Every other day, we encounter news of natural disasters, climate extremes or health hazards. The global climate is shifting prominently, and living beings are prone to several health risks. The lowering of immunity, risk of new disease outbreaks, depleting food habits, etc., are key trends visible these days. It underscores the need for a robust private and public healthcare system that can help to combat this.
Catering to the healthcare needs of such a large population may be a difficult task for the government. Therefore, private organisations working in various healthcare sectors play a crucial role overall. Amidst all the risks lurking upon the health of humans, the healthcare sector stocks in India may find a bright light of opportunities
The industry is already gaining momentum in recent years in India due to technological innovation, growing consumer needs, digitalisation, growing population, etc. Let’s explore a crucial industry and some of the best healthcare stocks.
Indian healthcare industry
In the past few years, the world has faced several healthcare challenges. Moreover, many loophole areas of the sector were highlighted in the pandemic period. India was no exception to it. However, post-pandemic, the country has witnessed the rise of several sub-sectors of the healthcare industry and some prominent companies in them. In 2021, the government expenditure on healthcare in high-income countries was around 13%, while that of India was nearly 3%.
The Indian healthcare sector is valued at US$ 372 billion by joint efforts of the private sector and government in 2023. The value is derived through several factors such as growing consumer demand, health risks, government schemes like Ayushman Bharat, exposure to foreign technology and capital, etc.
However, there are some challenges for the sector in India, such as lack of infrastructure, investment, awareness, stagnant government allocation, etc. Despite such challenges, there lies an opportunity for investments owing to its potential growth.
Why invest in the Indian healthcare sector?
Investment horizons are evolving all over the world. In the wake of it, the healthcare industry can be a hidden gem for investors. There are some prominent reasons to invest in health sector stocks in India:
- These days, healthcare is an unavoidable element of human life. The growing population in India provides an opportunity for a larger market.
- The government has taken up some key projects like the National Health Mission (NHM), which help build the required infrastructure and give a push to the overall industry.
- The key NIFTY Healthcare Index on the National Stock Exchange (NSE) has grown by nearly 52% in the past year as of October 15, 2024.
- The stocks of the top 5 prominent companies in the industry have an average return on equity (ROE) of 16.3%.
- The hospital industry is projected to grow at a compounded annual growth rate of 8% up to 2032.
However, before making an investment, one should understand the varied dynamics of the industry in detail. It can help investors consider probable factors affecting the index or industry as a whole.
Understanding health care sector stocks in India
The healthcare sector as a group constitutes several elements, which can also be separately categorised as a sector. The elements like medicine, hospitals, insurance, medical claims, health professionals, research and development, etc., constitute the industry.
Therefore, healthcare industry stocks can be components of various sub-sectors under the umbrella of healthcare. Moreover, stock market investment can give direct access to such a variety. Some of the best healthcare stocks in India belong to the pharmaceutical, hospital, financial, fin-tech, and manufacturing industries.
Must read: The healthcare industry in India: An overview
Best healthcare stocks to invest in India
The top 5 stocks selected below are based on their weightage in the NIFTY Healthcare Index as of September 30, 2024. The index was rebalanced last on July 31, 2024.
It is one of the most known pharma names for Indians. The company is involved in manufacturing a range of products and Active Pharma Ingredients (APIs) that can be further used as a raw material for drugs. The company’s financials reflect its strong position in the market.
| Particulars | 2023-24 (in ₹) | 2022-23 (in ₹) | Change (%) |
| Revenue | 484.9 billion | 438.8 billion | 10.5 |
| EBITDA* Margin | 25.7% | 25.5% | 0.7 |
| Net Profit Margin | 20.1% | 19.6% | 2.5 |
| Networth | 637 billion | 560 billion | 13.7 |
| Debt to Equity | 0.05 times | 0.12 times | Lower the better |
| EPS* | 39.9 | 35.3 | 13.0 |
(*EBITDA: Earnings Before Interest, Tax, Depreciation and Amortisation; EPS: Earnings per share)
It has the largest market capitalisation compared to other pharma and overall healthcare companies as of October 15, 2024. It is spread across 100 countries globally. The company reflects overall strong growth and can be one of the best healthcare stocks to invest in.
The company has been a known name in Indian houses due to products like Cofsils and Omnigel. It has spanned its brand with more than 200 APIs. Its price-to-earning ratio (P/E) is 28.6 as of October 15, 2024, and can be a potential health sector stock investment.
| Particulars | 2023-24 (in ₹) | 2022-23 (in ₹) | Change (%) |
| Revenue | 254.4 billion | 224.7 billion | 13.2 |
| EBITDA Margin | 24.4% | 22.1% | 10.4 |
| Net Profit Margin | 16.0% | 12.3% | 30.0 |
| Networth | 267.1 billion | 234.2 billion | 14.0 |
| Debt to Equity | (0.29) times | (0.23) times | Lower the better |
| EPS | 51.0 | 34.7 | 47.0 |
The company’s financials are on an upward trend. However, its promoter’s holding was reduced in the 2nd quarter of FY 2024-25. Therefore, investors should analyse all the factors before investing.
In recent years, this stock has constantly been in the news due to its growth, regulatory measures, market news, etc. The company also owns a subsidiary that is in the process of innovating novel therapeutics for fatal diseases, like cancer. It is present in countries like India, United Kingdom, Mexico, China, etc. Its financials tell the story of its growth in recent years.
| Particulars | 2023-24 (in ₹) | 2022-23 (in ₹) | Change (%) |
| Revenue | 271.3 billion | 234.5 billion | 15.7 |
| EBITDA Margin | 30% | 30% | – |
| Net Profit Margin | 19.9% | 18.3% | 8.7 |
| Networth | 280.5 billion | 230.9 billion | 21.4 |
| Debt to Equity | (0.23) times | (0.21) times | Lower the better |
| EPS | 334.0 | 270.9 | 23.2 |
The company’s stock is trading at ₹6,618 on October 15, 2024. Moreover, its P/E ratio is lower compared to industry P/E. Such factors, along with fundamental growth, can provide an investment opportunity.
It is a significant part of the Index and one of the leading hospital chains in India. The company has been expanding by acquiring local hospitals and establishing its world-class technology in them. Most of its hospitals are multi-special. Its consolidated financials are as follows:
| Particulars | 2023-24 (in ₹) | 2022-23 (in ₹) | Change (%) |
| Revenue | 54 billion | 45.6 billion | 18.4 |
| EBITDA Margin | 27.2% | 27.6% | (1.3) |
| Net Profit Margin | 18.6% | 19.5% | (4.9) |
| Networth | 840.8 billion | 741 billion | 13.4 |
| Debt to Equity | 0.06 times | 0.08 times | Lower the better |
| EPS | 10.8 | 11.3 | (4.4) |
Its stock is trading at ₹970 as of October 15, 2024. It is planning to expand its operations by doubling its operations in the upcoming 5 years. Such reasons can make it one of the most lucrative healthcare industry stocks for investors.
It is the largest hospital and pharmacy chain in India. It spans its integrated facility across major cities in India. Similar to its market reputation, the company’s financials have been projecting its growth capacity since its inception.
| Particulars | 2023-24 (in ₹) | 2022-23 (in ₹) | Change (%) |
| Revenue | 190.5 billion | 166.1 billion | 14.6 |
| EBITDA Margin | 12.5% | 12.3% | 1.6 |
| Net Profit Margin | 4.9% | 5.0% | (2.0) |
| Networth | 6.9 billion | 6.2 billion | 11.3 |
| Debt to Equity | 0.43 times | 0.41 times | Lower the better |
| EPS | 62.4 | 56.9 | 9.6 |
Its stock is currently trading ₹7,138 as of October 15, 2024. However, its growth and capacity reflect it as a strong choice among the healthcare stocks to invest in.
An interesting read: Apollo vs. Max Healthcare: Battle of healthcare titans
Major challenges when investing in health care stocks
- Lack of focus on R&D
The healthcare sector as a whole is very dynamic due to competition, pacing lifestyle, vulnerability to novel diseases, unpredictability of the human body, etc. Owing to these reasons, the companies would constantly need research and development.
They need to employ required bio-scientists and other medical professionals for the same. Moreover, technical infrastructure also requires research to facilitate better functioning for the healthcare industry.
- Urgent need for innovation
As of 2023, healthcare innovation constitutes 15% of the overall healthcare market in India. However, the market is ever-evolving, so there is an urgent need for innovation. The sector holds potential to grow at 12% CAGR by 2028. Therefore, to make it more inclusive, it would need innovation on holistic levels in the upcoming period. Moreover, innovation in allied activities, such as digital assistance, medical education, medical equipment manufacturing, etc., are also crucial to combat the evolving changes.
- Competition
In comparison to medicines in regular medicine, generic medicines can act as a significant alternative. Moreover, they usually cost less due to less number of trials. Jan Aushadhi stores across the country have catalysed the popularity of generic medicines in India. They constitute about 20% of the medicine market in India.
- Regulatory hurdles
Drug regulations and trials are crucial parts of medical items manufacturing. Drug companies are regularly inspected by the Food and Drug Administration (FDA), a federal agency. However, they are time-consuming and may increase the overall expense. These hurdles can further affect the supply chain.
- Technological risks
The risk and hurdle of obsolete technology, such as production techniques, hospital facilities, healthcare infrastructure, digital systems, etc., can make a significant impact on overall healthcare sectors. These days, patient details, hospital records, confidential research, etc., are stored digitally. However, the risk of cyber attacks lurks over them.
SWOT analysis of Indian healthcare industry
Investors willing to invest in healthcare stocks should understand the sector holistically before investing. Here is the analysis of its aspects like strength, weakness, opportunities and threats:
| Strength | Weakness | Opportunities | Threats |
| India’s large population provides a desired customer base for the industry. | The sector majorly lacks the required infrastructure and innovation. It may lead to competition from other countries. | Rural India can provide significant growth opportunities. Nearly 34% of households in villages lack health insurance. | The healthcare cost is rising at around 14% per annum. It can create further divides in the service quality of rural and urban settings. |
| Government is constantly making efforts to provide aid to the sector in its core and allied aspects. | Limited availability of skilled workforce. There is 1 doctor compared to 834 people in India. | The area of ayurveda medicine is an untapped opportunity for the sector. | Globally, climatic conditions are depleting which can burden the sector with more diseases. |
Way forward
The healthcare industry comprises varied elements. It is concerned with the regular human lives. Therefore, it is quite significant and makes a huge impact on human lives. The evolving climatic conditions, growing population, technological advancements, uncertainties of life, etc., have driven the growth of this industry.
In India, the healthcare industry has underscored its importance time and again. Moreover, its future growth targets also look lucrative and may provide a significant investment opportunity for investors. Some of the best healthcare stocks in India are part of the NIFTY Healthcare index. Investors can analyse their suitability before investing in them.
Check this out! Financial literacy for medical professionals: Strategies for debt management and investment
