The healthcare industry has been literally flush with cash this year.
After technology and real estate, healthcare is fast emerging as a favourite hunting ground for investors.
Till September, private equity investments in the sector have more than doubled to $754.33 million, across 30 deals – from 26 deals totalling $320 million last year, according to a research report by LSI Financial Services.
The major investments this year are $100 million by Government of Singapore Investment Corporation in Vasan Healthcare, $110 million by Advent International in Quality Care (Care Hospitals) and $98 million by Olympus Capital Holdings Asia in DM Healthcare. IFC and NYLIM India have pumped in $66 million in Super Religare Laboratories.
The healthcare industry is also witnessing mergers and acquisitions. Some of the big deals are: Fortis Asia Healthcare’s acquisition of Fortis Healthcare International (for $665 million), Abott acquiring Piramal ($3,720 million) and Daiichi Sankyo snapping up Ranbaxy for $4,539 million.
Driven by PE investments, the $65-billion domestic healthcare market is slated to touch revenues of $155 billion by 2017.
What makes it attractive for private equity investors to invest in the healthcare sector?
The most persuasive reason is the recession-proof nature of the industry.
Secondly, with the demand-supply still far too wide, there are plenty of opportunities for players in this space. With affordability of consumers going up, the private healthcare sector is where all the action is today.
Newer attractive models
Ambulatory (daycare) services – wherein patients come in the morning and get home after surgery the same day – is gaining ground in the country.
With the promise of faster scaling and turnaround, the business model looks compelling, says Rana Mehta, Executive Director, Leader - Healthcare Practice, PwC India. “This model is asset light and easy to replicate. It gives a quick exit opportunity for investors (5-7 years) at a good valuation.”
Vasan Healthcare (which runs eye and dental care centres) and Nova Medical Centre (short-stay surgical care centres backed by Goldman Sachs) are the major players in this space.
Apollo Hospitals too, has joined the fray with the launch of a day surgery centre in Chennai.
Single specialty hospitals and diagnostic centres are also attracting investments.
Small towns, medical tourism
Right now, most healthcare players seem to be urban-centric.
But more hospitals are slated to come up in tier-II and III towns in the next couple of years. Even big players such as Apollo and Fortis have plans for small towns in the coming years.
With this, PE interest is bound to go up, says Shantanu Deb Mookerjea, Executive Director – Equity, LSI Financial Services.
Pathology labs, clinical trial companies and medical equipment makers are likely to attract investments in the future. Telemedicine and medical tourism also hold potential, says Mookerjea.
Technology initiatives, especially mobile healthcare, will also find investors, says Mehta.