India emerged as the top destination to deploy healthcare capital at scale in 2023, according to Bain & Company’s Global Healthcare Private Equity report 2024. 

The announced healthcare deal value in the Asia-Pacific region stood at around $14.2 billion in 2023, down around 17% from $17.1 billion in the previous year. India accounted for the largest share of 2023’s deal value at $4.6 billion, according to the report. The healthcare deal value in India in 2023, however, was a tad below the $4.7 billion clocked in 2022.  

 Asia-Pacific’s share of global healthcare PE deal volume continues to rise, growing from 26% of global deal activity in 2022 to a projected 34% in 2023, noted Bain’s report.

India stands out as the main force expanding Asia-Pacific’s share of global deal activity. The nation in 2023 is expected to host 22 healthcare deals, based on Jan-Nov data, a slight decline from 26 in 2022. Overall deal volume in Asia Pacific was nearly flat in 2023, compared with the previous year. 

India has seen a long-term rise in biopharma-related activity (for example, in generics and active pharmaceutical ingredient manufacturing), albeit with a slowdown year over year, while also seeing growth in domestic demand driven by an expanding middle class and government insurance programmes.

These macroeconomic dynamics, coupled with several successful exits from early investors in India—such as TPG’s sale of a controlling stake in Care Hospitals to Blackstone in October—have propelled private equity sponsors to regard India as a place to deploy healthcare capital at scale.

However, India has traditionally seen investments in biopharma and providers, and it is still too soon to know whether green shoots in other areas such as health insurance technology firms achieve comparable prominence and whether these firms can parlay their success in India to expand across Asia-Pacific.

The report adds that the Asia-Pacific region has seen intensified deal activity outside of China—historically the main engine of transactions in the area—and is being transformed into a region with multiple engines of growth. 

Buyouts increasingly occurred across geographies—from high-income economies like Australia and South Korea to budding middle-income nations such as India. About two-thirds of the deals in India were executed by funds with less than $50 billion in assets under management (AUM), illustrating the wealth of activity outside megacap funds.

In China, many investors have stayed on the sidelines as the country navigates an evolving healthcare policy, Covid’s impact on public budgets, and a softening economy. Nonetheless, Chinese activity has begun to rebound, rising from 21 deals in 2022 for a total of $1.6 billion in value, to a projected 58 deals in 2023, reaching around $3.4 billion in value. 

Moreover, private spending on healthcare is on the rise across Asia-Pacific, as economic growth lifts millions of people into the middle class and health takes on new importance in the wake of the pandemic.

India’s advantage

Global PE investors have grown more comfortable putting larger amounts of capital to work in India, making the market more competitive. Moreover, more transactions are becoming controlling deals, as the perceived risk of making large investments in India diminishes—including for owners, who are often founders of the healthcare asset, and who are becoming more comfortable handing over the reins to investors.

The report highlights three forces behind India’s rise.

Spending on private and public healthcare: India’s burgeoning middle class is spending more on healthcare. As disposable incomes rise and given the explosion of insurance technology (insurtech) platforms, private healthcare has become more accessible. COVID-19 also served to reset consumers’ attitudes about healthcare spending. Meanwhile, government health expenditures have risen significantly over the past decade.

Multi-speciality hospitals in India have seen a flurry of deal activity over the past decade.  In 2023, Temasek acquired an additional 41% stake in Manipal Health Enterprises for around $2 billion, and Blackstone’s bought a controlling stake in Care Hospitals for some $800 million from TPG.

Single-speciality clinics have also seen a surge in activity lately, most notable was BPEA EQT’s acquisition of a controlling stake in Indira IVF, an in vitro fertilization clinic chain, valued at $1.1 billion.

Booming pharma manufacturing and services: India’s leading position in small molecule manufacturing has been fortified. Supportive government policy (including the Production Linkage Incentive programme), combined with the country’s chemistry and engineering talent, a strengthening pharma ecosystem, and a push to diversify supply chains away from China have helped India become one of the top-3 global manufacturers of pharmaceuticals by volume, and the top global generics manufacturer.

COVID-19 made India the top vaccine manufacturer, supplying 50% of global vaccine demand.

For PE investors, India’s emergence as a leading pharma hub has created an opportunity in pharma services, especially manufacturing services, such as contract development and manufacturing organizations (CDMOs) and active pharmaceutical ingredient (API) producers.  

While small molecules have been the focus to date, there are early signs that large molecules, especially biologics, may be the next frontier.

Evolving healthcare technology ecosystem: India has historically served as the back end for many US- and Europe-focused healthcare data and analytics companies, such as revenue cycle outsourcers. However, in recent years, digital health companies serving the Indian market directly—especially in fitness and wellness, such as HealthifyMe, telemedicine, such as Mfine, and insurtech, including Turtlemint and Even—have seen brisk activity.