CRISIL Forecasts Strong Revenue Growth of 11-12% for India's Private Hospitals in FY25

The 89 companies analyzed by CRISIL collectively account for two-thirds of the revenue (up to INR 46,700 Cr) of large private hospitals.

Private hospitals in India are likely to experience substantial growth in revenue, in the fiscal year 2025, a recent report by credit rating agency CRISIL predicted.

As per the projection, the private healthcare providers’ revenue is set to record an estimated increase of 11-12% in the next financial year.

Healthy occupancy levels and a consistent rise in average revenue per occupied bed (ARPOB) drove a commendable 14% growth in the FY 2024.

The 89 companies analyzed by CRISIL collectively account for two-thirds of the revenue (up to INR 46,700 Cr) of large private hospitals underscoring the optimistic outlook for the industry.

Anuj Sethi, senior director at CRISIL Ratings, attributed this growth to various factors.

"Healthy demand for healthcare services, increased awareness of lifestyle treatments, rising medical tourism, and increasing health coverage will ensure bed occupancy is sustained at 60-62% even on significantly enhanced capacities in fiscal 2025," Sethi said.

Factors Driving Revenue Growth

The report highlights the significant role of medical tourism, which contributes 10-12% of revenue and is expected to grow at nearly double the overall rate in the mid-term.

Lower treatment costs, world-class facilities, and skilled medical personnel attract a substantial number of medical tourists, particularly from Southeast Asia and the Middle East.

Furthermore, the report points to a rising trend in health insurance coverage, growing at over 20% in the last two fiscal years, making quality treatment more affordable and accessible.

This, coupled with the increasing occurrence of lifestyle diseases and an aging population, is expected to drive further demand for healthcare services.

CRISIL predicts that in response to this growing demand, hospital chains will add 2,000-2,500 beds in fiscal 2025, following an estimated addition of 2,000 beds in fiscal 2024.

Poonam Upadhyay, director at CRISIL Ratings, emphasized the positive financial outlook, stating, "Growing revenue and healthy operating margins will ensure strong cash accrual, which will help fund more than 65% of the total planned capex of Rs 4,500 crore by private hospitals in fiscal 2025."

Operating Profitability to Balance Out Expansion Costs

The report also goes on saying that operating profitability is likely to sustain at a healthy 16-17% in FY25. The increased costs incurred by private hospitals to expand their capacities is expected to be offset by improved operating leverage.

This will, in turn, help them maintain strong cash generation and limit reliance on external debt, despite substantial capital expenditure resulting in maintaining stable credit profiles.

Sethi said, ARPOB will rise to INR 38,000 in FY25, following its stellar 8℅ increase to INR 36,000 in FY24 on the back of higher share of specialized surgeries and pass on of inflation linked costs.

He reiterated, "These factors should spawn double-digit revenue growth for private sector hospitals this fiscal."

The report also highlights the geographical distribution of planned bed additions, with 60% allocated to Metros and Tier-I cities, recognized as medical tourism hubs.

This strategic allocation is driven by well-established infrastructure, the availability of medical professionals, higher paying capacity of patients, and good connectivity.

India's overall bed capacity under the private sector currently stands at around 11-11.5 Lakh. However, it is expected to grow around 11.3 - 11.8 Lakh by 2028, with 2.7% annual increase.

According to a recent report by ICRA, private hospital players in India are anticipated to invest approximately INR 32,500 Cr to add over 30,000 beds in the next four to five years.

Although the prospects look promising for India’s private hospitals, CRISIL report also cautions about the sustainability of high occupancy levels and the potential impact of govt regulations.