Financials back on track for hospitals and labs

With the pandemic showing signs of abating and a 16–18-percent CAGR growth expected in health spends in India, the hospitals and diagnostic centers are chalking out major expansion plans and enhancing their capacities. Setting up more beds is on the drawing boards for many.

Max Healthcare is planning to set up 3300 more beds over the next five years, KIMS 2400, Apollo Hospitals 2000, Aster DM 1860, and Fortis 1000 more beds. Other brownfield routes, like taking over and refurbishing existing sites in key geographies and operate-and-manage (O&M) contracts in smaller regions, are also being taken. The medical facilities also plan to spend for replacement CapEx and growth. Apollo, for instance, is looking at acquisitions in markets like NCR and Mumbai, where it has a limited presence. Manipal Hospitals too are going for greenfield projects as adding 250 beds each at Bangalore, Vijayawada, and Jaipur. Commitments as Axis Bank’s USD 150-million loan to healthcare sector are encouraging.

This is supported by the turnaround in revenues of the service providers. Six leading listed hospital groups, Apollo Hospitals Enterprise, Narayana Hrudayalaya, Max Healthcare Institute, Aster DM, Healthcare Global Enterprises, and Shalby have seen a combined 41-percent increase in income in the nine-month period, April–December 2021 period over April–December 2020. The combined income of the six hospitals was ₹26,185.83 crore in April–December 2021, up from ₹18,528.56 crore in April–December 2020. Max Healthcare reported a 73-percent increase, Narayana Hrudayalaya a 58-percent, and Apollo and HCG each a 44-percent increase. The combined profit-after-tax (PAT) saw an 803-percent increase in the same period, with Apollo Hospitals Enterprise reporting a whopping 5620-percent increase, from a loss of ₹17.49 crore to a profit of ₹965.47 crore. The combined PAT of the six hospitals was ₹2111.18 crore in April–December 2021, as compared to a loss of ₹300.35 crore in April–December 2020.

The leading diagnostic centers fared well too. The four listed labs, Dr Lal PathLabs, Thyrocare Technologies, Metropolis Healthcare, and Vimta Labs reported a combined increase in revenue of 36 percent, ₹3267.38 crore in April–December 2021, up from ₹2405.35 crore in April–December 2020. The combined PAT of the four labs was ₹642.09 crore in April–December 2021, as compared to ₹419.27 crore in April–December 2020, an increase of 53.14 percent.

Shifting gears, USA has replaced the European Union as the priority market for medical device companies, and has emerged as the go-to market for global launch, with MedTechs planning to prioritize FDA authorization, going forward. The shift is driven by EU’s complex and unpredictable Medical Device Regulation, which took effect in mid-2021 and has made gaining a CE mark more difficult. The downturn in the attractiveness of the EU has happened at a time when FDA has courted the MedTech industry. An interesting development indeed!