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The Emerging role of Small and Medium

Enterprises in the Indian Medical Devices Market
DATASET FEBRUARY 2014

1 AUTHOR:
Saneesh Edacherian
Indian Institute of Management
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Frost & Sullivan Market Insight

Published: 17 Sep 2012

The Emerging role of Small and Medium Enterprises in the Indian Medical
Devices Market
Date Published: 17 Sep 2012
By Dr. E. Saneesh, Research Analyst, Business & Financial Services (Healthcare)
Email: SaneeshE@frost.com
Imports (including devices and equipment) account for 75-80 percent of the Indian medical devices
market; Indian device companies account for the remaining 20-25 percent. Small and medium
enterprises (SMEs) constitute 60-65 percent of the Indian medical devices companies.
The Growth Drivers
The key growth drivers for SMEs in the Indian medical devices industry are:
The global demand for innovation
Demographic factors such as increasing population, increasing disposable income for
healthcare needs, the dual challenge of communicable and non-communicable diseases and
increasing rural penetration of healthcare services and health insurance
Government initiatives that ease the accessibility of funding for the SMEs
Increasing access to funding from VCs and corporate investors
Expected favorable regulatory change governing medical devices
Role of Venture Capital (VC)Investments
The growth of SMEs has not been in pace with the nation's economic growth, though the SMEs have
propelled the nation's growth; one of the prime reasons is their inability to access funds for growth.
With the advent of venture capital (VC), this scenario is expected to change.
The Indian medical devices industry has received significant VC investments between 2007 and
2012, worth $37.7 million. It has steadily increased over the years.Between January 2012 and May
2012, medical devices received $11 million as VC investments,accounting for 12 percent of the total
VC investments in healthcare during the aforementioned period.
A VC investment is the ideal route to obtain investment for a technology in the knowledge-intensive
medical devices industry, as a venture capital investor focusses more on the technology, the growth
potential, and the qualities of entrepreneurs. VCs are high risk takers than other conventional
investors, thus disruptive technologies backed by an exceptional business plan and a good
management team will be attractive to VC investors. The primary advantage of the VC investment
is that the investors get involved in the actual running of the company and help the management
team achieve growth targets.
The VC firms which have invested in Indian medical device companies are:
1. Accel Management Co. Inc.
2. IDG Ventures India
3. Fidelity Growth Partners India
4. Norwest Venture Partners
5. Accel India Venture Fund
6. Eplanet Capital
7. Midmark Corporation
Role of the Government
The Indian Government has taken measures to boost the growth of SMEs by; setting up specialized
SME lending institutions, the amendment of Micro Small Medium Enterprises Development Act
(MSMED) 2006, setting up SIDBI (Small Industries Development Bank of India), extending support
to foreign trade through the Export Credit Guarantee Corporation, to name a few.
Though these initiativessupport the growth of SMEs, there is a need for measures to accelerate the
growth of SMEs and the economy in turn. The government should implement differential tax policy
for SMEs, additional credit sharing for entrepreneurial ventures, invest in incubation centers and
research parks to encourage innovation, and identify SME clusters and provide financing.

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The Need for Public Private Partnerships (PPP)

Medical devices industry is a capital-intensive industry, so this could act as an entry barrier for
entrepreneurs. The government could encourage innovation and entrepreneurship in this industry
through Public Private Partnerships(PPPs). In addition, the government could share the initial capital
requirement or even arrange financing through its lending institutions. It will mutually leverage the
strengths of the industry and the government; where the government can have access to disruptive
technologies.
Potential Areas of Growth for SMEs in Indian Medical Devices Industry
Considering the changing healthcare needs and patient profile, devices in therapeutic areas like
cardiac diseases, neurology, orthopedics, and oncology have immense growth opportunities.
Increase in self-administered healthcare is expected to increase the need for devices and
technologies in the areas of blood monitoring, pain management, fitness and wellbeing, etc. The
increasing size of the aged population willaccelerate the need for remote patient monitoring
systems and personal emergency response systems. The smart revolution in mobile phones is
likely to influence the demand for devices and applications in mHealth.
Future of SMEs in the Indian Medical Devices Industry
There is a huge potential and several opportunities for SMEs in the medical devices market,
especially when the number of indigenous medical device manufacturersis less. Thus, good
incentives, trained personnel, and more friendly regulations are anticipatedto change this scenario
in the long run. The SMEs in the Indian medical devices industry should focus on technologies that
reduce the burden of increasing healthcare costs, focus on R&D and build a strong management
team. They should understand the needs and collaborate with all the healthcare stakeholders such
asproviders (hospitals), payers (insurance companies), regulator (the government) and end-users
(patients).
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