Any investor in Indian healthcare is often asked what drives the surging investor enthusiasm for the sector and whether this is a passing phase of overexuberance. While leaving room for skepticism and ups and downs, the answer remains quite straightforward.
India has more people than any other country on the planet. People tend to fall sick and their health requires tending to. So, as India’s pollution ages, as wealth increases, as awareness about prevention and wellness spreads, spending in health will go up. That explains the broad investor enthusiasm to ride this wave backed by strong and sticky fundamentals.
Healthcare investments in India have been on a steady rise since the pandemic, with $5-6 billion invested in 2024—almost double the pre-pandemic levels. This upward trajectory signifies robust appetite for healthcare opportunities, but to some, the growth in deal activity may not seem as rapid. Why isn’t the volume of deals rising more significantly, especially given the global interest in the sector?
The answer lies in the complexity and cadence of healthcare investments. Investors are enthusiastic, but deals take time. A substantial amount of due diligence, negotiations, and strategic considerations are required before capital can be deployed. Unlike the more volatile venture capital market, where sentiment-driven spikes can occur quickly, private equity investments follow a steadier, more deliberate pace. The work on both the promoter and investor side is significant, and this necessary diligence means that growth in deal volumes is often more gradual than a sharp surge.
In 2025, the healthcare investment landscape is expected to see key shifts. Consolidation will remain a major theme, particularly within diagnostics, medical devices, and single specialty. The trend toward vertical and horizontal consolidation is not new, but in 2025, it’s likely to intensify.
As healthcare companies seek to scale and improve efficiency, they will increasingly look for strategic acquisitions that can streamline operations, expand market reach, and reduce costs. For instance, diagnostic companies like Redcliffe, Neuberg and Metropolis have already started consolidating the fragmented market, and this momentum is expected to continue.
We have seen an uptick in single-specialty deals. Why? PE firms are increasingly drawn to these niches as they offer less complex profitability pathways. Unlike multispecialty hospitals, which can have complex operational dynamics, single-specialty hospitals typically provide targeted services with strong EBITDA margins and growth potential. This focus on high-growth, niche areas is one of the key trends we can expect to see more of in the coming year.
One of the most exciting opportunities in healthcare for 2025 lies in the pharmaceutical and medical device sectors; several secular tailwinds will present unique opportunities for domestic manufacturers in India. This will include the increasing demand for lower-cost devices and medicines in Japan and markets in the West as populations age; the impending patent cliff for important blockbuster therapies including anti-obesity and oncology drugs; and the “China plus one” strategy, which emphasizes diversifying supply chains away from China, especially under Trump 2.0.
As global markets increasingly turn to India for pharmaceuticals and medical devices, the country’s low-cost, high-quality manufacturing capabilities will look more attractive. The Indian government's continued efforts to boost local manufacturing and measures to regulate medical inflation, such as imposing price controls on cardiac STEM devices, are likely to provide significant tailwinds.
India’s burgeoning population is another key driver of growth in healthcare investments. It's quite a contradiction where young people are increasingly monitoring their fitness levels through health-tech apps and regulating their daily calorie consumption whilst also relying on e-commerce delivery apps that promise them (fast) food on their cheat days.
On the other end of the spectrum, the aging population is growing, contributing to higher healthcare spending in states like Kerala which has implemented a few innovative geriatric care programs. As people live longer, they require more healthcare services, from diagnostics to chronic disease management. This demographic shift will further fuel the demand for healthcare services and products, creating fertile ground for investments in areas such as nephrology, oncology, and senior care.
The rise of artificial intelligence (AI) in healthcare is a key emerging trend and is expected to attract a significant portion of investment in 2025. As technology continues to advance, its applications in diagnostics, drug discovery, patient care, and hospital management are becoming more pronounced. Investors will likely look to capitalise on these technological advancements, funding AI-driven startups and innovations within established healthcare firms. This technology will not only enhance operational efficiencies but also expand access to quality care, making it a prime area for investment.
The rise of the public markets as a viable exit route for healthcare promoters and PE investors has been a stand-out feature of the last couple of years, so much so that listing is considered as an alternative to PE investment for growth. While this could be an option for excellent management teams with great governance, working with a financial investor before listing is likely to remain a stronger option as even companies with excellent performance tend to require some preparation around governance, systems and processes before being ready to face the scrutiny of public markets.
As the healthcare ecosystem matures in India, we will see larger and more complex transactions. Competition will likely heat up between global investors and domestic players in terms of deal value, especially as they look to India’s public markets for exits. The sector will remain a key growth area for private equity and strategic acquisitions, driven by both domestic consumption and the broader geopolitical dynamics of the global economy.
While the pace of healthcare deals may appear steady rather than meteoric, the underlying trends point to significant opportunities for growth in 2025. The continued consolidation of sectors, the rise of AI, and India’s growing position as a global healthcare hub will shore up investment. The new year holds promise for investors who are prepared to navigate the complexities and opportunities in this dynamic and evolving landscape. The healthcare sector, while facing its challenges, is on track to deliver steady returns and create lasting value in the years ahead.
*Biju Mohandas is partner and global head for healthcare investments at LeapFrog. Views are personal.
