Hospitals knocking on SEBI’s door for IPO approval

With the Indian healthcare delivery market poised for ₹5.6 trillion by the end of FY23, at a 15–17-percent CAGR, to reach ₹7.67 trillion in FY25, and the share held by private players expected to increase from 58 percent in FY21 to 66 percent in FY22, and to 73 percent in FY25, the private hospitals are becoming a compelling story for investors. Key drivers are stabilization of regular treatments, surgeries, and OPD; expansion of ARPOB; and picking up of high-realization medical tourism. Increasing health insurance coverage, albeit the penetration is very low, presents a huge opportunity too.

It is since 2021 that the upcoming rise of IPOs is observed. There were no hospital IPOs in 2019 and 2020. IPOs had been launched by Aster DM in 2018, Shalby Hospitals in 2017, Healthcare Global in 2016, Narayana Hrudalaya in 2015, and by Fortis Healthcare in 2007 before that. 2021 saw two listings, Aashka Hospitals, and Krishna Institute of Medical Sciences. In 2022, the trend set by KIMs of large-valued IPOs continued with Rainbow Children’s Medicare, and the largest IPO in the hospital sector in India so far ₹2205 crore, by Medanta’s operator, Global Health. Cloudnine and Park Group of Hospitals too are in the waiting. Yatharth Hospital & Trauma Care Services, and GPT Healthcare have also received SEBI’s go ahead. Manipal Health Enterprises is assembling for its IPO, expected to be filed for listing by March 2023.

The hospitals that are planning to raise capital through IPOs have by and large equipped their facilities with world-class infrastructure, high-end medical equipment and technology. They already have presence in top capital cities of large states, decent brand equity, and experienced management teams. Armed with strong clinical expertise, an inclination for clinical research, a focus on under-served areas with dense population, presence in top capital cities of large states, decent brand equity, and experienced management teams, they find that the investors have developed a keen appetite in adding IPOs to their well-curated portfolios. Not only primary markets, but FIIs too are finding India as one of the most investable regions in the world right now.

Private capital investment in the healthcare sector too has nearly tripled in the last few years. In the period 2010–2014, the sector attracted half-a-billion dollars; it went up to USD 850 million during 2016–2019, and in 2020-2021 to USD 1.2 billion. 2022 has seen it rise to USD 1.5 billion.

Shifting gears, private funds force health systems to make decisions based on profits rather than patients, and PE investors may gain at the expense of patients, doctors, and other hospital staff.

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