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Mumbai: Private equity (PE) activity in India in 2012 slowed 17% to $3.3 billion, but some sectors such as healthcare bucked the trend, with investments quadrupling to $520 million from $137 million a year ago, according to Thomson Reuters data.

With the benefit of hindsight, though, it can be said that the numbers shouldn’t surprise anyone. India has a population of 1.21 billion, an economy that has grown at an average of around 8% for the past eight years, inadequate and poor state-provided healthcare, a willingness among people, even the poor, to pay for private services over the free or subsidized government variety, and the emergence of a significant number of companies in the space.

Indeed, experts say, investments in healthcare could exceed $1 billion this year.

That is simply a reflection of the deepening healthcare demand because of consumer affluence, changing lifestyles and greater awareness, said Mayank Rastogi, partner, private equity and transaction advisory services, at audit and consulting firm Ernst and Young. “The Indian model is such that a consumer pays for the service, unlike in some of the western markets (such) as the UK, where the government pays. Therefore, as the consumer is becoming richer, healthcare is increasingly becoming their mainstream agenda after food and housing," he said.

Credit rating agency Fitch estimated that the Indian healthcare market will be worth $100 billion by 2015, and $280 billion by 2020, on the back of growing demand for specialty and high-quality healthcare services. It is currently worth $65 billion.

While investors are keen on the sector, they do differ on its prospects.

“It’s a market for investors who want 2x (or two times) returns, not for people like us who seek six times to 10 times returns," said Mahesh Murthy, founding partner at Seedfund.

“The future is very bright as the sector is very nascent and will grow rapidly for several more years," said Sasha Mirchandani, managing partner at Kae Capital, an investment firm. And some others believe that while the sector holds the promise of hefty returns, it could take longer. They add that healthcare firms need longer gestation periods and can offer returns of at least 20-25% if they wait for 7-10 years. PE firms typically invest for around five years and expect a minimum 16-18% internal rate of return (IRR).

The 10 healthcare start-ups:

Biosense Technologies

Dr Lal Pathlabs

Healthcare Global Enterprises

Lifecell International

Healthkart.com

MyDentist & Vasan

Perfint Healthcare

Vaatsalya Healthcare

Vyome Biosciences

Five healthcare start-ups to keep an eye on

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