Demand from a growing middle class and a health tourism segment perceived to be on the verge of a boom, has a bunch of new private healthcare chains, led by foreign-owned ones, planning big investments in India. These investments, estimated to total Rs5,385 crore by 2010, add to the almost Rs9,000 crore already announced in the sector.
Pacific Healthcare Holding and Parkway Group Healthcare from Singapore, Dubai real estate major Emaar’s Indian venture, Prexus Health Partners from the US, and Malaysia’s Columbia Asia lead the list of investors with big interests in India. And, in a sign of the changing times, smaller cities are firmly on the radar of players who have been metropolis-centric so far.
“It is clearly an underserviced market. It is hard to find a bed in a ‘super-speciality’ hospital in the bigger cities while the smaller cities may not even have these facilities. In macro terms, the demand is clearly there,” said Hitesh Gajaria, pharmaceuticals sector leader with consultant KPMG.
Rana Mehta, health care vice-president at Technopak Advisors, predicts an addition of 1.1 million hospital beds by 2012.
Private hospitals earn revenues of about $15.5 billion (Rs68,200 crore) today and will mop up $36 billion by 2012, Ernst & Young said in a study for the trade body, the Federation of Indian Chambers of Commerce and Industry.
That’s because rising incomes means people can afford to pay more for quality health care. India’s per-capita income has doubled since 1997 and will double again in a little more than seven years if the economy continues to grow at 9%. India’s upper middle class households—those with annual incomes of more than Rs4,40,000—total 1.2 million and is growing at 20% a year, consultant McKinsey & Co. had said in a 2005 report.
But it’s not all about Indians. Medical tourism is a potential big earner as well. About 2.3 lakh people are estimated to have travelled to India for medical reasons in 2006. They spent about $450 million on treatments ranging from heart surgeries to knee replacements. Such expenditure is expected to more than triple, to nearly $1.5 billion by 2012.
Industry sources, who didn’t wish to be identified, said Emaar MGF, an Indian joint venture of the Dubai realty investor, is expected to spend Rs3,000 crore in the next three years on medical centres in Mohali, Hyderabad, Gurgaon, Bangalore, Lucknow and other cities.
Columbia Asia will spend about Rs860 crore on hospitals in Mumbai, Delhi and Kolkata, and Prexus Health Rs250 crore on three facilities for Delhi and its satellite cities. Pacific Health’s centres will come up in Mumbai and Hyderabad.
Artemis, promoted by the Kanwars of Apollo Tyres, plans investments of Rs500 crore, over and above the Rs200 crore announced for its first project.
There are more big-ticket investments. The Hindujas, the London-based non-resident Indian business family, have said they will invest over Rs4,300 crore.
The Paras Group is preparing a Rs650 crore warchest. Wockhardt Hospitals has lined up Rs500 crore and Max Healthcare has set aside Rs400 crore. The two ‘medicity’ projects—a collaboration between the Fortis Group and surgeon-entrepreneur Naresh Trehan— will cost Rs1,000 crore each.
“The Indian market is at an inflexion point where we have layers of emerging players, consolidating players and the mature players. There is a very high level of energy in the sector and a good part of it is going to translate into investments as well,” said Vishal Bali, CEO, Wockhardt Hospitals. The company he runs will double its chain of 10 hospitals by 2010 with new facilities in Kolkata, Mumbai and Delhi.
Like other hospital chains, Wockhardt will also target smaller cities such as Rajkot, Surat, Nasik and Bhopal with new projects. The Apollo Group, the country’s biggest health-care chain, will add facilities in Bhubaneswar and Visakhapatnam to its four ‘FirstMed’ branded hospitals in Mysore, Chennai, Hyderabad and Kakinada. Artemis, on the other hand, is targeting Baroda, Jaipur, Indore, Kochi, Kanpur and Nagpur.
Upcoming special economic zones (SEZ) will throw up fresh demand for new healthcare facilities, predicts Technopak. Demand for hospital beds could top 18,000 by 2012 with about 300 SEZs in the pipeline.
Yet, an oversupply of hospitals is a possibility, especially in the big cities. “Supply overkill is possible but it will hurt the smaller players, whose infrastructure and quality may be questionable, the worst,” says Nandakumar Jairam, chairman, Columbia Asia Medical Centre, which plans three ‘compact’ 100-bed hospitals. Wockhardt’s Bali feels the overkill could only be from a “metropolitan perspective” where hospitals already exist. “Large parts in the interiors still have unmet demand,” he said.