India’s top five hospital groups unveil big expansion plan

Ever considered healthcare as an investment strategy? In India, the age-old adage “Health is Wealth” takes on a whole new meaning. This booming sector isn’t just improving lives; it’s generating significant returns.

Fuelled by a post-pandemic surge in health awareness and a rapidly growing economy, India’s healthcare industry is experiencing unprecedented growth. The National Statistical Office (NSO) estimates a near 100% increase in per capita income between 2014-15 and 2022-23, jumping from Rs 86,647 to a staggering Rs 172,000.

This economic leap translates into more disposable income, with a significant portion being directed towards private healthcare.

India also faces a growing burden of lifestyle diseases like diabetes, heart disease, and cancer. This, coupled with a growing awareness of preventive healthcare, is further propelling the demand for medical services.

In line to keep up with the increase in healthcare demands, here are five hospital chains that have announced major expansion plans.

1. Max Healthcare Institute
Leading the list is Max Healthcare Institute.

The company is one of India’s largest healthcare firms, with 17 healthcare facilities and 3,550 beds.

It operates a chain of multispecialty, tertiary, and primary healthcare facilities predominantly in the Delhi and Mumbai regions, with 85% of its beds located in metro and Tier 1 cities.

Max Healthcare Institute also recently increased its focus on the pathology business, where it owns 18 hospital-based labs and offers over 2,000 tests through a network of 430 partner-run collection centres and 22 company-owned centres.

The company plans to increase contributions from its new hospitals in Lucknow and Dwarka over the next year. The new hospital at Dwarka is set to commence operations in early June.

Further, Max Healthcare plans to invest up to Rs 55 billion (bn) over the next 3-5 years to more than double its existing bed capacity.

The company currently has 4,000 beds, mainly concentrated in Delhi NCR. Of the new capacity, about 2,600 beds will become available over the next four years. The hospital chain plans to open 300 beds in Delhi shortly, and commission 1,000 beds each in FY25 and FY26.

Max Healthcare also plans to invest about Rs 25 bn over the next 3-5 years in Lucknow. This investment will be used to establish a greenfield 500-bed hospital on a 5.6-acre land parcel at Shaheed Path in the city and to expand capacity at Sahara Hospital, which it acquired last year for Rs 9.4 bn.

The company derives its revenue from multiple specialities, cardiology, oncology, neurology, and orthopaedic, which ensures diversified revenue streams. This has helped it increase its revenue at a CAGR of 21.8% in the last five years.

For FY24, the company reported an 18% year-over-year rise in revenue, reaching Rs 54 bn. However, the net profit for the year declined by 4.15% to Rs 10.6 bn. This decline was attributed to visa-related challenges affecting international business.

Going forward, the company intends to focus on higher-end work to improve margins.

2. Apollo Hospitals
Second on the list is Apollo Hospitals.

It’s present across the healthcare ecosystem, including hospitals, pharmacies, primary care, and diagnostic clinics.

Apollo Hospitals owns over 5,000 pharmacies and an network of over 1,700 diagnostics centres.

The company is planning to invest Rs 30 bn over the next three years to fund its expansion. As part of this expansion, the group aims to add 2,000 beds to its facilities.

Additionally, it plans to invest Rs 80 million (m) in a new AI-precision oncology centre in Bangalore and establish 25 more such centres across the country over time. Despite these ambitious expansion plans, the company is not currently exploring private equity (PE) investments.

The hospital segment accounts for 51% of the company’s total revenues, while the pharmacies and digital health distribution comprise 42%. The remaining 7% comes from the diagnostics segment.

For FY23, the company reported a 13% rise in revenue, driven by the hospital segment. The net profit declined by 24% to Rs 8.5 bn due to the increase in expenses.

For the December 2023 quarter, the company reported a 14% year-over-year rise in revenue to Rs 48.8 bn, with net profit for the quarter rising by 60% to Rs 2.5 bn. The company is set to release its Q4 results this week on 30 May 2024.

3. Aster DM Healthcare
Third on the list is Aster DM Healthcare.

Aster DM Healthcare operates in multiple segments of the healthcare industry, including hospitals, clinics, and retail pharmacies.

The company operates hospitals, clinics, pharmacies, diagnostic centres, educational institutions, and more.

Aster DM Healthcare on 27 May 2024, announced an expansion plan for Aster CMI Hospital in Bengaluru, adding 300,000 square feet of infrastructure.

This expansion will increase the hospital’s bed capacity from 500 to 850 beds. The multispecialty facility project involves an investment of Rs 2 bn and is expected to be commissioned by the financial year 2027.

Aster DM plans to add 1,700 beds in India by FY27, bringing its total bed count to around 6,600 through organic growth, with further expansion anticipated through inorganic means.

This plan includes a mix of brownfield and greenfield projects, such as Aster Capital in Trivandrum and Aster MIMS Kasargod, as well as increasing bed capacity at existing hospitals.

Additionally, the firm is targeting potential markets in Maharashtra and Uttar Pradesh. The capital allocation for this expansion is approximately Rs 10 bn.

For the December 2023 quarter, the company’s revenue came in at Rs 37.1 bn, up 16.2%. Meanwhile, the net profit came in at Rs 1.4 bn, up 28.6%.

4. Fortis Healthcare
Fourth on the list is Fortis Healthcare.

Fortis Healthcare is a well-integrated pan-India healthcare provider that owns and operates hospitals and diagnostics centres.

As healthcare needs rebound and hospital footfall increases, Fortis stands to benefit from these favourable developments, paving the way for sustained growth and profitability.

Its well-recognised brand name, extensive network of diagnostics centres and large number of hospital beds across the country can help the company bite off a sizeable chunk of the booming healthcare sector.

The company’s diagnostic centre, under the brand name Agilus, is the largest diagnostics services provider in the country in terms of lab network presence.

The company plans to add 600 beds to the existing 4,500 operational beds by the end of the financial year. Fortis is also planning to add 2,200 beds across its existing hospitals over the next three years. Last year, the company had added approximately 150 beds.

Fortis aims for an expansion from 4,500 beds to 10,000 beds in India over the next five to seven years.

The company earns 80% of its revenue from the hospital segment. A significant portion of the hospital revenue comes from oncology, orthopaedics, cardiac and renal sciences, comprising 47.8% of the total revenues.

For the December 2023 quarter, its revenue grew 7.7% to Rs 16.8 bn, while the net profit for the quarter came in at Rs 1.3 bn, down 3.2%.

5. Narayana Hrudayalaya
Last on the list is Narayana Hrudayalaya.

Narayana Hrudayalaya owns and operates over 45 multispecialty and super-speciality hospitals across multiple locations in India and one in the United States. It enjoys a total capacity of over 6,000 hospital beds in India (over 100 beds in the US), running at a 95% utilisation as of April 2023.

The company’s focus on offering economical healthcare services and specialisation (in cardiac and renal) sets it apart from its peers.

Narayana Hrudayalaya will continue to expand its presence across the country and at its international facility, given the consistent growth in demand for economical healthcare services.

Going forward, Narayana Hrudayalaya expects to roll out its insurance service by the first quarter of FY25.

The company received approval from the Insurance Regulatory and Development Authority of India to launch a health insurance business in India in January 2024.

While acknowledging that the hospital-insurer combination could be seen as a conflict of interest, the company believes it will be able to disrupt the way health services are provided in the country.

For the March 2024 quarter, the company reported a 4.7% YoY rise in revenue to Rs 12.8 bn. Meanwhile, the net profit for the quarter came in at Rs 1.9 bn, up 17.7%.

Conclusion
The Ministry of Health and Family Welfare has been allocated Rs 90,658.63 crore in the interim budget for 2024-2025. This is an annual hike of 12.6%

The government is also investing heavily in the healthcare sector, further boosting growth. The launch of Ayushman Bharat Yojana was the stepping stone for the national digital health mission for the country.

Also, more Indians are now covered by health insurance, giving them access to a wider range of healthcare services. All these factors are fuelling the growth of this industry.

Before considering an investment in these stocks, it’s essential to analyse the industry trends and economic conditions that may affect the performance of these comapnies. Equitymaster