Pvt hospitals projected to add 30,000 beds over next 5 yrs: ICRA

Rating agency ICRA projected a stable outlook for the Indian hospital industry in its report on the industry trends and outlook for the financial year 2024. The projection indicated a rise in capacity building and occupancy, translating into a year-on-year (Y-o-Y) revenue growth to the tune of 12 to 14 per cent in FY24 for its sample set of companies as opposed to 17 per cent in FY23.

Speaking on the rise in the trend of capacity building by private hospitals, Mythri Macherla, Assistant Vice President and Sector Head, ICRA, said that the broader industry has announced significant bed additions. Overall, most private players (including ICRA’s sample set companies) are expected to add over 30,000 beds in the next four to five years at an investment of around Rs 32,500 crore.

 

YoY Revenue Growth and OPM for ICRA's sample set of companies*

FY	Revenue Growth (%)	OPM (%)
FY 2020	21%	16%
FY 2021	-11%	14%
FY 2022	45%	21%
FY 2023	17%	23%
H1FY2023	14%	23%
FY 2024P	12-14%	22-23%
FY 2025P	9-11%	21-22%

Note: P: Projections
OPM: Operating Profit Margin
* Aggregate of ICRA sample set comprising hospital business of nine listed companies
Source: ICRA Research, Company data

The agency projects the aggregate occupancy for its sample set of companies to remain healthy at 64 to 65 per cent in FY24, similar to 65 per cent in FY23 and 66 per cent in H1FY24. However, the report expects occupancy to slightly moderate at 61 to 63 per cent in FY25 following significant bed additions.

Trend in bed additions for ICRA sample set companies*

FY	No. of Beds added
FY 2020	732
FY 2021	1554#
FY 2022	545
FY 2023	1043
H1FY2024	703
FY 2024P	1,500+
FY 2025P	3,400+

Note: P: Projection
* Aggregate of ICRA sample set comprising hospital business of nine listed companies
# includes 900 incremental beds after Max healthcare's merger with Radiant
Source: ICRA Research, Company data
 

The report states that given the strong operating metrics and demand outlook in India, industry players have announced sizable capital expenditure plans for the next four to five years. Cumulatively, ICRA’s sample set companies are expected to add around 3,900 beds over FY24 and FY25, translating to 15 per cent of their existing bed capacity. According to the study, the healthy rate of occupancy is backed by sustained healthy demand for healthcare services, continued market share gains for organised players, and revival in medical tourism post the pandemic.
 

Trend in ARPOB and YoY growth rate*

FY	ARPOB (in Rs)	YoY Growth
FY 2020	34,277	6%
FY 2021	36,235	6%
FY 2022	41,739	15%
FY 2023	45,814	10%
H1FY2024	49,836	11%
FY 2024P	49,708	8-10%
FY 2025P	52,193	4-6%

Note: P: Projection
ARPOB: Average Revenue Per Occupied Bed
*Aggregate of ICRA sample set comprising hospital business of nine listed companies
Source: ICRA Research, Company Data

 

The average revenue per occupied bed (ARPOB) is expected to witness a healthy growth of 8 to 10 per cent in FY24, aided by improving speciality and case mix, better payor mix (with higher contribution of cash and insurance patients), and annual price revisions by companies to offset cost inflation. Given the high base of FY2024 and commencement of operations at various new hospitals, ICRA expects ARPOB growth to moderate to 4 to 6 per cent in FY25.

The report states that improving operating leverage coupled with cost optimisation and digitisation measures are expected to support a healthy operating profit margin (OPM) of around 22 to 23 per cent for these companies in FY2024, similar to the 23 per cent OPM recorded in FY23. 

Annual trend in operating beds and occupancy*

FY	No. of operating beds	Occupancy
FY 2020	29,178	60%
FY 2021	30,732	52%
FY 2022	31,277	60%
FY 2023	32,320	65%
H1FY2024	32,582	66%
FY 2024P	33,911	64-66%
FY 2025P	37,330	61-63%

Note: P: Projection
* Aggregate of ICRA sample set comprising hospital business of nine listed companies
Source: ICRA Research, Company Data