Top 5 Indian Hospital Chains Poised for Significant Growth

India's healthcare sector is experiencing a surge, attracting billions in investment from private equity and venture capital firms.

In 2023, investments reached a record-breaking US$ 5.5 billion (bn), a25% increase from the previous year.

The sector's immense growth potential is fuelled by a rising population, increasing disposable incomes, and the growing prevalence of lifestyle diseases.

Despite the optimism, challenges remain. The public healthcare system faces underfunding, with government expenditure at just over 1% of GDP.

However, the focus on preventive care, medical technology, and digital health solutions offers promising avenues for growth.

The hospital industry is expected to see its revenue more than doubling to US$ 219 bn by 2027.

This surge highlights the immense potential of India's healthcare sector, making it an attractive investment destination.

Here are five companies, well-poised to benefit from this development.

#1 Apollo Hospitals

At the top of the list we have Apollo Hospitals.

At the forefront of India's healthcare sector, Apollo Hospitals stands out. The hospital chain enjoys a strong presence in hospitals, pharmacies, primary care, and diagnostic clinics.

Apollo operates over 5,000 pharmacies and boasts an extensive network of over 1,700 diagnostic centers.

The hospitals contribute 51% to the company's total revenue. Pharmacies and digital health distribution account for 42%. The diagnostics segment makes up the remaining 8%.

While the hospital and diagnostics segments are well-established, the pharmacy business is still finding its footing.

Apollo Hospitals has made significant strides in leveraging technology for improved patient care.

The focus on technological innovation positions the company as a leader in providing cutting-edge healthcare.

The company's has added new beds in Indore and Rourkela.

It has also grown its pharmacy and healthcare facility network.

In FY24, the healthcare services business witnessed substantial improvement in key metrics such as case mix, payer mix and ARPOB (Average Revenue Per Occupied Bed), indicating enhanced efficiency and profitability.

Apollo Hospitals Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	16.94%	-6.11%	38.85%	13.30%	14.73%
Operating Profit Margin (%)	14.35%	11.20%	15.44%	12.88%	13.00%
Net Profit Margin (%)	3.87%	1.29%	7.51%	5.34%	0.05%
Return on Capital Employed(%)	17.13%	9.32%	24.92%	17.78%	15.60%
Return on Equity (%)	13.08%	3.44%	21.60%	15.16%	13.70%

Source: Equitymaster

The business has grown consistently, with the sales and net profit reporting at a 5-year CAGR of 14.6% and 36.2%, respectively.

The average Return on Capital Employed (RoCE) and Return on Equity (RoE) have also expanded, averaging 16.9% and 13.4% over a 5-year period.

The company aims to operationalise new hospitals with a capacity of 1,500 beds, combined with initiatives to enhance surgical volumes and optimise costs.

Apart from this, it aims to leverage it's digital platforms to enhance patient care and operational efficiency by achieving breakeven for the Apollo 24/7 Digital business within the next 6-8 quarters.

To know more about the company, check out its financial factsheet and latest financial results.

#2 Fortis Healthcare

Next on our list is Fortis Healthcare.

Fortis Healthcare is a well-integrated pan-India healthcare provider, owning and operating hospitals and diagnostic centres.

The company's diagnostic segment, branded as Agilus, is the largest diagnostics services provider in India by lab network presence.

It operates across over 1,000 cities and 30 states. This segment accounted for 16% of Fortis' total revenues in FY24.

The remaining 84% of revenue came from the hospital segment, with oncology, orthopaedics, cardiac, and renal sciences making up nearly 60% of the total hospital revenue.

In FY24, occupancy dipped slightly from 67% to 65%. The addition of 246 beds helped maintain occupied bed levels.

ARPOB witnessed a robust 10.8% growth to Rs 22 million (m), fuelled by a 13% increase in key specialities like oncology, cardiac sciences, and neurosciences.

Fortis Healthcare Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	3.65%	-13.00%	41.87%	10.14%	9.45%
Operating Profit Margin (%)	14.29%	11.19%	19.17%	18.47%	18.95%
Net Profit Margin (%)	1.98%	-1.39%	13.82%	10.05%	9.36%
Return on Capital Employed(%)	5.36%	2.72%	15.61%	12.50%	12.01%
Return on Equity (%)	1.38%	-0.88%	12.85%	9.44%	8.66%

Source: Equitymaster

The business has grown on the back of improved occupancy levels and higher revenue per bed ratio. The revenue has grown at a CAGR of 9%.

The 5-year average RoE and RoCE stand at a respectable level of 9.6% and 6.3%, respectively.

Fortis Healthcare, owns and operates over 4,600 beds and plans to add 2,200 more beds over the next few years, bringing the total to around 6,800 operational beds.

The new leg of growth will stem from brownfields as well as acquisition opportunities in Tier 1 cities.

To know more about the company, check out its financial factsheet and latest financial results.

#3 Narayana Hrudayalaya

Third on our list is Narayana Hrudayalaya.

Narayana Hrudayalaya owns and operates over 45 multispecialty and super-speciality hospitals across India and one in the United States.

The company enjoys a total capacity of over 6,000 beds in India (and over 100 in the US).

Narayana Hrudayalaya's focus on providing affordable healthcare services, particularly in cardiac and renal specialities, sets it apart from its peers.

Initially concentrating on cardiac and renal care, Narayana Hrudayalaya started as a network of multispecialty primary and tertiary healthcare centres.

It has since broadened its scope to include additional specialities such as cancer, neurology, neurosurgery, orthopaedics, and gastroenterology.

In FY24, Narayana Health delivered a strong financial performance, with revenue surging 10.9% to Rs 50 bn and EBITDA climbing 24.5% to Rs 12 bn.

Narayana Hrudayalaya Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	9.33%	-17.42%	43.29%	22.25%	10.90%
Operating Profit Margin (%)	14.55%	8.39%	18.85%	23.12%	23.00%
Net Profit Margin (%)	3.81%	-0.55%	9.24%	13.41%	15.74%
Return on Capital Employed(%)	13.61%	1.46%	26.83%	33.92%	26.20%
Return on Equity (%)	10.77%	-1.27%	26.30%	33.55%	31.50%

Source: Equitymaster

Over the past five years, the company has achieved remarkable performance, with sales growing at 5-year CAGR of 11.8% and profits going up six times.

The 5-year average RoE and RoCE stand at a notable 20.4% and 20.2%, respectively.

The company has a net debt-to-equity ratio of 0.6 (FY24), providing ample room for expansion.

It invested over Rs 9 bn in upgrading hospitals and expanding capacity.

Looking ahead, the hospital chain aims to expand its presence, particularly in Bangalore. It is building over 800,000 square feet at its existing Bangalore campus, including additional rooms, ICUs, OTs, and parking facilities.

It has acquired land in Rajarhat, Kolkata, for a similar-sized project, with construction expected to start in the third quarter.

Further expansion plans include acquiring more land for greenfield projects in key cities.

Beyond these major expansions, the company will allocate over Rs 55 bn for biomedical equipment, maintenance, and a new Cayman facility.

To know more about the company, check out its financial factsheet and latest financial results.

#4 Krishna Institute of Medical Sciences

Fourth on our list is Krishna Institute of Medical Sciences (KIMS).

KIMS Healthcare operates a network of 3,503 operational beds across Telangana, Andhra Pradesh and Maharashtra. KIMS has solidified its position as a leading player in the region.

The hospital chain has carved a niche for itself in specialised care, with orthopaedics, neurology, cardiology, and maternal and child care forming the core of its services.

These specialities collectively contribute to over half of the company's business.

KIMS Healthcare has demonstrated strong financial performance for the year. The company achieved a robust growth in gross revenue, driven by increased patient volumes and higher average revenue per patient.

While EBITDA faced some challenges due to one-time expenses, the overall financial health of the company remains strong.

Krishna Institute of Medical Sciences Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	22.29%	18.46%	24.13%	33.13%	13.67%
Operating Profit Margin (%)	22.76%	29.01%	32.83%	28.97%	26.46%
Net Profit Margin (%)	10.25%	15.45%	20.83%	16.65%	13.45%
Return on Capital Employed(%)	21.17%	30.82%	35.69%	27.84%	20.26%
Return on Equity (%)	20.22%	28.12%	30.55%	23.93%	19.21%

Source: Equitymaster

Between 2020-24, the revenue has more than doubled.

The RoCE and RoE have averaged at 27.5% and 24.2% over the last 5 years, respectively.

Demonstrating its commitment to growth and expansion, KIMS has outlined an ambitious plan to invest Rs 49.6 bn between FY25 and FY27. This investment will fuel the addition of over 2,400 beds to its existing capacity.

The company is strategically targeting markets adjacent to its home states of Telangana and Andhra Pradesh to broaden its reach.

To know more about the company, check out its financial factsheet and latest financial results.

#5 Yatharth Hospital & Trauma Care Services

Last on the list is Yatharth Hospitals.

Yatharth Hospitals is a prominent healthcare provider based in Noida, Uttar Pradesh.

Yatharth offers a wide range of specialties, including neurosciences, general surgery, oncology, IVF and more.

In FY24, Yatharth Hospitals delivered impressive financial results. The company recorded a robust growth in revenue, along with a surge in profitability.

This strong financial performance was driven by increased patient volumes, higher average revenue per patient and improved operational efficiency.

The hospital chain is executing an aggressive expansion strategy. A significant milestone was the acquisition of Asian Fidelis Hospital in Faridabad, Haryana, which was successfully completed and rebranded as Yatharth Hospitals Faridabad.

Yatharth Hospitals Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	43.41%	56.59%	75.33%	29.77%	28.87%
Operating Profit Margin (%)	26.42%	29.99%	28.34%	26.52%	0.27%
Net Profit Margin (%)	-1.41%	8.57%	11.01%	12.64%	0.17%
Return on Capital Employed(%)	7.53%	19.30%	27.07%	26.88%	23.60%
Return on Equity (%)	-3.74%	30.91%	46.65%	43.87%	21.70%

Source: Equitymaster

Between 2020-2024, the business has performed exceedingly well, with the sales multiplying by more than 4 times.

The company has turned a profit in FY21, which is up 5 times since then.

As a result, the returns have been strong, with the RoCE and RoE averaging at 20.8% and 27.9%, respectively, over a 5-year period.

Yatharth Hospitals is on a rapid growth trajectory, aiming to double its bed capacity to 2,800 within the next three years. This expansion plan involves both organic growth and acquisitions.

The company plans to invest approximately Rs 60-65 lakhs per bed for the expansion of its existing Noida and Greater Noida facilities, with a target of adding 450 beds.

This translates to a potential capital expenditure of around Rs 273-292 m for these projects.

Yatharth is exploring acquisition opportunities, budgeting approximately Rs 7 m per bed.

The hospital chain is focusing on strengthening its presence in Uttar Pradesh, Madhya Pradesh and Haryana.

To know more about the company, check out its financial factsheet and latest financial results.

In conclusion

The Indian hospital industry is at an inflection point.

Most of the larger companies have pared down their debt substantially and are ready for the next leg of growth.

While challenges such as infrastructure gaps and talent shortages persist, the industry's potential is undeniable.

Strategic investments in infrastructure, technology and talent development will be crucial for hospitals to capitalise on the opportunities.

For investors, meticulous research and due diligence are important.

By analysing individual company strategies, risk profiles, and financial health, investors can make informed decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...