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Monday, October 24, 2011

Releasing Soon: Hidden Gem Oct 2011

Dear Saral Gyan Reader,

Our equity analyst team will release Hidden Gem - October 2011 during this week. The Hidden Gem selected by our team belongs to Healthcare Industry. We firmly believe that Healthcare Industry in India have huge potential in terms of growth going forward. Hence, it is wise to have exposure in one of the Hidden Gem from this sector.

Government initiatives in the public health sector have recorded some noteworthy successes over time with focus on investments related to better medical infrastructure, rural health facilities etc.

Government Policies:

100 per cent FDI is permitted for health and medical services under the automatic route.

The National Rural Health Mission (NHRM) had allocated US$ 10.15 billion for the upgradation and capacity enhancement of healthcare facilities.

Moreover, in order to meet revised cost of construction, in March 2010 the Government allocated an additional US$ 1.23 billion for six upcoming AIIMS-like institutes and upgradation of 13 existing Government Medical Colleges.

Healthcare Industry Snapshot:

The Indian healthcare sector is predicted to reach US$ 280 billion by 2020, contributing an expected Gross Domestic Product (GDP) spend of 8 per cent by 2012 from 5.5 per cent in 2009, according to a report by an industry body. Growing population, increasing lifestyle related health issues, cheaper treatment costs, thrust in medical tourism, improving health insurance penetration, increasing disposable income, government initiatives and focus on Public Private Partnership (PPP) models are some of the driving factors for the growth of healthcare sector in India.

Some of the key players in the Indian healthcare industry who are helping in making the sector buyout include Apollo Hospitals Ltd., Fortis Healthcare Ltd, Max Hospitals and Aravind Eye Hospitals.

Challenges and Opportunities

Owing to the fact that the healthcare sector is one of the largest service sector industries in India with an estimated revenue of US$ 35 billion, the industry has also emerged as on the of most challenging sectors as well. 
  • India would require another 1.75 million beds by the end of 2025 to reach a ratio of two beds per 1000 population.
  • An additional 0.7 million doctors are needed to reach a doctor population ratio of 1:1000 by 2025.
  • Although the health insurance sector is projected to grow to US$3.8 billion, the health insurance penetration rate still has a lot more scope to grow with only 2 per cent of the total population being insured at present.
The government recognised the significant challenges and potential in the sector and provided priority status to healthcare in the Eleventh Five Year Plan. Further, the sector is expected to witness added growth through a well-defined partnership between the government and the private sector.

Meanwhile, the total healthcare infrastructure expenditure is expected to reach US$ 14.2 billion in 2013, registering an increase of 50 per cent as compared to the 2006 figure, according to a report by KPMG.

Major Investments:

The sector is undergoing significant changes driven by the continuing phase of rapid economic growth, with emerging markets, such as medical device manufacturers and diagnostic chains attracting increasing amounts of investments.

  • Hospitals chain Apollo Hospitals Enterprise Ltd plans to invest around US$ 204.04 million- US$ 226.70 million over the next two years.
  • Wockhardt Hospitals plans to invest up to US$ 158.32 million to double its bed capacity to 2,000 by 2013.
  • Hospitals chain Fortis Healthcare plans to invest US$ 146.81 million and add 2,100 new beds.
  • The BCG Group plans to build a multidisciplinary health facility, BCG Healthsquare in Palarivattam in Kochi, Kerala, by August 2011. The company’s long-term plan is to set a 750,000 sq ft health village with an estimated cost of US$ 88.91 million.
  • GE Healthcare will invest US$ 50 million to set up more facilities for developing diagnostic services.  
  • Manipal Hospitals plans to invest US$ 45.23 million in the next three years to double its capacity to 8,000 beds.
PPP Model:

Private healthcare is emerging as one of the fasting growing sectors in India, with hospital chains exploring the markets in metros and tier II cities, private players seeking accreditation and developing new healthcare models. Further, the private and public sectors across various states such as Gujarat and Uttarakhand have launched innovative initiatives to attract PPP investments into healthcare.

While the government is exploring potential to establish state-funded healthcare insurance schemes for supporting healthcare delivery for the poorer sections of the population, the corporate segment is catering to the growing need of the general public for quality care. Thus, through a sustainable partnership, development and delivery of low cost, affordable, basic healthcare services, PPP models may help in improving the infrastructure and healthcare provision in the country.

Note: All our Hidden Gems subscriber will receive complete research report of Hidden Gem - October 2011 during this week.

If you are a new member and wish to subscribe to our Hidden Gems services, you can subscribe now & enjoy savings upto 45% during this festive season under our Special Diwali OfferClick here to view the discounted subscription rates. Hurry! Offer closes on 31st Oct 2011.

Wish you happy & safe Investing!


Saral Gyan Team,
Saral Gyan Capital Services