India’s healthcare sector has seen a remarkable surge in foreign direct investment (FDI), with hospitals emerging as the dominant force. In FY24, hospitals accounted for 50% of total healthcare FDI, equivalent to $1.5 billion. This marks a dramatic rise from their 24% share in FY21 and 43% in FY20, highlighting their growing importance within the sector.
The shift reflects an increasing investor preference for hospitals, a trend that has gained momentum since the pandemic. Traditionally, pharmaceuticals, including APIs (active pharmaceutical ingredients), have been the primary focus for investors, attracting significant deals. However, the spotlight has now shifted to hospitals and diagnostics, driven by high-profile acquisitions such as Temasek’s $2 billion stake increase in Manipal Hospitals and Aster DM Healthcare’s merger with Quality Care India.
According to Sujay Shetty, PwC India’s Global Health Industries Advisory Leader, “Hospitals have become a focal point for private equity interest, fueled by the demand for quality healthcare, underserved regions, a high disease burden, and the growing insurance market. There’s still a long runway for growth, which explains the sustained optimism.”
The capital-intensive nature of the hospital sector has also drawn attention. Abhay Soi, CMD of Max Healthcare, emphasized that the industry is reinvesting profits to expand infrastructure, which is reflected in rising valuations. “At Max, we’re doubling our capacity over the next three years with an investment of over ₹5,000 crore,” Soi said.
IPO activity in the hospital sector has further bolstered investor confidence. Over FY24-27, the bed capacity of 10 listed hospital firms is expected to grow by 47%, primarily in North and South India, according to BNP Paribas analyst Tausif Shaikh.
As reported by TOI, recent years have also seen seven major hospital chains go public, collectively raising ₹3,600 crore through IPOs and qualified institutional placements. Analysts suggest that these developments, along with sustained private equity interest, are setting the stage for significant growth in India’s hospital sector as it plays a key role in driving the healthcare industry forward.