The pandemic proved to be the inflection point for the industry-highlighting the dearth of good quality healthcare facilities and increasing the investor interest in the sector. Hospital companies have emerged from the pandemic financially stronger, managing to cut down debt, improving average revenue per operating bed and investing in technology such as robotics to improve the healthcare outcomes. Public healthcare expenditure has continued to remain low even as medical insurance penetration as well as costs continue to rise.
Over the years, most large players have turned to private equity to fund their organic as well as inorganic expansion. For instance, the merger of Aster DM Healthcare and Care Hospitals is slated to create India’s third largest hospital chain backed by PE major Blackstone.
While several corporates such as Tata, Birla and Hinduja have a presence in healthcare, none has made a significant pan-India presence. Bajaj with its plan to set up a chain of hospitals in metros can make a difference. But it will have to face challenges.
Healthcare investment requires deep pockets and a long-term horizon. It is a difficult and expensive proposition to set up a hospital from scratch (green field project) in India today. There is a gestation period of 3-4 years for the new hospital to break even. Acquiring smaller hospitals has emerged as a viable alternative but there are limited targets available at high valuations. Most leading chains operate their facilities in the metros. It is the smaller cities and towns that need high quality infra.
There are challenges like shortage of health professionals, investment in tech and getting the payor mix right. There is the challenge of striking a balance in a healthcare infra-starved country like India of making the healthcare services accessible, affordable as well as profitable. With Bajaj being a household name in India, patients will have high expectations from its hospitals.
