47335 - Quadria Fund III

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Summary of Investment Information

Project Number

47335

Company Name

QUADRIA CAPITAL FUND III LP

Date SPI Disclosed

Dec 22, 2022

Country

Southeast Asia Subregion

Region

East Asia and the Pacific

Projected Board Date

Jan 30, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jul 2, 2023

Department

Regional Industry - MAS Asia & Pac

Industry

other

Previous Events

Approved : May 17, 2023
Signed : May 18, 2023
Invested : Jun 30, 2023

Sector

other

Project Description

IFC proposes an equity investment of up to US$40 million and an additional co-investment envelope of up to US$30 million under the delegated authority framework, in Quadria Capital Fund III LP (the “Fund” or “Fund III”), a private equity fund dedicated to investments in the healthcare sector in South and Southeast Asia. The target Fund size is US$800 million (with a hard cap of US$1 billion). The Fund aims to provide equity to growth stage healthcare companies and will focus on strategic initiatives and operational improvements in its portfolio companies. The Fund will make investments in companies focused on the provision of healthcare delivery, life sciences, medical technology, and associated healthcare services. The Fund will be registered in the Singapore Islands as a limited partnership.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	70.0

Development Impact

Stakeholders (Fund's portfolio companies) – Increased access to private equity capital and value creation for health sector focused mid-market companies in India and Southeast Asia region: The main Project Outcomes include increased access to private equity capital and value creation for mid-market companies in the Indian and Southeast Asian health sector and their ability to improve customers or patient health outcomes. South and Southeast Asia have strong unmet demand for quality healthcare. Following the strategy of its previous funds, the Fund plans to invest in quality, scalable businesses that address the mass market at an affordable price on a financially sustainable basis, thereby improving access to quality, affordable healthcare across Asia. Stakeholder (customers/patient health outcomes) – Increased access to affordable and quality health products and services for investees' customers: Quadria invests in healthcare companies that generate positive development impacts, contributing to increases in the provision of health services and improved access to affordable and quality health products. Investments by previous funds (Fund I and Fund II) have led to an increase in patients served by 11 million among a total of 34 million patients served by the Fund investee companies. Many of the invested companies have provided their services and products with 40 to 50 percent discounts for local patients. Fund III will continue its investment strategy, selecting companies in which development impact is intrinsically linked to its business model. Competitiveness – Increasing competitiveness in the South and Southeast Asian health market by promoting alternate funding options and demonstrating the ongoing viability of a healthcare-focused PE model: The private health sector provides more than half of the health services in the region, easing capacity constraints of the public health sector. However, in response to increasing demand for health services, further investment is needed. PE funds provide an alternate source of capital that supports funding options for scaling health services. Since 2017, around $12 billion across 132 deals has been invested by PE funds in healthcare across India and Southeast Asia, representing around 10 percent of PE activity in the regions. IFC expects that Fund III will build on the signal sent by Fund II, encouraging other fund managers to raise funds and reduce the reliance on DFI investors.

(i) Own Account Equity: IFC's support with a US$40 million equity investment will help the Fund reach its first close. A focused healthcare mandate is relatively unique within South and Southeast Asia. Quadria's specialty focus on raising a health sector focused fund is considered niche and less marketable than generalist funds, with DFIs expected to make up around 30 percent of first close. (ii) Non-commercial Risk Mitigation: IFC's role as a global institutional impact investor also provides unique signaling support to a multi-region sector fund like Quadria, as it will provide a consistent reference point for international investors and signal attractiveness for investors operating beyond a country-specific lens. (iii) Knowledge, Innovation and Capacity Building: IFC will also support Quadria via knowledge sharing and standard setting. The Fund manager values IFC's deep health sectoral knowledge and global experience and has often leveraged IFC's healthcare expertise and networks to make better investment decisions and to formulate strategy for its investee companies. (iv) Standard Setting: IFC also supported the previous funds implement an ESMS and ensure alignment with IFC performance standards. Incrementally to this, IFC will work closely with Quadria to support them in promoting gender diversity within their investment team and portfolio. This will include developing internal mechanisms and targets to improve their pipeline of female investment professions and representation of females in Quadria's senior investment team, where there are currently no female Partners or IC members.

E&S Category Rationale / Risks and Mitigation

The fund will primarily invest in established private healthcare companies in South and Southeast Asian countries. Potentially this will include investments in pharmaceuticals, hospitals, pathology labs, pharmacy chains, medical devices manufacturing, and contract research. The fund may also make platform investments where an anchor investment/platform would be used to make further acquisitions or portfolio expansion. Most of the environmental and social risks and impacts of these healthcare sub-sectors will be few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures and good industry practices. Given fund's investments strategy there is very limited likelihood for investments in companies exposed to significant E&S risks related to involuntary resettlement, adverse impacts on Indigenous Peoples, significant risks to the environment, community health and safety, biodiversity, cultural heritage, or significant occupational health and safety risks. Hence, the E&S risk of the proposed investment is medium, and the project is categorized as FI-2 according to IFC's Policy on Environmental and Social Sustainability. The applicable performance requirements will be i) the IFC- FI Exclusion List; ii) the relevant national E&S laws and regulations; and iii) the IFC Performance Standards. The fund will not invest in coal-related activities.

The main E&S risk relate to life and fire safety in public access buildings, compliance with labor laws and regulations, potential supply chain risks that relate to child labor/force labor, waste and pollution management and occupational health & safety. The Fund Manager is an existing IFC client. It has appointed an E&S team and is implementing a detailed E&S risk management system (ESMS) which includes third party E&S due-diligence to identify gaps prior to making an investment and monitoring the implementation of corrective actions to ensure compliance with the IFC Exclusion List, applicable national E&S laws and regulations, and IFC Performance Standards. The ESMS includes an external communication mechanism. The existing ESMS will need to be upgraded to include the scope of investing through platforms and a supply chain evaluation of the potential investments.

Contacts

For Inquiries About the Project, Contact

Quadria Capital Investment Management Pte Ltd
Gerald Ng
Investor Relations
+65 9815 8291
Gerald.ng@quadriacapital.com
11-A, Stanley Street, Singapore 068730
https://www.quadriacapital.com/

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Task Title & Description	Anticipated Completion Date
Upgrade Applicable Requirements	01/31/2023

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