The Indian hospital sector has long and secular drivers of growth drawing from both pricing and volume. In the current volatile macro-environment, reasonably-valued stocks in the defensive hospital sector with a growth outlook should be part of investor portfolio. Within the sector, Narayana Health (Naryana Hrudayalaya) offers growth at a reasonable valuation compared to peers. The base operations of Narayana in the short term, and capacity expansion in the longer term can support strong topline growth. The margin profile of the company should improve from scaling of ancillary operations in India and Cayman Islands pertaining to insurance and care centres. Recently, we had recommended investors accumulate the stock. Given the way markets have played out over the last month and the uncertainties ahead, its relative position in the markets has only got better. Hence, we reiterate our accumulate rating on the stock, which is now trading at one-year forward PE of 33 times. Investors with a three-to-five-year perspective can also gradually add to positions on any corrections.

India organic growth

Narayana Health has a geographically well-diversified business with 54 per cent of consolidated revenue of ₹2,151 crore in Q3FY26 derived from India and 23 per cent each from Cayman and the UK.

India revenue grew 9 per cent year on year in 9MFY26, excluding integrated care operations. This largely organic growth (without bed additions) is driven by pricing and volume growth. The company is significantly expanding complex procedures’ proportion in revenue mix that includes robotic, cardiology, transplants and oncology operations. The other price levers include payor mix (self-paid, government schemes and insurance) and efficiency programmes. The ARPP (average revenue per patient) has grown 11 per cent in Q3FY26 along with ALOS (average length of stay) reducing from 4.5 to 4.4 days. The latter metric, which measures the turnaround time for a patient and hence efficiency, has a higher scope to improve as the company’s peers operate on a range of 3-3.5 days.

As the table shows, the company is present in Bengaluru, Kolkata, Ahmedabad, Jaipur, Raipur, Gurugram and Delhi. The ARPP measure in different regions with the exception of Bengaluru has significant scope to expand. The reason for the difference can be attributed to legacy of operations (age), competition, efficiency measures and proportion of complex procedures. The management noted that the work on improvement is ongoing and should narrow the difference between regions if not closing the gap with Bengaluru owing to its legacy of the operations.

Indian operations reported a 300-bps year-on-year improvement in EBITDA margins in Q3FY26 to 22.7 per cent. The company has a strong margin profile, which is comparable to peers despite a lower ARPP profile. This is owing to a strong suite of process efficiency measures, ERP design — built and deployed in-house. This is despite lagging operations in other clusters and added losses from integrated operations (explained below), which would otherwise have improved margins by another 100-200 bps.

Narayana’s India-integrated operations refer to NHIC (20 clinics and dialysis centres) and NHIL (health insurance programme ‘Aditi’). The nascent operations are scaling up with 98 per cent year-on-year revenue growth in 9MFY26. These operations are loss-making at the EBITDA level and are yet to reach a break-even point. This is possible on achieving scale of operations. The drag on India profitability should improve as the revenue growth adds to scale of operations.

International operations

Narayana’ s international operations are from Cayman and the recently-acquired Practice Plus Hospitals. With 14 years of operations in Cayman Islands, the company has expanded its base here with a new additional facility. The segment operations grew 61 per cent year on year in 9MFY26, driven by the new facility. Apart from inorganic addition, the company should target a higher market share as well. It operates an insurance segment in this region as well, revenues of which are scaling up (from $0.9 million in Q3FY25 to $12.9 million in Q3FY26) and EBITDA losses at $1.5 million in the quarter from the insurance segment.

The company reported its first consolidated revenues from Practice Plus group in the third quarter. The UK chain of 12 hospitals was acquired in October 2025 at £189 million (₹2,200 crore). In Q3FY26, the segment reported revenues of £42 million and 10 per cent EBITDA margins compared to £250 million and 11.2 per cent EBITDA margin in FY25 prior to acquisition. To note, the consolidation is from November 6, 2025, only in the quarter.

Synergy levers for the acquisition include process developed in India and Cayman applied in the region. Also, the group has been reliant on NHS (the UK government care-provider), which has lower realisations and lower margins. The company anticipates shifting gradually to at least peer range of private payers mix in the medium term, which can improve financial performance from the acquisition.

Capital expansion

Narayana has growth levers in India, Cayman and the UK that should sustain low double-digit growth in the medium term. But the company has also launched a capex drive for longer-term growth. At a capex outlay of ₹3,000 crore, it is adding close to 2,000 beds in Bengaluru, Kolkata and Raipur to the current capacity of 5,750 beds for a total outlay of 7,600 beds. Most of the projects are expected to be completed by FY28 and will follow a gestation period of three-four years for optimal utilisation closer to Bengaluru metrics.

The company reported 32 per cent revenue growth in 9MFY26 with the consolidation of the UK hospital in Q3FY26. With a lower EBITDA margin than the group, its EBITDA margin has declined to 22 per cent in 9MFY26 compared to 25 per cent in FY25. Its margin levers should bridge the gap to an extent. The company reported a net debt to equity of 0.53 times in December 2025. The management is focused in improving operation in the UK and Cayman Islands, and repaying the debt, which should further improve the ratio.

Published on April 18, 2026