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This blog explores insights for multinational corporations, NGOs, academics, social entrepreneurs and others working at the Base of the Pyramid.

Friday, March 2, 2012

In Tune With the SONG Fund: Investing in health in India

By Rose Reis

Eye Q , a chain of high-quality but affordable eye-care hospitals in North India, has tripled in number since the SONG Fund investment. (Image credit: Eye Q).

Who’s on top of the lightning-speed Indian impact investment space?

One major player is the $17 million USD SONG Investment Company. Funded and owned by Google, the Omidyar Network, and the Soros Economic Development Fund, SONG was launched in 2009 to demonstrate that investing in small and medium-sized enterprises (SMEs) can not only elicit shareholders returns, but also improve economic opportunities and jobs for the masses in India. SONG invests in commercially sustainable ventures creating social impact in three sectors: education, health, and agriculture.

I spoke to Kartik Srivatsa, lead advisor to the fund, about SONG’S approach to investing in health. Srivatsa, who previously worked for McKinsey, joined SONG in 2009 from the global venture capital firm Lightspeed Venture Partners. I recently spoke with Srivatsa from his office at the Indian School of Business in Hyderabad, also home to CHMI’s India hub ACCESS Health International. Below, Srivatsa gives the download on what’s new with SONG. 

SONG’s current healthcare investments

We have a significant focus in healthcare, typically investing $2 million to $2.5 million in each company. Currently we are invested in a chain of specialty eye care hospitals offering services at an affordable price point in smaller towns in north India. Eye Q was at 4 locations when we invested and now runs 14 hospitals.

We are also invested in Be Well, a chain of 40 bed hospitals offering basic surgeries and outpatient consulting in small towns in the southern state of Tamil Nadu. Be Well operates a couple of centers and will scale up to over 10 hospitals in next the few years.

A strong market for private healthcare

We are strongly focused on the belief is that the role of private enterprise in Indian healthcare is only going to increase. In India, government is moving to being a payer more than a provider.  Government wants private providers to play in the space.

We’ve been provider-focused in secondary and specialty care in capital efficient models, which can be scaled rapidly. Multi-specialty (‘tertiary care”) will not be in our scope of investment.

Primary care is the next frontier

Some people think primary care needs to be provided by government. We believe there are several interesting private models but they are not scaling in commercial ways – but there is definitely a way for that to happen.

Compared to specialty care, primary care is more localized and must be taken state by state. Primary care should be tied with healthcare financing on the consumer side as well as the provider side. On the consumer side, people need insurance to avoid having to pay out of pocket for care. Providers might need debt financing so they can buy the right equipment, and we’d want to help build these investment products for them.

A one-stop source of information on health enterprise for the BoP

We haven’t seen a database before that captures enterprises across the ecosystem. There is nothing else like the Center for Health Market Innovations. The healthcare industry has professional associations where best practices are discussed including how to scale up, but no one-stop place to house information on all operations in the sector.

Other players in the BoP health space in India

The Aavishkaar fund invests in enterprises including Vaatsalya, GV Meditech, MeraDoctor, and Swas Healthcare, a naturopathy chain.

What’s coming up for me? I’ll be at Intellecap’s Sankalp Forum Summit, one of Asia’s largest platforms bringing together social enterprises, impact investors, policy makers, academicians and others. 

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