Healthcare commands 16 per cent of all private equity exits in 2022: India Private Equity Report 2023

Investors in healthcare see a bumper year for exits as an exit cycle returns

India in 2022 saw investments of $61.6 billion in a difficult year for private equity globally—in a slight moderation of 12 per cent over 2021’s peak value of $69.8 billion. In a year that saw resurgent interest in traditional sectors, sectors such as healthcare, BFSI, energy, and manufacturing grew by 50 per cent to nearly $28 billion enabled by strong domestic consumer sentiment. India’s healthcare sector emerged as an attractive bet for investors with the sector seeing deals worth $4.3 billion in 2022, at approximately 8 per cent of total PE-VC investments. However, this was a year when healthcare delivered commanding 16 per cent of total exit value, at $3.5 billion, accordingly to Bain & company’s annual ‘India Private Equity Report 2023’, released in collaboration with Indian Venture and Alternate Capital Association (IVCA).

KKR’s public markets exit from Max Healthcare worth $1.6 billion, Everstone’s exit from Sahyadri Hospitals and the IPOs of Medanta and Rainbow Hospitals were a few notable exits in the space.

“The healthcare sector is seeing continued potential upside with a low beta, and headroom for growth with large players driving scale through greenfield expansion to tier 2 cities, brownfield expansion and consolidation initiatives”, said Aditya Shukla, Partner Bain & Company and co-author of the report.

“Healthcare providers have been a strong destination for capital. ARPOBs have improved with deeper service mix, resurgence in electives and growth in digital channels, and at the same time, cost optimisation initiatives focused on variable compensation models, tech integrations and improved occupancy rates have allowed providers to improve margins by 5-8 percentage points.”, said Prabhav Kashyap, Partner, Bain & Company and co-author of the report. With robust and streamlined models emerging out of COVID, listed health providers have generated two to three times the returns of the Nifty index in recent years, driven by focused value creation initiatives and macro tailwinds.

While pharma saw a slowdown in PE activity in 2022, long-term outlook is positive, led by (1) a deep pharma ecosystem with consistent improvement in quality, compliance, reliability, cost; (2) regulatory enablers to boost manufacturing, such as PLI 2.0 being expanded to high-value goods, government investment in bulk drug parks to boost local API manufacturing; and (3) tailwinds from global sourcing diversification, and the opportunity for generics where India has the largest share in global supply by volume.

Overall 2022 was a year of recalibration for PE-VC investments in India with a tempered outlook for 2023

India’s share of private equity and venture capital (PE-VC) investments in Asia-Pacific grew from ~15 per cent to ~20 per cent from 2021 to 2022, as China + 1 tailwinds and India’s macro robustness made it a bright spot for investing, amidst decelerating capital flow in the region.