Healthcare turns hot for private equity players

Industry sees 30 deals worth $745 million till September

In the past three years, healthcare has emerged a much preferred and rather safe sector for private equity players. The investments being pumped into the sector has been steadily growing and the first three quarters of calendar year 2012 has seen more than double the investments happened in the year 2011.

Till September, the sector attracted 30 deals amounting to $745 million, while in the calendar year 2011, the sector had witnessed only 26 deals valued $320 million, according to the report published by LSI Financial Services.

The total deal value had steadily grown from $220 million in 2010.

Among the major deals happened in the year Advent International invested $110 million in Care Hospitals, GIC invested $100 million in Vasan Healthcare and Olympus Capital pumped in $98 million in DM Healthcare.

Almost 70 per cent of investments have been going into healthcare delivery centres, including multi-specialty hospitals and single specialty hospitals and clinics. Diagnostic labs and medical technology companies too have been attracting PE investments.

“Private equity players look for less volatile, recession-proof sectors, which have a high scalability potential. The doctor to patient ratio in India, especially out of the metros, is abysmally low and there is a huge potential for growth. The industry also has been consistently growing despite the macro-economic ups and downs,” said R V Kajaria, managing director, LSI Financial Services.

As per the study by rating agency Fitch, the $65 billion industry is set to grow at a CAGR of 15.5 per cent to $155 billion by 2017.

Considering the fact that 70 per cent of the total spend is to come from the private sector, the need for investments will continue to be huge.

According to Rahul Roy, vice president, LSI Financial Services tier II and III cities offer huge growth potential for hospitals, as the doctor to patient ratio is as low as 1:25,000 in rural areas.


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