Raelene Kambli, EH News Bureau
Healthcare, one of the fastest growing sectors in India with a growth rate of 15-20 per cent, is drawing attractive valuations from PE firms. The deal momentum in this segment can be measured by the fact that nearly 14 per cent of all the PE deals in India this year was in the healthcare sector, as per a healthcare industry study conducted by LSI Financial Services, an investment banking and advisory organisation. According to the study, the Indian healthcare sector which is spurred by scaleable business models and attractive valuations of mid-sized niche healthcare firms, has raised $521 million from 16 deals uptill June this year. Some major deals during this year include: (a) Vasan Healthcare attracting $100 million from the PE fund, GIC Special Investments Pte (b) Super Religare Lab attracting $66 million from IFC, another PE fund and c) CARE Hospitals Group attracting aorund $110 million from PE fund Advent International Corp.
Elaborating on the biggest PE funding deal of this year, Georg Stratenwerth, Managing Director, Advent India PE Advisors states, “There is tremendous potential in the Indian healthcare market. Through this union, Advent brings relevant global experience to support CARE’s expansion plans in India. CARE aspires to match the best international benchmarks in healthcare delivery and we are committed to supporting them in this endeavour.” Talking about the opportunities that healthcare organisations have from the attractive valuations offered by PE firms, Dr N Krishna Reddy, CEO, CARE Hospitals, Hyderabad, “The investment process was run to provide funds to support growth plans of the company and also provide exit for some of the shareholders. The growth plans are mainly aimed at renovation of some of the existing hospitals, creation of additional capacity in existing cities, and upgrading infrastructure to elevate certain specialities to centers of excellence. The plan hopes to double the bed capacity during next two years”
Further, the LSI study, which is a 360 degree report analysing various segments within the the healthcare sector, also reveals that the Indian healthcare industry is on a robust growth curve with enormous scope for investments in new speciality hospitals or expansion of existing facilities in recent days and installation of advanced equipment/technology upgradation.The segment is anticipated to touch $81.2 billion in 2015, recording a CAGR of around 21 per cent during the period 2010-2015. Medical tourism industry is also growing at an annual rate of 30 per cent and caters to patients chiefly from the Middle East, West Asia, Africa, America, Europe and also from neighbouring countries like Bangladesh, Pakistan and Afghanistan. The inflow of medical tourists in India is likely to cross 32 lakh by 2015 from the current level of 8.5 lakh.
The study further mentions that there is a growing demand for public private partnerships (PPP) in the sector as the collaboration would improve equity, efficiency, accountability, quality and accessibility of the entire health system. Public and private sectors can also potentially gain from one another in the form of resources, technology, knowledge and skills, management practices, and cost efficiency. Partnerships are expected to improve the resource constraints of the public sector by reducing investments in expensive tertiary care services. Additionally, PE investors will continue to focus on mid-sized, niche healthcare firms in 2012.
According to Shantanu Deb Mookerjea, Executive Director – Equity of LSI Financial Services, LSI, as an investment banker and industry advisor, wants to lock in the potential of the healthcare sector and share information to the industry as well as investors. Mookerjea further says that the debt-equity ratio in healthcare is 1:1 which gives more scope for PE investors to invest in healthcare, making the sector a preferred choice for investments.
