Private hospitals will grow ~14-15% in fiscal 2027, supported by healthy occupancy and ongoing bed additions, with new facilities ramping up faster. This will mark the fifth consecutive year of double-digit revenue growth, while realisations reflected in average revenue per occupied bed (ARPOB), continue to improve, driven by a higher share of complex, high value treatments.

Healthy demand and operating leverage will help sustain operating margin at 20-21% despite ongoing investments as hospital chains expand. However, strong internal accruals will finance a large part of this spending, limiting reliance on external borrowings and, thereby, ensuring credit profiles remain healthy.

Our analysis of 98 private hospitals, accounting for nearly two-thirds of the sector's revenue, which was ~Rs 78,500 crore in fiscal 2025, indicates as much.

ARPOB for the portfolio under review is poised to rise 5-7% to ~Rs 52,200 next fiscal, driven by increasing share of complex, high-value treatments across key specialties such as cardiology, oncology, neurology, gastroenterology and orthopaedics (CONGO; refer chart in annexure), and an improving share of insurance patients.

Says Anuj Sethi, Senior Director, Crisil Ratings, “The share of CONGO specialties has increased to ~62% in fiscal 2025 from ~59% pre-pandemic, reflecting a rise in incidents of complex, high value treatments which has supported ARPOB improvement. Further, the recent CGHS¹ rate revision is expected to improve procedure viability for hospitals and be favourable for patients by reducing their out-of-pocket costs. Additionally, the GST² exemption on health insurance premiums for individuals and families should support insurance uptake, enabling more hospitalisations. Together, these factors are likely to support patient volumes and bed occupancy at ~65% despite ongoing capacity additions, thereby supporting ~14-15% revenue growth.”

Sustained healthy occupancy, along with faster ramp-up of new facilities (now achieving breakeven within 12-18 months compared to 3-4 years earlier), is supporting operating margins. Expansion has been a mix of brownfield additions, greenfield projects and acquisition of operating assets, enabling quicker stabilisation and early cash flow generation. With this approach continuing, the drag from initial costs incurred upfront as new facilities scale up, is likely to remain limited, helping sustain operating margins at 20-21% despite high investment intensity.

Alongside this shift in expansion strategy, large private hospital players have undertaken acquisitions worth ~Rs 11,000 crore over fiscal 2024-2026, adding ~4,300 beds. This implies a ~2.2 times valuation premium³ paid for acquiring operational assets upfront. Importantly, these deals have been funded through a prudent mix of internal accruals, equity and moderate external borrowing, helping contain balance sheet risks.

Investments, across organic (greenfield and brownfield) and inorganic (acquisition) routes, is set to remain elevated, as it continues to underpin bed additions, a key growth driver.

Says Poonam Upadhyay, Director, Crisil Ratings, “Organic bed additions are set to scale up, with over 10,000 beds becoming operational over this fiscal and next, including ~6,000 beds in the current one. That is more than double ~4,500 added in the preceding two years, underscoring the elevated pipeline. The expansion mix has shifted from 60:40 (organic:inorganic) to 80:20, as large acquisition opportunities are now limited, with most remaining assets being smaller and regional. Players are thus entering such markets through selective acquisitions and then scaling up organically. Expansion remains focused on metros, high-ARPOB clusters, and select Tier-2 cities, where higher-value treatments remain underpenetrated due to limited access to advanced infrastructure and specialists.”

With a large number of beds becoming operational, the capex run rate for organic expansion is expected to remain elevated at ~Rs 13,000 crore in fiscal 2027, compared with ~Rs 12,000 crore in the current fiscal. However, reliance on external debt should remain limited, supported by healthy internal accruals. As a result, key debt protection metrics such as interest coverage and debt to Ebitda⁴ should remain healthy at ~6 times and 1.7 times, respectively, broadly in line with current levels.

Going ahead, sustaining occupancy and ARPOB will be critical to maintaining revenue growth momentum. Elevated acquisition valuations and their potential balance sheet impact, along with timely ramp-up of new capacities without margin pressure will remain key monitorables.

¹ CGHS refers to Central Government Health Scheme
² Goods and Services Tax
³ Valuation premium is the ratio of acquisition cost per bed (deal value per bed) to the organic cost of setting up a bed
⁴ Ebitda is earnings before interest, tax, depreciation and amortisation