Behind Temasek's ambitious plans to enter India's healthcare sector, reveals PE firm's top exec

Singaporean sovereign wealth fund Temasek, which has invested in diverse portfolios in healthcare, pharmaceuticals and diagnostics in India, is eyeing growth prospects in the healthcare services sector in the country. Ravi Lambah, Head, Investment Group; Head, India at Temasek, in an interview with BT, talked about interest in Indian healthcare space, India becoming an attractive market for global PE firms and Temasek's future plans in India. Edited excerpts from an interview:

BT: Temasek- Manipal deal is one of the biggest deals in Indian healthcare space. What are your plans after this deal for Manipal hospitals?  

RL: We are excited with the growth prospects in the healthcare services sector in India, and Manipal Hospitals is an important part of this sector. In line with our governance approach, we will continue to look towards the Board and management team to drive the business, including looking at organic and inorganic growth opportunities.

BT: What is your strategy for the Indian healthcare market after this acquisition?

RL: At Temasek, we continue to seek opportunities in India that are aligned with our views on structural trends shaping the future. This includes our focus on Longer Lifespans, which looks at how healthcare can address the growing needs of longevity.  Beyond hospitals, we are also invested in pharmaceuticals, such as in Intas Pharmaceuticals, and therapeutics, like Integrace Health. We continue to seek opportunities in the broader healthcare space in India. 

Across our global portfolio, we are open to increasing our stakes in investments during our holding period, as we get more comfortable with the businesses and if they suit our long-term portfolio construction objectives. There are, of course, many other considerations at play, and all investment decisions are also subject to our intrinsic value tests. An example here is our follow-on investment in Dr. Agarwal’s Health Care.

BT: Why do you see a rise in PE investments in Indian healthcare space?   

RL: The healthcare sector in India is growing rapidly, and attracting much needed capital to fund this growth.  To serve this growth, several hospital chains have grown organically, across large cities, metros, and smaller towns. There has been consolidation amongst hospital chains, and we expect this organic and inorganic growth to continue. 

There is a large underserved population that would benefit from access to the best possible healthcare services. In addition, hospitals will need to cater to the ageing population, improve resource and operational efficiencies, manage rising costs, and achieve better patient outcomes. The COVID-19 pandemic has also highlighted the need for greater supply chain resilience and the potential of digitalisation in addressing this challenge.  Amidst global headwinds, as investors remain disciplined on valuation, growth prospects in the sector make it a favourable destination for capital.  We see an opportunity for strategic consolidation where strong management can drive synergies for long-term value creation.

BT: What makes India such a key and attractive market for healthcare investments?  

RL: One of the key structural trends shaping Temasek’s investment is our focus on longer lifespans. The growing needs of longevity are bringing new opportunities and challenges, leading to a growing demand for healthcare across markets and age demographics. We’re seeing this play out in India – there has been rapid growth in the healthcare sector over the past few years, and there continues to be significant growth potential in this space.

This trend is underpinned by changing consumption patterns, like the growing middle-income population and increased demand for clinical excellence and specialties, enabled by technological advances. The COVID-19 pandemic has also exacerbated this shift by spotlighting the importance of quality healthcare. We’re quite keen on opportunities that meet this need.

BT: What are the M&A trends are you noticing in the Indian hospital sector? Is Temasek also planning to do more M&A in Indian healthcare after Manipal? 

RL: The healthcare sector in India is growing rapidly, and attracting much needed capital to fund this growth.  To serve this growth, several hospital chains have grown organically, across large cities, metros, and smaller towns. There has been consolidation amongst hospital chains, and we expect this organic and inorganic growth to continue. 

Amidst global headwinds, as investors remain disciplined on valuation, growth prospects in the sector make it a favourable destination for capital. We see an opportunity for strategic consolidation where strong management can drive synergies for long-term value creation. We are open to participate in strategic M&A deals if the right opportunities arise. We’ll continue to seek opportunities that are aligned with our structural trends, and conduct bottom-up intrinsic value analysis for each investment we make.

BT: Are there any plans from Temasek to adopt a platform approach for its Indian hospital assets by bringing them under the same cover the way Advent International has done in pharma?   

RL: To explain further, Sheares Healthcare Group is a healthcare platform we established to be both an investor and provider of healthcare delivery services in Asia. It is building up end-to-end healthcare services in the region, with a vision of building integrated healthcare ecosystems to close care gaps and delivering value-based care. Hence, we have already adopted a platform approach for building our presence in the hospital sector in India, through the Sheares India subsidiary. We have hired operating experts and engaged industry specialist advisors to build this portfolio. The expertise that we gain from our control of Manipal Hospitals will add to what we have within Sheares India. This will provide us the ability to leverage a wider pool of capabilities and expertise across networks, and to reap the benefits from scaling up solutions and offerings. Similarly, we’ve established various platforms in our offices around the globe, across different areas, including AI, blockchain, cybersecurity, digital transformation and sustainability.