Moneycontrol Pro Panorama | The making of pan-India hospital chains

healthcare

Dear Reader,

Apollo Hospitals was the only pan-India listed hospital chain till a couple of years back. Listed private hospital companies largely focused on specific markets and clusters. Max Healthcare and Fortis Healthcare had a strong presence in northern states. Aster DM Healthcare, Rainbow Children’s Medicare and KIMS Hospitals were focused on southern states.

But having cemented their positions in existing markets, they are entering new territories to capture a bigger share of India’s growing healthcare pie.

Last week, Max Healthcare announced its entry into Pune. Fortis Healthcare signed an agreement to acquire People Tree Hospital in Bengaluru. Krishna Institute of Medical Sciences (KIMS Hospitals) entered into a lease agreement for a land parcel in Chennai to set up a super speciality hospital. This will mark KIMS Hospitals’ entry into Tamil Nadu.

The recently listed Park Medi World announced acquisition of an hospital in Agra, Uttar Pradesh, on December 19.

Earlier, Rainbow Children’s Medicare announced its decision to acquire Pratiksha Hospital in Guwahati, marking its entry into Assam and the broader North-East region. Aster DM Healthcare is in the process of merging with Quality Care, making it one of the largest hospital chains in India. Aster’s presence will increase to nine states from the current five states after the merger.

Some of the above-mentioned acquisitions are aimed at strengthening existing clusters – namely Fortis Healthcare and Park Medi World. Also, given the active growth strategies of the companies, the expansion moves have not come as a surprise for investors.

Even so, with companies tasting success in their existing clusters, they are pursuing growth with renewed vigour. This will transform the companies and India's healthcare delivery market in coming years. Listed and large unlisted hospitals are estimated to add as many as 32,000 hospital beds in the next five years.

KIMS Hospitals, which was present only in Telangana and Andhra Pradesh before COVID, has expanded into Karnataka, Kerala and Maharashtra. Max Healthcare gained a foothold in Mumbai, Nagpur, and is looking to expand into other markets. Rainbow Children’s Medicare is setting up new facilities in NCR and Pune. The company was largely present in southern states in FY23.

Fortis Healthcare, which retreated from Chennai several years ago, is expanding in new markets with tie-ups and acquisitions.

So much so, listed hospital companies have shown interest in acquiring privately-held hospital chains to expand their geographical presence, notably in southern, eastern and western markets. Max Healthcare and Fortis Healthcare are examples of this strategy.

While companies' expansion plans underline the large business opportunity in India’s healthcare market, the key success factors are focus and execution. Expansion in new states can consume management bandwidth. Managing that and achieving success in new markets will go a long way in creating value for shareholders.

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