s

About Heath Care in India

1) Non cyclical and recession proof.

2) 9 beds per 10000 as against 40 per 10000 world over
3) Sector is currently $35 billion and projected to touch $77 billion by 2012(23% CAGR)
4) Diagnostics likely to contribute $ 2.5 billion out of $ 77 billion
5) Highly fragmented – both on pharmacy and health delivery front.
6) Much of the business will come from tier 2 and tier 3 cities – branding is an issue here.
7) $ 86 billion investment needed by 2025. Govt. will contribute only about 15-20%.
8) India needs 1.75 million additional beds by 2025.
9) Investors are especially keen to tap into sectors like Diagnostic Services, Medical Devices /
Equipment, Hospital Chains and Wellness Products and Services.

Learning for PE

1) Need economies of scale

2) Primary care clinicians may be physicians, nurses, or various other health workers trained for
the purpose. Countries with better provision of primary health care have greater patient
satisfaction at lower costs and better health indicators.
3) Lifestyle diseases typically take a longer time to cure and are more costly to treat.
4) Some hybrid business models like HCG (16 cancer hospitals) & RG Stone Urology (~15 hospitals)
are located in Metro, Tier I & Tier II cities across India. All these founded by doctors and
entrepreneurs’ are attracting good PE investments.
5) In the context of rising interest among PE firms to invest in the hospitals segment
6) consolidating hospital chains - especially in Tier II and Tier III cities - an attractive opportunity for
PE investors. – this is mailnly to replicate pockets of excellence across many facilties.
7) Over 42% of PE & VC investors felt there was a strong opportunity to tap the market for
healthcare services in semi-urban and rural areas,
8) Dental hospitals fall in line with the daycare business Vasan brand is known for. It is a scalable
model and the company will be able to bring in standardised treatment protocol in a highly
unorganised sector, he said.
9) According to data compiled Venture Intelligence, a research service focused on private equity and M&A, a
total of $126 million of private equity money got invested across 4 deals from August 2009-August 2010.
During the same period, there were 5 M & A deals in the diagnostics space.
10) For PE firms, investing in the healthcare space is the equivalent of being a kid in a candy store.
At the recent VCCircle Summit on Healthcare Investments in India, one message came through
loud and clear – much of the action is in building hospital capacity, whether that means
refurbishing existing hospitals, creating chains of hospitals, or using other innovative business
models, such as franchising.
11) There are unmet needs throughout the healthcare system,which has created tremendous
business opportunities, says Jacob Kurien,partner in New Silk Route (NSR) Advisors,a private
equity firm that invests from a $1.2-billion fund.
 12) For investors such as PE major Warburg Pincus,the focus is on three segments in healthcare
including hospital chains,diagnostic facilities and innovative medical devices firms.
13) Affordable healthcare segment that is the cynosure of investor interest.Quality healthcare at
affordable prices is a model that is scaleable, says Bharati Jacob,partner in Seed Fund,investors
who has backed Vaatsalya Healthcare,a start-up that pioneered the lowcost hospital model in
Karnataka and is now expanding its services in Andhra Pradesh.
14) Two third of expenditure comes from outside the hospital.
15) ophthalmology, day-care surgery and dialysis care involving lower capital expenditure. For
instance, a cardiac hospital or a multi-specialty tertiary care hospital costs an average of Rs 60-
70 lakh per bed, excluding the real estate cost, says Singh of Technopak. That works out to Rs
60-70 crore for a 100-bed hospital. Cash break-even typically takes about three years.
16) We prefer to look at more specialized play in the healthcare sector and stay
away from multidisciplinary, five-star-type hospital chains as their capital
expenditure is high,” said Jacob Kurian, partner, New Silk Route Advisors Pvt.
Ltd.

17) K.P. Balaraj, managing director of Sequoia Capital India, says

specialized medical centres break even in 12-18 months, faster than the
seven-eight years that multidisciplinary chains need.
18)

Concerns

1) Long gestation periods, scalability and talent shortage are among the top concerns for investors
when it comes to the healthcare sector
2) Capital Intensive