Jaypee group in healthcare foray

Infrastructure behemoth Jaypee Group, with revenues in excess of Rs 10,000 crore, is set to enter the healthcare industry.

The diversified group, with presence in power, cement, hotels and education verticals, will soon be launching its flagship hospital in Noida, Uttar Pradesh.

Industry sources said the multi-speciality tertiary care hospital will be titled Jaypee Medical Centre Noida.

“It is a part of the group’s ambitious township project called Wish Town, spread across 1,162 acre, in Noida’s Sector 128. Featuring 415 rooms (500 beds), the medical centre will offer advance healthcare facilities and latest diagnostic services,” said a source.
Manoj Gaur, executive chairman and CEO, Jaiprakash Associates Ltd was not available for comments. A detailed questionnaire requesting financial details and future plans for the healthcare foray remained unanswered at the time of this article going to print.

Industry sources said the healthcare foray is a logical extension of the company’s realty business, which mainly comprises large township developments in north India. The group’s ambitious infrastructure projects include the Yamuna Expressway (formerly Taj Expressway), a six-lane (extendable to 8-lanes) access-controlled road that is expected to reduce travel time between Delhi and Agra, connecting them via Mathura.

“The group has five land parcels at various locations on the Yamuna Expressway development. These land parcels will largely be used for residential and commercial developments and are very likely to have education and healthcare facilities,” said the source.

Fitch Ratings analysts Shashikant Ranjan and Nikhil Gupta in a recent report said the outlook for India’s healthcare sector is stable for 2010.     

They expect the industry to expand by 10-15% and the revenues of industry players to increase as occupancy rates rise for existing hospitals, and newly commissioned facilities become operational.

“Healthcare being a high-operating-leverage business, Ebitda margins are likely to improve with capacity utilisation, and also due to hospitals increasing their focus on high-margin tertiary and quaternary services. Expansion will continue to be driven by a persistent demand-supply gap and significant investments funded by private sources… Increasing concentration of reputed players in metropolitan cities should see many established players chalking out plans to spread to Tier 1 and Tier 2 cities to increase their catchment area. However, a limited supply of doctors and trained medical staff will continue to restrict industry growth,” the analysts said.

According to independent research estimates, India will need to add 3.1 million beds by 2018, calling for an immediate investment of $82 billion (Rs 4 lakh crore). The favourable demand-supply gap, and the promising state of the Indian healthcare sector overall, has prompted significant investment in the last few years.

There were substantial investments announced in 2009 by several private equity firms, including Global Technology Investment Group in Nova Medical Centres ($60 million), International Finance Corporation in Max India ($33 million), India Venture Advisors in Kavery Medical Centre ($20 million), and India Venture Advisors’ second healthcare fund ($150 million).

The private sector is expected to continue to make substantial investment, and to contribute nearly 80-85% of the sector’s total annual spend. Within healthcare, the most favoured sectors for investors are likely to be diagnostic services, medical devices, hospital chains, and wellness products and services.