The Funding Opportunities in Healthcare

June 2015

FUNDING OPPORTUNITIES IN HEALTHCARE

OVERVIEW
Funding options

Equity

Debt

(Including OCPS, CCPS, Options, Warrants)

(Including NCDs, OCDs, CCDs)

Mezzanine financing

Larger inflow of capital leading to

faster ramp up of operations

Tax deductibility of expenses

In the nature of debt capital

Dilution and Exit Pressure and

valuations

Leverage to enhance return

Option for conversion into equity

Gives the lender the rights to convert

if the loan is not paid back

Challenge obtaining long term finance

Costly source of funding

Board directives and control clauses

HNIs, PE/ VC Funds, IPO

Banks, NBFCs, Public Markets

High Yield Funds

Stage of
business

Funding options based on life cycle of the business

Mature Businesses

SMEs

Mid Cap Businesses

Ideas

Micro Business

Revenue

NIL

Up to USD 5 Mn

USD 6 20 Mn

USD 20 200 Mn

> USD 200 Mn

Equity

Incubation funds by
Promoters

Family & Friends,

Angel Investors,
Venture Capital

Private Equity

Capital Markets Mutual

Funds, AMCs
Private Equity

Capital Markets Mutual

Funds, AMCs

Debt

Difficult to source

Difficult to source

Bank loans

Bank loans

NCDs, OCDs, CCDs, Bank

loans

Private & Confidential

FUNDING OPPORTUNITIES IN HEALTHCARE

CAPITAL STRUCTURE PLANNING FOR VARIOUS SEGMENTS IN HEALTHCARE
In INR Mn

Primary

Pure
Pathology

Ambulatory
(Eye Care)

Pure
Radiology

Secondary

Ambulatory
(Maternity)

Tertiary*
Revenue
Capex

400
350

320

Peak^
Revenue
p.a. and
Capex

240

High

180
75
18

18

70

90

70

Moderate

100

Low

12

Asset Turnover

Challenges

Challenges

EBITDA Breakeven
(no. of months)

Mitigation

Servicing principal/ interest before achieving break even

Moratorium option/ Ballooning repayment schedule/ Long term debt

Cash flow management Expansion vs. Debt repayment

Equity would be a more preferable option

Asset-liability mismatch

Business planning (Expansion strategy), Capital structure planning

10

24

12

18

40%

Peak
EBITDA and
Pay back
period

30%

15
80

60

60

80

60
48

20%

Pay back period

100 (months)

60

30

30

35%

22%

40

10%

20
12%

22%

35%

0%

23%

17%
0

Note: ^Typically 4th 5th year of operations

Source: Company data and Spark Research

*300 bed tertiary care facility

Private & Confidential

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