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Covid-19 pandemic: PEs pour $584 million into healthcare in 2021

June 11, 2021 16:32 IST

While tech healthcare is undoubtedly coming into focus, it is led primarily by online pharmacies that are diversifying to include diagnostic services, tele-consultations and so on.


IMAGE: Cartoon characters Motu-Patlu wear face masks during an awareness campaign against COVID-19 at a market in Bhopal. Photograph: Rajeev Gupta/ANI Photo

Sensing a huge opportunity in the healthcare sector during the Covid-19 pandemic and its aftermath, private equity (PE) players are upping their investments in the space.

According to data from research platform VCCEdge, the PEs have together invested a staggering $583.82 million in the first five months of 2021 in five deals, which is the highest investment in the sector in the last five calendar years — from 2016 to 2020.


The second highest investment in the sector took place in 2017, when PEs invested $503 million in 18 deals, with an average deal size of $29. 9 million.

In 2021, though, the average deal size has been $116.82 million.

However, it is only the big hospital chains and pan-India clinics that are attracting the big bucks.

Top hospital chains where PE investors have put in money include Manipal Healthcare ($286.21 million from NIIF Strategic Opportunities Fund), Apollo Hospitals ($224.11 million from Sands Capital Management) and promising hospitals like GHV Advanced Care Ltd which runs Prystyn surgical centres across the country ($53 million from Sequoia) and DCDC Health Services, which runs 150 dialysis centres independently and in hospitals across India.

Though they are ready to pour more money into the healthcare sector, PEs face some challenges.

These include the fragmented nature of the healthcare business where just a few large hospital chains have reasonable bed capacity and valuations.

Besides, while the emerging tech health sector shows promise, it is still in its infancy.

Says Amit Chandra, chairman of leading global PE firm Bain Capital India, which is closely looking at this area.

“One of the biggest challenges we face is healthcare, which is massively underserved.

"Covid-19 has shown us that we need to re-imagine healthcare with greater tech enablement like telemedicine.

"Unfortunately, there are very few hospital chains in the country with valuations of over $1 billion, which prevents big PE deals in the sector.

"However, PEs see this sector as a key area to invest in.”

While tech healthcare is undoubtedly coming into focus, it is led primarily by online pharmacies that are diversifying to include diagnostic services, tele-consultations and so on.

Their acceptance has grown many-fold thanks to the challenges thrown up by the pandemic.

For instance, between January and May of 2021, the total PE investments in the online pharmacy space hit $78.75 million, spread over three deals, while in 2020, it was only $11.2 million (three deals) and in 2018, $80.92 million (four deals).

Moreover, the sector is also witnessing consolidation, with Reliance Industries buying NetMeds last year, and PharmEasy merging with rival Medlife a few weeks ago to forge the country’s largest online pharmacy.

Some investment is also trickling into the telemedicine space, but the overall numbers compared to the opportunity it offers is still very small.

The pandemic induced lockdown last year forced many Indians to try out telemedicine and online medical consultations, leading PEs to raise their commitment in the space to $40.20 million in the calendar year 2020.

While this is a 10-fold increase from the monies they put into the sector in 2019 and nearly 20 times of what they invested in 2018, considering the growing opportunity the sector offers, the investments are relatively less.

Says Bala Deshpande, founder of PE fund MegaDelta, which has a significant allocation in this space: “Post the global pandemic, there is a heightened interest in this space from PE players.

"But as of now, it is large traditional propositions like hospital chains which are cornering the capital in value terms.”

Deshpande adds that more capital will flow from PEs after there is clarity on how this fragmented sector will consolidate, who will top the leader board, and which health bet will win.

Surajeet Das Gupta in New Delhi
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