Finally one of the unicorns in the foodtech space has turned profitable. Zomato is going public with its IPO. With public money it will raise, will also come the public scrutiny of what it does to the public and society at large. Here are some of the data from the Zomato prospectus that summarizes the scale of its business model and its impact on Indian society.
Total reach of Zomato is in 526 cities
It has around 350,000 restaurants listed
Around 41.5 million people visit its app or website in a month of which around 11 million people place orders
It make around 400 million food deliveries in a year (averaging around 3 deliveries a month per user who places orders on Zomato)
Zomato earns around INR 90 per order of food. Their gross order value in 2020 was around INR 230 (increased substantially during lockdown)
Around 160,000 delivery partners are employed in the 526 cities averaging around 300 delivery partners for 3 shifts on 24/7 operations
Industry experts say that the delivery partners drive around 6 kms (during lockdown it was 7.5 kms) from their point to restaurant and the user delivery location to meet the time commitments of 30 minutes. The radius for the restaurant to the user comes to around 5 kms (during lockdown it was 6 kms)
I am assuming the metrics for Swiggy would be around the same metrics as Zomato. Both the Food Delivery Apps must be providing tremendous time and place value to its loyal consumers but at what economics. Let me debunk this now.
Economics of Food Delivery Apps in India
Assuming 800 million food deliveries with an average radius of 5 kms, the total distance traversed would be around 4 billion kms in a year. This is equivalent to travelling between earth and Neptune. That’s a long distance in terms of the food delivery only! The cost incurred for each food delivery was INR 50 per trip. The total cost incurred and cross subsidized by the Food Delivery Apps amounts to INR 4000 crores in 2020. This costs 10 Mars Missions from India in a year!
Now let’s turn to the carbon emission of the 2-wheelers used by the delivery partners. Assuming 4 billion kms travel would require around 80 million litres of petrol for the bikes in a year. They would release around 186.16 million Kgs of carbon in the environment assuming all the bikes are 4-stroke engines. That’s not a great environmental impact! I am not assuming the impact of plastics and other packaging material used by the restaurant partners and dumped into our cities dumps every year as this is not the responsibility of the food delivery apps but the consumer and the restaurant partners as a choice.
On an average INR 230 per order would provide around 1000 calories worth of food assuming all is healthy food ordered. The impact that the consumer feels by getting time and place value is hugely negative. So far these companies doing food delivery were not in public scrutiny but the reality is very negative. Are we creating Tomatos out of the Zomato’s consumers?
Not healthy for the Food Delivery Apps Companies, their investors or their consumers.
Health Economics of Tomato!
Now lets focus on the health of the tomatos who order food. I am assuming that they are busy enough not to be able to cook or step out to the restaurants and are intelligent enough to be aware of their health risks and well being and are only ordering bunk food (anti thesis of junk food) as nobody likes to eat healthy food which is not so delicious to the taste buds. At INR 230 per average order they are consuming around 1000 calories of food. As per ICMR the recommended daily calorie intake is 2100 Kcal for urbanintes. So the average order on food delivery apps is equivalent to a single meal which is around 800 kcal .
Let’s turn to the fitness. WHO recommends that a fit person should walk 10000 steps a day. This is around 8 kms a day. The 80 million consumers of the food delivery apps (Zomato and Swiggy divided equally) would be walking around 230 billion kms in a year. This is 60 times more than what the food delivery partner of these apps travel in a year. So, the question is, what is the health risk of those who order food on these apps really walking their quota of daily distance and prefer instead the meal right on their doorsteps?
Based on the penetration of cities of food delivery and the health risks penetration, the Tomatos are equally penetrated in states where the health risks are fairly high and shows a very strong correlation to food to be served at their doorsteps.
Health Economics of Tomato!
The remedial health issues and what the public subscribing to the IPO of Zomato should be inquiring into is a subject matter of another blog which may come some other time post IPO.
Disclaimers: I do not have Zomato and Swiggy Apps installed on my mobile phone and do not order any food from the food delivery apps. I am not an interested party in pooping the party of Zomato’s IPO.
Madam Secretary, members on the dais, dignitaries, my mentor friends and budding start up entrepreneurs. I invoke the blessing of his holiness to bestow the positive energies and blessing to one and all.
Delivering Key Note Address
Delivering keynote Address is always a matter of honour and pride on which one stands amongst ones own to share the experience. I remember delivering my first keynote at Arab Health 2003. I was part of the team that set up Cleveland Clinic in Abu Dhabi, Saudi Aramco-John Hopkins in Saudi Arabia, Cornell Medical College in Qatar and Joslin Clinic. It was definitely an honour to stand with the Royal and industry executives but no pride as I was not standing amongst my own. Today, when I am standing in front of you to deliver this keynote address, I feel honored and full of pride. And why not? Since I settled down in Bangalore, in 1998 till I migrated back to Bombay in 2017, this city has provided me with inspiration to do so many initiatives. So I am full of pride to be rightly one amongst you, although I no longer reside in Bangalore, my spirit and heart is still a Bangalorean. However, there is something in the air, water and weather of Bangalore that has motivated me to do so many initiatives. I feel that I am going to share some of my experience and motivations to you to do more than me while you are in Bangalore and deliver to the nation and the world.
In 1998, I worked on PM Atal Bihari Vajpayee’s Task Force on Food and Agri Reforms that set the direction and pace of reforms in Agri and Food Processing Industry right from my office on Airport Road
In 2008, I became world’s first CISO in the Drug Discovery Outsoucing, leveraging my learnings from Wipro as Head of Healthcare
From Bangalore, I was invited to Singapore Government to assist them in their Biotech and healthcare delivery model around Sing Health and Biopolis
In 2009, I hosted the Hon CM Yadurappa to showcase the smart ambulance and health presence while I was CEO of Cisco.
I was one of the member of the Planning Commission’s PPP Committee on Healthcare where we drafted the first PPP regulatory draft under Dr. Ramadoss. Later, I was invited by the Principle Secretary Health for working on the World Bank Karnataka PPP healthcare delivery model
In 2010, India’s first day care surgery chain was conceptualized and rollout by me as one of the early investors with the first 2-day care surgery centers at Koramangala and Sadashiv Nagar. This is now part of Apollo Hospitals now.
My investment in XY Clinic which was an innovation genomic, diagnostics and nutrigenomics. The first India flagship was launched here in Bangalore. The same year, we started Bangalore Angels with my school time buddies who had started Mumbai Angels. As of date over 75 start ups from Bangalore have been funded by Bangalore Angels. We also represented and fought with the Center on the removals of the demonic Angel Tax
This city’s Rotary Club in Bangalore which I was part of worked to make SMS mandatory working with the Planning Commission for eradication of Pulse Polio when there was a strong fake news like the Covid Vaccine amongst the villagers in Hosur District. With the SMS campaign, we saw 99.8% turnout in Bangalore while in Hosur it was less than 80%
As member of the FICCI National Committee nominated by Dr Jairam and my industry associate Rajen Padukone I delivered the country’s first Genomics Roadmap for mainstreaming India.
In 2013, at the behest of Kiran Majumdar Shaw, I took up the lead on Investment Committee of ABLE to deliver the Biotech Ignition Grant (BIG) policy, kicking of the public discussion with the current Principle Secretary right here at BIEC. This was further worked on to deliver the Start Up India Fund under the BJP in their first budget.
This city also kicked off Nasscom’s Product Conclave of which I was part of the committee for the first three editions.
In 2014, my firm completed taking Manipal Hospital to KL, Malaysia and consummate India’s first cross border M&A in hospital sector in India.
It was here from my World Trade Center Office, I conceptualized and launched 2 funds. India’s first healthcare REIT and India’s first offshore quant/algo hedge fund.
Position of Karnataka
Algo we developed from my hedge fund has been successfully predicting healthcare and life sciences investments in India with 95% accuracy since we launched in 2016, except last year. This year we reset out algo as our predictions for 2020 all went haywire. This year, for the first time we have created our heatmap on hottest states to invest in India for healthcare and life sciences. I must say, my pride is further validated for Bangalore and Karnataka as it has emerged on the top emerging states for investment for the sector. Bangalore, is the innovation hub not only for tech but for healthcare and life sciences in India. That attracts investments. I must say that this vibrant ecosystem creates a healthy pipeline for investments for our funds. This year, Karnataka will also delivery two more Unicorns to this nation’s list of unicorns.
My Message to the Start Ups in the New Normal
2020 was a disastrous year for world in terms of employment and investments. I must warn that emerging out of the situation of 2020, please do not profit out of the misery of others and make money out of this situation for your venture and investors. This would be the biggest disservice you would do to yourself and mankind. I will be discussing on the emerging business models and tech in healthcare and life sciences and what would be the lessons learnt and the key opportunities for start ups in the new normal in my other session. All I want to say now is that don’t be guided by the events of 2020 that your venture’s value proposition is narrowly defined. The time of the first-generation cohorts of start ups which were imitating the models of the west is now over. We have witnessed in 2020 that their advancements and innovation in tech could not prevent the catastrophe of 2020. Its now time to innovate for Bharat for the Bharat Stack. Karnataka is one of the best sandbox for rolling out your ideas to the world. Let me assure you that there is no shortage of capital for the right ventures.
My Message to the Government of the Day in Karnataka
Madam, I would like to also leave a message for you today from this podium. While drafting the BIG policy, we analysed all start up in healthcare and life sciences across the world including India. One of the key issues that healthcare and life sciences start ups require is a longer gestational cycle to mature their tech and innovation as there is risk of lives. We discussed at length at the DBT BIG policy back in 2013, how do we mitigate this. I believe that Bharat Biotech is a shining example of how DBT and the state administration collaborated to its success. In the past, Karnataka was diametrically opposite to the political party ruling Delhi. This time round we have alignment both at the Center and State. I would like to emphasise in no uncertain terms that the success of Bharat Biotech in our neighbouring state was not incubation but acceleration and grants for the scientific innovation. Please do consider this when you are drafting policies to support start ups and ventures in healthcare and life sciences. I must also request you to consider developing the infrastructure in Karnataka like the erstwhile Andhra Pradesh has developed in Hyderabad for the Biotech industry.
Healthcare and education are social services and goods. During Covid, I was part of the committee that drafted the Social Stock Exchange. Karnataka has been misfortunate to have divergent governments in State and the Center and hence many of the initiatives could not be encouraged in the state. However, we now have the opportunity to align with the Center. Karnataka has the opportunity to be the first incubator and sandbox for social ventures. I would urge you to reach out to the Principle Secretary Finance and discuss the issues and requirements with the Minister of State for Finance at the Center.
My Message to Mentors to Be Ready for New Technological Disruptions
My message to the mentors is very straight and simple. We are at the cusp of new slew of disruptions in technology. Our neighboring state has already tested 5G and would be rolling out in the state and the country very soon. Please do get ahead of these developments to be able to guide your start ups on what to expect in the future. Also instead of going with the feeling of Never Done Before, it would be better to leverage the technology and platforms already developed and operational to partner. Do not fall into the heady lure of make versus buy just because you have a personal point to prove yourselves. Look at this LG Velvet phone which I am using for testing some of the healthcare solutions and delivering my keynote. This handset is as powerful as my tablet giving a full desktop experience while being so portable and enabling mobility with being 5G ready.
My Message to the Accelerator Operators is to Share and Grow the Ecosystem
I heard some of the positive developments in our journey here in the start up ecosystem. I would urge you to share your templates, learnings, best practices to others who are setting up new accelerators. Good Karma always comes back. Like open source, please be a contributors to the ecosystem and the ecosystem will grow further and stronger.
Finally, the Alchemy of Success
I would like to conclude now that the platform is very strong that is available to you. On one hand you have the encouragement and full endorsement of the ITBP Ministry of Karnataka. One the other hand, you have a solid mentor base. I have had the privilege to work and collaborate with some of the mentors who are associated with you here in your journey. Please leverage their experience to the maximum. Also challenge them with the problems you are solving in your venture so that they are also bringing out their best to you. Finally, you also need to share your experiences with your peers so that you all come out of this experience stronger and positive. From my end, there are a whole lot of resources available on my website www.kapilkhandelwal.com which is available free of cost with no GST to leverage.
I thank you all for a patient hearing and wish you all the very best in your entrepreneurial journey.
In Part 1 of the Healthcare and Life Sector in 2021, we focused on the heat map on different sub-sectors. 2021 Investment Heat Map | Kapil Khandelwal (KK), we predicted the investment activity for 2021. In Part 2, we focus for the first time State-wise investment Heat Map under Part 2, Hottest States to Invest for Healthcare and Life Sciences. These have been aggregated into our overall Heat Map in Part 1. In India’s federal structure of governance, healthcare is a State subject while some of the other parts of the healthcare and lifesciences value chain are Centre subject. Hence it is very difficult to isolate the impact of governance model on the overall investment activity. Also some States and Union Territories were demerged and hence historical data may be merged with erstwhile states from where the new States demerged.
The meta data from different states and social media feeds have been incorporated to produce India’s first state-wise heat map.
We have taken the following parameters on which we assessed all the States and Union Territories of India
Provisioning For Covid
Promoting Start Up Ecosystem
Participation of Value Chain
Policies and Regulations
Population Dependency
Penetration of Insurance
Preventative Health and Wellness
Penetration of Digital Health
Population Epidemiological Burden
Population Access to Beds Per Km
Point of Care Access to Doctors
Point of Care Access to Other Clinicians
Healthcare Pricing Competitiveness
Healthcare Disparity
2021 State-wise Healthcare and Life Sciences Investment Heatmap
Hottest Investment Destinations for 2021
Andhra Pradesh/Telangana
Karnataka
Gujarat
Tamil Nadu
Emerging Investment Destinations for 2021
Kerala
Madhya Pradesh
Rajasthan
Uttar Pradesh
Maharashtra
Hottest Union Territories Destination for 2021
Delhi NCR
Chandigarh
Daman/Diu
Stay Safe and Happy Investing in the rest of 2021!
Bidenomics and Pivoting Indo-US Geopolitics and Investments
Trumponomics and Indo-US Geopolitics
During the Trump Era, all the indices have doubled and his mantra of ‘Make America Great Again’ seem to have worked. Sino-US trade and geopolitics seems to be at its rock bottom. Modi-Trump bonhomie through Howdy Modi seems to have worked and also were the defense with the strengthening of the Quad. Trump was the most favourable President at the White House, India ever had. The Indian diaspora in the US were divided between Trump and Biden and expect that the Indo-US relations, trade and investment flows will grow stronger. Will this continue with the Biden presidency?
Bidenomics – The Local Politics – Walking on a Tight Rope
The Democrats have a very slender margin of 10 senators in the House of Representatives. Given the way the US had been divided down in the middle, it would be very difficult for the Biden administration to push for major policy initiatives to attain the administrative goals with the support of the pro-Democrat Republicans. The fiscal stimulus that would be required to push the US economic recovery in the new normal to pass fiscal stimulus or any bills with a simple majority would be a challenge . unless Democrats remaining unified or at least a few Republicans support Biden. The Biden administration has just revealed a USD1.9 trillion fiscal package, which is centred on providing up to an additional USD1,400 in direct payments to targeted income groups, along with state/local support, supplemental unemployment insurance, additional grants for businesses, and funding for testing and vaccine distribution. This would put combined past and potential coronavirus relief near USD5 trillion (or approximately 25% of GDP) when all is said and done. To fund all this, Biden would pivot the Trump Tax Cuts and Job Act to increase the taxes and also work on employment generation. In addition, the Democrats and Biden administration would focus on more strategic initiatives on green energy, infrastructure, education, health care, and broader social safety nets which would be as per the initial budget for these programs to be around around USD 2 trillion.
Bidenomics – The International Trade Relations
Bidenomics would pivot to a multilateral approach to reduce the trade disputes and tensions in the North American neighbours and the EU. Trumponomic “Phase 1” trade deal with China may has not dented Chinese exports to the US in 2020 and the trade surplus with the U.S. reached a five-year high of USD 535 bn in 2020. Agreed-to increases in China’s imports from the U.S. have fallen well below target. A recent further escalation of tensions (e.g. around the listing of Chinese firms in the U.S.) may complicate matters, but Biden’s at the helm should help reassure markets and trade relations globally.
Bidenomics – The Indo-US Relations Pivot
Biden recently announced military spending support to Pakistan to maintain its presence in Afghanistan. This is a major departure from Trump and would be a bone of contention between Indo-US relations and defense spending and relations in the future. Biden has in the past not supported India’s space program which led India to be Atma Nirbhar and develop its own technology to be a leader in the space race. These past Biden hangovers would be difficult to remove for a steady Indo-US relationships. From an investment flows to India, many of the Indo-US think tanks and forums believe that there would be no rolling back to the last few years of Indo-US relations. We are definitely bullish on the Bidenonmics and as the overall markets will still provide returns for equity and risky assets given the improving macroeconomic situation, fueled by significant fiscal impulses and the local political mandate of Biden and Democrats which is very slim.
Wishing Bidenomics to rebuild the New Normal World!
2021 Healthcare and Lifesciences Investment Heatmap
Healthcare and Life Sciences in 2021: Part 1- Sectoral Investments Heat Map
Since 2013 our algos have been accurately predicting the investment heatmap in the healthcare and life sciences in India which were predicting with 95% accuracy on the sectoral investment cycle in India till the end of 2019. Covid Pandemic has completely disrupted and reset the investment cycle in India and we missed out all our prediction accuracy for 2020. We were at cross roads for releasing our Heat Map for 2021. The first was to actually abandon the whole exercise of predicting. The second was to actually relook at India and the world afresh and rebuild out algos and work with lower levels of prediction accuracy like we started back in 2013. We chose the later. While we worked on the Heat Map for 2021, we realized that there were additional variables that would impact investments in 2021 which we have added. These are Human Capital and New Normal Disruptions which would have an impact on how investments and investment activity in healthcare and life sciences in India will pan out in 2021. During 2020, while we were tracking the progress or containment of Covid to an endemic stage in India, we also realized that the execution of the Covid-related measures is in the hands of the States of India given that health is a State subject in our Federal governance structure and different States have demonstrated varying levels of outcomes in healthcare. My blog Sustainability of Digital Health | Kapil Khandelwal (KK) provides this insights. We have taken these into consideration to create for the first time State-wise investment Heat Map under Part 2, Hottest States to Invest for Healthcare and Life Sciences. These have been aggregated into our overall Heat Map here. Please await the release of our Part 2 shortly.
As part of our revised Heat Map for 2020 released in mid-2020, we had predicted a V-shaped recovery for healthcare and lifesciences. March 2020 was the all-time low for the markets and BSE Healthcare Index. By 31 December 2020, the index was at all-time high. With the rapid bounce back of the equity markets, the pricing and returns for healthcare and lifesciences is now not going to be sustainable in 2021, given low cost of debt in India, other supply side challenges, proactive regulations such as Telemedicine Act, National Digital Health Mission (NDHM), PLI Incentives, two leading Covid vaccine candidates.
Vaccine Race and Human Capital to Determine Investment Bounce Back
The investment for the industry for bounce back into the new normal is anywhere estimated to be around INR 120,000 crores a good chunk of this is going to be spent on the vaccination program in India. Our heatmap provides the snapshot of how the investment cycle is gearing up with increased pipeline of deals and investment flows. Markets have already recovered and factored this in their pricing.
2021 India Healthcare and Life Sciences Investment Heat Map
Based on the Heat Map 2021, we have updated our revised Heat Map of 2020 published in June 2020 with the addition of Human Capital and New Normal Disruptions. Let’s relook at the board trends for 2021 in terms investment activity and trends.
Healthcare Financing
Pay cuts, job losses, low interest rates, reduced household saving and speed for digitization accelerates the ‘India Stack’ to reach to the consumer faster with innovative consumer financing products. Innovation into financing products and services for consumer financing of healthcare will see a few more players emerge. Many existing players are reworking their value proposition and plan to provide innovative products and services thus increasing coverage in 2021. However, as new demand accelerates, risk underwriting is equally important to avoid delinquency.
2021 Outlook: Very Hot
What’s going wrong: regulation, maturity to scale, right bite for the consumers, reach and penetration, debt financing costs, slower non-discretionary and elective healthcare spend, delaying of healthcare spend
What’s going right: India stack digitisation, consumer borrowing to spend on non-electives, immediate gratification, reduced household savings supplemented by borrowings
Medical Education
Key shortages of healthcare frontline workers was very apparent during the Covid Crisis and now for the vaccination program. The need for regulatory regime to upskills is still being reworked. Healthcare could be the key job creator. Regulatory reforms are urgently required to push digitization and newer business models for upskilling existing workforce. Many of the debt servicing issues of the sector continue to persist with a few more NCLT/bankruptcy cases. A lot more exits expected and churn in ownership of assets due to consolidation activity.
2021 Outlook: Moderate
What’s going wrong: regulation, corruption, no vision, skill shortages, alignment to new age care, increasing debt burden, new age skills certification, funding dry up
Med Tech Innovation and Life Sciences Discovery and Clinical Development
Focus in 2020 for clinical development had completely pivoted towards Covid vaccines and solutions and of global scale. India-Shinning moment with the two vaccines being awarded the emergency approvals has heightened investor interest in India. Investments will be selective in opportunities for Covid related therapeutic solutions. Social innovation would be the way forward. On the human capital, renewed interest of scientists to return back to India like in 2006-07 outsourcing boom.
2021 Outlook: Hot
What’s going wrong: innovation pipeline, IP regulation, regulatory bottlenecks on clinical development, newer skill sets for research and acceleration
What’s going right: Human capital, cost advantage, emerging social innovation models,
Pharma and Therapeutic Solutions
M&A and consolidation activity will spiked up. Digitisation will be a key driver in 2021 and beyond. Some social impact models to counter the bottom of pyramid need gaps are emerging. Will not get mainstream in 2021 as China substitution and supply chain issues need to be resolved urgently inspite of positive policy push.
2021 Outlook: Very Hot
What’s going wrong: price controls, policy log jam, wrong product portfolio, innovation and scale up, global or China-level cost competitiveness
What’s going right: cost advantage, distribution infrastructure, digital business models, Government incentive programs
Healthcare Providers
Funding and liquidity crisis continue after the lock down. Newer delivery models and hospitals of the future with asset-lite strategy emerge as costs build up and prices remain under pressure. Huge churn in asset ownership and consolidation activity. There will be no major action on PPP front. The telemedicine guidelines accelerate digital business models.
2021 Outlook: Hot
What’s going wrong: margin pressures, price controls, GST slabs rationalization on inputs, execution of programs on the ground, PPP in healthcare, supply and demand mismatch in micromarkets, debt financing costs, gun powder churn, operating cash runway, liquidity and working capital crunch
What’s going right: Digital business models augmentation, asset-lite models
Healthcare Insurance
Complete liquidity crisis due to moratorium of renewals till October 2020. Innovative models for healthcare payors emerge in India for the middle bulge of India Stack for the middle 500 million that are paying out of pocket. As loss ratios will further mount, insurance rate will go northwards. Innovative products and pricing still a distant reality with the regulator in India. Many of the digital healthcare insurance players have to scale back and reduce their human capital and now need to rebuild in 2021. Don’t expect any IPOs.
2021 Outlook: Moderate
What’s going wrong: margin pressures, product fit to consumer needs, product approvals, loss ratios, slow pace of innovation, operating cash runway, human capital reduction, consumer offtake and demand
What’s going right: Consumer demand, digitisation
Health Retail
Muted consumer demand and discretionary spending due to reduce disposable income will result in slower growth and GMV pick up. Valuations will be a key issue. Consolidation and acquisitions expected for some to survive and grow. VC and PE interest is still muted and reviving their commitments to those ventures that survived the pandemic situation. Consolidation activity will increase. No serious IPO expected in 2021.
What’s going right: Consolidation, newer cross-vertical innovative business models
Wellness
Discretionary consumer spending on wellness to pick up due to fear of Covid. Mass market moderately priced wellness products and business model innovation is still lagging behind. Post lockdown the growth has not be pre-lockdown due to consumer intertia. However, very innovative business models have emerged for the new normal. Investment activity is yet to pick up in 2021 as most of these ventures are in infancy.
2021 Outlook: Moderate
What’s going wrong: regulation, maturity to scale, new mass market business models
What’s going right: newer cross-vertical innovative business models, Fit India
Alternative Therapies
The Babas promoting alternative therapies have been coming up with Covid related products and its controversies. MNCs and local businesses have entered in this segment affecting their market share and position. Consumers adoption to accelerate faster as these products become the only choice. In this sub-sector, we are witnessing some very interesting ideas for disruptions in the New Normal these are very much at the seed or angel investing stage.
2021 Outlook: Hot
What’s going wrong: maturity to scale, consumer education and confidence, clinical research, new product development
There have been very positive developments for Indian healthcare on the digital front. First, the Indian Telemedicine Guidelines and then the National Digital Health Mission (NDHM). From various think tanks and industry bodies there have been various numbers been project on the incremental value that these will create for the Indian economy. While it is wishful to conjecture the US$ 250 billion dollar impact, what hums in my mind is the Dire Straits famous 14-minutes “Telegraph Road” song. At that time, Mark Knopfler was reading the novel The Growth Of the Soil by the Nobel Prize winning Norwegian author Knut Hamsun and he was inspired to put the two together and write a song about the beginning of the development along Telegraph Road and the changes over the ensuing decades. Using the same analogy, the development of India’s Digital Health Silk Road is feasible on the back of the physical and human healthcare infrastructure. So let’s tune in to my song!
India is a country of paradoxes for healthcare infrastructure. India has 18% of world’s population. However, it has around 18% of world’s diseases burden which is increasing. To service this diseases burden, this increasing disease burden, India has only 2.4% of world’s land mass and needs approx 0.01% of world’s land usage for health and well-being purposes. On the clinical manpower supply, India has 1% of world’s lab techs, 9% of world’s health workers, 8% of world’s nurses and doctors. To level up India to the global average, the total investment is approx $460 billion now (165 countries in the world had a GDP of less than $460 billion in 2018). (see Tedx talks My Presentations – Kapil Khandelwal (KK) To address the country’s healthcare needs within the constraints of capital, land and clinical manpower, homegrown solutions are required. At per capita healthcare spend of INR 4116 (USD 55), India’s per capital spend is growing @ 22% pa. However, India is amongst the lowest 4 countries (ranked 129) in the world on healthcare spend as per Oxfam’s latest Commitment to Reducing Inequality Index 2020 at 4% of GDP (against the globally recommended 15% of GDP).
Let’s set the context under which there has been an accelerated push for healthcare digitization in India. The Great Covid Lockdown. Elective healthcare were down by 70% across the board due to lockdown and priority to Covid affected. The healthcare industry started rumbling and requesting Government to come out with a bail-out package of over INR 50000 crs. Doctors needed to restart their practice through work from home or anywhere. The decade-long deadlock on the telemedicine act between Medical Council of India (MCI) and the Ministry suddenly cleared. There was a mutual agreement to develop the telemedicine road and to regulate the gold rush road to telemedicine in India.
The actual verse of the telemedicine regulations in India was announced by the Niti Aayog and the MCI. The Prime Minister in his verse of Independence Day speech also announced the National Digital Health Mission (NDHM). The draft verse of the digital health regulation was available for the general public to review and critique. This was the back drop to the crescendo of the industry chorus on the digital health in India and the opportunity it offered.
With the regulatory verse out in the public, the industry voice chorus on the real impact to the Indian economy initiated. One industry report estimated the pace of digital healthcare can unlock USD 200 to 250 billion in next 10 years in terms of primary and secondary impact to the nation’s economic value. These value-creation in the march to the wild west will be on three key roads:
Road 1: From episodic care to wellness-oriented care
Road 2: From volume-based to value-based healthcare
Road 3: From siloed systems to streamlined processes
While such stratospheric estimates at a Concorde-neck supersonic speed of the digital health silk road to the Wild West is great for headlines for the chorus, let’s not fool ourselves with the history of what the retail (brick and mortar) and ecommerce underwent in the past decade which went super sonic with investments and valuations on digital retail commerce in India. I have been writing about various issues and roadblocks to digital health path in my various columns which are available at My Library – Kapil Khandelwal (KK)
For any song chorus there is also a bridge/solo that makes the real sense. Here is my view of the chorus. The last decade received around USD 500 million in different ventures of digital health which were cut-past healthcare business models of the West. The current technology spend on these is around USD 500 million per annum. For the USD 250 billion impact on the ground to be realized a straight forward deep healthtech investments of around 5% (around USD 12.5 billion) is to be right away with a gestational lag of around 3 years on a conservative 2x on valuations return and not on revenue growth. In other words, all the sum total of early stage VC money raised in 2019 globally will have to be directed to India and that too in healthtech. A tough ask and a pipe dream.
Let’s also focus on the available data sets which is the oil to run the digital health motorway in India that we currently have. Currently, India’s data sets on healthcare is of the Telegraph road era. These include information on radiology, EMR, labs, meds, monitoring, doctor exam, nurse observations, claims data, billing and transactions. This data set is available for the Bharat Stack 1 (the elite-12% of India’s population). The real driver for the growth is the Bharat Stack 2 (the next billion of India’s population) and 30-odd points of healthcare data (not under the current NDHM regulations) which will make the digital health silk road truly a reality. An incremental investments of USD 18 billion in deep tech ventures in next generation digital health ventures to create a true high-speed digital health motorway of the future.
Therefore to land the stratospheric Concorde of the chorus that were singing, we require a total of USD 30 billion of tech investments on the word go. Where is that sort of money? We still don’t know where this money raised will be invested and that is not the point we are belabouring. Taking that cue, we have been tracking around 150 healthtech ventures in our annual healthcare and life sciences investment heatmap on digital. We will need to create 10000s of ventures that can create the depth and width of healthcare apps for the next billion today!
While most songs orchestra fade and end abruptly, this India digital health silk road would need a different Outro to its song. On a conservative basis, we estimated that the overall India digital health silk road opportunity is valued conservatively at USD 50 billion as it currently stands with the different constraints in our physical and technology healthcare delivery system. This is on the back of three key multiplier effect on the Indian healthcare economy:
Increasing per capita spend on health and well being of the next 1 billion population as disposable incomes goes up moving from the informal sector to formal sector in next 10 years
Incremental 1/6th disease burden our population carries as compared to world due to the genomic make up and ageing population in next 10 years through alternative healthcare delivery models
Emerging alternative digital healthcare delivery models that would play on the shortages in the physical delivery system as penetration and acceptance of mobile first delivery of healthcare services become mainstream and productivity of the clinical manpower is augmented by healthtech
Money for Nothing – Covid Vaccines for Free
Another Mark Knopfler hit which talks about the excesses of a rock star and the easy life it brings compared with real work. Between the Independence Day announcement and the Bihar elections manifesto announcement, there seems to be shift in the focus and the priorities it seems from our Rock Star Prime Minister. The Government would not have the funds to spend on the Digital Health Silk Road if it spends its budget on providing free Covid Vaccines to the masses.
Only time will tell how the orchestra and the song of the great India digital health gold rush will play out!
Excerpts of this blog published as an article in VC Circle:
