Jefferies Calls Indian Hospitals the Top Growth Industry for FY24-26, Citing an Expected Capacity Boom.

The industry will be marked by rapid bursts of growth and times of moderate development, but it will witness significant capacity expansion and an increase in average revenue per occupied bed.

According to recent research by Jefferies, India’s hospital industry is likely to have a considerable increase in new capacity, resulting in a dramatic increase in net income.

According to the research, hospitals are preparing for major capacity growth over the next 12 -15 months, with a projected increase of 3-10 percent. This will depart from the previous three years’ linear trend.

The growth is expected to be unpredictable, with periods of sluggish progress followed by bursts of fast development. According to Jefferies’ strategic assessment, new bed additions in the following fiscal years (FY24-26) would drive growth. This planned bed increase is likely to complement the rise in Average Revenue Per Occupied Bed (ARPOB), functioning as the driver for the healthcare sector’s overall profit growth trajectory.

Jefferies attributed future “lumpy” growth to the time it takes for additional capabilities to break even, which may range from 6 to 18 months. When this vital breakeven threshold is achieved, operational leverage is projected to kick in, resulting in a fast and significant increase in growth. This unusual development trajectory is a significant element in hospitals being Jefferies’ top selection in the sectoral preferences. The representation of a company’s fixed expenses as a proportion of total costs is known as operating leverage. Increased bed expansions, for example, are fixed expenditures for capacity expansion programs.

According to Jefferies, the financial outlook for the healthcare industry remains positive. They expect their coverage universe, which includes the hospitals they follow, to rise by 14-21 percent in EBITDA over fiscal years 2024-2026. This upbeat view reflects the firm’s belief in the potential for substantial profits in the healthcare investing sector.

Max Healthcare Institute in India has purchased Sahara Hospital in Lucknow for Rs 940 crore. For Rs 4,800 crore, private equity funds run by Blackstone purchased a controlling stake in CARE Hospitals from Evercare, a platform of TPG RISE funds, in October. In a separate transaction, Dr Azad Moopen’s Aster DM Healthcare sold its Middle East or GCC (Gulf Co-operation Council) business to Alpha GCC Holdings Ltd for around $1.01 billion and turned its attention to India’s activities.