Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Industry News

| More

ICRA Analysis: Hospital sector performance on the growth path after two years of subdued performance

Posted On: 2019-12-26 06:55:00


- Aggregate revenues of companies in sample set grew by a healthy ~14% on a Y-o-Y basis in Q2 FY2020 over Q2 FY2019; EBITDA grew by a robust ~38% and EBITDA margin improved from 13.0% to 15.7%

The Hospital sector has come out of troubled times after more than two years of subdued performance on account of several regulatory measures. As per ICRA analysis, during Q2 FY2020 the aggregate revenues of companies in its sample set[1] grew by a healthy ~14% on a Y-o-Y basis, from Rs. 4,206 crore in Q2 FY2019 to Rs. 4,807 crore in Q2 FY2020. The EBITDA grew by a robust ~38%, from Rs. 547 crore to Rs. 757 crore, and the EBITDA margin improved substantially from 13.0% to 15.7% during the same period on account of better revenues and; the positive impact of implementation of IndAS 116.

Giving more insights, Mr. Kapil Banga, Assistant Vice President, ICRA, said, "In line with our expectations, the performance of the players in the sector has improved, after struggling for more than two years. Factors that have worked in favour of the sector are the waning impact of the regulatory restrictions, improvement in occupancies of the hospitals, increase in the ARPOB and the effect of the multiple efficiency improvement initiatives undertaken by the players. Nonetheless, regulatory risks remain for the sector."

The cap on prices of stents by the National Pharmaceutical Pricing Authority (NPPA), cap on prices of knee implants by the NPPA and the negative impact of the rollout of Goods and Services Tax (GST) on profitability are several regulatory measures which have adversely impacted the industry's performance. In addition strict regulatory action taken by multiple states, including putting restrictions on procedure rates, levying penalties and placing operational limitations on erring hospitals also had a bearing on the performance. The performance was also impacted due to the start-up cost of new hospitals, owing to significant capex done by the entities in the sector and the long gestation period required for the new facilities.

The revenue growth in Q2 FY2020 was driven by an increase in both the occupancy as well as the average revenue per occupied bed (ARPOB) while the aggregate number of operational beds increased by a modest 2%, from 24,187 beds as on September 30, 2018 to 24,669 as on September 30, 2019. The occupancy of the sample set improved from 61.7% in Q2FY2019 to 62.7% in Q2FY2020, reflecting better asset utilisation. The ARPOB of the sample set grew by a healthy 8% in Q2FY2020 on a Y-o-Y basis, much higher than the six-year compounded annual growth rate (CAGR) of ~6%.

The total debt of the companies in the sample set increased from Rs. 10,068 crore as on September 30, 2018 to Rs 12,498 crore as on September 30, 2019, partly on account of the impact of implementation of Ind AS 116. Nonetheless, on account of a significant improvement in performance, the debt protection indicators have improved considerably - total debt/EBITDA improved from 4.36x to 3.14x, interest coverage ratio improved from 2.26x to 3.23x while the net cash accrual/total debt rose from 10.0% to 21.2%.

As per ICRA's estimates, the hospital sector is likely to report 10-12% growth in revenues in short-to-medium term, driven primarily by the increase in occupancy and ARPOB (Average revenues per occupied bed), while the increase in operational bed capacity is likely to be modest as players are focused upon improving the utilisation of existing infrastructure rather than aggressively expanding the network. With rising revenues and improving efficiencies, the sector's debt coverage indicators are also likely to improve going forward.

Concludes Mr. Banga, "We believe the performance of healthcare companies will improve further going forward, though concerns on any incremental regulation having a transient impact remain. Structurally, in the long term, underlying fundamentals like the significant shortage of beds in the country, and the increase in the disease burden and an ageing demographic profile continue to favour the sector. Further, the demand for quality healthcare will be supported by the rising per capita income, increasing penetration of medical insurance, riding healthcare awareness and double-digit growth in medical tourism."

[1] Apollo Hospitals Enterprise Limited, Fortis Healthcare Limited, Narayana Hrudalaya Limited, Healthcare Global Enterprises Limited, Max India Limited and Shalby Limited


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com





Other Headlines:

Honda 2Wheelers India pledges support to its dealer family to maintain business continuity

Moneycontrol Pro reaches a new milestone - 1.5 lakh paying subscribers

Former Executive Director, RBI - Mrs. Surekha Marandi joins SATYA MicroCapital Limited as Independent Director

Arcil commits Rs. 1.5 Crore towards India's fight against COVID-19

Cognizant to acquire Lev to expand Digital Marketing expertise

Hon'ble Finance Minister reaches out to CAs for promoting Vivad se Vishwas scheme

SIAM numbers - Suman Chowdhury, President - Ratings at Acuité Ratings & Research Ltd

Sterlite Power Concludes Sale of Novo Estado

mastertrust Slashes its Trading Fees to Zero, on the MobileApp, for Millennial

CAMS FinServ receives RBI license for Account Aggregator service

Brookfield Properties bags four awards at the ET Now Global Real Estate Congress Awards 2020!

RXIL Digitizes its MSME Onboarding using Jocata GRID

Indian Exhibition of Air Conditioning Industry Draws International Attention

India Post Payments Bank Crosses Milestone of 2 Crore Customers

EFL revolutionises AC's by launching Health Conditioners

BankBazaar Looking to End FY20 at EBITDA Profitability Despite Tough Year for Fintech

Sapient Wealth Advisors organises its 11th annual conference in Pune

ICAI sign MoU with IIM Jammu

Venture Garage Conducts 5th and Final Leg of 'Find Your Investor' Programme in Chandigarh, Supported by Kotak Mahindra Bank

BRICS CCI announces Direct Tax Summit & Awards 2020 in association with Achromic Point

ETMONEY introduces the National Pension System (NPS) on its App

Anviti Insurance Brokers Expands Presence in India, Opens its 7th Office in Delhi NCR - Noida

Global shrimp demand and prices contract following the n-coronavirus pandemic: ICRA

ICAI 70th Annual Function

ETMONEY unveils India's first and only tax saving solution

Cashfree introduces 'Instant Settlements', makes online payments as attractive as cash

TrustLine Announces Successful Closing of Intrinsic Deep Alpha AIF - Category III Offering

Bharti AXA General Insurance Receives IRDAI Nod for Health and Motor Insurance Proposals under Sandbox Project

Ather Energy invites dealers to set up experience centers across India

Restriction on import of refined palm oil will safeguard the margins of domestic palm oil refiners while also improving their capacity utilisation: ICRA

Cognizant Named a Leader in SAP Services by Independent Research Firm

CarDekho becomes first auto fintech platform to process 100 cr of monthly used car loans

Super Surfaces raises half a million USD as Angel Funding

KARVY Group initiates corporate restructuring

ICRA maintains stable year-end outlook for Construction sector

ZestMoney's 0% EMI Launched on Myntra

Ministry of Railways revises tariff of standard meals on static units

ClearTax launches feature of Nil GST Return Filing for CAs and Businesses

Almost 70% of BankBazaar Consumers have a Healthy Credit Score

MSE Financial Services Ltd has commenced online trading

JNPT bags 'Public Port of the Year (container)' at the Samudra Manthan Awards

TAFE Chairman Mallika Srinivasan appointed to the Global Board of U.S.-India Business Council

Mastercard Picks BharatPe for its Start Path Program

Adani Foundation celebrates skilling 50,000 youth

Vikram Solar Brings Solar Energy to 3 More Airports in India

Times OOH helps Godrej Interio set up Experience Zone at Mumbai Airport

Vikram Solar wins CII Award for Customer Obsession Three Years in A Row

Windrose Capital leads the $600K investment round in Nivesh.com

CarDekho closes $70 million round from leading investors in China and Europe

Bosch Power Tools inaugurates Bosch Service Center in Mumbai, India







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019