 "Fresh capex to boost hospital bed expansion by 35-40% in 3-5 years")
Buoyed by growing demand for healthcare, especially in the post-pandemic era, corporate hospitals are likely to expand bed capacity by 35–40 per cent over the next 3–5 years, a report by CareEdge Ratings said.
The analysis is based on FY24 levels for the top nine multi-specialty listed hospital chains.
Moreover, corporate hospital chains are projected to achieve 10–12 per cent year-on-year sales growth in FY26, driven by a 5–6 per cent rise in average revenue per occupied bed (ARPOB), a 100–200 basis point increase in occupancy, and expanded bed capacity through new additions.
“Future growth will be driven mainly by volume expansion and bed additions. Operating margins are expected to remain in the 18–19 per cent range, even with the influx of new supply, as factors like increased insurance coverage, international patients, and a diversified clinical mix will help sustain margins despite the added overhead from new facilities. Although additional debt will be taken on to fund expansion and capital expenditure, CareEdge Ratings expects net leverage (net debt to Ebitda) to remain around one fold by the mid term,” said Ravleen Sethi, director, CareEdge Ratings.
Post-COVID-19, the healthcare sector has undergone major structural shifts, including heightened health awareness, expanded insurance coverage, and increased demand for elective surgeries, the report said. Rising costs have driven improved profitability and return on capital employed (RoCE), with reinvested cash flows fuelling capacity expansion and long-term growth.
After a consolidation phase from FY17 to FY24, hospitals are shifting focus to expansion, emphasising brownfield projects and operation and maintenance models to mitigate risks and enhance profitability.
In addition, with a growing demand–supply gap for quality beds and improved financial health post-pandemic, corporate hospitals are poised for profitable growth, strengthening core markets and expanding into Tier-II and Tier-III cities.
CareEdge highlighted that India's healthcare spending remains significantly lower than the global average and lags behind developing nations like Mexico, Brazil, Russia and Argentina.
Over the past decade, capital investment in healthcare has fluctuated between 2 per cent and 4 per cent. With vast untapped opportunities and infrastructure gaps, Indian healthcare companies have substantial potential for expansion.
Driven by long-term structural growth, PMJAY momentum, and increased government focus, India’s hospital sector is set to grow at a 10–11 per cent compound annual growth rate (CAGR) over the next 3–5 years. Key demand drivers include the rise in lifestyle-related diseases, growing medical tourism, increasing incomes and demographic changes.
The slow adoption of health insurance remains a major hurdle for India’s healthcare progress, especially for low-income groups. Despite coverage rising to 55 crore individuals in FY23, penetration remains low at 39 per cent, highlighting significant growth potential in the sector, according to the report.
India has become a top destination for medical tourism, driven by skilled professionals, advanced technology, and Joint Commission International (JCI)-accredited facilities, as cited by CareEdge. These factors position the country for sustained growth in the global healthcare market.