The Fortis acquisition may have created fireworks in healthcare skies, but it has not sparked too much cheer amidst other players.
Industry experts believe the Fortis acquisition would perhaps remain a one-of-its-kind overseas deal by an Indian player for a long time.
A combination of high growth aspirations, ambition to create a global footprint, and strong financial wherewithal would determine if overseas deals would be a frequent phenomenon, says Muralidharan Nair, partner, life sciences practice, Ernst & Young. “The Fortis buy would definitely set minds thinking,” says Nair.
However, only those hospital chains eager to achieve quick billion-dollar sales figures, which believe that Indian assets fall short of their aspirations and are not in a selling mode will look outside India, feel experts.
According to Rajen Padukone, CEO, Manipal Health Systems, the group, which has 13 hospitals in India, and a presence in Nepal and Malaysia, is focusing on consolidation of its existing hospitals and considering opportunities for expansion in India, in case of a strategic fit.
“International acquisition opportunities exist, but these are few and will typically be expensive and should be considered only if they are an integral part of an overall inorganic growth strategy.”
Moreover, the reimbursement and insurance-driven healthcare models abroad operate differently from the self-pay, doctor-centric models in India, thereby providing limited synergies from overseas deals, says V Krishnakumar, ED, Avendus Capital.
Acquiring within India provides a lot of synergies to players, as also higher returns, existing physician network, efficient use of capital, and help in creating a feeder base for the large tertiary care facilities of the existing hospital network, says Shiraz Bugwadia, director, o3 Capital Advisors, an investment banking firm.
The healthcare industry in India is projected to grow by 23% per year, according to estimates from Yes Bank and Assocham,
Bugwadia says the private sector, which already accounts for 65-70% of healthcare delivery space, is expected to cater to 80-90% of future bed requirement, which will provide more growth avenues.
In five years, overseas acquisitions will gain some amount of credence, says B S Ajaikumar, chairman and CEO, HealthCare Global (HCG) enterprises, a chain of 18 cancer hospitals headquartered in Bangalore. “We might look at buys in markets such as Sri Lanka, Africa, for cancer focused players.”
At present, as compared to outright buys, the joint venture (JV) route is seen as a better channel, said Alistair Stranack, global healthcare head at advisory firm Parthenon Group.
“JVs also carry lower risk alternative to full acquisition, involve less capital, and help in a new territory, where the local partner can provide knowledge and international partner the expertise,” Stranack said.
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