Paras Healthcare IPO: Can higher occupancy deliver lasting profit?

Paras Healthcare Ltd, an operator of hospitals, posted a profit in FY26 and the first quarter of FY27 and is counting on its ₹1,450 crore initial public offering (IPO) to reduce debt and support its next phase of growth. For investors, the question is whether improving occupancy can deliver sustained earnings as the hospital chain expands.

The healthcare provider is selling shares at ₹660- ₹693 apiece. Opening on Wednesday and closing on Friday, the offer comprises a ₹500 crore fresh issue and a ₹950 crore offer for sale by existing investors, with ₹375 crore earmarked for debt repayment.

Paras operates eight hospitals across North India, Bihar and Jharkhand, with a capacity of 2,211 beds (for which the civil structure has been planned), of which 1,502 were operational as of June. Tier-II cities contributed about 68% of its revenue in FY26.

Cardiac sciences, oncology, neurosciences, gastro sciences, orthopaedics and renal sciences together generated almost three-fourths of its revenue.

Consolidated revenue increased at a compounded annual rate of 19.3%, from ₹1,129 crore in FY24 to ₹1,606 crore in FY26. Ebitda rose 47.4% at an annualized rate to ₹336 crore. The company posted a net profit of ₹44 crore in FY26, turning around from losses of ₹15 crore in FY24 and ₹58 crore in FY25.

The management attributed the earnings recovery primarily to rising patient volumes. Occupancy increased from 50.8% in FY25 to 61.8% in FY26 and 69.7% in the June quarter. Managing director Dharminder Nagar told Mint that higher capacity utilization drove the turnaround, helping operating earnings grow faster than revenue and improving margins.

The opportunity extends beyond building new capacities, according to Vedant Gupte, co-founder and chief executive officer of investment platform Trackk.

“Paras does not necessarily need to expand aggressively to improve earnings; getting more out of its existing network could itself drive a meaningful improvement in profitability,” he said.

Growth versus profitability

The company operates in a highly competitive market alongside giants Max Healthcare Institute Ltd, Fortis Healthcare Ltd and Apollo Hospitals Enterprise Ltd. Paras’s FY24-FY26 revenue CAGR exceeded the 15.1% rate posted by Fortis Healthcare and Apollo Hospitals, Global Health Ltd’s 16% and Jupiter Lifeline Hospitals Ltd’s 18.2%. It, however, trailed Max Healthcare’s 21.2%, Krishna Institute of Medical Science Ltd’s 25% and Yatharth Hospital and Trauma Care Service Ltd’s 34.2%.

Acquisitions, geography and hospital maturity affect comparability. Further, its stronger Ebitda growth against peers partly stems from a low base.

Paras delivered an impressive performance in the June quarter (Q1FY27). Revenue increased 27.7% year-on-year to ₹470 crore, while Ebitda surged 71.1% to ₹113 crore. The Ebitda margin, measured against total income, reached 23.7% against 20.6% in FY26.

“The business is demonstrating operating momentum, although net profitability and returns on capital still have room to improve,” Gupte said.

However, quarterly earnings included a ₹16.2 crore deferred tax credit, warranting caution when extrapolating profits.

Debt relief

Paras will use ₹375 crore of the fresh proceeds to repay borrowings at the company and its Srinagar subsidiary, easing interest costs and creating room to fund expansion. June-end borrowings, excluding lease liabilities, stood at ₹888.9 crore. After adjusting for cash and fixed deposits, net debt was ₹536 crore.

Group chief financial officer Dilip Bidani said that the IPO-funded debt repayment and cash retained from the issue would leave Paras with minimal net bank debt, although lease liabilities would remain. Stronger internal cash flows and greater borrowing capacity would help fund expansion, he added.

Gupte, however, said the test would be whether Paras can add capacity in line with demand and generate enough operating cash flow to fund growth without rebuilding leverage.

Collections need attention

While Paras expands its footprint in the regional markets, government-backed healthcare schemes and public-sector undertakings accounted for 41.3% of FY26 revenue versus 29.8% in FY24. This has introduced working capital friction. Receivable days increased from 46.4 to 66.4 over the period, reaching 76.3 in the June quarter.

Managing director Nagar attributed the rise in government receivables to the empanelment of its newer hospitals in Kanpur and Srinagar and said it expects collections to stabilize.

“Typically, you’ll find that these payment cycles settle down to an average,” he said.

For investors, however, the key operational measure will be cash conversion. The operating cash flow of ₹163.5 crore in FY26 remained slightly below the ₹169.4 crore spent on property, equipment and intangible assets, before disposal proceeds.

“Better cash conversion would strengthen the company’s ability to fund growth internally and reduce its dependence on borrowing,” Gupte said.

Execution risks

Paras plans to add 300 beds in Gurugram and up to 500 in Ludhiana, taking its capacity to 3,011 beds by March 2028. While Gurugram builds on an existing presence, Ludhiana represents entry into a new market.

“Typically, it takes two to three years for us to break even in any of our new geographies,” Nagar said.

Meanwhile, June-quarter occupancy reached about 53% in Srinagar and 66% in Kanpur, offering further earnings potential within the existing network.

“The opportunity is to allow newer hospitals to mature while expanding selectively,” Gupte said.

Anand Rathi Research puts the IPO at about 25.7 times FY26 enterprise value to Ebitda. It recommends subscribing for the long term but considers the issue fully priced.

Its P/E estimate of 37.7 times annualizes June-quarter earnings rather than forecasting full-year FY27 profit.