ICRA retains positive outlook on hospitals, stable on pharma

New Delhi: The business outlook for the Indian hospital industry remains Positive, reflecting expectations of continued robust operating metrics on the back of strong structural tailwinds, according to credit rating agency ICRA.

ICRA’s sample set of eleven leading listed hospital companies is expected to witness robust revenue growth of 16-18% in FY2026 and 18-20% in FY2027, supported by sustained high occupancy and healthy average revenue per occupied bed (ARPOB).

Commenting on the sector, Ms. Mythri Macherla, Vice President and Sector Head, Corporate Ratings, ICRA Limited, said, “The performance of the Indian hospital industry is expected to remain strong in FY2026 on the back of healthy occupancy and ARPOB. ICRA expects occupancy of its sample set companies to remain robust at 62-64% in FY2026 (63.5% in FY2025), while the ARPOB is expected to expand by 6-8%.”

This follows a strong first half, where the sample set witnessed a 16% year-on-year revenue growth in H1 FY2026, supported by occupancy of 63.3% and a 7.8% increase in ARPOB. The operating profit margin (OPM) in H1 FY2026 remained healthy at 23.7%, aided by improved case mix and cost optimization.

“Cost optimization efforts along with an improving case and payor mix will support operating profit margin (OPM) of 22-24% for the sample set companies in FY2026 (23.6% in FY2025),” Macherla added.

ICRA notes that despite sizeable greenfield and brownfield expansions planned across metros, tier-II and tier-III cities, the credit profile of its sample set is projected to remain healthy, given the strong accrual expectations.

“Despite ongoing debt-funded capital expenditure, debt metrics for the sample set companies are expected to remain comfortable backed by healthy cash accruals. ICRA thus continues to have a Positive outlook on the Indian hospital industry,” Macherla further commented.

For the pharmaceutical sector, ICRA has affirmed a ‘Stable’ outlook for FY2026, projecting a 9-11% revenue expansion for its sample set of companies

“Revenues of ICRA’s sample set of Indian pharmaceutical companies are expected to grow by 9-11% in FY2026,” said Ms. Mythri Macherla.

She added, “This will be supported by healthy growth of 8-10% in the domestic market and 15-17% in the European markets, while pricing pressure on certain key drugs such as Lenalidomide will result in moderation in the growth in the US market to 4-6%.”

The operating profit margin (OPM) for the sample set is expected to remain stable at 24-25% in FY2026, supported by healthy performance in key markets and stable raw material costs.

“ICRA maintains its Stable outlook on the Indian pharmaceutical industry, arising from healthy earnings outlook coupled with a comfortable credit profile and strong liquidity position of major industry participants, despite higher capex outlay towards acquisitions, and R&D expenses,” Macherla noted.