India’s listed hospital sector is entering a new expansion phase, driven by strong structural demand drivers, believes Equirus Securities. However, the shift toward greenfield capacity additions could create near-term pressure on margins for some operators.
Meanwhile, analysts reckon that the sector delivered a 15.5 per cent revenue compound annual growth rate (CAGR) and a 25 per cent Earnings before interest, tax, depreciation and amortisation (Ebitda) CAGR between FY20 and FY25, with margins expanding by 780 basis points (bps), despite the addition of around 14,000 beds during the period.
The improvement was largely aided by a higher share of brownfield expansions and inorganic acquisitions, which ramp up faster, require lower capital, and have limited margin dilution.
Next capacity cycle to be much larger
The upcoming growth cycle is expected to be significantly bigger, with 23,039 beds slated for addition over the next three to four years, nearly 2.4 times the previous cycle. However, unlike the last phase, greenfield projects now account for the bulk of planned additions, changing the operating dynamics for hospital operators.
The brokerage noted companies with a higher mix of brownfield expansion or a balanced mix of greenfield and brownfield projects are likely to grow faster and defend margins better in the near to medium term. In contrast, operators with a heavier greenfield pipeline may face margin drag as new projects take longer to stabilise.
Strong demand tailwinds remain intact
The sector continues to benefit from a range of long-term tailwinds, including a rising burden of lifestyle diseases, an ageing population, growing health insurance penetration, and the recent revision in CGHS tariffs.
These factors are expected to support a sector revenue CAGR of 18–20 per cent over the next three to four years. Analysts noted that revenue growth will continue to be driven by strong inpatient demand, annual price hikes, improving case mix, and a shift in payor profile toward insurance and TPA-led payments.
Last five years reshaped the sector
India’s listed hospital universe, comprising 13 tracked companies, reported revenue of around ₹49,200 crore in FY25, clocking a 15.5 per cent CAGR over FY20–25. Growth was broad-based, with 12 out of 13 companies posting double-digit growth.
This was supported by strong momentum in inpatient volumes, annual growth in average revenue per occupied bed (ARPOB), and around 9,400 bed additions during the period, while occupancy levels remained steady at around 60 per cent.
Margin path varies across players
While the growth outlook remains robust, margin performance is expected to vary across operators depending on their expansion mix. Sector margins are projected to remain in the 22–25 per cent range through FY26–FY27, as greenfield ramp-up costs and tighter clinician and nursing supply weigh on profitability.
Margins are expected to recover and expand to 25–27 per cent by FY29 as new beds mature and utilisation improves.
Analysts believe brownfield- and acquisition-heavy operators will see an earlier recovery in return ratios, while greenfield-heavy players may face a temporary dip before margins improve. Disclaimer: The views and investment tips expressed by the analysts/brokerage are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.
