IHH expands in India amid margin pressure

INDIA’S underserved healthcare sector is undergoing rapid transformation and offers significant opportunities for private healthcare providers to grow their services.

The sector is projected to experience a growth rate of 10.6% annually for next few years, while the government increasingly plays the role of payer through schemes like Ayushman Bharat, which covers over half the population.

The industry remains fragmented with 65% to 75% of hospitals being small nursing homes and only about 25% organised chains.

The payer mix is also shifting rapidly. Out-of-pocket spending has fallen from 60% to 70% to about 30% to 35%, replaced by retail insurance and social schemes.

This evolving landscape creates opportunities for larger, consolidated players to scale and capture market share.

Unsurprisingly, India is a key focus market for IHH Healthcare Bhd, which has a presence in 11 states, operating 36 hospitals with some 6,500 beds under the Gleneagles Hospitals brand, as well as via its 31.7% stake in Fortis Healthcare Ltd.

Fortis also operates more than 400 Agilus Diagnostics laboratories across the country and is leading the group’s expansion there.

“This year, we are going to have about 400 beds added to the system at an expenditure of about seven billion rupees (about RM300mil).

“We expect similar capital expenditure over the next three to four years, adding incremental beds of about 400 every year via brownfield expansion.

“We are also exploring possibilities of greenfield projects as well as acquisitions.

“All our expansion via Fortis is funded internally, with sufficient internal accruals.

“The company’s leverage is very conservative right now.

“There is enough capital to fund this growth through internal accruals,” said Ashok Pandit, group chief corporate officer at IHH Healthcare, at a media briefing in Delhi recently.

Fortis aims to raise its total bed capacity to about 7.500 beds through brownfield expansion, and hit 10,000 beds by the end of this decade via greenfield projects and mergers and acquisitions, as the group seeks to compete with rivals like Apollo Hospitals Enterprise Ltd, Manipal Health Enterprise Ltd and Max Healthcare Institute Ltd.

Pandit says IHH Healthcare will help fund the expansion if needed, as the group aims to raise its stake in Fortis to 51% over the next few years.

“If there is a need for equity within the company (Fortis), we will inject fresh equity. We can also do what is called a creeping acquisition, where we buy shares from the secondary market,” says the former investment banker.

Dr Ashutosh Raghuvanshi, managing director and chief executive officer of Fortis, notes that the company has a strong balance sheet capable of funding much of its expansion plans.

“Our debt to Ebitda (earnings before interest, tax, depreciation and amortisation) ratio is only 1.08. We are slightly conservative on debt. Our board feels that we can go up to 2.5, so there is a huge headroom,” he says, adding that a large acquisition may see the need for fresh equity.

IHH Healthcare reported strong second-quarter (2Q26) and first half of financial year ended June 30, 2026 (1H26) results, driven by higher patient volumes, more complex cases and diversified operations across 10 countries, notably Malaysia, Turkiye, Europe and India.

Revenue, Ebitda and earnings grew by double digits year-on-year (y-o-y) helped by expanding day cases, medical tourism and strategic integration.

The group is targeting a double-digit return on equity by 2028, underpinned by prudent capital management.

The India business contributed about 15% of IHH Healthcare’s total revenue and 13% of its Ebitda in 1H26, making it the group’s third-largest foreign market after Turkiye/Europe and Singapore.

The performance reflects steady patient volume growth at Fortis and Gleneagles, although margins are slightly lower compared with Malaysia and Turkiye.

Quarterly revenue stood at RM1.04bil, down 1% y-o-y from RM1.05bil in 2Q25.

Revenue for 1H26 was RM2.03bil, also 1% lower than RM2.04bil in 1H25.

Ebitda was RM186mil in 2Q26, 4% lower y-o-y, while Ebitda in 1H26 marginally increased by 1% to RM385mil from RM380mil in 1H25.

Nevertheless, inpatient admissions in India increased 14% y-o-y for both the quarter and 1H26, while revenue per inpatient admission increased by 5% in 2Q26 to RM8,980 and by 5% year-to-date to RM8,913.

Despite higher patient volumes and revenue per admission, overall revenue and Ebitda growth were muted, likely due to currency translation effects and cost pressures, including higher staff costs following regulatory changes such as India’s new labour code, which took effect in November 2025.

Raghuvanshi says Fortis is targeting annual revenue growth of at least 15% and wants to lift its Ebitda margin from around 23% currently to about 25% over the next few years, driven by operational efficiency, higher patient volumes and more complex case mix, amid ongoing pressure to rein in healthcare cost inflation.

Pandit says IHH Healthcare’s board is keenly aware of the need to balance growth with dividends payouts.

“IHH Healthcare is a growth company. I think all the shareholders are quite well aligned that the focus should be on deploying capital to grow.”

He adds that across the group’s markets, competitors are growing rapidly, so IHH Healthcare must ensure it maintain its market leadership.

The group has declared an interim dividend of 5.5 sen for financial year 2026. IHH Healthcare now operates 190 healthcare facilities, including 89 hospitals, across 10 markets.