Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Table 19: Target population
Brackets A–E, Urban, Unattended
births in next 10 years, mm
Population
Africa 18
Asia 68
Eastern Europe 7
Latin America 20
Total 113
Source: WRI
Considering the landscape of healthcare provision, we focus on the population that is
not currently utilizing healthcare services (whether provided by government or
private sector). According to the World Health Organization, which publishes data
tracking countries’ progress on the Millennium Development Goals, only 43% of
births in low-income households are attended by skilled health personnel 73 . Given
this data, we have chosen to calculate the size of our target market by considering the
births that will occur within the next 10 years 74 and be unattended by a skilled
professional. Across regions, this gives us 113 million births over the next 10 years,
broken down by region as shown in Table 19. Applying the penetration rate –
LifeSpring has obtained a 43% market share, which we haircut to 40% for the
transferability assumption described above – the target market is then 45 million
births. Our haircut is less dramatic in this sector since we’ve already limited our
target population to those who will not be expected to employ government services.
In practice, the private sector hospitals may attract some customers that could
otherwise have used government services.
Revenues, margins, capital and profit
Now that we have identified our target market, we can estimate revenues by applying
the costs of each of those deliveries. The price ranges from INR 2,000 (about $40)
for a normal delivery in a general ward to INR 14,000 (about $300) for a Caesarian
delivery in a private room. Multiplying these prices by the number of deliveries over
the 10 year period gives us an estimated revenue opportunity of $2–$14bn. Factoring
in a profit margin between 5% and 10% 75 we calculate a potential profit opportunity
of $0.1–$1.4bn. Based on revenues in year 10, we conclude that potentially $0.4–
$2.5bn of impact investment capital could be allocated to fund hospitals that deliver
maternal health care over the next 10 years.
Case studies
Gyan Shala (India)
Analysis of Private Budget Schools
in Hyderabad City, India
by S Joshi, Gray Matters Capital
Ancillary model:
Indian School Finance Company,
(established by Gray Ghost
Ventures)
Education
As young children grow to school-age, they ideally are able to access quality schools
close to home, an opportunity we explore in this section. While the UN Millennium
Development Goal of universal primary education has spurred government activity in
extending primary education to all income levels, there remain areas in which
affordable private schools are supplying services that meet with high demand from
parents who are willing to pay. In the Dominican Republic, research concludes that
parents’ demand for private education is driven by lack of access to public
(government) schools and by a preference for private schooling when the public
education is perceived to be low quality 76 . In India, one study finds that 73% of
families in slum areas send their children to private school, and that many parents
believe the quality of these affordable private schools is higher than that provided by
the government (if any local alternative is provided) 77 . Similarly, urban schools in
73 Where low income is as defined by the World Bank: 2009 GNI per capita of $995 or less.
The percentage of births attended by skilled health personnel is calculated as a fraction of the
total number of live births in the defined population.
74 Using current crude birth rates from the CIA World FactBook (country by country).
75 We do not have explicit profit margin data from LifeSpring, though we know it is profitable
(i.e. more than breaking even). R-Jolad, which operates a similar high volume hospital model,
delivers high single-figure net margins, according to the IFC report.
76 The Private and Public School, G Murray cited in Affordable Private School Initiative
Research in Latin America, I Faulhaber, Gray Matters Capital Foundation, 2008.
77 Private Schools for the Poor: Development, Provision, and Choice in India, R Baird, May
2009.
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