While the healthcare sector in India will continue to secure investments in 2012, the rate of expansion will be slower on account of the "wide gap" between demand and supply, global ratings agency Fitch has said.
"India's healthcare sector will continue to witness investments in 2012 but at a slow pace, driven by a wide gap between the demand for, and supply of, healthcare services," Fitch Ratings said in its annual report '2012 Outlook: India Health Care'.
It further said: "This (slow growth) is due to below-par healthcare infrastructure, especially in Tier II and Tier III cities, increasing lifestyle-related health problems, changing demographics, rising disposable income and insurance penetration, and increasing government support and medical tourism."
The report said that as more hospital beds become operational in 2012, revenue of firms will grow.
It, however, warned that profitability margins may remain subdued due to a rise in operational costs such as manpower costs due to a shortage of doctors and medical staff.
"High cost of funds may lead to a slowdown in investments in 2012 and also affect the credit profiles of small players, especially the ones which have carried out debt-led expansion in the past one or two years and are yet to reach meaningful occupancy levels," Fitch said.
According to the report, high competition and expensive real estate in the big cities will drive the expansion plans of the healthcare companies in the Tier II and Tier III cities, where lack of healthcare services, cheaper real estate and lesser competition will be the main growth drivers.
"The sector will continue to offer investment opportunities in increasing bed capacity, ancillary industries like medical technologies and diagnostics in Tier II and Tier III cities, while specialty services like cardiology, neurology, joint replacements etc, are likely to attract most of the investments in bigger cities," the report said.