Private Equity (PE) investors and Venture Capitalists (VC) are aggressively working out strategies to offer enticing funding offers to the healthcare sector. Between 2008 and 2010, the sector is expected to see investments of around Rs 15,000 crore. The funds will be from capital markets or PEs to set up greenfield and brownfield projects, according to industry experts.
India already has an active fund provider base supported by the ICICI Ventures, one of the largest private-equities, which allocated $250 million for a dedicated healthcare fund through I-Ven Medicare. Others include IDFC, HSBC, JP Morgan Private Equity Fund, American International Group Inc. (AIG), Evolvence India Life Sciences Fund, George Soros's fund Quantum and BlueRidge.
According to Sandeep Sinha, head, Healthcare, Frost & Sullivan, healthcare is a mandatory requirement for people and therefore the sector throws up opportunities to investors. A visible trend is that VCs and PE investors are keen to invest in either a chain of hospitals or diagnostic centres.
The healthcare industry is maturing and private investors view long-term value to pick up stakes, informed Vishal Bali, chief executive officer, Wockhardt Hospitals Limited.
The prospects and the return on investment (ROI) in healthcare make the sector an attractive portfolio for PE and VCs. Over a five year- period, there is an annual 15 to 20 percent ROI, which is driving the healthcare funding space informed Sinha.
Factors alluring investors to healthcare are the growth of the medical tourism industry with increasing number of foreign patient accessing Indian hospitals. Expertise of the Indian clinician together with the reverse brain drain has seen a spurt in hospital entrepreneurship. The health insurance is yet another growth engine, pointed out Sinha.
To meet the increasing sick and ageing population suffering from infectious diseases to lifestyle disorders there is a huge need for more hospitals and the only way to increase infrastructure is to either go public or look at PE stakes, Dr Devi Prasad Shetty, managing director, Narayana Hrudayalaya. Of the many fund infusion deals that have taken off across India, in Karnataka alone there have been four such efforts.
On February 6, JP Morgan and AIG became private equity partners of the Narayana Hrudayalaya Private Limited, the holding company of a leading corporate cardiac care centre in Bangalore, Narayana Hrudayalaya Institute of Cardiac Sciences. A fund of Rs 400 crore will be used to set-up a nationwide health city project with a bed capacity of 5,000. Allegro Capital Advisors were the financial advisors on the transaction.
In January end, ICICI Venture made a US$ 24 million equity investment through IVen Medicare India Pvt. Ltd. in Vikram Hospital Pvt Ltd, Mysore. The investment will enable Vikram Hospital to have a pan Karnataka footprint of secondary and tertiary care centres.
In mid June 2007, Evolvence India Life Sciences Fund made its maiden fund investment of Rs 22.5 crore( $5million) into Health Care Global Enterprises (HCGE), a cancer care and research centre in Bangalore. The Mauritius-based Evolvence India with a $150 million corpus spread over three years is promoted by the Dubai-based Evolvence Capital. A typical deal size varies from Rs 50 crore to Rs 800 crore in India keeping way from start-ups and buyout operations, informed Hari Buggana, managing director Invascent, advisors to Evolvence India Life Sciences Fund.
In July 2006, Manipal Health Systems Private Limited raised Rs 900 million equity from IDFC Private Equity Fund II, a fund managed by IDFC Private Equity to expand its network.