Healthy occupancies, ARPOB to drive double-digit growth for pvt hospitals

The expected revenue growth in FY25 comes on the back of an estimated 14% growth in the last financial year

Steady uptick in average revenue per occupied bed (ARPOB) and healthy occupancy levels on enhanced capacities will increase revenues of Indian private hospital companies by 11 to 12 per cent in financial year 2025, according to ratings agency Crisil.

The expected revenue growth in FY25 comes on the back of an estimated 14 per cent growth in the last financial year.

Crisil's analysis is based on a study of the 89 hospital companies in its sample set, having a combined revenue of Rs 46,700 crore.

Speaking on the reasons behind steady ARPOB, Anuj Sethi, senior director at Crisil Ratings, said that ARPOB rise supported by a higher share of specialised surgeries and pass-on inflation-linked costs.

 

“The ARPOB per day will rise to around Rs 38,000 in FY25, from Rs 36,000 recorded in the last financial year,” he added.

“Healthy demand for healthcare services, including increased awareness of lifestyle treatments, rising medical tourism, and increasing health coverage will ensure bed occupancy is sustained at 60 to 62 per cent,” the agency said.

The ratings agency added that other reasons contributing to increased revenue will rise in medical tourism and rising insurance coverage.

Medical tourists are expected to surpass pre-pandemic highs of around 7 million this calendar year, due to lower treatment costs, world-class facilities, and skilled personnel.

“The influx will primarily be from Southeast Asia and the Middle East, who comprise around 80 per cent of India’s overall medical tourist arrivals,” the agency said.

The total gross health insurance premiums have continued to grow at over 20 per cent in the past two financial years, making quality treatment more accessible. “Besides increasing instances of lifestyle diseases, the rising share of the ageing population means demand for healthcare services will keep growing,” Crisil said.

The ratings agency has predicted that in response to this demand, hospital chains will add 2,000-2,500 beds in FY25, following an estimated addition of 2,000 beds in FY24.

Crisil’s outlook also suggests that operating profitability for the companies in its dataset is likely to sustain at a healthy 16 to 17 per cent in FY25, with better operating leverage offsetting a ramp-up in cost associated with newer capacities.

“This will ensure cash generation remains strong and reliance on external debt is limited even as capital expenditure remains sizable,” the agency added.

ARPOB Progression for private hospitals

FY	ARPOB per day (in Rs)
2021-22	31,000
2022-23	33,300
2023-24E	36,000
2024-25P	38,000

*Source: Crisil Study

ARPOB: average revenue per occupied bed

E: Estimates

P: Projection