Driven by healthy occupancy, ongoing bed additions and faster ramp-up of new facilities, the revenues of private hospitals in the country is expected to grow at about 15% in FY27, as per ratings agency CRISIL. This will be the fifth consecutive year of double-digit revenue growth for this segment. Despite the hefty investments in expansion, the operating margins of the hospital chains are likely to sustain at 20-21% on the back of healthy demand, the ratings agency noted.
Crisil said that the key performance metric of the segment – average revenue per occupied bed (ARPOB) – is expected to jump 5-7% to Rs 52,200 in FY27, largely due to the increasing share of complex, high-value treatments across key specialties such as cardiology, oncology, neurology, gastroenterology and orthopaedics, and an improving share of insurance patients.
High-Value Specialties
“The share of key specialties has increased to about 62% in FY25 from 59% prior to the pandemic, reflecting a rise in incidents of complex, high value treatments which has supported ARPOB improvement. Further, the recent central government health scheme (CGHS) rate revision is expected to improve procedure viability for hospitals and be favourable for patients by reducing their out-of-pocket costs. the GST exemption on health insurance premiums for individuals and families should support insurance uptake, enabling more hospitalisation,” said Anuj Sethi, senior director at Crisil Ratings.
It’s estimated that the bed occupancy will remain at 65% in FY27, despite rapid expansion by the hospital companies. Over the past few years, the chains are expanding their presence through a mix of brownfield additions, greenfield projects and acquisition of operating assets.
Prudent Expansion
“Alongside this shift in expansion strategy, large private hospital players have undertaken acquisitions worth Rs 11,000 crore over FY24-FY26, adding 4,300 beds. Importantly, these deals have been funded through a prudent mix of internal accruals, equity and moderate external borrowing, helping contain balance sheet risks,” the agency said.
“Organic bed additions are set to scale up with over 10,000 beds becoming operational over this fiscal and next. Expansion remains focused on metros, high-ARPOB clusters, and select tier-2 cities, where higher-value treatments remain under-penetrated due to limited access to advanced infrastructure and specialists,” said Poonam Upadhyay, director at Crisil Ratings.