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Moving to a relatively quiescent phase?

After two years, India has finally declared that the pandemic situation has improved, and there is a contraction in the spread of Covid-19 infection. Unlike in the previous Covid surge, the current coronavirus variant surgery is safe, and a decline in daily positivity and fatality rates, and an increase in vaccine doses is seen.

Hospitals are witnessing a strong revival in non-Covid business, supported by a significant jump in inpatient admissions and faster recovery in elective surgeries, which are closer to pre-Covid levels. Medical tourism that forms 12 percent of most large hospital revenues also needs to be revived. Challenges, as Indian government being selective in granting medical visas and slowdown of some international economies, remain.

The hospital sector that accounts for 80 percent of the total healthcare market is growing at a CAGR of 16–17 percent, poised to reach Rs 9.768 lakh crore by 2023. The Q3 FY22 results are encouraging. Aster DM Healthcare announced a 19-percent YoY increase in revenue in Q3 FY22, at Rs 2650 crore compared to Rs 2228 crore, and a 22-percent increase in EBITDA to Rs 409 crore, from Rs 334 crore. PAT increased by 57 percent in the corresponding period. Narayana Hrudayalaya’s revenues were up 27.9 percent YoY to Rs 959.6 crore, EBITDA up 66.8 percent YoY at Rs 175 crore, with margins at 18.2 percent, and PAT up 138.9 percent at Rs 97.5 crore in Q3 FY22.

The listed clinical laboratories are looking for new sources of growth to fuel investor interest. Surging healthcare spending and demand for Covid tests led to multi-fold share-price gains during the pandemic. Those gains have started to fade away as outbreaks ease and countries look to reopen. The tumble in the lab stocks accelerated since the start of the year after disappointing results, missing analysts’ profit estimates. Dr Lal PathLabs reported a revenue of Rs 497 crore in Q3 FY22, a growth of 9.8 percent YoY, and EBITDA margin at 28.5 percent versus 28.4 percent in Q3 FY21. Metropolis Healthcare saw revenues increase from Rs 274.21 crore in Q3 FY21 to Rs 293.1 crore in Q3 FY22, with a decline in EBITDA margin from 32.8 percent to 27.5 percent in the same period, (PAT declined from Rs 58.6% to 41.2%). Vijaya Diagnostics saw a 10.9-percent YoY revenue growth in Q3 FY22 to Rs 110 crore, while EBITDA margin shrunk 330 bps YoY to 43.2 percent and PAT grew 2.3 percent to Rs 25.3 crore. The Thyrocare-PharmEasy combine revenues in Q3 FY22 dropped 35 percent sequentially and 17 percent from the year-ago quarter.

Shifting gears, in the recently announced Union Budget 2022-23, the healthcare sector witnessed a 16.5-percent increased public spend, from Rs 73,932 crore in FY21 to Rs 86,200 crore in FY23, with a focus to strategically increase patient access by developing more hospitals, gauge investor interest by launch of digital health and mental health programs, and provide employment opportunities by increasing the allocation for human resources. Going forward, a clear roadmap for implementing the new and flagship schemes is needed for optimum health outcomes. There is an urgent need to augment additional funding and devise a national agenda around preventive health, testing, and screening as these are key to reducing the overall disease burden in India.

While, the brand-new Deltacron variant, not yet detected in India, looms large on the horizon, India has taken the initiative urging the G20 countries, including IMF, to close gaps in global health systems and ensure increased multi-lateral funding for low-middle-income and middle-income countries to prepare for future pandemics.

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