Ajay Kumar Vij, Co-founder & CEO, Asian Healthcare Fund, dives deep into the ocean of healthcare investment and brings out the following expert opinion

How well is the Indian healthcare sector doing in terms of attracting investment funding?

Indian healthcare, as compared to what they have in developed countries, has a long way to go. Facilitated by growth drivers like a rapidly growing middle class with enhanced affordability, increasing urbanisation and rising prence of chronic diseases, the Indian healthcare sector is expected to demonstrate sustained growth over the next 10-15 years and is expected to be one of the fastest growing healthcare sectors globally. This makes the sector an attractive destination for Private Equity investors who want to invest in companies which can demonstrate sustained earnings growth over the medium term.

Is the sector able to attract good amount of funding both from domestic and overseas investment market?

Investments in healthcare has been showing an increasing trend from both domestic and international investors with investments across the value chain from hospitals to specialty clinics, medical devices, pharmaceuticals and diagnostic
chains. Healthcare companies are getting funded both at the early stage (e.g. Wellspring Healthcare was funded by Reliance & Catamaran Ventures last year) and at a more mature stage (Funding of Vasan by GIC earlier this year)

What are the criteria that an investor looks at in a healthcare company before investing?

A PE / VC firm would look at a number of factors like strength of management team and its ability to ute, the size
and attractiveness of target market, uniqueness of business model, regulatory issues, entry barriers and competitive
landscape and potential exit options before investing in a healthcare company. PE funds like Asian Healthcare Fund
which have significant in-house operating capabilities are able to add significant value to companies that they invest
in by virtue of their in-house business building abilities. This value add is typically in areas like fine tuning business growth plans/strategies, establishing robust systems and processes to support faster expansion, business development, recruitment of senior management, M&A and fund raising etc.

Do the investors remain on board till the company break-even? What is the exit policy that such investment company follows in healthcare?

A PE investor typically takes a long term view of the companies they invest in with typical investment horizons of 3-5 years. Once this period expires and the company has uted its growth strategy, the PE investor would endeavour to exit the company. Whether the investors remain on board till the company reaches break-even or not depends on the stage of investment, type of investor and specific company situation. The preferred option of exit for a PE firm is an IPO. Secondary sale to other financial investors, strategic sale and company buybacks are some of the other exit options pursued by PE firms.

Give us the names of few healthcare companies got recently funded?

There is Orbimed, which reportedly acquired close to 12 percent stake in midsize drug-maker Shasun Pharmaceuticals
Ltd by investing Rs 50 crore in February 2012. Then there is Evolvence, which has reportedly invested Rs 60 Crores in Dr Agarwal Eye Centre in July 2012. GIC has invested US$ 100 into Vasan Health earlier this year. Some of the successful healthcare organisations backed by investments include Apollo Hospitals, NovaMedical, Dr Lal Path Labs, Trivitron, Metropolis Healthcare, Mankind Pharma, Intas Pharma, Dabur Pharma etc.

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