Healthcare biz on track after two muted years

As per ICRA analysis, during Q2 FY2020, the aggregate revenues of companies in its sample set grew by a healthy 14% on a Y-o-Y basis, from Rs 4,206 cr 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 (accounting standard).

Kapil Banga, AVP, ICRA, said, “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 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 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.