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New Delhi: India‘s hospital sector is abuzz with feverish deal-making activity. The latest of big deals which are consolidating the sector and bringing big players into it is by a New York-based global private-equity and investment company, KKR, which has bought a controlling stake in leading cancer care hospital chain Healthcare Global (HCG) from private equity peer CVC Capital Partners for nearly $400 million.
By acquiring Baby Memorial Hospital last year, KKR made a comeback to the sector after one of its biggest paydays in India exiting Max Healthcare two years ago. “Healthcare continues to be a thematic focus for KKR in India, our investment in HCG will support the development of medical infrastructure and the delivery of critical oncology services and care to more patients in the country,” said Akshay Tanna, KKR’s Head of India Private Equity.
The race to buy into Indian hospitals
Deal-making in India’s healthcare sector has surged in recent years, with hospitals now commanding the largest share of foreign direct investment (FDI) within the sector, TOI had reported in December. In FY24, hospitals accounted for 50per cent of the FDI in total healthcare, translating to $1.5 billion. This marks a significant increase, as the share of hospitals in healthcare FDI has more than doubled from 24per cent in FY21, and has been rising from 43per cent in FY20, underscoring their growing prominence. The trend also reflects a strengthening investor preference for hospitals, alongside the traditionally favoured pharmaceuticals sector.
The strong private equity interest in India’s healthcare services companies is a highly credible indicator of the multi-decade growth potential inherent in the sector, as per a top executive at European investment bank Rothschild & Co. “We expect to see expansion of interest as international players evaluate the market and get more comfortable with the domestic landscape,” Hedley Goldberg, partner and global head of healthcare services at Rothschild & Co, told ET in an interview in January.
Besides a number of private equity deals, the hospital sector is also attracting big Indian businesses. While several corporates such as Tata, Birla and Hinduja have a presence in healthcare, none has made a significant pan-India presence. But the Bajaj Group is preparing to enter the healthcare sector by setting up a chain of hospitals in metros across the country., ET had reported last year. As per Bloomberg, it has earmarked Rs 10,000 crore as an initial investment.
A few months ago billionaire Mukesh Ambani’s Reliance Industries acquired technology-driven and oncology-focused healthcare platform Karkinos for Rs 375 crore. Reliance bought it under the Insolvency and Bankruptcy Code (IBC). The healthcare sector, particularly hospitals, witnessed major expansion during the Covid-19 pandemic. However, after the situation eased, it became difficult for many standalone hospitals to sustain their businesses. Such hospitals have been seeing interest from two sets of bidders — those already in the industry and seeking to expand and those who want to turn around such entities before they sell to someone else. Promoter-driven strategic investment firms and hospital operators are scouting for stressed healthcare assets that they can acquire through the insolvency and bankruptcy process, as private equity firms often edge them out in the race for good assets by offering lofty valuations.
In recent years, healthcare companies and hospitals in India have been increasingly focussing on acquiring buildings and properties to expand their operations and strengthen their market presence. This trend is driven by the rising demand for quality healthcare services in urban and semi-urban areas, fuelled by a growing population, increasing health awareness and better insurance coverage. Leading hospital chains like Manipal Hospitals, Apollo Hospitals and Fortis Healthcare have been investing heavily in strategic locations, acquiring both existing hospitals and new properties for greenfield projects. These acquisitions not only allow healthcare providers to quickly scale their operations but also help them tap into high-demand regions with limited medical infrastructure. Temasek Holdings-backed Manipal Health Enterprises’ Manipal Hospitals acquired a five-storey hospital property in Mumbai’s western suburb Andheri for Rs 415 crore last year.
Why India’s hospital sector has turned so hot
Historically, the pharmaceuticals sector, including APIs (active pharmaceutical ingredients), has been the investor favourite, attracting multi-billion-dollar deals. However, post-Covid, the hospital and diagnostics sector has come into the spotlight, drawing a wave of investors. The Indian hospital sector market cap surged 9x from Rs 37,500 crore in FY20 to Rs 3.5 lakh crore, brokerage firm JM Financial said last year in July. At a time when the sector was grappling with inefficiencies, high leverage and low ROCEs, Covid provided a much-needed impetus. This came from improved pricing, higher insurance coverage and dedicated shift towards complex surgeries such as transplants. India’s top listed hospital chains performed well in the stock market leading up to this year. Apollo Hospitals’ shares climbed 28per cent in 2024, while Max Healthcare Institute Ltd. soared 64per cent.
“Hospitals have been at the centre of PE interest over the last few months. The size of the Indian market, relatively underserved markets outside the urban areas, high incidence of disease burden and growth in insurance (both public and private), will continue to fuel growth. Given the demand, there is still a long road for growth. Hence the optimism,” Sujay Shetty, global health industries advisory leader, PwC India, had told TOI in December. Further, hospitals have garnered significant investor attention due to primary market activity which has been marked by listing of several hospital chains.
The Bajaj Group was drawn to the hospital sector due to the high growth potential in the metros and the increasing corporatisation of healthcare, as per an ET report. Hospital chains account for 10-23per cent beds in Delhi, Hyderabad, Bengaluru, Kolkata, Chennai and Mumbai, compared with 21-52per cent at public hospitals and 10-62per cent at standalone facilities, according to a research report by JM Financial released last year.
The Indian hospital industry is poised to post a healthy compound annual growth rate (CAGR) of about 12per cent over the next three fiscal years, credit rating agency CareEdge Ratings said last year. The surge in growth has led to an increase in capital expenditure by healthcare companies.
Growing incidence of lifestyle diseases and easing demand for affordable health care delivery are driving the healthcare market in India. A report released last year by HSBC Global Research on India hospitals said seven listed hospitals will add 14,000 beds in the next 3-5 years. A total of 22,000 new beds is expected, including those by other private hospital chains. Even with these additions, there will be no over-supply of beds in India. The report said that the addition of beds is triple the number of beds added between FY19-24 at 4,000. Most hospitals are now in a consolidation phase and planning to expand and add sees growth opportunities after making profits between FY19-24 because of low capex.
A World Health Organisation (WHO) report said last year that India has only 16 beds per 10,000 people, which is abysmally low if compared with most of the developed and emerging markets.
India requires 100,000 additional beds in the next 5-7 years just to meet its healthcare demand on the back of increasing non-communicable diseases such as diabetes, cardiac disorders, and cancer., as per the HSBC report. The seven top listed hospital chains have announced capex for projects to add over 22,000 beds in the next 3-5 years.
The government’s push to turn India into a global healthcare hub by promoting medical tourism is another strong growth driver for the hospital sector. Quoting government data, the HSBC report said that medical tourism in India has grown from 0.18 million in 2014 to 0.73 million in 2024. India remains a preferred medical tourism destination because of the availability of high-end clinical procedures at a much cheaper rate as compared to most of the countries like the U.S., Singapore, Korea and Thailand.
The Union Budget 2025-26 presented in February was hailed by healthcare and industry experts for its focus on creating a patient-centric ecosystem and a renewed push for medical tourism. Finance Minister Nirmala Sitharaman said that medical tourism and ‘Heal in India’ will be promoted in partnership with the private sector. It will be backed up by capacity building and easier visa norms, she said.
(With inputs from TOI)
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