4,000+ Beds, ₹11,500 Crore: India's Private Hospital Power Play

Private hospitals in India are set to expand capacity by over 4,000 beds in the next fiscal year (FY25) with an investment of ₹11,500 crore, following an aggressive addition of 6,000 beds this year, according to a Crisil Ratings report. This two-year expansion will match the total bed additions between FY20 and FY24.

An analysis of 91 private hospitals, which generated ₹64,000 crore in revenue last fiscal, highlights the sector’s strong performance. Private hospitals currently contribute 63% of India’s healthcare sector revenue. Between FY20 and FY24, the sector recorded an 18% compound annual growth rate (CAGR) in revenue and maintained an operating profitability of 18%, ensuring strong cash flows. The increasing demand for quality healthcare, coupled with India’s relatively low bed capacity per capita, has driven significant private equity and IPO investments, strengthening hospital balance sheets and enabling expansion without major credit risks.

“With occupancy levels nearing 65-70% and sustained demand, private hospitals are investing ₹25,000 crore over two years—nearly 80% higher than the average annual investment in the past four fiscals,” said Anuj Sethi, Senior Director, Crisil Ratings. “Three-fourths of this capex will be funded through internal accruals, while equity markets and private equity have infused ₹55,000-60,000 crore since FY22.”

Half of the new beds will come from greenfield expansions, while 40% will be from brownfield developments to modernize existing facilities. The remaining 10% will be through acquisitions of under-construction or small and mid-sized hospitals.

"The large share of greenfield expansion brings execution risks, but since 70% of these projects are in metro and Tier-1 cities, hospitals are expected to achieve optimal occupancy and breakeven within 12-15 months," said Naren Kartic K, Associate Director, Crisil Ratings. "Additionally, recent equity raises have strengthened balance sheets, mitigating capex-related debt concerns."

Key debt protection metrics, including interest coverage ratio and total debt-to-EBITDA, are projected to remain stable at 8.0 times and 1.2 times, respectively, aligning with last year’s performance.

While demand for quality healthcare is expected to sustain occupancy levels, Crisil noted that hospitals' ability to maintain profitability amid regulatory changes will be crucial in the coming years.

News by Rahul Yelligetti.