. It is part of Pan Group that also has exposure to businesses in raw cotton, cottonseed oil, nonwoven fabrics, power generation, construction, cement and steel products.

Vijay Dhanuka, head of consumer sector at MO Alts, said the hygiene products segment in India is significantly underpenetrated as reflected by per capita diaper consumption of less than 60 units as against 1,000 in the US and 400 in China, and the market is dominated by multinational companies.

“The company’s strategy of creating large-scale operations, be it in manufacturing or in offline distribution through large feet-on-street workforce, will allow them to offer high quality products at competitive prices not just across tier II/ III cities but even in rural areas,” he noted.

Pan Healthcare operates under brands such as Little Angel, Liberty, Everteen, Neud, Mansure and Naturesure.

The deal, one of the single largest cheques signed by MO Alts, comes four months after it backed footwear firm with Rs 225 crore investment in its third deal from the new PE fund. The new fund also invested in Pathkind, a diagnostic chain promoted by the Mankind Pharma group,  and Simpolo, one of the largest players in India’s premium tile segment.

This followed the completion of the fundraising process for its fourth investment vehicle , garnering Rs 4,500 crore ($550 million). The firm had launched  the India Business Excellence Fund IV in July 2021 hoping to raise Rs 4,000 crore ($550 million then) and later upped the target   in rupee terms.

The fund has been primarily raised from domestic high-net-worth individuals (HNIs) and family offices. With this fund, the cumulative assets under management raised under MO Alts, including for growth capital and real estate investments, has touched Rs 14,000 crore.

In the Indian private equity space, where traditionally most of the capital has been sourced from international investors, MO Alts has been one of the few PE firms that has raised a substantial portion of the funds from domestic investors thus creating a strong ecosystem for this asset class in India. Approximately 75% of the capital in aggregate across all the funds has been raised from domestic investors across 55 cities in the country.

The fund, led by Vishal Tulsyan and Raamdeo Agrawal, seeks to invest in 10-15 companies in consumer, financial services, life sciences and niche manufacturing sectors. The sector-agnostic fund also hopes to evaluate tech-enabled businesses and expects to deploy 10-15% of its capital there.

The PE firm launched its first fund in 2007, raising $115 million. This vehicle invested in 13 companies. The fund made six-fold returns and clocked an internal rate of return of about 27% at the gross level in rupee terms.

Some of the notable investments via Fund 1 include AU Financiers (now called AU Small Finance Bank), Dixon Technologies, Minda Industries and GR Infraprojects. Many companies in terms of valuation over a period of 10-15 years have become over 100x of the entry valuation of MO Alts, the firm says.

Other notable investments made by MO Alts have been in companies like facility management and business services company Updater Services, Molbio Diagnostics, fintech Kreditbee and snack brand Happilo.

The second fund raised $155 million in 2013 and made 11 investments. The third fund raised $320 million in 2018 and is almost fully committed across nine investments.

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