1. Healthcare Sector in India as an Investment
Option
A PE/VC Perspective
© 2005 NEA Inc. All rights reserved.

2. Evolution of Indian healthcare services
Growth
Boom Phase
 New corporate houses
Increased enter the sector with large
Corporatization investment plans
Improving  Consolidation and
Situation  Middle class emergence expansion of existing
and need for high medical corporate chains
Poor State of and service standards
 Well developed health
 Mushrooming nursing
Healthcare  Private insurance insurance system
homes
companies begin
 Improved healthcare in
 Largely govt. driven  First signs of corporate operations
rural India
activity
 Seen as a social/  Multifold growth in
 Need for long distance
charitable activity  Adoption of technology corporates, but a few
number of large hospitals travel eliminated
and emergence of sub-
 Long distance travel specialities
even for simple  Long distance travel only
procedures  Long distance travel only for sub-specialities
for secondary care
1947-1970s 1970s-1991 1991-Current Post 2010
Timeline
Healthcare Services in India has entered a boom phase 2
confidential

3. Growth is driven by several demand
factors
Rising Household
Income
Increase in proportion of
middle class
Increasing Percentage of
Senior Citizens
3
confidential

4. Growth is driven by several demand
factors
Prevalence of
lifestyle diseases
Growth of health
insurance
Treatment Cost USD India USA
Bone Marrow Transplant $30,000 $400,000
Growth of medical Liver Transplant $40,000 $500,000
tourism Open Heart Surgery $4,400 $50,000
Knee Surgery $4,500 $16,000
4
Neuro Surgery $8,000 $290,000
confidential

5. Along with a large demand-Supply
mismatch
Shortage of Medical Professionals in India Beds per ‘000
Doctors per ‘000 Nurses per ‘000
Global Global
Average 1.5 Average 3.0
5
confidential

6. Which will drive large investments in
Healthcare
 Current healthcare spend of ~$75 Billion to double to $150
Billion in next 5 years
 650,000 beds to be added over next 10 years, 20% of which
will be for complex procedures
 More than $40 Billion in capital expenditure needed
 New and innovative business models (vs. multi-specialty
tertiary care hospitals) will get an increasing share of the
investment
6
confidential

7. Key factors that PE/VC Firms look for
 Capital efficient and asset light business models
Business
Model  Examples: day care surgeries, hub and spoke models
Management  Demarcation of responsibilities between management and delivery
Quality  Capable second line of management under promoters
Verticalization
 Focus on building strong capabilities in verticals
 Examples: Orthopedics, Oncology
Brand  Balance of power shifting to hospital brands from doctor driven franchises
Strength
 Brand consciousness increasing among middle class
Corporate  Effective checks and balances to avoid revenue leakages
Governance  Strong MIS systems in place to track financial performance
7
confidential

8. More than $1.6 Billion invested since 2008
Some representative transactions
Company Amount ($m) Investors Date
Max India 115.0 Goldman Sachs Dec-09
Narayana Hrudayalaya 100.0 JP Morgan, PineBridge Feb-08
Metropolis Healthcare 85.0 Warburg Pincus Jun-10
SevenHills Hospital 72.0 JP Morgan May-08
DM Healthcare 50.0 India Value Fund Feb-08
Thyrocare Technologies 45.5 CX Partners Dec-10
Radiant Life Care 44.4 Halcyon Group Jan-11
Sahyadri Hospitals 35.0 ICICI Venture Jan-08
Dr. Lal PathLabs 32.0 TA Associates Aug-10
Max Healthcare Institute 31.3 IFC Jul-09
Max India 30.0 IFC May-09
Manipal Health Enterprises 28.8 Kotak PE Sep-10
Max India 27.0 Temasek Dec-10
Vikram Hospital & Heart Care 24.0 ICICI Venture Jan-08
Super Religare Laboratories 23.0 Avigo Capital Apr-11
Care Hospitals 22.5 Ashmore Jan-08
Zulekha Hospitals Group-SPV 21.0 IFC Jan-10
Diwan Chand Medical Services 20.0 Asian Healthcare Fund Mar-10
HealthCare Global 20.0 PremjiInvest, Others May-08 8
confidential

9. And have given investors healthy
returns
 Ranbaxy promoters sell their 34.8% stake for 10,000 Crore
to Daiichi
 Sequoia sell 16% stake in Dr. Lal Pathlabs. Company valued
at 1000 Crore
 Warburg Pincus invests 392 Crore in Metropolis Healthcare.
Used partially to buy ICICI Ventures stake which was
acquired in 2006 for 35 Crore
 Apollo and Fortis both valued at 15X-20X EBITDA compared
to ~6X in developed economies
9
confidential

10. Summary
 Healthcare in India is an attractive investment destination
given the macro drivers
 PE & VC firms will continue to invest in this sector over the
next few years
 New, innovative business formats will get a higher share of
investments and also higher returns
 Upside will be shared by all shareholders: Financial
Investors, Promoters, Doctors & Employees.
10
confidential