Emerging segments like single-speciality hospital chains, diagnostic chains and day care centres within the Indian healthcare sector are drawing in a significant amount of private equity (PE). Increasing number of PE deals in this financial year only proves that the Indian healthcare sector is a preferred choice for investments. Padmaja Ruparel, President, Indian Angel Network (IAN) explains to Raelene Kambli the key drivers for the growing number of PE deals in healthcare, the parameters for an healthcare organisations to qualify for PE investment and IAN’s interest in investment in the medical device sector
What role does PE funds play in the growth of the Indian healthcare sector? What are the opportunities and challenges in this space?
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| Padmaja Ruparel |
Healthcare is one of India’s largest sectors, in terms of revenue and employment, and the sector is expanding rapidly. It is one of the favourite and top investment categories for angel investors. Need of speciality hospitals in India makes Indian healthcare sector ripe for the expansion and significant growth. Looking at the growth opportunities offered in the sector, the number of start-ups is gradually increasing. Within the healthcare sector, medical devices has been dominating the angel investment opportunities, exceeding pharmaceuticals, drugs and biotechnology spaces.
This sector is considered to be a high risk and a high return one. The healthcare industry in India is reckoned to be the engine of the economy in the years to come which encompasses health care instruments, healthcare in the retail market, hospitals enrolled to the hospital networks etc. Hence, there are enough and more opportunities for the entrepreneurs to grow.
Opportunity in the healthcare sector and increasingly the spend on health has been increasing. The challenges are also immense – currently the number of trained staff, specially high quality nursing staff, robust healthcare insurance, availability of low cost medicines, culture of preventive medicine all make the healthcare industry more challenging than any developed/ developing country
Are there any regulatory challenges that PE investors need to face? What are some of the changes you wish to see especially in terms of regulations?
Healthcare insurance needs revamping – today’s needs are very different to what the insurance schemes provide. For example, medical science has progressed to avoid/reduce the number of days of hospitalisation which means that many of the existing schemes become ineffective. New drug discovery needs a radically different legal framework and this change could make availability of new indigenous drugs much more cheaper.
What would be the triggers for growth of PE in healthcare?
Emergence of innovative startups, entrepreneurs working towards India specific products and technology will drive the growth for PE in the sector. Coming up with original technologies that are tailored to the local community will help this sector grow and take the much awaited next step towards development in the sector by filling the gap gradually.
What are the parameters for an healthcare delivery organisation, diagnostic company or a healthcare equipment firm to qualify for PE investment?
There are a few key characteristics which we look for in the entrepreneurs and the startups before investing in them, be it in any sector. Most important being their passion for their business idea because that’s what drives their performance and business. Having domain expertise is the next thing we look for in an individual as it’s equally important for entrepreneurs from an angel investor’s perspective to be well-versed with the operational and regulatory aspects of their respective sectors.
You said that IAN is looking at investing in a medical devices start-up. What is the rationale behind investing in medical device start-ups?
IAN realises the scope and opportunity in this segment. Considering the growth opportunity in the sector and the uniqueness of their product, we have taken a step forward by investing in Consure Medical. Also, IAN’s deal table has other healthcare investment opportunities and they are being looking at avidly.
What potential do you foresee for investments in the medical device market?
Medical devices is an exciting space with tremendous potential. This is exactly the kind of space angel investors like which offer innovative products with large markets.
Tell us about the recent developments at the Indian Angel Network.
We have recently invested in Consure Medical; a Delhi-based company has developed a new standard of care for the management of fecal incontinence in non-ambulatory patients. It has developed a novel, disruptive technology that will benefit more than 16 million patients in India and over 100 million patients worldwide. Consure has global applicability and IAN looks to help them scale their business and enhance their global competitiveness.
IAN has already closed 11 deals this year and nine deals within seven months of 2012. We do expect to close a few more by the year-end.
What do you think about the healthcare vertical?
We are sector agnostic and there is a wide variety in our deal flow. We move fast when we see something exciting irrespective of the stage of the company. IAN members include professionals and entrepreneurs with healthcare expertise. We believe healthcare is an exciting vertical with tremendous potential to grow and we will continue our momentum to foster global competitiveness amongst the young, dynamic start-ups in this space.
IAN believes in a fast track process for funding. It’s our sincere endeavour at making successful exits in short time span of making an investment.
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