Is Indian Healthcare Sector Ripe For Disruption? private equity funds in India

private equity funds in India is growing at a rapid pace at a CAGR of 22% since 2016. At this rate, it is expected to reach USD 372 Billion in 2022. It provides direct employment opportunities to 4.7 million people and the sector has the potential to create 2.7 million additional jobs by the year 2022.

India is considered as one of the fastest-growing healthcare markets worldwide and is giving a fillip to the positive investment sentiment in this sector. Given the opportunities and significant RoI the sector is offering, private equity funds in India have been aggressively making its ways towards the healthcare sector.

Indian healthcare industry mainly consists of hospitals, medical devices and equipment, health insurance, clinical trials, telemedicine, and medical tourism. These market segments are expected to diversify as an aging population with a growing middle class increasingly favors preventative healthcare. Besides, the rising number of lifestyle-related diseases is boosting demand for specialized care services.

Apart from these, COVID-19 is likely to catalyze long-term changes in attitudes towards personal health and hygiene, health insurance, fitness, and nutrition as well as health monitoring and medical check-ups. The pandemic has also accelerated the adoption of digital technologies, including telemedicine.

Further, there is a growing emphasis on and the emergence of Public-Private Partnership models in India’s healthcare sector. The country’s relative cost competitiveness and availability of skilled labor are also making it an increasingly favored destination for medical tourism.

Talking about the policy, the Indian Government is undertaking deep structural and sustained reforms to strengthen the healthcare sector; it has also announced conducive policies for encouraging Foreign Direct Investment (FDI). India’s FDI regime has been liberalized extensively.

· Currently, FDI is permitted up to 100% under the automatic route in the hospital sector and the manufacture of medical devices.

· In the pharmaceutical sector, FDI is permitted up to 100% in Greenfield projects and 74% in Brownfield projects under the automatic route.

According to a report by NITI Aayog, India has emerged as one of the fastest-growing emerging economies over the last two decades, receiving large FDI inflows, which have grown from USD 2.5 Billion in 2000–01 to USD 50 Billion in 2019–20. The healthcare sector, in particular, has received heightened interest from investors over the last few years, with the transaction value increasing from USD 94 Million (2011) to USD 1,275 Million (2016) — a jump of over 13.5 times.

All of these factors together create several opportunities for investment in India’s healthcare industry.