Indian private hospitals to add 10K beds by next fiscal, 6K added in FY25: Report

The report by Crisil Ratings, based on an analysis of 91 private hospitals, showed that this will be followed by 4,000 beds next fiscal, at an investment of Rs 11,500 crore. Together, the 10,000 beds will equal the number of beds added between fiscals 2020 and 2024.

"With occupancy close to the peak of 65-70 per cent and continued demand for quality healthcare, private hospitals are investing around Rs 25,000 crore this fiscal and the next, nearly 80 per cent higher than the average annual investment in the previous four fiscals," said Anuj Sethi, Senior Director, Crisil Ratings.

"Three-fourths of the capex will be funded through internal accruals. Plus, healthy return metrics have attracted a substantial investment of Rs 55,000-60,000 crore from private equity and equity markets since fiscal 2022," he added.

Currently, private hospitals account for about 63 per cent of the sectoral revenue in India. Between fiscals 2020-2024, private hospitals clocked a compound annual growth rate (CAGR) of about 18 per cent in revenue and healthy operating profitability of around 18 per cent, ensuring strong cash flow, the report said.

"Their strong performance and the relatively low bed capacity per person in India vis-a-vis developed and developing nations has spurred substantial investments through private equity and initial public offerings (IPOs). This has strengthened balance sheets and enabled hospitals to pursue ambitious bed additions without materially impacting their credit profiles," it added.

Further, half of the new beds will come from greenfield expansions, highlighting significant investment in new healthcare infrastructure. About 40 per cent will comprise brownfield development, focusing on modernising and optimising existing facilities.

The remaining 10 per cent will result from large players taking over under-construction hospitals and small and mid-sized hospitals, reinforcing organic growth efforts, the report said.

"The large proportion of greenfield expansion poses risks related to timely completion and ramp-up in occupancies. However, given that about 70 per cent of these projects are in metropolitan/Tier 1 cities, where hospitals reach optimal occupancy and break-even in 12-15 months, the pressure on profitability and associated return metrics is likely to be limited," said Naren Kartic. K, Associate Director, Crisil Ratings.

"Moreover, recent equity raises have strengthened balance sheets, allowing for absorption of capex debt without materially impacting debt protection metrics," he added.

Notably, the interest coverage ratio and total debt to EBITDA -- both key debt protection metrics -- are expected to stay healthy at around 8.0 times and 1.2 times, respectively. This mirrors last year's performance and lending stability to credit profiles.

While healthy demand for quality healthcare should keep occupancy high despite the bed addition, the ability of hospitals to sustain operating profitability and regulatory changes will remain monitorable in the road ahead, the report added.