Big Deal | PE pours $8 bn into Indian healthcare, M&A doubles amid market consolidation

While the market volatility as well as the macro concerns may have slowed down the Deal Street, there is one sector that stands out as unphased, that is the hospital space and there is a lot of hectic deal flow in the pipeline as well.

The healthcare sector in India has been a beacon for private equity capital in recent years, with the industry drawing a whopping $8 billion investment over the past five years. According to Kaivaan Movdawalla from Ernst & Young India, the sector will continue to be a bastion of private equity capital in the country.

“Healthcare sector has been and will continue to be the bastion of private equity capital in the country,” he said.

The healthcare sector now represents 5 percent of the entire private equity capital flow into the country, which is a significant increase from the sub-2 percent pre-COVID. The pandemic has highlighted the need for a strong healthcare system, and the private equity capital flow into the sector reflects this.

In addition, the last two years have seen 99 deals in the healthcare sector, which is double the number of deals pre-COVID. The market structure in India's healthcare industry lends itself to consolidation, which has been a contributing factor to the surge in M&A activity, he further mentioned.

Despite the growth in investment and M&A activity, the healthcare sector in India still faces some challenges. Currently, there are around 45,000-50,000 hospitals in the country, but only 3 percent of them have more than 100 beds. In contrast, the US and China have 40-45 percent of their hospitals with more than 100 beds. This disparity highlights the need for more investment in the healthcare infrastructure in India.

Mitesh Daga, MD of TPG Capital and Abhinay Bollineni, CEO of KIMS Hospitals also discussed why this sector is gaining so much deal traction.