Major Indian hospital stocks experienced a significant rally on Friday, with shares of Fortis Healthcare, Apollo Hospitals, Manipal Health, Max Healthcare, and Global Health (Medanta) climbing by up to 5%. The surge follows a crucial government decision to cap trade margins on non-scheduled anti-cancer drugs at 30%.
The Union Ministry of Chemicals and Fertilizers announced this new measure, which applies to both branded and generic medicines, domestically manufactured and imported drugs, as well as patented and non-patented products. Experts anticipate this move will drastically reduce medicine prices by up to 70%, potentially saving cancer patients approximately Rs 2,500 crore annually in out-of-pocket expenses.
Impact on Key Hospital Players
Individual stock performances reflected the market's positive reaction:
- Fortis Healthcare: Rose 5.37% to Rs 805.15, pushing its market capitalization to Rs 58,966 crore.
- Apollo Hospitals: Gained 4% to Rs 7977, with its market cap reaching Rs 1.14 lakh crore.
- Global Health (Medanta): Increased 3.2% to Rs 1317.25, commanding a market cap of Rs 35,357 crore.
- Manipal Health: Saw a 4.68% rise to Rs 715.50.
- Max Healthcare: Shares climbed over 3% to Rs 915 on the BSE.
This policy extends price protection to a category of anti-cancer medicines not previously covered by existing ceiling prices for scheduled drugs. By limiting trade margins across the entire supply and distribution network, the government aims to prevent excessive mark-ups before these vital medicines reach patients, thereby enhancing the affordability of cancer treatment across the nation.
Analyst Outlook
Analysts from Jefferies, Alok Dalal and Dhawal Khut, noted the potential for a near-term impact on hospital margins but described it as transitory. Importantly, they believe the regulatory uncertainty surrounding the sector has eased for now. The brokerage also highlighted that the recent correction in hospital stocks has created an attractive entry point for investors. Valuations currently stand at around 21–25 times their estimated FY28 EV/EBITDA, a notable decrease from 25–35 times a year ago, making the sector appear more appealing from a valuation perspective.