PE deals in India’s MedTech industry trebled in 4 years

The Indian medical devices industry, often regarded as a sunrise sector, is attracting significant interest from private equity investors. To put this into perspective, there have been 59 private equity transactions in the Indian medical devices space since 2017.

Private equity deals have surged 3.3 times compared to pre-Covid-19 levels in this sector. The contribution of medical devices to the total deal value has doubled from 6% between 2017 and 2020 to 11% between 2021 and mid-2024.

Some of the prominent deals include Warburg Pincus investing $210 million in Meril Life Sciences, India’s largest medical device manufacturer and $300 million in ophthalmic equipment manufacturer Appasamy Associates.

Samara Capital has invested $150 million in stent manufacturer SMT, while Everstone Capital has injected around $90 million into another stent manufacturer, Translumina.

Other notable transactions in the sector include Kotak Alt’s $48 million investment in Biorad Medisys, Temasek Holdings and Oswal Alternates’ $85 million investment in Molbio Diagnostics, and KKR’s acquisition of Healthium from Apax Funds, valued at over $800 million.

Indian companies have largely focused their efforts—and consequently, deal activity—on medical consumables and mid-range medical equipment. Medical consumables primarily encompass single-use or disposable products like syringes, needles, IVs, surgical blades, and microscopes.

Higher-end equipment produced by Indian companies includes stents, ventilators, X-ray machines, and diagnostic equipment.

So, why is there such a strong interest in the med-tech space, particularly in medical consumables? The Indian medical devices market, valued at around $11-12 billion, is among the fastest-growing globally, with an estimated compounded annual growth of 10-12% from 2024 to 2030.

It’s expected to be over four times the current size and hit about $50 billion

in the next six years, according to a report in June 2024..

The medical consumables and implants segment is expected to reach a value of $4-4.5 billion within this market, with a projected growth rate of 10% CAGR. India is currently one of the top 5 to 10 manufacturers of medical consumables worldwide.

Indian manufacturers benefit from lower production costs, skilled labor, and competitive pricing, which has led some investors to liken the sector to the generics industry of the 1990s. The industry is expected to grow at a 10-12% rate overall, with some sub-segments expanding even faster.

However, there are challenges and trends to consider. Investors emphasize the need for companies to enhance their technological capabilities and be mindful of competition from China, which is considered a decade ahead of India in this space.

Investors will closely observe India’s capability to enter higher-tech sectors, where multinational corporations control 80-90% of the market. These sectors include specialized devices like staplers, clips, endosurgery accessories, hemostatic accessories, gastro consumables, and central venous catheters.

While investors expect strong private equity interest in the medical devices sector over the next 5 to 10 years, one cannot rule out pharma or healthcare companies throwing their hat in the ring.

A recent example has been Alkem Labs tying up with US based Exactech to manufacture their joint replacement implants in India to Mankind having been potentially interested in Healthium.

Let’s wind this down with the near term deal potential deal pipeline. Possible deals could revolve around the acquisition of India’s largest cardiac stent manufacturer, SMT. Firms like KKR, TPG, and Alkem are reportedly in the race to acquire the company.

Other anticipated deals include Everstone’s plan to merge Translumina with Everlife Holdings, a distribution platform, and eventually list the merged entity. Moreover, medical equipment manufacturer Skanray, which counts notable investors like Arun Kumar of Strides Pharma among its backers, is another name to watch for potential mergers and acquisitions. CNBCTV18