Hospital sector on recovery path after more than two years of underperformance: Report
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
The hospital sector is seeing better days ahead after more than two years of subdued performance. The tough days were triggered primarily on account of several regulatory measures, including the cap on prices of stents by National Pharmaceutical Pricing Authority (NPPA), cap on prices of knee implants by the NPPA, adverse impact of rollout of Goods and Services Tax (GST) on profitability, and strict regulatory actions taken by multiple states, including putting restrictions on procedure rates, levying penalties and placing operational limitations on erring hospitals.
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 to ramp up.
Kapil Banga, assistant vice president – Corporate Ratings, ICRA, said: “In line with our expectations, the performance of the players in the sector has likely bottomed out, after struggling for more than two years. Nonetheless, the regulatory environment continues to be the overarching challenge for the hospital sector; the wide-ranging regulatory restrictions from multiple authorities had supressed their margins.”