In the current economic landscape, investors are increasingly focusing on India’s healthcare sector for stable returns in a volatile market. This surge in interest extends across diverse segments, including health providers, pharmaceuticals, diagnostics, health insurance, single-specialty providers and other health technology enabled services.

In 2022, the healthcare sector witnessed deals worth $4.3 billion, constituting approximately 8 percent of total investments. In 2023, with 22 transactions totalling $4.6 billion, the Indian healthcare sector showed promise for investors due to economic growth, business-friendly government, maturing pharmaceutical manufacturing landscape and burgeoning middle class with a keen interest in investing in quality healthcare.

The post-Covid era has also witnessed a surge in both government and private spending on healthcare coverage with the Ministry of Health and Family Welfare receiving a 16.5 per cent boost in the 2022-23 Union Budget at ₹86,200 crore.

Private Equity

The role of private equity in healthcare champions technology-driven solutions, investments leveraging AI and data for improved decision-making, diagnostics, prevention and treatment. Drawing attention to these burgeoning investment opportunities contributes significantly to the growth and evolution of the healthcare sector.

Looking ahead, the government could provide further support to the medtech sector by contemplating reductions in import duties for components and lowering GST on locally procured raw materials, particularly for critical medical devices such as stents, heart valves, knee and hip implants.

Acknowledging the limitations of super-specialty hospitals in effectively managing the entire healthcare landscape, there is a resounding call for a more specialised and cost-efficient approach. A model focusing on single specialties — including eye care and dental care — is deemed a more scalable and capital-efficient means of delivering quality healthcare. Striking a balance between single and multi-specialty models presents multifaceted opportunities for growth and an overall enhancement in healthcare delivery.

While there is a glaring gap in urban vs rural private equity investments in healthcare, incentivising private equity in rural settings — through budget allocations, support for insurance coverage and the establishment of feeder hospitals for basic healthcare, emerges as a strategic approach to promoting rural healthcare.

By adeptly addressing challenges and astutely leveraging opportunities, India can chart a course towards a transformative healthcare system that caters to the diverse needs of its population.

(The writer is Founder and Managing Partner of Kedaara Capital. Views are personal.)