3 Interesting Hospitals Plays
Aug 6, 2025
6 mins to read
Rainbow Children’s Medicare Ltd
1) About the Company
India’s largest standalone paediatric‐and‐perinatal hospital chain, RCML operates 19 hospitals + 5 clinics across six cities with 1,935 beds and a hub-and-spoke model that concentrates quaternary paediatric care in large hubs and level-III NICU / obstetric services in spokes.
Founded in 1999 by Dr Ramesh Kancharla (CMD), a UK-trained paediatric gastroenterologist, the group is backed by a full-time doctor model (~910 clinicians) and boasts three JCI- and thirteen NABH-accredited units. CFO Vikas Maheshwari leads finance; the board is majority independent with strong governance structures.
They offer comprehensive neonatal, pediatric, obstetrics, gynecology, and fertility services under brands “Rainbow Children’s Hospital” and “BirthRight by Rainbow.”
2) Key Financial Metrics (FY25)
FY-25 revenue climbed 17 % to ₹1,520 crore, sustaining a robust 32 % EBITDA margin and 12 % PAT growth, while Rainbow remained net-cash positive at ~₹700 crore—showcasing strong operating leverage on a debt-free balance sheet.
3) Industry Analysis
India Healthcare Market: Expected to grow to ~$372 Bn by 2025; pediatric healthcare is a niche but fast-growing segment.
Global: Medical tourism in pediatric care is rising, though FY25 saw regulatory bottlenecks in markets like Oman, Bangladesh, and Sudan.
Pediatric Segment: India has the world’s largest child population (~26% under age 14), with increasing demand for tertiary/quaternary pediatric care.
This segment is growing at 14-16% CAGR in India and globally at 5-6%
Growth drivers: Rising NICU [Neonatal Intensive Care Unit] penetration, congenital disease detection [health problems children and born with], insurance coverageObstetrics & Perinatal (private): This segment is growing at 12-14% CAGR in India, and globally at 7-8%
Growth drivers: Higher institutional deliveries [more deliveries in hospitals] , premium birthing trend [Premium rooms, hotel like rooms demand]
Fertility / IVF: This segment is growing at 18-20% CAGR in India and globally at 10-11% CAGR. Growth drivers: Delayed parenthood, affordability, regulation
4) Business Segments
Pediatrics: NICU, PICU, multi-specialty, organ transplants (liver, kidney, bone marrow).
70 % of revenue – secondary through quaternary services including PICU, transplants, oncology etc.Perinatal & Women’s Health: Obstetrics, gynecology, fetal medicine, maternal intensive care.
~30 % revenue; IVF contributes 2.6 % and growing 70 % YoYFertility Services: 12 IVF centers under BirthRight.
New initiatives: Child Development Centers, digital care platforms.
Butterfly Essentials (retail baby/women care)– nascent e-commerce pilot
Region wise:
Hyderabad has 940 beds, Bengaluru 592, Tamil Nadu 400, NCR 424 and Andhra Pradesh 359 (post-planned expansions).
Hyderabad hubs are mature and carry higher ARPOB than new spokes in other cities
5) P&L Analysis
Revenue +16.9 % on healthy volume and 8 % ARPP uplift despite 3 % ARPOB decline (ALOS -mix effect).
EBITDA margin compressed 0.80% to 26.6 % as 280 new beds ramped up, in-line with guidance.
PAT margin dipped 0.70% to 16.1 %, cushioned by higher other income and lower deferred tax.
Pricing power is intact. Average revenue per occupied bed rose 6-8 % even while occupancy slid at the older hubs. That cushions margins.
Ramp-up story in new hospitals is on track. Occupancy there jumped from ~30 % to ~36 % in a year and operating beds were raised by ~15 %. As these centres head toward the 50-60 % zone, they’ll add meaningful EBITDA.
Efficiency is improving. Average length of stay fell ~2-3 % network-wide, letting Rainbow treat more patients with the same bed base.
Seasonality evident in mature units. The ~9 % drop in their occupancy is the main drag on the headline number but is partly a seasonal/Q4 pattern and partly mix shift as new beds went live.
Big picture: Rainbow is still in its classic “expand-beds-then-fill-them” phase. Q4 shows solid growth in patient volumes, higher revenue per bed and improving utilisation at the new sites, even though the mature hubs had a softer quarter. That mix should translate into healthy revenue momentum with margins holding up as occupancy at the new hospitals continues to climb.
6) Balance Sheet Analysis
₹1367 Cr in cash reserves and no debt increase from Fy 24-25.
Strong internal accruals to fund ~₹145.7 Cr capex in FY25.
Capex planned for Rajahmundry, Coimbatore, and Gurugram over FY 26–28 (~1,000 beds expansion)
7) Cash Flow Analysis
Cash Flow from Operations: ₹396cr
Minimal working capital stress due to strong cash-payor mix (48%) and lean receivables.
Capex entirely funded through internal accruals.
8) Concall Summary (Q4FY25)
Q4 growth modest due to seasonality; strong in pediatric surgery and obstetrics.
472-gram NICU survival case and rare neuroblastoma success highlight clinical excellence. -> Tells about clinical excellence
Expansion updates: Rajahmundry (Q1 FY 26), 2 spoke hospitals in Bengaluru (Q2 FY26), Gurugram (CY27), Coimbatore (130 beds) expected by Q4 FY27
IVF growth, digital health initiatives, and ESG practices reinforced.
Management reaffirmed their commitment to add ~1,000 beds over the next 3 years:
Pipeline total capacity to 2,715 beds by FY-28.
Growth outlook: late-teens to 20 % revenue CAGR guided for next three years.
EBITDA guard-rail: ≥25 % despite 250 new beds in FY-26 (B’luru spokes, Rajahmundry) and 130 beds in Coimbatore FY-27.
Cost optimization in new units.
Operating leverage from maturing hospitals.
Maintaining discipline even with expansion.
IVF scale-up across 12 hospitals; international patient revenue weak at ₹30 cr vs ₹44 cr YoYRainbow ppt.
Exploring M&A but nothing imminent
9) Key Growth Drivers / Special Situation Play
Asset-light expansion via hub-and-spoke model in underserved geographies (NE, Western India).
Strong fertility & transplant potential as high-margin businesses.
Digital transformation (Patient App, EMR integration) improving efficiencies.
Training pipeline (230+ DNB seats) ensures clinical manpower scalability.
No debt + ₹700 Cr cash provides flexibility for future acquisition-led growth.
Strong growth expected from:
Maturation of new hospitals (e.g. Rainbow Children’s Heart Institute and Rosewalk).
Addition of ~250 beds in FY26 (150 in Bengaluru, 100 in Rajahmundry).
IVF and high-risk obstetric segments showing strong momentum.
Pediatric quaternary services including transplants expanding to Bengaluru and Chennai.
The entire ₹1,000+ Cr capex plan over 3 years will be funded through internal accruals.
No plans to raise debt or equity.
As of March 2025, Rainbow has ₹700 Cr in cash reserves.
Capacity expansion to >2,700 beds (40 % CAGR in beds) with zero leverage.Fertility & transplants add high-ARPOB, less seasonal revenue.Hub-and-spoke moat in South & NCR; early-mover advantage in paediatric quaternary care.Doctor-ownership model promotes retention and quality outcomes, recognised by multiple JCI awards.
10) Valuations
EV/EBITDA: ~21x (based on current market cap & FY25 EBITDA).
P/E Ratio: ~30x (based on FY25 PAT).
Premium justified due to high margins, niche leadership, strong balance sheet, and long-term secular growth.
11) Antithesis
Low overall occupancy (50.5%) vs peers.
Heavy dependence on 3 metros for revenues. Dependence on South India geography; diversification still in progress.
Medical tourism volatility; FY25 saw 30%+ dip in international revenues.
Regulatory hurdles (bed licensing, JCI/NABH accreditations) may delay expansion. Regulatory caps on procedure pricing and insurance tariffs.
Rising competition in pediatric IVF and premium maternity segments. Competitive entry of multi-specialty chains into paediatrics in Hyderabad/B’luru could pressure pricing
Seasonality in paediatric admissions can swing quarterly ARPOB/occupancy.
Execution risk on 780 planned beds; cost overruns or slower ramp-up can dilute margins.
12) Conclusion
RCML offers a rare, scaled play on India’s fast-growing paediatric & perinatal healthcare segments. A debt-free balance sheet, disciplined cash generation, and visible bed pipeline underpin a late-teens earnings CAGR outlook. Near-term margin dilution from new units and seasonal swings are watch-points, but structural drivers – rising neonatal care demand, IVF adoption and quaternary paediatric procedures – support long-term value creation. Valuation comfort should be gauged relative to premium specialty peers and the company’s own guidance of maintaining >25 % core EBITDA margin.
HCG [ Healthcare Global Enterprises Ltd. ]
1. About the company
Healthcare Global Enterprises Ltd. (HCG) is India's largest oncology-focused hospital chain with a pan-India network, operating over 25 cancer care centers (including 4 multi-specialty). Headquartered in Bangalore, HCG is recognized for its patient-centric approach, deep clinical expertise, and use of advanced technology. The company was founded by Dr. B.S. Ajai Kumar is currently led by a marquee management team with strong experience in healthcare delivery and operations.
2) Key Financial metrics-Basic snapshot of screener
3) Industry Analysis
Indian Oncology Market: Growing at a CAGR of 12–14%, driven by rising incidence rates (1 in 9 Indians likely to suffer from cancer by 2025).
Key Challenges: Low early-stage diagnosis, concentration of cancer care in metros, high mortality/incidence ratio.
Global Insight: Dedicated cancer hospitals deliver better clinical outcomes than general hospitals.
4) Business segments
Oncology Hospitals: Core business covering Consultation visits (18%) that can result in diagnostics, surgical (23%), medical (43%), and radiation oncology (16%) treatments.
Milann (Fertility): Smaller segment, currently facing decline in revenue and IVF cycles.
Geographic Spread: Present in 10 states, with 25+ centers and international presence in Kenya.
Emerging vs Established Centers: Emerging centers (South Mumbai, Borivali, Kolkata) are high-growth, while established centers drive margins and ROCE.
5) P&L analysis
Revenue grew 16% YoY in FY25 to ₹2228 cr.
EBITDA grew 17% YoY to ₹396 cr, with margin improving by 0.20%.
PAT up 19% YoY to ₹74 cr.
Milann's revenue declined 14% YoY, showing weakness in the non-core fertility vertical.
6) Balance sheet analysis
Net Debt rose to ₹632 cr (vs ₹358 cr in FY24), primarily due to brownfield expansion.
Gross debt (including leases) stands at ₹1467 cr.
Capex was ₹206 cr, majorly directed toward Bangalore expansions.
7) Cash Flow analysis
Cash utilization is higher due to expansion and tech upgrades.
They are doing capex, hence their cash flow statement is showing -ve.
Post 2026 they will only do 100 cr maintenance capex so your depreciation stagnates and interest will come down if debt goes down.
8) Concall Summary
HCG aims to operationalize over 900 beds across its networks within the next three years, including additions this year. Approximately 350 beds are already fully invested but not yet operational. Of the current capacity, about 200 beds are not yet operational, and an additional 600-700 beds will be invested in over the next 2-3 years.
Guidance:
-Management expects 7–8% ARPOB growth in FY26, driven by higher-end modalities and shorter length of stay.
-Management expects EBITDA margins to improve going forward.
-Target: “Low 20s” as emerging centers mature; new greenfield centers may temporarily dilute margin
9) Key growth drivers/Special situation play
Emerging Center Turnaround: Focused investments in metros like Mumbai and Kolkata expected to drive long-term profitability.
Digital Health: Launch of the official HCG mobile app, allowing patients to book appointments, consult doctors virtually, access reports, and manage their care journey end-to-end. This initiative has seen a very positive response. Digital revenue for FY '25 doubled over the past year, and the company is committed to scaling this further, expecting it to be a major contributor to the top line
M&A and Brownfield Expansion: Smart bolt-on acquisitions and CoE upgrades in existing units.
Daycare, Clinical Trials, Genomics: New revenue verticals to increase patient value capture.
KKR acquisition: The incoming new investor, KKR, is seen as a solid foundation for HCG's future long-term growth, marking a shift from a consolidation phase to a high-growth, high-performance phase. [JB chemicals e.g.]
Oncology industry tailwind: People don’t delay treatments
Bringing latest treatments: Acquisition of the Orbitrap Astral Mass Spectrometer from Thermo Fisher Scientific, Addition of 5 state-of-the-art linear accelerator (LINAC) machines across multiple centers, Strategic investments in other advanced technologies such as PET-CT scanners and robotic surgery platforms
International Expansion: The CCK Cancer Center in Nairobi, Kenya, which focuses on radiation and medical oncology, is performing well, with plans to potentially look at a second LINAC in Nairobi. The international opportunity in countries like Africa is considered significant due to its high profitability, with margins reaching almost 24-25%
10) Valuations
Valuations look reasonable but there are certain negative factors because of which market is not giving it a premium. [loss making facility, high debt, aggressive expansion]
11) Antithesis
Debt Issues:High Capex and debt burden may stretch the balance sheet,As debt and assets are increasing, Depreciation and interest look higher -> PAT may suppress if the hospitals don’t go live or there is some execution issue.
Loss making ventures:Emerging centers are still loss-making, with negative ROCE (-18.1%). Milan Centers,The fertility business under Milan as well is a drag on profitability.
Execution risk: Greenfield and brownfield expansion projects if delayed can affect the sales and further reduce the PAT numbers.Also the New Greenfield expansion may dilute the margins temporarily.
International Expansion: As HCG is expanding in Kenya, and there is any geopolitical tension there it may affect companies, execution and margins.
Segmental revenue growth: Medical oncology when it becomes a higher % of sale, their margins reduce as it’s lower margin compared to other treatment types. So the increase here directly affects the margin.
12) Conclusion
HCG is a differentiated player in India’s fast-growing oncology market with proven capabilities in driving clinical outcomes, scaling centers, and leveraging technology.
The company is entering a phase of sustainable margin and ROCE improvement, with multiple levers for growth.
While short-term debt and capex intensity remain concerns, long-term structural tailwinds and a focused strategy makes it a compelling healthcare story.
If debt reduces, draggers being closed down [milan], KKR turning around this company the company can benefit.
Krishna Institute of Medical Sciences Ltd
1. About the company
KIMS Hospitals is a leading healthcare chain in India, started in 2004 under the leadership of Dr. Bollineni Bhaskar Rao, operates 12 multi‑specialty hospitals across Telangana, Andhra Pradesh and Maharashtra under the KIMS brand. They are now expanding in other states like Kerala and Karnataka.
2. Key Financial metrics
3. Industry Analysis Industry growth rates-Global and Indian
Indian healthcare sector poised to grow at ~23% CAGR and rising healthcare awareness, insurance penetration, and private investments, KIMS is well-positioned to benefit.
4. Business segments
City wise unit economics:
ARPOB [Average revenue per operating bed] is inc QoQ and YoY, plus ARPP [Average revenue per patient] is also inc YoY and QoQ for telangana and AP. ALOS [Average length of stay] is also reducing which is also margin accretive.
Why is AP beds higher compared to Telangana but ARPOB is lower -> see how govt is involved in this?
The Maharashtra units are currently underperforming and ebitda reduced last year because of local competition [Max and Fortis]. Kerala units have not yet breakeven.
5. P&L analysis
Add screener Snapshot
a shorter ALOS—around 3.6–3.8 days—improves its Average Revenue per Occupied Bed (ARPOB), even if occupancy is moderate
The ARPOB growth (22.7% year-on-year) and ARPP (Average Revenue Per Patient) growth (9.2% year-on-year).
This growth is attributed to a mix of factors including price revision in the Telangana cluster, a decrease in the length of stay (ALOS) by almost 15%, and a focus on cash and insurance business in newer markets
The introduction of new technologies also contributes to expected ARPOB growth
6. Balance sheet analysis
Fixed assets are inc at a healthy rate. 1/3rd of the capex is going to go live [CWIP]. Borrowings are too high, which means the company is trying to grow very aggressively. Borrowings have become 2x, which can increase interest and can affect PAT margins.
7. Cash Flow analysis
8. Concall Summary [Make it shorter]
Andhra Pradesh growth: INR 30,000 ARPOB over the next few years (targeting a 3-4 year period due to capacity coming in '27
Telangana cluster is expected to continue to grow at similar growth rates for the next few years due to additional capacity in Sunshine and the new Kondapur hospital. It is projected to sustain a 20% kind of growth given new bed capacity, existing beds, and the additional new hospital. Management aims for occupancy to reach 65-75% over the next 4-5 years
Revenue CAGR for the next 5 years: Management agrees that a 20%+ revenue CAGR is a very achievable number for a 5-year timeframe, given the increase in bed capacity and expected ARPOB/occupancy increases
Overall Group ARPOB (Average revenue per occupied bed): Expected to scale towards INR 50,000 - INR 75,000 over the next 2-3 years, driven by the addition of 3 big assets in larger cities and continued growth in the Telangana cluster
Two Bangalore hospitals (final stages, to open in FY26), new hospital in Kondapur (Telangana), Srikakulam, Ongole, Anantapur (Andhra Pradesh), one more facility in Vizag, new micro-market in Hyderabad, Thrissur (Kerala, FY27)
9. Key growth drivers/Special situation play
ARPOB set to increase - add here
New Technology Adoption: Introduction of new, high-value technologies like Gamma Knife, MRI-guided focused ultrasound, and TULSA-PRO that generate revenue without requiring admissions and have minimal operational costs. They also have MR-Linacs and Mako Robotic Systems for knee replacements, which are considered the latest products available only at a few centers. These technologies contribute to ARPOB growth and have minimal operational costs. [Name one or two things and explain in your own voice]
Payer Mix Improvement: Incremental business from cash and insurance as the year progressed. The focus on cash business in newer markets like Nashik, Sangli, and Guntur (where empanelments are not yet through) contributes to higher ARPOB. -> explain it better for novice
Mother and Child Care: KIMS has started a pediatric and childcare unit under the brand name Cuddles. There are currently 8 Cuddles units among their hospitals, and this segment is expected to contribute approximately 10% of the group's revenue. ->Key high growth driver
Fertility Center: A fertility center was also started in Vizag
Specialty Centers in Vizag: Apart from the fertility and childcare units, a general specialty center was opened in Vizag
Foot Care Center and Rehabilitation Center: An exclusive foot care center and a rehabilitation center were opened in Hyderabad
Transplant Programs: KIMS has mature transplant programs for heart, lung, liver, and kidney. They plan to start a new transplant program at their Kondapur unit, which will add incremental volumes. KIMS Kurnool completed 50 renal transplants.
Oncology: They are looking to start an oncology hospital within the Sunshine Begumpet facility. They also plan to start oncology services in most of their Andhra Pradesh hospitals.
10. Valuations
EV/EBITDA: 37.4
Peer valuations:
Max Healthcare: 64.29
Fortis Healthcare: 36.96
NH: 30.64
Aster DM: 36.73
Valuation currently looks overvalued compared to peers but long term growth remains intact.
11. Antithesis
Short-Term Margin Dilution:
New hospitals (Thane, Nashik, Bangalore, Kollam) are still ramping and will drag consolidated EBITDA in FY26. Losses from new units are expected to rise in Fy26, but they will break even in 12 months. FY 26 can be bad for the company.
~30–40% of total bed base will always be in the "growth phase", making group-level margin expansion a slower process.
Execution Risk in New Markets:
Delays in insurance empanelment (e.g., Nashik) have led to revenue delays and higher cash-burn periods.
Success in non-core regions like Maharashtra and Kerala is not yet proven.
Leverage & Depreciation Headwinds:
Net debt to rise further in FY26, though within guided range.
Depreciation will rise as newer assets come onstream, impacting reported PAT even if EBITDA holds.
12. Conclusion
KIMS is a high-quality, regional hospital chain transitioning into a pan-India player. While the next 12–18 months may see margin dilution due to new unit drag, the medium-term story of rising ARPOB, specialty-driven growth, and tight cost controls makes it a compelling long-term compounder in India’s healthcare space.