Hospital sector profits dragged by GST, stiff regulatory action: Icra

The hospital sector has been witnessing deterioration since the beginning of 2017 because of several factors that have adversely affected its profitability, says an Icra report. These include the implementation of the goods and services tax, 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. The muted performance of the hospital sector continued in the second quarter of FY19. The companies in Icra’s sample set reported a 7 per cent drop in earnings before interest, tax, depreciation and amortisation, from Rs 5.56 billion in Q2 FY18 to Rs 5.16 billion in Q2 FY19, and 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 in Q2 FY19.