Monday, September 04, 2006
Project Development
Finding Capital
Around the time that Dr.Prathap C Reddy founded the Apollo Hospitals Group (in the mid 80s), the biggest challenge to healthcare entrepreneurs was to find Capital. Strangely, Hospitals did not have industry status at that time and were therefore not eligible for funding from the development financial institutional (that sanctioned loans at reduced rates) and had to borrow from commercial banks at market rates of interest. I remember signing a loan agreement in 1989 at 21 % !!
That was then. Today, not only have interest rates on borrowing come down, debt itself is no longer the preferred means of funding for healthcare projects. Not only are promoters investing their own money, they are also aggressively seeking out equity funding. A new breed of investors have emerged (many of who made their money from other sectors like IT) and willing to back them up are players like Private Equity Funds and Venture Philanthropists.
What this means is that entreprenuers can have visions on any scale and there will be someone willing to bank roll that, though the newer class of investors may specify more aggessive timelines for demonstrating financial viability. These investors might also insist on constantly innovating the business models.
But all this is surely good for the Indian Healthcare Industry. Most of the current investment of around $ 2.5 Billion every year goes towards adding around 80,000 Hospital Beds. In the mid-80s the Corporate Hospital was a huge innovation in a country whose private sector consisted of mostly physician owned nursing homes. Today, the Corporate hospital seems passe.
What will be the next big idea ?
Around the time that Dr.Prathap C Reddy founded the Apollo Hospitals Group (in the mid 80s), the biggest challenge to healthcare entrepreneurs was to find Capital. Strangely, Hospitals did not have industry status at that time and were therefore not eligible for funding from the development financial institutional (that sanctioned loans at reduced rates) and had to borrow from commercial banks at market rates of interest. I remember signing a loan agreement in 1989 at 21 % !!
That was then. Today, not only have interest rates on borrowing come down, debt itself is no longer the preferred means of funding for healthcare projects. Not only are promoters investing their own money, they are also aggressively seeking out equity funding. A new breed of investors have emerged (many of who made their money from other sectors like IT) and willing to back them up are players like Private Equity Funds and Venture Philanthropists.
What this means is that entreprenuers can have visions on any scale and there will be someone willing to bank roll that, though the newer class of investors may specify more aggessive timelines for demonstrating financial viability. These investors might also insist on constantly innovating the business models.
But all this is surely good for the Indian Healthcare Industry. Most of the current investment of around $ 2.5 Billion every year goes towards adding around 80,000 Hospital Beds. In the mid-80s the Corporate Hospital was a huge innovation in a country whose private sector consisted of mostly physician owned nursing homes. Today, the Corporate hospital seems passe.
What will be the next big idea ?
# posted by Srivathsan @ 5:37 AM 
