Indian hospital industry to post robust performance in FY2023: ICRA

  • Aggregate occupancy for the sample set[1] is estimated at 62-64% for FY2023. With ARPOB growth expected at 8-10% on a YoY basis, translating to 15-17% revenue growth
  • Operating profit margin (OPM) will remain healthy at over 20% in FY2023 supported by improving payor mix, operating leverage and cost optimisation measures.



Chandigarh, January 12, 2023:

Rating agency ICRA expects the aggregate occupancy for its hospital industry sample set to remain healthy at 62-64% in FY2023 and FY2024, backed by continued healthy demand for elective surgeries, recovery in medical tourism to pre-Covid levels; and continued market share gains for organised players. Improving payor mix, growth in surgery volumes, price revisions by companies to offset cost inflation and faster throughput in discharges are expected to aid healthy growth of ~8-10% in average revenue per occupied bed (ARPOB) for the sample set in FY2023. Given the high base, ARPOB growth in FY2024 is estimated to moderate to ~2-4%.

Revenue growth is estimated to be ~15-17% on YoY basis in FY2023, supported by strong occupancy and higher ARPOB. However, growth is expected to slightly moderate to ~4-6% in FY2024, given the high base and moderate growth in ARPOB. Despite high input cost inflation, improving operating leverage, supported by the increasing scale of operations and continued cost optimisation measures, are expected to support a healthy OPM of ~20-22% in FY2023 and FY2024.

ICRA maintains its Stable outlook on the Indian hospital industry, led by the rising incidence of non-communicable lifestyle diseases, growing per capita spend on healthcare and awareness levels, increasing penetration of health insurance and revival in medical tourism volumes.


Commenting on the expansion in the hospital industry, Ms. Mythri Macherla, Assistant Vice President & Sector Head, ICRA said, “Covid-related uncertainties resulted in deferment of organic capex plans of industry players over the last two years. Supported by sustained improvement in demand, sample set players have announced a sizeable expansion with the addition of ~7,000 beds and an upgradation/refurbishment plan for the next three-four years. Further, some large players in the sector continue to scout for inorganic growth opportunities which could translate into incremental beds being added through mergers and acquisitions. With robust performance expected in FY2023 and FY2024, the debt metrics will remain strong going forward, despite incremental debt funding for supporting expansion plans.”

While most of the capacities are expected to be set up in metro cities, some of the large players are also entering into operations and management contracts to geographically diversify their presence in unexplored markets on an asset-light basis.

The in-patient footfalls for ICRA’s sample set during H1 FY2023 remained high at 1.3x of pre-Covid levels backed by higher elective surgeries and revival in medical tourism coupled with changing patient preference towards large hospitals on the back of increasing insurance coverage. Average length of stay (ALOS) in H1 FY2023 at 3.6 days reached pre-Covid levels and is expected to remain low, backed by faster throughput of patients, which is also supported by technological advancements. In Q2 FY2023, relatively higher patient flow for viral diseases led to occupancy expanding to 67.5% from 61.7% in Q1 FY2023. However, ARPOB slightly moderated on a sequential basis due to lower realisations from the viral diseases’ patients.

Overall, the revenue growth and OPM for ICRA’s sample set in H1 FY2023 stood at 12% and 21.8%, respectively, on the back of improvement in both occupancy (64.7% vs 63.0% in H1 FY2022) and ARPOB (12% YoY growth). Q2 FY2023 witnessed the highest-ever quarterly OPM of 22.8%, in the last several years, backed by improved occupancy, better speciality mix and turnaround in operations of many of the new centres for some hospitals.


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