New Delhi, July 14 -- TPG Growth, the mid-market and growth equity platform of TPG, has pressed the sell button on what was the private equity group's second investment in the pharmaceutical sector in India, just a year after signing off from its maiden pharma-sector bet in the country.

TPG Growth sold nearly a quarter of its remaining 2.6% stake in Solara Active Pharma Sciences Ltd late last week, encashing Rs 17 crore, stock-exchange data show. This is the fifth known liquidity move by the investor from Solara.

The PE firm originally committed Rs 200 crore in Solara through equity convertible warrants in March 2019. It shelled out Rs 60-65 crore to push up its holding later that year. It converted the warrants into equity shares in September 2020.

Indian regulations call for 25% of the amount for a warrant issue to be made upfront and the remaining amount to be shelled out at the time of conversion, if the warrant holder opts for it. In cases where the holder decides not to convert the warrant into shares, they forfeit the money paid upfront.

This means TPG would have initially put in Rs 110-115 crore in two tranches in 2019 and brought in the balance Rs 150 crore in September 2020.

While TPG picked up the warrants at Rs 500 a share, it brought down its average cost of acquisition when it picked up shares from the secondary market, albeit marginally.

It sold almost the entire block of shares it bought at the lower share price just a year after acquiring them, generating abnormally high returns.

However, Solara has lost two-thirds of its value since then. In mid-2024, TPG sold a large chunk of its stake almost at par value.

Solara's share price zoomed soon after and TPG again harvested some money with smart returns but that was a short-lived phenomenon and the latest share sale is believed to be at a 10% premium to the original investment in 2019-20.

TPG's realised internal rate of return (IRR) to date is pegged around 21-23% in rupee terms and 18-20% in dollar terms, according to VCCircle estimates. This marginally beats the 20% rupee benchmark and 15% dollar benchmark that growth equity investors chased in India.

The PE firm's remaining stake is worth Rs 56 crore. This means it could be eyeing a multiple on invested capital of less than 2x. However, thanks to a quick-fire partial exit at the beginning of the investment period, it may eke out respectable annualised returns.

Notably, TPG exited its first pharma-sector investment in the country a year ago with a better outcome when it divested its stake in Sai Life Sciences. The exit profile from that bet was more conventional, resulting in a 5.6x MOIC and nearly 30% IRR in local currency, as per VCCircle estimates.

Solara, which makes active pharmaceutical ingredients, was created after Strides Pharma Science (earlier known as Strides Shasun) and SeQuent Scientific merged some of their bulk-drugs businesses in 2017.

Its revenue for the year ended March 31, 2026 rose 6.6% to Rs 1,368 crore from Rs 1,289 crore the year before but it sank deeper into the red with a net loss of Rs 7.2 crore. The company recorded revenue of Rs 1,387 crore and a net profit of Rs 59 crore during FY19, immediately prior to TPG Growth's investment.

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