Hari Buggana received first-hand knowledge of the healthcare system when a close relative was diagnosed with cancer some time ago.
After a misdiagnosis in India, he moved the relative to the US for radiation treatment, which cost about seven times the price of similar therapy in India.
"I realised the importance of good affordable treatment," says Mr Buggana, managing director with InvAscent, advisers to the Evolvence India Life Sciences Fund.
The result was Evolvence India Life Sciences Fund's investment in Healthcare Global Enterprises, a cancer treatment specialist run by Bangalore-based doctor Ajai Kumar.
The move is part of an increasing push by alternative investment funds to get a front row seat in new industries in India that are emerging as a result of the country's rapidly growing economy and the rising affluence of its middle classes.
Many view private equity-related funds as a better way of capturing the upside in the economy, given that stock market valuations have been swollen by three to four years of almost uninterrupted share price rises.
And there is no longer a paucity of private equity funds in which to invest in India. Measured by transaction volume, the industry's presence in India has grown exponentially over the past two years.
As of the middle of last month, there were 121 private equity deals in India worth a total of $5.9bn (Euro4bn, £2.9bn) so far this year compared with 112 valued at $3.9bn for all of last year, according to figures from Dealogic, the data company.
Every week, a new infrastructure or real estate fund is announced. Among the big operators, 3i Group of the UK has launched an infrastructure fund while domestic firm IDFC is launching a large infrastructure fund that will involve investment from Blackstone and Citigroup.
More firms are expected to come. A recent survey by KPMG found that only 37 per cent of 119 private equity funds active in the Asia Pacific had investments in India compared with 61 per cent in China.
But 63 per cent of the firms said they would be targeting India in five years compared with 74 per cent for China.
There are also signs that alternative investment managers looking to sell more funds of funds involving private equity holdings will find a more willing audience for their products among Asia's individual high-net-worth investors.
According to a survey conducted by Barclays Capital earlier this year, alternative investments such as hedge funds, private equity and real estate are set to become mainstream investment products in Asia over the next two years as assets under management in China and India boom.
Funds of funds involving private equity are also expected to become a more popular route for tackling India. Dubai-based Evolvence Capital has set up the Evolvence India Fund, a fund of funds focused on private equity in real estate, infrastructure and private equity.
Its strategy is to target fund managers who seek small to medium-sized deals of the $10m-$30m size.
Alongside this, the firm has the India Life Sciences Fund. The strategy here is to participate at the entry level in new industries or business models in India.
The firm paid $5m for a 12 per cent stake in Healthcare Global, its first investment. As Indians grow more wealthy, there is an increasing incidence of the reporting and treatment of cancer, with about 3m known cases in the country to date.
"A few years ago cancer was a rich man's disease primarily because only he could afford the treatment," says Mr Buggana.
"But when it comes to healthcare today, people are willing to borrow and spend more."
He says Healthcare Global's innovation is to take the cancer treatment out of hospitals and put it into specialised clinics. The company runs 10 treatment centres around the country.
Patients, who formerly had to travel to one of the large hospitals in one of the big cities for treatment, can now go to one of the satellite centres nearer their homes. If they need more specialised help, they can visit one of the company's more comprehensive central treatment centres.
Costs are lower because the treatment centres are not part of the expensive infrastructure associated with a large hospital.
This allows the company to specialise in better quality equipment that might not be available in a larger hospital, which must allocate funds to other, higher cost or loss-making areas of the facility.
"This model can be replicated in other geographies as well as other diseases," says Mr Buggana, who is also targeting investments in the pharmaceutical industry.
Copyright The Financial Times Limited 2007
