Indian healthcare sector to touch $155 billion by 2017: study
10 December 2012The Indian healthcare sector is expected to generate revenues of $155 billion by 2017, according to a research report by Kolkata-based investment bank LSI Financial Services.
According to Shantanu Deb Mookerjea, executive director, equity, LSI Financial, healthcare is emerging as a favourite among investors after technology and real estate. During the first half of the current fiscal, PE investments in the sector had more than doubled to $754 million across 33 deals, as against $320 million from 26 deals in H1 of 2011-12.
Rajya Kajaria, managing director, LSI Financial, said that the $65 billion domestic healthcare sector is expected to top $155 billion in just five years. Referring to this year's major deals, he said it included $110 million by Advent International in Quality Care Hospitals; $100 million invested by the government of Singapore in Vasant Healthcare; and $98 million by Olympus Capital Holdings Asia in DM Healthcare.
Interestingly, while in the past only large tranches of funds – of above $80 million – were available, these days even smaller tranches of around $25 million are accessible for the sector. And with hospitals coming up in tier-II and tier-III cities, PE interest in the sector is expected to go up, he added.
PE funds will also show interest in pathology labs, clinical trial firms and medical equipment makers, said the report.
Kajaria says there is a huge demand-supply gap in the healthcare delivery business in India. The sector accounts for 4.6 per cent of India's GDP at present. According to him, almost 75 per cent of healthcare spending in India is accounted for by the private sector.
''Government policy has not been conducive to attract specialist doctors to rural areas and so the healthcare infrastructure in such areas where 65 per cent of the population live, continues to be inadequate,'' according to the report. ''Healthcare indicators in rural India are significantly bleaker than those in urban areas. This is witnessed by the fact that the difference of life expectancy between urban and rural India is currently 12 years.''
The report points out that mergers and acquisitions would also gain speed in the healthcare sector. The sector has in recent years seen several major acquisitions including the $4.54 billion acquisition of Ranbaxy by Japan's Daiichi Sankyo, the $3.72 billion acquisition of Piramal Healthcare by Abbott, and Fortis Asia Healthcare's $665 million acquisition of Fortis Healthcare International.