Healthcare sector these days in Hyderabad is witnessing some unprecedented events. The sector has bounced back with almost all major chain of hospitals smelling ‘success’, attracting investments and fuelling expansion. There is a race to cater to the newly settled population in Miyapur-Gachibowli-Shamshabad belt, very near to Hi-tech City, the IT hub of Hyderabad.
Currently, an all out bidding has broken out among eight top Private Equity (PE) firms, who are trying to outdo each other to acquire a majority stake in Care Group of Hospitals, founded in 1997 by well known cardiologist B. Soma Raju. When the dust settles, industry observers are expecting that by this month-end, a new PE firm will take control of the super-speciality hospital after paying over Rs. 1,200 crore.
Care Group of Hospitals is not the only hospital that has attracted private capital. In the last few years, all the major well established and even recently started speciality hospitals have got access to abundant financial resources through PEs. Continental Hospitals, promoted by Guru N. Reddy and located in the financial district at Gachibowli, has attracted an investment of close to Rs. 380 crore from the Parkway Group, a subsidiary of IHH Healthcare, which operates an integrated healthcare business and is a leading player in Singapore, Malaysia and Turkey.
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In the coming years, the hospital will be expanded further at a massive cost of anywhere between Rs. 700 and Rs. 800 crore. The Parkway Pentai group now has 51 per cent stake in Continental Hospitals and is trying aggressively to invest in other super-specialty hospitals in Hyderabad, including Care Group.
Through Advent International PE investors, Care Group has spent close to Rs. 200 crore to acquire a 200-bedded hospital located near Cyberabad Commissioner Office, which will be operational by December.
So, why is Hyderabad attracting so much PE attention in healthcare? Industry observers point towards the ‘value’ created by individual doctors, who were responsible for setting up such hospitals. The present-day healthcare industry owes a lot to the pharmaceutical business which had brought a shape to the healthcare space in 70’s, 80’s and early 90’s within Hyderabad, they aver.
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Such conditions in Hyderabad created enormous opportunities to physician-entrepreneurs in healthcare space. As a result, almost all the top corporate hospitals in the capital are owned or managed by doctors. “Within a short period, most of them perfected in healthcare business dynamics and kept pace with new medical technologies while delivering quality care. Next step for these entrepreneurs is only to replicate the models. The driving force seems to be the value they create out of the business than the net profit they enjoy,” explains senior VP, Citizens Hospital and American Oncology Institute, Dr. Balaji Goli.
However, question is how many hospitals stay afloat. There is also a question mark over affordability and the outlook of PE firms, who have short term gains as their priority. Many also point out that there is too much money chasing too few opportunities. “There’s a lot of money to invest but there is not many opportunities, so to that extent, whenever people see an existing infrastructure, they get tempted. Whether it is Continental, Care or Global Hospitals, when investors see large chain of hospitals, they see instant results as you can hit the ground running immediately. Profits can be generated instantly,” points out former CEO, Apollo Health and Lifestyle, Ratan Jalan.
Mr. Ratan, also founder of Medium Healthcare Consulting, cautions: “There was a time when patients from East, North East and Central India used to come to Hyderabad. But, the in-flow is fast drying up with hospitals are coming up there, so hospitals may struggle to adjust,” he adds.
This article has been corrected for a factual error.