It was a day when investors tried to unravel the complicated doctor’s prescription. The VC Circle Healthcare Investment Summit–attended by over 250 delegates from healthcare service provider and the investing community–attempted to come out with the Rx to fix some of the challenges that come in the way of investing in this recession-proof space.
That India’s healthcare sector offers immense opportunities ($50billion per annum) is pretty well documented in varied statistics and sectoral reports. The $35-billion industry is projected to touch over $75 billion by 2012 and $150 billion by 2017 (Technopak Advisors). The Confederation of Indian Industry pegs an annual investment of $50 billion into healthcare for the next 20 years. India needs to add 3.1 million beds by 2018 against the existing 1.1 million and that alone means an immediate injection of $82 billion. Add to this ancillary opportunities such as medical tourism, wellness, alternative medicine and diagnostics that offer unlimited possibilities in both generic and niche investment play.
So, why do we not see large-ticket deals in this space? Why is this sector largely limited to regional play? What do investors look for when they bet their cash on this sector? VC Circle put together a power-packed panel for its inaugural session to come out with a toolkit for both potential investors and medico-entrepreneurs. The panel–Aluri Srinivasa Rao, Managing Director, Morgan Stanley PE; Sanjay Arte, Partner, India Value Fund Advisors; Dr G S K Velu, Managing Director, Metropolis Health Services; Raja Parthasarathy, Managing Director, IDFC PE; Nikhil Puri of Ambit Corporate Finance (moderator) and Rajiv Vasudevan, Managing Director, AyurVaid Hospitals–came out with broad themes that may perhaps define the way both these communities would behave in deal-making in the future.
Healthcare, which is largely a regional play, is often plagued by the issue of inability to scale both the business and also the geographical spread. According to Mr Parthasarathy, being regional is not such a bad thing. “Just planting a flag in Delhi or Mumbai does not make any player national,” he says, adding, instead, it would be better for hospitals/healthcare service providers to expand in their core region. Mr Rao too proposed expansion around geographic spread that would lend itself to a hub-and-spoke model.
A key driver to investments into the healthcare sector, particularly clinics and hospitals, is the ability of the medico-entrepreneur to invest in a balanced team and scale up the management bandwidth. Says Arte, “we look for an entrepreneur in a doctor.” From the healthcare industry perspective, Mr Velu emphasised on the need for a regulatory framework for the industry.
Clearly this industry needs novel models and innovative approaches to investment given the lack of scale and conventional exit opportunities for investors.
Watch this space for a complete report on the event proceedings.