US venture capital firms invest in India's Nova Medical
This article was originally published in Scrip
The US venture capital firms, GTI Group and New Enterprise Associates (NEA), have invested about Rs1 billion ($21.4 million) in Nova Medical Centers, which is setting up a chain of specialised day care surgery centres across India. The investment is expected to part-finance Nova's Rs2.50 billion expansion plan in India.
GTI, which conceived and incubated Nova, is Nova's largest shareholder. Earlier Nova raised $3.5 million from GTI and key management in an initial financing round.
Nova, which plans to set up 25 specialised day care surgery centres across India over the next 20 months, said that a second centre in Bengaluru (formerly Bangalore) would be ready shortly. "We expect to have two centres each in Mumbai and Delhi by September, followed by centres in cities such as Chennai and Hyderabad," Girish Rao, managing director and CEO of Nova, told Scrip.
Last May, Nova opened its first centre in Bengaluru's upscale Koramangola district, with 30 physicians from diverse specialties offering their services in a facility that includes operating rooms, diagnostics, imaging, a pathology laboratory, and a pharmacy. This centre had conducted about 100 surgeries per month and feedback had been good, Mr Rao said.
Mr Rao explained that Nova's business model was based on a partnership between the company and about 40 surgeons from multiple specialties in each centre. The investment in each centre is pegged at about Rs100 million, with 70% of this being financed by Nova and the balance by the surgeons. Each centre could break even in about six to eight months of operation, he said.
Earlier, GTI said that Nova's operating model was designed for "rapid scale" and helped empower physician-entrepreneurs to start their own practices, and offered shared support services that delivered economies of scale to each centre in the company's network.
Internationally, almost 70% of all surgeries are conducted as day care surgeries, and this trend is on the rise in India as well, Nova said. Bala Deshpande, senior managing director of NEA's affiliate operations in India, said that day care surgery facilities would play an important role in shaping India's healthcare delivery system and Nova was a pioneer in the field.
Industry analysts added that day care surgery centres could, at least to a small extent, help "spread the load" of larger hospitals, which perhaps can focus on more complex cases that require longer hospital stays. A 2008 paper by Interlink Marketing Consultancy entitled "Growth agenda for the Indian pharmaceutical industry in 2015", prepared for the Confederation of Indian Industry, said that India has only about 860 hospital beds per million population, just one-fifth of the world average as per World Health Organization norms.
The paper cites estimates from the consultancy firm Technopak, which suggest that India needs 3.1 million new hospital beds over the next 10 years and expect the bulk of this new capacity to become available in smaller cities.