India's big hospital chains think small to expand in booming market

Rainbow Childrens Medicare

21/12/2023 07:02

By Aby Jose Koilparambil and Rishika  Sadam
       Dec 21 (Reuters) - India's prominent hospital chains are
shifting their focus to smaller centres and facilities as they
chase growth in the booming healthcare market while coping with
higher real estate costs and a dearth of land space in its
cities.
    Though healthcare facilities are still in short supply in
most parts of India, and especially so in its towns and smaller
cities, patients in the world's most populous nation are showing
a greater preference for specialised-but-accessible amenities in
the post-COVID pandemic era.
    That trend is expected to form the bedrock of demand in the
Indian healthcare market, which, according to forecasts by
global consulting firms Boston Consulting Group and B Capital,  
is expected to grow near three-fold over eight years to $458
billion in 2030. 
    "We don't build facilities with 600-700 beds anymore as you
have to be catering to a micro market," Temasek-owned Manipal's
Managing Director and Chief Executive Officer Dilip Jose said,
highlighting how India's second-largest hospital chain plans to
focus on units with 250-325 beds.
    The change is also reflective of infrastructure issues.
    "Metro Indian cities are too large and the traffic at these
cities is making it difficult for people for travel to one large
hospital," said a spokesperson at children's-hospital chain
Rainbow  RAIB.NS .
    That is forcing hospitals to evaluate "micro markets" within
the cities and build smaller hospitals to cater to them.
    India has 1.3 beds per 1000 people, well below the World
Health Organization recommended ratio of 3 per 1000, indicating
it needs 2.4 million additional beds, a study by property
consultancy Knight Frank and its US partner Berkadia showed. 
    It needs an additional 2 billion square feet of healthcare
space to cater to its 1.42 billion people, the study said.
    CHANGING TACK
    Healthcare providers are also looking to get more bang for
their buck.
    "Bringing the services closer to the customers is to a large
extent also driven by the economies of scale, which best works
up to a sizing of 300-350 beds," said Saurabh Mehrotra,
executive director, valuation and advisory at Knight Frank
India.
    Some hospital chains such as Fortis Healthcare  FOHE.NS ,
partly owned by Malaysia's IHH Healthcare  IHHH.KL , are
shifting gears to cope with volatile real estate prices. 
    Fortis is relying mostly on "brownfield" sites, or land that
has previously been built on, rather than land that has yet to
be developed, while expanding.
    "This approach allows us to efficiently advance our
expansion plans without the burden of fluctuating land prices,"
Fortis MD and CEO Ashutosh Raghuvanshi said.
    Manipal will rely on the "smaller is better" formula while
expanding in metros such as Hyderabad and Pune, and Tier 2
cities in Kerala, Andhra Pradesh and Maharashtra, CEO Jose said.
    India's largest private hospital chain Apollo Hospitals
 APLH.NS  aims to add 2,860 beds over the next three years,
including in Tier 2 cities such as Mysore and Varanasi, while
Rainbow will focus on expanding in the smaller cities of Andhra
Pradesh and Tamil Nadu.
    Some of the larger Indian healthcare providers are also
moving to an asset-light strategy, keeping the land and building
out of their books, according to Knight Frank's Mehrotra,
forcing commercial property firms to change too.
    "Now, the developers are more amenable to build-to-lease and
have a 20-30-year contract with a visibility on cash flow than
to build with a purpose to sell," the Rainbow spokesperson said.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
India lags major economies in key healthcare metrics    https://tmsnrt.rs/3TsJ2g9
India's healthcare market, estimated to be at $372 bln in 2022,
has grown significantly over the last decade    https://tmsnrt.rs/487YrXG
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Aby Jose Koilparambil in Bengaluru and Rishika
Sadam in Hyderabad; Editing by Dhanya Skariachan and Muralikumar
Anantharaman)
 ((abyjose.koilparambil@thomsonreuters.com))