India’s leading private hospitals are expected to add approximately 14,500 beds over FY26 and FY2027, with a combined capital expenditure of ₹30,000 to 32,000 crore, says a report by rating agency ICRA.

The industry is projected to maintain strong occupancy levels of 62 to 64%, record a 6 to 8% growth in average revenue per occupied bed (ARPOB), and sustain healthy operating profit margins of 22 to 24% in FY26, says the report, based on analysis of eleven listed hospital chains and two major unlisted players. The planned capacity addition translates to around 26% of their existing bed capacity at the end of FY25. These bed additions are expected to be across metros, tier-II and tier-III cities, with significant additions in tier-II cities such as Nagpur, Lucknow, Ongole, and Coimbatore, to cater to the unmet demand in these regions.

“Following a strong occupancy of 63.5% in FY25, the occupancy for the sector is expected to remain resilient at 62-64% in FY26 backed by expanding insurance penetration and continued market share gains for organised players, in both single specialty (such as oncology, orthopaedic, etc.) and multi-specialty segments,” says Mythri Macherla, Vice President & Sector Head, ICRA.

Structural factors, such as rising incidences of lifestyle diseases, higher awareness, and increased affordability, in addition to preventive health check-ups, will continue to contribute to enhanced demand for healthcare services. According to ICRA estimates, the ARPOB growth for the industry is expected to remain between 6% and 8% in FY26, in line with the 7% year-on-year expansion observed in FY25. The consequent operating leverage, ongoing cost optimisation measures, and digitisation initiatives will result in a stable OPM of 22-24% for the industry in FY26.

Furthermore, despite international patient footfalls being curtailed due to geopolitical developments in Bangladesh, the ARPOB for the industry remained solid in FY25. Over the past few years, ARPOB growth for the industry has been aided by improving speciality and case mix, better payor mix (with more contribution of cash and insurance patients), annual price revisions by companies to offset cost inflation, in addition to technological advancements (such as robotic surgeries), augmenting high realisations for the hospitals, observes ICRA. 

Many hospital chains are also exploring inorganic opportunities, which has led to increasing consolidation in recent years. Mergers and acquisitions enable hospital chains to diversify their geographic reach and/or speciality mix, in addition to improving their operational scale. Furthermore, given the strong financial performance outlook of industry players, the sector has experienced heightened interest from institutional investors over the past few years.

Despite ongoing capital investments, partly funded by debt, ICRA expects the debt metrics for the hospital sector to remain healthy, with Total Debt/OPBDITA at 2.4-2.6x as on March 31, 2026, compared to 2.1x as on March 31, 2025. A long gestation period and the capital-intensive nature of operations had previously constrained the return on capital employed (RoCE) for the industry. However, improvements in the performance of mature hospitals across players and the turnaround of many new centres led to a sharp increase in RoCE over the past few years. ICRA expects the ROCE for the industry to remain between 13% and 15% in FY26, supported by incremental absolute OPBDITA, despite new capacities coming on board.