I for one was glad when we bid 2011 goodbye. There was hardly anything to be positive about in the year gone by, what with a scam a day, the rupee at an all-time high and our gross domestic product (GDP) growing the slowest among the Bric (Brazil, Russia, India, China) countries. However, we are off to a much better start this year with some key verdicts from the Supreme Court on the 2G case that has sent a strong message that even powerful politicians and top business houses are not above the law. Additionally, the judgement in favour of Vodafone in the capital gains tax case is a positive development.

Recently, I met a seasoned entrepreneur who had just started a healthcare technology company. I came out of the meeting euphoric due the potential this company had, the huge market opportunity, the innovative business model and the entrepreneur’s clear vision on how he would go about building his business.

If this same entrepreneur had come to me a year ago, I would have mostly passed on the opportunity. But I think the time has come for us to take a serious look, considering the changing dynamics of the healthcare market in India. I recently read a Technopak consultancy report that estimates India’s healthcare sector to be at least a $50 billion opportunity that will grow at about 10% a year for several years. Venture Intelligence put out a report last year that private equity and venture capital firms invested more than $2 billion in healthcare and life sciences companies over the past five years. If you read any report on healthcare, the statistics show how heavily underpenetrated we are in every aspect of the value chain. Healthcare is one of a few sectors insulated from the effects of the downturn as it is rarely cyclical.

But for all the euphoria and obvious opportunity, the healthcare industry has underperformed in most parameters. It has been a laggard in adopting information technology as an enabler of growth. There are plenty of investment opportunities in the healthcare technology space but most have long gestation cycles and challenging business models. Few healthcare business have been able to pass the crucial return-on-capital metric. They have been sucking cash for years without showing any sign of turning profitable, which makes exits difficult for investors. Talent shortage is another big concern.

There are several investment opportunities in the healthcare space such as affordable healthcare, which is very scalable. Rural India needs better healthcare advice to treat ailments at the primary level. There is a crying need for a central repository of patient records. Multi-specialty healthcare is another growth opportunity. Single specialty healthcare—such as eye care, dental care, fertility clinics and oncology—too, is an opportunity. Segments like diagnostics facilities, which are very fragmented, have great growth opportunities. Medical device firms that innovate will also be very interesting. Firms developing intellectual property in medical technology will be the ones to look out for. Healthcare information technology and mobile health is also growing fast in areas such as speech recognition, analytics and revenue cycle improvement. Electronic medical records is yet another opportunity.

In conclusion, I believe we are at a inflection point and there will be a tremendous opportunity for growth in several segments of the healthcare industry. Most of the companies in this sector are in very early stages but considering the growth opportunities and the large potential market, investors will keep deploying large amounts of capital into this sector. A large initial public offering in this sector that will make a lot of money for its backers will be a great catalyst for growth, and I think we are not far from that happening.

Sasha Mirchandani is managing partner of Kae Capital and a co-founder of Mumbai Angels.

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