Private hospitals to add ~10,000 beds over this fiscal and next

28 February 2025

Healthy cash accruals to fund expansion plans; credit profiles to remain stable

Private hospitals in India will increase their capacity by over ~4,000 beds next fiscal, at an investment of ~Rs 11,500 crore, after an aggressive addition of around ~6,000 beds this fiscal. The bed addition in just these two fiscals will equal those added between fiscals 2020 and 2024.

A Crisil Ratings analysis of 91 private hospitals, with a combined revenue of about ~Rs 64,000 crore last fiscal, indicates as much.

For the record, private hospitals account for ~63% of the sectoral revenue in India. Over fiscals 2020-2024, private hospitals clocked a compound annual growth rate of ~18% in revenue and healthy operating profitability of ~18%, ensuring strong cash flow. 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.

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

Half of the new beds will come from greenfield expansions, highlighting significant investment in new healthcare infrastructure. About 40% will comprise brownfield development, focusing on modernising and optimising existing facilities. The remaining 10% will result from large players taking over under-construction hospitals and small and mid-sized hospitals, reinforcing organic growth efforts.

Says Naren Kartic.K, Associate Director, Crisil Ratings, “The large proportion of greenfield expansion poses risks related to timely completion and ramp-up in occupancies. However, given that ~70% of these projects are in metropolitan/Tier 1 cities, where hospitals reach optimal occupancy and breakeven in 12-15 months, the pressure on profitability and associated return metrics is likely to be limited. Moreover, recent equity raises have strengthened balance sheets, allowing for absorption of capex debt without materially impacting debt protection metrics.”

Interest coverage ratio and total debt to Ebitda1, both key debt protection metrics, are expected to stay healthy at ~8.0 times and ~1.2 times, respectively, mirroring 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.