Rainbow’s new hospitals report negative EBITDA in Q2 FY27

Rainbow Children’s Hospital’s five new hospitals reported a negative 16% pre-Ind AS 116 EBITDA margin in Q2 FY27, generating 4% of group revenue while representing 12% of group beds. Their occupancy improved to 27.4% from 22.6% in Q1 FY27, and inpatient discharges rose 66% sequentially to 1,758.

Why did Rainbow’s new hospitals report negative EBITDA?

Rainbow’s new-hospital cluster reported negative EBITDA because its revenue contribution and occupancy remained below those of the older hospital clusters in Q2 FY27. The five hospitals generated 4% of group revenue from 12% of group beds, recorded 27% occupancy and had a negative 16% EBITDA margin before Indian Accounting Standard 116, or Ind AS 116, effects. By comparison, the 14 mature hospitals generated 73% of revenue from 63% of beds, with 54% occupancy and a 28% pre-Ind AS 116 EBITDA margin.

The difference also appeared in average revenue per occupied bed, or ARPOB. New hospitals reported ARPOB of about Rs 43,000 in Q2 FY27, compared with Rs 59,000 for the seven emerging hospitals and Rs 67,000 for mature hospitals. The group ARPOB was Rs 63,000, placing the new cluster below the group figure and both older maturity categories.

Rainbow defines new hospitals as facilities that commenced operations after 1 April 2024 and are within zero to two years of opening. The cluster comprises Rajahmundry, Electronic City, HBR, Nellore and Guntur. No Q2 FY26 comparison is available because these hospitals had not commenced operations during the corresponding prior-year quarter.

How did Rainbow’s new hospitals perform in Q2 FY27?

Rainbow’s new hospitals improved operating indicators sequentially in Q2 FY27, although their occupancy remained below the group’s reported 49.2%. Inpatient, or IP, discharges increased 66% to 1,758 from 1,059 in Q1 FY27. Occupancy rose to 27.4% from 22.6%, a 4.8-percentage-point increase, while ARPOB was broadly unchanged at Rs 42,701 against Rs 42,460.

Average length of stay, or ALOS, declined to 3.32 days in Q2 FY27 from 3.58 days in Q1 FY27, a 7.1% reduction. That length remained above the group ALOS of 2.64 days and the mature-hospital figure of 2.71 days. The presentation does not provide a hospital-level explanation for the new cluster’s occupancy, ARPOB or negative EBITDA margin.

Capacity increased during the quarter as three facilities commenced operations or joined the new cluster. Rainbow Nellore opened on 1 September with 70 capacity beds and 55 operational beds, while Rainbow Guntur opened on the same date with 50 capacity beds and 40 operational beds. Rainbow HBR commenced on 1 May with 60 capacity beds and 48 operational beds.

How do Rainbow’s new hospitals compare with older facilities?

Rainbow’s new hospitals had the lowest occupancy, lowest ARPOB and the only negative pre-Ind AS 116 EBITDA margin among the three maturity categories in Q2 FY27. Their 27% occupancy was 20 percentage points below emerging hospitals’ 47% and 27 percentage points below mature hospitals’ 54%. Their negative 16% EBITDA margin compared with 26% for emerging hospitals and 28% for mature hospitals.

The emerging cluster provides a reference point because it consists of hospitals between two and five years after commencement. Its seven facilities include OMR, Financial District, Himayat Nagar, Sarjapur, Anna Nagar, Warangal and Guwahati. Emerging hospitals reported 47.2% occupancy and 8,845 IP discharges in Q2 FY27, compared with 27.4% and 1,758 respectively for the new cluster.

Mature facilities maintained capacity of 1,550 beds and 1,202 operational beds in Q2 FY27, Q1 FY27 and Q2 FY26. Their Q2 FY27 occupancy rose to 54.2% from 45.0% in Q1 FY27, while IP discharges increased to 22,103 from 18,620. Mature hospitals’ ARPOB of Rs 66,922 was higher than the new cluster’s Rs 42,701.

What does H1 FY27 show about Rainbow’s new-hospital ramp-up?

Rainbow’s H1 FY27 data show that the new cluster remained negative at the EBITDA level while accounting for 11% of group beds and 4% of revenue. Its pre-Ind AS 116 EBITDA margin was negative 22% in H1 FY27, compared with negative 16% in Q2 FY27. Occupancy was 25% for the half year, below the 27% reported in the Q2 maturity analysis, while ARPOB was Rs 43,000 on the presentation’s rounded basis.

The quarter-on-quarter change in occupancy and margin coincided with the addition of Nellore and Guntur on 1 September. The new cluster’s H1 FY27 bed share of 11% was one percentage point below its 12% Q2 share, while revenue share remained 4% in both periods. Rainbow does not disclose revenue, expenses or EBITDA for individual new hospitals, so the contribution of each opening cannot be identified from the presentation.

At group level, revenue from operations increased 23.2% year on year to Rs 548.02 crore in Q2 FY27 and 16.6% from Rs 469.99 crore in Q1 FY27. Post-Ind AS 116 EBITDA was Rs 169.98 crore, up 14.2% year on year, while the margin was 31.0%, compared with 33.5% in Q2 FY26. The pre-Ind AS 116 group EBITDA margin used in the maturity analysis was 26%, compared with the new hospitals’ negative 16%.

Conclusion

Rainbow’s Q2 FY27 disclosure shows that its five newest hospitals remained in an early operating phase. Capacity increased from 250 to 370 beds sequentially, IP discharges rose to 1,758 and occupancy reached 27.4%. Those gains had not yet produced positive pre-Ind AS 116 EBITDA, as the cluster generated 4% of group revenue from 12% of beds and reported a negative 16% margin.

The next reported periods will show whether facilities that commenced on 1 May and 1 September increase utilisation and ARPOB. The disclosed measures to watch are new-hospital occupancy against the group’s 49.2%, ARPOB against Rs 42,701 in Q2 FY27, and whether the pre-Ind AS 116 EBITDA margin improves from negative 16% in Q2 FY27 and negative 22% in H1 FY27.