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Hospital Industry – Saving Lives!


“It is health that is the real wealth, and not pieces of gold and silver.”

– Mahatma Gandhi

The healthcare sector has been one of the most promising sectors within the Indian economy.

We have had an increase in life expectancy, a reduction in fertility rates, and a reduction in maternal & child mortality rates. The burden of communicable diseases like tuberculosis and malaria has come down but is still high as compared to other developing countries like China or developed countries. Simultaneously, the incidence of non-communicable diseases like cancer, diabetes, etc. has been increasing rapidly.

India’s healthcare spending remains abysmally low even as compared to other developing countries like Brazil and South Africa. Healthcare spending in the west (ex-US) is supplemented with other social schemes that cause better living standards and overall health, leading to a reduced level of healthcare spending. India spends ~3.5% of GDP on healthcare vs the world average of ~10%; developed countries like the US at 17%, France & Germany at ~11%; developing countries like Brazil at ~10%, South Africa at ~8%, and China at ~5%.

The broader healthcare sector comprises various industries such as hospitals, diagnostics, pharmaceuticals, and medical devices. The healthcare industry in India has seen outstanding growth over the past few years. The industry is expected to grow at a CAGR of 17% during the period 2018-to 2025. The expansion may be attributed to factors such as population (including aging), economic development, and the adoption of recent technologies.

As per CRISIL Research, in FY20, the hospital industry had the highest revenue contribution towards the healthcare sector at ~60%, followed by domestic pharmaceuticals at 20%, diagnostics at 10%, and medical devices at ~10%.

Within hospitals, we have a unique situation in India, where the tertiary care institutions are serving a major proportion of primary and secondary care requirements as well. Due to a relatively weak primary care system and broken referral pathways, tertiary care public health facilities are often overburdened with primary and secondary care patients.

Key characteristics of the Indian Hospital industry are:

  • Health Indicators – Still high number of years lost due to disease burden. The proportion of communicable diseases is coming down and non-communicable diseases like cardiovascular, diabetes, cancer, etc. are increasing

  • Private Players to drive growth

    • High growth driven by rising income levels, increasing awareness, and an aging population

    • A significant proportion of the health needs (OPD and IPD) of the population is served by the private sector

  • Affordability of healthcare could be a challenge and a major contributor to the healthcare expenditure remains Out of Pocket Expenses (OOPE) at ~60%

  • Human Resources - Hospitals face challenges in terms of shortage of doctors and other healthcare professionals

  • Medical Tourism – India is an established place for medical tourism. It is no wonder that Akshay Kumar’s movie (Baby) used the premise to bring the dreaded terrorist to India from Saudi Arabia

Health Indicators

The disability-adjusted life year (DALY) could be a measure of overall disease burden, expressed as the number of years lost because of ill-health, disability, or early death. It has been developed in the 1990s as a way of comparing the general health and life expectancy of various countries.

DALYs from all causes (communicable and non-communicable diseases) remains high for India as compared to the international benchmark.

The disease category in India is as follows:

As can be seen from the above table, the share of communicable diseases has fallen from ~60% in 1990 to ~33% in 2016 with a sharp fall in diarrhea, cold cough, and other common infections. On the other hand, there is an increase in lifestyle-related ailments like cardiovascular diseases, diabetes, and cancer.

Cardiac care will continue to dominate healthcare spending in India, thanks to better diagnostic facilities and the prevalence of cardiac diseases. Most of the healthcare spending in cardiac care is driven by spending on heart surgeries.

India is said to be one of the diabetes capitals of the world, and diabetes cases will continue to account for a large chunk of its healthcare spending.

The prevalence of cancer is increasing worldwide, and India is unlikely to stay untouched. As early cancer diagnosis improves thanks to scientific advancements, spending on cancer-related surgeries and medicine will also increase. Despite having a low number of hospital cancer cases, the price of cancer treatment is almost similar to that for cardiac cases, due to high treatment/medicine costs.

Private Players drive hospital industry growth

The Indian hospital industry has grown over the years driven by an increase in per capita income, rising awareness of diseases and their impact, and changing lifestyles. However, the overall spending on healthcare is still way lower compared to global standards primarily due to limited government participation and an inadequate number of qualified healthcare professionals. To satisfy the requirements of its 1.3 billion people, India needs to develop its healthcare infrastructure quickly and efficiently.

Moreover, with renewed impetus from schemes like Pradhan Mantri Jan Aarogya Yojana (PMJAY) and also the government’s sharpened focus on healthcare, the sector is anticipated to grow at ~16% CAGR to INR 8 lakh crore in FY25.

The government has limited resources to drive growth in the hospital sector and hence, it’s encouraging the participation of private players. Private participation within the healthcare sector is estimated at 58% in FY21 and projected to jump to 66% by FY22 and to 73% by FY25.


Affordability of healthcare is an important factor affecting universal health coverage. 7% of the Indian population fall below the poverty level because of indebtedness for health expenditure (Source: Ravi, Ahluwalia, & Bergkvist, 2016). The share of OOPE is around 60% (in 2017) of total healthcare expenditure and is the highest in the world. However, the OOPE share is coming down – it was ~70% around 2005.

The government has introduced Ayushman Bharat- Pradhan Mantri Jan Arogya Yojana to provide free health coverage at the secondary and tertiary level to India’s bottom 40% poor population. However, an outsized portion of the population (non-poor or near-poor) which includes those working in the informal sector are missed out. These informal non-poor represent the “missing middle” that continues to be without financial protection and gets neglected.

Human Resources

In India, there are 0.91 doctors available per 1,000 people, which is low compared to the WHO recommendation of a 1:1000 doctor-population ratio (MoHFW, 2020). The US has a ratio of 2.44 and China has 1.49. There is also a need for 44.5:10,000 numbers of health care workforce: population ratio as achieving health care outcomes involves a multi-disciplinary approach. India has a shortage of 6,00,000 doctors and a couple of million nurses (Centre for Disease Dynamics, Economics and Policy, 2019).

Medical Tourism

India is emerging as a significant medical tourist destination, given the relatively low cost of surgery and critical care in the country. Indian doctors are one of the most skilled in the world given the amount and variance of patient load which they have to cater to. Most key medical procedures are performed at cheaper rates in India vis-à-vis developed and a few developing countries. India is additionally an attractive destination because of the presence of technologically advanced hospitals with specialized doctors and facilities. As per the Ministry of Tourism, of India’s total foreign tourist arrivals, the proportion of medical tourists grew from 2.2% (1.1 lakh tourists) in 2009 to 6.4% (6 lakh) in 2019.

The government has also constituted a National Medical and Wellness Tourism Board which can provide financial assistance of INR 6 lakh to medical tourism service providers under market development assistance (MDA) to develop medical tourism in India.

[End of Part 1]

In the subsequent articles, we will analyze listed hospital players like Narayana, Apollo, KIMS, HCG, Fortis, and Shalby.


About the Author

I have over 15 years of experience in venture capital, private equity and investment banking in India and Middle East across a wide variety of sectors. I was last working with Majid Al Futtaim Holding (MAF), a leading conglomerate in Middle East, to look after investments, M&A and venture capital. I have prior experience in India with Tata Capital (Private Equity), Merrill Lynch (Investment Banking or IB) and Ambit Corporate Finance (IB). I bring the long-term ownership mindset to the analysis.

I graduated from the MBA program of the Indian Institute of Management Lucknow (2005) after completing the Bachelor of Technology program at the Indian Institute of Technology, Kharagpur (2002).

I am an Insignificant Investor in the public market and co-founder of SocInvest.


I have no stock, option or similar derivative position in any of the companies mentioned since last 30 days, and shall not initiate any such positions within the next 5 days. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from SocInvest). I have no business relationship with any company whose stock is mentioned in this article.

I am not a SEBI registered advisor. This article is purely for educational purpose and not to be construed as an investment advice. Please consult your financial advisor before acting on it.

I have used publicly available information while writing this article.



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