| Log in

When Is It Right To Raise PE In Healthcare

03 September, 2010

All the elements seem to be in place for an explosive opportunity in India’s multi-storeyed healthcare theme.

The sheer market size coupled with its non-cyclical and recession-proof nature make this sector a winner. India’s healthcare sector is expected to grow at 23% annually to become a $77-billion industry by 2012 with diagnostics contributing $2.5 billion, a Yes Bank-Assocham report says. Alongside this growth is a rather worrying statistic on the demand-supply mismatch in basic healthcare in India. At present, there are only nine beds per 10,000 people in India as opposed to the world average of 40 beds per 10,000.

On the other side of the spectrum, what is making this sector red-hot in terms of attractiveness are macro trends such as rising income levels, penetration of insurance, increased life expectancy and incidence of lifestyle diseases, greater awareness of ailments and, more importantly, higher wallet spends on well-being.

Third, consider the spread itself. From mainstream hospitals, clinics, telemedicine centres, diagnostics chains, daycare surgery centres, specialty maternity clinics, air ambulance services, generic implantable stent-makers to stem cell and blood products and so on, it is clearly a multi-layered and multi-nuanced theme.

So, VCCircle’s Healthcare Investment Summit, which managed to attract a house of 250 participants and stellar speakers drawn from a pool of thought leaders, medico-entrepreneurs and investors, looked at some of the various layers in one of the most compelling domestic themes. In the first panel on ‘Understanding the anatomy of a hospital,’ panelists who have a deep presence in the hospital space deep-dived on trends in healthcare delivery. Here is a gist of key takeaways from the day-long conference:-

Myth & Reality of PE Investing Into Healthcare: First the good news. Fortis Hospitals CEO Vishal Bali says,  “Indian healthcare is an evolving story and there are ample opportunities for PE investors to make money.”

That said, owing to its fragmented nature and the fact that Indian healthcare industry is still rather young, there are not many business models ripe for funding yet, believe the investor community.”Look at raising PE money only when you have very aggressive plans to achieve economies of scale,” said Sandeep Naik, Apax Partners. The PE fund has invested Rs 426 crore in Apollo Hospitals for a 12% stake.

Echoes, Leo Puri, MD, Warburg Pincus, “Don’t take too much burden on your back. You might just break your business.” This is essentially linked to the fact that the entrepreneur can be made to achieve very aggresive targets. This was well-reflected in the remarks of Rajen Padukone, CEO, Manipal Healthcare Systems–which has gone through the cycle of raising money–“Chasing such targets along with managing the company can become very frustrating”.

Outside of private equity, there are other models such as joint venutres that can drive growth. “Joint Ventures will drive growth in the healthcare industry,” said Vishal Bali, CEO, Fortis Hospitals. Bali was quick to add that entrepreneurs in India need to learn to dissociate themselves from the property that they have created. He added that there is a huge room for consolidation in the sector. He added that hospital groups like Fortis have consolidated tremendously over the last couple of years and has 46-48 hospitals under its umbrella.

Growth Enablers

On the growth enablers in future, panelists agreed that much of the demand will come from the Tier II & Tier III cities. While most of the operators in India are concentrating in the metros, there is a huge potential of branded healthcare in the tier II & tier III cities. “There is a huge credibility issue attached to in these markets and that provides a huge comfort to the population there. Branded healthcare is here to stay”, asserted Vishal Bali, Fortis Hospitals.

What will further add to increased demand would be growth in diagnostics, medical tourism, standardization of services and quality, improvements in telecom infrastructure for quick transmission of data and images, telemedicine and teleradiology opportunities.


Leave Your Comment
Launching VCCircle Healthcare Summit: The Investment Rx

Launching VCCircle Healthcare Summit: The Investment Rx

TEAM VCC 7 years ago
VCCircle is back with the second edition of its immensely successful healthcare...
Small and Niche Plays Drive Indian Healthcare

Small and Niche Plays Drive Indian Healthcare

TEAM VCC 8 years ago
It was a day when investors tried to unravel the complicated doctor’s...
Sequoia Capital To Put $22M In Delhi-based Moolchand Healthcare

Sequoia Capital To Put $22M In Delhi-based Moolchand Healthcare

Shrija Agrawal 6 years ago
Venture Capital firm Sequoia Capital is investing up to $22 million to acquire...
No Comments

When Is It Right To Raise PE In Healthcare

Powered by WordPress.com VIP