India needs to invest $160 bn in healthcare to compete globally

The Indian healthcare industry is in quite a pitiful situation and may require $ 160 billion dollars to help it reach the global standards, according to a latest report on the Healthcare sector in India by HSBC. India is substantially under invested in healthcare as it has only six percent of the world’s bed vs 17 percent of the world’s population, far below the world average. India has only nine beds per 10,000 people compared to the USA (31 beds) and the world average (29 beds). And this is despite India carrying a higher share of the world’s total disease burden (see table).

Apart from that, India also lags behind in terms of ratio of medical personnel to population, with just six physicians per 10,000 population.

However, this represents a huge investment opportunity for investors to tap into. “Assuming the population continues to grow at the current rate, India needs to add c930,000 beds by 2020 to improve its bed to population ratio to just 15 beds per 10,000 people. This would require an additional investment of cUSD52bn assuming a bed costs USD50,000 …..to reach the global average of 30 beds per 10,000 people, India would need to invest $160 billion in hospital healthcare” says HSBC.

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 It has initiated coverage on two stocks, Apollo Hospitals and Fortis Healthcare. It is over weight on Apollo Hospitals with a price target of Rs 796 per share against its current price of Rs 644.

Apollo is the largest hospital chain in the country with 8,300 beds (5,888 owned and 2,388 managed) of which 5,153 beds were operational as of the year ended March 2012. It plans to add another 2,900 beds in the next three years.

 On Fortis, it initiates coverage with a neutral rating. The company is now the second largest healthcare chain in India with a two-pronged organic and inorganic growth strategy. The company has 68 hospitals in India of which 23 are 100 percent-owned, 30 managed and 15 under development with a total of 12,000 beds.