The revenue of private hospitals is seen growing at a healthy 11-12 per cent in FY25 after an estimated 14 per cent growth in FY24. Good occupancy levels on enhanced capacities and steady uptick in average revenue per occupied bed (ARPOB) will be the tailwinds expected to drive this growth. Interestingly, the rising share of medical tourism and increasing health insurance coverage is expected to drive this growth further, contributing to better bed-utilisation and ARPOBs of private hospitals in the country. These findings were revealed in a recent report by CRISIL.
The report states that operating profitability of private hospitals is likely to sustain at a healthy 16-17 per cent in FY25 with better operating leverage offsetting a ramp-up in cost associated with newer capacities. This will ensure that cash generation remains strong and reliance on external debt is limited even as capex spends remain sizeable. That, in turn, will keep credit profiles stable.
CRISIL analysed 89 companies that account for two-thirds of the revenue of large private hospitals and a combined revenue of Rs 46,700 crore. “Healthy demand for healthcare services, including due to increased awareness of lifestyle treatments, rising medical tourism and increasing health coverage will ensure bed occupancy is sustained at 60-62 per cent even on significantly enhanced capacities in FY25. In addition, ARPOB, which is estimated to have grown 8 per cent to ~Rs 36,000 in FY24, will rise to Rs 38,000 in FY25 supported by higher share of specialised surgeries and pass on of inflation linked costs. These factors should spawn double-digit revenue growth for private sector hospitals this fiscal,” observed Anuj Sethi, Senior Director, CRISIL Ratings.
The reports highlights that medical tourism, which accounts for 10-12 of revenue of some private hospitals is expected to grow at almost twice the overall rate in the near to medium term. Lower treatment costs, world-class facilities and skilled personnel will drive the inflow of medical tourists, particularly from south-east Asia and Middle East. They comprise 80 per cent of India’s overall medical tourist arrivals. Medical tourists are expected to surpass pre-pandemic highs of 70 lakh this calendar year.
As per the CRISIL report the rising insurance coverage — total gross health insurance premiums continued to grow at over 20 percent in the past two fiscals which in turn is making quality treatment more accessible. Besides increasing instances of lifestyle diseases, rising share of ageing population means demand for healthcare services will keep growing.
The report highlights that 60 per cent of the bed additions are planned in Metros and Tier-I cities of recognized medical tourism hubs of northern and southern India. Key reasons driving this trend are well-established infrastructure, availability of doctors and nurses, higher paying capacity of patients, and good connectivity.
As per experts from CRISIL, higher revenue and operating margin will ensure strong cash accrual, which will help fund more than 65 per cent of the total planned capital expenditure of private hospitals.
