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Panacea Biotec may tap PE fund for hospital business expansion

Panacea had bought 76% majority stake from Umkal Hospital last year

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Biotec, the Rs 700-crore drug and vaccine major, is betting big on hospitals. The New Delhi-based company is likely to tap private equity funding for its future expansions.

It will launch its first multi-super specialty early next year, and has larger plans for expanding into tier II, III cities of north India.

Panacea had bought 76 per cent majority stake from Umkal Hospital last year. Under the project, a 225-bed multi-super specialty hospital in Phase III in Gurgaon is expected to start operation by March 2013, at a cost of Rs 145 crore.

Once the first hospital – Panacea New Rise Hospital, starts full-fledged operations, the healthcare major will explore the expansions into north Indian states.

Rajesh Jain, joint managing director, Panacea Biotec, said, "We have plans for a chain starting with North India, depending on experience gained in our first venture. Once our first hospital is launched early next year in 2013, we will explore opportunities for private equity investments as well for further expansions." However, he refused to disclose the figures of fundraising.

According to a recent study by the Associated Chambers of Commerce and Industry of India, private hospital market in India will touch $54 billion by 2014 by growing at a compounded annual growth rate of 20 per cent as against the present level of $26 billion.

Hospital chains in India have witnessed major PE/ VC deals for the last couple of years. In March 2012, US-based Advent International invested $110 million (Rs 560 crore) in the Hyderabad-based hospital chain Care Hospitals. In January, Olympus Capital Asia Investments invested $100 million in DM Healthcare.

“There are a lot of international hospital majors, looking to tap India’s growing healthcare demands. We are open for tie ups with knowledge partners or investors for our future projects,” Jain said.

“In comparison to the hospital sector of developed countries like the US, Indian hospital sector is growing at a faster pace and exhibits a much better operational and financial performance. India has the key advantage of significantly lower costs, which is attracting a large number of international patients to India,” he added. Apart from tapping demand from India, growing demand in medical tourism will also be one of the revenue earning models for Panacea Biotec.

According to a recent study by KPMG, India will need another two million hospital beds by the end of 2028, to achieve a target of five beds per 1,000 patients. At present, India has one bed per 1,000 people, as against the global average of three beds per 1,000 people.

About 25 per cent of its bed strength is devoted to critical care while it will have special focus on neurosciences, renal transplant and dialysis, Orthopedics with Joint Replacement and oncology.  The company has a lease hold 2.54 acre plot in DLF Phase III.

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