$1.8 Billion VC investment flows to India's healthcare

Bangalore: Though medical equipment companies have been largely facing the snub of venture capitalists (VC), the healthcare segment has been among the top picks for private equity (PE) investors and VCs. Only six investments worth $21 million went in to the medical devices, while 114 deals valued at $1.8 billion were struck in the health care space since 2006, according to PE deal tracking company Venture Intelligence.

PE firms do not see much of business potential in the medical equipment companies. PE or VC firms have a much shorter investment cycle of about less than five years. A PE investor who requested for anonymity, told DNA Money that the Indian medical device makers do not have a variety of products that could help them scale up the business.

Sreekanth Raghavan, the Scientific Advisor to medical device companies, said, "Most companies like replicating products made by their Western peers."

The medical device market in India is pegged $4 billion, of which 85-90 percent is imported. The presence of big international companies with vast R&D budgets has become a major deterrent factor for small domestic players in the field. "When it comes to the health care products, hospitals and clinics don't take the risk of buying equipments from smaller establishments. They prefer trusted names like GE and Philips," said Rajesh Singhal, Managing Partner of Milestone Religare Investment Advisors. Also, the capital intensive nature of the segment and long gestation period prompt the PEs to look away.

However, Dinesh Puri, the CMD of Medived Innvations, a medical device firm says that the constant investment in R&D delays the returns in this business. Also, there is not much of government support for private companies. A handful of domestic companies like Optocircuit and Trivitron Healthcare made it to the league of big companies.

According to Sudhir Sethi, Founder and CMD of VC firm IDG Ventures India, the medical equipment industry in the country is still at an early stage for local players. "Indian medical device companies are slowly evolving and coming out with exciting new innovations. We can expect many more investments in the future."