India’s insurance penetration rises to 41% on public schemes growth

India’s healthcare and hospital sector is moving to aggressive expansion.

India’s insurance penetration rose to 41% in fiscal year 2024, led largely by public insurance schemes. 

Overall, India’s healthcare and hospital sector is moving from a period of consolidation to aggressive expansion, driven by a persistent mismatch between healthcare demand and supply, according to a report by Asit C. Mehta Investment Interrmediates Ltd. (ACMIIL), a Pantomath Group Company.

Most new hospital projects are focused outside of core metropolitan areas, responding to rising demand in smaller cities.

Whilst the sector’s asset-heavy model continues to constrain returns on capital employed compared to retail and staples sectors, higher margins offer partial support. 

Valuations for hospital companies have rerated but are seen as justified given the sector’s growth prospects and margin resilience.

However, challenges such as pricing regulations, affordability ceilings, and competition from single-specialty hospitals may impact margins in the coming years.

Corporate hospitals, supported by stronger balance sheets and increased healthcare awareness after COVID-19, are targeting expansion primarily in Tier 2 and smaller cities whilst maintaining their presence in major metros. 

Growth drivers include higher insurance penetration, an ageing population, and rising medical tourism.