Coming on the back of what was a record year for private investments and equally busy year with bold overseas bets by Indian drugmakers, the healthcare sector is poised for another year of hectic activity.

Be it the expansion of the pool of public-listed healthcare firms, government policies that could redefine future growth of the sector and breakouts from firms in emerging sub segments of the business, 2016 will be crucial for investors as well as businesses in the sector.

More IPOs

Healthcare firms figured prominentlyamong those tapping on to the primary market last year and this year is expected to be even bigger for those looking to own a piece of healthcare service firms. Although, several pharma companies are already listed, only a few healthcare service firms are public and this shall change this year.

“Eight years after the last healthcare IPO hit the primary markets, 2015 saw a couple of leading players in the sector go through their listing process. This trend is going to continue in early 2016 as a few more companies have completed their IPO filings,” said Vishal Bali, former CEO of hospital chain Fortis who now serves as Asia Head (Healthcare), TPG Growth, besides being a co-founder of a home healthcare venture Medwell Ventures.

With the successful listing of Dr Lal PathLabs, two other key players are expected to follow suit. Thyrocare has already filed its papers for the proposed issue and market leader SRL is also expected to revive plans for it long-pending IPO.

Bangalore-based oncology chain HealthCare Global Enterprises Ltd will set the IPO ball rolling this month and among others who are waiting in the wings is single-specialty firm Centre For Sight, which has also filed the draft prospectus for the IPO.

In the services side, pending issue of Aster DM Healthcare, the hospital chain controlled by Dubai-based Indian billionaire Azad Moopen, is also expected to move forward.

Indeed, the second-largest hospital firm by number of beds Narayana Health is scheduled to list its shares on January 6 and that could set the stage for more hospital firms to plan their public issues.

Policy factor

A string of policies from the government is awaited including the bulk drug or active pharmaceutical ingredients (API) policy that is expected by March. It is expected to reduce India's dependence on China, from where the country gets 75 per cent of bulk drugs.

"2016 promises to bring with it a second wave of digital health disruption and shift in the place of care"

The pharmaceuticals and the medical devices sector will also be watching out for the possible creation of a separate ministry for the medical devices sector, which was hinted by the government last year.

Currently, Central Drugs Standard Control Organisation (CDSCO) and Drug Controller General of India (DCGI)—which deal in regulatory control over the import of drugs, approval of new drugs and clinical trials—are governed by the Ministry of Health and Family Welfare.

Traction in single-specialty healthcare

According to Ken Research, the single specialty hospitals and clinics market in India recorded a CAGR of 12.6 per cent over FY10-FY14 with even large hospital chains branching out by opening centres for dialysis, maternity centres and dental care centres.

While 2015 ended with a large investment in maternity and infant care domain where India Value Fund Advisors invested Rs 400 crore in Cloudnine, industry insiders say a few other segments would attract investors this year.

"Within the single-specialty segment, we will continue to see investor appetite for eye care and dialysis care players as both categories demonstrate scale and better unit economics relative to other single-specialty segments," said Shiraz Bugwadia, managing director at o3 Capital.

He said the healthcare sector will see domestic consolidation among the tertiary care providers and larger hospital chains will end up acquiring the smaller (with less than 500 beds) regional chains and/or single assets.

New-age drugmakers under limelight

The top Indian drugmakers have sewn big deals both domestically and overseas in the last two years and while some of them are expected to continue to expand internationally, one set of firms in the business under focus would be those engaged in the new-age domestic formulation models.

"On the pharmaceuticals side our view is that most of the new-age domestic formulation models will be looking at raising follow-on capital to fuel their fast paced growth trajectory," said o3's Bugwadia.

Companies in this space include Akumentis Healthcare and Curatio Healthcare, which already have the backing of Sequoia Capital.


Last year, Practo received Series C funding while several health-tech firms attracted early-stage funding. While some of them may have challenges in raising follow-on capital, those with differentiated models and teams to execute it would continue to fund investors.

"Year 2016 promises to bring with it a second wave of digital health disruption and a shift in the place of care," said Bali of TPG and Medwell.

Wearables, point of care diagnostics, virtual care and remote health apps are expected to support the creation of powerful healthcare platforms.

The year is also expected to see the acceleration of the asset light healthcare delivery system to support the wider healthcare agenda for India, according to Bali.

“Artificial intelligence in medicine which has been symbolised by IBM's Watson will hopefully see a wider application during the year,” he said.

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