The evolving role of private equity in strengthening mid-market healthcare infrastructure while balancing impact and returns

The end objective of any investment is economic gain. Other benefits like impact, sustainability, ESG compliance etc., are value additions.

The extent of economic gain expectation can differ depending on the thesis of the investor.

Unlike the past, investors increasingly are looking at value addition by the invested companies to achieve greater impact and may be at slightly lower economic return.

There are a multitude of investors, high net worth individuals, family offices, accelerators, government, public sector, seed stage VC’s, VC’s, private equity, MFI /DFI’s, strategics, IPO etc.,

Each one of them takes on adequate risks to support entrepreneurial aspiration to succeed. few succeed many fail, lots of them merge and the game goes on. Capital is the key ingredient to propel ideas into action. Compared to the past, incurring losses is no longer a taboo. It is well understood to build a sustainable business, losses must be incurred to get scale, leading to profits

In addition, the world has opened up , the markets have expanded, opportunities have increased, there are more dreams chasing success and every conceivable venture has a funder provided the basics are strong and the risk capitate matches the funders hunger.

Capital today is more patient, understanding, long term, flexible leading to different modes of funding opportunity. Private credit, venture debt etc, are booming, there by offering the promoters an option to dilute less and save for the rainy day.

Of course, no money ever comes free and are loaded with terms and condition some palatable and some not. While the government is the biggest enabler, accelerator, risk taker in start up ventures or ideas not still visible to many, the key is to start with this support and grow further, thereby attracting capital a variant stage/progress dependent on the traction, performance and the stage of success.

Private equity is positioned as growth capital investing in revenue accretive and profit earning ventures. The risk capacity is minimal. However, this can be leveraged very well to ensure significant impact, sustainability and compliance to ESG is done.

Growth is not measured by economic gain alone; there is significant value addition which until now was not fully captured and presented.

Now increasing LP’s focussed on impact funds are propelling GP’s to invest in responsible and meaningful initiatives, striking a fine balance between returns and rewards, going beyond economics.

Fundamentally a business cannot operate where revenue is public based and costs are private based. There has to be a significant culture change in matching cost to revenue leading to reasonable profits.

The model of doctor engagement to consumable procurement, pharma purchase, leveraging technology, affordable rent, opening up opportunities for women, complying with all required statues, being responsible to environment, generating renewable energy, recycling water, reducing impact on climate etc., are gaining importance and have gained the attention of the private equity investors.

With a holding period of about 5 years, increasing trends to acquire majority, active mergers and acquisitions, increasing strategic interest, growing global business etc are making private equity investment very attractive, safe and secure leading to a new focus of enabling social improvements, impactful business, and reducing the inequality across multiple fronts.

Healthcare is essential, required and ever growing in terms of technology to offer better care at lower costs. For example, the evolving robotics, and the growing tele robotic surgery is a big disrupter in ensuring precision surgeries with unhindered access, leading to quicker discharge and optimising of cost. The combination of human intelligence and robotic brilliance is unbeatable. Genomics is another area where the quality, the intensity, the depth of the tests conducted enables better diagnosis for early cure. Added to this is relevance of genomics in rare and undiagnosed condition is a game changing move that can ensure more healthier world.

Supporting elderly at hospital and at home through geriatric care is required needed and socially relevant, as we need to take care of the elderly who took care of us during their best years.

Home care by taking care of people who are impacted, be it elderly, pregnant women, mobility challenged person etc., is again what India wants.

All of this requires funding and there are multiple funds at variant stage to support for the purposes of growth, private equity is always there.

There is a famous “albeit humorously” in India there are rich doctors and poor hospitals.

Having said that in a lighter vein, every emerging healthcare entrepreneur or non-doctor is imbibing transparency, honesty, clean business practices to give healthcare its due.

Beyond hospitals to multiple initiatives, It is quite interesting to see the robust action in health insurance IPD, health insurance OPD, software Enterprise and business application, connected devices , generic drugs manufacture, self-reliance in API – pharmaceuticals , growing bio pharma initiatives, game changing fermentation technologies , expanding market for nutraceuticals , protein, after sales equipment and services, partnering with the government ensure medical equipment procured at high cost are working 24/7, all of which require capital (debt, equity or structure) at varying points of time.

The options in healthcare both within and outside is endless and private equity in its various avatars including impact and sustainable funds, debt options, private credit options etc., plays a significant role in harnessing the sector and gaining so economically and socially.

Private equity plays a very significant role in enabling companies to grow, expand, diversify, merge, acquire, go public, or become a part of a large strategic. They balance economic and social returns very well and everyone wins in this game to change India and Indian healthcare 2.0.