Corporate hospitals chart out plans for expansion via brownfield route

With the pandemic showing signs of abating and the macro healthcare growth outlook expected to be intact, corporate hospitals, both listed and unlisted, are busy charting out expansion plans, primarily through the brownfield route.

Most hospitals have plans to add beds in their facilities, while also  taking over and refurbishing existing sites in key geographies. Some hospitals are also looking out for operate-and-manage (O&M) contracts in smaller towns and cities.

Param Desai, analyst with Prabhudas Liladher, says that the existing capacities can at best take care of the demand for the next one to one-and-a-half years. “Hospitals are thus embarking on expansion plans, mostly brownfield, and adding beds in existing locations to address the demand over a five to six-year horizon,” says Desai, adding that the overall healthcare growth story and the macro indicators are intact.

Health spends are expected to grow at 16-18 per cent CAGR, driven by improved affordability and increasing incidence of non-communicable diseases, notes a recent Prabhudas Liladher report

Alok Roy, chairman and managing director of the Medica Group of Hospitals in eastern India, says that the group has already hit 80 per cent occupancy across its network of five hospitals. “We are now adding beds at existing facilities, going for brownfield sites as well as looking for O&M opportunities in smaller towns and cities in eastern India,” he says.

Medica is adding around 500 beds to the 1100 beds it has right now. The plan is to invest around Rs 150 crore to add beds at existing facilities in Ranchi, Kolkata, Siliguri, and around Rs 300 crore to set up brownfield hospitals in Raipur, Guwahati and Bhubaneswar. “Through brownfield expansion and the O&M route we will add another five hospitals over the next few years,” says Roy. 

Listed corporate hospitals are also chalking out major expansion plans. 

Max Healthcare spokesperson said that they plan to add more than 4000 beds to its network, of which around 2800 beds would come onstream in the next five years. "This capacity augmentation will be through a prudent mix of brownfield, asset light and opportunistic greenfield modes. As part of brownfield expansion, we are adding beds to our existing facilities in Saket, Shalimar Bagh, Mohali and Mumbai that have been witnessing high occupancy levels for the last few years," the spokesperson added. Max has also acquired a company having the rights to aid development of and provide services to an upcoming hospital in Patparganj, East Delhi where Max Healthcare’s existing facility is unable to serve the demand owing to very high (over 81%) occupancies. The company has phased out the expansion plan based on their expectations of the increasing demand in each micro-market. 

Fortis Healthcare, too, plans to spend around Rs 350 crore this fiscal for growth and replacement capex. Ashutosh Raghuvanshi, managing director and CEO of Fortis Healthcare, says that the company is on track with its expansion plans in Shalimar Bagh, Faridabad, Kolkata main hospital and Mulund in Mumbai.

“We are planning to commission a project in Greater Noida sometime in the next fiscal. We will also keep looking for acquisitions or brownfield projects if they come within our strategic geographies,” Raghuvanshi adds.

Max too is looking for potential acquisition targets. "We are consistently looking for value accretive opportunities to not only strengthen our presence in the existing geographies but also expand into other tier 1 and 2 cities. To bring that into effect, we keep evaluating potential acquisition targets as well as asset light expansion opportunities through long term management contracts/service agreements on “built to suit” hospitals," the spokesperson says. 

The focus on brownfield expansion and sprucing up existing hospitals is because this requires less investment.

Azad Moopen, chairman and managing director of Aster DM Healthcare, explains, “The strategy is to reduce overall investments. Brownfield expansion may cost Rs 15-20 lakh per bed, whereas in a new hospital, depending on the land price, it can vary from Rs 80 lakh to Rs 1 crore.”

Some corporate hospitals like Manipal Hospitals, however, are going for greenfield projects too.

Manipal Hospitals, which operates around 7000 beds across its network, is adding another 1000 beds over the next two to two-and-a-half years, of which about 750 beds are at greenfield locations. 

Dilip Jose, MD and CEO, elaborates, “Our 250-bed greenfield hospital in Pune will come up this June, and we are adding two more greenfield hospitals (250 bed each) in Bangalore, which will be operational by 2024.”

The hospital is also adding around 250 beds at Whitefield, Bangalore, Vijayawada and Jaipur. “Brownfield expansion is for locations where the hospitals already have high occupancy. Greenfield expansion is targeted at entering new markets,” Jose says.

Analysts feel that hospitals like Apollo will look for acquisitions in markets like NCR and Mumbai where it has a limited presence, while it could also add 1000-2000 beds through brownfield expansion.

Hospitals expect patient footfalls to increase in the coming years, and medical tourism would add to the volumes. 

"We expect the patient footfalls to further increase once the international medical tourism returns and grows beyond pre-covid levels. Also with increasing connectivity the upcountry demand is expected to add to the footfalls," Max spokesperson added.