Healthcare and advance manufacturing to see big investments in 2024

Traditional sectors like healthcare and advance manufacturing will continue to attract big investments during 2024. India Private Equity Report of Bain and Company, a global management consulting firm, says that investors are supporting established business models with long-term growth potentials.

During 2023 as well, sectors like healthcare and advance manufacturing have shown resilience and gained market share, with 75 per cent of the investments.

Healthcare investments hit a record high of USD 5.5 billion in 2023, driven by a threefold increase in deals compared to 2022. Multi-specialty hospitals saw large-scale transactions; Manipal Hospital grew 2.7 times over FY2021-23, and acquired Columbia Asia and Vikram Hospitals.

The report suggests strong deal activity is expected in healthcare and advanced manufacturing across sub-segments in 2024. Healthcare is likely to see continued investment across multi-specialty and single-specialty hospitals. Multiple-scale pharma and med-tech deals are also likely to happen during 2024.

Most traditional sectors stayed resilient as investors sustained interest in mature businesses with long-term secular growth. The 5 megadeals in this segment saw a total investment of over USD 1 billion. The beneficiaries include Manipal Hospitals, Reliance Retail, HDFC Credila, Adani Power, and Avaada Group. On the back of investments, strong growth of over 10 percent is seen in consumer retail, healthcare and energy sectors.

Advanced manufacturing investments grew by 20 percent CAGR over 2021-23. Growth in the sector was driven by supply chain diversification, government incentives like the Production Linked Incentive scheme, and numerous scale assets coming to the market. Electric vehicle OEMs saw large investments, and because of the rise in EV penetration, it rose to over 6 per cent in 2023 from 1 per cent in 2019.

Within advanced manufacturing, packaging, electronics, and EV sectors are likely to see increased investments in 2024. Electronics manufacturing is expanding rapidly with government support, and EV penetration is on the rise in India.

However, deals in the IT/ITeS sector continued to decline, and investment in the sector declined by 65 per cent as valuations remained elevated and end markets demand remained subdued.

Mirroring the overall decline in investments, SaaS and new-age tech fell by 60 percent. Well-funded scale SaaS companies stayed out of the market, and new-age tech declined as investors focused on profitability.

Investments in new-age tech sectors declined by 65 percent over 2022-23 due to cautionary sentiment amongst investors as they increased focus on business model viability and proven economics with growth.

2023, also saw a decline in the fintech sector, the report says it is because of the regulatory clampdown, rising NPAs in small ticket loans, and lack of clarity on the path to profitability.

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