Eye care industry is at an inflection point and a boom in M&A activity is expected
As it reaches an inflection point where organized businesses wanting to establish a national footprint will attempt to disrupt a market that has historically been controlled by mom-and-pop stores, India's eye care sector is poised to experience a surge in Merger and Acquisition (M&A) activity.
In the next five years, the M&A boom might see the rise of four or more significant firms, which together could own more than 2,000 eye hospitals across the country. According to industry observers, acquisitions may account for up to 50% of their growth.
Currently, patients who require surgical procedures for cataract removal or vision correction are taken care of by ophthalmologists that operate tiny clinics around the nation. The larger firms with access to money are attempting to buy out the smaller ones and merge them under a single brand.
Dr. Mahipal Sachdev, Founder of the Delhi Board Centre for Sight, is a Padma Shri awardee and a practicing ophthalmologist who left his position at the All-India Institute of Medical Sciences to start his eye care hospital chain in 1996. Out of the 90 hospitals run by the Centre for Sight, 13 came about through acquisitions.
Other major players have used funding obtained from private equity firms to engage in acquisitions more forcefully. For instance, Jodhpur-based ASG Eye Hospitals, which secured Rs. 1,500 crore (US$ 181.1 million) from General Atlantic and Kedaara Partners in July of last year, recently bought Vasan Eye Care. This enabled it to spread its reach from northern India to areas of southern India, such as Karnataka and Andhra Pradesh, where Vasan had the majority of its centres, and expand it from a chain of 50 hospitals to over 150 hospitals.
This is proceeding according to diagnosis. This is what happened as diagnostic chains began to grow by obtaining more compact setups. National players were produced as a result, according to Mr. Nav Khosla, Partner at Novo Holdings, the company that controls the Danish pharmaceutical giant Novo Nordisk.
India outperformed the US, Europe, and China combined in the number of cataract procedures conducted in a single year, performing 83 lakh in the fiscal year 2022-23.
According to projections made by some investment bankers, the Indian eye care sector's revenues are currently estimated to be over US$ 3 billion and are expected to increase by 14% annually. Only 10% of the market is controlled by organized firms.
Other organised companies with significant expansion aspirations include Dr. Aggarwal's Eye Hospital, which the late Dr. Jaiveer Agarwal founded, and Maxivision, which is led by Dr. GSK Velu. Over the following few years, Dr. Agarwal plans to develop a network of 500 hospitals.
Dr. Jaiveer Agrawal further mentioned that acquisition-based growth enables entry into newer geographies and strengthens brand recognition. You can collaborate with outstanding medical professionals and groups from various markets.
While Maxivision recently closed a Rs. 1,300 crore (US$ 157.26 million) fundraising round from Qaudria Capital, Dr. Agarwal raised Rs. 1,000 crore (US$ 120.97 million) from US-based fund TPG Growth and Singapore's Temasek in May of last year. Both have intentions to use the funds for M&A activity, according to industry observers. Most of Dr. Agarwal's clinics are currently concentrated in southern India, although recently, the company has acquired hospitals in Pune, Panchkula, Chandigarh, and Mohali. The three southern states of Andhra Pradesh, Telangana, and Tamil Nadu are the focus of Maxivision's operations.
This strategy is more asset-light than multi-specialty, making it scalable across numerous cities. Eye hospitals are an appealing possibility for PE because of their high return on investment and well-diversified footprint, according to Mr. Gaurav Sharma, Managing Director (MD) of Investcorp. One of the first investors in ASG Eye Hospitals was Investcorp. M&A will be a key factor in the sector's growth, but analysts warn that it has drawbacks.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.