'Occupancy recovery will drive corporate healthcare profitability'

NEW DELHI: Occupancy recovery, along with cost control measures, will drive corporate healthcare's FY22 profitability, an India Ratings and Research (Ind-Ra) report said. It said the outlook for the hospital sub-sector is stable in view of robust demand drivers, moderation in capacity enhancement capex and improvement in profitability at new hospitals.

"Revenue recovery to FY20 level along with the focus of the management on cost control and significant moderation in capex is likely to improve with cash generation in FY22 with free cash flow generation turning to moderately positive," the Ind-Ra report said.

"However, continued international travel restrictions and intermittent local lockdowns owing to the resurgence of infections would continue to impact the hospitals located primarily in metros and Tier I cities which derive a considerable revenue share from the margin-accretive complex and elective surgeries as well as medical tourism."

Besides, the report cited that amid increased competition in metros and Tier I cities, majority of the beds added by large hospital players over the last five years are in less-crowded Tier II cities which have seen a strong demand during the pandemic.

"While increasing competition and acquisition-led expansion could compress margin, the headroom available to absorb shock remains comfortable." (IANS)

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