Why are global investors flocking to India’s much-neglected healthcare sector? Aster’s Alisha Moopen offers some clues.

Mergers in the healthcare sector aren’t just about business, they help deliver quality medical treatment to smaller towns, insists Alisha Moopen.

“Doctors in Bengaluru, who might not go and live in Kolhapur (about 600 km away), are willing to go once a week or once a month to Kolhapur and do the sort of surgeries that a hospital in Kolhapur will not be able to get,” Moopen, deputy managing director at Aster DM Healthcare, told Mint in an interview.

“So you actually end up being able to share resources, that knowledge-sharing, of getting your doctors who are sitting in the metros, sitting in the cities, which at this point of time might be the ones doing the more cutting-edge work, and with this network into the tier two, tier three cities, get them to go there so that they do not have to come to the urban cities,” Moopen said.

The other benefit of any merger is the scale of a larger network, she said. “If the scale increases, my purchasing power, negotiation, is much higher and that brings benefits which can hopefully be passed on.”

Moopen’s comments come amid reports of Bengaluru-based Aster merging with Hyderabad-based Care Hospitals. According to a Mint report on 5 August, the combined entity would become India’s third-largest hospital chain.

To questions on the potential merger, Moopen did not offer any comments.

Aster, in a stock exchange filing in September, stated that while the company routinely explored strategic opportunities no material events had taken place requiring disclosure under the Securities and Exchange Board of India’s listing obligations and disclosure requirements.

Moopen, however, said Aster was going ahead with its plans to add almost 2,000 beds over the next three years.

“The expansion would require an investment of close to ₹1, 500 crore; the hospital chain has already deployed around ₹250 crore in the last 6 to 12 months. So another ₹1,250 crore will be invested, funded mainly through internal accruals,” she said.

Aster currently has about 5,000 beds.

The rush of global investors

India’s healthcare sector has seen an increasing interest from investors.

In October last year, Blackstone Group Inc. acquired controlling stakes in Care Hospitals and Kims Health in a $1 billion multi-layered deal, marking the US-based private equity firm’s first investment in India’s healthcare sector.

In April last year, Sheares Healthcare, a unit of Singapore’s Temasek Holdings, agreed to buy a controlling stake in Manipal Health Enterprises, raising its ownership from 18% to close to 59% for about ₹16,400 crore. In February this year, however, Temasek, the investment arm of the Singapore government, sold up to an 8% stake in Manipal to Mubadala Investment Co., Novo Holdings, and the California Public Employees’ Retirement System.

More recently, in July this year, private equity giant KKR scooped up a controlling stake in Kerala-based Baby Memorial Hospital. The US private equity fund has also invested in drugmaker JB Chemicals and Pharmaceuticals Ltd, health tech firm Infinx, and medical device maker Healthium.

Also, Canada’s Ontario Teachers’ Pension Plan owns a majority stake in Pune-based Sahyadri Hospitals.

“The hospital industry, which includes multi-speciality and single-speciality hospitals, nursing homes, and other healthcare delivery organisations, has been the industry with the highest growth and the centre of deal activity in the year to date in 2024,” law firm Nishith Desai Associates said in a report in August.

“This trend is expected to continue in the second half of 2024 and the following years, with major focus being on increasing the bed capacity and expanding the geographical reach of such hospitals,” the report added.

Moopen said among the factors contributing to the growing interest in India’s healthcare sector was the increasing insurance penetration because of the pandemic and the government’s Ayushman Bharat Scheme.

The government’s national public health insurance scheme aims to provide free access to health insurance coverage for low-income earners. It currently covers about 500 million poor people in the country and is being expanded to cover all citizens above 70.

“People want to have insurance because they want to know that they have access to good quality care. Ayushman Bharat is going to be the biggest tipping point for people, for the world itself,” Moopen said.

“Taking it a bit more futuristic, talking about the amount of data that is going to come through, looking after 25% of the population with Ayushman Bharat is going to be the game-changer for healthcare in the world,” Moopen said. Such vast volumes of data on people’s health, she explained, would allow healthcare experts to “run models in terms of predictive health”.

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