NEW DELHI: The healthcare industry is likely to witness a 20% revenue growth in financial year 2022 and outlook for the sector remains ‘stable’ with swift recovery seen in performance despite covid-19 challenges, credit rating agency ICRA has said.
The occupancy of companies in the sector is expected to bounce back substantially to 60% in financial year 2022, from the projected occupancy of 52% in 2021, ICRA said in a statement.
“There has been significant sequential improvement in occupancy every month after the sharp fall in April and majority of the players are expected to be back in operating profits, starting from the month of August,” said Kapil Banga, assistant vice president, ICRA.
Pent-up demand is also likely to support the performance, as elective procedures cannot be delayed indefinitely, by domestic as well as international patients, it said. Significant capex in the last five years has started contributing to the profitability, and the capex as well as start-up costs of new hospitals are likely to be much lower going forward, which will also aid profitability and debt protection indicators over the medium term.
The credit risk profile of entities in the sector had been on an improving trajectory over the last two years and notwithstanding the near-term disruption, as well as given the essential nature of the services, the sector will report a speedy recovery.
Nevertheless, the performance has been weak in the last three quarters, although the worst is behind for the sector; occupancy plunged across all the players in the sector due to lockdown, restrictions on movement of people, suspension of international flights, cautious approach adapted by patients as well as hospitals due to fear of infection, sharp drop in OPD footfalls, and postponement of elective surgeries, ICRA said.
It said that as a result, the average occupancy of companies in ICRA’s sample set dropped from 59% in Q1 FY2020 to 37% in Q1 FY2021 and the average revenue per occupied bed fell by 1% in Q1 FY2021.
The companies in sample set reported a 39% decline in revenues and posted EBITDA loss of ₹231 crore in Q1 FY2021, against an EBITDA of 620 crore in Q1 FY2020. The operating margin fell from 14% to 9% during this period. To weather the impact, the entities have reduced costs to the extent of 15-20%, and the largest cost rationalisation has happened in doctor and employee expenses, which is the largest cost for hospitals,” said ICRA.
Among the various specialties, critical ailments such as oncology and cardiology have seen faster recovery from the lows while orthopaedics has been lagging during this period. Additionally, emergency and trauma as well as mother and child departments have been relatively resilient although lower traffic flows have impacted even the emergency and trauma revenues to an extent,” it said.
“Over the medium-to-long run, the demand is expected to continue to rise steadily, given the underlying fundamentals, including a growing population, increasing life expectancy, rising incidence of non-communicable lifestyle diseases, growing per capita spend, increasing penetration of health insurance and double-digit rise in medical tourism (excluding impact of Covid-19),” Banga said.
On the supply side, India currently faces significant shortage of beds and government investments towards hospital bed addition are limited. This provides private sector players with the opportunity to step in to fill the gap, he said.
Catch all the Business News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess