Hospital sector on recovery path after more than two years of underperformance

The Hospital sector performance was impacted due to the start-up cost of new hospitals owing to significant capital expenditure done by entities.

Published: 10th July 2019 07:53 PM  |   Last Updated: 10th July 2019 07:53 PM   |  A+A-

hospital, doctors, stethoscope

For representational purposes


New Delhi [India], July 10 (ANI): The hospital sector is seeing better days ahead after more than two years of subdued performance, investment information agency ICRA said on Wednesday.

The tough days were triggered due to several regulatory measures, including the cap on prices of stents and knee implants by the National Pharmaceutical Pricing Authority (NPPA).

The rollout of Goods and Services Tax (GST) had an adverse impact on profitability. Strict regulatory actions were taken by multiple states including putting restrictions on procedure rates, levying penalties and placing operational limitations on erring hospitals.

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

"In line with our expectations, the performance of players in the sector has likely bottomed out after struggling for more than two years," said Kapil Banga, Assistant Vice President for Corporate Ratings at ICRA.

"Nonetheless, the regulatory environment continues to be an overarching challenge. The wide-ranging regulatory restrictions from multiple authorities had suppressed their margins," he said in a statement.

During January to March (Q4 FY19), aggregate revenues of companies in ICRA's sample set grew by a healthy 14 per cent year-on-year from Rs 3,551 crore in Q4 FY 18 to Rs 4,035 crore in Q4 FY 19.

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by a robust 33 per cent from Rs 420 crore to Rs 521 crore while EBITDA margin improved substantially from 11.8 per cent to 13.9 per cent during the same period on account of high operating leverage of the business.

"The revenue growth in Q4 FY19 was driven by an increase in occupancy as well as the average revenue per occupied bed," said ICRA.

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