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Scope of Healthcare Investments in India for International Venture Capitalists

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As the Healthcare industry in India is in boom, there is a lot of opportunities for Investors to make healthy investments in Indian Healthcare Industry.

As the Healthcare industry in India is in boom, there is a lot of opportunities for Investors to make healthy investments in Indian Healthcare Industry.

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  • 1. INVESTMENT DESTINATION
    MERGER
    PRIVATE EQUITY
    Health Care
    ACQUISITION
    JOINT VENTURE
  • 2. Agenda
  • 3. Section - I
    Healthcare Scenario in India – A review
  • 4. Market Scenario
    • Public and private hospitals will contribute more than 70% of healthcare sector revenues by 2012
    • 5. Hospital market in India is expected to reach USD 54.7 billion by 2012 with private sector contributing USD 45 billion
    • 6. Increasing number of hospitals in Tier-II and Tier-III cities is the major driver for private sector growth
    • 7. Market is fragmented with large number of independent, privately run hospitals
    • 8. Demand for healthcare far exceeds supply due to dismal performance by the government
    • 9. A huge shortage of beds is a major driver for investment in a growing industry
    • 10. Current figures of 9 beds per 10,000 in India is far behind the world average of 40 beds per 10,000
    • 11. India needs an investment of USD 14.4 billion by 2025 to increase the bed density to 20 per 10,000
    • 12. Specialty hospitals in particular are expected to grow faster than overall industry due to rise in heart diseases and cancer
    Market Size and Growth – Healthcare Sector (USD Bn)
    Market Size and Growth – Private Hospital Sector (USD Bn)
    +27%
    Share of different Sectors
    in Health Expenditure
    Source - IBEF “Healthcare Industry Overview”, Jan 2010; Economic Times article “Healthcare to become $77-bn sector in India by 2012: Report”, Nov 2009; Business Standard article “Private hospital sector may touch Rs 2 lakhcrore by 2012: Study”, Dec 2009;
  • 13. Continued….
    Healthcare Segment’s Share
    Public & Private Growth (2005-2015)
    Public & Private Share in Hospitals
    Private sector
    2005-2015 CAGR
    Source: McKinsey “India Pharma 2015 Prescribed Growth”, Aug 2007
  • 14. Drivers & Challenges
  • 15. Competition
    Hospital industry is dominated by the private sector with 78% market share
    Hospital industry in India is extremely fragmented due to the large number of nursing homes and small- to mid-sized hospitals
    Large private players are leading industry growth:
    Apollo
    Fortis
    Manipal Group
    Max Healthcare
    Global Hospitals
    New players are also entering the market and competition is limited due to the large untapped potential of the market
    Public Vs Private Sector
    New Market Players
    Source: E&Y “Healthcare in India, Emerging Market Report, 2007”, Healthcare Outlook “A Quarterly Report by Technopak” February 2007
  • 16. Future Outlook
    Favourable policies on FDI and taxations will increase foreign participation
    Private equity investing significantly; investment set to increase, especially in regional hospitals
    Large hospital groups making strategic acquisitions but future opportunities may be limited
    Emergence of telemedicine for rural areas with participation from private sector and government
    Evolving concept of “Health Cities”, which have scale and provide a host of satellite services
    Despite increase in number of beds, supply constraints will remain in top cities
  • 17. Section - II
    Foreign investments in India – A Review
  • 18. Overview
    Source: IBEF and Ernst & Young “Healthcare: Market Size and Growth” Oct 2006, INBICS “Healthcare sector” Mar 2008, Investment Commission of India
  • 19. FI’s in relation to healthcare
    Government Policies
    • 100% FDI is permitted for all health-related services under the automatic route
    •Income tax exemption for 5 years to hospitals in rural areas, Tier II and Tier III cities
    •Policies and attractive markets are combining to attract foreign service providers and Investors
    Picking up of foreign investments
    • At least 20 international players are competing for a share of the Indian hospital market
    •Early international entrants, particularly from Singapore and Malaysia are already taking advantage of the hospital market potential
    Source: IBEF and Ernst & Young “Healthcare: Market Size and Growth” Oct 2006, INBICS “Healthcare sector” Mar 2008, Investment Commission of India
  • 20. Section - III
    Investment opportunities
  • 21. Overview
    Medical College
    Hospitals
    Diagnostic chain
    Ayurveda & Homeopathy
    Specialty Centers
    Beauty & Wellness
    IVF Centers
    Nursing College
    &
    Allied Institutions
    Eye Care Centers
    Organ Transplantation
    Psychiatric & Rehabilitation
  • 22. Section - IV
    Way Forward….!!
  • 23. Deal Structuring – in detail
    Exit Policies
    Downside
    Protections
    Documentation
    Stage
    Selection of Appropriate
    Instrument
    IPO in India
    Buy back/Put Option
    ROFO/ROFR/Tag along/Drag along
    Strategic Sale
    Merger
    Breakups
    Portfolio sale
    Holding Company Model
    Ratchet
    Mechanism
    Entry level exchange
    control Issues
    Definitive transaction
    agreement
    Equity Share
    Convertible preference Shares
    Convertible debentures
    Warrants
    ADR’S/GDR’s
    FCCB’s
    Due Diligence
    Automatic route
    Post facto filings with RBI
    MOU/LOI
    Negotiations
    Identification of potential
    Investee
    Source: Nishit Desai Associates “Private Equity Investments in Indian Companies” June 2010.
  • 24. FAQ’s
    1. What is the startup cost structure and CAPEX required for making a hospital?
    2. What is ratchet mechanism?
    Whenever the company issues additional shares to a third party at a price that is lower than the investor’s entry
    price, then such investor would get issued such number of additional shares at no cost to ensure anti-dilution of the
    investor at no additional cost.
    3. Why PE firms using holding company model to create more exit options and reduce risk?
    In the holding company model all the investments in a sector such as healthcare would be made by the
    holding company. The advantages of having such structure includes:
    Multiple hospitals under single focused management
    Exit options like direct initial public offering, secondary stake sale, listing of individual companies
    Investments are not limited by confident investors or limited partners
    Economies of scale in procurement and top management bandwidth utilization.
    e.g. PE firm Sabre capital invested Oyster & Pearl Hospitals in Pune under the holding company
    Sabre Healthcare.
  • 25. For Further Queries Kindly Contact..
    Dr. VarunGoyal
    Project Associate
    EPOS HEALTH (INDIA) PVT. LTD.
    445, UdyogVihar Phase-III
    Gurgaon - 122016, Haryana, India
    Ph #. 91 9650639318
    Tel #: 91 124 4264900
    Fax #:91 124 4264906
    Email: varun.goyal@epos.in
    Skype: varungoyal1984
    Website – www.epos.in