Rising disposable income, ageing population, increasing healthcare awareness, growing health insurance penetration, growing middle class and increasing lifestyle diseases are the major factors currently driving the growth in India’s healthcare sector.
With investors recognizing the growing potential of the Indian healthcare market, the hospital sector is experiencing an enormous influx of investment. Rs 27,000 crore of investment coming into the Indian hospitals reflects growing investor confidence.
Image Source: Shutterstock
Indian healthcare sector consists of hospital infrastructure, medical devices and equipment, health insurance, clinical trials, telemedicine, and medical tourism. And, the hospital industry in the country accounts for about 80% of the total healthcare market. In terms of revenue, the hospital sector was valued at Rs 7940.87 billion in FY 2021. With an expected growth of about 18.24% CAGR during FY 2021-FY 2027, it is estimated to be worth Rs 18,348.78 billion by FY 2027.
The Indian healthcare industry has been undergoing consolidation since the Covid-19 pandemic and people are seeking higher-quality healthcare. They are moving from smaller nursing homes to bigger hospitals. A large number of independent hospitals as such are trying to associate with larger hospital networks and are looking for buyers. Consequently, the ongoing trend is leading the hospital industry toward consolidation.
For instance, during the COVID-19 epidemic, Manipal purchased the Columbia Asia Hospital and the Vikram Hospital.
There has been a consistently strong demand for healthcare services in the Indian hospital sector, while the organized players in the sector are persistently increasing their market share. Revenue in the sector is therefore going up. According to ICRA, the hospital sector is expecting a robust revenue growth of 8-10% in FY24. The operating profit margin is being expected at 22-23%.
The sustained demand growth has induced further expansion in the hospital industry. Many companies have announced significant expansion plans. The expansion plan focuses primarily on installing nearly 8,400 beds and an upgrade over the next four years. The resulting capacity addition would be more than 26% from the March 2023 levels.
Some large companies in the hospital industry are exploring inorganic growth opportunities. This also is likely to increase the number of beds being added through mergers and acquisitions.
According to ICRA, an increase in non-communicable lifestyle illnesses, rising healthcare spending per person, growing awareness levels, expanding use of health insurance, and rising medical tourism activity, are expected to raise the overall occupancy and the average revenue per bed. For FY2024, the overall occupancy is predicted to be at 63-65%, while the average revenue per bed is expected to increase by 5-7%.
The healthcare sector in India is experiencing significant transformation and expansion. As the leading private players are spreading out to tier-2 and tier-3 cities, the hospital industry tends to offer an attractive investment opportunity for domestic as well as foreign investors.
The Indian hospital sector is at present bustling with deals. According to rating agency ICRA, the Indian hospital industry has transacted deals worth over Rs 27,000 crore in the last two years. The top transactions include investments in Manipal Hospitals, Sahyadri Hospitals, ASG Eye Hospital, and Maxivision Eye Hospital.
With an investment worth Rs 16,400 crore, Temasek has gained a majority stake in Manipal Health.
In aggregate, the eye-care segment attracted a PE investment of about Rs 4,000 crore. General Atlantic and Kedara invested Rs 1,500 crore in ASG Hospital. From Quadria Capital, the Maxivision Eye Hospital received Rs 1,300 crore and Dr Agarwal’s Healthcare received Rs 1,050 crore worth of investment. In addition, Kedara Capital purchased Rs 540 crore for Olivia’s skin and hair clinic from Sreyas Holistic Remedies.
Tata Capital Healthcare Fund invested Rs 83 crore in Series A funding to Mumbai Oncocare Centre, a chain of cancer daycare facilities and a division of Cellcure Cancer Centre.
Some of the existing PE players were seen to be making exits, after generating significant profits. With the Ontario Teachers’ Pension Plan Board (Ontario Teachers’) coming in as an investor, the Everstone Group made an exit from the Sahyadri Hospitals.
The largest hospital chain in Maharashtra, Sahyadri, has been acquired by Ontario Teachers for about Rs 2,500-Rs 2,700 crore. The Ontario Teachers would be investing an additional Rs 750 crore in the Sahyadri Hospitals network.
The COVID-19 pandemic highlighted the necessity for efficient and sound healthcare systems in the country. Both the public and private sector players are coming forward to invest and collaborate. They also acknowledge the growing potential of the Indian healthcare market.
Growth in demand for health services is largely being driven by the large & ageing population, increasing lifestyle diseases, growing awareness about health and wellness, and government healthcare schemes like Ayushman Bharat.
India’s healthcare sector is receiving investments currently from both domestic and foreign sources, including private equity, venture capital, and public funding. The increasing investments in the sector have triggered innovation in medical technology and healthcare management practices. This in turn is enabling India to become a global healthcare destination. The influx of Rs 27,000 crore into the Indian hospitals reflects growing investor confidence in the sector, in the long term.
You must be logged in to post a comment.
Stay ahead in the dynamic world of trade and commerce with India Business & Trade's weekly newsletter.