MUMBAI, May 7 (Xinhua) -- Indian private sector hospitals are going through a consolidation process due to deteriorating margins and pressure on revenues.
The margin pressure was an outcome of a slew of regulatory actions, including caps on prices of oncology drugs, cardiac stents and knee implants and the advent of the Good and Service Tax, leading to higher indirect tax burden.
This has led to increase in merger and acquisition transaction in the hospital space. According to credit rating agency -- ICRA, the total value of Merger and Acquisition transactions in the hospital sector in 2018-19 amounted to 1.1 billion U.S. dollars, as against transactions worth 431 million U.S. dollars done in 2017-18, recording an increase of 155 percent.
"Consolidation is a better option for the players as the gestation period for investments in hospitals is already high due to large upfront investments and the longer time needed to ramp up the utilization of assets," Kapil Banga, Assistant Vice President of ICRA said.
Further, the recent regulatory actions have increased the gestation period further, thus increasing the funding requirement of the sector and necessitating consolidation, he said.
A majority of the deals involve acquisition of stake in multi-specialty hospitals rather than a single specialty hospital.
India has over 35,000 government hospitals with over 1.3 million beds, but not equipped with experienced doctors forcing citizens to opt for private sector. India's private sector accounts for almost 70 percent of the healthcare spend in the country.
