New Delhi: India’s health care services sector is expected to maintain its strong growth momentum in the coming quarters, with rising occupancy at newly commissioned hospitals likely to support profitability and margin expansion, according to Kotak Institutional Equities. The brokerage expects hospital profitability to inch up as new units ramp up, while diagnostics companies are likely to benefit from sustained volume-led B2C demand and improving realisations.
The outlook follows a strong first quarter for the sector, with Indian hospitals under Kotak’s coverage reporting a 21 per cent year-on-year increase in revenue and a 22 per cent rise in EBITDA in Q1 FY27.
Average revenue per occupied bed (ARPOB) growth remained healthy at 5-14 per cent across hospitals, supported by a combination of higher patient volumes, improved realisations and contributions from newly added beds.
All hospital companies covered by Kotak reported double-digit year-on-year sales growth during the quarter. Apollo Hospitals’ hospital revenue increased 22 per cent, while Aster DM Healthcare, Medanta, and Rainbow Children’s Medicare recorded growth of 22 per cent, 27 per cent and 33 per cent, respectively. KIMS posted the strongest growth among the major hospitals at 35 per cent, driven by ramp-up across its Maharashtra, Kerala, and Karnataka clusters.
However, rapid capacity additions continued to weigh on margins. Operational beds across the Indian hospital coverage increased 15 per cent year-on-year, while capacity beds rose 16 per cent. The resulting ramp-up costs and losses at newly commissioned or acquired facilities kept the aggregate hospital EBITDA margin at 23 per cent, broadly flat year-on-year. Kotak expects this pressure to ease as occupancy improves at newer facilities.
The diagnostics segment delivered an equally strong performance. Companies under coverage reported 18 per cent year-on-year sales growth and 29 per cent EBITDA growth, driven by higher test and patient volumes, better realisations and sustained B2C traction. Dr Lal PathLabs reported 19 per cent sales growth, while Metropolis Healthcare grew 17 per cent, with organic growth of around 16 per cent.
