Healing business offers multi-million-dollar avenues.
There are very few venture capital backed companies that begin opera tions in Ghazipur, a small city in east ern Uttar Pradesh and even fewer will have a 52-year-old entrepreneur at the helm.
But that is where the unconventional ends for GV Meditech, a Varanasi-based health care firm that is setting up a chain of low-cost hos pitals modelled around one of the fastest growing entrepreneurial opportunities in India — afford able healthcare. Apart from hospitals, entrepre neurs are also expanding diagnostic facilities and building new devices to detect and treat illnesses
While India’s young population is getting wealthier over time, it is not necessarily getting healthier. India faces some of the highest incidence rates in the world of conditions such as diabetes cancer, cardiac, respiratory and gastrointestinal diseases.
“Compared to other developing coun tries, India has amongst the lowest rates of diagno sis, treatment and management of such diseases There are unmet needs throughout the healthcare system, which has created tremendous business opportunities,” says Jacob Kurien, partner in New Silk Route (NSR) Advisors, a private equity firm that invests from a $1.2-billion fund.
GV Meditech will roll out a franchise model under the Surya Meditech brand, with small 25 55 bed hospitals offering basic services such as general medicine, child care and maternity care in Uttar Pradesh and Bihar.
“We expect to set up six such hospitals in the first year of operations,” says Dr Indu Singh, who has raised equity capital of up to $2 million from social venture fund Aavishkaar Venture to kick start her new enterprise.
Earlier this week, Song Advisors; the $17-mil lion early stage investment fund backed by Soros Economic Development Fund, Omidyar Network and Google; invested in Eye Q Vision, an affordable eye-care hospital chain based in Gurgaon, which operates eight eye-care hospitals on a hub-and spoke model across Haryana, Delhi, Uttaranchal and Uttar Pradesh and is planning to expand its net work to another 20 towns in the next two years.
In June, private equity major Warburg Pincus an nounced an investment of $85 million in global di agnostic chain Metropolis Healthcare Limited un derlining the rising tide of interest amongst in vestors in the country’s healthcare sector.
Since April this year, nearly $192 million has been invested in segments spanning medical de vices, affordable healthcare and diagnostic servic es according to data from Venture Intelligence, a research firm. Much of this activity is in response to the growing demand for healthcare facilities across the country.
Early this year, NSR invested Rs 250 crore in Nectar LifeSciences, a Chandi garh-based company that supplies pharmaceuti cal ingredient (API) for a range of anti-infection products, including indictable anti-infectives.
Investors are also bullish on the sector as the de mand for healthcare is rarely ever a cyclical phe nomenon. “Given its growth fundamentals healthcare was among the few sectors insulated from the effects of the downturn,” says Sandeep Singhal, managing director of Sequoia Capital, a global investment firm that manages over $1.85 billion of funds targeted at the Indian market.
“We have invested over $100 million in the healthcare space, including a $15-million investment in Vasan Eye Care last year,” says Mr Singhal, whose fund has been an early investor in companies such as diagnostics player Dr Lal PathLabs.
The diagnostics segment, estimated to have a value of Rs 10,000 crore with nearly one lakh laboratories across the country, is a top draw for most investors who are backing the transformation of this sector into an organised segment. For instance, nearly 40% of the market for diagnostic services in the US is provided by the top five companies in the sector.
“As medical insurance is accessed by more people, there will be a more organised market for healthcare in India,” says Ameera Patel, executive director and chief executive officer of Metropolis Healthcare, who expects to roll out more laboratories in India and other emerging markets in Africa as consumer demand for this sector grows.
For investors such as PE major Warburg Pincus, the focus is on three segments in healthcare including hospital chains, diagnostic facilities and innovative medical devices firms. “As a country develops, there is increasing consumption of services in healthcare and education,” says Niten Malhan, managing director of Warburg Pincus, who expects the firm to replicate the success in healthcare investing in US and Europe in the local market.
“We will look for opportunities to do deals ranging from $30-35 million all the way up to $300 million depending on the stage of evolution of the firm,” says Mr Malhan. The firm, which has backed a Chinese company Lepu Medical Technology (Beijing) that builds interventional cardiology devices, is also looking at similar innovations in the medical devices space in India.
Venture capital firms such as IDG Ventures and Norwest Venture Partners are also focused on such a path. Earlier this month, Norwest led a $7.2-million round of funding in medical devices firm Perfint Technologies that develops cancer detection and treatment devices. “We will back companies that are developing intellectual property in medical technology and pharma,” says Mohan Kumar, partner in Norwest Venture.
But it is the affordable healthcare segment that is the cynosure of investor interest. “Quality healthcare at affordable prices is a model that is scaleable,” says Bharati Jacob, partner in Seed Fund, investors who has backed Vaatsalya Healthcare, a start-up that pioneered the lowcost hospital model in Karnataka and is now expanding its services in Andhra Pradesh.
More such hospitals are expected to come up across the region. Investors such as Acumen Fund is putting in $2 million into low-cost eye care organisations Pushpagiri Eye Institute in Hyderabad.
“We will have low-cost eye hospitals in tier-II and III cities such as Vizianagaram and Cuddapah and will soon spread the network to Maharashtra and Gujarat,” says R Govind Hari, chairman of Pushpagiri Eye Institute. Clearly, the business of healing is now a multimillion-dollar opportunity.
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