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Hospital Stocks Attractive Despite Regulation Fears, Elara Securities Says Impact Under 10%
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Moneycontrol•01-10-2026, 15:06
Hospital Stocks Attractive Despite Regulation Fears, Elara Securities Says Impact Under 10%
- •Elara Securities views hospital stocks as an attractive medium-term opportunity, expecting potential government regulation on margins to impact the bottom line by no more than 5-10%.
- •The Supreme Court's criticism of high medicine markups and suggestion of a 16% margin cap led to a 5-7% sell-off in hospital counters.
- •Bino Pathiparampil, Head of Research at Elara Securities, argues that overall healthcare profitability is not as high as isolated examples suggest, with hospitals making a decent 20% ROC.
- •He explains that high profitability on certain drugs might subsidize other aspects of the business or patient sections, making a uniform price cap undesirable due to diverse cost structures.
- •Despite regulatory overhang, recent corrections and the court's remarks have made valuations reasonable, with Elara Securities maintaining that hospital stocks are attractive at current levels.
Key Questions Answered
According to Elara Securities, potential government regulation on margins is unlikely to impact the hospital sector's bottom line by more than 5 to 10 percent.
Hospital counters suffered a sharp 5 to 7 percent sell-off after the Supreme Court criticized steep medicine markups—highlighting a cancer drug sold at Rs 27,000—and advocated for a 16 percent margin cap.
Bino Pathiparampil from Elara Securities noted that the hospital business generates a decent return on capital (ROC) in the range of 20 percent plus or minus.
