Hospital deals: PE firms pull back on aggressive bets, eye IPO windfall instead
Private equity investments in Indian hospitals have plunged to $142 million so far this year from $1.15 billion in 2024, as investors shift focus from fresh deals to taking multi- and single-specialty chains public.
After years of aggressive dealmaking, private equity firms have slowed their hospital investments in India, opting instead to leverage the improved financials of multi- and single-specialty chains and take them public.
PE investments in Indian hospital chains have dropped to $142 million so far this year from about $1.15 billion 2024 and $3.6 billion in 2023, show data from Venture Intelligence. The number of deals has dropped to six this year from eight last year and 11 in 2023.
The largest PE deals in Indian hospitals were both in 2023: Temasek and TPG Capital’s $2.4 billion investment in Manipal Hospitals, and Blackstone’s $700 million cheque to Care Hospitals.
“Most of the larger hospital chains have the scale and size, which makes them appropriate for listing soon," said Sunil Thakur, partner at healthcare-focused private equity firm Quadria Capital.
It isn’t like mega hospital deals have completely vanished. In February, global investment firm KKR announced its plan to buy a controlling stake in cancer treatment chain Healthcare Global Enterprises Ltd, amounting to $400 million. (HCG is a listed company; Venture Intelligence has only considered completed transactions in private companies for its PE investment data.)
Manipal Hospitals has appointed investment bankers for a $1 billion initial public offering of its shares by the end of this financial year. In July, the Temasek-backed hospital chain acquired Pune-based Sahyadri Hospitals from Ontario Teachers Pension Plan in a deal valued at ₹6,200-6,400 crore ($740-760 million) as part of its pre-IPO strategy to bulk up its asset base.
PE investors remain interested in India's sector as hospital capital expenditure is now structurally healthier than before, said Anshul Gupta, managing director and head, healthcare investment banking, Avendus Capital. “Unlike earlier phases, most new expansions are funded by internal accruals rather than debt, reflecting the strong cash flows of established operators."
Mid-size and single specialty hospital companies are also heading for the public markets.
Fertility chain Indira IVF, backed by Swedish investment firm EQT, has filed for an IPO with the Securities and Exchange Board of India via the confidential route. Creador-backed Paras Hospitals and NephroPlus, backed by Quadria Capital, are expected to go public in 12 months.
India’s IPO market is witnessing a surge despite broader macroeconomic turbulence, with a lineup of public share offerings worth more than ₹1 trillion. Tata Capital Ltd’s ₹15,511-crore IPO, the biggest this year and India’s fourth-largest, opens on Monday.
Consolidating geographies
Large hospital chains are opting to expand by acquiring smaller operators as investing in new properties could prove expensive and time consuming as they prepare to go public.
“What you’re now going to see is regional acquisition strategies playing out. They [target hospitals] will typically be single hospitals, maybe a group of a few hospitals," said Mayur Sirdesai, founder and managing partner at Somerset Indus Capital Partners, a PE fund focused on healthcare in India. “They’re [large hospital chains] now going to go after smaller assets to consolidate."
The consolidation in India’s hospital sector is shifting to smaller cities.
KKR snapped up Kerala-based Baby Memorial Hospital in July 2024 and Meitra Hospital in September this year. Following KKR’s investment, Baby Memorial Hospital acquired Kerala-based Chazhikattu Multi Speciality Hospital last year for an undisclosed amount.
“What you’re also seeing now is large southern brands buying out hospitals in the north as they expand into these geographies... To build a pan-India model organically isn’t easy," said Sirdesai.
Areas of opportunity
While large hospital chains head to the public markets, PE investors are shifting their focus to new hospital chains with operations in multiple cities.
In fact, PE firms are backing single-specialty hospitals as these need less capital, can be expanded fast, and tend to command higher prices.
“Single-specialty hospitals are also emerging as a strong-conviction theme with lower capex intensity [and] optimized unit economics…," said Avendus Capital’s Gupta.
Avendus Capital expects single-specialty hospitals to grow at a 24% compound annual growth rate between 2024 and 2028 as they gain market share from multi-specialty hospitals.
The contribution of single-specialty hospitals to India’s overall private healthcare segment increased from 20% in 2019 to 30% in 2024. By 2028, their contribution is expected to jump to 40%, representing a CAGR of 20%, according to Avendus Capital.
“Eyecare is reaching the scale required for IPOs, as are diagnostics and IVF," said Somerset’s Sirdesai. “... Orthopedics and cardiac, they’re still building up."
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