Profitability matters, not single or multi-specialty, say VCCircle summit panellists

The emergence of eye-care, dental and oncology-focussed companies has brought to the fore the debate whether investor interest will tilt in favour of single-specialty or multi-specialty healthcare companies. The verdict at the News Corp VCCircle Healthcare Investment Summit, which began in Mumbai on Monday, was clear that investors will target those companies that can grow and are profitable irrespective of the segment they are operating in.

“Investors will invest in companies that are making money,” said Vamesh Chovatia, partner at Tata Capital Healthcare Fund in response to a query from a delegate at the event on whether single-specialty or multi-specialty companies will attract more funding.

There was also a broad agreement among the panellists that single-specialty and multi-specialty companies will continue to co-exist as their business models are different.

Mahipal Singh Sachdev, chairman and managing director at eye-care chain New Delhi Centre for Sight, said the ophthalmology business has not much to do with sickness and a patient does not spend the entire day undergoing a treatment. In the multi-specialty segment, patients are treated for a longer duration and the investor talk is mostly around the average cost of beds. This is of no relevance in the single-specialty space, he said.

“But single-specialty and multi-specialty can co-exist. It is a question of where the patients get a good treatment," Sachdev said. Centre for Sight has received approval from the capital market regulator Securities and Exchange Board (SEBI) for an initial public offering and will be the second eye-care chain to list on the bourses.

That customer satisfaction is a priority for both the segments was also seconded by BS Ajai Kumar, chairman and CEO of oncology chain Healthcare Global Enterprises (HCG). He also noted that while multi-specialty hospitals may have oncology services, they may not be diversified enough to offer services that an oncology-focussed chain can provide.

Rohit MA, co-founder and managing director at mother and child care hospital chain Cloudnine, said that the ability to go deeper and increase efficiency will help single-speciality hospitals to grow as single-specialty chains are mostly confined to some regions. The company, which is backed by private equity firm India Value Fund Advisors (IVFA), Sequoia and Matrix Partners, has majority of its centres in Bengaluru.

Vikram Vora, CEO at dental chain Mydentist said that compared to the international market, dental services are under-penetrated in India. There is scope to become an organised single-specialty player and provide affordable services to middle and lower-middle income groups, Vora said.

Multi-specialty: Time for consolidation?

Monika Sood, co-founder and partner at consulting firm Arete Advisors, said that consolidation will happen in the segment. “We're looking for the easiest way to grow. It’s easier to acquire than build a hospital for four years and then ramp that up,” Sood said. 

For a long time, only Apollo Hospitals and Fortis Healthcare were the only listed hospital chains in the country and acquisitions in the space have been few and far between. In a mark of maturing of the industry, Aster DM Healthcare recently filed for an IPO.

However, Madhur Verma, managing director of IDFC Alternatives-backed Sahyadri Hospitals, differed in his view on consolidation.

“In our experience with PEs, a few years ago, when there was talk of consolidation in the healthcare sector, it did not happen. M&As, as a way of expanding fast, has not been proven in the Indian market," he added.

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