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Buyout funds are piling into Indian hospital chains and medical firms, lured by rising spending on healthcare in the world’s most populous nation, with the sector providing a rare bright spot amid a downturn in overall deal activity.
Private equity and venture capital investment in India’s health and pharmaceutical sector hit a record of about $5.5bn in 2023, a 25 per cent jump on the previous year, according to a report published by Bain & Company on Thursday.
Global private equity executives from firms including Bain Capital and Blackstone Group, as well as KKR co-founder Henry Kravis, have visited India in recent months, talking up its economic potential and pledging multibillion-dollar acquisitions.
This year had got “off to a good start”, said Prabhav Kashyap, a New Delhi-based partner at Bain. “Assets are reaching the right scale . . . more are coming to the market.”
KKR made its latest move in India’s rapidly expanding health sector this week, purchasing medical device manufacturer Healthium Medtech from Apax Partners. Advent International last month said it would invest nearly $300mn in a digital and pharmacy arm of Apollo Hospitals, India’s largest corporate chain.
“Almost all hospitals of size have been invested in by private equity and that trend is not coming down,” said Bhavin Shah, private equity and deals leader at PwC India, who highlighted rising health costs and insurance coverage among the country’s 1.4bn population.
As Indian incomes steadily climb, the spread of non-communicable health issues, such as diabetes, is also on the increase. The medical industry is expanding with the “growing incidence of lifestyle diseases”, according to government agency Invest India, which estimates hospital revenues will hit about $219bn by 2027, more than doubling from 2021.
The tide of money flowing into Indian healthcare also illustrates the widening gulf between the country’s expanding private networks and the parlous state of its underfunded public hospitals.
“Decades of under-investment and mismanagement have resulted in a public healthcare sector that has centres of excellence, but generally low average quality and coverage,” said Radhika Jain, an assistant professor of health economics at University College London.
“The majority of healthcare visits, including a substantial share among poor households, are in the private sector, where people pay the full cost out of pocket.”
With India in the middle of national elections, the incumbent Bharatiya Janata party — led by Prime Minister Narendra Modi — has promised to improve health services. In 2018, his government rolled out a public insurance policy to cover about 120mn low-income households.
But government health expenditure remains among the lowest globally, at just over 1 per cent of GDP. Access to quality care remains patchy, particularly in India’s vast rural hinterland.
“Inadequate infrastructure, a shortage of healthcare professionals” and a “lack of trust” in public facilities had driven most Indians to private providers, said Javier Guzman, director of global health policy at the Center for Global Development think-tank in Washington.
Yet Modi’s shift to expand insurance to cover private care for poor Indians “is not a panacea” and is “enormously complicated”, Jain said.
“It requires careful pricing, enforcement of insurance rules . . . fraud control, and tying payments in some way to health outcomes,” she added. “It’s unclear how well it has ensured broad-based access to high-quality and affordable healthcare.”
Fund focus on the medical industry stood out in the context of a wider 35 per cent overall contraction in 2023 in private dealmaking in India, to about $39bn. That mirrors worldwide trends affected by globally elevated interest rates and political tensions, according to Bain. The drop was driven by a 60 per cent plunge in venture capital funding,
Capital deployment will probably “remain cautious” this year, but the consultancy noted India’s share of private investment in Asia had climbed from 15 per cent to 20 per cent since 2019.
Given China’s slowdown, most funds “are keen to deploy a large amount of capital in India”, said PwC’s Shah. “Many deals will close this year.”
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