India's hospital sector is characterized by significant fragmentation, presenting a substantial opportunity for consolidation through mergers and acquisitions (M&A) in the coming years. This perspective comes from Dominic Hollamby, Executive Vice-Chairman of Rothschild & Co's global advisory division and global head of healthcare. According to Hollamby, the current landscape of the Indian healthcare industry is just the beginning of its evolution.
Compared to more consolidated markets like Australia, the UK, and South Africa, where the top three or four private hospital groups control a significant 60-70% of bed capacity, India's hospital sector is remarkably dispersed. The top ten private players in India collectively own less than 10% of the private bed capacity. This stark contrast highlights the vast potential for growth and efficiency gains through consolidation.
Several factors are driving this consolidation trend. One key aspect is the increased investor interest from private equity firms and corporations. For instance, a report indicates that mergers, acquisitions, and private equity deals in India's healthcare sector have surpassed $30 billion between 2022 and 2024, with hospitals accounting for nearly 40% of the total deal value. In 2024 alone, investments in hospitals reached approximately $6 billion, marking a 24% year-on-year increase. The year's biggest healthcare deal, a $5 billion merger between Aster DM Healthcare and Quality Care India, exemplifies this trend.
Expanding healthcare infrastructure and growing insurance coverage are also fueling consolidation. India's insurance penetration rose to 41% in fiscal year 2024, largely driven by public insurance schemes. This increased insurance coverage, coupled with an aging population and rising medical tourism, is driving demand for healthcare services, prompting hospital chains to expand their operations.
Furthermore, the adoption of technology, including AI diagnostics, robotic surgeries, and telemedicine platforms, is reshaping the healthcare landscape and improving both patient outcomes and hospital efficiency. The country's AI-driven healthcare market is projected to grow significantly in the coming years, fueled by rising investments in digital health solutions.
However, the sector also faces challenges. These include pricing regulations, affordability ceilings, and competition from single-specialty hospitals, which may impact margins in the future. Additionally, while government initiatives like Ayushman Bharat drive patient volumes to smaller hospitals, delayed reimbursements can create sustainability issues.
Despite these challenges, corporate hospitals with stronger balance sheets are targeting expansion, particularly in Tier 2 and smaller cities, while maintaining their presence in major metros. This strategic focus reflects the rising demand for healthcare services in these underserved areas. The expansion of hospital chains is expected to add a significant number of new beds over the next few years, addressing the existing shortage in medical infrastructure. To meet the growing healthcare demands, India needs a substantial increase in the number of hospital beds.
In conclusion, India's fragmented hospital sector presents a ripe environment for consolidation. Driven by increased investor interest, expanding healthcare infrastructure, growing insurance coverage, booming medical tourism, and technological advancements, the sector is poised for significant growth and transformation in the coming decades. While challenges remain, the potential for efficiency gains, improved patient outcomes, and increased access to quality healthcare makes consolidation a compelling strategy for hospital groups in India.
