Healthcare and advanced manufacturing will see huge investment in 2024

Traditional sectors such as healthcare and advanced manufacturing will continue to attract large investments through 2024. The India Private Equity Report by Bain & Company, a global management consulting firm, said investors are supporting established business models with long-term growth prospects.

Even during 2023, sectors like healthcare and advanced manufacturing have shown resilience and gained market share with 75 per cent investment.

Healthcare investments reach a record high of US$5.5 billion in 2023, driven by a three-fold increase in deals compared to 2022. Large-scale transactions seen in multi-specialty hospitals; Manipal Hospital grew 2.7x in FY 2021-23 and acquired Columbia Asia and Vikram Hospital.

The report shows that strong deal activity is expected in the healthcare and advanced manufacturing sub-segments in 2024. Healthcare is likely to see continued investment in multi-specialty and single-specialty hospitals. Multi-tier pharma and med-tech deals are also likely to be struck during 2024.

Most traditional sectors remained resilient as investors maintained interest in mature businesses with long-term secular growth. This segment saw investments totaling more than US$1 billion across 5 megadeals. Beneficiaries include Manipal Hospitals, Reliance Retail, HDFC Credila, Adani Power and Avada Group. Consumer retail, healthcare and energy sectors are seeing strong growth of more than 10 percent on the back of investment.

Advanced manufacturing investment to grow at 20 per cent CAGR in 2021-23. Growth in the sector was driven by supply chain diversification, government incentives such as the Production Linked Incentive Scheme and a number of scale assets coming to market. Electric vehicle OEMs saw large investments, and due to increased penetration of EVs, it increased from 1 percent in 2019 to more than 6 percent in 2023.

Within advanced manufacturing, the packaging, electronics and EV sectors are likely to see increased investment in 2024. Electronics manufacturing is growing rapidly with government support, and EV penetration is increasing in India.

However, deals in the IT/ITeS sector continued to decline, and investments in the sector declined by 65 per cent as valuations remained high and end market demand remained low.

Reflecting the overall decline in investment, SaaS and new-age technology declined by 60 per cent. Well-funded large-scale SaaS companies remained out of the market, and new-age technologies declined as investors focused on profitability.

A sense of caution among investors has led to a 65 per cent decline in investment in new-age tech sectors in 2022-23 as they focus on proven economics along with business model feasibility and growth.

The fintech sector also witnessed a decline in 2023, the report said, due to regulatory tightening, rising NPAs in small loans and lack of clarity on the path to profitability.

Consumer tech deal activity continued to decline as investors pulled away from large investments in businesses with unproven economics.