Indian hospital sector attracts USD 1.5B FDI in FY24
India’s healthcare sector is experiencing a remarkable transformation, particularly in the realm of foreign direct investment (FDI). Hospitals are now at the forefront of this investment surge, capturing a significant share of the market. This article delves into the recent trends, major deals, and future prospects of the healthcare investment landscape in India.
Rising share of hospitals in FDI
The healthcare sector in India has seen a dramatic increase in deal-making activities, especially in hospitals. In the fiscal year 2024 (FY24), hospitals accounted for 50% of the total FDI in healthcare, amounting to $1.5 billion. This is a notable rise from just 24% in FY21 and 43% in FY20. The growing prominence of hospitals reflects a shift in investor preferences, moving away from the traditional focus on pharmaceuticals.
Historically, the pharmaceuticals sector, including active pharmaceutical ingredients (APIs), attracted substantial investments. However, the Covid-19 pandemic has shifted attention towards hospitals and diagnostics. Investors are now keen on acquiring stakes in major hospital chains, leading to significant buyouts. For instance, Aster DM Healthcare recently announced its merger with Quality Care India, highlighting the trend of consolidation in the sector.
According to Sujay Shetty, the global health industries advisory leader at PwC India, the Indian healthcare market is still underserved, particularly in rural areas. The high disease burden and the growth of both public and private insurance are driving demand for quality healthcare. This optimism suggests that the hospital sector will continue to attract investment, paving the way for future growth.
Major deals reshape the landscape
The past year has witnessed several high-profile deals in the Indian healthcare sector. One of the most significant transactions was Temasek’s acquisition of an additional 41% stake in Manipal Hospitals for $2 billion, valuing the company at an impressive $4.8 billion. Such large-scale investments indicate a strong belief in the potential of the hospital sector.
Abhay Soi, the Chairman and Managing Director of Max Healthcare, emphasized the need for substantial investment in quality healthcare facilities to achieve India’s goal of becoming a $5 trillion economy. He noted that the hospital sector is capital-intensive and typically does not pay dividends. Instead, profits are reinvested to enhance infrastructure. Max Healthcare, for instance, is in the process of doubling its capacity over the next three years, with an investment exceeding Rs 5,000 crore.
The surge in primary market transactions has also contributed to the growing interest in hospitals. Six hospitals completed their initial public offerings (IPOs) recently, attracting new investors, particularly private equity firms looking for ownership stakes. This trend underscores the increasing confidence in the hospital sector’s growth potential.
Future growth and expansion plans
Looking ahead, the future of India’s hospital sector appears promising. Over the next four years, from FY24 to FY27, the ten listed Indian hospital firms plan to increase their combined bed capacity by 47%. Most of this expansion is expected to occur in northern and southern India, where demand for healthcare services is particularly high.
The listing of seven new large hospital chains on the stock exchanges has further bolstered growth. These chains collectively raised around Rs 3,600 crore through IPOs and qualified institutional placements (QIPs). This influx of capital will enable hospitals to enhance their services and expand their reach, ultimately benefiting patients across the country.
Analysts believe that the ongoing investments and expansions will significantly improve healthcare access and quality in India. As the sector continues to evolve, it is poised to play a crucial role in the country’s overall economic growth and development. Observer Voice
