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Carlyle threatens legal action against G.S.K. Velu

LiveMint logoLiveMint 04-04-2017 Deborshi Chaki

Private equity firm Carlyle Group has threatened to take G.S.K. Velu to court over violation of a non-compete agreement the co-founder of Metropolis Healthcare signed with it two years ago when it bought his 37% stake in the company.

Three people familiar with the matter separately said on condition of anonymity that the private equity firm sent Velu a legal notice in March.

A Carlyle spokesperson did not respond to a query seeking comment. Velu declined to comment.

According to the three people, Carlyle, in its notice, asked Velu to sell his stake in Sri Kauvery Medical Care (Trichy) Ltd, or SKMC, a speciality care hospital chain founded in 1999 in Tamil Nadu.

In May last year, Velu, through Aral Holdings Pvt. Ltd, an investment firm controlled by him, acquired a stake of around 30% in SKMC.

Carlyle added in the notice that SKMC was providing pathology and diagnostics services, which, it added, were being camouflaged as third-party services, to circumvent the non-compete agreement. Carlyle also accused Velu of investing in a company called Anand Diagnostic Laboratory Services, a direct competitor to Metropolis in some markets. Since selling his stake in Metropolis, Velu, who has founded several healthcare companies including Chennai-based Trivitron Healthcare in 1997, has raised two venture funds aggregating $175 million.

Carlyle has alleged in its notice that Velu has been soliciting customers, potential joint venture partners and employees of Metropolis Healthcare with the intent of damaging the company’s operations. Metropolis Healthcare is currently one of the country’s largest healthcare diagnostic chains and is controlled by the Mumbai-based Shah family, which owns around a 63% stake in the company.

This is not the first time that problems have cropped up between Metropolis shareholders and Velu. Mint reported in January last year that relations soured between the Shah family and Velu, both almost equal partners in the venture, when the former bought out the 27% stake of private equity firm Warburg Pincus, which had been looking to exit. The transaction resulted in the Shah family’s stake rising to 63%.

“As a co-founder and co-promoter, I was deeply hurt. This transaction was put through without my knowledge,” Velu was reported as saying by The Economic Times in April 2015. In September 2015, Carlyle Group acquired Velu’s 37% stake, leading to his exit.

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