TechnoPak - Healthcare

T E C H N O P A K H E A L T H C A R E O U T L O O K F E B ‘ 0 7

A Quarterly Report by Technopak

ten industry trends:

2007

Healthcare Outlook

FEBRUARY ‘07 / VOLUME 01

The growing demand for

quality healthcare and

the absence of matching

delivery mechanisms pose a

great challenge and an even

greater opportunity. Here’s

an informed view of trends

& drivers for the Indian

healthcare industry.


Volume 1, February 2007 ©Technopak Advisors Ltd.

‘Healthcare Outlook’, a quarterly feature is an effort by the Technopak Healthcare Team to explore the dynamic changes that are occurring in the industry in India today.

We at Technopak understand the need for continuous and intensive assessment of the world’s largest service sector industry. With this report we have attempted to provide insight of the trends and the opportunities in healthcare market. During the course of this year we will be publishing reports on various aspects of the industry with a specific focus on the diverse opportunities for investment.

Healthcare Outlook Vol.1 leaves out an important component in the industry i.e. pharmaceutical sector. We feel that the pharmaceutical sector has its own dynamics and needs a separate analysis.

Contents Overview 01

Trend1The Private Sector Takes the Lead 02

Trend2Health Insurance: Increasing Accessibility 03

Trend3Standardisation: Need for Uniformity 04

Trend4The Empowered Indian Patient 05

Trend5Manpower: Reversing the Brain Drain 06

Trend6Technology Takes Centre Stage 07

Trend7Public Private Partnership: The Way Ahead 08

Trend8Medical Value Travel: Hype & Reality 09

Trend9Special Economic Zones 10

Trend10Infusion of Private Equity 11

About Technopak 12

Footnotes 12

Healthcare Outlook


The Indian economy is witnessing phenomenal growth, currently at 8.5%

of Gross Domestic Product - a fiery pace that most analysts predict is

sustainable and likely to accelerate further, making it one of the fastest

growing economies in the world. The major drivers of this growth story

are quite well known and really need no elucidation.

The last decade has seen the healthcare sector transition from a static

and seemingly inconspicuous industry to an increasingly dynamic and

significant industry today. A decade ago in India, health (and the

healthcare sector), was not usually considered as a key driver of national

economic performance. However, over the years, there has been a

fundamental change to this paradigm, with incontrovertible evidence

from the world over firmly establishing that improved health leads to

better economic performance. The direct as well as unquantifiable

benefits from healthcare have become too large to be ignored. Small

wonder that healthcare planning and investment have become the

buzzwords for corporate planners the world over.

DRIVERS OF GROWTH

Better Health Insurance penetration

Newer Treatments

Lifestyle Diseases - Obesity, Diabetes, Cardiovascular

Rising Income Levels

Population of 1.2 billion by 2015

01

OverviewIndia’s economic growth is bringing with it an expected “health transi-

tion”, in terms of shifting demographics, socioeconomic transformations

and changes in disease patterns - with increasing degenerative and

lifestyle diseases and altered healthcare behavior. Healthcare providers

have been struggling to cope with this exciting scenario where change is

the only constant.

The growing demand for the quality healthcare and the absence of

matching delivery mechanisms pose a challenge and certainly a great

opportunity. We stand at the threshold of an exciting opportunity to

design and engineer healthcare delivery systems, develop numerous

commercially viable & customizable delivery formats for the growing,

demanding and health conscious Indian populace - the collective size

and economic clout of which is indeed hard to fathom. And as if

this colossal market isn’t big enough, the Indian price and human

resources advantages have already made Indian shores the new haven

for medical value travel. In short, we are witnessing a classic case of

demand far in excess of what healthcare providers can deliver, both

qualitatively and quantitatively. Some of the more prescient and

proactive players in the field have already made substantial inroads

to bridge this divide and profit from this tremendous opportunity.

We feel that such endeavors make sound economic sense and would

benefit all stakeholders in great measure.

The succeeding pages provide an informed view of healthcare trends

and drivers for the Indian healthcare industry. INDIA - THE AGING POPULATION

0-14 yrs 15-59 yrs 60 yrs

2001

35.4

6.9

60.4

40

62.6

8.3

26.8

63.9

25.1

9.3

64.2 64.3

Popu

latio

n Di

strib

utio

n (%

)

2006 2011 2016 2021 2026

57.7

32.1

7.5

29.1

10.7

23.4

12.4

T E C H N O P A K H E A L T H C A R E O U T L O O K F E B ‘ 0 7 02Trend 1The Private Sector Takes the Lead

The delivery capability of India’s healthcare industry has not been able to match up with the burgeoning population and socio-economic changes. The growth rate of over 13% witnessed by the healthcare industry in 2006 is only a precursor of far greater increases to be seen in the future. This is driven by a host of ubiquitous factors that are inevitably defining individual and societal needs and preferences in the 21st century. Besides the growing population, these include a rise in income levels across all strata of society, the commensurate increase in lifestyle diseases, deeper penetration & growing involvement of health insurance, newer treatment modes and finally the inadequacy of the public healthcare delivery systems.

PUBLIC / PRIVATE SHARE OF

HOSPITALISATIONPUBLIC / PRIVATE SHARE OF

NON-HOSPITALISATION TREATMENT

1986-87 1995-96 2004

60

Perc

enta

ge

rural urban rural urban rural urban

40

60

4044

56

43

57

42

58

38

62

Healthcare, which is a US$ 35 billion dollar industry, is expected to reach over US$ 75 billion in the next five years. The private sector today accounts for over 80% of this spending. With 1.5 beds per thousand population (both private and public combined), India is at par with some of the less developed countries like Mexico, Costa Rica & Philippines. An addition of even a single bed per thousand population (1.1 million beds in the case of India) will require an investment of around US$ 80 billion. We envisage that most of these will be created in the secondary care format in Tier II cities where the bed ratio is most adverse.

It is estimated that over 90% of the private healthcare is being serviced by the unorganized sector. This preponderance of the unorganized sector in healthcare is not because of a preferred choice for such health practitioners, but by more functional imperatives, namely the absence of affordable, convenient and quality healthcare delivery systems. This is expected to undergo a sea change in the coming years. Such a transition is not hard to foresee. The great opportunities afforded at this juncture are attracting a large number of established players as well as new entrants who are eager to capitalize on this exponential growth.

CORPORATE PR IVATE PLAYERS

ApolloHospitals40 hospitals with 6,000 beds

FortisHealthcare12 hospitals with 1,900 beds

WockhardtHospitals10 hospitals with 1,500 beds

MaxHealthcare7 hospitals with 800 beds

NEW MARKET PLAYERS

NATIONAL

Reliance HealthcareArtemis Health Sciences (Apollo Tyres)Paras Group

INTERNATIONAL

Parkway Group, SingaporePacific Healthcare Holding, SingaporeColumbia Asia, MalaysiaEMAAR Group, DubaiPrexus Healthcare Partners, USA

Public Private

1986-87 1995-96 2004

Perc

enta

ge

rural urban rural urban rural urban

74

26

72

28

81

19

80

20

78

22

81

19


Trend 2 Health Insurance: Increasing Accessibility

Access to quality healthcare in the private sector till now is limited by the high cost for the vast majority of India’s population. However, this is changing dramatically with the advent of health insurance as a preferred tool to finance most healthcare expenditures. Health insurance is destined to grow exponentially in the coming years with large and diverse players having entered the fray and enticing consumers with an ever growing array of schemes. There is still a lot of ground to be covered - even today over 75% of the expenditure on healthcare is still being met by consumers “out of pocket”.

Less than 10% of India’s population today has some sort of health insurancecover: either voluntary or as part of the Employees State Insurance, CentralGovernment Health Scheme or Community Insurance. Private players in thevoluntary health insurance sector saw spectacular growth in their collections last year. Healthcare insurance premium collected in 2005-06 registered a growth of 35% over year 2004-05. The private players registered a growth of 77% over year 2004-05 and public players a growth of 25% over 2004-05. These figures are only likely to further increase. In addition, Community Health Insurance (CHI) schemes are also slowly penetrating the rural market. There are more than 25 schemes covering over 8 million lives all over India. With the Insurance Regulatory and Development Authority (IRDA) stipulating that 5% of the business for insurance companies be from the rural sector, a slew of innovative schemes & better coverage is being seen.

The entry of pure Health Insurance companies into the marketplace in 2007promises a plethora of innovative products. Swiss Re estimates a potential of US$ 7,700 million in health insurance premium by 2015. In 2007, Foreign Direct Investment (FDI) limit in health insurance may be raised from 26% to 49%, which would result in surge of international players & even more customized offerings targeting all sections of society. In the event of the minimum capital requirement of US$ 22 million being reduced to US$ 11 million, a number of standalone players would enter the fray as is the trend across the world for health insurance.

EVOLUT ION OF HEALTH INSURANCE IN IND IA

1986Introduction of first MediclaimInsurance Scheme by GIC.

1999Insurance Regulatory and Development Authority (IRDA) Act passed; opening up the insurance sector to private players allowing 26% Foreign Direct Investment in the sector.

2001IRDA introduced several insuranceregulations including provisions for ThirdParty Administrators (TPA) system to support administration and management of health insurance product offered by Insurance Companies.

2005IRDA stipulated the regulation onmicro-insurance for 5% business in ruralsector.

NEW STAND ALONE PLAYERS IN HEALTH INSURANCE

1. Star Health2. Apollo Hospitals & DKV

03

SHARE OF PUBLIC / PRIVATE SECTOR COMPANIES IN HEALTH INSURANCE PREMIUM 2005-06

18%

1% 4% 9%

6%

2%

10%

50%

Royal Sundaram

Tata AIG

Reliance

Iffco Tokio

ICICI Lombard

Bajaj Allianz

HDFC Chubb

Cholamandalam

Public Sector 76%

Private Sector 24%

Trend 3Standardization: Healthcare’s Need for Uniformity

Health processes in advanced countries are well standardized both in the terms of the clinical protocols and actual delivery. This, apart from producing superior outcomes and reducing error probability also provides transparency on the effectiveness of the treatment, which is increasingly critical given the more informed and demanding patients or health “seekers”. A growing number of hospitals in India are turning to accreditation agencies worldwide to both standardize their protocols and project their international quality of health care delivery.

Joint Commission International (JCI), the leading healthcare accreditation agency in the United States has accredited five hospitals in India till date. However, most hospitals in India are unlikely to go for JCI accreditation due to the high cost of accreditation and compliance. The JCI accreditation is likely to be limited to only those players who are banking on international patients to swell their numbers.

The Quality Council of India has established the National Accreditation Board forHospitals and Healthcare Providers (NABH) in 2005. The NABH looks at providing accreditation specific to the Indian Healthcare setting, major aspects being the assurance of uniform access, assessment, care of patients and protection of patient’s rights .Besides hospitals it would also accredit blood banks, diagnostic centers and ayurvedic hospitals. In the process, it would target over 15,000 healthcare providers nationwide. A MoU with the Australian Council on Healthcare Accreditation Standards (ACHS) will help the NABH to access some of the best international practices.


ACCRED ITAT ION ADVANTAGE

• Strengthens community confidence in the quality and safety of care, treatment and services• Recognition by insurers and third parties• Provides a competitive edge in the marketplace• Improves risk management and risk reduction

JC I ACCRED ITED HOSP I TALS

Indraprastha Apollo Hospital, New DelhiApollo Hospital, ChennaiApollo Hospital, HyderabadWockhardt Hospital, MumbaiShroff Eye Hospital, Mumbai

NABH ACCRED ITED HOSP I TALS

B.M. Birla Heart Research Centre, KolkataMIMS Hospital, CalicutMax Super- Speciality Hospital, New DelhiMax Devki Devi Heart and Vascular Institute, New DelhiKerala Institute of Medical Sciences, Thiruvananthapuram

JO INT COMMISS ION INTERNAT IONAL

Joint Commission launched its international accreditation program in 1999 but has accredited more than 15,000 healthcare organizations in US for more than 50 years. Its accreditation is a nationwide seal of approval that indicates a hospital meets high performance standards. The World Health Organization (WHO) designated the Joint Commission on Accreditation of Healthcare Organizations and Joint Commission International as its Collaborating Centre on Patient Safety in 2005. Over 60 hospitals being accredited by JCI worldwide including, India.

The Joint Commission provides evaluation and accreditation services for the following:

• General, psychiatric, children’s and rehabilitation hospitals• Critical access hospitals• Medical equipment services, hospice services and other home care organizations• Nursing homes and other long term care facilities• Behavioral health care organizations, addiction services• Rehabilitation centers, group practices, office-based surgeries and other ambulatory care providers• Independent or freestanding laboratories

04


Trend 4 The Empowered Indian Patient

05

Healthcare systems worldwide have traditionally lacked transparency. Howeverpatients today are demanding more information not only about treatments butalso about their possible outcomes. Patients today are more health savvy, exacting and well aware of the options available. This new sense of accountability can be attributed to patients having better access to medical information, a weakening of the classical doctor-patient relationship (with physicians spending progressively lesser time with patients), benchmarking of healthcare delivery with other industries and finally the patients desire to become part of the decision making process. In India, this has resulted in consumers migrating from the single doctor nursing home set up to a more organized hospital delivery format. This in a way is analogous to the behavioral aspirations of the consumer in retail sector where paradigm shifts in delivery formats are being seen. With consumers looking at quality healthcare not only in urban but also the rural areas, a huge opportunity exists for existing players to diversify and for new entrants to secure a toe hold in this exciting space.

The Worker’s Social Security Bill 2005 is likely to be passed by parliament this year. Over 360 million workers will be under a social security scheme including health insurance. This for the first time will empower the lesser privileged classes to choose healthcare service providers including private providers. A few states are now looking at purchasing health insurance for below poverty line families as an alternative to healthcare delivery. The state government of Punjab bought health insurance to cover 0.46 million below poverty line families last year.

THE NEW HEALTHCARE CONSUMER

• Has better access to medical information• Focuses on quality and convenience• Benchmarks across industry• Is more able to afford the best• Wants to be part of the decision making process• Demands transparency• Measures outcomes

INDIA: RISING INCOME

2005 -06 2009 -10

132249,000

66459,000

4334,000

609,000

52,000

114394,000

97572,000

8546,000

1433,000

141,000

140,000,000

10,000,000

0

Annual Income in ‘000 INR

<90

91-500

2001-10000

501-2000

10001+

Num

ber o

f Hou

seho

lds

Maximum rise in households with income between 91,000-500,000 INR

Trend 5Manpower: Reversing the Brain Drain

One of the pivotal factors to sustain the projected growth of the healthcare industry in India would be the availability of a trained workforce, besides cheaper technology, better infrastructure etc. Worldwide, the shortage of doctors, nurses and paramedical staff has led to an exodus of such manpower from India in the last three decades. A major challenge for our nation and the healthcare industry would be not only to retain the healthcare workforce but also to develop an environment which would attract those abroad to return.

Even if the number of doctors were to increase from 0.6 to 0.8 per 1000 population and number of nurses were to increase from 1.5 to 2 per 1000 population to catch up with best world practices, India needs 0.2 million doctors and 0.5 million nurses right away, besides need for other paramedical and healthcare management personnel.

One of the encouraging trends has been the growing interest of physicians of Indian origin who number is more than 60,000, working in other nations and willing to return home. The world class infrastructure which most corporate hospitals offer along with salary levels to facilitate the same living index at par with the west are just two reasons which are encouraging more top notch doctors to come back. Growing restrictions on licensing and practice within the European Economic Community is also translating into a large number of Indian doctors looking to relocate back from the UK which accounts for over 15,000 doctors of Indian origin.The recent developments in the UK are a case in point.


MED ICAL WORKFORCE FEW TRENDS

More than 10% of Indian Physicianswork abroad

Indians Physicians constitute 11% ofUnited Kingdom and 5% of work force ofUnited States.

700,000

140,000

200,000

500,000

REVERSING THE BRAIN DRAIN

Medical Professionals leaving India for:-Better remuneration-Better lifestyle-Perceived growth

-Access to better technology and training

Medical Professionals returning India for:-Salaries at par with those abroad-Better growth avenues-World class infrastructure

MANPOWER GAP BY 2010

HEALTHCARE

HOSPITALITY

RETAIL

IT/IT ENABLED SERVICES

06


Trend 6 Technology Takes Centre Stage

07BENEF I TS FOR SETT ING UP PRODUCT ION BASE IN STP I

Duty free import of equipment,instruments and consumables.

Tax holiday under Section 10A/ 10B of the Income Tax Act

The biotech company located in biotech parks will be allowed a five-year time frame to meet the export obligationnorms under the SEZ scheme. Thismeasure helps to address the long andunpredictable gestational time lines thatare inherent to biotech productdevelopment

NEW MEDICAL EQUIPMENT VENTURES TO COME

1. Europe-Isreal Group2. Steris3. BSN Medical GmbH (A joint venture of Beiersdorf and Smith & Nephew)4. Artemis Health Sciences

MARKET OPPORTUNITIES MEDICAL EQUIPMENT: MARKET DISTRIBUTION

18

3

Per

cent

age

Billi

on $

40%

15%

Growth rateMedical Equipment Heathcare IT

Equipment52 %

Medical Furnitures3 %

Orthopaedic Products19 %

Consumable26 %

Technology in the last two decades has revolutionized the way healthcare is delivered worldwide. It has greatly aided patients and providers alike by enhancing the quality of delivery, reduction in turn around time of workflows (and thus the overall cost), besides bringing in higher accountability into the system. As a typical example, a 100 bedded hospital could decrease its time for discharge by 50% to less than 60 minutes leading to an approximate increase in revenue of over 25%, on an average investment of only 2% of its annual revenue by an appropriate hospital information system.

In an era, when the Indian IT companies & professionals have sculpted their expertise in world class quality delivery, the Indian healthcare industry is also trying to reap the full benefits of the IT usage. The total market opportunity stands at around US$ 3 billion for the new healthcare IT infrastructure required in the country.

The Indian medical equipment and consumable market which is presently valued at over US$ 2 billion is largely made up of imports which account for over 90% of this share. The whole medical equipment market is witnessing a CAGR of 15%. Medical equipment takes the biggest share as 52% followed by consumables 26%, orthopedic products 19% & medical furniture 3%. With the additional infrastructure requirements we predict this could reach over US$ 18 billion dollars in the next five years.

A major development has been the Government of India announcement in 2006 for setting up of Biotech Parks with special sanctions to promote and encourage private players to establish production bases. It is proposed that a central body Biotechnology Parks Society of India (BPSI) be set up for the promotion of bio-technology parks in the country on the same lines of the Software Technology Parks of India (STPI). The Department of Biotechnology will promote and support at least 10 biotech parks by 2010.

Trend 7Public Private Partnerships: The Way Ahead

In recent years, the trend in both the developed and developing world has beentowards greater private sector involvement in health care provision and financing.The UK Government has used public-private partnerships (PPP) in financing,construction and facility management for many public hospitals. In Australia,federal and state governments have introduced private participation in more than50 public hospitals through several different mechanisms. Reasons for this include insufficient government resources and poor performance on the part of the public sector. There is a growing realization that involving the private sector in health services provision could lead to improved systems efficiency. In India given the extent of private sector dominance in the healthcare system the Government of India has laid various strategies under the National Rural Health Mission 2005 for partnerships with the private sector in meeting national public health goals. Recently the Planning Commission constituted a Working Group on Public Private Partnership to improve health care delivery for the 11th Five-Year Plan (2007-12).

There has been significant shift in the Government of India’s approach to involveprivate sector in delivery mechanism to achieve desired output and improve uponmacro health indicators. It envisages partnerships with the private sector. A widerange of PPP have been initiated. Noticeable examples are contractual appointment of health care personnel for providing services in Primary Health Centres (PHCs)/ Community Health Centres (CHCs), handing over management of public sector health facilities to private sector/ NGOs, contracting for providing a variety of services in major hospitals. In addition, there is growing involvement of the corporate sector, partnership with professional organizations, Community Based Organisations (CBOs)/ Non-Government Organisations (NGOs), social franchising and social marketing.


FEW STATE GOVERMENTS HAVE ALREADY STARTED WORKING ON PPP

Gujarat Government has taken a policy decision to entrust management of 23 district level civil hospitals, with about 4,100 beds, and six medical college associated hospitals to the private sector.

Rajasthan Government has contracted out the installation, operation and maintenance of CT-scan and MRI services to a private agency at SMS Hospital at Jaipur. The agency is paid a monthly rent by the hospital and the agency has to render free services to 20% of the patients belonging to the poor socio-economic categories. Rest of the patients are charged as per preagreed tariff which is considerably less than the market.

MECHANISM OF PUBL IC PR IVATE PARTNERSHIP ( PPP )

PublicFinancing&PrivateProvision

Contracting• Clinical Services• Non Clinical Services

Leasing or rentals• Facilities• Equipment

Management of hospital

Subsidies to private players

PublicProvision&PrivateFinancing

Community Insurance e.g. Karuna Trust

Private insurance inking deal with government hospitals

BENEF I TS OF PPP

• Economies of scale• Improving quality and efficiency• Exchange of skills and expertise between the public and private sector• Optimum utilization of public resources• Equitable healthcare• Broad range of services

08


Trend 8 Medical Value Travel: The Hype and the Reality

DRIVERS

1. Lower delivery cost2. World class facilities3. Highly qualified and experienced medical professionals4. Less waiting time5. Rising number of uninsured in developed countries

ROADBLOCKS

1. Poor public infrastructure2. Inadequate air connectivity3. Visa requirements from most countries4. Medico legal jurisdictions5. Country specific restrictions

09

During the last year considerable effort was put in both by the government and the hospital industry federations to project India as the preferred destination for medical value travel. Despite all the hype, the actual number of patients coming to India is only a fraction of what Thailand, Singapore and Malaysia treat individually.

Bumrungrad Hospital in Thailand last year treated over 400,000 foreign patientsand was estimated to have earned revenue of US$ 170 million. This is incomparison with 230,000 patients who would have come to all Indian hospitalscombined. A recent Newsweek article on “Medical Mecca’s” failed to list a singleIndian corporate hospital. Instead, the All India Institute of Medical Sciences wascited as an oasis for India’s poorest. However, the Institute evidently does notfocus on the high paying foreign patient.

Despite the evident advantage of low cost, world class hospital infrastructure,superior treatment outcomes and some of the best trained medical staff, the flowof foreign patients is still a trickle. Significant improvement would have to be made in public infrastructure, connectivity and reduction of visa formalities. Also, the healthcare and hospitality sector needs to be better integrated to further increase the medical value travel.

MEDICAL VALUE TRAVEL IN INDIA

UnitedKingdomLong waiting period for even the

critical illnesses

UnitedStatesHigh medical cost

Cosmetic Surgery not covered by insurance

Pakistan,Bangladesh,SriLanka,BhutanAbsence of superspeciality care

Otherthirdworldcountries,especiallyAfricaNo Medical facility even for those who can afford it

BUMRUNGRAD: THE SUCCESS STORY

First hospital in Asia to be accredited by the US-based Joint Commission International

Facilities

– 554 Inpatient beds– 135 Clinic examination suites– 19 Operating Theaters– Hospitality Residence: 74 fully serviced apartments connected to the hospital– Hospitality Suites: 51 fully serviced apartments with swimming pool and fitness facilities– Over 1 million patients treated per year– Almost 400,000 are international patients from over 190 different countries– US$ 170 million turnover in 2005– International Representative Offices in over 15 countries– Special international services including interpreters, international concierge service, embassy assistance, VIP airport transfers, e-mail correspondence, international medical coordinators

INDIA

Trend 9Special Economic Zones: The Hidden Opportunity

Special Economic Zones (SEZ) were introduced in 2000 to achieve three-foldobjectives of attracting Foreign Direct Investment (FDI), increasing exports and accelerating the economic growth in India.

To provide an impetus to economic activities outside the urban areas the Government of India (GOI) is actively promoting SEZs. Proposals for over 75 have been cleared till date with a further 225 pending in 2006.


The SEZs require hospitals to be set up in these zones. For a sector specific zonea hospital with minimum bed strength of 25 is stipulated and this goes up to 100beds for a multi product Special Economic Zone.

We predict a surge in healthcare activities in these zones both based on the needto comply as well as the opportunity to provide healthcare in mostly under servedareas. Over 18,000 beds would be required in the next five years necessitating aninvestment of over US$ 1.26 billion.

BENEF I TS SEZ

100 % foreign equity ownership in numerous industries

100 % exemption from income for the first five years

No licenses required for imports

Import of capital goods, raw materials, consumables and spares are exemptedfrom customs duty

Exemption on Central Excise Duty fordomestically procured raw materials,working capital, consumable spare parts

Exemption from Service Tax and Central Sales Tax

Import and export duty exemptions

SEZS : A BR IEF H ISTORY

2000 GOI announced the establishment of SEZs in its Export-Import Policy of March 2000

2005SEZ Act proposing that multi-product SEZs must have an area of at least 1,000 hectares and sector-specific zones including ports and airports must have a minimum area of 100 hectares

2006Ministry of Commerce laid stipulated rules regarding minimum number of hospital beds, 25, for sector specific SEZ and 100 for multi product SEZ

NUMBER OF HOSPITAL BEDS IN SEZs

HEALTHCARE INVESTMENT IN SEZs (US$ MILLIONS)

Multi product900

Sector Specific367

Multi product13,500

Sector Specific4,125

10


Trend 10 Infusion of Private Equity: An Unmistakable Sign of Growth

11

The healthcare sector in Asia and specifically in India is witnessing a surge ofactivity and the beginning of what is seen as a rapid phase of growth. Emerginghealthcare segments like diagnostic chains, medical device manufactures as wellas hospital chains are increasingly attracting investments from a variety ofventure capitalists. At a broader level, this trend in health care is often seen asa manifestation of the overall surge in private equity.

The Healthcare sector attracted US$ 379 million in year 2006 that formed 6.3% of the total private equity investment of US$ 5.93 billion. Clearly, there are strongindicators of promise and returns that are attracting discerning investmentprofessionals and institutions from the world over. This excitement is by no means confined to India. The growing interest of private equity investors in healthcare was affirmed by acquisition of HCA, the US largest hospital chain for US$ 33 billion making it the largest private equity deal for year 2006. The UK healthcare market was hitting headlines last year with private equity houses paying increased multiples to grab a piece of the action. General Healthcare Group (GHG) was sold by BC Partners to a consortium headed by Apax Partners, and the South African hospital group Netcare for £ 2.2 billion it is the largest ever European healthcare deal.

Compared to the West, the healthcare sector in India is poorly developed andnascent. Added to this is the seemingly insatiable market afforded by the now wellheeled Indian middle class - over 300 million strong and increasing purchasingpower crying hoarse for better healthcare. Small wonder that prospective healthcare providers and venture capitalists are excited at the very thought of this market. Clearly, some of the most exciting laps of the healthcare race would be run in India in the coming years.

MAJOR HEALTHCARE DEALS

George Soros’ fund Quantum and BlueRidge bought 10 % in Fortis Healthcare

Manipal Health Systems Private Limitedhas raised over US$ 20 million of equityfrom IDFC Private Equity Fund

Bangalore-based HealthCare GlobalEnterprises Limited (HCG) has raisedover US$ 10 million in equity from IDFCPrivate Equity Fund

Metropolis Health Services Ltd.(Metropolis), India’s leading CorporateDiagnostics Chain raised over US$ 8million in equity from India AdvantageFund-I managed by ICICI Venture

PRIVATE EQUITY DEALS IN PHARMACEUTICAL & HEALTHCARE IN INDIA, 2006

(US$ MILLION)

Pharmaceuticals377.56

Hospitals82.33

Diagnostic Chains8

Automotive 450.75Aviation 93.13Banking & Financial Services 657.33Cement 115.79Engineering 88.09

Energy 113.07FMCG, Food & Beverages 154.1Hotel 125.17IT & ITES 1608.55Logistics 37.63

Manufacturing 217.83Media & Entertainment 166.3Pharma & Healthcare 467.89Real Estate & Infrastructure 1288.02Retail 161.22

Telecom 1393.42Textiles & Apparels 212.92Travel & Toursim services 55.2Others 453.02

About Technopak

Technopak is a management consulting firm focused on the Healthcare, Apparel, Retail, other Consumer products and Textile industries.

Technopak has a strategic alliance with Kurt Salmon Associates (KSA). KSA has the most extensive healthcare provider client base in the United States and is currently working with most US News and World Report Honor Roll Hospitals.

The healthcare practice is uniquely positioned to advice clients based on its expertise in the Indian scenario , insight into consumer behaviour in India and its access to the best international practices.

The Healthcare Practice provides the whole gamut of services from concept to commissioning for the healthcare delivery chain.

Strategic & Business Consulting

Facility Planning & Architectural Design

Medical Equipment Planning

Human Resource Management

Operations Optimization

Quality and Accreditation support

Marketing & Branding

Information Technology

Health Education & Training

Public Health

Mergers & Acquisition Support

CONTACTS

Dr. Rana MehtaVice President, [email protected]

Gulshan BawejaPrincipal Consultant, [email protected]

Abhishek Pratap SinghSenior Consultant, [email protected]

Healthcare DivisionTechnopak Advisors Ltd.4th Floor, Tower ABuilding-8DLF Cyber City, Phase-IIGurgaon-122002(National Capital Region of Delhi)India

T: +91 124 4541111F: +91 124 4511198/99Email: [email protected]: www.technopak.com

FOOTNOTES

1. Morbidity, Healthcare and the

Condition of the Aged;

Report No. 507 National Sample Survey

Report 60th Round

2. Morbidity and Treatment of Ailment

Report No. 441, National Sample Survey

Report 52nd Round; November 1998

3. The Metrics of Physician Brain Drain;

Mullan F, MD;

The New England Journal of Medicine;

Vol.353:1810-1818; October 27, 2005

4. SEZ Act 2005

5. Health Insurance – A Horizontal Study;

Ministry of Finance;

Eleventh Report, Committee on Public

Undertakings (2005 - 2006);

Fourteenth Lok Sabha)

6. Report on Population Projection

for India;

National Commission on Population

7. http://www.bumrungrad.com/

8. Redefining Hospitals; Cover Story,

Business World;

18 December 2006, pg 38

9. The Unorganised Sector Workers’

Social Security Bill, 2005

12


t e c h n o p a kHealthcare PracticeTechnopak Advisors Ltd., 4th Floor, Tower A, Building-8, DLF Cyber City, Phase-II, Gurgaon-122002 (National Capital Region of Delhi), India

T: +91 124 4541111 F: +91 124 4511198/99 [email protected] www.technopak.com

TechnoPak - Healthcare

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