Greetings on the new financial year. On this new financial year starting, we can look at a new sector which is normally overlooked.
Hospitals in India.
The spending of government on health care is not raising higher and is way below the developed countries. In developed countries, the allocation is around 10% of GDP and in India this year it is just 1.3% which is less than 40 k crores.
Some of the factors which will see growth in revenues in Health care are:
a. The medical tourism in India is likely to touch $8 billion or around 5500 crores by 2020
b. The life span of the individuals in increased and has gone up by 8 years in the last 35 years from 65 to 73 years.
this can be considered as boon or a Bane. A bane for people who are sick and need to spend more on health care.
c. There are lot of lifestyle diseases which are now affecting the youngsters including depression
d. Addiction to drugs, tobacco, alcohol are only adding to the problems.
e. There is so much of pollution around us, in water, air, food we eat which does affect our body.
f. New viruses which keep surprising everyone like Zika, Ebola etc
g. You also have the medical inflation around 12% for the last 5 years, This means you treatment cost will go up 10 times in the next 20 years.
95% of the people die due to some illness and undergo treatment.
Therefore, there is strong case for the revenue of the hospitals to grow.
DO we know how much it costs to build a hospital?
The current estimated cost to build a hospital is 40 to 50 lacs per bed. This means it requires 100 crores to build a hospital of 200 beds. If we calculate the interest the pay back period will be more than 10 years, depending upon, how much the hospitals charge.
This is big entry barrier for setting up a hospital. Though there are small hospitals who cater like kirana stores, we must focus on big hospitals as investors.
Now which are the hospitals which are listed in India
Of this we see nationally there are four with good market cap and of the four two are recent issues.
You can consider Apollo Hospitals and Fortis. But understand the performance, Management of these stocks before investing.
This is new sector with a high growth prospectus and will be everlasting.
Also read the survey on Best HOspitals.
See the out performance of Apollo hosptials vs Fortis.
Please note the first two hospitals AIIMS and CMC vellore are not listed.
I will be glad to help build your portfolio.
Watch out for this space where you will see how a SIP in Apollo in the 5 years would have made a difference to your portfolio