India’s First Healthcare Real Estate Fund of USD 500 million Launched by Toro Finserve

Toro Finserve LLP’s India Healthcare Opportunities Fund (IHOF) has received SEBI’s nod for registration under Category 2 Alternative Investment Fund.  This fund is being launched by Kapil Khandelwal, an investment and healthcare industry veteran, and Tapan Bhatt, a global real estate investment manager. The total fund corpus will be USD 250 million (with additional leverage of USD 250 million). The fund will invest into stabilized healthcare real estate providing sticky long term leases from stabilized assets such as hospitals, diagnostic centers, rehab facilities and assisted living facilities with established healthcare operators in Tier I & Tier II cities in India. Outlining the investment opportunity, Kapil Khandelwal, Managing Partner of Toro Finserve, says “Total value of healthcare real estate already built is of over USD 120 billion with less than 5 – 7% operating under asset light model. Further USD 200+ billion is expected to be spent on development of healthcare infrastructure for India to get to Indian Government’s target of 3 beds per 1,000 people by 2025. Our fund expects to create and invest in healthcare infrastructure where institutional investments in healthcare infrastructure has been shy and selective around a few chains of private hospital so far. Indirectly, we are also creating social impact through increasing the supply of scarce healthcare infrastructure in our country”

The IHOF has an experienced management team with strong track record and in-depth understanding of healthcare & real estate investment management industry in India and globally. Our team has worked on over USD 42 billion of real estate transactions and USD 2 billion of healthcare transactions globally” adds Bhatt. Moreover, the fund has an illustrious investment and advisory committee that includes:

  • Arvind Lal, Chairman, Dr. Lal’s Pathlabs
  • Kewal Handa, Former Managing Director, Pfizer, India and current non-executive Chairman of Union Bank
  • Sampath Shivangi, Former Chairman, Association of American Physicians of Indian and recent Pravasi Bharat Awardee, 2017
  • Sathya Kallur, entrepreneur and dentist to celebrities in the US and founder of Swiss Smile in India

The fund has commitments of USD 110 million from three State Governments in India, UHNIs and Fund of Funds from abroad. It is expected to start its formal road show in India and abroad in November 2017.

The fund is currently evaluating deals worth USD 150 million in Indian hospital chains, assisted living and diagnostic centers to issue term sheets. Private healthcare operators want to expand to underserved / profitable areas to widen their reach, but have limited access to affordable capital. Moreover, many Hospital Operators that had received PE investment are struggling to provide their investors an exit due to lack of access to affordable capital. “Raising finance from private equity firms and financial investors is very expensive and IPO is not an option for many of the hospital operators. Some banks may provide loan against property to the operators, but generally the amount is not adequate (restricted to 50-60% of the property value) for an operator to expand and stabilize operations in a new location. Therefore, a product like ours provides a win – win situation for Hospital Operators, PE Funds as well as our consistent yield seeking investors” adds Bhatt.

Commenting on the growth prospects of the Indian Healthcare industry, Khandelwal highlights that “In the US, the healthcare industry makes up an astonishing 17.3% of the nation’s economy, whereas in India it contributes only 4.1%. Growth drivers seem to be perfectly aligned now more than ever, owing to reforms and a promising healthcare policy. The Ministry of Heath, Government of India announced National Health Policy 2017 to stimulate investments and growth of infrastructure in healthcare in India. There are limitations around the forms of capital the healthcare industry in India has been able to raise through banks, financial institutions, private equity. Our model of sale-lease back transaction of real estate assets for medical entrepreneurs who are looking to expand their healthcare business by either set up one or a chain of hospitals, old-age homes or diagnostic centres in the country. This would allow them to free up capital to deploy in their business and focus on better returns in their business of healthcare services delivery.”

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