• India's healthcare sector saw a 17.6% YoY revenue increase in Q2 FY25, driven by rising hospital occupancy rates.
• Insurance payers contributed 33% of total revenues in the hospital segment, marking a 23% YoY growth.
• Despite positive growth, insurance penetration remains low in India, indicating potential for expansion.
• The pharmaceutical sector also recorded strong growth, with a positive outlook over the next three years.

India's healthcare sector has been a beacon of growth in the second quarter of the fiscal year 2025, with a robust increase in revenue by 17.6% year on year (YoY), as per a report by Axis Securities. This growth is not an isolated incident but a continuation of a strong performance, with the sector also registering a 10.4% growth quarter on quarter (QoQ).

A significant factor propelling this growth has been the rise in hospital occupancy rates. The report indicates an increase of 340 basis points (bps) YoY and 470 bps QoQ. This surge in occupancy rates is a testament to the increasing demand for healthcare services in the country.

The financial aspect of the healthcare sector also witnessed a positive trend. Insurance payers, who contributed 33% of total revenues in the hospital segment, marked a 23% YoY and 12% QoQ growth.

Insurance Penetration and Future Growth

Despite the positive growth in insurance contributions, the report points out that insurance penetration in India continues to remain low. This, however, is not necessarily a negative aspect. The low penetration of insurance offers room for expansion as awareness and purchasing power increase among the population.

The report also sheds light on the specific areas within healthcare that are driving growth. Cancer and cardiac care continue to drive double-digit growth. This, coupled with rising occupancy rates and Average Revenue Per Occupied Bed (ARPOB), is expected to sustain future growth in the healthcare sector.

Pharmaceutical Sector: A Key Player

The pharmaceutical sector, a crucial component of the healthcare industry, also recorded strong growth in Q2 FY25. Major pharmaceutical companies in India reported a 10% YoY growth in Q2 of FY25. This growth has been driven by impressive performance in North America and the domestic market.

The Indian Pharmaceutical Market (IPM) grew by 8% YoY, with chronic therapies seeing a 9% increase. However, acute therapies experienced a modest 4% growth due to a weaker season. The pharmaceutical sector under coverage recorded a 10.2% YoY and 1.7% QoQ growth, led by a 10.8% YoY increase in North America and a 9.8% YoY rise in the Indian business.

The future outlook for the pharmaceutical sector remains positive over the next three years, with a promising pipeline in biosimilars, GLP-1 (glucagon-like peptide-1), and peptides, all of which are important in treating diabetes and other conditions. Companies with a significant share of chronic therapy portfolios continue to outperform the broader market.