Major private hospitals to grow 10-12% next year

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Kapil Banga, Assistant Vice President, ICRA

After two years of subdued performance and regulatory challenges, India's major private hospitals are now on a growth path and are likely to continue the momentum in the coming year, says credit rating and industry analysis firm ICRA.

The private hospital sector, which posted the best growth in revenues and earnings before interest, tax, depreciation and amortisation (EBITDA) in the second quarter of FY20 since the first quarter of FY17, is likely to report a 10-12 per cent growth in revenues in short-to-medium term during the new year, said ICRA.

Kapil Banga, Assistant Vice President, ICRA, said, "Structurally, in the long term, underlying fundamentals such as the significant shortage of beds in the country, the increase in the disease burden and an ageing demographic profile continue to favour the sector."

He said, “The brokerage, which studied the revenues of top six listed hospitals for the second quarter of FY20, said the aggregate revenues of these companies grew 14 per cent on a year-on-year basis to Rs 4,807 crore from Rs 4,206 crore a year ago in the same quarter.”

There has been a cap on prices of stents and knee implants by the National Pharmaceutical Pricing Authority and the negative impact of the rollout of Goods and Services Tax on profitability, besides several regulatory measures which have adversely impacted the industry’s performance.

In addition, strict regulatory action taken by multiple states, including putting restrictions on procedure, rates, levying penalties and placing operational limitations on erring hospitals also had a bearing on the performance.

The performance was also impacted due to the start-up cost of new hospitals, owing to significant capex done by the entities in the sector and the long gestation period required for the new facilities.


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