Roll Up Rx: Why hospital consolidation is the new normal in Indian healthcare

Major healthcare chains are increasingly pursuing growth through acquisitions of smaller, regional facilities— a swing from traditional expansion methods. This “roll-up” strategy is being actively supported by private equity investors and is apparent in a series of recent transactions.

From Manipal Health’s Rs 2,400-crore acquisition of Pune-based Sahyadri Hospitals to Apollo’s recent asset buy in Gurugram and Max Healthcare’s aggressive push in North India, consolidation is no longer an outlier—it’s becoming the new playbook.

In June, Manipal Health Enterprises (MHE) strengthened its position as India’s second-largest hospital chain by acquiring Sahyadri for ₹6,400 crore. The transaction—done at a price nearly 31 times the company’s annual earnings before interest, tax, and other costs—was one of the most expensive healthcare buyouts in the country, showing aggressive investor appetite for scalable regional assets.

Manipal’s backers, Singapore’s Temasek and U.S.-based Sheares Healthcare (a wholly owned Temasek unit), are betting on a thesis that sees national healthcare platforms with deep regional moats as offering durable competitive advantage—especially in a sector that remains fragmented and under-penetrated.

The consolidation wave is largely being bankrolled by private equity. KKR, which exited Max Healthcare in 2022 with a 5x return in four years, re-entered the space by acquiring a 51% stake in Bengaluru-based HealthCare Global Enterprises (HCG), a leading cancer care provider.

General Atlantic has backed Ujala Cygnus, which operates hospitals in North India’s Tier 2 and Tier 3 towns. Others such as TPG, Baring PE Asia, and Warburg Pincus are actively scouting regional chains with strong clinical teams and loyal patient catchments.

“India’s hospital consolidation is a classic play of operational leverage, valuation uplift, and capital efficiency—backed by a secular healthcare growth trend,” said Taponeel Mukherjee and Poornima Vardhan, Principals at AltG, an investment research firm.

They explained that roll-ups combine organic growth through greenfield hospitals (which deliver 10–12% post-tax returns) with inorganic acquisitions of smaller hospitals at relatively lower EV/EBITDA multiples. Cost savings come from supply chain efficiencies, centralised overheads, and exiting underperforming units, while a lower cost of capital enhances returns. Add to that the moat of brand equity, centralised infrastructure, and India’s long-term healthcare growth story—and consolidation becomes a structural trend, not a passing cycle.

Strong fundamentals

Hospitals in India have become a major investment destination, according to a March 2025 report by Grant Thornton Bharat and the Association of Healthcare Providers of India (AHPI). Between 2022 and 2024, the sector attracted $4.96 billion from private equity (PE) investors and $3.2 billion through foreign direct investment (FDI). The report, based on an analysis of 594 M&A and PE transactions, found that hospitals undertook M&A worth $6.74 billion and raised an additional $466 million through IPOs during this period.

Key PE deals include Temasek’s $2 billion investment in Manipal Health, BPEA EQT’s $656 million in Indira IVF, and Blackstone’s $591.1 million in Quality Care India. Cumulatively, FDI inflows into healthcare and diagnostics reached $11.19 billion since April 2000, with $931.46 million added in FY25 (until September).

The next wave of consolidation is expected in specialty care—oncology, IVF, ophthalmology, and dialysis—as well as hybrid models combining physical and digital infrastructure. These segments alone drew $1.4 billion in PE funding over the last two years, driven by scalable, asset-light models and rising demand, the report said.

However, the rapid pace of consolidation is prompting scrutiny around pricing power, affordability, and regional dominance. Still, investors argue that consolidation is not just about expansion—it’s about building sustainable, formalised healthcare platforms in a fast-growing market.

“For now, the roll-up prescription appears to be working,” said Vishal Manchanda, Senior Vice President – Institutional Research at Systematix. “Consolidation is a signal the demand-supply situation is getting sorted, and growth now is more a function of gaining share.”

Rs 32,000 crore in new beds, focus on smaller cities

Given the bullish demand outlook, hospitals are planning major expansions. ICRA in a report released this week estimated that 11 listed and two large unlisted hospital players will add 14,500 beds between FY2026 and FY2027—a 26% increase in capacity—backed by total capital expenditure of ₹30,000–32,000 crore.

Notably, much of this growth is targeted at underserved Tier 2 and Tier 3 cities such as Nagpur, Lucknow, Ongole, and Coimbatore, where demand is rising but organised hospital infrastructure remains limited.

“Mergers and acquisitions aid hospital chains in diversifying their geographic reach and/or specialty mix in addition to improving their scale of operations,” ICRA noted.

Despite ongoing investments, the sector’s debt metrics remain healthy, with Total Debt/OPBDITA projected at 2.4–2.6x by March 2026, compared to 2.1x in March 2025.

Long constrained by heavy capital requirements and long gestation periods, hospitals are now seeing better return on capital employed (RoCE). With new facilities turning profitable and mature centres delivering stronger margins, ICRA expects RoCE to remain between 13–15% in FY2026.

The macro environment remains favourable. The Indian hospital industry, valued at over ₹6 lakh crore, is projected to grow at a CAGR of 15–17% over the next five years. Integrated platforms offering inpatient, diagnostics, pharmacy, and outpatient care are best positioned to capture this upside.

According to ICRA, the industry is on a stable footing. The ratings agency has upgraded its outlook for the hospital sector to Positive, forecasting occupancy rates of 62–64%, average revenue per occupied bed (ARPOB) growth of 6–8%, and operating margins of 22–24% in FY2026.

“Structural tailwinds like rising lifestyle diseases, growing insurance penetration, affordability, and awareness are all pushing demand,” said Mythri Macherla, Vice President & Sector Head, ICRA. “Digitisation, cost optimisation, and brand strength are reinforcing operating leverage.”