Why Are Private Equity Firms Interested In India’s Healthcare Sector?

In recent years, private equity (PE) firms have rapidly increased their presence in India's healthcare sector, acquiring stakes in major hospital chains. The trend is part of a broader movement of PE investments in industries that offer high growth potential and operational turnaround opportunities. 

Talking about private equity firms, they gather funds from high-net-worth individuals, pension funds and other large investors. These funds are managed by general partners (GPs), who look for investment opportunities in private companies or public companies that can be taken private. In this article, BW Businessworld shed lights on reasons behind the interest of PE firms in the Indian healthcare system and its implications for the industry and stakeholders

PE firms focus on companies with significant growth potential or those needing operational improvements. Once they acquire a stake, they inject capital, restructure operations, and aim to enhance the company’s value. After typically four to six years, PE firms exit the investment, usually by selling the company or taking it public.

“We view this surge in private equity investment as more than just financial backing—it's a powerful partnership that brings in capital, strategic expertise, and a forward-looking mindset. This allows us to expand rapidly, embrace cutting-edge technologies, and deliver innovative healthcare solutions at scale,” said Yatharth Tyagi, Director - Yatharth Group of Hospitals.

Private equity is also playing a pivotal role in enhancing access to care in underserved regions, aligning with the broader vision of a healthier and more inclusive India, Tyagi added.

Gaining Prominence
India's healthcare system is struggling with significant gaps in infrastructure and access. As per the National Health Profile 2021, the country has only 0.6 hospital beds per 1,000 people, far below the recommended three beds per 1,000. This gap became evident during the deadly Covid-19 pandemic when the system was overwhelmed. Private equity firms see this shortfall as a lucrative opportunity.

“Growing demand for healthcare and India's relatively stable political and economic environment makes it a favourable destination for international investments. The combination of a large, underserved population, an expanding healthtech ecosystem, and a conducive investment climate, positions India as a major market for growth in the healthcare sector. The country is well on its way to becoming a key player in the global healthcare industry,” said Omkar Nakade, Co-founder and Director, MEDNET Labs.

According to reports, in 2023 alone, PE firms invested USD 5.5 billion in Indian hospital chains, and the number is expected to grow in the coming years. Major acquisitions include Manipal Hospitals (Singapore’s Temasek), Care Hospitals (US-based Blackstone), HealthCare Global (CVC Capital), and Sahyadri Hospitals (Ontario Teachers’ Pension Plan). Also, private equity firm KKR owned controlling stakes in MAX until they sold it to Radiant Life Care.

What Does This Mean For India's Healthcare Sector?
With fresh funds from PE firms, hospital chains are expected to expand rapidly, opening new facilities and upgrading existing ones. This competition could drive other hospitals to seek similar PE investments, leading to further consolidation in the industry.

However, the involvement of PE firms also raises concerns. These firms typically focus on short-term profitability, aiming for quick returns on their investments. This could lead to higher healthcare costs for patients as hospitals may raise prices to maximise profits. Additionally, if the government imposes price caps, PE-owned hospitals might cut costs by reducing staff or compromising the quality of care.

Notably, private equity’s track record in the healthcare industry, particularly in the US and Europe, is concerning. According to the National Institute of Health, in the US, PE-owned hospitals like Hahnemann University Hospital and ManorCare suffered operational issues or financial distress, leading to closures. Many of the same PE firms now investing in Indian healthcare were involved in these cases.

The increased involvement of PE firms in India’s healthcare sector may bring short-term growth but could come at the cost of quality, affordability, and access to care. As private equity continues to make inroads into healthcare, patients and policymakers must remain vigilant to ensure that the primary focus of the healthcare system—patient well-being—remains intact.