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Healthcare

Last Updated: November 2009

Sector structure/Market size


Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017, according to Technopak Advisors in their
report – ‘India Healthcare Trends 2008’.
The sector offers immense potential to healthcare players as the country witnesses a rise in the incidence of lifestyle-related and other diseases. A growing elderly population
and rise in income levels are also pushing for better facilities in the country.
To meet this growing demand, the country needs US$ 50 billion annually for the next 20 years, says a Confederation of Indian Industry (CII) study. India needs to add 3.1 million
beds by 2018 to the existing 1.1 million, and requires immediate investments of US$ 82 billion, as per the Technopak Advisors report.
Adds a FICCI-Ernst and Young report, India needs an investment of US$ 14.4 billion in the healthcare sector by 2025, to increase its bed density to at least two per thousand
population.
According to a latest report by McKinsey, driven by strong local demand, Indian healthcare market is expected to continue growing close to previously projected rates of 10 to
12 per cent. With average household consumption expected to increase by more than seven per cent per annum, the annual healthcare expenditure is projected to grow at 10
per cent and also the number of insured is likely to jump from 100 million to 220 million.
India's healthcare industry registered 42.44 per cent growth in net profit during April-June 2009, according to the Associated Chambers of Commerce and Industry
(ASSOCHAM). In the healthcare sector, the leading 10 companies posted a growth of 23.94 per cent in total income and 21.37 per cent in total expenditure during the quarter,
the study said.
Health Insurance
Currently only 10 per cent of the Indian population has health insurance, which means that there is tremendous scope for growth in this area. The Indian health insurance
business is growing at 50 per cent. The sector is projected to grow to US$ 5.75 billion by 2010, according to a study by the PHD Chamber of Commerce and Industry.
Investments in Healthcare
The sector has been attracting huge investments from domestic players as well as financial investors and private equity (PE) firms. Funds such as ICICI Ventures, IFC,
Ashmore and Apax Partners invested about US$ 450 million in the first six months of 2008-09 compared with US$ 125 million in the same period a year ago, according to an
analysis carried out by Feedback Ventures. Feedback Ventures expects PE funds to invest at least US$ 1 billion in the healthcare sector in the next five years.
In February 2009, India Venture invested almost US$ 18 million in Tamil Nadu-based Kavery Medical while in June IFC invested US$ 30 million in Max India.
Piramal Life Sciences, the research and development (R&D) arm of Piramal Group is investing US$ 41.17 million in the next two years’ period to discover and develop new
chemical entities and novel drug delivery systems.
The Hinduja Group will invest up to US$ 72 million in increasing capacity of its hospital in Mumbai by 350 beds in the next four years through expansion of existing facility and
setting up of a new unit.
As part of its ‘Healthymagination’ initiative, GE will spend US$ 3 billion over the next six years on research and development, provide US$ 2 billion of financing over the next six
years to drive healthcare information technology and health in rural and underserved areas, and invest US$ 1 billion in partnerships, content and services.
The government, along with participation from the private sector, is planning to invest US$ 1 billion to US$ 2 billion in an effort to make India one of the top five global
pharmaceutical innovation hubs by 2020.
The Ajay Piramal Group-owned private equity (PE) firm, India Venture Advisors, will launch its second US$ 150 million healthcare fund next year.

Healthcare

OVERVIEW

SIZE
The Indian Healthcare market is estimated at about US$34 billion (FY 2006)

The industry is expected to grow at 15% p.a., to reach US$79 billion by FY 2012

The large domestic market complemented by the inflow of medical tourists

○ Medical tourists have increased almost 20-fold from 10,000 in 2000 to about 1,80,000–2,00,000 in 2006

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STRUCTURE
The industry is fragmented with a large number of independent, privately run hospital and healthcare centres

Private sector corporate entities like the Apollo Hospitals, Wockhardt Hospitals and Fortis Healthcare have aggressive expansion plans

Indian hospitals are gaining reputation globally as “quality” service providers

○ Many Indian hospitals have secured accreditation from the British Standards Institute and Joint Commission on Accreditation of Healthcare Organisations

○ NHS, UK has indicated India to be a preferred destination for surgery


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POLICY
100% FDI is permitted for all health-related services under the automatic route

Infrastructure status has been accorded to hospitals

○ Lower tariffs and higher depreciation on medical equipment

Income tax exemption for 5 years to hospitals in rural areas, Tier II and Tier III cities

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Top Private Healthcare Providers in India

Player FY07 Revenues (US$ million) Number of Hospitals

Apollo Hospitals 225 41

Wockhardt Hospitals 59 12

Fortis Healthcare 31 11

Manipal Group NA 20

Source: Company websites, Capitaline Database

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OPPORTUNITY

Healthcare delivery is one of the largest service World-class healthcare facilities are available in India
sector industry in India

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OUTLOOK
1. The industry is expected to grow to US$79 billion by 2012

2. Medical tourism is expected to become a US$2.2 billion industry by 2012

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POTENTIAL
1. High-growth in the domestic market arising from:

1. Increasing health awareness: share in total private consumption expected to increase by 10%

2. Increasing penetration of health insurance

3. Rapid growth in private sector companies owning and managing hospitals

2. High-growth in medical tourism

1. Cost of comparable treatment is on average 1/8th to 1/5th of those in western countries.

3. Opportunities exist in multiple segments along the value chain

1. Service providers: curative and preventive in primary, secondary and tertiary care

2. Diagnostics services: imaging and pathology labs

3. Infrastructure: hospitals, diagnostic centres

4. Health insurance: less than 10% of the population is covered by health insurance. The medical insurance premium income is expected to grow to US$3.8 billion by 2012

4. * 44% growth in health insurance during 2006-2007

1. Healthcare BPO: medical billing, disease coding, forms processing and claims adjudication

2. Training: large opportunity for training doctors, managers, nurses and technicians

5. Investment opportunity of over US$25 billion by 2010

Source: IBEF, Indian Healthcare Foundation, India Country Commercial Guide 2002

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For additional information: Ministry of Health and Family Welfare (http://mohfw.nic.in), Indian Medical Association (http://www.imanational.com)

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Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

Private Hospital Segment Will Touch US$ 45 Bln. By 2012 : ASSOCHAM-YES Bank
Sunday, December 13, 2009

The Indian private hospitals segment estimated to reach a level of US$ 45 billion by 2012
with a CAGR of 20% against the present level of US$ 22 billion and have significantly
increased their investments in Tier II and III cities, according to ASSOCHAM and YES Bank
Study.
The Study brought out by the two institutions have also projected that the Indian diagnostic
and pathology services contribution to healthcare industry shall touch US$ 2.5 billion by
2012 as against US$ 1.2 billion during 2008-09.
The private sector accounts for 80 percent of India’s healthcare delivery market which is
higher for India than in any other country in the world. Rising income levels and exposure to
international standards of quality have led to an increasing demand for quality private
healthcare. Out of pocket spending by Indians constitutes 94 percent of total spend in the
private health industry.
Investments by private players for Tier II and III cities, the ASSOCHAM President, Dr. Swati
Piramal said are increasingly getting momentum and with the economic growth in these
cities, healthcare sector is expected to rise exponentially. Vaatsalya Healthcare has
successfully completed two rounds of funding. While in 2008, it raised almost INR 6 crores
from Seedfund and Aavishkar, it recently raised a further amount from Oasis fund and
returning investor Seedfund. Though the investment amount is small, it is indicative of the
interest and confidence in a novel model like that proposed by Vaatsalya.
Another such hospital is Vikram Hospital which has raised money from ICICI Venture. The
hospital chain aims to create super specialty hospitals in Tier II cities like Mysore. Sahyadri
Hospital based out of Pune has a similar model and raised money from ICICI Venture as did
Quality Care India based out of Hyderabad who raised money from Ashmore.
The private healthcare landscape is poised to be a key contributor to the healthcare
industry. With substantial Private Equity investments in private hospital chains not only in
urban cities but also in innovative rural models, we expect this large investor appetite to
contribute significantly to the increase of private healthcare establishments. Innovative
infrastructure financing models will reduce incubation periods stimulating increased investor
interest. Large corporations have also begun venturing into this highly lucrative business
and we expect to see continuity in this trend.
The study further says the increasing attractiveness of this sector for private investors has
helped fuel the organic and inorganic growth requirements of these companies. The
Chamber expected to see a greater interest from private equity players once significant
consolidation in the sector takes place along with the verification of an appropriate India
specific business model.
Several key players have proposed significant investments into their expansion plans. Dr.
Lal PathLabs plans to scale up to a size of 50 laboratories with 1000 collection centres in the
next five years with an investment of INR 35cr. Piramal Diagnostics plans to invest INR
100cr to add 10-15 laboratories over the next three years and increase the number of
collection centres to one thousand by the year 2012, with an increased focus on Tier II and
III towns. Similarly Metropolis Health Services and Super Religare Laboratories propose to
invest INR 100Cr and INR 150Cr respectively to penetrate new geographies pan India.
The industry is highly fragmented and encompasses over 40,000 laboratories, very few of
which are accredited. These include the major pathological laboratory chains spread across
urban cities referred to as corporate laboratories, the smaller regional laboratories catering
to the local population, and hospital run diagnostic facilities.
The corporate laboratories cater to the portion of the population with increasing household
income and health awareness; large corporations, and insurance companies; and
pharmaceutical companies in their clinical and Research and Development activities. The
regional laboratories and hospital run facilities primarily cater to patients with existing
medical conditions.