Mahindra War Room 2018 Partners - Healthcare Caselet

MAHINDRA PARTNERS - HEALTHCARE SECTOR

STRATEGY FOR HEALTHCARE SECTOR

As the popular saying goes, “where there is man, there is need for medicine”. One of
the basic human needs is Healthcare - we may postpone purchases or entertainment
based on economic situations, but healthcare is essential expenditure and there is no
escaping that! ‘Healthcare’ as is commonly understood spans a spectrum of specialized
businesses - Hospital activities, Medical and dental activities, activities of Nurses,
Physiotherapists, Scientific and Diagnostic Labs, Pathology clinics, residential health
facilities, fields of optometry, healthcare equipment and services, Pharmaceuticals,
Biotechnology, Life sciences, Telemedicine and so on. Globally, healthcare accounts for
10% of the GDP in Developed countries.

Healthcare in India is a complicated and evolving industry, with paradoxes and

opportunities. On the one hand, India is home to the ancient forms of natural healthcare
spanning Ayurveda, Siddha, Unani Medicine, Yoga and Breathing Practices, which find
growing global appeal even after thousands of years. Indian hospitals such as
Narayana Hrudayalaya in Bangalore and Shankar Nethralaya in Chennai offer cutting
edge medicine and attract medical tourists around the world. Our ancient Ayurvedic
texts outline detailed procedures for areas like even ‘Open Skull Surgery’ which modern
medicine is yet to realize. On the other hand, India could not reach her millennium
development goals of healthcare, and is yet to reach quality healthcare to the vast
population spread across the country. The Rural Healthcare infrastructure is weak.

Prior to colonial rule, healthcare in India was widely practiced based on the indigenous
forms of medicine such as Ayurveda, Siddha, Unani and so on. The very word for health
- Swastha - meant “being established in oneself”, defining the scope of health spanning
body, mind and soul. During the 1700s & 1800s, British physicians assumed scholarly
roles, European medicine was thrust upon as the more dominant medical knowledge
system. British colonial policy marginalized indigenous medicine to secondary status,
and actively propagated a belief system that the local systems were spurious and
suspicious, whereas the European systems were scientific and proven. After
Independence, the Indian Government struggled with an enormous challenge of
meeting diverse healthcare needs of a rapidly growing population in a vast country.
Realizing that the Public Healthcare systems cannot meet all the demand, Government
started to offer subsidies in the 1980s to private healthcare providers. With the opening
up of India’s economy in the 1990s, the quality and availability of healthcare services
has grown significantly, though the overall health status is still on a developing level,

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and reaching healthcare to rural areas remains a challenge. In terms of parameters

such as life expectancy, India has recorded a significant improvement, but the job of
high quality healthcare is still far from done.

The Indian Healthcare sector is valued at USD. 100 Billion, and is expected to grow at a
CAGR of 17% in the coming years. The sector generates employment to over 30 million
people, contributing to 1.3% of India’s GDP. Rising income levels, growing awareness of
health & hygiene issues and improved access to insurance are the key drivers of
growth. Of the total revenues, USD. 57 Billion is accounted for by hospitals, USD. 4
Billion by Diagnostics providers and USD. 2 Billion by Check-up centres. The market is
significantly under-penetrated, with only 0.7 physicians catering to a population of 1000,
against the World Health Organization guideline of 3.5 physicians for every 1000
people. India’s government expenditure on healthcare at 1.2% of GDP, lagging behind
global benchmarks such as 17% of GDP in the United States. China spends 5.6 times
more per capita, and the United States spends 125 times more per capita on healthcare
compared to India. Indians usually meet over 60% of their health expenses from their
personal savings, as against 13.4% in the US, 10% in UK and 54% in China. Over 70%
of Doctors are concentrated in Urban areas, catering to 30% of the total population,
severely limiting healthcare options in rural India.

LIVE BUSINESS CHALLENGE: STRATEGY FOR HEALTHCARE SECTOR

Healthcare is one of the few sectors in India which offers high growth, high Return on
Capital Employed, is non-cyclical and has a large unmet need. Mahindra Partners -
Mahindra Group’s USD. 1 Billion internal incubation fund that offers seed and growth
capital to pursue new and emerging opportunities - spotted this and started making
inroads into the Healthcare sector. (Mahindra Partners already manages a portfolio of
diversified ventures in Logistics, Retail, Luxury Boats, Steel Trading, Clean Energy and
Media, while constantly exploring newer avenues for growth. By adapting Mahindra’s
unique strengths in brand, governance, innovation and creative business modeling,
Mahindra Partners brings a unique value proposition to the incubation table.)

An overview of the healthcare scenario in India shows high concentration in Urban

areas and limited availability and accessibility for healthcare services and products in
rural areas. While Pharmaceuticals and Multi-Specialty Hospitals are large sub-
segments in Healthcare, Mahindra is not keen on pursuing those segments. Looking
beyond Pharma and Multi-specialty Hospitals, the canvas seems to have Single-
specialty hospital formats, Diagnostics, Medical Equipment and Devices, Rural

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Mahindra War Room 2018 Partners - Healthcare Caselet

Healthcare , Home Healthcare Wellness & Preventive Care related products & Services
and emerging areas in Health-tech seem to be potential areas. Mahindra is open to both
organic and inorganic plays in these areas of interest.

In April 2017, Mahindra Partners invested USD. 15 Million into a home healthcare
service provider called Medwell Ventures in Series B funding. Home Healthcare is a
new emerging segment, where services such as nursing, physiotherapy etc. are made
available 24X7 at a patient’s home to help them heal faster. With hospitalization being
expensive, particularly in crowded metros, a significant segment of people prefer to use
the hospital for specific procedures that require intensive care (such as surgery) but
return home for continuing care with the help of specialized home healthcare providers.
Medwell provides specialized home healthcare services under the ‘Nightingale’ brand,
including out-of-hospital care plans for patients with chronic diseases, across 13
branches in Mumbai, Bengaluru, Hyderabad and Pune. Medwell has a team of over
1,000 medical, paramedical and healthcare professionals, who develop care plans for
diseases such as congestive heart failure, stroke management, chronic obstructive
pulmonary diseases (COPD), diabetes, dementia, Alzheimer’s disease and arthritis. The
investment by Mahindra Partners is expected to help Medwell expand in existing cities,
as well as grow into new cities. Other key players in this segment of healthcare are
HealthCare At Home, Care 24 and Portea Medical.

Given this backdrop and the baby steps taken into healthcare, what should Mahindra do
in the healthcare sector? Which are the sub-segments it should enter and how? Should
Mahindra leverage its deep India roots to explore ventures into Ayurveda and Wellness?
How should it think about Wellness and the fitness revolution in India? Can Mahindra
use its strong brand equity and trust to organize the Rural Healthcare sector of India
and benefit millions of under-served Indians? Is there a strong value proposition in
Healthcare for Mahindra, other than Multi-specialty Hospitals and Pharma - if so, what is
it? Is it scalable across rural and urban segments, or should it be specialized in Rural,
given the current Urban healthcare landscape? Can Mahindra revolutionize Rural
Healthcare, leveraging on its 6 decades of dominance in rural markets for automobiles
& farm equipment, and 3 decades of dominance in Rural Finance? Or does Mahindra
have a play in futuristic healthcare trends such as surgical robots, remote care, portable
diagnostics, genomics, body sensors etc? With IOT and Cloud Based Platforms getting
more popular, is there an opportunity there? Given the current position and the
preferences stated above, evolve a strategy for Mahindra to emerge as a
significant player in the Healthcare sector.

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