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Healthcare Industry in India

March, 2013

Brief Overview

The Indian healthcare sector is estimated to reach US$ 100 billion by 2015, growing 20 per cent year-on-year (y-o-y), as per rating agency Fitch. The industry is expected to touch US$ 280 billion by 2020, on the back of increasing demand for specialised and quality healthcare facilities.

India is the most competitive destination with advantages of lower cost and sophisticated treatments, highlighted the RNCOS report titled 'Indian Healthcare - New Avenues for Growth'. The report further elaborates that several key trends are backing the growth of India's healthcare sector.

"India is a very important market for many reasons. The government continues to invest in healthcare. We see that healthcare is expanding across the country. There is a growth opportunity and we continue to invest very much in India. There is so much innovation in India," highlighted Mr Adam H Schechter, Executive Vice President and President, Global Human Health Division, Merck.

Market Size

Private equity (PE) and venture capital (VC) investments in the healthcare industry in India are increasing rapidly. In 2012, the industry absorbed US$ 1.2 billion across 48 deals, according to research firm Venture Intelligence.

The hospital and diagnostic centre in India has attracted foreign direct investment (FDI) worth US$ 1,542.35 million, while drugs & pharmaceutical and medical & surgical appliances industry has registered FDI worth US$ 9,783.31 million and US$ 584.14 million, respectively during April 2000 to December 2012, according to data provided by Department of Industrial Policy and Promotion (DIPP).

Indian pharmaceutical industry is projected to show double-digit growth in near future owing to a rise in pharmaceutical outsourcing and rising investments by multinational companies, as per RNCOS report titled 'Indian Pharma Sector Forecast 2014'.The report highlighted that focus of the industry will shift towards capitalising the potential of tier-III and rural areas. Emerging sectors, such as bio-generics and pharma packaging will also pave way for the pharmaceutical market to continue its upward trend during the forecast period (FY 2012- FY 2014).

Trends and Investments

Healthcare providers in India plan to spend Rs 5,700 crore (US$ 1.05 billion) on IT products and services in 2013, a 7 per cent rise over 2012 revenues worth Rs 5,300 crore (US$ 981.50 million), according to a report by Gartner. It is expected to grow to 3.9 per cent to reach Rs 1,720 crore (US$ 318.52 million) in 2013, with most of this growth coming from enterprise communication equipment.

Further, the hospital services market, which represents one of the most important segments of the Indian healthcare industry, is expected to be worth US$ 81.2 billion by 2015, as per a RNCOS report.

Some of the major investments in the sector include:

  • Temasek Holdings, Singapore's state-owned investment company, has invested Rs 140 crore (US$ 25.92 million) in the cancer care provider HealthCare Global Enterprises (HCG)
  • LifeCell International Pvt Ltd has won funding of Rs 35 crore (US$ 6.48 million) from Helion Venture Partners. The investment will be used to increase LifeCell's market awareness and penetration in the country, said Mr Mayur Abhaya, CEO and MD, LifeCell
  • Spice Global has made an investment of Rs 400 crore (US$ 74.07 million) in a new healthcare foray to launch multi-speciality Saket City Hospital in the New Delhi. The hospital will have 1000 bed capacity by the end of its third and final phase, expected by mid-2016
  • International Finance Corporation (IFC) is planning to invest around US$ 25 million in the India 2020 Fund II, a successor fund to India 2020 Fund I. The new fund has a target size of US$ 125 million and will focus on investing in Indian small and medium enterprises (SME) in healthcare, education, rural consumption and agribusiness
  • Sri City, an integrated business city near Chennai, has signed a memorandum of understanding (MoU) with Medical Research Foundation of Sankara Nethralaya to establish an eye care hospital and research facility inside the industrial complex
  • Apollo Group of Hospitals has launched its telemedicine service in Yangoon, Myanmar. The facility will allow Myanmar to consult Indian doctors and have accessibility to quality treatment and latest medical technology. As per company's press statement, the network will primarily provide infrastructure supports like Tele-Education, Tele-Medicine, Internet, videoconferencing and voice over internet protocol (VoIP) services via satellite and fibre optic network
  • Dubai-based health care major, DM Healthcare plans to invest Rs 2,300 crore (US$ 425.92 million) in Kerala over a period of three years. The Group aims to provide quality healthcare to people across geographies. The firm has close to 1,000 beds in India and is looking to take this up to 4,000 in two years' time by establishing clusters of 'Hub and Spoke Hospitals' in the Tier II and III cities
  • Fortis Healthcare International plans to sell its 64 per cent stake in Dental Corporation Holdings Ltd, Australia, to UK-based Bupa for A$ 270 million (US$ 284.62 million). The firm's businesses span diagnostics, primary care, day-care specialty centres, and hospitals