India has world-class hospitals and doctors, but quality healthcare remains expensive for the average Indian. At the same time, private hospital companies are seeing strong growth, supported by new bed additions and rising patient volumes, which are driving revenue and EBITDA growth.
Let’s take a closer look at India’s healthcare paradox and the growth story of private hospitals, and understand whether this trend is truly good news for the sector.
What’s Happening?
India’s healthcare sector has become an attractive investment opportunity for major global investors. Big names such as Blackstone, BlackRock, KKR, Carlyle, Temasek, and Vanguard are investing in Indian hospitals, pharmaceutical companies, insurers, and diagnostic firms. However, these investments cannot always be viewed as efforts to build healthcare infrastructure for the long term. In many cases, the focus is on generating returns and eventually exiting, turning healthcare increasingly from a social service into a profit-driven asset.
This is happening at a time when government spending on healthcare in India remains low. Government healthcare spending stands at just 1.43% of GDP, while the National Health Policy 2017 had set a target of raising it to 2.5%. Meanwhile, the 176th Parliamentary Standing Committee report made 368 recommendations on healthcare affordability and accessibility.
According to the report, the average cost of hospitalisation is Rs 6,631 in government hospitals, compared with Rs 50,508 in private hospitals, nearly eight times higher. For childbirth, the out-of-pocket expenditure is Rs 2,299 in government hospitals versus Rs 37,630 in private hospitals, highlighting the significant affordability gap.
Private Hospital Sector’s Strong Q1 FY27
Indian hospitals tracked by Kotak Institutional Equities posted 21% YoY revenue growth and 22% EBITDA growth in Q1 FY27. The sector’s outlook remains strong as occupancy levels continue to improve in newly commissioned hospitals.
ARPOB (average revenue per occupied bed) grew 5-14% during this period, supported by higher patient volumes and better realisations. Apollo Hospitals’ hospital revenue rose 22%. Aster DM grew 22%, Medanta 27%, and Rainbow Children’s Medicare recorded 33% growth.
Capacity Addition and Margin Pressure
Operational beds increased 15% YoY, while capacity beds were 16% higher. However, ramp-up costs at new facilities kept the aggregate EBITDA margin flat at 23%. KIMS delivered 35% revenue growth, driven by the ramp-up of its Maharashtra, Kerala, and Karnataka clusters.
Kotak Institutional Equities expects margin pressure to ease as occupancy improves at new facilities. The diagnostics segment reported 18% sales growth and 29% EBITDA growth. Dr Lal PathLabs gained 19%, while Metropolis grew 17% organically.
The Affordability Paradox and Government Steps
According to IBEF, India is one of the world’s most affordable destinations for major surgeries for foreign patients. Treatment costs are around one-tenth of those in the US or Western Europe, supporting the growth of medical tourism. Out-of-pocket expenditure stood at 62.6% in 2014-15 and fell to 43.4% by 2022-23. Still, a serious illness can put a significant financial burden on a family.
The government increased the number of medical colleges from 387 in 2014 to 823 in 2025-26. MBBS seats also increased from 51,348 to 1,39,489. As of 30 June 2026, 20,149 Jan Aushadhi Kendras were operational, offering medicines at 50-80% lower prices and helping save Rs 45,000 crore over 12 years.
What Does This Mean for Investors?
Revenue and EBITDA growth in private hospital companies is creating a strong long-term growth story. However, adding new beds can put pressure on margins during the initial phase. Therefore, investors should closely monitor the occupancy ramp-up of new beds and trends in ARPOB (Average Revenue Per Occupied Bed).
Meanwhile, diagnostic companies such as Dr Lal PathLabs and Metropolis
Healthcare could see steady growth, supported by strong B2C demand and rising test volumes. However, affordability regulations and price caps could affect the pricing power and profitability of private healthcare companies.
What’s Next?
Over the coming quarters, rising occupancy at new hospital units could support profitability and margin expansion. If the government increases healthcare spending to 2.5% of GDP, district hospitals and the public healthcare system could become stronger.
Over the long term, both medical tourism and domestic demand could drive growth across the sector. However, the uneven geographic distribution of doctors and hospital beds remains a major challenge. Rising global investments, private capacity expansion, and potential policy reforms will determine whether Indian healthcare becomes merely a global profit opportunity or also becomes more accessible to a broader section of the population.
This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
