All you need to know about healthcare finance

Why Invest in Healthcare?

A fast, high-growing, recession-free and lucrative sector, healthcare is an avenue where many investments are channeling their funds in. A Deloitte India Report has predicted the $ 100 billion healthcare industry to grow at a compounded annual growth rate of 23% to $ 280 billion by 2020.

As per the 2015 Medical Tourism Market report, India has become the most sought-after destination among patients all over as it has the competitive edge of providing the highest quality of healthcare at the lowest cost and the medical tourism industry is estimated to reach $8 billion by 2020.

Demand and Supply Gap: A Huge Opportunity for Doctors

As per a Business Standard Report, 80% of the country’s doctors, residing in urban areas, are serving 28% of the population. Rural India, that forms 70% of the country’s populace, is left untapped with a huge market potential.

With a poor hospital bed to patient ratio, overburdened hospitals, inadequate or low-quality medical facilities and an increasingly health-conscious consumer base underpin the opportunity for doctors to set-up their own practice or clinic.

Today, Healthcare is Dynamic

Healthcare is rapidly evolving with developments being made in medical technology, patient empowerment, laws and quality compliances. Meeting market requirements and remaining competitive by providing new facilities and acquiring and expanding operations requires commensurate investment.

Investment avenues include- hospitals, clinics, medical devices and equipment, telemedicine, medical tourism, health insurance, and more. There are various ways of funding your medical practice or clinic to cater to the untapped medical demand of the country.

Types of Private Source Funding

1. Debt Financing:

Debt financing, lets you have full control over your business as lenders don’t become a part of your business. Borrowing money as opposed to distributing equity saves you taxes as well. Debt financing is preferred for small hospitals or professionals/ entities who don’t want to dilute their control/ ownership.

Medical professionals can use debt financing for

• Expanding services
• Investing in innovation
• Improving infrastructure
• Investing in medical education and training
• Indigenization by focusing on implants and high-value medical consumables
• Increasing access by partnering with insurance companies

Bajaj Finserv offers tailor-made loan solutions to doctors for upto Rs. 80 lakh (for unsecured loans) and upto Rs. 2 crore (for secured loans) with attractive interest rates, customized and flexible repayment options and a tenor up to from 12 months to 96 months.

2. Foreign Direct Investment (FDI):

Being a profitable market, many foreign players are ready to invest through channels like capital investment and technology tie ups. India attracted an FDI of $31 billion in the first half of 2015.

3. External Commercial Borrowings:

External commercial borrowings are loans in foreign currency given by non-resident lenders to Indian borrowers. Due to complex approval process from RBI its use is limited. Corporate in the service sector (hospitals, hotels and software) can avail ECB beyond 200 million.

4. Private Equity:

It is one of the most common funding methods. Along with capital, it also provides assistance for strategic planning and management. Private equity investment increased from 94 million USD in 2011 to 1,275 million USD in 2016.

5. Individual Investors:

Individual physicians or healthcare specialists can be entrepreneurs and set their healthcare facility.

6. Foreign Institutional Investors (FIIs):

FIIs are registered outside India. For entering the Indian market, they need to register with SEBI. AIG, BUPA, and Allianz are some foreign companies that have paired with Indian companies and investing in private health finance. Uptill 14-April-2017, foreign institutional investors net investments in Indian equities and debt stood at US$ 7.46 billion.

7. Venture Capitalists:

Venture capitalists finance new ventures. The VC funds investment increased from 94 million USD in 2011 to 1,275 million USD in 2016.

The Final Word

There are several healthcare infrastructure investment opportunities in both urban and rural India. To match/ exceed the brisk pace of the industry and competition, differentiated services play a key role, which ultimately requires finance.