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Non-Covid demand is expected to drive the corporate healthcare industry's growth in FY23, as per rating agency India Ratings and Research (Ind-Ra).

Within the sector, the hospital sub-sector is expected to witness robust demand drivers, a strong improvement in profitability, and calibrated capacity enhancement capex, it said, adding that together, these factors support the hospital sub-sector's liquidity position and aid in sustaining the credit profile improvement.

"Normalisation of international travel restrictions can lead to a recovery in international patient revenue," Ind-Ra said.

"Given that the operating procedures have been standardised across hospitals during the past two years of Covid-19, any intermittent local lockdowns owing to the resurgence of infections are unlikely to impact the hospitals significantly."

According to the rating agency, with most of the sectoral players having expansion plans, the sector is likely to remain exposed to competition, leading to a longer gestation period in ramping-up operations at greenfield facilities.

Besides, Ind-Ra pointed out that outlook for the diagnostic companies' sub-sector is neutral for FY23, supported by a recovery in non-Covid-19 related revenue and a moderate demand for Covid-19 tests, robust cash generation and strong credit profiles.

"While increasing competition and acquisition-led expansion could compress margin, the headroom available to absorb shocks remains comfortable."

During 9MFY22, the revenue of most of the listed companies in the sector surpassed that of FY21, moving up about 40 per cent year-on-year for almost all players.

"While Covid-19 contributed to a sizeable share of revenue in 1QFY22, it has tapered-off from 2QFY22. The growth during 9MFY22 was mainly driven by the lower base of 9MFY21 and a consistent recovery in occupancy from 2HFY21.

"Ind-Ra expects continued growth in health care needs and part of the pent-up demand and price increase to drive growth in FY23."