India’s quasi-SWF, the National Investment and Infrastructure Fund, has sprung a surprise with a new venture into healthcare.

The NIIF is reportedly in advanced discussions to acquire a minority share in Manipal Hospitals. In return, the fund will invest INR20 billion (US$273 million), which will help pay for the company’s INR21 billion purchase of Columbia Asia Hospitals, according to Moneycontrol. Manipal Hospitals is already backed by Singaporean state-owned investor Temasek, which acquired an 18% stake in 2017 for INR10 billion. The hospital operator is planning an IPO by 2024.

The NIIF has focused on transportation, energy and urban infrastructure, but the healthcare sector had not previously been highlighted as part of its core mandate and its interest in healthcare has been marginal. It invested INR1.25 billion (US$17 million) in the Somerset Indus Healthcare India Fund II, which is investing in SME companies in the Indian healthcare sector with target capital of US$80 million.

India’s healthcare sector is a fast-growing market with 80% controlled by the private sector. Rising household incomes are driving the private healthcare sector, although a significant amount of spending is from out-of-pocket expenditure rather than insurance.

State-owned investors have tended to invest in India’s thriving biotech and pharma sector with ADIA and Temasek the leading players in the sector. Yet, hospitals have not drawn the same level of interest, despite the huge market potential with the healthcare market set to exceed US$400 billion by the end of the decade – a four-fold increase from 2020.

Growth in private healthcare is being stimulated by the “Modicare” plan, named after Prime Minister Narendra Modi but officially known as the National Health Protection Mission (NHPM). With the aim of insuring 40% of India’s burgeoning population through state support, beneficiaries include those who were previously marginalized by the healthcare system, such as deprived members of Scheduled Castes and Scheduled Tribes. Modicare is set to boost private health provision in provincial cities, creating the basis for growth in hospital provision that SOIs are likely to capitalize on.