After witnessing a growth erosion for the past two years due to several regulatory restrictions, the hospital sector seems to be on the path to recovery.
The sector’s revenue is likely to grow in the range of 8-10 per cent in short-to-medium term, supported by a higher number of patients and better pricing, said an Icra report. The report gave a stable outlook to the sector.
Significant bed additions in the last four years, and their ramp-up is expected to show marked results, it said.
Further, the sector is expected to benefit from an increase in the disease burden, higher incidents of lifestyle diseases, and an ageing demographic profile.
Implementation of the goods and services tax (GST), the cap on prices of stents, knee implants by the National Pharmaceutical Pricing Authority, and stiff regulatory action by certain states, including putting restrictions on procedure rates, levying penalties and placing operational limitations on erring hospitals had hurt the profitability of the sector.
Ayushman Bharat, the government's healthcare plan, is also likely to fuel the mandatory and discretionary healthcare spending in the country as the plan boosts the spending power of the patients, added the report.
In the second quarter of FY19, the companies in Icra's sample set had reported a 7 per cent drop in earnings before interest, tax, depreciation and amortisation (Ebitda), from Rs 5.56 billion in Q2 FY18 to Rs 5.16 billion. It also saw a drop in operating margin from 15 per cent to 13.3 per cent during this period.
The aggregate revenue grew by a subdued 5 per cent from Rs 37.07 billion in Q2 FY18 to Rs 38.89 billion. Shubham Jain, group head and vice-president, Icra had said the aggregate number of operational beds has gone up 4 per cent, from 20,665 beds in Q2 FY18 to 21,551 beds in Q2 FY19.