Healthtech Hasn’t Scaled Yet — But the Next Wave Could Be Bigger Than Hospitals, Says Somerset Indus’ Ramesh Kannan

As Somerset Indus Capital Partners closes its third fund, Partner Ramesh Kannan explains why India’s healthcare investment story is just getting started — and why healthtech’s biggest problem isn’t innovation, but payments.

India’s healthcare investment scene is heating up, but one of its most active players, Somerset Indus Capital Partners, believes the sector is still far from its full potential — especially in healthtech. With its third fund nearing completion, the Mumbai-based private equity firm is doubling down on affordability, access, and the next phase of medtech and digital transformation.

Founded over a decade ago, Somerset Indus has built a reputation for backing healthcare entrepreneurs who serve underserved markets. The firm has invested in 15 companies across hospitals, diagnostics, pharmaceuticals, and life sciences — managing over $500 million in assets. Fund III, expected to exceed its $250 million target, has attracted commitments from development finance institutions in Europe and the U.S., along with global impact investors and domestic banks.

“Our goal remains the same — improving access and affordability,” says Ramesh Kannan, Partner at Somerset Indus. “We look for founders who combine innovation with execution in Tier II and III cities.”

Why Healthtech Still Struggles to Scale

Despite a surge of digital health startups in recent years, Kannan says healthtech hasn’t scaled because the economics remain unclear. “In traditional healthcare, you know who pays — the patient, insurer, or government. In healthtech, that’s not always obvious,” he explains.

In many outpatient settings, hospitals might pay for screening or equipment, hoping to recover costs later if a diagnosis leads to more treatment. Meanwhile, inpatient adoption is slowed by rigid insurance and reimbursement frameworks. “Unless the technology clearly reduces costs or improves outcomes, hospitals hesitate,” Kannan adds.

Investment Trends: Specialization and Scale

Somerset’s current fund is focusing on specialized care models, particularly single-specialty hospitals in oncology, nephrology, IVF, mother-and-child, and orthopedics. “There’s a lot of traction in oncology-focused setups and diagnostic consolidation,” says Kannan. Many standalone diagnostic centres now seek mergers to achieve scale and efficiency.

Somerset’s track record includes Krsnaa Diagnostics—one of India’s largest affordable diagnostics networks—and Ujala Cygnus Hospitals, which has expanded low-cost tertiary care across northern India. The firm also recently exited Apex Hospitals in Rajasthan with a 4x return, after helping the company launch telehealth and E-ICU services.

Medtech, Manufacturing, and ‘Make in India’ Momentum

Another key growth driver, Kannan says, is medtech manufacturing. “India still imports most of its medical equipment,” he notes. “That’s changing with the government’s Production Linked Incentive (PLI) scheme and clusters like AMTZ in Vizag.”

In the past three to four years, domestic manufacturing of CT, MRI, ultrasound, and X-ray equipment has begun gaining traction. Startups like SSI Mantra are even challenging global players in surgical robotics. “It’s early, but the direction is positive,” he adds.

Healthcare at Home: A New Frontier

Beyond hospitals and manufacturing, home care and geriatric care are emerging investment hotspots. “Urban consumers are willing to pay for at-home services, much like food delivery,” Kannan observes. Geriatric care is taking two paths — senior living facilities bundled with healthcare, and clinical services embedded in residential setups. “Both are seeing traction, especially in metros,” he says.

Consolidation: The New Normal

Across the sector, consolidation is accelerating. “Instead of building new hospitals from scratch, many players are acquiring brownfield facilities or leasing trust hospitals,” Kannan explains. “Global players want scale in India, while local ones are expanding in Tier II cities.”

AI and Diagnostics: Promise Meets Friction

While artificial intelligence is gaining ground in diagnostics and treatment support, Kannan believes it’s still early days. “AI won’t replace doctors, but it can enhance productivity and accuracy,” he says. “The challenge is clean, interoperable data.”

Today, diagnostic data often stays siloed. “A test done at one centre isn’t easily shared elsewhere, leading to duplication,” Kannan adds. Until interoperability improves, efficiency will remain limited.

Financing Innovation: From Loans to Crowdfunding

Healthcare financing is evolving too. NBFCs now help hospitals by discounting receivables, while patients increasingly access loans and EMI options for surgeries. Crowdfunding for high-cost procedures is also growing. Meanwhile, CSR and public-private partnerships are playing larger roles in preventive care and community health access.

From Doctors to Operators: A Shift in the System

The dynamics between doctors and hospitals are also shifting. Once mostly consultants, doctors now work full-time at hospitals, with compensation tied to performance. “It’s improving stability and reducing churn,” Kannan explains. Some doctors are even moving into hospital management or COO roles. “India’s entrepreneurial spirit supports this,” he adds.

Looking Beyond Borders

Somerset is also eyeing opportunities beyond India through medical tourism and cross-border partnerships. “Many smaller countries want Indian expertise locally,” says Kannan. “We see potential to reduce outbound medical travel and build regional capacity.”

The Nutrition Opportunity

Kannan is also bullish on nutrition-focused health startups. “Protein, sports nutrition, and gender-specific nutrition linked to preventive care are all growing,” he says. “It’s a direct-to-consumer play, driven by digital platforms rather than hospitals.”

As Fund III nears close, Somerset plans to begin new investments in 2026 while exiting earlier positions. “We’re patient investors — we back founders who are adaptable and consistent,” Kannan says.

🧠 TechTribe-One Insight

India’s healthcare evolution offers a mirror for Africa’s growing healthtech ecosystem. The challenges — affordability, payment clarity, and data interoperability — are strikingly similar. As Africa’s medtech manufacturing and digital health infrastructure take shape, lessons from India’s model could shape a more scalable, inclusive healthcare future for the continent.