Large chains like Apollo Hospitals and Manipal Hospitals are in an aggressive expansion mode, increasing their operational footprint and bed capacity across the fast-growing healthcare market in India. It is against this backdrop of an intense fight for market leadership that Apollo Hospitals announced the addition of 3,512 beds by FY28, amounting to a significant investment of ₹6,100 crores, reiterating its commitment to deeper ingress into Uttar Pradesh and Karnataka regions through greenfield projects. On the other hand, Manipal’s recent acquisition of Khubchandani Hospitals in Mumbai for ₹415 crores is again another strategic acquisition aimed at strengthening its regional reach. 

Apollo’s Expansion: The Strategic Bed Capacity Increase The management of Apollo Hospitals is contemplating an investment of ₹6,100 crore, which would add 3,512 beds across its network by FY28. Given the average addition cost of ₹1.74 crore per bed, this bed addition stands out not only quantitatively but more so qualitatively from a location strategy point of view, with a greater focus on greenfield projects in Varanasi (UP) and Mysuru (KA). Apollo is thereby investing avenues to capture the undervised patient demographics in Tier II and Tier III cities for broadened geographical reach and increased revenues.

But such an expansion raises all sorts of questions about the funding sources for Apollo. While its EBITDA of ₹2,008 crore in the last financial year speaks volumes about its profitability, there is a doubt if Apollo can fully fund a ₹6,100 crore expansion through internal accruals. While internal accruals remain a rich source, Apollo may still need a mix of retained earnings, debt financing, or even equity dilution to complete this expansion without straining its liquidity.

Feasibility Testing: Could Apollo Be Supported Fully by Internal Accruals? The immediate question, therefore, is whether internal accruals at Apollo would fully cover this investment requirement. A close look at its financial performance indicates that with an EBITDA of ₹2,008 crore, Apollo provides a good cash flow base. If that level of profitability sustains or improves, it can cover ₹6,100 crore over years. But then again, this would presuppose the fact that most of Apollo’s cash flow goes to capital expenditures alone, which may be at the cost of other investments or perhaps other operational requirements. In reality, the use of financing sources would more likely be a mix-and-match, as this helps Apollo balance growth with maintaining operating liquidity in the company.

More importantly, financing exclusively through internal accruals can expose Apollo to risks, especially in view of the high CAPEX required per bed (₹1.74 crore). A mix of debt or external financing will provide Apollo with an opportunity to offset cash flow risks while pursuing regional expansion at a steady pace.

Strategy of Manipal Hospitals: Acquiring Khubchandani Hospitals  two weeks ago, Manipal Hospitals made an entry into the lucrative Mumbai healthcare market when it acquired Khubchandani Hospitals for an amount of ₹ 415 crore at an average acquisition cost of ₹ 0.83 crore per bed, which is much lower than projected green field expansion cost by the Apollo. That shows that some cost-efficient approach is used by Manipal while expanding footprints. Here, with Manipal, it is a clear case of acquisition over new build that is quick and far less complicated in high demand urban centers such as Mumbai.

Manipal’s EBITDA growth of 41.3% YoY, translating into ₹1,600 crore, underlines its strong profitability. This growth has positioned Manipal to consider inorganic expansion that scales up reach without the longer gestation period and higher upfront cost seen in greenfield projects. Manipal’s approach also represents the difference in strategic choices for the same sector when compared to Apollo.

Profitability Comparison of leading Hospitals Leading listed healthcare companies in India reflect a wide range of profitability indicative of varied business strategies and operational efficiencies across the sector. A glimpse of the EBITDA for top Hospitals:

Apollo Hospitals: ₹2,008 crore Fortis Healthcare: ₹1,322 crore, up 9.4% YoY Manipal Hospitals (MHEPL): ₹1,600 crore, up 41.3% YoY Max Healthcare: ₹1,668 crore, up 18.5% YoY Narayana Health: ₹1,226 crore, up 10.9% YoY Aster DM Healthcare: ₹602 crore Medanta: ₹799 crore KIMS Hospitals: ₹652 crore. This profitability profile indicates that Apollo and Manipal are among the best on EBITDA performance and are well placed to fund their respective expansions. Fortis and Max Healthcare also report commendable growth, but far and away a lot more modest than that of Apollo or Manipal. KIMS Hospitals, for its part, with an EBITDA of ₹652 crore, has recently signed a ₹700 crore MoU with Wipro GE Healthcare to double its bed capacity to 8,000 and target ₹5,000 crore in revenue by FY27, with the aim of becoming the third-largest hospital group in India. The above ambition underlines the trend of aggressive growth and expansion within the sector, where the hospitals and technology providers are into partnership agreements to drive capacity and revenue growth.

Sector Dynamics and Future Trends The sustained growth and key profitability indicators of India’s healthcare sector are a manifestation of the bright prospects driven by a few key factors:

Diversification of Operations: The hospitals have already begun shifting their focus from metro-centric expansions to tier-II and -III cities, in tune with demand-driven growth, coupled with fiscal and other incentives promulgated by the government. Thus, the greenfield projects of Apollo at Varanasi and Mysuru are apt examples of this trend wherein the demand for advance healthcare facilities has been high, but supply remains relatively low.

Acquisition Strategy: The acquisition of Khubchandani Hospitals by Manipal forms part of the broader sector trend in acquiring existing hospitals for quicker market entry at lower cost per bed than new builds. This model is likely to yield faster returns, especially in high-demand urban centers.

Technology-enabled Growth: KIMS’ collaboration with technology providers such as Wipro GE Healthcare to ensure operational efficiency, clinical outcome, and patient experience indicates moving toward tech-enhanced healthcare delivery models.

Profitability Focus: High EBITDA figures underline the fact that efficiently run hospitals with focused expansion plans continue to be in a position to maintain profitability even at aggressive growth rates. This would reflect strong sectoral fundamentals and indicate that the leading hospitals can fund expansions without significant shareholder value dilution or incurring unsustainable levels of debt.

This implies that the aggressive plan of Apollo to add 3,512 beds by FY28, while promising to expand pan-India, with a special focus on Tier II and Tier III cities, would involve only internal accruals for funding such expansion. But this would restrict the operational flexibility of Apollo. A relatively balanced financing mix would rather position Apollo to keep up the growth momentum while preserving cash for other investments.

Meanwhile, Manipal’s acquisition-led model attempts another strategy toward growth and profitability, while KIMS does so with a tech-driven expansion plan in the highly competitive Indian healthcare market. Investor and stakeholder confidence has been underlined due to these strategic differences and their consequence for varied pathways of expansion in the healthcare sector where acquisitions, greenfield projects, and partnerships for technology coexist as viable approaches to growth. The operating models pursued by Apollo, Manipal, KIMS, and other similar groups will, therefore, define what healthcare delivery would look like in India for the foreseeable future. This presents a future of easy access, technology-enabled, and regionally diversified healthcare services as the demand for healthcare continues to rise in India.

Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh). 
MBA (BITS, Pilani), MHA, 
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru). 

Senior Professor and former Head, 
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery. 
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India. 

My Vision: I don’t want to be a genius.  I want to be a person with a bundle of experience. 

My Mission: Help others achieve their life’s objectives in my presence or absence!

My Values:  Creating value for others. 

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