Private hospitals in India to add 10,000 beds by FY26: CRISIL Ratings

Private hospitals in India are set to expand their capacity by over 4,000 beds in the next financial year, with an investment of Rs 11,500 crore, followed by an addition of approximately 6,000 beds in FY25. Notably, the total bed expansion over these two years will match the number added between FY20 and FY24.

 

A recent analysis by CRISIL Ratings of 91 private hospitals, which collectively generated approximately Rs 64,000 crore in revenue last financial year, supports this finding.

 

Anuj Sethi, senior director, CRISIL Ratings, said, "With occupancy close to the peak of 65-70 per cent and continued demand for quality healthcare, private hospitals are investing approximately Rs 25,000 crore this financial year and the next, nearly 80 per cent higher than the average annual investment in the previous four financial years."

   

"Three-fourths of the capex will be funded through internal accruals. Additionally, healthy return metrics have attracted substantial investment of Rs 55,000-60,000 crore from private equity and equity markets since FY22," added Sethi.

 

Private hospitals dominate India's healthcare sector, contributing 63 per cent of the industry’s total revenue. Between FY20 and FY24, the segment experienced a robust compound annual growth rate (CAGR) of approximately 18 per cent in revenue, alongside a steady operating profitability of around 18 per cent. This sustained growth has bolstered cash flow, reinforcing the financial resilience of private healthcare providers.

 

Moreover, the country’s strong healthcare performance, coupled with its relatively low hospital bed capacity per capita compared with both developed and developing nations, has fuelled significant investment through private equity and initial public offerings (IPOs). This capital influx has fortified hospital balance sheets, allowing for ambitious expansion plans without significantly straining credit profiles.

 

Half of the new beds will come from greenfield expansions, 40 per cent from brownfield projects, and 10 per cent from acquisitions of under-construction or smaller hospitals. This reflects a significant investment and organic growth in healthcare infrastructure.

 

"The large proportion of greenfield expansion poses risks related to timely completion and ramp-up in occupancies. However, given that 70 per cent of these projects are in metropolitan/Tier-I cities, where hospitals reach optimal occupancy and breakeven in 12-15 months, the pressure on profitability and associated return metrics is likely to be limited," said Naren Kartic K, associate director, CRISIL Ratings.