21 Nov 2012
Private equity and venture capitalists are chasing India’s booming specialty healthcare services — eye care, dental and cosmetology chains — as an offshoot of the consumption story. US–based fund Matrix Partners is investing Rs 40 crore for about 20% stake in a Rajasthan–based orthopaedic chain and is close to finalizing another deal with a cosmetology chain.
Investors have traditionally pumped in big money into multi–specialty centres but of late have shown interest in boutique chains not only in the metros but in smaller cities as well. In the last one year, there has been a flurry of interest from investors in specialty healthcare — the biggest deal being the Government of Singapore Investment Corporation investment of $100 million for a minority stake in Vasan Health Care, an eye and dental care centre in August this year. Other marquee investors like the PE arm of Goldman Sachs have also bet on this sector as day care and short stay surgery clinics become an attractive proposition for PEs and VCs.
"We are big believers in specialty chains largely because they do not offer everything to everyone like the bigger hospitals. The average load is far less and, therefore, there is far more efficiency. This enables higher returns in a much shorter time compared to the big, multi–specialty chains. Also, the orthopaedic space, which is extremely fragmented, was on our radar for a while since it is growing handsomely at about 20–25% annually," said Avnish Bajaj, co–founder & MD, Matrix India.
Typically, specialty chains break even at the operating level in not more than 18 months; in fact most of the times making investments in this sector is extremely attractive, he said.
"This kind of business model does not involve huge capital expenditure. Also, the margins are much higher which is why short–stay surgical facilities are becoming extremely attractive for investors. Eventually, just like the developed markets, Indian consumers will enjoy the same comfort level with specialty chains as they currently have with big hospitals," said Varun Gupta, managing director of American Appraisal, a US–based firm which provides valuation and consulting services to healthcare companies.
Matrix has earlier invested in a maternity and infant care clinic Cloud Nine and in Delhibased Centre for Sight, a chain of specialty eye hospitals. The Udaipur–based chain will be the fund’s third investment in the specialty healthcare sector, which provides surgical orthopaedic care in Rajasthan, Gujarat and MP. It plans to expand across several tier–two centres, said Manish Chhaparwal, cofounder of Mewar Orthopaedic Hospitals.