Private equity investors have taken a liking for Kerala's healthcare sector, pumping in more than $700 million in just over two years to acquire hospitals, clinics and medical devices makers that experts say will act as anchor assets for their broader South India expansion.

The state has recorded at least ten private equity-led deals in the sector since October 2023, with the list of investors comprising marquee names KKR and Blackstone, and local funds such as ICICI Venture and CX Partners. Kerala had seen negligible PE participation in the sector in the past, when states like Maharashtra, Telangana and Karnataka had recorded most of the M&A deals.

A number of factors work in favour of Kerala when PE investors look for healthcare assets, say experts. While some of the top private hospitals are operated by non-profit bodies, there are also many well-established facilities run by doctors and families who are willing to divest a majority stake. Also, people in the state have shown a strong preference for private hospitals that offer modern amenities for treatment despite higher expenses, offering opportunities for growth and visibility on return on investment.

The trend has more to do with health awareness among the state's population, said P Unneen, vice-chairman of KIMS Alshifa Hospital in Malappuram district. "In Kerala, people are health conscious and hence are willing to spend,” he told ET. “Growing awareness about health has led to the increase in multispecialty hospitals in the state."

KIMS Alshifa Hospital is controlled by Blackstone-owned KIMS Health Management.

KKR, Blackstone lead the charge

Kerala's healthcare sector emerged as a key destination for PE investment starting late 2023, when Blackstone-owned Hyderabad-based hospital platform Quality Care invested nearly $300 million to acquire Thiruvananthapuram-based hospital chain KIMS Health Management. US-based TPG also joined the cap table with a $100 million investment in KIMS.

Meanwhile, KKR, after making a fivefold return from its Max Healthcare exit, acquired a 70% stake in North Kerala-based Baby Memorial Hospital (BMH) in July 2024. BMH has since taken over the 350-bed Chazhikattu Multi Speciality Hospital in Idukki district's Thodupuzha and Meitra Hospital in Kozhikode. It has also taken a stake in Naruvi Hospitals in Vellore and is constructing a 300-bed facility in Chennai.

BMH has also emerged as a frontrunner to acquire Hyderabad-based Star Hospitals, as reported by ET last week.

BMH chairman KG Alexander told a local newspaper recently that the chain wanted to expand across Karnataka, Andhra, and Telangana, covering the entire South India.


KKR and Blackstone did not respond to emails seeking comment.

"Global private equity buyout funds pursue a regional strategy for their hospital platforms. For example, KKR, after Max hospital's lead platform in North, is trying to create a similar platform in South through BMH," said Shreyan Maralur Lakshmi Prasad, who leads M&A deals at investment banking firm InCred Capital. "While West India is also an attractive regional market, deal dynamics like availability of sizable targets and promoter willingness to divest a majority stake are also key deciding factors for the platforms choosing South over West.”

While Kerala has seen several deals, M&A activity has been hectic elsewhere in South India as well, with Manipal Hospitals, medical devices manufacturer Healthium Medtech, fertility chain Indira IVF, HealthCare Global, and Hyderabad-based Care Hospitals collectively raising nearly $5.0 billion in the past three years, according to Venture Intelligence data.

Doctor-founded hospitals

Founded in 1987 by cardiologist Alexander, BMH employs more than 2,000 nursing, paramedical, and administrative staff and more than 300 doctors. Blackstone-backed KIMS Healthcare Management, founded by internal medicine specialist MI Sahadulla in 2002, owns four hospitals in Kerala with 1,378 beds. Another chain with a major presence in Kerala, Aster, is founded by physician Azad Moopen.

Some of those doctors who had built and grown the business are now looking at a three-to-five-year horizon for retirement, said a person involved in a recent deal, adding: "The next generation may not share the same entrepreneurial drive or even be in the same profession."

Meanwhile, experts believe the increasing involvement of private investors could lead to escalation in healthcare costs and trigger resentment among the public. In fact, Kerala chief minister Pinarayi Vijayan recently warned that MNCs have a profit-driven strategy which would eventually raise the cost of treatment.

"Already, healthcare costs have increased," said Prasad. "There will be a pushback at some point.”