PE-VC investments in India's healthcare sector fall in 2024, shows data

Experts feel that the sector will continue to attract $5-6 bn private capital annually

After picking up during the Covid-19 pandemic, private equity, venture capitalist (PE-VC) investments in the healthcare sector in India seems to have slowed down in 2024.

 

According to data from Venture Intelligence, in the first 11 months of 2024 (till November 27), the sector attracted $5.33 billion investments, involving 57 deals. This is a 14 per cent drop from 2023 full-year figure of $6.26 billion. Though a full month is yet to go for 2024 to end, there seems no major deals in the pipeline.

 

PE-VC investments in the sector have grown over the last few years, barring pandemic-hit 2020. In 2019, investments into the sector were around $3.98 billion, which fell to $2.8 billion in 2020, but picked up after that. In 2021, investments touched $6 billion.

   

The MD & CEO of a private hospital chain, which has attracted investment from a PE player, said that investments are cyclical. “The last few years have seen major investments flow into the sector, and right now there are not good assets available. Of the PE or VC funds that have invested, it is too early for them to exit now,” he said, predicting that 2025 would also see a downward trend in investments. 

 

“Any PE or VC that has invested in an asset will now wait for it to grow in scale and profitability before they seeks an exit. Most PEs and VCs are now in the first or second year of their investments. When these players plan to exit, that would trigger private deals, thus likely increasing investment flow,” he felt.

 

Some of the major deals in the last few years include Temasek’s investment in Manipal Hospitals (April 2023), Advent International’s investment in Suven Pharmaceuticals (December 2022), and Blackstone and Care Hospital deal (May 2023), among others.

 

Visalakshi Chandramouli, managing partner, Tata Capital Healthcare Fund II, said that the healthcare sector has been attracting around $5-6 billion annually post-pandemic versus pre-Covid levels of $3-4 billion.

 

“In our view, we don’t see a fall in investments in healthcare sector in calendar year (CY) 2024. During the pandemic, in CY21, the healthcare sector attracted over $6 billion capital and since then the sector has set a new normal of attracting $5-6 billion annually versus pre-Covid levels of $3-4 billion,” Chandramouli said.

 

“We believe based on the current momentum, CY24 should be in line with the past three years and attract at least $5.5 billion. In CY21, there was a significant allocation of private capital towards the health-tech sector, driven by the pandemic. But now, healthcare delivery and pharmaceuticals are the dominant sub-segments,” Chandramouli told Business Standard.

 

India’s healthcare and lifesciences market is estimated to reach $285 billion by 2028, implying a growth that is twice India’s GDP growth. This growth trajectory, experts feel, is underpinned by several favourable macro factors like demographics. By 2030, 140 million additional households will be classified as middle-class, driving three-four times additional spend on healthcare, Chandramouli pointed out.

 

Further, insurance penetration improvement will play a key role. “India’s health insurance penetration has gone up from around 25 per cent in 2013 to 65 per cent in 2023, but is still low with 35 per cent of the population (around 500 million people) uninsured,” Chandramouli stated.