Over the same period, the biggest news in the pharmaceutical industry has been the sell out by the promoters of Ranbaxy to Japanese major Daiichi Sankyo. Tellingly, one of the businesses they have retained is Fortis, the hospital chain. There are also rumours of another Hyderabad-based pharmaceutical company scouting for a buyer to come to its rescue. This is in stark contrast to the trend between 2004 and 2006, when Indian drug majors were sewing up big-ticket acquisitions abroad.
“The first half of 2008 has seen more private equity investment in healthcare and life sciences than all of 2007,” said Rajiv Shukla of ICICI Ventures at a recent industry summit. Most of this money, however, has gone into hospitals rather than drug manufacturing, he adds.
The big ticket deals include AIG’s Rs 400 crore investment in Narayana Hrudayalaya, the Bangalore-based heart hospital. Another Bangalore-based hospital, Healthcare Global, which specialises in cancer treatment, has seen investment by IDFC Private Equity and Evolvence, a Mauritius-based fund. ICICI Ventures has also invested close to Rs 300 crore in three hospitals, just in January 2008.
Medical tourism is also expected to see huge rise with expectations of over 46% CAGR growth in revenues from 2007 to touch $ 2.2 billion in 2012. Evolvence India Life Sciences Fund managing director Hari Buggana says, “Increasing healthcare cost in the more developed economies of the west such as the US and UK, has led to these countries looking at Asia and in particular India for their healthcare needs.”
To conclude, the cost benefit positioning of smaller hospitals is more appealing to the PE investors who see this to be the next IT for India Inc. However, we will have to wait and watch for what fruits these investments bring given the fate of the ‘Para IV filings’ opportunity almost making the companies crunched for cash.