Healthcare infrastructure to benefit from new loan guarantee scheme and incremental allocation towards short-term Covid-19 preparedness: ICRA

With the aim of scaling up medical infrastructure targeting underserved areas, the government has declared a Rs50,000cr guarantee scheme. Under the same, National Credit Guarantee Trustee Company Limited would provide guarantees to entities expanding or setting up new healthcare facilities in cities other than the eight metropolitan cities.

While the guarantee coverage for aspirational districts is 75% for both new projects and expansion, the same for the other districts is 50% for expansion and 75% for new projects. The interest rate on these loans will be capped at 7.95% and the maximum loan which can be availed by any entity is capped at Rs100cr. The guarantee duration would be up to 3-years.

Source: Ministry of Finance, ICRA research
 
Under the Covid Emergency Response and Health System Preparedness Package announced in April 2020 with an outlay of Rs15,000cr in FY2021, the government has set up ~3,900 Covid-dedicated hospitals, ~7,900 Covid health centres, 9,954 Covid care centres and increased the oxygen-supported beds by 7.5x, isolation beds by 42x and ICU beds by 45x (~1.1 lakh beds).

Source: Ministry of Health, ICRA research

To augment the current Covid-19 care infrastructure and considering warnings from healthcare experts that the third wave may affect children adversely, the government has also allocated Rs. 23,220 crores (for one year) under a new scheme focused on short-term preparedness with special emphasis on children and paediatric care/paediatric beds. This scheme would be used to fund short-term HR augmentation through medical students and nursing students, increase the availability of oxygen beds, ensure adequate availability of equipment and medicines, and enhance testing capacity and supportive diagnostics.

Ms. Mythri Macherla, Assistant Vice President and Sector Head, ICRA said: “With significant infrastructural gaps persisting in the Indian healthcare industry, renewed focus and support provided by the government for expanding and setting up new capacities in traditionally underpenetrated areas of the country is expected to improve healthcare access in the semi-urban and rural areas of the country. While the guarantee duration has been provided only for three years as against typically higher breakeven period for most hospitals (including the time for setting up the facility), the guarantee will provide additional comfort to lenders in case of borrowers with weaker credit profile.”

While hospitals have witnessed an all-time high occupancy in Q1 FY2022 with resurgence in Covid-19 cases and revival of elective surgeries in recent weeks, revenues of hospitals are expected to witness healthy expansion in FY2022. However, with Covid ARPOB (Average Revenue Per Occupied Bed Day) remaining 30-40% lower than non-Covid ARPOB for most hospitals and the evolving nature of the pandemic, margins of hospitals would remain a key monitorable in the short-term.

Furthermore, while relatively lower-interest backed loans are available through the previously announced RBI on-tap liquidity window of Rs. 50,000 crores and ECLGS 4.0 and the current guarantee scheme, hospitals will need to evaluate the demand prospects and impact of additional loans on their balance sheets before incurring capital expenditure for expansion.