Health care Industry analysis

Introduction

The healthcare industry primarily includes establishments that provide medical, surgical, and
other health services

Sector structure/Market size

Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150
billion by 2017, according to Technopak Advisors in their report – ‘India Healthcare Trends 2008’.
The sector offers immense potential to healthcare players as the country witnesses a rise in the incidence of lifestyle-
related and other diseases. A growing elderly population and rise in income levels are also pushing for better facilities
in the country.
To meet this growing demand, the country needs US$ 50 billion annually for the next 20 years, says a Confederation
of Indian Industry (CII) study. India needs to add 3.1 million beds by 2018 to the existing 1.1 million, and requires
immediate investments of US$ 82 billion, as per the Technopak Advisors report.
Health Insurance
Currently only 10 per cent of the Indian population has health insurance, which means that there is tremendous
scope for growth in this area. The Indian health insurance business is growing at 50 per cent. The sector is projected
to grow to US$ 5.75 billion by 2010, according to a study by the New Delhi-based PHD Chamber of Commerce and
Industry.
Investments in Healthcare
The sector has been attracting huge investments from domestic players as well as financial investors and private
equity (PE) firms. Funds such as ICICI Ventures, IFC, Ashmore and Apax Partners invested about US$ 450 million in
the first six months of 2008-09 compared with US$ 125 million in the same period a year ago, according to an
analysis carried out by Feedback Ventures. Feedback Ventures expects PE funds to invest at least US$ 1 billion in
the healthcare sector in the next five years.
Religare Venture Capital has entered into a 50:50 joint venture with PE player Milestone Capital to manage a US$
120.09 million PE fund and tap the huge potential in healthcare and education sectors.
GE Healthcare has invested US$ 50 million in its Bangalore facility and will be investing an additional US$ 25 million
soon.
Philips plans to make India one of its global production hubs for medical equipment by investing substantially on
upgrading of its two acquired manufacturing facilities in the country and increasing their capacity.
The government, along with participation from the private sector, is planning to invest US$ 1 billion to US$ 2 billion in
an effort to make India one of the top five global pharmaceutical innovation hubs by 2020.
Medical Tourism
In 2007 India treated 450,000 foreign patients ranking it second in medical tourism.
According to a study by McKinsey and the CII, medical tourism in India could become a US$ 2 billion industry by
2012 (from US$ 350 million in 2006). Credit Suisse estimates medical tourism to be growing at between 25-30 per
cent annually.
The key selling points of the medical tourism industry are its cost effectiveness and its combination with the
attractions of tourism. Treatment cost is lowest in India—20 per cent of the average cost incurred in the US,
Singapore, Thailand and South Africa.
Besides world class medical facilities, India is also trying to promote its traditional medicine such as ayurveda.
Areas of Opportunity
The fast growth in the Indian healthcare sector has created various pockets of opportunities for investors. A recent
FICCI-Ernst and Young (E&Y) report highlights several such areas within the healthcare sector.
• Medical infrastructure forms the largest portion of the healthcare pie. Beds in excess of 1 million need to be
added to reach a ratio of 1.85 per thousand at an investment of US$ 77.9 billion.
 • The medical equipment industry is around US$ 2.17 billion and is growing at 15 per cent per year. It is
estimated to reach US$ 4.97 billion by 2012.
• The medical textiles industry is projected to double to reach US$ 753 million by 2012.
• Clinical trials have the potential to become a US$ 1 billion industry by 2010 and the health services
outsourcing sector has the potential to grow to US$ 7.4 billion by 2012, from US$ 3.7 billion in 2006.
Government Initiative
The Governemnt launched the National Rural Health Mission (NRHM) in 2005. It aims to provide quality healthcare
for all and increase the expenditure on healthcare from 0.9 per cent of GDP to 2-3 per cent of GDP by 2012.
During the 2009 interim budget, the government has allocated US$ 2.42 billion for NRHM.
Reference source :- http://www.ibef.org/industry/healthcare.aspx

Vrio analysis

VRIO is an acronym of four question framework i.e. value, Rarity, Imitability,

Organization.

Valuable: If resource is valuable it can help company to perform better.