India's hospital sector is poised for a robust financial performance in FY2025, according to the rating agency Icra. The operating profit margins are expected to remain sturdy at over 22 per cent in FY2025, driven by sustained high occupancy rates, moderate growth in average revenue per occupied bed (ARPOB) of 4 to 6 per cent, and benefits from cost optimisation measures.
The rating agency anticipates that aggregate occupancy for its hospital industry sample set will remain strong at 61 to 63 per cent in FY2025, supported by consistent demand for healthcare services and market share gains for organised players. ARPOB is expected to witness a moderate expansion of 4 to 6 per cent in FY2025, driven by an improving speciality mix, better payor mix, and annual price revisions to offset cost inflation.
Overall, Icra estimates revenue growth of 12 to 14 per cent for its sample set companies in FY2025, supported by improving operating leverage, continued cost optimisation and digitisation measures. The agency maintains a Stable outlook on the Indian hospital industry, despite incremental debt to fund bed capacity expansion plans.
Key drivers of the industry's prospects include rising incidence of lifestyle diseases, growing per capita healthcare spending, increasing health insurance penetration, and higher medical tourism volumes. In-patient footfalls remained healthy in FY24, aided by a strong revival in medical tourism and changing patient preferences. The average length of stay is expected to remain low, backed by faster patient throughput and technological advancements.
Medical tourism in India witnessed significant growth in CY 2023, driven by low treatment costs, quality medical facilities, and relatively short waiting times. The government's extension of e-medical visa facilities to nationals of 167 countries is expected to further boost medical tourism footfalls.
