Rainbow Children’s Medicare to acquire two hospitals in Northeast, Hyderabad 

Hyderabad-based Rainbow Children’s Medicare, also known as Rainbow Hospitals, is gearing up for growth through acquisitions and bed expansion in the coming years.

Ramesh Kancharla, Chairman and Managing Director of Rainbow Children’s Medicare, shared that the company is in the process of acquiring two hospitals, one in the Northeast and one near Hyderabad. These acquisitions are expected to be completed within the next 4-5 months.

The first acquisition will be in the Northeast, with an initial capacity of 100 beds, which will be expanded to 150 beds. The second acquisition is being pursued in a tier-2 city near Hyderabad, with a capacity of 75 beds, Kancharla stated.

Kancharla also highlighted that funding these acquisitions will not be a challenge as the company has strong internal accruals. As of September, the hospital had a cash balance of nearly ₹580 crore.

Rainbow Children’s Medicare also plans to increase its current bed capacity by nearly 50% over the next three years, aiming to add around 1,000 beds by the end of 2027.

A significant portion of this expansion, of nearly 450 beds, will be in Gurugram, while the remaining beds will be distributed across southern India, following a regional and hub-and-spoke model.

For the Gurugram facilities, construction is expected to begin between late February and early March. The development process is projected to take about two and a half years, with both hospitals anticipated to be operational by mid-2027.

Talking about Madhukar Rainbow Children’s Hospital, the company’s pediatric and maternity hospital in Delhi, Kancharla stated that it operates under a trust model, which makes it difficult to achieve earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins exceeding 20-25%.

Kancharla attributed this to the hospital’s cost structure, the requirement to allocate free beds, and the high rental payments to property owners.

These challenges are inherent to facilities managed under Delhi Development Authority (DDA) guidelines and the trust hospital framework. Despite these obstacles, he noted that the hospital is performing well within these constraints.

Currently, Madhukar Hospital is operating with a 10% margin, but it is expected to reach a 15% margin in the coming 18 months.

The company, which has a market capitalisation of ₹16,232 crore, has seen its shares rise 23% over the last year. CNBCTV18