Asia Healthcare Holdings (AHH), a platform founded by TPG Growth, has been betting on India’s specialty healthcare industry for the past four years. Vishal Bali, its executive chairman, says in an interaction with Gireesh Babu that while the Covid-19 has impacted the healthcare sector, AHH will continue to consolidate around the current specialties and pursue others. Edited excerpts:
How do you see Covid-19 impacting the Indian healthcare industry?
It has brought to the fore 73 years of under-investment in the country’s healthcare sector, making it under-prepared to face this crisis. In the Global Health Security Index 2019, which measures countries’ preparedness for outbreak of infectious diseases, India was ranked 57 out of 195, more susceptible than China (at 51) and Italy (at 31). Covid-19 has elucidated India’s vulnerable ranking in the index. India needs to fast-track its healthcare reforms and accelerate investment in this sector. Overall trading of healthcare products within the country, including pharmaceuticals, has fallen from $2-3 billion a month to $200-300 million.
How the industry is coping up with the issue?
Almost 60 per cent of India’s two-million bed capacity comes from the private sector, which also harbours 80 per cent of the country’s clinicians. The lockdown has reduced occupancy in private institutions from the pre-Covid 75 per cent level to 45 per cent, translating into revenue drop of 50-70 per cent. For a sector which is extremely capital-intensive and has high fixed costs, this will result in the industry going through a operating loss of Rs 14,000-24,000 crore in Q1FY21. The liquidity crunch will actually cause an adverse impact on growth and capacity expansion. Providers will rightly expect liquidity protection to remain solvent in this times of crisis.
Many of the changes in healthcare delivery driven by the coronavirus crisis will redefine India’s healthcare services. Flexibility in hospital infrastructure to rapidly scale up critical care capacity, strengthening the indigenous supply chain of medical equipment and devices, improving the productivity of current systems from a median Return on Invested Capital (ROIC) of seven per cent are some of the changes we foresee. There will also be a new wave of digital patient engagement with remote technology-enabled models, including telehealth.
From an investor’s point of view how will Covid-19 impact you?
At AHH, we continue to be very optimistic with our focus on single-specialty and have seen our companies pivot very quickly to meet the demands of the consumer in these unprecedented times. Motherhood Women & Children’s Hospital has 13 facilities across India and Nova IVF has 25 centres in South Asia. The combined strength of both these companies makes us the largest Mother and Child business in India. During the lockdown period we launched a digital telehealth program in the M&C speciality which has seen phenomenal success with more than 250 tele-consults each day. Our ROICs are ahead of the sector.
How many investments has AHH made in India and what are your plans?
AHH has pursued the single-specialty healthcare delivery model over the past four years and has already crossed capital deployment of more than $180 million. We took the tough call of taking majority control in early-stage single-specialty entities and through the right mix of capital structure, management teams and operating model, we have scaled these companies to become sector leaders in a short time span. The scale and growth of Cancer Treatment Services International (CTSI), Motherhood and Nova have created a unique proof point of the AHH model in the Indian healthcare sector. We will continue to consolidate around the current specialities in our portfolio and also pursue other specialties.
You said earlier that the healthcare industry may see further consolidation this year. What is the impact of Covid-19 on this momentum?
The negative impact of Covid-19 has been unprecedented in modern history. The pandemic has metastasized into a massive crisis for the global economy and financial systems. Healthcare systems around the world have been equally affected, we will have to wait and watch how healthcare enterprises in India navigate this challenging environment. It will take a few quarters for the sector to find stability and companies will have to work hard to remain resilient during this time.