Healthcare Sector Drawing Private Equity Investors

The healthcare industry is expanding rapidly in India and has witnessed steady growth despite the economic slowdown. The major growth factor has remained the domestic demand for high-quality healthcare and the booming medical tourism sector. As a result, the healthcare sector in India is emerging as a blue-eyed sector for many investors, mainly the private equity investors. The industry is providing attractive investment opportunities for private funders, due to its increased institutionalized activity in small hospital chains and specialized corporate facilities. Clearly, given the opportunities in healthcare, there is expected to have a sustained Private Equity investment in healthcare in the years ahead.

Why healthcare attracts PE investments?

The Indian healthcare industry comprises of not only hospital services, but also diagnostic services and products, medical devices and medical technology, e-Health services, and clinical research organizations. As a whole, the Indian healthcare industry is currently experiencing low healthcare spend and low hospital bed density. However, the rising income levels, aging population changes, increasing NCDs, and insurance penetration have created a strong demand for quality healthcare services. To cater to the demand, the private sector is continually providing superior health services and holds the potential to increase its services further into the secondary and tertiary care segment.

With the government spending on healthcare getting stagnated over the past few decades, the private healthcare sector is booming across the country. Currently, the sector is predominantly privatized with almost 75 to 80 percent of the hospitals being administered by the private corporate sector. As the private sector is aiming to broaden the focus of its services using technology to improve infrastructure and to expand its services to Tier II and Tier III towns, private equity investments play a significant role in the development of the sector and have indeed become the key driver of industry growth moving forward.

Currently, the Indian healthcare industry is ripe for significant growth and expansion. The opportunities for private funders are vast in the sector. The country’s unorganized primary healthcare system is valued at $30 billion and the sector is expected to grow at least 25 percent per year. As a result, healthcare has always been a bright spot for private equity investors in India, such that the overall investment falls 17 percent which is about $3.3 billion.

The growing demand for quality and sophisticated healthcare services is what invites investors to pour funds into the sector, adding a huge scope for entrepreneurs with innovative minds. As of now, inventive healthcare companies are getting huge funds from private equity firms and other venture capitalists. These funds are providing new opportunities for entrepreneurs and innovators to bring forth quality healthcare services that would become accessible to the majority of the population.

According to known statistics, private equity investments in healthcare almost tripled its count in recent years. Since the sector is highly fragmented and dominated by private players, there is rapid expansion and tremendous entrepreneurial possibilities in various sub-segments, all of which attract PE players for the investment.

Growth Factors for PE investments:

The consumers’ demand for convenient, easily-accessible, and sophisticated healthcare treatments is emerging with the increasing income levels, lifestyle changes, and awareness about healthcare. The population growth, demographic changes and the rise of NCDs are a few of the factors that are making the sector a money-spinning opportunity for future investments. The current trends and advantages of a skilled workforce, lower costs, and advanced treatment options are making healthcare sector more lucrative and preferable for investments, thus drawing the attention of private equity investors.

Some of the growth factors propelling the healthcare sector today include the increase in aging population, increasing lifestyle diseases, increasing disposal incomes and the rise in insurance culture. All of these drivers for industry growth contribute to the need for healthcare facilities to expand their infrastructure and services, thus needing fresh capital from investors for their expansion and growth.

Opportunities in Healthcare:

There are tremendous business opportunities emerging in the healthcare sector for entrepreneurs. Every segment from healthcare centers and pharmaceutical drug development to labs and biotechnology segments are full of opportunities. As a result, Private Equity firms are making a shift of their focus from generic healthcare and pharma companies to all emerging segments in healthcare for their investment options. Currently, diagnostics, biotechnology, and medical equipment segments are attracting big investments similar to hospitals and pharma units. Similarly, more and more private equity firms are looking for investments in research and development units in healthcare as a very lucrative future market for good returns in the future.

Overall, the healthcare development is still in the nascent stage but is remaining as a prospective marketplace where investors can bet huge money. Private equity investments in healthcare will help hospitals and other healthcare organizations promote professionalism, corporate governance, and thereby improve the quality of services to global standards.

With the healthcare sector witnessing a boom in its growth and investments, it is high time that the influx of well-educated, well-skilled healthcare professionals takes place so as to cater the services effectively. To that end, IIHMR, New Delhi, has been serving as a premier healthcare management institution, delivering healthcare management education for aspiring students to embark on a prospective career in the healthcare world. Realizing the crucial role of management education in the growth of the healthcare industry, IIHMR offers cutting-edge curriculum and very high standards of education to develop the intellectual and practical ability of the students.