M&A heats up in India’s healthcare sector

2024 has been a transformational year for the healthcare sector in India, with mergers and acquisitions (M&A) playing a crucial role in shaping the future direction of businesses. This momentum is driven by several factors, including the demand for affordable quality healthcare, technological breakthroughs, and the expansion of services beyond metropolitan and Tier 1 cities. As the healthcare industry undergoes significant transformation, businesses are increasingly seeking new markets for growth to address emerging needs. This article examines the main themes and forces shaping healthcare mergers and acquisitions in India.

 Reaching outside of big cities

As with any industry, the focus of the healthcare sector in India has traditionally been on metro and Tier 1 cities. However, we are witnessing a rapid shift toward smaller cities to address the supply gap. Prominent healthcare organisations such as Narayana Health, KIMS, Paras Hospitals, NephroPlus, and 7Med have expanded into Tier 2 and Tier 3 cities to broaden their reach and achieve desired growth. The increasing demand for reasonably priced, high-quality healthcare services presents significant growth opportunities in these regions, which lack adequate quality healthcare infrastructure.

 With increasing disposable incomes, the middle and upper middle class in these cities is expanding rapidly. This is, in turn, driving up affordability for healthcare treatments and increasing demand for healthcare companies that were previously out of reach for this population. As a result, many healthcare companies are seeking to capture this next wave of growth, which is driving M&A activity among firms focusing on these regions. The trend of healthcare providers expanding into smaller cities is expected to gain further traction in 2025 as companies aim to reach underserved populations.

Emphasise accessible, high-quality care

The provision of high-quality care at a reasonable cost has become a top priority in India’s healthcare market over the last ten years. Value-based care has been particularly effective in niche sectors like dialysis, where companies have established sustainable business models that balance expenses with patient satisfaction.

We have seen a rise in M&A activity in 2024, with businesses focusing on these regions and affordable quality care benefiting from the growing need for specialised healthcare services. Organisations that have established a reputation for delivering cost-effective treatment while upholding clinical excellence are likely to attract the attention of investors in the future. These businesses are increasingly attractive targets for M&A as they continue to grow.

 Integration of technology after COVID-19

The COVID-19 pandemic accelerated the adoption of digital technologies, radically changing the healthcare landscape across India. Hospitals, diagnostic centers, and other healthcare organisations swiftly adopted new technologies to boost productivity and improve patient care. This shift included a push toward the digitisation of medical records, automation of patient entry procedures, and the introduction of AI-driven chatbots for quick responses to patient queries.

These technological developments are critical for taking the next leap in healthcare operations as we work to stimulate investor interest in companies leading the way in tech integration. The use of automation, machine learning, and artificial intelligence is expected to become an industry standard, enabling healthcare providers to improve patient outcomes and streamline internal processes. Businesses that have adopted these technologies early will be attractive targets for investors seeking the next phase of growth in Indian healthcare.