The Bajaj group, a giant in the Indian market with a value of ₹1.5 lakh crore, has decided to venture into the healthcare industry. This move has the potential to have a significant impact on the healthcare sector in India. Private-sector hospital chains have been experiencing positive growth, increasing profits, and expanding their capacities. This growth is reflected in the rising stock market valuations of these hospital chains.
The COVID-19 pandemic has brought to light the lack of quality healthcare facilities in India, leading to a surge in investor interest in the healthcare sector. Despite the increase in medical insurance costs, public healthcare expenditure remains low. However, hospital companies have managed to strengthen their financial positions during the pandemic by reducing debt, improving revenue per operating bed, and investing in advanced technologies like robotics to enhance healthcare outcomes.
Large players in the healthcare industry have turned to private equity to fund their expansion plans. For example, the merger of Aster DM Healthcare and Care Hospitals, supported by PE major Blackstone, is set to create India’s third-largest hospital chain. Although corporate giants like Tata, Birla, and Hinduja have a presence in the healthcare sector, none of them have a significant presence across India. Bajaj’s plan to establish a chain of hospitals in major cities could fill this gap, but it will face various challenges.
Investing in healthcare requires substantial financial resources and a long-term perspective. Setting up a new hospital in India today is a costly and challenging endeavor, with a gestation period of 3-4 years before the hospital becomes profitable. Acquiring smaller hospitals has emerged as a viable option, but there are limited opportunities available at high valuations. While major hospital chains are primarily focused on metro cities, smaller towns and cities lack access to high-quality healthcare infrastructure.
Challenges such as the shortage of healthcare professionals, investment in technology, and managing the payor mix need to be addressed. Balancing accessibility, affordability, and profitability in a country like India, which is lacking in healthcare infrastructure, is a significant challenge. Patients will have high expectations from Bajaj’s hospitals, given the company’s reputation as a household name in India. It remains to be seen how Bajaj will navigate these challenges and make a positive impact on the healthcare industry in the country.
