Malaysia: PE player Creador injects $24.53m in investee RedCap Pharmacy for expansion

March 17, 2016: Private equity firm Creador has invested MYR100 million ($24.53 million) in RedCap Pharmacy, which it acquired in April last year.

The retail pharmacy chain, formerly D’Apotic Pharmacy, has undergone some management changes, rebranded itself and is now aiming to become a leading national player.

The funding will cover RedCap’s first phase of growth by providing capital for expansion plans over the next 18 to 24 months.

The South and Southeast Asia-focused PE firm will consider investing more capital in the chain for expansion, within the period, should the need arise.

Creador founder and chief executive Brahmal Vasudevan said, the firm has always been keen on the healthcare sector but recognised that there were few “strong players” to pick from for investment.

“We have not done anything in healthcare largely due to the scarcity of opportunities to invest,” he said of the Malaysian market.

Creador’s acquisition of D’Apotic was completed in May 2015, with the PE firm buying out the pharmacy chain from its three pharmacist founders.

The deal was done under Creador’s Fund II, and Vasudevan said, future funding into the business could either be sourced from Fund II or its current Fund III.

Post-acquisition, Creador brought in a new chief executive officer and managing director, Ian Cruddas, to lead the business, and put in place a new management.

The business is now rebranded as RedCap. Vasudevan said, Creador owns the majority of the business, with a portion of shareholding set aside for the management.

An executive with RedCap noted that one of the founding pharmacists has also rejoined the current management team. Partnering the management team, Creador is looking at building the retail pharmacy business organically, with a six to ten-year investment horizon.

There are eight RedCap stores opened in the Klang Valley since November last year, and the company intends to expand its store network around Malaysia to at least 300 stores over the next three years, with the initial capital of MYR100 million.

The target for end-2016 is to have 70 pharmacies to be operating throughout Malaysia. The chain now has 25 stores.

The company will also rebrand its existing D’Apotic stores, located in the southern state of Johor, to RedCap.

Vasudevan saw great potential in the retail pharmacy market in Malaysia, given its low saturation. “There are 2,500 pharmacies across Malaysia at present and we believe that the market can take 4,000 to 5,000 pharmacies,” he said, adding that RedCap’s strategy is to be a community pharmacy chain, with great accessibility for consumers.

He also pointed out that as Malaysians take home higher disposable income, their healthcare needs will increase in tandem.

Cruddas commented: “The retail pharmacy sector remains fragmented, with almost 70 per cent of stores operating as stand-alone outfits, and few have qualified pharmacists present throughout all trading hours. There is tremendous opportunity for RedCap, a fully professional Malaysian pharmacy chain.”

Another selling point about RedCap, he added, was that 30 to 40 per cent of the stores will be dedicated to consultation.

Source