India Ratings and Research (Ind-Ra) has maintained a Neutral Outlook for the corporate healthcare sector for FY26. The agency cites robust demand, sustained profitability improvements, and carefully calibrated capacity expansions as key factors expected to secure a comfortable liquidity position and enhance the overall credit profile of the sector.

Ind-Ra forecasts that its coverage companies will deliver approximately 15% year-on-year sales growth over FY25-FY26. This growth is anticipated to be driven by several factors:

Average Revenue per Occupied Bed (ARPOB): Expected to increase by 5-6% year-on-year.

Occupancy Rates: Projected improvement of 100-200 basis points.

New Bed Additions: Estimated growth of 6-8% year-on-year.

Highlighting the sector's growth potential, the agency noted that Indian hospitals are poised for significant expansion in the near to medium term as healthcare infrastructure upgrades to meet global standards continue.

“Ind-Ra’s rated healthcare coverage in the large corporate space is likely to deliver strong sales growth (15% yoy) in FY26, primarily led by growth in ARPOB and new bed additions. Acquisitions of small hospitals not only boost larger players’ financial position and improve economies of scale but also provide growth opportunities for larger chains. An efficient capital deployment and successful execution will remain key monitorables,” said Vivek Jain, Director, Corporate Ratings at India Ratings & Research.

In terms of profitability, Ind-Ra expects EBITDA margins to rise to 20.9% in FY26, up from a projection of 20.0% in FY25. This projection comes despite anticipated capacity expansions and the associated increase in overhead costs from new facilities. During FY24, healthcare players recorded EBITDA margins of 19.5%, a notable improvement compared to an average of 13.8% during FY17-FY23. The margin improvement has been driven by:

Increased ARPOB,

A better payer and case mix,

Stringent cost control measures,

A rise in surgical volumes and a higher proportion of oncology cases.

The agency also anticipates a 20% year-on-year growth in absolute EBITDA for the coverage companies in FY26. Large hospitals in India, which have demonstrated robust performance in key operational metrics post-COVID-19, are expected to continue this trend. Specifically, the average ARPOB is projected to grow by 5-6% year-on-year in FY26, despite a deceleration compared to previous years due to a higher base effect and the inclusion of tier-II and tier-III patients with a weaker payer mix.

Despite significant capital expenditure—projected to reach INR112 billion in FY26 compared to INR95 billion in FY25 and INR60 billion in FY24—Ind-Ra expects the net leverage ratio to remain stable at around 1x. This stability is attributed to strong operating profits and sufficient free cash flow. Liquidity levels are expected to remain adequate, with sector companies maintaining liquidity scores well above 1x (within a range of 1x-10x), supported by long-tenure repayment structures spanning eight to ten years.

Ind-Ra continues to closely monitor its rated portfolio. The agency has cautioned that any material deviations in the credit metrics from its expectations could result in a rating downgrade, underscoring the importance of efficient capital management and strategic execution in the evolving healthcare landscape.