CII: Funding agencies vital for healthcare sector

Last Updated: Sat, Jul 20, 2013 18:35 hrs

The Confederation of Indian Industry (CII) on Saturday noted that the healthcare industry in India is at a point of inflection in terms of growth and funding agencies are one of the critical agents for giving a big push to the healthcare sector in India, including Eastern Region, here.

CII on Saturday hosted the conference on the Scope of Venture Capital & PE fund in Healthcare and reiterated that given the enormous size of the sector and the fast pace it is growing, the healthcare industry requires active participation from venture capitalists, private equities and other funding agencies.

Sanjay Randhar, President, India Venture Advisors Pvt Ltd, said that Tier II and Tier III cities will drive the next phase of growth in healthcare in India.

"The next story will come from tier-II and tier-III cities. This is a market that has huge potential for expansion in quality healthcare," Randhar said.

With RBI having classified the healthcare industry as part of the infrastructure sector, long-term loans for a term period of 12 years are now available, he added.

Randhar also noted some traditional forms of funding such as debt and private equity and new models like PPP, joint ventures and management contracts.

In the end, he said, it is the risk appetites of funding agencies that will define and determine how the mode of funding will evolve.

A major advantage of PE is that these promoters bring efficiency to the system in the form of better management practices such as corporate governance, financial re-engineering and benchmarking, he said.

"However, an important challenge with PE funding is deciding on the right time to exit and a viable route."

According to Amit Mookim, Partner, Head Healthcare, KPMG, a successful investor needs long-term vision and a "defensible proposition" rather than an eye for "supernormal profit" in health care.

Some features that attract a funding from venture capitals and PEs are scalability of projects, defensible propositions, ability to emerge as a leader and disruptive capacity of the model, he said.

G V Ravishankar, Managing Director, Sequoia Capital, underscored the need for innovative and capital-efficient business models.

He cited a few successful enterprises that developed infrastructure at a very low cost or developed processes that were easily replicable at low cost.

Rana Mehta, Executive Director, PWC, said regulatory reforms, industrialisation and personalisation have been some of the major drivers of the healthcare sector in India.

He outlined a few major areas that have high growth potential in the future such as HONDA (hypertension, obesity, non-compliant, diabetic, asthma).

"Cancer can be the new Cardiology," said Mehta, highlighting its huge scope in healthcare delivery.

Earlier, in his welcome address, Viresh Oberoi, Deputy Chairman, CII Eastern Region, said India has become a major destination for investment in healthcare.

"However, there is still a big demand-supply gap. India needs over 100,000 hospital beds and a several-fold increase in diagnostics centres to achieve India's ´Health for All´ initiative by 2020," he said.

The hospital and diagnostic centre in India has attracted foreign direct investment (FDI) worth USD 1,542.35 million, while drugs and pharmaceutical and medical and surgical appliances industry has registered FDI worth USD 9,783.31 million and USD 584.14 million, respectively during April 2000 to December 2012, according to data provided by the Department of Industrial Policy and Promotion (DIPP).

"Healthcare providers in India plan to spend Rs 5,700 crore (USD 1.05 billion) on IT products and services in 2013, a 7 per cent rise over 2012 revenues worth Rs 5,300 crore (USD 981.50 million). It is expected to grow to 3.9 per cent to reach Rs 1,720 crore (US$ 318.52 million) in 2013, with most of this growth coming from enterprise communication equipment," Oberoi said.

Rupali Basu, Chairperson, Healthcare Sub-Committee, CII Eastern Region & CEO, Apollo Gleneagles Hospitals, Kolkata, explained how the healthcare sector is growing exponentially on the back of the rising middle-class in the country and demand for quality healthcare services.

"By the end of 2015, the sector will be worth USD 100 billion, and by 2020, it will be $280 billion," she said.

Basu added, "This is a great opportunity for the funding agencies to look at Eastern India, especially West Bengal, which offers a wide range advantages - low-cost and quality treatment, to name a few."

"Funding agencies such as private equity (PE), venture capital (VC), debt funds see this as a great opportunity to engage with healthcare in the region and give a big push to the industry. Notably, in 2012, the industry absorbed US$ 1.2 billion across 48 deals, according to research firm Venture Intelligence," she said.

"A large number of patients from Bangladesh, Nepal, Bhutan and Myanmar, visit Kolkata for organ transplant, treatment of orthopedic, cardiac and oncology problems. There are opportunities in Medical Tourism as well," she asserted.

CII further stated that Private equity (PE) and venture capital (VC) investments in the healthcare industry in India are increasing rapidly.

In 2012, the industry absorbed USD 1.2 billion across 48 deals, according to research firm Venture Intelligence.

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