New Delhi, Aug. 5 -- Motilal Oswal Alternates (MO Alts), the private equity unit of diversified financial services group Motilal Oswal Financial Services Ltd, is scripting benchmark beating returns in a partial exit from a healthcare company it backed more than six years ago.

This is despite the portfolio firm taking a valuation cut in its initial public offering (IPO) that opens next week.

Goa-based diagnostics chain Molbio Diagnostics, which also counts Singapore's sovereign wealth fund Temasek as an investor, has filed its red herring prospectus for an IPO and set the price band for the public issue that opens next Monday.

Through its IPO, the company is looking to raise up to Rs 939 crore (nearly $99 million), which will consist of a fresh issue of Rs 200 crore and an offer-for-sale for the remaining portion. Molbio has set the price band at Rs 768 to Rs 807 per equity share. At the upper end of the price band Molbio will be valued at Rs 9,300 crore post money (Rs 9,100 crore pre-money), just shy of the $1 billion mark.

Notably, the company had seen secondary transactions a year ago when it was valued at around Rs 12,300 crore.

This means the company's valuation has come down by a quarter in the public issue.

"Last September, the IPO activity in the market was high... the markets have changed since then, and one has to keep in mind retail investor valuations also," said a person referring to the lower price band.

Besides its promoters, MO Alts is among the sellers in the secondary sale, even as the PE firm has cut the quantum of shares it had planned to tender a year ago.

Notably, MO Alts had part exited in the secondary transaction last year. It had spun 7.5x in five-and-a-half years in the liquidity event last year. In contrast, it will be making 5.5x in the share sale during the IPO, based on a first-in-first-out methodology.

The PE firm had later invested at a much higher valuation and will be sitting on unrealised returns of a more modest 3x in the IPO for its follow-on investment.

MO Alts had invested around Rs 140 crore in January 2020 and later via separate tranches put in a further Rs 130 crore. Bulk of the latter was at a higher valuation via secondary purchase from promoters.

In the IPO, its realised annualised returns would be in the region of 37%, including the partial exit last year, nearly twice the 20% benchmark. It had pulled out Rs 110 crore last year and is eyeing Rs 80.7 crore in the IPO.

MO Alts' remaining stake would be worth Rs 1,065 crore at the upper end of the IPO price band.

Temasek's bet

Meanwhile, Temasek had bet Rs 675 crore (nearly $85 million then) in 2022-23. Bulk of this was via secondary purchase from promoters and other shareholders. It was looking to sell over a quarter of its stake in the IPO but has decided against it given the poor outcome as per the issue price band.

Temasek will be sitting on just under 5% unrealised returns in rupee terms in its four-year-old investment. In dollar terms, it would be barely above its actual investment.

Indeed, Temasek had invested in the company at a time when it was just rolling out its business selling Covid-19 detection kits. During FY21, the firm had seen its revenue rocket by more than 20x to Rs 1,275 crore with 54% EBITDA margin. While the company has remained profitable since, its revenues had shrunk over the subsequent two years.

The company has now bounced back recording revenues of Rs 1,446 crore in the year ended March 31, 2026.

Molbio's diagnostics business

Set up in 2000 by Natarajan, Molbio offers point-of-care diagnostics technology to diagnose infectious and non-communicable diseases.

It runs the Truenat platform for polymerase chain reaction (PCR) testing which has received patents in more than 100 countries for diagnosing multiple infectious and non-communicable diseases.

As of March 31, 2026, Molbio offers molecular testing for 30 diseases, including tuberculosis, Covid-19, Hepatitis B and C, human immunodeficiency virus (HIV), and human papillomavirus (HPV) with 43 assays. It also provides devices, enabling radiology, digital pathology and breast health screening, through its units, Prognosys and OptraScan and collaboration partner UE Lifesciences.

The company is currently building a pipeline of additional products and platforms that are at various stages of development, according to its draft prospectus.

Through the IPO, the company plans to use up to Rs 105 crore of the net proceeds to fund capital expenditure for setting up a research and development facility, a centre of excellence and connected office space. Another Rs 70 crore will be used to include automation in its manufacturing processes and Rs 15 crores for general purposes.

"As we are growing, we have to keep on buying new places. We want to have everything under one roof and we thought we'll build our own R and D [for better cost efficiency and to scale up even further]," CEO Sriram Natarajan told VCCircle.

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