Healthy occupancies, ARPOB to drive double-digit revenue growth for hospitals this fiscal: CRISIL Ratings

Strong accruals counterweight to high capex spending, supporting credit profiles

Revenue from private hospitals is seen growing at a healthy 11-12 per cent in fiscal 2025 after an estimated 14 per cent growth in fiscal 2024. Good occupancy levels on enhanced capacities and a steady uptick in average revenue per occupied bed (ARPOB) will be the tailwinds. The rising share of medical tourism and increasing health insurance coverage will be supportive as well, contributing to better bed utilisation and ARPOBs. 

Operating profitability is likely to sustain at a healthy 16-17 per cent in fiscal 2025 with better operating leverage offsetting a ramp-up in cost associated with newer capacities. This will ensure cash generation remains strong and reliance on external debt is limited even as capex spending remains sizeable. That, in turn, will keep credit profiles stable. 

An analysis of 89 companies rated by CRISIL Ratings, accounting for two-thirds of the revenue of large private hospitals and a combined revenue of ~Rs 46,700 crore, indicates as much. 

Says Anuj Sethi, Senior Director, CRISIL Ratings, “Healthy demand for healthcare services, including due to increased awareness of lifestyle treatments, rising medical tourism and increasing health coverage will ensure bed occupancy is sustained at 60-62 per cent even on significantly enhanced capacities in fiscal 2025. In addition, ARPOB, which is estimated to have grown ~8 per cent to ~Rs 36,000 in fiscal 2024, will rise to ~Rs 38,000 in fiscal 2025 supported by a higher share of specialised surgeries and pass-on of inflation-linked costs. These factors should spawn double-digit revenue growth for private sector hospitals this fiscal.” 

Says Poonam Upadhyay, Director, CRISIL Ratings, “Higher revenue and operating margin will ensure strong cash accrual, which will help fund more than 65 per cent of the total planned capex of ~Rs 4,500 crore by private hospitals in fiscal 2025. This, in turn, will lend stability to credit profiles. We expect debt protection metrics such as the interest coverage and the total debt/Ebitda2 ratios of CRISIL Ratings rated entities to remain in line with fiscal 2024’s levels of 6.2 times and 1.7 times, respectively.”