India hospital chains to invest Rs 14600 crore; add 17800 beds

India’s creaking healthcare infrastructure is set to receive a healthy boost of CapEx from private hospitals. In their first meaningful expansion since Covid, leading hospital chains have firmed up plans to cumulatively invest more than ₹14,600 crore to add about 17,800 beds nationwide over the next three to five years.

Manipal Hospitals, Aster DM Healthcare, Apollo Hospitals and Max Healthcare, among several others, are working to add more beds in the coming years to meet the rising demand for healthcare (see chart for details).

“Healthcare is a fragmented sector,” said Dilip Jose, MD & CEO of Bengaluru-based Manipal Hospitals. There is a lot of opportunity to grow and consolidate, and we just want to continue our growth momentum.”

Analysts attributed the explosion in CapEx for developing hospitals to, among other things, rising insurance penetration following the Covid-19 pandemic, and especially the government’s PM Jan Arogya Yojana, which aims to offer free health insurance to 550 million citizens.

Mehul Sheth, deputy vice president, institutional research (pharma and healthcare) at HDFC Securities, said, “There are multiple reasons for bed-capacity expansion, such as increasing cases of non-communicable diseases, insurance penetration, and also because the utilisation levels for some hospital chains are reaching optimal levels of 75-80% (for example, Max Healthcare is running at 75-76% occupancy).”

Analysts expect large cities to be the main beneficiaries of the expansion plans. “Metros are expected to remain focal points for this capacity expansion,” said Mythri Macherla, assistant vice president & sector head at rating agency Icra. “Cities such as Delhi NCR, Mumbai and Bangalore are expected to witness sizeable bed additions in the next few years.”

Who’s investing, where, and how much
Among the biggest upcoming investments of roughly ₹2,000 crore would be from Medicover Hospitals, a Sweden-based multinational specialty hospital group, which currently has 5,500 beds across in more than 21 hospitals across in Maharashtra, Andhra Pradesh, Karnataka, and Telangana. The group plans to increase its capacity to more than 10,000 beds in the next five years, the company’s chairman and MD Anil Krishna said.

“We as a country have a shortage of beds and with the population growing, there is a huge demand-supply gap,” said Krishna. “But the economy is strengthening, and the middle class is also growing rapidly, so there is a change in dietary habits leading to an increased need for healthcare.” Krishna expects spending on healthcare to continue to increase over the next decade or so.

Then, CK Birla Hospitals is expanding in the Delhi National Capital Region over the next 12-18 months. “We are looking to expand beyond Delhi NCR as well, and this investment would be about ₹1,000 crore,” Akshat Seth, vice chairman of CK Birla Healthcare said. “We also have an expansion planned at our Jaipur hospital. After all this, we could have more than 1,500 beds in the country.” It currently has around 1,200 beds.

Bengaluru-based Aster DM Healthcare, which has 19 hospitals across five states, is also looking to invest more than ₹2,000 crore to double its bed capacity to 10,000 over the next three years through acquisitions and organic growth, chief executive Nitish Shetty had told Mint in an interaction. The company plans to expand in the North and West, especially in Uttar Pradesh.

The biggest investment is expected from Delhi-based hospital chain Max Healthcare. The company plans to invest around ₹5,000 crore to double its capacity across its network of hospitals by adding 4,200 beds in the next four to five years, a company spokesperson said. The group currently has 4,000 beds and plans to raise it to 8,200.

The company recently announced it will invest ₹2,500 crore, part of the five-year plan, to develop a new 500-bed hospital, and to expand the capacity of the recently acquired Max Super Specialty Hospital in Lucknow. It has 19 healthcare facilities, with eight hospitals and four medical centres located in Delhi NCR, and the rest across six other cities.

Manipal Hospitals, which recently acquired a majority stake in Kolkata-based healthcare group Medica Synergie for an estimated ₹1,400 crore, has said it will increase its presence across the country through a mix of organic and inorganic expansion. The acquisition will see Manipal Hospitals increase its bed count from 9,500 currently to more than 10,500.

The group is keen to augment its footprint in key regions such as Kerala, Hyderabad, Vizag, Pune, and Delhi NCR. It did not disclose the allocated capital expenditure (CapEx) for these expansions.

Meanwhile, Jagat Pharma, an Ayurvedic healthcare group, plans to invest ₹100 crore to expand to cities such as Pune, Bangalore and Chennai, a spokesperson of the company said.

Explosive growth ahead
HDFC securities estimates India’s healthcare sector will grow at a compounded annual growth rate (CAGR) of 11-12% over the next five years. As per the Indian Brand Equity Foundation (IBEF), the Indian healthcare market is projected to reach $638 billion by 2025 from $110 billion in 2016.

Driving this growth is the assurance that is brought about by health insurance. According to data from the Insurance Regulatory and Development Authority of India (IRDAI) and the red herring prospectus of Medi Assist, the number of people with medical insurance in India has more than doubled from 216 million in 2014 to an estimated 594 million as of March 2023.

Meanwhile, rating agency Icra estimates that private firms will invest ₹32,500 crore to add more than 30,000 beds in the next four to five years. LiveMint