Hospital sector - The upcoming gem of Healthcare Sector

Hospital sector - The upcoming gem of the Healthcare Sector

Twitter Handle: @shuchi_nahar

India has emerged as one of the fastest-growing emerging economies over the last two decades, receiving large FDI inflows, which have grown from USD 2.5 Billion in 2000-01 to USD 50 Billion in 2020-21. The healthcare sector, in particular, has received heightened interest from investors over the last few years.

In the hospital segment, the expansion of private players to Tier 2 and Tier 3 locations, beyond metropolitan cities, offers an attractive investment opportunity. According to Invest India’s Investment Grid, there are nearly 600 investment opportunities worth USD 32 Billion (INR 2.3 Lakh Crore) in the country’s hospital/medical infrastructure sub-sector.

Indian Government initiatives towards development of hospital sector

With respect to pharmaceuticals, India can boost domestic manufacturing, supported by recent Government schemes with performance-linked incentives, as part of the Aatmanirbhar Bharat (Self-Reliant India) initiative. Further, between 2018 and 2024, patents worth USD 251 Billion are expected to expire globally, presenting a lucrative opportunity for the country’s pharmaceutical sector, including the patent market. In addition to generic drugs, there are investment opportunities in other segments of India’s pharmaceutical sector, including over-the-counter drugs, vaccines, and contract manufacturing and research.

The hospital's industry is the largest segment of the healthcare services in the country which has proliferated from primary healthcare centers to single and multi-specialty corporate hospitals over the years. The healthcare facilities are delivered to the population through public and private routes which are explained below.

India’s healthcare industry comprises hospitals, medical devices and equipment, health insurance, clinical trials, telemedicine, and medical tourism. The medical devices and equipment segment, expansion of diagnostic and pathology centers as well as miniaturized diagnostics have a high potential for growth. Medical Value Travel, especially wellness tourism, also has bright prospects, given India’s inherent strengths in alternative systems of medicine.

Indian government Policies and Scheme for Healthcare Sector

Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA)

Pradhan Mantri Swasthya Suraksha Yojana (PMSSY)

Mission Indradhanush

National Resource Centre for EHR Standards (NRCeS)

National Health Policy (NHP) Scheme

Ayushman Bharat

FDI in India’s Hospital Sector

India’s FDI regime has been liberalized extensively. Currently, FDI is permitted up to 100% under the automatic route (i.e., the non-resident investor or Indian company does not require approval from the Government of India for the investment) in the hospital sector and in the manufacture of medical devices. In the pharmaceutical sector, FDI is permitted up to 100% in greenfield projects and 74% in brownfield projects under the automatic route.

FDI beyond 74% in brownfield projects requires approval from the Foreign Investment Promotion Board. Between April 2000-June 2020, India received USD 6.8 Billion in FDI in hospitals and diagnostic centers. In the AYUSH sector as well, 100% FDI is permitted for the wellness and medical tourism segment.

Need for development Hospital Sector

India which accounts for nearly a fifth of the world’s population has 12 beds per 10,000 people mainly in urban areas with the number being far lower in rural areas. India’s bed density not only falls far behind the global median of 29 beds, it also lags that of other developing countries such as Brazil (21 beds), Malaysia (19 beds), and Vietnam (26 beds).

Despite the uptick in Government spending and thrust on increasing insurance coverage, the Government of India’s expenditure on healthcare stood only at 1.4% of GDP in FY18. The continuing disparity of healthcare spending between urban and rural areas has resulted in a sharp disparity in healthcare availability across the country. The Government of India is planning to increase public health spending to 2.5% of the Country’s GDP by 2025.

The public healthcare facilities in India have been unable to scale adequately to serve the needs of the large population reaching the interiors of the country has been another challenge. Additionally, several of these facilities are understaffed, poorly equipped in terms of basic infrastructure and equipment, and in need of enhanced quality standards and protocols.

This unmet opportunity combined with strong fundamentals has largely led to the private sector taking center stage in the healthcare landscape. The late 1990s witnessed improvement in the economic conditions and made private healthcare affordable to many Indians. These hospitals turned into Centres of Excellence and over time, became the preferred choice for patients and communities over Government hospitals.

Today, the healthcare sector in India offers a potent mix of opportunities and challenges. The significant gap between ‘required’ and ‘actual’ healthcare infrastructure has driven considerable investment over the years into assets like hospitals and other facilities. Healthcare in India today provides corporations with a unique opportunity for innovation, differentiation, and profits it has become a preferred sector for strategic and financial investments.

Few of the Listed Companies in this space:

HCG

Narayana Hrudayalaya

Aster DM

KIMS

Apollo Hospital

Max Healthcare

We will be covering a few of the above-mentioned companies in the coming weeks.

Twitter Handle: @shuchi_nahar

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