Ladies and gentlemen, good day, and welcome to Max Healthcare Institute Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then Zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Pujari from CDR India. Thank you, and over to you.
Thank you. Good evening, everyone, and thank you for joining us on Max Healthcare's Q4 and FY 25, 24 earnings conference call. We have with us Mr. Abhay Soi, Chairman and Managing Director; Mr. Yogesh Sareen, Senior Director and Chief Financial Officer; and Mr. Keshav Gupta, Senior Director, Growth, M&A, and Business Planning of the company. We will begin the call with opening remarks from the management, following which we'll have the forum open for a interactive question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Abhay to make his opening remarks.
A very good afternoon to everyone, and a warm welcome to Max Healthcare's earnings call for the last quarter of fiscal 2024. This has been yet another noteworthy year for us. We witnessed a robust growth in revenue and profitability, with both gross revenue and operating EBITDA registering a 16%-17% growth year-on-year. We touched all-time highs for all our key operating and financial metrics, including ARPOP, margin, and EBITDA per bed. This year also marked our foray into two new cities, namely Nagpur and Lucknow, adding approximately 750 beds to our existing bed capacity with further expansion potential. Both these cities represent key markets in the fast-growing and populous states of Maharashtra and Uttar Pradesh.
We consummated the Nagpur transaction on February 9 for a net consideration of INR 395 crores, financed through internal accruals and QIP funds. While the Lucknow transaction was consummated on March 7 for a net consideration of INR 993 crores, with INR 600 crores being financed through external debt. We have already embarked upon the performance improvement journey for these hospitals, which include the revamping of existing infrastructure, expansion of bed capacity, centering of clinical talent, and establishing a robust sales and marketing program. These hospitals have been renamed as Max Super Speciality Hospital, Lucknow, and Max Super Speciality Hospital, Nagpur. We expect them to be the key drivers for future growth in these regions.
In addition, we have also acquired 5.44 acres of prime land at Shaheed Path in Lucknow, with the potential to build approximately 550 beds. The plans for this hospital will be firmed up once we turn around the operations of Max Super Speciality Hospital, Lucknow. Now, coming to the Quarter Four performance, this is our 14th consecutive quarter of year-on-year growth. The new hospitals have added INR 42 crores of revenue and INR 3 crores of EBITDA and a net loss of INR 11 crores during Q4, including one-time transaction expenses. Consequently, overall network gross revenue stood at INR 1,890 crores, registering a growth of 15% year on year and 6% quarter on quarter. While network operating EBITDA was INR 503 crores, a growth of 15% year on year and 7% quarter on quarter.
Profit after tax, tax dipped marginally to INR 311 crore compared to INR 320 crore in Q4 last year due to increase in effective tax rate having an impact of INR 31 crore, net loss from the new hospitals of INR 11 crore, and movement in non-cash item of fair value of contingent consideration of INR 25 crore, which reflects improved projected profitability for the managed hospitals. Growth numbers from here on are being shared on a like-for-like basis, excluding new hospitals. Average occupancy for the network was 75%. Occupied bed days rose marginally by around 1% year-on-year and 3% quarter-on-quarter, driven largely by increased admissions under preferred channels, which is cash, TPA, and international. Growth in occupancy and footfall was impacted due to capacity constraints.
Average revenue per occupied bed, ARPOP, for the quarter improved to INR 78,100, growing by 10% year-on-year and 2% quarter-on-quarter. Year-on-year growth was driven by increased share of super specialties, such as Oncology, Neurology, and Cardiac Sciences, an increase in tariff, including that for the institutional segment. Institutional bed share was 29.1%, compared to 29.2% last year and 29.5% in the previous quarter. However, after excluding Max Shalimar Bagh, the overall institutional bed share stood at 27% during Q4, and occupied bed days were down by 6% year-on-year for this segment. Network gross revenue was INR 847 crores compared to INR 1,637 crores in Q4 last year, and INR 1,779 crores in the previous quarter.
This reflects an increase of 13% year-on-year and 4% quarter-on-quarter. The international patient revenue grew by 14% year-on-year, slightly subdued due to credit risk related actions taken by us and visa related issues in two markets. Network operating EBITDA touched the magic mark of INR 500 crore, reflecting a growth of 14% year-on-year and 6% quarter-on-quarter. Most importantly, annualized EBITDA per bed rose to our highest ever of INR 78.5 lakh, clocking a growth of 12% year-on-year and 4% quarter-on-quarter, while operating EBITDA margins stood at 28.4% for the quarter. Year-on-year growth in EBITDA was impacted due to cost of people hired for Dwarka Hospital, GST on variable management fee, and higher provisioning due to buildup of accounts receivable.
Max Shalimar Bagh, where we added 122 beds, recorded year-on-year growth of 33% and 48% in its revenue and EBITDA, respectively, with an average occupancy of 78%. Profit after tax was INR 322 crores versus similar level in Q4 last year, and INR 338 crores in the previous quarter. Free cash flow from operations generated this quarter amounted to INR 412 crores. Of this, INR 176 crores was deployed towards the ongoing capacity expansion projects and INR 1,509 crores was spent for recent acquisitions. Consequently, net cash position stood at INR 22 crores at the end of March 2024, compared to INR 733 crores same time last year.
Continuing our efforts to support the local communities, we treated approximately 35,200 patients in OPD and 1,200 patients in IPD from economically weaker sections of society, entirely free of cost. Both our strategic business units continue to report significant growth in their revenue and profitability. Max At Home reported a top line of INR 46 crore, reflecting a strong growth of 25% year-on-year and 3% quarter-on-quarter. This SBU continues to garner customer loyalty and has now expanded its footprint to over 10 cities. Max Laboratories, Max Lab, the non-captive pathology vertical, now offers its services in 41 cities and has a network of over 1,100 collection centers and active partners. This SBU reported a gross revenue of INR 39 crore, reflecting a growth of 26% year-on-year and 15% quarter-on-quarter.
On the status of our expansion projects, for 300 beds at Dwarka, we are awaiting last few licenses and will be ready to launch the hospital by early June. We expect to launch it by early June. We have already onboarded over 280 people, including senior doctors. For 329 beds at Nanavati, the hospital structure should be up by mid-July, and the project is on schedule with expected completion by Q4 FY 2025. 375 beds at MAX Smart at Saket Complex, post the initial delay due to tree transplantation issues, this project has now been fast-tracked and is expected to be completed by Q1 FY 2026, 9 months ahead of the previously communicated timelines. For 155 beds at Mohali, the slab work for the 3 basements is underway and base raft has been completed in May.
The number of beds has reduced due to change in configuration and requirement to build a fire ramp, which is a new requirement as per Punjab Fire Authorities. Project completion is expected by Q1 FY 2026. For 300 beds at Sector 56, Gurugram, slab work for the 3 basements is in progress. The pace of work at the project has slowed down due to restricted working hours in view of adjoining residential complexes. This will likely impact the project timeline by a maximum of 6 months. For 250 beds at Patparganj, fire and water departments have issued NOCs for the building plan. While the EC and municipal corporation approvals are in process, tendering work has been initiated. We expect it to be on schedule. For 300 beds at MAX Vikrant at Saket Complex, the environmental clearance and the consent to establish have been received.
Tendering work has been initiated. For Nagpur Hospital, work has been initiated to add 25 beds through internal reconfiguration by Q3 FY 2025, while we are simultaneously firming up plans to augment infrastructure by another 140 beds. For Lucknow Hospital, we have commenced work for installing additional 140 beds and refurbishing existing 250 beds by December 2024. We plan to add another 140 beds by Q2 FY 2026, subject to requisite approval. Further 50 beds will be added through internal configuration in FY 2026. In addition, we plan to put up a new tower of 350 beds by Q1 FY 2027.
Finally, moving on to overall performance, including new hospitals for the twelve months ended March 31, 2024. Network growth revenue stood at INR 7,215 crores, including new hospitals, reflecting a growth of 16% year-on-year. Network operating EBITDA grew by 17% year-on-year to INR 1,907 crores, including INR 3 crores from new hospitals. Increased RPOP, improved case mix and augmentation of network bed capacity translated into a 13% improvement in EBITDA per bed to INR 74 lakhs. During the fiscal year, we generated INR 1,336 crores of free cash flows from operations after interest tax, working capital changes, and routine capital expenditure, of which INR 441 crores has been deployed towards ongoing expansion projects, INR 97 crores was distributed as dividend, and INR 1,509 crores was spent for recent acquisitions.
With this, I would like to open the floor for questions and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity. Sir, firstly on Lucknow, where we already have acquired this-
Sorry, can you use your handset more, please? Your audio is not very clear.
Is this better?
Yes.
Okay. Sir, firstly on Lucknow, where we have acquired Sahara, where we also plan to add 140 beds and then another tower of 60 beds. So if you could just explain conceptually, the need for this buying land at Shaheed Path, Lucknow. That is my first question.
Okay. Firstly, you know, the size of UP itself is the size of Europe, and it is extremely, extremely underserved market. It has a major supply of clinical talent, okay, because traditionally you had many, many government hospitals and many sort of distinct things well over there. It drains a lot of patients from various places right up from Bihar to right up to Nepal and so on. We believe that there is immense need for quality infrastructure over there, and our presence in you know, in the Lucknow market, in the UP market, furthering our presence over there, will add to further volumes. I mean, we've barely been there since the ninth of March, and in the last couple of months itself, we moved the capacity occupancy by 8%.
You know, just our presence right now has been taken up from 54%-62%. That's the extent of ramp-up that we expect. Having said that, I would also like to tell you that our capacity and infrastructure is triple A plus over there. It is right in the heart of Lucknow. If you're familiar with Lucknow, you know, this is in the heart of Gomti Nagar, 27 acres of land, and with access like no other. In terms of infrastructure, it is superior. In terms of location, it is superior to anything else over there. And we are seeing... I mean, we believe there will be a lot of traction. You know, the state of UP itself is the kind of development which is happening.
I mean, you just see the, I mean, the 5 airports which have been launched, another 4 over there which are being launched, the development which is happening, aiming to be a $1 trillion, economy by 2027. Now, it's another matter whether they do it by 2027 or 2028 or 2029, but the rate of development over there is second to none. I mean, not second to none, but it's right up there. So, you know, development of any state, any economy, you know, quality healthcare is a prerequisite. I think, you know, there is a lot more demand over there. Yeah.
Understood, sir. Sir, but just that, maybe we could have spread across maybe other city of Lucknow, because peers are also trying to at least build a 500-bedded hospital, if not in Lucknow, but in other smaller cities. So that can sort of, you know, reduce the pace of patient flow to Lucknow, and they are also coming up with super specialty hospital itself. So, so, from that perspective?
Please understand the demand is there across the country, right? The supply of clinicians is where the problem is. Lucknow is where the clinicians reside. That is where the government hospitals, the medical colleges etc., have traditionally been. Now, my belief is as far as tertiary care is concerned, okay, the entire tertiary care of the region will be serviced through Lucknow. You cannot set up tertiary care hospitals in tier three cities over there and in smaller cities because, you know, doctors aren't willing to go there and stay there because the social infrastructure isn't there, the school isn't there, and so on. And given the kind of roads which are being made, the connectivity which is there, and so on and so forth, it will act like what Delhi is in NCR. You know, you get people from various places.
Now you will have Lucknow, you will have many more hospitals over there. I mean, for the entire state of 280 million people, literally, I mean, there are 1.5 corporate hospitals, and both of them are in Lucknow. You haven't heard of a third hospital in all of UP, right? My belief is you can have 5 more super specialty hospitals. Why 1 or 2 more? The only question that I needed to ask at that point in time when we were even bidding for this piece of land is: Look, okay, does it deserve another super specialty hospital? What if somebody else gets it? And so on and so forth. I think, you know, like in Delhi, our approach is a cluster approach. We believe that is the next Delhi NCR, and, frankly, it can do with many more hospitals.
... Got you, sir. That's, that's helpful. And secondly, with these beds sort of coming up and just to refresh per se, in terms of the EBITDA growth for, say, 2025, 2026, with the kind of expenses that would be coming on board, particularly for FY 2026. So if you could share, in terms of whether we'll be able to grow on the EBITDA front even in 2026?
You are talking about 26 or 25 now?
26, sir. FY 2026, particularly.
Look, so imagine what's happening to FY 2026, right? You would have had Dwarka, which starts now in the first of June, okay. Okay, next year, you are definitely in the black and making money. You put all the building blocks of Lucknow and Nagpur in place. Both of them are profitable in any case. Okay, they become more profitable in 2025, but look, it will have a tremendous growth in 2026, simply because this year we are putting all... We'll be fixing everything and so on and so forth.
Then you have three basic capacities coming in, in beginning of FY 2026 effectively, which we will get the benefit of the whole year, will be Mohali, 155 beds, 329 beds in Nanavati, and 375 beds in Max Saket. All three are brownfields. I mean, right in the adjacent two properties which are already fully occupied. You should see the same sort of results that we've seen in any of our brownfields. I mean, FY 2026 will be a very exciting year for us, in fact. I think this year, if you look at FY 2024, it was always meant to be a year of incremental growth. We're very fortunate we were able to add...
In fact, 25 would have also been incremental growth if we hadn't added, you know, sort of, both, Lucknow and Nagpur. We'll have the EBITDA and the revenue kicking from both these. You add to it, Dwarka, where you will have some losses, of course, up till break even in the first year, okay, which will get more than absorbed by Lucknow and Nagpur, but next year also we will be exploding. In addition to that, we have three brownfields, okay, which don't take time to break even. Have you seen that in the past?
Understood, sir. That's helpful. Just lastly, what made, you know, a push or in fact prepone the Max Smart by almost 9 months? If you could just elaborate on that. That's one last question.
So, I mean, as you're aware, we were coming up with a much larger capacity in two phases in Max Smart. And we were also coming up with the first phase of Max, Max Vikrant's capacity. Now, the fact is that we got delayed on Max Smart, so what we've done is instead of doing one phase of Max Vikrant, which is, you know, contiguous, which is joining adjoining land, and doing two phases of Max Smart, we are doing one phase of Max Smart and two phases of Vikrant. So, you know, what we've done is essentially we prepone. We are not going to be making so many basements, that takes less time. And, you know, we prepone the entire project.
I mean, we'd rather have 375 beds sooner than have 600 beds later, and then another 300 beds coming through Vikrant at an even later stage. Right now, you know, we've kind of caught up with Vikrant timeline, which was supposed to be later, and that's how we've done this.
Tushar, does that answer your question? Thank you. Ladies and gentlemen-
I think this is... I'd like to add, so this should be a surprise to everybody. It's a pleasant surprise that we've been able to prepone Max Smart. I think a lot of people are expecting delays. Let alone delays, we've prepone this entire project.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We'll take our next question from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi, good evening, and thank you for the opportunity. Abhay, you mentioned in your opening comment there were some visa issues in two markets, which slightly impacted the international segment, international patient segment. Can you please elaborate on it?
So Damayanti, basically, you know, there are, you know, markets where there are, et cetera, where we have AR built up. So we obviously took some calls on, on the trade control, and we said we will not take more patients till such time we get our money. So I think that's what Abhay was alluding to. There are also some markets where there's some developments on the visa side, right? So the, because of elections, the visa, et cetera, were not being given, right. So that's the... These are the two, three markets that got impacted, right. So that's the You'll find that overall, we've been growing the international market by around international markets by around 23%. This quarter, it is 14%-15% growth. So bit subdued growth because of these two, three reasons.
Okay. And these are more temporary in nature, right? And once we get rid of-
Yes. Yes, very much.
Okay.
We continue to see great traction with new offices that we are opening overseas. They're very, very positive, and we intend to sort of double down on that further.
Okay. So in all focus markets, you'll be doubling down your effort to get more footfall?
We started the direct-to-fly kind of setting up offices, okay, as you recall, last year, and we've seen great traction with that and great throughput through those. So we've seen a lot of success with the new markets where we're setting up our own offices. We will continue the strategy.
Okay. And, Abhay, the way you mentioned attractiveness of, Lucknow, market in terms of, like, demand and then availability of clinical talent, et cetera, can you talk a bit about, how do you see the Nagpur market? And, do we have similar supply of clinical talent in, that market, too?
... Yeah, so I mean, you have supply of clinical talent, but, you know, if I look at the country of India, you know, Lucknow that way is unique, and perhaps it has the most amount of... And just to give you an example, a lot of our, at least 20% all of our own doctors in Delhi, you know, which work for Max, have come from Lucknow. So it's traditionally been a good thing. Of course, Nagpur is also a repository for clinical talent, but not to the same extent in Lucknow. Because, you know, Lucknow is Lucknow. You don't have other places with the same sort of this thing.
I mean, I would compare Nagpur more to a Dehradun and, you know, where we have hospitals which are doing quite well, et cetera, but I would, you know, compare it to those markets rather than... Having said that, it's also emerging as the transplant capital of the country, because you have huge amount of awareness of organ donation, and lot of, lot of people, it seems to be a cultural thing there, are donating organs and so on. Also, it is been a big destination for mouth cancer because of much higher consumption of gutkha and so on and so forth. So we are seeing a lot of oncology patients in Nagpur.
So I think, you know, oncology being our main state, I have no doubt that, I mean, there's, by the way. So let me also clarify. You know, Nagpur also has, you know, much fewer, sort of quality, healthcare assets. I don't think there is anybody even compared to Alexis over there. Competition is also significantly lesser. So we will have first dibs to pretty much all the clinical talent over there. So we are quite comfortable that maybe less than Lucknow, but nevertheless we'll get the best dibs. We don't have a challenge getting the clinical talent. And the market itself is quite big. It also draws a lot from Madhya Pradesh, Chhindwara, and so on and so forth.
Okay, understood.
Of course, being a country state, it also has great connectivity and infrastructure.
Okay. And, my next question is, a quick clarification on occupancy. So now you're giving it on like for like basis, 75% for fourth quarter, and then you have given separate number for the, new units. Can you just, just for understanding purpose, on a blended basis, what is, what is the number, occupancy number for fourth quarter?
Around 74. Yeah. [crosstalk] 73, but do keep in mind that, Nagpur has only been there since ninth of February, and Lucknow has been there since seventh of March. So you don't get the full import of the fourth quarter, right?
Got it. And my last question is, like your upcoming hospitals, most of which are located in very attractive location, brownfield location, et cetera. So, for most, I guess, we are assuming breakeven within a year of start of the operation. So, very broadly, like, what kind of loss you generally incur when hospitals are ramping up? Maybe like loss per month or any indication.
Hello?
Hello.
In the Brownfield?
For your upcoming hospitals, most of which are brownfields. So I just want to understand, while hospitals are ramping up, what kind of loss you generally incur?
So I'll give you the example of the last brownfield we did.
Which we added about 122 beds on, I think, 240 or 250 beds. That would have broken even in 10 days or maybe 15 days, and by the 40th day, the additional beds were generating a 40% EBITDA margin. And in the whole year, I think, we have a 78% average occupancy of the new and the old beds. So brownfields don't take time to break even. They don't take years, they take a month. We normally say a quarter at best, but, you know, we kind of outbeat that every time.
Yeah. Just like in NCR, I can understand this kind of performance we may expect, but is it true for, say, Nanavati or Mohali, et cetera, also? We should see similar ramp up?
No, no doubt. I mean, Nanavati is Bombay, right? I mean, in the heart of Bombay, you have another 375 beds, of quality beds coming in. And in a place where no new hospitals come up in 20 years, I don't see a challenge in breaking even. Mohali, again, we already. It's the highest ROC, the highest occupancy that we have in the country right now is in Mohali Hospital. It's not Delhi and Bombay.
Okay. Okay, thank you again.
Thanks.
Thanks for your response.
No problem with the Mohali.
Thank you. We'll take the next question from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. Based, you know—given the background you gave on Lucknow, is it fair to assume that Lucknow can get to what we have margins for our corporate average, you know, much faster, probably, let's say, in 2026 itself? Would that be a fair assumption, or do you think because of the addition, et cetera, that could take a little bit longer?
No, see, addition is a separate thing altogether. Addition is a capital expenditure, right?
No, no, I mean- Margin is al- [crosstalk] ... with the addition, et cetera.
I didn't get the question. Can you repeat the question?
Yeah, yeah. Basically, in terms of margin, we can probably get to the overall, you know, similar kind of margin very soon. Not probably, you know, in the initial part of the year, but maybe by the end of the year. But I think the EBITDA margin will have to wait because I think the RPOP there is low, right? So the RPOP in Sahara Hospital, when we put it, was 40. So I think the RPOP has to go up, right? The margin on the lower RPOP doesn't really mean much because we-
Right.
Usually see that in EBITDA perfect metric, right? So EBITDA perfect will have to wait. I would say it'll take some time for it to get to that level. But, you know, margin, I would, by probably the end of the year, we should be closer to what the margins are, you know, on our-
... No, I think on all, pretty much all ARPOB and other metrics,
Yeah.
I think, you know, we will be able to catch up in the next two years.
Understood.
When I say catch up, catch up, you, you know the numbers of some of our peers over there.
Yes.
I think we should be able to get there, if not further.
Okay, understood. What about Lucknow, sir? Given their margins there, at least the numbers that you gave seem, you know, close to 14, 15%. It's probably not as flourishing as UP. Would that take a little bit longer and a much slower pace to catch up?
Nagpur or Lucknow?
Lucknow. Lucknow.
Nagpur is a different ARPOB. See, please understand, you know, different ARPOB means different ROCE as, as well. I mean, today, you know, Mohali and Dehradun, okay, you compare it to, to a, similar to a Dehradun rather than any other sort of this thing. We can't compare ARPOBs of that to, to, to, Delhi and, Bombay, for that matter. We'll be, looking at, obviously more subdued ARPOBs, but, given the price you pay, you look at ROCEs.
Hmm. So if I were to look at the, you know, Nagpur, ARPOB, it's very similar to where Lucknow is, right? So that's why I was asking. So will it take the same trajectory as Lucknow, or could that be longer?
Today it is, but, Lucknow has, a potential lot more, right?
Yeah.
Like I said, Lucknow, we will sort of if we even look at some of our peers who are operating there, they operate at a significantly higher ARPOB. Correct?
Yeah.
Nagpur as a market will, you can use maybe Dehradun as a target.
Oh, okay. Understood. Got it. Okay. In terms of, you know, incremental M&A, now that you've announced this in Lucknow, you know, you've always said we'd rather be, you know, the second or third player in a market. Any markets that you think are interesting, particularly, you know, given you've done two of these, Nagpur and Lucknow now, which could interest you?
The 20 cities, where at least two people or three of my viability are doing fairly well. We intend to go there if we find the right, targets, and, you know, we are quite, confident we'll be able to perform better in them.
Abhay, what would be our target leverage? I mean, let's say if we were to get a multiple, you know, assets, what leverage are you comfortable with in terms of when we're looking at M&A, particularly given the strong cash flow generation?
Yeah. So, you know, we are quite comfortable with going up to 2.5x debt to EBITDA, right?
Got it.
If you ask me, our EBITDA at present, I think we will be circa INR 2,000 crore. Okay?
Yeah.
We have 99.7, but if I add up, you know, 11 months of EBITDA for both, Nagpur and Lucknow-
Lucknow.
Okay, we'll be closer to INR 2,000+ crore, right? And then you have growth in the current year. But even if you take 2.5 times that, you're getting some INR 6,000-INR 7,000 crore of,
Yeah
... debt that we can use. Now, do keep in mind, anything bigger than that is, would mean that we are acquiring something which is listed.
Yeah.
If it's a listed entity, in any case, you'll have to look at a merger, because you can't have a step down subsidiary of a listed company to be a listed company.
Yeah. Yeah. Understood. Fair enough. This is helpful. Thank you so much.
Thank you. We have our next question from the line of Andrey Purushottam from Cogito. Please go ahead.
Okay, I have two questions.
Sir, may I request that you use your handset mode, please? Your audio is not very clear.
Can you hear me now?
A little better.
Yeah. Okay. I have two questions. One more, could you comment on the valuation parameters in acquiring these two hospitals? They are actually different EBITDA multiples. Are they meant to be ROC seekers or what is the philosophy in financial philosophy, apart from growth, obviously? That was my first question. And my second question is, going forward in the next 12 months, how do you see the levers for profit working in your favor? Whether it is increasing mix of international patients, whether it is a better mix, or whether it is, you know, a lower proportion of government cases, et cetera, et cetera. I would want to hear your general outlook on the trends that you see in the next 12 months that will lead to profitability.
I think two aspects. One is on the financial aspect, we seek a 20%-25% pre-tax ROC, you know, within the space of 4-5 years. In both these cases, my belief is we will be able to hit that number far sooner than that. And, you know, we do this by seeing what is the value we are paying versus what we believe with adequate amount of intellectual integrity what is the business plan that we are able to or capable of underwriting. And so we do a goal seek for that number at 20%-25% pre-tax ROC, and that's how we come up with the maximum that we're willing to pay for asset. You know, of course, we won't pay that maximum. We try to negotiate and pay as little as possible, but that's where we are on the financial side.
Right.
I hope that answers the question as far as-
Yeah.
What is the target? Now, as far as drivers for the current year, for the current year is concerned, I think, it is all of the things that you spoke about. Sorry?
For the next 12 months.
Next 12 months is this financial year, right, effectively?
Yeah. Okay, fine.
Next financial year. If you take, well, instead of 12 months, I'll just draw a line at 10 months or whatever, because that's the number of months left for the current financial year. I think all of these that you mentioned, I think, higher international patients, so that means better payer mix, better clinical mix. We are seeing more robotics happening. We are seeing more, sort of the thing, more oncology, higher-end surgeries, and so on and so forth. So I think all of these things should be in play. We're also hoping that, and we believe that, you know, CGHS rates will get reworked, and even on institution side, we're expecting better rates. So I think all of these are levers for us in the current year.
You know, other than that, of course, compared to last year, we would be adding the EBITDA, or an incremental EBITDA emanating from both Lucknow and Nagpur. While Dwarka will have some sort of initial losses at startup. But those initial losses at startup should be. We'll be able to more than absorb it with our new profits that we're generating through Lucknow and Nagpur.
Right. This will be drag on profitability?
No. Like I said, you know, of course you have your Dwarka will take time to break even, but you added two new capacities, which is 500 beds, which are already generating profits and free cash flows. We will be adding to that.
Okay.
That number is only likely to go up, in our under our watch.
Okay. Thank you. Thank you very much.
Thank you. We'll take our next question from the line of Binu Pathuparampil from Elara Securities. Please go ahead.
Hi, good afternoon. Just two clarifications. One, did you say you are adding... planning to add more beds in Nagpur over and above the 200 beds there?
That's right. We're gonna add another 150 beds on top of the 200 beds that we have.
By when would that be?
I think, you know, we are working that out at present, but, definitely within the next 24 months. I think we've given a timeline. Yeah, so I think definitely within the next 24 months.
24 months. Okay. And, I didn't quite understand the Saket Smart and Saket Vikrant. So those put together, how many beds are now getting added in FY 2026?
No, Vikrant, nothing is getting added by 2026. Saket is getting added by 2026. Vikrant wasn't meant to be added by 2026. Vikrant doesn't come into play, whereas Saket, which was going to be added in 2027, has been preponed by 9 months, is gonna come through in Q1 FY 2026.
That is 360 beds?
375 beds.
Three seventy-five.
Sorry, three?
Three seventy-five.
Three seventy-five.
375. Okay. I was looking at your February investor presentation. That shows Vikrant 300 beds in FY 2026. Is that old one?
I don't know. I think maybe you're looking at the older presentation. Which presentation are you looking at, Rakesh?
So as the investor presentation, we have to change for all the 375 bed changes that are happening. Other than that, will be updated now with whatever we've done in terms of preponing the beds, right? So there are some beds being preponed, some being, you know, kind of postponed. So I would say this presentation will get updated in another 8 times, the new one, and that is the one that should be referred, right? So because as I mentioned, we've done some rethinking in terms of, you know, getting some beds in advance, and some beds are getting delayed for that reason.
Okay. Understood. Thank you. I will refer to it.
Your total, your total number of beds remain the same, but like I said, this gets preponed. Your total number of beds don't change.
Okay, thank you.
Thank you. We have our next question from the line of Rishabh Tiwari from Allegro Capital. Please go ahead.
Hi. So I have two questions. Firstly, what would the EBITDA look like now post and for this quarter and for the year?
I don't give forward-looking projections.
Sorry?
We don't provide forward-looking...
Oh.
We don't-
For this quarter and for the year, forward trend.
Rishabh, we don't provide guidances, right? We don't generally provide guidance for the next quarter or for the year.
No, I'm, I'm asking for Q4 and FY24.
Yeah, the Q4 EBITDA was INR 500 crore from the existing hospital, right? There's INR 3 crore EBITDA, which has come up from these, you know, two hospitals that we added in quarter four. One was in February, the other was in March, right? And the INR 3 crore is actually net of INR 5 crore of expenses that happened on the deal side. So the overall EBITDA for the year is INR 1,907 crore.
This is the post end item, right?
Post? In the FY, yes.
Yeah, post. No, I'm asking post end, that is pre-merger.
So for pre- and post, you have to reduce it by around, around, you know, INR 70 crores. So that will be the... If you want to take the deals off, that's the only difference in our case. So the deals cost would be around INR 70 crore.
For the year or for the quarter?
For the year. For the year.
Okay. Next question is, I know you mentioned that you took the occupancy up from 54 to 62 in Sahara Hospital. I just wanted to know more. Was this through operational levers? Did we see some improvement in case mix or seasonal mix or something? How did you take this within few months?
No, just changing some basic processes. You know, you always have some very, very early easy wins when you walk in, right? Because you will see those things, those things kick in. These are very cheap early wins.
Okay.
Like any-
Are you looking to add any beds here as well in Sahara?
We will be adding beds. Like I said, we will be adding 140, then another 140, and then 350.... Okay. Okay, thank you.
Thank you. We move on to our next question from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah, thanks for taking my question, and congratulations on a good quarter performance. The first question I have on the volume growth: So IPD volume seems to be around low- to mid-single-digit. Anything to read there, or do you expect the volume growth to remain at this kind of level? And second question I have is on the city selection. I understand we generally map 20-odd cities across the country. What would be the cities you would not like to enter into, and what are the reasons for the same? Thank you.
Okay. So first and foremost, you have to keep in mind that our occupancy growth till we come up with new capacity, brownfield or otherwise, okay, will be fairly muted because we don't. We have a capacity constraint, and we don't have places to put more patients, so that's why we are doing the brownfield, right? So having said that, because of constraints on capacity, our occupancy ramp-up will be limited whilst it will have a play, a positive impact on ARPOPs. So what tends to happen is that the lower-end surgeries get posted, okay, at a later stage, at a later date, whilst the larger surgeries, the more significant ones, okay, get priority, as they should.
So therefore, the lower-end ones sometimes have a tendency of evaporating, because the patients then decide to go to some other facility or some other brand, because they may not be very important sort of surgeries as well. So what happens is that your, you know, whilst your occupancy doesn't ramp up your RPop, okay, you see a significant growth in RPop. But when you come up with brownfield capacity, the interplay which happens is that your occupancy ramps up immediately, but your RPop growth becomes more muted. Having said that, the impact on overall EBITDA per bed is positive, simply because you have huge operating leverages emanating in the new capacity that you add, because, you know, the management costs, the clinician costs, et cetera, are already being incurred by the previous capacity.
So I just wanted to answer that question as far as occupancy is concerned and kind of assure you that there's nothing to read into it. Simply that we don't have capacity, so, you know, our occupancy obviously will go up at a smaller sort of pace. Having said that, when you look at your second question was with respect to which cities I would not go to. So conversely, I would not go to cities where my peers have not proven viability or uncharted territories, because, you know, we don't see ourselves as pioneers going into places where, you know, and taking chances. We'd rather have somebody else define the market, be able to sort of demonstrate success, go there and try to do it better.
you know, we've been very comfortable in doing it, and we've been successful in doing that.
So is there any city which you think is oversupplied with the quality of the beds, et cetera? Or is just that be because it's uncharted territory, that's why you don't want it?
So let me give you an example. Look, the maximum amount of beds, okay, in any geography is Delhi NCR, right? The National Capital Region. We have 11 hospitals over there, and we have 2,100 beds. We are the largest players by far. We are equal to the, our next 3 peers put together, multiplied by two in terms of number of locations, and we are equal to all three of them put together, okay, as far as number of beds are concerned. And the next 15 players have similar amount of bed locations, similar amount of, bed capacity. Yet, we only have 2,100 beds, 10% of which are free, 10% of which are catering to international business, 40% of which are catering to up country.
So essentially, if the largest player has 800 beds catering to the National Capital Region, okay, and the next 3 peers of mine, okay, that you heard of, they also have 800 beds, and then the next 15 people have 800 beds, this is like 2,400 beds or 2,500 beds for a population of 48 million people, which is 85% of U.K.'s population. And this is a place where you have the maximum amount of supply.
Right.
So look, I mean, look at the places we are going to. If we are going to Lucknow, I mean, literally, there are 1.5 corporate players, then we've come up with a hospital, and there's a, you know, a state with a population of 208... of 24 crore people, which is Europe's population. I mean, we in Dehradun, we are pretty much the only players over there. We are hardly, there's us and one more player. I mean, you look at-- I mean, if some of my player, peers are in Patna, but they're the only players over there. If you look at places like Kanpur or Pune, this, that, et cetera, I mean, every place is underserved, right? Even a place like Bombay, no new hospital come up in 20 years.
I don't think India, we have a problem of oversupply anywhere.
Right. But in general, speaking about Mumbai, like, we generally don't see, except, I'm talking about the private hospital. We don't see, hospitals being overrun or something like that, or there is a... Like, like, we have not seen many hospitals getting added, but we have not seen capacity get overrun.
No, let me hold you there. You haven't seen hospitals being added, because to make a 400-bed hospital, you need 4 acres of contiguous land. Firstly, you can't find 4 acres of contiguous land in Mumbai, and even if you found it, you'd rather make a residential complex or a commercial building there, right?
Right.
I mean, no new hospital being made for 20 years. I mean, the same hospital, Hinduja, the same Breach Candy, they haven't added one square inch. Where is the space? Even HCM, they brought down an earlier hospital and made a new hospital, right? Bombay Hospital is the same one. Jaslok is the same one. Nanavati was the only one which had the land, so they built it. Thank you so much. I will join back. Yeah. Thank you.
Thank you. We have our next question from the line of Kunal from Macquarie. Please go ahead.
Yeah. Thank you for the opportunity, sir. So, you know, just kind of, you know, continuing on the previous question. So mature hospital, we are at 75%, and we are seeing that there is not enough capacity for us, but we have done quarters with 77%-78% occupancy, right? So, what is it that, is it a mix of hospital where, you know, our good hospitals are already full, and some of the hospitals are below that 75 run rate? And secondly, if it's kind of across the hospitals, you know, we are facing a difficulty in terms of capacity, then why our payer mix improvement is not accelerating in terms of reducing the institutional patients?
Because, Kunal, it's a seasonal business, okay? There's some quarters which are surgical quarters and some quarters which are medical quarters, okay? In a medical quarter, you require rooms, while surgical quarters you require more sort of ICU beds. And it's not every kind of capacity is not fungible across every hospital. In fact, some hospitals may have certain constraints, that they're operating 75% because you have maybe lesser single rooms where there's demand for and more ward beds, where you don't have demand for, and so on and so forth. But whereas, you know, in a dengue season, even the lesser sort of rooms or multi-share, et cetera, get absorbed, and that doesn't happen in a surgical season. So that's the reason that, you know, we are constrained by seasonality, as well as the kind of infrastructure that we have.
Now, as far as the payer mix is concerned, okay, the payer mix is a slow turn now. You know, if I look at ex-Shalimar Bagh, ex new capacity that we've come up, okay, it's come down from 29%-27%, but there's been a 6% reduction as far as the occupied bed days are concerned. So I think what we are seeing is, you know, we are seeing a turn, perhaps more so on the occupied bed days than anything else.
Sure. Thank you. But let's say, when you say the 122 beds added in the Shalimar Bagh capacity or hospital, and we say that, you know, it's been EBITDA positive in 10 days, is it more on a contribution margin? Because if I back calculate, you know, our payer mix, for that 122 beds, there'll be roughly 46%-47% of those beds have been occupied by institutional patients, right? And we all know that the ARPOB are roughly 50% of what you get in other channels. So is it on a contribution margin we are seeing that, you know, the EBITDA turned positive in 10 days? Was it loaded with the management cost, or how should we think about that?
Please let me explain.
No, because that's on a. Not only it's an EBITDA, it's after the incremental cost that you have to, you know, incur for those beds. So it's not contribution, it's EBITDA. Right, you have to understand that we had an option. We had an option to open only 50 beds to start with, not open all the 122 beds, right? So what we did is, we said we'll open all the beds and try and fill up the balance also through the institutional beds, or institutional patients. So there are two options that we had, right? So we chose for the option, we said, "Let's open all 122 beds, and then try and fill up, and then filter." Right? Then distill. So that's where we are today.
But when we say number, the number 40% is EBITDA margin, right, after incremental cost. In total, if 122 beds be open, there are more manpower being recruited, right? So there are nurses required, there'll be GDAs required, maybe less doctors, but there'll be obviously, there'll be more, let's say, costs, etc. So it's after all those costs.
So even with 46% kind of institutional payer mix, we are making 40% EBITDA there. Is that the correct-
Because the incremental cost of those running those beds which we opened is very less, right?
Let me, let me explain this separately. If, let's say, if you look at bed by bed unit-wise, right? Or let's say all 100% of the beds over there, okay, were you were operating only for institutional business. It will still be EBITDA positive.
Okay.
Okay, it will be EBITDA positive simply because you've got operating leverage. The only thing you're getting over there in necessarily, okay, is the nurses, which is not very expensive, is the resident doctors, again, not very expensive, okay, and allocated to those beds alone, which are operational. What you're not doing is, you're not fitting out beds, and you're not sort of staffing beds where you don't have capacity. You just open floor by floor, right? Whatever you have demand for. So there's no fixed cost associated or fixed variable cost associated with beds which are operational.
And the ones which are operational, we have only the low-end cost. It does not have high-end sort of clinicians, et cetera, or minimum guarantee, which are being taken on board for that. Because those clinicians already exist, their minimum guarantee is already paid. Utilities are common. The general sort of, you know, your management cost is already being incurred. You don't operate a separate CEO, separate medical director, separate HR, separate marketing, nothing for that.
Mm-hmm. Okay. Thank you. Thank you for that. And if I may just, you know, one more on the Supreme Court matter. You know, now, it seems that the next date for that, you know, hearing of PIL seems to be somewhere around September. So what's your internal assessment? Is it kicking the can down or would you say that, you know, the risk of adverse outcome has reduced meaningfully in your view? How do you view that?
I would not want to comment on it. It's a Supreme Court matter. It's sub judice. Okay, we've seen the rap IMA got, so I definitely don't want to be speaking about it... But I think the last hearing, the comments, the observations of the judge, et cetera, were for everybody to hear and make their own inferences.
Sure. Thank you and all the best.
Thank you. We'll take our next question from the line of Shubham Harne from Purnartha Investment Advisors. Please go ahead.
Hi, sir. On Dwarka bed, I want to ask question. So that get, beds getting added in tranches, or it will be on one go? No, in tranches only. I think, you know, because our occupancy will also have been in tranches only. Okay. So initially, earlier you had said 160 bed will be added and then 140, like, something like that only? Because occupancy also ramp up, ramps up in that manner. No point, you know, starting on all the 300 beds when you are, you don't have occupancy day one of all three, you know. Got it. And on Gurugram Sector 56 hospital, by when it will get commissioned or something from dates around that?
We gave the date, I think... One second. I think, Gurugram Sector 15, we delayed by six months, so whatever the original date is later by six months. I think it will be third quarter of 2026 or 2025.
Q3 FY 2026, yes.
25. 26 or 25? 25, no?
Current year, 2025.
2025 is current year.
Current year, 2025. Financial year, 2026.
Oh, okay. Got it. Thank you, sir.
Thank you. We have our next question from the line of Rishabh Tiwari from Allegro Capital. Please go ahead.
So just one follow-up on the lease impact. So the rental growth is what you mentioned for the year. Is this taking into account the recent acquisition? Could you please help us with a like-to-like number for-
The recent acquisition doesn't have any lease rentals, right? So that land is obviously getting committed to freehold. We already put one in acquisition, so this is on the existing hospitals.
Okay, that helps. Thank you.
71 crore is a total impact. There is one or more, two entries there, which comes up in the below the line. So I'm taking all those. There is a donation also. There is liability for donations that we have. So that also comes up. INR 71 crore is total impact of the Ind AS movement. If I was to do either accounting, then the 71 will come before the Ind AS.
Okay, thank you.
I think, you know, just to last this, I think an important one, I don't know if you picked up my statement or not, that during the fiscal year, we generated INR 1,336 crores of free cash flows from operations. This is after interest, tax, working capital changes and routine CapEx also, let alone leases. So our translation of EBITDA, post-Ind AS EBITDA to free cash flows, post Ind AS, pre-Ind AS impact, pre, you know, interest, tax, working capital changes and routine CapEx, et cetera, 70%. It's a significantly high number.
Thank you. We'll take our next question from the line of Senthil Kumar from Joindre Capital Services. Please go ahead.
Good evening. Thanks for the opportunity. My question is, what is the management policy on writing off goodwill and other intangible assets over a certain period of time as a matter of prudent accounting policies?
So, what is it?
Management policy on writing off goodwill and intangible assets, sir?
So goodwill is not under the Ind AS. The goodwill is only, only tested for impairment. Intangible assets represent some of the contracts that we obviously, over the period of time, we are writing off, right? Over the period of the contract. Ind AS accounting standards require us to only, only test for impairment, the goodwill and the brand. And for the other, other intangibles, you will find that they are coming down progressively, you know, year after year, because we're putting them in the, in the amortization charge. Yeah?
Okay. Understood. Thank you. That's it from my side.
Thank you. We'll take our next question from the line of CA Vipul Makwana from Makwana. Please go ahead.
Hi. Good evening to everyone. A good set of numbers, Abhay, sir. Apart from my peers-
Makwana, can you use your handset mode, please? Your audio is not very clear.
Yeah, hello. Can you hear me now?
Yes.
Yeah. Apart from all the financial queries which my peers have asked, I just want to ask on the qualitative aspects, like, what is Max doing separately or concisely different than the others, where we're seeing a good number set, like in ARPOBs and everything? So, Mr. Abhay, if you could just throw some light on it.
I think first and foremost, you know, proof of the pudding lies in its eating. The fact that we have significantly higher occupancy levels than any of our peers or whatever means that we are doing well on qualitative aspects as well. You know, we, the value proposition that we're able to provide to our patients, you know, it's not only Delhi, Bombay. Our highest occupancies also continue to be in tier two, tier three cities. So yes, I think it's for people to perceive, you know, the patients to perceive more than what I can say, you know, in terms of what is the policy that they sort of this thing. Yes, we continue to cater to a lot of free patients.
There are thousands of patients in a year that we treat free of cost, and I mentioned to, I think, 35,000 patients in OPD and some 1,500 patients in IPD in the last quarter itself, that we treated. All our hospitals are teaching hospitals. We have 850-odd students, both these are postgraduate students. We write a lot of, you know, you've seen the number of publications that we're doing, which is the highest ever that we did last year, both for international and domestic journals. So we continue to academics and research as well, besides, you know, of course, the financial parameters of it.
That helps. That helps. Thank you. Thank you so much.
Thank you. We'll take our next question from the line of Amit T, an individual investor. Please go ahead.
My question has been answered. Thank you so much, Abhay. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to you.
Thank you. I would like to thank each one of you for either covering the company or having invested in the company. We appreciate that, and, we believe, the next, two years will be, years of, exponential growth for us, particularly FY 2026, where a lot of, things are going to be coming on stream. So, we look forward to a extremely lucrative journey going forward. Thank you.
Thank you, members of the management team.
Thank you.
On behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.