Private hospitals to be largest beneficiary of growing healthcare spend

May garner 65-70% of spending pie; Indian healthcare growth momentum likely to continue in FY23 as occupancy improves and average revenue per occupied bed remains steady

As overall healthcare spending is expected to grow at 16-18 percent CAGR, driven by improving affordability and increasing incidence of non-communicable diseases, private hospital players are expected to be the largest beneficiary with 65-70 percent share of the healthcare spend. Analysts at Prabhudas Lilladher (PL) have pointed out in a recent report on the Indian healthcare industry that they expect that the growth momentum will continue in FY23 with improvement in occupancy and sustainability of the average revenue per occupied bed (ARPOB). The analysts said that for the listed hospitals under their coverage they expect 48 percent Ebitda CAGR over FY21 to FY24 (estimates).

Beyond 2023 hospitals would be more focused on growth as they are now adding capacities, largely through brownfield expansion, scaling up other ancillary businesses. “Hospital companies are scaling up ancillary businesses like third party diagnostics, retail pharmacy and digital business for future growth. Scaling up of ancillary businesses and potential spin-offs could be a value unlocking opportunity,” said PL analysts Param Desai and Akshaya Shinde. Ancillary businesses could contribute anything between 5-27 percent to total Ebitda in FY24.

The analysts go on to add that Apollo Hospitals is expected to generate around 28 percent of Ebitda from the non-hospital segment in FY24 – from pharmacy and retail health. Fortis, on the other hand, owns 57 percent stake in SRL, one of the top 3 diagnostic chains in India. Even Max Healthcare’s non captive business Max Labs and Max Homecare witnessed strong traction during Covid-19.