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Hospital Stocks Attractive Despite Margin Cap Risks, Says Elara Securities' Bino Pathiparampil
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CNBC TV18•01-10-2026, 10:00
Hospital Stocks Attractive Despite Margin Cap Risks, Says Elara Securities' Bino Pathiparampil
- •Hospital stocks offer a buying opportunity for medium-term investors after a recent price correction, as potential earnings impact from proposed drug margin caps is expected to be limited.
- •The sector saw a sharp sell-off following Supreme Court criticism of high medicine markups, citing a cancer drug sold at ₹27,000 and advocating for a 16% margin cap.
- •Bino Pathiparampil, Head of Research at Elara Securities, estimates that even with a 16% margin cap, the impact on bottom line and EPS will not exceed 5 to 10%.
- •Valuations have become attractive due to a time correction over the last one to two years, with stocks weakening from six-month peaks and correcting a further 6% recently.
- •While some price control is likely, Pathiparampil does not expect drastic measures that would significantly impair profitability, noting the complexity of applying a uniform cap to diverse hospital procedures.
Key Questions Answered
Hospital stocks experienced a sharp sell-off after the Supreme Court criticised high medicine markups, highlighting a cancer drug priced at ₹27,000 and advocating for a 16% margin cap on drugs.
According to Elara Securities' Bino Pathiparampil, even if the government implements a 16% margin cap, the total impact on the bottom line and earnings per share will not exceed 5 to 10%.
The hospital business currently generates a decent return on capital (ROC) of around 20%, plus or minus, making stocks attractive despite regulatory margin risks.
