PE firms scout for opportunities in healthcare space

Private equity and venture capitalists are keen to invest in Indian healthcare and life sciences (HLS) companies. Over 42 per cent of PE and VC investors surveyed by Venture Intelligence felt there was a huge opportunity to tap the market for healthcare services in semi-urban and rural areas.

PE firms and VCs have invested over $2 billion in healthcare and life sciences companies in India over the last five years and are keen to step up the pace of investments in this industry, says a report by the research firm.

Diagnostic services, medical devices/equipment, hospital chains, wellness products and services as some of the identified sectors for investments.

“Given the fragmented nature of both hospitals and pharmaceuticals sectors, investors see a potential for tapping the consolidation opportunities in partnership with growth-oriented entrepreneurs,” said Arun Natarajan, CEO, Venture Intelligence.

He said, “The HLS industry did not participate significantly in the bull phase of Indian public and private equity markets during 2005-2007. With about 20 per cent of new PE/VC fund corpuses expected to be invested into HLS, a revival is clearly on the cards,” he said.

Despite the overall optimism, PE/VC firms also have some specific concerns relating to investments in the HLS industry. The Venture Intelligence poll lists long gestation periods, scalability and talent shortage as among the top concerns for investors when it comes to the healthcare sector. In the Life Sciences segment, investors’ concerns are focused on the high risk of failure (especially in new drug R&D), stiff competition from inside and outside India, as well as patent-related issues. Lack of clarity in regulations and corporate governance standards were listed as common concerns across the industry, it said.