Ladies and gentlemen, good day and welcome to the Q2 FY25 Post-results Conference C all of Fortis Healthcare Limited. 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 this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kalra, Senior Vice President, Investor Relations at Fortis Healthcare Limited. Thank you, and over to you, sir.
Thank you, Neelam. A very good evening, ladies and gentlemen, and thank you for taking the time to join us on our quarter to FY25 earnings call. We realize it's a bit late, so we do really appreciate you joining us for the call. The call is being chaired by Dr. Ashutosh Raghuvanshi, our CEO and Managing Director. With him, we have Mr. Vivek Goyal, our Chief Financial Officer. Anand, the CEO of Agilus Diagnostics, joins us remotely, and along with him, we have Mr. Akshay Tiwari, the CFO of Agilus. We will begin with some opening comments by Dr. Raghuvanshi on the business performance of the quarter gone by, for which Anand will take you through his views on the business for the quarter, and then we can open the floor for questions and answers. Over to Dr. Raghuvanshi.
Thank you, Anurag. Good evening, everyone, and thank you for taking time to join us for our Q2 Financial Year 25 earnings call today. I extend my warm greetings for the festival season, and I hope all of you are doing well. Before diving right into the numbers and sharing my thoughts on the business performance, I would like to highlight that our performance in Q2 Financial Year 25 and H1 Financial Year 25 continues to witness a healthy improvement over the corresponding previous year, led largely by our hospital business. Coming to the quarterly results, we reported a consolidated top line of INR 1,988 crore, a growth of 12.3% over the Q2 of Financial Year 24. Our hospital business revenues have increased by 13.9% to INR 1,655 crore, while the diagnostic business revenue stood at INR 372 crore versus INR 360 in Q2 of Financial Year 24.
Our consolidated operating EBITDA increased 31.9% to INR 435 crore, delivering a margin of 21.9% versus 18.6% in Q2 of Financial Year 24. The hospital business reported an operating EBITDA of INR 355 crore, driving a robust 300 basis point improvement in margins from 18.4% in Q2 of Financial Year 24 to 21.4% in Q2 of Financial Year 25. The hospital business EBITDA now accounts for 82% of the total consolidated EBITDA. In 11 of our facilities, we have reported operating EBITDA above 20% during this Q2 . These 11 facilities together contributed 75% to the hospital revenue. In comparison, in Financial Year 24, we had only eight units which were having an operating EBITDA margin above 20% and contributed at that time 62% to the hospital revenue. Operating EBITDA margin in the diagnostic business basis gross revenue have improved to 21.5% from 17.2% in Q2 of Financial Year 24.
Excluding one-off items like rebranding exercise by Agilus for its brand transition, reversal of provisions related to certain government businesses, and the contingent consideration payment for an earlier lab acquisition, the operating margin stood at 24%. On a like-for-like basis, adjusted operating margin was 22.7% in Q2 of Financial Year 24. Our consolidated profit after tax before exceptional items for the quarter increased 40.3% to INR 253 crore. For H1 of Financial Year 25, our consolidated revenues stood at INR 3,847.3 crore, up 12.3% versus H1 of Financial Year 24. The operating margin for H1 Financial Year 25 increased to 20.2% against 17.6% in the corresponding previous period. H1 Financial Year 25 hospital business revenue increased by 14.2% to INR 3,204 crore. Operating margin for the hospital business improved by 310 basis points to 20% for the period versus 16.9% in the corresponding previous period.
On the balance sheet side, we remain comfortable and healthy with a net debt to EBITDA of 0.16x as on September 30, 2024, as against 0.29x on September 30, 2023. Our net debt stands at INR 281 crore as of September 30, 2024. Continuing from Q1, our hospital occupancy further improved to 72% compared to 69% in Q2 of Financial Year 24. This translates into occupied bed increase by about 5.8% to 2,939 beds compared to 2,779 beds in the Q2 of Financial Year 24. Our hospital business saw a 7.6% increase in ARPOB, reaching INR 2.37 crore per annum. This growth was largely driven by revenue gained in our key specialty areas such as oncology, neurosciences, cardiac sciences, orthopedics, gastroenterology, and renal sciences. Collectively, these specialties achieved a 13.6% year-on-year growth and accounted for 61% of total hospital revenue, consistent with the share in Q2 of Financial Year 24.
To highlight, the oncology specialty registered a growth of 19%. Neurosciences reported a growth of 17%. This is also reflected in the number of procedures performed in neurosciences, with a growth of 21% compared to Q2. Encouragingly, the numbers of robotic surgery performed increased by a strong 57% compared to the corresponding previous period. Our revenue from medical travel grew 6% compared to Q2 of Financial Year 2024 to reach INR 134 crore. The revenue contribution of international business stood at approximately 8% in Q2 of Financial Year 2025, on similar lines with Q2 of 2024. Most of our key facilities delivered strong performance this quarter, with revenue for Shalimar Bagh, Mohali, and Mulund districts growth close to or in excess of 20% compared to the corresponding previous year.
During the quarter, we further strengthened our medical talent with the onboarding of specialists in the area of cardiac sciences, renal sciences, gastroenterology, internal medicine, and obstetrics and gynecology. I'm pleased to share that our dedication to enhancing our medical programs has made significant progress in driving our strategic growth initiatives. Marked by brownfield bed expansion and continued investment in advanced medical equipment, Fortis Manesar, a 350-bedded hospital facility, commenced its operations in September, offering an entire spectrum of clinical services, including all the key specialties and latest state-of-the-art medical equipment. I'm also pleased to announce that FMRI launched the first MR Linac of North India to treat tumors with unparalleled precision. We are making good progress on our brownfield expansion plans for the year, with capacity additions across key facilities, including Faridabad, Noida, BG Road, FMRI, Shalimar Bagh, and Anandapur during this financial year.
I would also like to highlight the ongoing success of our digitalization initiative. We have successfully implemented electronic medical records for outpatient modules across 11 units now. At the same time, revenues from digital channels via website, mobile application, and digital campaigns have witnessed a 30% year-on-year growth in Q2 of Financial Year 25. Digital revenue contributed 29.3% to overall hospital revenue versus 25.6% in Q2. On the diagnostic business front, we are moving ahead to consolidate our stake in Agilus by acquiring 31.52% stake from the PE investors. Our operating EBITDA improved to 21.5% compared to 17.2% in Q2 of Financial Year 24. This was primarily driven by cost optimization initiatives, including, among others, improved network efficiency and optimizing manpower costs. As part of our ongoing network expansion strategy, the total number of CTPs reached 4,085 as of September 30, 2024.
The preventive portfolio revenues in Agilus' overall revenue grew 20% in Q2 of Financial Year 25 and contributed 12% to the operating revenues versus 10% in Q2 of 24. While expenses related to rebranding would constitute to be incurred for the remaining part of the current fiscal year, Agilus' steady recovery and improvement in margins reassures my faith in its ability to scale its revenue and profitability. Driven by its strong network presence, a well-balanced B2C and B2B mix, and an increasing focus on preventive care and specialized testing, I believe the Agilus brand is gaining acceptance and recognition, which will position the company to further enhance its performance going forward. With this, I'll conclude my comments. Just to reiterate, we are making considerable progress on investments in multiple business growth drivers, be those in bed expansion, state-of-the-art medical equipment, digitization, and clinical talent.
We also continue to assess various inorganic growth opportunities that align with our cluster strategy and offer promising synergy. I believe all those initiatives will further enhance our growth potential and strengthen our position in the healthcare sector. Thank you, and with this, I would like to hand over to Anand for his comments now. Thank you very much, Dr. Raghuvanshi. Right, sir.
Good evening, everyone. Thank you for joining us today. On behalf of Agilus Diagnostics, I welcome you to our Q2 FY25 Results Conference Call. Agilus Diagnostics reported a revenue of INR 372.5 crore in Q2 FY25, marking a 3.4% increase from INR 360.3 crore in Q2 of FY24. This follows last quarter's revenue of INR 343.5 crore, representing an 8.4% growth compared to the trailing quarter.
Operating EBITDA reached INR 80 crore in Q2 FY25, up from INR 62 crore in Q2 FY24, with the margin improving to 21.5% from 17.2%. In comparison, Q1 FY25's EBITDA stood at INR 55.4 crore, yielding a margin of 16.1%. Adjusted for one-off expenses, operating EBITDA in Q2 of FY25 was INR 89.3 crore, with a 24% margin, versus INR 81.9 crore, at 22.7% in Q2 of FY24. For the half-year period, Agilus posted a revenue of INR 716 crore, reflecting a 1.9% growth from INR 702.9 crore in H1 of FY24. Operating EBITDA for H1 of FY25 was INR 135.4 crore, with an 18.9% margin, up from 18.3% in the previous year. Adjusted EBITDA before one-off expenses was INR 153.6 crore, slightly higher than INR 153.2 crore in H1 of FY24, with a margin of 21.4% compared to 21.8%.
Agilus Diagnostics conducted a total of 11.1 million tests in Q2 of FY25, up from 10.6 million in Q2 of FY24 and 9.9 million in Q1 of FY25. In H1 FY25, the company processed 21 million tests compared to 20.5 million in H1 of FY24. Agilus expanded its network significantly, adding over 150 customer touchpoints in Q2 of FY25 and 330 plus touchpoints in H1 of FY25. The B2C to B2B revenue mix stood at 54 to 46 in both Q2 FY25 and H1 of FY25, slightly higher than the 53 to 47 in the same period last year. From a product standpoint, revenue contributions are 33% from specialized testing, 55% from routine testing, and about 12% from our wellness portfolio in Q2 of FY25. Our wellness portfolio showed a 20% growth in Q2 of FY25 versus Q2 of FY24, and 17% in H1 of FY25 versus H1 of FY24.
Regional revenue contributions are 31% from the north, 21% from the west, 32% from the south, 13% from the east, and about 3% from the international markets. On the brand side, we have introduced Ranbir Kapoor as our new brand ambassador to a campaign centered on the theme, "Keep Testing Yourself." We expect this brand-building initiative to strengthen our brand presence, particularly supporting growth in our B2C and wellness segments. We continue to focus on improving our efficiencies through various cost management initiatives. Thank you so much.
Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Participants, you may press star and one to ask a question. The first question is from the line of Amey Chalke from JM Financial. Please go ahead.
Thank you for taking my questions, and congrats to the management for the good numbers. The first question I have on the margins, especially hospital margins, we have been, like this is Q2 , we have clocked more than 20% margins. These margins are improving consistently. Sequential. This is even before our brownfield expansion initiatives are yet to kick in. So what are the key levers here? If you can call out any specific hospitals which have helped deliver improvement in margins for the last six months?
Yeah, if I can take this question. As you rightly said, we are moving nicely on our margin expansion journey. For the quarter, we achieved 21% plus margin. For the half-year, also, the margin is about 20%, which is quite increasing. The main lever for margin expansion is the occupancy. If you see, the occupancy level has gone to 72%, which has led to the higher margin. In terms of the hospitals, almost all of our premium facilities have witnessed the good occupancy. Plus, there is a volume growth. As a result, there is a volume growth. If you see this quarter, the main contribution for revenue growth is coming from the volume and the occupancy. So I will say that is the main contributor to the margin. Apart from some of the facilities like [Uncertain] and other facilities, which is high-margin facilities, they have also contributed a lot.
Sure. Now, is it possible to tell which two hospitals have moved to the 20%-25% range during this quarter?
Yeah. One is, of course, Mulund, which has done well. Mulund, there is a decent increase in the occupancy level, and so is the margin expansion. Then another unit which has moved to this level is Nagarbhavi, which is in Bangalore. There, last quarter, there was certain additional marketing and sale expenses because of which the margin was low. This time, this unit is really doing well in terms of revenue, occupancy, and margin trend. Kalyan also has moved up in the margin market.
Sure. Mulund, we have come back to the original occupancy level, what we used to deliver. Is it a seasonal impact, you think, or do you think it is a structure which could continue going ahead?
No, Mulund, we were struggling. Actually, we have mentioned that there also. We are struggling around 60% type of occupancy level. So the unit has moved to about 65% occupancy level. And that has yielded into the EBITDA margin improvement. And because this improvement is gradual, it is not sudden. And we feel this is sustainable. And the unit will continue to improve its occupancy and EBITDA margin going forward.
Sure. And the second question I have is on the diagnostic segment that also has delivered stellar margin this quarter around 24%. Is it possible to call out the reason for the same?
Yeah. Anand, will you like to take this question also?
Yeah, yeah. Thanks. So regarding our margins, as stated by Dr. Raghuvanshi as well, so we have focused on improving our network efficiencies in terms of both in terms of improving our direct costs as well as improving our network efficiency by combining certain lab operations and creating some efficiencies there, as well as some amount of optimization in terms of other costs as well. So this has led to the margin improvement of this.
So should we assume these margins to sustain in coming quarters, or we should expect some normalization?
This particular increase in this particular quarter is also driven by an increase in revenue. As you know, the Q2 is usually the best quarter for diagnostics. So there has been an increase in revenue as well. So I would say that the optimization levels will continue, but the revenue levels will also determine the kind of profitability that we will deliver. We are seeing steady increase in revenue levels as well.
Sure. So thank you, and I will join that. Thank you.
Thank you. Next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah. Thanks for taking my question. You mentioned that you're adding quite a few brownfield capacity in the second half. Could we quantify the number of beds that will get added in the second half?
Yeah. So one is the managed facility we have operationalized. So the benefit of that should be coming in this quarter. And in terms of revenue, although it will be contributing slightly on the EBITDA side, negative on the EBITDA side. Plus, we are expecting at the latter part of the quarter, this Faridabad facility to be commissioned.
Okay. Only Faridabad will come in the second half.
And then we are also having some additional bed at our premium facility in FMRI, where we are rejigging certain operations. And through that, we will be adding another 20, 25 beds. So that should also be commissioned. Noida, we are expecting. I don't know whether it will happen in this quarter, maybe Q3 , or it will move to Q4 . But Noida is also progressing quite well. So in all our expansion, we are progressing quite well. But major benefit will be coming, I will say, in the Q4 of this expansion capacity.
And for Manesar Healthcare, how many beds have we commissioned so far, and what's the plan in terms of break-even in the Manesar Health facility?
Yeah. So we have initially started with 50 beds. And as we progress in occupancy metrics, we will open more beds. So we have assumed we expect around 15 months' time for the break-even of this facility, so in terms of EBITDA. But the initial response is quite good, and we are quite hopeful that we may achieve even better, even earlier this break-even time.
And this 15-month break-even is assuming bulk of that capacity is commissioned?
Sorry? Bulk of?
15 months is assuming bulk of the beds is operational by then.
Yes, yes. Yes, yes. So as I said, we are seeing very encouraging signs in terms of occupancy and the response we are getting in that area. So we expect that occupancy ramp-up will be quite fast, and that will result in earlier achievement of the break-even time.
Okay. And on the diagnostic business, what should we think about the margins, let's say, 12-18 months from now or probably in fiscal 2027? In your view, once growth starts to normalize for this business, ideally, what is the sustainable margin that the diagnostic business can get to? And second, by when do we complete the stake purchase from the private equity?
Yeah. I will take that question on private equity, and then I will ask Anand to comment on the margin. The private equity side, we have progressed quite well. We have got CCI approval, and we have also got NCLT approval from the stakeholders for the NCDs. We are in the final stage of finalizing the agreement with the key investors. Hopefully, we should be concluding all these things by this month's end. And then we will conclude the deal by this month's end and maybe early week of December. Anand, over to you on the margin side.
Got it. Thank you. So on the margin front, what we feel is margins are basically dependent on two factors here. One is the operating leverage that we get from revenue, and another is the cost optimization and network efficiencies that come through over a period of time. So what we are seeing, what we feel is that over the, by in another 15 to 18 months, we should be able to be in the range of about 25%-26% kind of margins. In the upcoming quarters, we'll be able to see steady progress on these numbers.
You said 25 to 26. Did I hear that correctly?
Yeah, yeah. I'm talking about FY 2027 or 2028, those kind of times.
Okay. Got it. Okay. Got it. Thank you, sir. Thank you.
Okay. Next question is from line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Good evening. Thank you for taking my question. Just the first one on the balance sheet post this stake increase, rather, in Agilus. I just want to understand how does this start looking today? It is at 0.16 EBITDA, net debt to EBITDA. But just want to understand with the INR 1,500 crore NCD, any rough numbers we should be working with? And also, is the valuation for the 31.5%, is the put option liability, is that the best benchmark to look at how the stake increase is going to happen? If you could highlight how the balance sheet could likely change.
Yeah. Sure, Shyam. So Shyam, balance sheet will remain to be very healthy even after post-acquisition of stake through debt of INR 1,500 crore. Because we are seeing a very steady increase in the EBITDA. With this run rate, by year-end, our debt EBITDA will be below 1.5, which is quite healthy from that angle. It may further come down because of, as I mentioned, the EBITDA run rate of the EBITDA is quite high. With this brownfield expansion, the EBITDA should even go further.
Got it. Vivek, just want to take a step back and look at this deployment of capital, right? Is that the best use for capital to buy the stake in subsidiary? I know there is a put option liability and there is a timing. But when we were to evaluate all the different ways to deploy capital, including brownfield or maybe greenfield, just want to understand, is there any ROC kind of analysis that you did before we made that? Or is this a compulsion of the business, and then you had to kind of acquire it?
Yeah. Shyam, I will say this and try to answer this two ways. Okay? One is you rightly mentioned this is a liability on us, and we have to honor this liability. So there is no two ways about it. So we have to honor it. Having said that, looking at the performance level of Agilus on which the valuation has been done, and future potential of this unit, we feel it is a best use of the capital. And plus, also, I would like to ensure everybody here that by this capital deployment, we are not compromising at all with our hospital business operation. So we are moving forward on our brownfield expansion journey as we have committed earlier. And also, we are looking actively from acquisition target also.
From that angle, we are not compromising or restricting ourselves in the hospital business at all because of this expansion. The company is having a decent balance sheet. We have other options also if we want to raise capital. There is no restriction as such on capex we are putting for our growth and expansion. This acquisition, I think, acquisition of stake in the long term will create a lot of value for the shareholders.
Any implied EBITDA multiples for the stake increase for Agilus?
Yeah. The implied valuation of this based on the valuation report which has finally been agreed by all the parties is around 17-18 times EBITDA multiple one year forward. One year forward. We are seeing better than our expected EBITDA numbers in Agilus. As Anand mentioned earlier, he is quite hopeful of improving it even further. So that's why I'm quite hopeful that this investment will be very fruitful for the investors.
Got it. My last question is just on Agilus operations, right? Despite the margin improvement, I think growth still remains a challenge. 0% or flat growth in patients. Most of the growth has come from this test increase. And this is clearly trailing some of the peers, right? So what are the plans to kind of improve top-line growth at Agilus? And is that the key lever for getting to 25%-26% margins, or it will be still we will still lag peers in terms of top-line growth?
Thanks, Shyam. So in fact, if you actually see our volume growth has been quite consistent compared to last year. If you see that last year, we had a large component of PPP business, which was there, which was contributing very high on volume, but on value, it was very low. So such business is now very low in volume at this point of time. So that's why you're seeing sort of a flattish volumes there. But when you look at sort of our core business growth kind of a thing, so you'll see that the volumes are also growing as well as the price increase that we have done in February of last year. So that has an impact of about 1.5% on the growth.
So the balance is the volume growth. So we see this combination of volume and value growth will be the primary drivers for the overall growth going forward as well. Because what we are seeing is that when we changed the brand in June of last year, June 23, so from there, the kind of impact which we saw on our B2C businesses, those impact is now much reduced, and we are seeing a good recovery on all fronts. With the upcoming campaigns that we are doing with our new brand ambassador, Ranbir Kapoor, and all that, so we are also expecting that this to be further improved compared to the current levels.
Great. Thank you, and all the best.
Thank you. Next question is from line of Bino from Elara Capital. Please go ahead.
Hi. Good evening. Just following up on the question on Agilus, is the absolute valuation number public? Can you share that?
Yeah, yeah. It is in public domain. We have gone for the shareholder approval also for that. I think the number is 1778 enterprise value.
Equity value.
Equity value.
Equity value is 1778. 1778 equity.
Yeah. For 31% stake.
Okay. This is the price of the 31% stake that you are buying.
Yeah. Okay. And when you execute this transaction, would it have any sort of P&L impact? Any profit loss, anything processed through the P&L?
Yeah. The impact will not particularly be because of acquisition of this transaction, but because we are funding it through interest, so that interest charge will be coming in the consolidation number. No, but no.
Okay. Okay. Interest charge will come, but there is no particular P&L entry in terms of any one-time profit or loss.
No. Nothing like that. Nothing on that.
Okay. Understood. And finally, one question on hospitals. Earlier, you had given a guidance of 200 basis points margin expansion in the hospital business for the full year. That remains as it is because you are mentioning to Manesar contributing a little negatively to the EBITDA, etc. Even after all that, you will maintain that 200 basis points margin expansion for the year?
Yeah, yeah. So we are maintaining our margin guidelines. And when we have given that guideline, we have factored in these losses of Manesar, which is obvious because it is a sort of greenfield project. So initially, some losses are expected to occur.
Understood. Okay. Thank you very much. Thank you.
Thank you. Next question is from line of Nitin Agarwal from DAM Capital Advisors. Please go ahead.
Hi. Thanks for taking my question. So just going back to Agilus question again, Anand, on the, when you look forward 2026, 2027 onwards, can we expect the business to or do you expect the business to go back to double-digit growth territory?
Yes. Definitely. That will happen. Because we are seeing that trend happening. I think this year will be an outlier. After this year, you'll see that the basis will change because of whatever changes we have done compared to last year, the brand transition, all those things happening now. Those will have a better impact in the coming years.
Essentially, when you look at Agilus going forward, essentially, it's 10%; it's a double-digit growth business with a 25%-26% EBITDA margin.
I think in line with the industry, we'll be able to move forward in terms of growth numbers. The margins, as you know, our structure is slightly different from other companies. Accordingly, our margins would be different, but at the same time, they'll be definitely much more improved compared to where we are today.
Thanks. And secondly, on the hospital part, any FMRI we're looking to, we mentioned we'll be doing about 180 beds that we're adding. What 220 beds, rather, new tower, what is the how many beds will be commissioned in Phase I, or it's going to get commissioned, the 220 beds altogether?
No. Generally, for the expansion of this side, we open bed will be available from, say, April 25 onwards. But we will open the bed as per our occupancy to contain the cost factor. We initially our plan is to open initially 100 beds. And as we achieve a particular occupancy level, then we'll open up the balance beds maybe in six months to one year time.
And what is the current base?
Within which we will open earlier, which will be somewhere around January of this coming year. You said 20 beds? 20. 2-0. Okay.
And what is the current base of the FMRI? How many operational beds do we have in FMRI right now?
310 beds currently we have.
Okay. And when you are evaluating these brownfield projects, in your assessment, what is the kind of time you're seeing for these brownfield capacities to come back to the levels of the existing bed profitability? How much time do you think it's going to take for these brownfield expansions?
Yeah. It is generally from day one it is self-sustainability because it is on the running hospital, and we plan the bed opening accordingly. So we are expecting almost immediate return type of things in the brownfield.
Don't see any drag on EBITDA on the brownfield expansions at all?
Not really.
Okay. And the last one, you've already in the presentation, you've highlighted the beds that you will add in F25 on the brownfield side. For F26, which are the major capacities which will come on board apart from FMRI?
So there will be Noida will be fully commissioned. FMRI will be fully commissioned. There will be some bed addition in Anandapur as well as Anandapur is in Calcutta, and then BG Road in Bangalore. All in all, another maybe 350-400 beds will come through next year incrementally in F26? Around that number we are expecting, yes.
Okay. Thank you.
Thank you. Next question is from the line of Bansi Desai from JP Morgan Chase. Please go ahead.
Yeah. Hi. Thanks. So my question is on hospitals. So if I look at the top-performing hospitals for us, I think consistently these hospitals have been doing occupancy of 70% plus, around 70%-72% in that range. Do we have scope to kind of improve our occupancies here for the best-performing ones, hospitals for us?
Yeah. Occupancy, except two hospitals, BG Road and Mulund, I'm talking premium hospital, which are the high-performing hospitals. The occupancy is about 70% in almost all the hospitals. And that's why we are going for this expansion thing. However, once the new brownfield capacity kick in, as I mentioned, from, say, March, April onwards, then we may see some drop in the occupancy level on the enhanced bed capacity. But overall, I think we will be able to maintain this type of occupancy level in these premium facilities.
Okay. So the reason I asked is that I do see two, three hospitals of ours which are in the bracket of 15%-20% EBITDA margins, even achieving 77% kind of occupancy levels in the first half of this year. I was just trying to understand that probably what is stopping us from achieving those kind of numbers, even for our top-performing ones?
Yeah. Each hospital has a different dynamic. For example, Faridabad, for example, it is around 18% occupancy level, EBITDA level. The occupancy level of this hospital is quite high. It is around 80% plus. The occupancy level it is consistently operating. Because there are certain personnel costs relating to the labor union and those type of costs associated with it. With this expansion program, which will start kicking in from this quarter onward, we are expecting this hospital definitely should move into 20% plus EBITDA margin radar. Similarly, for Amritsar, for example, it is hovering near 20%. It is slightly low. That's why it is coming in the 15%-20% bracket.
But this unit, again, is a good unit from the EBITDA margin perspective. Ludhiana is another, the only one unit, I will say, 15%-20% bracket, which will, in the immediate vicinity, remain in 15%-20% region. We are not expecting in a year time to move to 20% EBITDA margin thing.
Okay. And for this expanded bed capacities, do we expect our contribution from institutional patient revenue also go up? It's already at 20%. So how do you think about that?
Yeah. So the unit where we are extending capacity, like Noida, for example, where we will be adding 160-170 beds. Our immediate priority will be to fill those beds. So for that, we may opt for some scheme business. But unit like SMRI, where we are adding beds and it is having almost zero scheme business, we will continue to do that.
Our strength on international front patient and the strong TPA and care business should be able to absorb this type of bed expansion. But I think in our expansion thing, this Anandapur and Noida are the two units where I expect there will be a little bit increase in the scheme business.
Okay. And last one, I also see a couple of hospitals moving in the less than 10% EBITDA margin bracket. And we now have seven hospitals out there. And obviously, this all excludes the loss-making ones which we divested. So any thoughts on how do we see improvement in these underperforming hospitals from here on?
Yes. So there are very small dip in two of our hospitals, one is FEHI and one is in Cunningham Road. That's why the two hospitals which were earlier in the range of 10%-15% have come below 10% thing.
We are not very much worried because it is just a mathematical calculation. It has just come down by half a percentage point, and that's why it is categorized in this thing, so FEHI, specifically, we are quite happy with the performance in terms of the revenue growth, occupancy, RCOP, and other things, and we are moving very nicely in terms of matching it multi-specialty type of hospital rather than cardiac-specific hospital. And that is yielding the result, and we are consistently now on double digits, which is quite increasing. I think another hospital, big hospital in this category, is Jaipur, which we always discuss about, and Q1 was really bad for Jaipur. I have explained the reason in the earlier call because of that organ transplant-related issue, and now I think it is moving back to its normal level.
With this, we are quite hopeful that Jaipur will reach its double-digit plus EBITDA margin maybe in the next six to eight months' time. Other units are quite small. Ludhiana is just started eight months back, so it is giving negative EBITDA. Another hospital in this category is a very small hospital, Sacred Heart in Bangalore, which actually we are planning to divest and get rid of this hospital because we are not anyway, it is a very small hospital. It is not having very much big impact. The remaining hospitals are below 10% because they have a big charge on the rental side, like CH Road, La Femme. These are the hospitals which have rented 6%-7% rental sitting into this EBITDA. And after absorbing that rental cost, the EBITDA margin like.
Understood. Thanks a lot, sir. Thank you.
Next question is from the line of Kathun, individual investor. Please go ahead.
Hello. Thanks. So my question is on the legal side. Any updates on the High Court side on the case?
Yeah. So in the High Court, in the matter of Fortis, the hearings are happening. We expect the next hearing to be there sometime end of this month. And that hopefully should be the last hearing, but then the vacation period will begin. So we are not expecting much movement for another one or two months. Whereas in the matter of land, the court has ordered for auction of the court’s land. So for that, on 21st, the court officials will decide on the mechanism and the terms, etc. Post that, we will see how we can participate and secure this for us.
Thank you, Dr. Raghuvanshi. Another question which I have is on the legal cost side. Are we? This is these hearings will be done maybe one month or two months, right? Are we expecting legal costs to come down, which means improving our EBITDA?
Yes, so this year, we don't expect the legal costs to be low. In fact, this year, the legal costs have been slightly higher than the last year because more number of hearings, etc., has happened in the High Court compared to last year. So the cost has been slightly higher this year, but we expect that to go down from next year.
Okay, and my last question is, I'm not sure whom to ask, but it is more on the side of. I'm not looking for numbers, but on the occupancy side in the current quarter, how the things are shaping up, if we can get some indications? Because we are already one month and eight days over, so. Yeah.
So we are expecting, and as is always the case, this particular quarter, the current quarter is affected because of the seasonal impact. As you know, there is a festival season. So there will be some dip in the occupancy. But overall, we are not expecting very drastic change in the occupancy and the profitability matter.
Okay. Maybe my question is more on the side of the culmination of efforts, which is going on for now a couple of years, maybe three or four years, right? So from that front, seasonality will always be there. But in terms of the overall numbers, you see improvement finally reflecting on the margins and everything?
Yeah. I think the gains we have achieved so far, we will keep on going on that track, and the trend is healthy.
Momentum is there in the right direction, right? Is that the right way of saying it?
That's correct. Yeah.
Thank you. Thank you so much. I appreciate it.
Thank you. Next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. So for my first question, with reference to your Mulund hospital, so if I look at the quarterly revenue numbers that you have shared, there has barely been any movement in the quarterly sales, whereas the margins have gone up significantly. So if you could throw some color here as to what has happened at Mulund?
Yeah. So in Mulund, as I said, one is the occupancy level has gone up. Second is the facility in which the revenue has gone up, which is high-margin facility. As a result, there is an overall improvement in the EBITDA margin in the Mulund.
Got it. Sir, did I hear it correct that you would be divesting one more hospital at Bangalore?
We are evaluating that. Smaller facility, we are evaluating that.
So will that be the one at Rajajinagar?
No. This is on Richmond Road, which is called the Sacred Heart.
Okay, sir. Understood. Thank you.
Thank you. Next question is from line of Mayank from Axis Asset Management. Please go ahead.
Hi. Thank you. I have two questions on the diagnostic side. First is, for the touchpoints added last year, is there any regional bias per se? And secondly, what is the plan for addition of more customer touchpoints for the remainder of FY25 and FY26?
So we are normally adding close to about 900 touchpoints every year before the brand change. After the brand change, our touchpoint addition has slowed down to about 600 odd.
So this year, we expect to add close to about 600 to 700 touchpoints. And we are seeing that improving every quarter. So this quarter, we have added close to about 115 touchpoints.
So this update is likely to continue into FY26?
Yes, sir. We continue to add touchpoints because we have a network across the country. So it's not you are asking also that whether it is specific to any particular region. So there's an increased focus on some of the focus regions. We have some of the territories, some of the regions like our Kolkata region, our Mumbai region, Bangalore region, Delhi NCR, and Chandigarh region. So these regions, we have a higher focus on improving our network. Whereas across the country, also, we continue to add new touchpoints.
On a blended basis, if I have to talk about pricing, pricing broadly, I mean, different regions for different pricing, but broadly, the pricing is kind of maintained? Or do you see any change in the pricing as well in terms of price hikes and delivery prices to get in line with the competition in the specific regions?
You're talking about pricing region-wise?
Yeah. So on a blended basis, I mean, region-wise, it will be difficult to give a hypothesis. But on a blended basis, do you see any price change happening on a blended basis in diagnostic prices?
No, it's fairly constant. So we have differential pricing across different segments, across different regions. It's kind of very similar to how the rest of the industry players go more.
Got it. Got it. Second, on the diagnostics part, only so you alluded to the fact that the margins from that; it's a function of the efficiency improvement, productivity, and the overall top-line level. So fair enough to say, in case whenever you hit INR 350 crores plus kind of number, this level of margins are sustainable. There is nothing like which is one-off if this level of revenue kind of is achieved. Is that right?
Correct. Correct.
Got it. Got it. Thank you. Just one last question on the hospital side. Given the fact that we have a fairly good pipeline of bed capacity coming in the next two to three years' timeframe, and given the fact that we'll have some debt because of the stake purchase in the diagnostic business, would the company still be evaluating any additional asset, either through M&A or additional land buildings in the next one to two years' timeframe, which can basically be an addition to the already existing capital addition, or will it be avoiding it because of the leverage or because of the leverage primarily?
No, no. Absolutely, we will be evaluating organic opportunities at all times. We are very mindful as to what kind of value we are acquiring for the shareholders.
So we are looking at individual assets to a large extent, but they have to fit into the geographical strategy of ours or cluster strategy of ours. So based on that, we are continuously evaluating projects, and we will certainly be doing certain inorganic acquisitions.
Perfect. Perfect. Good. That's all from my side. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Next question is from line of Nitin Agarwal from DAM Capital Advisors. Please go ahead.
Thanks for the follow-up. Just quick one. Sir, what kind of CapEx spend should we assume for this year and next year?
Yeah. So we are expecting around INR 800 crore to INR 900 crore approximate CapEx, which includes maintenance as well as a growth CapEx for both the years, each year.
Okay. Thank you.
Thank you. Ladies and gentlemen, we'll take that as a last question. I'll now hand the conference over to the management for closing comments.
Thank you, Neerav. Ladies and gentlemen, thank you very much for joining us on the call today. Really appreciate your time. If there are any follow-up queries, please feel free to email us. Me and my colleague, Amit, are there available to speak with you and try and resolve your queries as best possible. Thank you and have a good evening.
Thank you very much. On behalf of Fortis Healthcare, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.