New Delhi, June 22 -- The private equity arm of Mumbai-based JM Financial Ltd as well as venture capital firms Peak XV Partners and Kae Capital, will walk away from a common healthcare portfolio company with returns that fall well short of industry benchmarks as part of a larger transaction.

JM Financial Private Equity and the two VC firms will sell their stake in Innovcare Lifesciences Pvt Ltd as Sun Pharmaceutical Industries Ltd has agreed to acquire 100% of the Mumbai-based nutraceutical company for Rs 271.2 crore ($28.6 million) in an all-cash deal to strengthen its product portfolio.

While the acquisition provides an exit route to the three investors, none of them will make a decent return on their investment, according to VCCircle estimates based on VCCEdge data collated from regulatory disclosures.

Peak XV Partners first backed Innovcare in 2014, soon after it was incorporated, as part of the Series A round and reinvested in the Series B and D rounds. It is the company's single-largest shareholder. Kae Capital led the company's Series C round while JM Financial PE led the Series D round.

Investments and returns

Peak XV, then known as Sequoia Capital India, first invested Rs 6.5 crore in Innovcare in August 2014. It put in Rs 25 crore in the Series B round a year later and Rs 3.5 crore in 2019 as part of the Series D. It held a 43.4% stake in the company as of March 2025 on a fully diluted basis, VCCircle estimates show. This means it will likely take out Rs 117.7 crore by selling its stake to Sun Pharma, translating into a multiple on invested capital of roughly 3.3x and an internal rate of return of approximately 12% in rupee terms, the estimates show. In dollar terms, Peak XV is likely to earn a 2x multiple and an IRR of roughly 7-8% - below the 15% dollar benchmark.

Kae Capital invested Rs 12 crore in December 2016 and will pocket Rs 15.2 crore for the approximately 5.6% stake it holds. This shows an IRR of approximately 2.5% in rupee terms over nearly a decade, and a loss once the returns are converted to the dollars that ultimately matter to its limited partners.

JM Financial PE, which led the Series D round in 2019 through its second fund and invested Rs 35 crore in two tranches for a stake of less than 20%, is likely to get back Rs 53.25 crore and log an IRR of roughly 7.1% in rupee terms over a seven-year holding period. Its IRR in dollar terms would be barely 3-4%, VCCircle estimates show.

At Rs 271.2 crore, approximately $28.6 million at current exchange rates, the deal implies only a marginal step-up from the $25.15 million post-money valuation at which JM Financial led its investment. This means Innovcare's valuation has risen barely 14% in dollar terms in the seven years since that deal was struck.

For perspective, PE and VC firms typically target 20% IRR in local currency and 15% in dollar terms. The three investors' returns in dollar terms are poor also because of the rupee's depreciation against the greenback.

Innovcare's financials

The muted investor returns also appear a direct reflection of Innovcare's financial trajectory. Its revenue from operations tripled from Rs 16.95 crore in FY16 to Rs 53.61 crore in FY19, according to VCCEdge. Revenue slipped a tad the following year and then plunged to Rs 34.3 crore in FY21 when the Covid-19 pandemic hit. It recovered gradually thereafter. For FY26, its revenue stood at Rs 94.06 crore, up from Rs 86.09 crore in FY25 and Rs 80.93 crore in FY24, per the Sun Pharma filing - an annualised growth rate of roughly 8% over two years.

At Rs 271.2 crore, the acquisition implies a multiple of approximately 2.9x revenue.

Moreover, Innovcare recorded a net profit for two years since inception-in FY23 and FY24. It slipped back into the red in FY25, posting a net loss of Rs 2.24 crore, per VCCEdge. Profitability data for FY26 was not publicly available till the time of publication.

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