Toro Finserve to launch $500 mn fund to invest in healthcare real estate

Investment opportunities in India's health-care sector are huge

Private equity firm Toro Finserve is raising a $ 500 million fund to invest in real estate for healthcare enterprises. This is the first fund focused on putting money on infrastructure for hospitals and diagnostic companies in the country, it says.

 

India Healthcare Opportunities Fund, which has got commitment of $110 million from investors, has an investment committee with advisors such as Dr Lal PathLabs Chairman Dr Arvind Lal, former Pfizer India Managing Director Kewal Handa, and Dr Sampat Shivangi, ex-chairman of American Association of Physicians of Indian Origin (AAPI). The fund will have an initial size of $250 million, with additional leverage of $250 million.

 

Investment opportunities in India's healthcare industry are huge, owing to the limited infrastructure built so far. There are around nine hospital beds per 10,000 population, compared to 39 beds for a similar population in China. India needs around three million beds to achieve the target of 30 beds per 10,000 people by 2025, and an additional 1.54 million doctors and 2.4 million nurses required to meet the growing demand for healthcare. For this, India requires $200 billion investments on healthcare infrastructure.

 

“For a medical entrepreneur, there are very limited opportunities for funds, and most of them are expensive,” says Kapil Khandelwal, managing partner at Toro Finserve.

 

Toro is building a model of sale-lease back transaction of real estate assets for medical entrepreneurs who are looking to either set up one or a chain of hospitals, old-age homes or diagnostic centres in the country. This would allow them to free up capital to deploy in their business and focus on better returns, Khandelwal says.

 

The firm has a pipeline of $200 million investment opportunities in hospital and healthcare assets in the country. Toro is in talks with three state governments to invest in the fund.

 

Total investments in India's real estate sector has increased by 40 per cent from $3.8 billion in 2011 to $5.4 billion in 2016, with a bulk of the money invested in core office and residential assets. The share of private equity investments in 2016 stood at 58 per cent last year.

 

Toro says real estate in healthcare offers an untapped opportunity that has not been exploited by investors so far.

 

The team has worked on over $42 billion of real estate transactions and $2 billion worth healthcare transactions globally, says Khandelwal.

 

In India, hospitals are the biggest segment and contribute 75 per cent to the healthcare market. The segment clocked 12 per cent CAGR during 2012-15 to $63 billion. Private healthcare system comprises 75 per cent of the total healthcare market, implying $48 billion opportunity for private players who have put up 185,000 beds across the country.

 

Toro says it could play a role in taking the country towards a more organised healthcare sector, which is currently less than 20 per cent, by helping entrepreneurs build chains and provide quality healthcare service to citizens.