With our focus on delivering impact at scale, over the past three years Arisaig has invested in a range of companies whose products and services contribute to people’s improved health and wellbeing. At last count, these reach over 300m people annually[1], which is an increase of 39% since 2022. We estimate that nearly 40%[2] of those reached are underserved, which is defined as groups that are at a disadvantage when accessing such products and services, such as low-income households, rural populations and residents in lower tier cities.
This focus on impact at scale means we are naturally drawn to business models that have a cost advantage or a technological or distribution moat that allows them to ensure that earnings growth is driven by a growing market, not by short term price rises. Emerging markets are perfect places to deliver impact at scale, home to 85%[3] of the world’s population, with India’s 1.3bn people an obvious focus for a strategy like ours.
A perfect example of businesses that can deliver positive health impact at scale in India are diagnostic businesses. The ability to provide accurate diagnostic testing and figuring out exactly what is going on improves patient outcomes. A business that builds out testing capability around an expensive machine parked in the middle of a large Indian city of 100’s of millions of people, and is committed to a business strategy that passes on cost savings from doing more tests to the customer, creates a virtuous circle where the patient and company benefit from growth. This is basically applying the “EveryDayLowPrice” model that Walmart made famous in scaling its retail operations to a far more important outcome than buying more stuff. We have also previously written about an Indian pharmacy chain’s similar focus on delivering value to improve accessibility and affordability of medicines across India .
And whilst scaling medical testing or medical supplies is a natural place to look for healthcare solutions in India, our team in India were highlighting some other important business models that we might take for granted in developed markets. In India, piped fresh water is sadly not a given. It is estimated that 91m people in the country lack access to safe water and around 229 million lack access to improved sanitation[4]. Both lead to water borne diseases, which are a significant health issue in India. Inadequate access to safe water contributes to c.200,000 deaths in India per annum[5] and tragically there is a strong correlation between deaths in children with lack of proper sanitation – an estimated 55,000 children under five died of diarrheal diseases in India in 2019[6].
Many incredibly important NGOs are addressing this and indeed Arisaig’s own Foundation has supported a range of meaningful WASH projects in India. As an investment firm, our goal was to find a business that can improve healthcare outcomes from supporting improved sanitation in India AND make financial returns for our clients in the process. The answer lies in a business such as Astral. This is one of the leading manufacturers of plastic pipes in India. The first company in the country to launch CPVC and lead-free pipes, the future of this business is built on helping to deliver safe water to households with high quality corrosion-resistant pipes and water storage tanks with anti-viral copper shields. In addition to being more hygienic than metal pipes, the high quality of Astral’s plastic pipes reduces the risk of leakages, which will matter more as India’s cities become increasingly water stressed. According to the UNESCO, India’s cities are projected to be the most severely affected by water stress by 2050[7]. Water pipes are certainly not sexy but are a critical part of India’s urbanization story in making sure that safe water provision and sanitation can be secured as part of this future.
Without our team on the ground in India, who identify and verify these business models and project the financial outcomes and impact potential, we would not be able to step beyond GICS classification of healthcare to think more holistically about how impact can be delivered. In terms of local insights, a key learning has been that pipes actually matter to developers constructing the 130 million homes required over the next 20 years[8]. Whilst branding pipes like Nike is a bit of a stretch, brands do matter, especially in India where the validation of quality is so much more important. Getting it wrong – installing a cheaper brand that fails – is expensive, hence players like Astral that focus on quality and reliability have stolen a march in a fragmented industry dominated by informal players.
Of course, there are other much more cutting-edge solutions to addressing WASH challenges in India but perhaps few that currently can have impact at such scales as Astral. We welcome the work of impact investors in the private space investing in a range of earlier stage sanitation business models and technologies. As patient, engaged, public equities impact investors, our role is to ‘pick up the baton’ from these private investors when they seek to exit through the public markets. In doing so, we give asset owners the opportunity to make impactful investments beyond the niche private investment component of their portfolios[9]. Meeting the USD 2.5 trillion[10] financing shortfall for the SDGs demands that such action is taken.
Sources
[1] Based primarily on data from holding companies’ most recent full year results available as of 31 Mar 2023 but may include Arisaig estimates where data are not available. Figures are not adjusted to reflect the size of investment. Not all metrics available for/relevant to all holdings within the theme. Best efforts made to avoid double-counting (i.e., where an individual is a customer of more than one holding).
[2] Estimates based on Arisaig’s impact assessments of companies using our proprietary impact measurement and management framework.
[3] https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp020416
[4] https://water.org/our-impact/where-we-work/india/#:~:text=India’s%20water%20and%20sanitation%20crisis,safely%20managed%20household%20sanitation%20facilities.
[5] https://www.financialexpress.com/lifestyle/science/indias-water-crisis-is-there-a-solution/2089860/
[6] https://ourworldindata.org/childhood-diarrheal-diseases
[7] UN World Water Development Report 2023
[8] Arisaig estimate based on rise in population by c.200mn to 1.6bn (www.populationpyramid.net/india/2040/) and continuing decline in number of people per household (globaldatalab.org/areadata/table/hhsize/IND/)
[9] Public markets were estimated to be ten times the size of private markets in 2020, https://www.cnbc.com/2020/11/12/global-stock-market-valuerises-to-a-record-95-trillion-this-week-on-vaccine-hope.html
[10] UNCTAD World Investment Report, 2014
