Ladies and gentlemen, good day and welcome to the Q4 FY 2025 earnings conference call 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 the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Kalra, Senior Vice President, Investor Relations at Fortis Healthcare Limited. Thank you and over to you, sir.
Thank you very much. A very good afternoon, ladies and gentlemen, and thank you for taking the time to join us on our quarter 4 FY 2025 and FY 2025 earnings call. The call is being chaired by our MD and CEO, Dr. Ashutosh Raghuvanshi. With him is Mr. Vivek Goyal, our Chief Financial Officer. From Agilus, w e have Mr. Akshay Tiwari, the CFO of Agilus. Unfortunately, Mr. Anand could not join us today because he is currently in the midst of some travel overseas, but we'll be happy to take any diagnostic questions as well. We will start off with some opening comments by Dr. Raghuvanshi, post which we will open the floor for questions and answers. Over to you, sir.
Thank you, Anurag. Good afternoon, everyone, and thank you for taking the time to join us on this quarter 4 2025 and financial year 2025 earnings call today. To begin with, I'm pleased to inform that the board has recommended a dividend of INR 1 per share, which is equivalent to 10% of the face value for the third consecutive year, subject to the approval of shareholders. This highlights the strengthening fundamentals of the company and its sustained earning growth momentum that we are witnessing. Coming to the financial performance of the company, I shall comment on the year as a whole and then move on to quarter 4. We have witnessed another year of healthy growth and improved margins. The hospital business has been the primary driver of the company's performance, consistently demonstrating year-over-year improvements in margins.
For the financial year 2025, consolidated revenues of the company stood at INR 7,783 crores, a growth of 12.9% over financial year 2024. Our hospital business revenues have grown 14.8% to INR 6,528 crore, while the financial year 2025 diagnostic business gross revenues were at INR 1,407 crores versus INR 1,372 crores in financial year 2024. Our consolidated operating EBITDA increased 25.3% to INR 1,588 crores, which translates into a margin of 20.4% in financial year 2025 versus 18.4% in financial year 2024. The hospital business operating EBITDA margins have improved from 18.6% to 20.5% in financial year 2025, with an EBITDA of INR 1,339 crores. The hospital business contributed approximately 84% to both our consolidated revenue and our consolidated EBITDA. Consolidated reported profit after tax before exceptional items for the year increased 42.8% to INR 899 crore, while the reported PAT after exceptional items stands at INR 809 crores.
On the quarterly performance, we reported a consolidated top line of INR 2,007 crore in financial year in Q4 of financial year 2025, a growth of 12.5% over quarter 4 of financial year 2024. The hospital business revenues have increased by 14.2% to INR 1,701 croress, while the diagnostic business gross revenue stood at INR 348 crore in quarter 4 of financial year 2025, compared to INR 338 crores in financial year 2024. The consolidated operating EBITDA in quarter 4 of financial year 2025 increased 14.3% to INR 435 crores, delivering a margin of 21.7% versus 21.3% in quarter 4 of financial year 2024. Operating EBITDA for the hospital business in quarter 4 grew by 11.7% to INR 372 crores, with a margin of 21.9% compared to operating EBITDA of INR 333 crore in quarter 4 of financial year 2024.
The figures for quarter 4 financial year 2025 and 2024 include certain year-end adjustments related to write-back of excessive provisions, unclaimed balances, expected credit loss, and other adjustments, which are accounted for in the quarter but pertain to the full year. Our consolidated reported profit after tax before exceptional items for the quarter increased 20.8% to INR 242 crores. Coming to the balance sheet side, the company's net debt on 31 March stood at INR 1,694 crores, while the net debt to EBITDA of 0.93x as on March 31, 2025, as against 0.17 on 31 March 2024. In December 2024, we raised INR 1,550s crore through the issuance of non-convertible debentures. Leveraging these funds along with internal accruals, we have consolidated our stake in Agilus by acquiring 31.52% stake from our private equity investors. As a result, FHL now holds 89.2% equity stake in Agilus.
Our hospital business recorded a 9% increase in ARPOB for the year, reaching to INR 2.42 crores per annum. This growth was primarily driven by the revenue gains in our key specialty areas such as oncology, neurosciences, cardiac sciences, gastroenterology, orthopedics, and renal sciences, which together achieved a 16% year-on-year growth and contributed 62% to the overall hospital business revenue. Noticeably, the oncology specialty registered a growth of 25%, and neurosciences reported a growth of 19% year-on-year. Hospital occupancy improved to 69% in financial year 2025 compared to 65% in financial year 2024. This translates into occupied bed increase by 5% to 2,838 compared to 2,700 beds in financial year 2024. We also witnessed strong volume growth across key procedures in financial year 2025, such as 72% growth in robotic surgeries and 17% in neuro and spine procedures.
Most of our key facilities delivered strong performance this year, with revenue of large facilities such as Shalimar Bagh and FMRI registering a growth in excess of 20% compared to financial year 2024. In 10 of our facilities, we have reported operating EBITDA above 20% both during the quarter 4 of financial year 2025 and financial year 2025 as well. These facilities together contributed 73% to the hospital revenues during the quarter and during the year. In comparison, in financial year 2024, we had eight of our facilities operating within EBITDA margin of above 20%, contributing to 62% of hospital revenues. Revenue from international patients for the quarter grew 17% to INR 145 crore, contributing 8.1% to overall hospital business revenues versus 7.9% in quarter 4 of 2025. For year 2025, international patients' revenue grew 13% to INR 539 crores.
I'm pleased to share that financial year 2025 has been marked by significant development. Recently, the company successfully acquired the Fortis brand and trademarks for INR 200 crores. We have also made significant progress in advancing our strategic growth levers, including inorganic growth, portfolio rationalization, and brownfield bed expansion. As part of the company's inorganic growth strategy, Fortis signed a definitive agreement in February 2025 to acquire Shrimann Superspecialty Hospital in Jalandhar, Punjab, along with an adjoining land parcel for INR 462 crores. This acquisition will add 228 beds to our network and offers the potential to increase the facility's total capacity to over 450 beds.
This transaction will allow us to further strengthen our presence in the Punjab region from approximately 800 beds to 1,000 beds, and then on from the brownfield expansion, which is going to come in next two to three years in Amritsar and Mohali. That would take the bed count to approximately 1,600 beds in Punjab. This transaction is expected to be consummated very shortly. Continuing with the portfolio rationalization strategy, we divested business operation of Richmond Road Hospital in Bangalore in December of 2024. This is the third facility divested by the company after the divestment of Malhar Facility and Varapuzhi Facility in Chennai. Our focus on bed expansion continues this year, with Fortis Manesar, a 350-bedded hospital facility, commencing operations in September 2024, offering an entire spectrum of clinical services, including all key specialties and latest state-of-the-art medical equipment.
We added approximately 200 beds across our network, with Shalimar Bagh and Anandpur being the key facilities where the beds were added. Our expansion strategy continues to focus on deepening our cluster presence. We plan to ramp up bed capacity by approximately 2,000 beds over the next couple of years. When completed, we can also expect to see some of our key facilities, such as Shalimar Bagh, FMRI, Mohali, and BG Road, to become more than 450 beds each. Focus on digital continues to remain core to our strategy, especially with a view to enhance patient care and operational efficiency. In financial year 2025, we rolled out electronic medical record outpatient modules in 12 additional facilities, bringing it to a total of 15.
Additionally, we began implementing the inpatient module of the EMR, with the implementation done at Fortis Manesar to start with, and during the year, we will proceed with other units as well. This enhances the real-time access to patient data for clinicians. Revenue from digital channels via the website, mobile application, and digital campaigns, etc., delivered a strong growth of 35% year-on-year. Digital revenues contributed to approximately 29.6% to overall hospital revenue. The company further augmented its medical infrastructure by commissioning several high-end equipment, such as Gamma Knife, MR Linac, and surgical robots in some of the key facilities. This reaffirms our commitment to offering the most advanced treatment options and delivering precision-based treatments. Just to highlight, our capital expenditure in financial year 2025 stood at approximately INR 700 crores, reflecting our confidence to further scale up operations, both in terms of capacity expansion and augmenting medical infrastructure.
We expanded our clinical offerings, bolstered by high-quality talent. The year saw the addition of reputed clinicians in various specialties, including neurology, cardiac sciences, oncology, gastroenterology, orthopedics, and gynecology. Turning to our diagnostic business, Agilus continues to recover and witness improvement in operating margins. Operating EBITDA margin basis gross revenue stood at 17.7% in financial year 2025 versus 15.3% in financial year 2024. Excluding one-offs primarily related to rebranding expenses, the operating EBITDA margin stood at 22% in financial year 2025 versus 19.6% in financial year 2024. For quarter 4 2025, operating EBITDA margin basis gross revenue stood at 18% versus 14% in the corresponding previous period, excluding the one-offs. The operating EBITDA margin stood at 23.4% in Q4 of 2025 versus 16.3% in the corresponding previous period. As part of our ongoing network expansion strategy, the total number of customer touchpoints reached 4,171 as on March 31, 2025.
The preventive portfolio revenue in Agilus overall revenues grew 13% in financial year 2025 and contributed 11% to overall diagnostic business revenues compared to 10% in financial year 2024. We believe that Agilus has the potential to scale significantly from the current level, and efforts are underway to strengthen its growth imperatives to drive revenues and optimize cost lines. I also believe that the Agilus brand is gaining strong acceptance and recognition in the market, positioning the company well to further scale its performance. With that, I'll conclude my remarks. We are making strong progress across our strategic growth levers. I believe these initiatives will drive sustainable growth potential and strengthen our position in the healthcare sector. With that, thank you, and I hand over to Anurag, please.
Thank you, sir. Ladies and gentlemen, we will now open the floor for questions and answers.
May I request the moderator to take a seat?
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 the touchstone 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 a first question from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. On the hospital business, now that we have started seeing a fair bit of traction on the margins, how should we look at the margin expansion from the 20.5%-21% that we have reported in the current year?
Should the step change in margins continue to get to that mid-teens where our peers are at? Given I think a large part of this was driven by brownfield, just trying to understand where Manesar is in terms of ramp-up in bed capacity and profitability, and when do we think that gets to break even?
Yeah. Hi, Neha. This is Vivek. On margin expansion, we are sticking to our guidance earlier, where we said that we want to achieve margin expansion nearer to some of the best competitors. We expect the margin to grow from the current level. Similar growth you can expect in the forthcoming years also, like 2% growth we have seen in the current financial year. Similar margin expansion growth we are expecting next financial year.
Regarding Manesar, we are currently operating at about 40% occupancy, but we have commissioned only 90 beds. Another 120 beds we will commission as the occupancy levels go up. We expect that on the entire bed capacity, which is about 120 plus 90, we will have about 50% occupancy by the end of this year. The exit should be at least 50% plus occupancy. The uptake of this hospital has been very good. Some of the programs which we had anticipated that we will start a little later, we are preponing them, and we are going to put up the radiation oncology suite, which was planned earlier for two years from now within this year.
Would it be fair to assume that at 50% occupancy we achieve breakeven on this facility?
I think so. Even before that, we should expect a breakeven.
Understood.
My second question is on the diagnostic business. The revenue momentum remains in this low single-digit range, but margins have moved up. Is there any provision fightback, etc., which is sitting in the margin number? How confident are we of growing in line with the industry or growing high single-digit in the diagnostic business, given that now the Agilus brand change is nearly getting to two years old?
Yeah. In diagnostic business also, we have seen now the increase in the revenue as well as the margin, which is reflecting the financial. The brand change is now affected, is now behind us, and we are seeing a double-digit type of growth number in the diagnostic business henceforth.
As regard to your other question regarding the one-off type of thing, this year, of course, there is a one-off relating to the brand transition and some one-off relating to the legal fees and some contingent consideration we have to pay for the past acquisition. Apart from that, I do not see very much this thing. This will discontinue from this year onward, and 2025, 2026, there will be normal type of EBITDA margin we are expecting.
Vivek, just to clarify here, I think initially our view was that this probably grows more high single-digit. You believe, based on the Agilus momentum currently, you are confident of double-digit revenue growth. Is that correct?
Yes. This is what we are targeting.
Got it. Margins would be in the mid-20% as we scale up revenue?
It should be around 23% nearly, and then moving towards 25% in a couple of years' time.
Got it. This is very helpful. Thank you so much.
Thank you. We'll take our next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Good afternoon. Thank you for the opportunity. The first one on the hospital business is, how should we look at the revenue guidance for fiscal 2026, and if you could break it down into volume and maybe ARPOB?
Yeah. Hi, Shyam. Vivek this side . So revenue-wise, we expect to grow around 14-15% similar number. And this time, last year, the year we have completed, we have seen 9% type of ARPOB growth, and balance growth is coming from the volume.
I'm expecting it will be the reverse this time, around 5-6% in the ARPOB growth, and the balance is from the volume side. Volume growth is mainly coming from some of the brownfield expansion which has been completed. We will be operationalizing, which mainly includes Noida and Faridabad, and also from the capacity ramp-up in the form of better occupancy than last year.
Vivek, helpful. We had about 5% volume growth. You're saying this volume growth goes to almost double, like 10%. What are we baking in terms of for the occupancy? Should I model it on all the expanded beds, or we descended 69? Just trying to see how we should model that.
Yeah. We are aiming around 70-71% occupancy level at the overall level.
Because this brownfield expansion is on the existing facility, and these hospitals anyway are operating at 80% type of occupancy level. I think we will not be facing any challenge in occupancy side. Plus, the Manesar facility, as Dr. Raghuvanshi alluded, it is ramping quite well.
Just from a data point, how many operating beds we ended fiscal 2025, and what is the expected addition this year?
Yeah. We ended fiscal 2024 with a bed capacity of around 4,024 because we have taken out certain beds also in the Richmond Road. We will be adding around almost 1,000 beds in the current financial.
Bed addition is like 25%?
Yeah. Because most of these capacities are coming. Like Noida, we have got full OC, and we are operationalizing it. 150 beds we'll be getting.
There will be Shalimar, sorry. Faridabad, which has completed and will be operationalized in the first quarter itself. Manesar, we will be opening further beds. We are expecting around 200 beds to be opened in Manesar. FMRI, we will be completing it. Maybe the benefit we'll be getting only in the last quarter, FMRI, the 220 beds capacity expansion. I will say BG Road is another one which we are expecting OC actually in the future. There is another capacity I have added also, the Jalandhar facility, which will be in our fold maybe by this month end also.
What's the margin profile there currently?
They are on the similar margin profile.
Yeah. They are at an occupancy currently at about 60-62%, and the margins are about 22-odd % currently.
Understood. Just Vivek, just from a it's a lot of bed additions, right?
Brownfield, greenfield, or acquisition. So you're confident of this 150-200 basis points of margin expansion for the hospital business this year?
Yeah. Yeah. So we are quite confident. And last year also, we have demonstrated 2% margin improvement. And similar thing, we are expecting this financial year. So we are quite confident on that.
Got it. Last question. Sorry, I've taken many questions. Just what is the quantification for this write-off and all the changes that you have mentioned? It's in the hospital revenue. Sorry, I didn't understand. I don't know whether I missed opening comments on this one. What are the one-offs?
Yeah. One-off is basically there is some impairment charge we have to take, and that is mainly coming because of this Ludhiana-2 facility, where the performance level is not up to mark, I will say.
As a result of that, based on the future profitability and cash flow, we have to adjust the carrying value of the assets. That, along with there is some write-off impairment we have to take for our investment in Sri Lanka assets, where, as you know, the Sri Lanka stock price movement and the currency movement both affect the carrying value of the investment. These are the two big items. Apart from that, there is a positive item in this number also, where we have taken a positive sort of write-back of impairment, which we have done earlier for our Faridabad unit, because the performance of Faridabad unit has improved tremendously. The total net impact is around INR 89 crores for this financial year, and for this quarter, it is INR 54 crores.
It was in the revenue line, and sorry, can you say where it has been accounted for? Sorry, I did not understand that.
It is sold separately below EBITDA, INR 54 crores as a separate item.
Understood. Thank you. Thank you very much.
Revenue and other things are not much affected. What is impacting is, as an annual cleanup exercise, we do write off, write back certain unidentified estates which are more than three years old, and we also assess the provision which we have created in the books of fund, whether it is required, it is quite old, and stable similarly. Those types of things are quite normal now, which we are doing for the last three years, and it is not having significant impact on us.
Okay. Understood. Thank you and all the best.
Thank you.
Thank you.
We'll take our next question from the line of Deepthi Rajulapati from Axis AMC. Please go ahead.
Hello. Hi, sir. Thank you for your time. My question is on the diagnostic business. Last quarter, you have mentioned that we are done with rebranding exercises, and these expenses will taper off in the end of FY 2025. We will not see any rebranding costs in the coming quarter, or is there any carryover? One more question is on the variance of the margins in the diagnostic business. Of revenue, Q-o-Q, if we see, it's flat, but there is 2.1% variance in the margins. What is driving this? Just one more question is on the BG Road expansion on hospitals. How many beds are we expecting in FY 2026?
Yeah. Correct. Yeah. Yeah.
Regarding the first part of your question about the brand-related expenses, the one-off kind of expenses which were there in rebranding, those are done already. In this year, you will not find those as one-off items. The second is about the margin expansion, in spite of the revenue being flattish, is that we have built in a lot of efficiencies in the lab network. The CTPs versus the lab network, we have rationalized. There are several other initiatives on the cost side that have been taken, and that has resulted into this. We have also upgraded our infrastructure on the diagnostic side quite a bit. We have opened a new lab of genomics in Gurgaon. At the same time, we have opened a new lab for the transplant immunology in Bangalore as well.
With all these initiatives, we believe that higher test volume with the higher ARPOB will also drive growth in the coming year. Regarding the number of beds in BG Road, it is 140. 140 beds.
Okay. Thank you. All the best.
Thank you. We'll take our next question from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Hi. Good afternoon, all of you. Most of my questions got answered. Just one strategic question on the kind of expansion we are doing. If I look at most of your competitors, they are all targeting tier-one, tier-two cities with large 400-500 bed facilities. Whereas if I look at your acquisition, be it Manesar, Jalandhar, etc., you're more going tier-three, four, and slightly smaller facilities. Is that the way forward for us?
No. You see, we have always stated that our growth strategy is a cluster-based strategy.
As I was mentioning in my opening remarks also, in Punjab, we have approximately 800 beds spread over four facilities, two in Ludhiana, one in Amritsar, and one in Mohali. Now, all these hospitals, along with that, this is a strategic fit in Jalandhar, and that is why we have chosen. Out of choice, we are not going to any new geographies, tier-two or tier-three kind of geographies. Punjab as a state is important to us. With the addition of these beds and the expansion which we have planned in Amritsar and Mohali, we would have Jalandhar has a potential of 450 beds. We will go to 450 beds there. Mohali, we are going to be adding another approximately 350-400 beds. Sorry, Amritsar, we are going to be adding another 150 beds.
Punjab as a cluster, we are the dominant player already, but we will become even stronger once this happens. That is our cluster strategy. The Manesar facility, I mean, just I would like to correct you, is almost part of the growing part of Gurgaon. This is not really a tier-two or tier-three kind of situation. This is kind of a very upcoming area within the greater Gurgaon area. Manesar also has additional FSI, which will take this hospital size to 450 beds. The other comment which I made earlier is that many of our hospitals were smaller in size, but the larger hospitals which we have, which are already doing EBITDAs of about 20%, most of them will also become 450 beds plus after the brownfield expansion. This will give us a profile of a hospital.
I completely agree with you that a 450-bed hospital has a completely different economic than a 200-bed hospital. We believe in that. We are not changing our strategy within these clusters where we are present, which is Bangalore, Kolkata, Punjab, Delhi-NCR, and Greater Mumbai area. In these clusters, we will be seeking more opportunities, and we would be looking at more hospitals and try to do hospitals which are at least in the range of about 350 beds plus.
Understood. Just a later question or beginning a little deeper. Mumbai, Bangalore, Kolkata are cities where you are already present.
In these cities, your competitors, both listed as well as private, probably in the last two or two and a half years, have announced at least four or five big projects each, most of them greenfield, which means there is potential and there is land or whatever infra available to develop. You have not been so aggressive in those particular geographies in that sense. I mean, is there any reason or would you become more aggressive now?
Yeah. No, we were more focused on our brownfield expansion and execution thereof. We had other distractions as well, and Brand was one of them, which we have behind us now. We have been actively looking at opportunities, especially in Mumbai. As you said correctly, most of these projects which are announced are all greenfields.
We have also been looking for greenfields only because there are no acquisition targets per se available in these markets. Land costs being what they are, especially in Greater Mumbai area, which is of great interest to us and we believe has a lot of potential and a lot of demand-supply gap, that comes hard. We have been actively looking at it. Unfortunately, nothing has materialized so far, but we are pretty hopeful that at least a few of those discussions we will be able to culminate into actual projects now. Those would be purpose-built hospitals.
Understood. Thank you.
Thank you. We'll take our next question from the line of Prashant Nail from AMBIT. Please go ahead.
Thank you. Good afternoon, everyone. The first question is more of a clarification.
When you mentioned that you expect diagnostics margins to get to 23% and then beyond that to 25%, this is basis gross revenues or net?
Net revenue only. Net revenue only.
Net revenue. Okay.
All right. Understood. Secondly, in your network, now you have around five hospitals which are in the sub-10% margin bracket, and then you have a few which are in the 10-15% bracket. Do you have any other hospitals which are not core to the way you look at the business now? You sold three assets over the last year or two. Are there any more assets like this which you would look to rationalize, or do you think you're done with that exercise for now?
I think we do have work to do in a couple of our hospitals still in terms of improving, but we believe that those are strategically important for us, and exit is not an option. I think more or less we are done as far as this rationalization is concerned. On the performance side, two hospitals, especially I will mention rather three, where we are still working and we are seeing some good results. One is Escorts Hospital in Delhi, where our margin profile was less, but we have already consistently been achieving EBITDAs of about 10-14%, and we are going above 15% over there. We have a clear visibility on that. We are confident that this hospital will also come into kind of a normal profitability profile. The other two units in this category are Jaipur and Mulund.
Jaipur has had some issues, but now it is again recovering. The revenues trend looks very healthy. We have made certain changes there, both in terms of the leadership and some of the infrastructure changes as well. We expect very good results to come out of that. We expect that in six months to by the end before the end of the year, we should have a healthy margin profile in Jaipur as well. Bashi has some specific challenges because this is part of a government hospital, and that is why we have also got to serve certain free patients referred from the municipal corporation. Because of that, the profitability profile of this hospital has been low. We also had some attrition of clinicians here. Because of that, the occupancy numbers were a little low.
This is, again, an important market, an important micro-market, and we are working on strengthening the clinical talent over there to make sure that this also comes in the healthy zone. That is regarding these three projects which we are keeping under watch.
Thank you. Just one follow-up question on Escorts Delhi. Would 15% plus be close to what this hospital has achieved in the past when it has been part of Fortis, or is this even higher in your view?
No, this is actually better than what it has ever achieved.
Mind you, this is after absorbing the EWS bed cost because we have to provide 25 beds, of course. It is after absorbing that cost. As Dr. Avanti mentioned, it is showing upward improvement in the EBITDA margin profile, and we expect it should be settling somewhere around 15-16%.
Okay.
Great. Thank you. I'll get back in touch with you.
Thank you. We'll take our next question from the line of Abdul, an individual investor. Please go ahead.
Hello. Thanks for taking my question. My question is on any update on the Delhi High Court case? As per last call, it was discussed that from last conversations standing, so if there is any update on that side. I will add another question. How is the occupancy trend going in the current quarter?
Thank you. Yeah. So regarding the High Court case, there is no fresh development. That is still a matter of sub judice, but that doesn't have much impact on us. Regarding the occupancy, the trend is healthy, and we are doing occupancy levels similar to what we did in last quarter.
Thank you.
Thank you.
Thank you.
We'll take our next question from the line of Harsh Bhatia from HDFC Mutual Fund. Please go ahead.
Yeah. Thank you. Good afternoon. Am I audible?
Harsh, can you use your headset more? Your audio is not very clear.
Is it better? Yes. Please go ahead. Just one quick clarification.
I'm sorry. Harsh, I'm sorry. You're sounding muffled.
Is that better?
You can try. Please go ahead with your question.
Just on the hospital EBITDA part, you alluded to some one-off expenses which are below the EBITDA line item, and I'm purely referring to the hospital EBITDA. Just to be clear, in terms of when we look at the fourth-quarter performance on a bar and wide basis, the drag at the margin level is largely to do with the manifest performance, or is there any other one-off setup there at the EBITDA line item? That is the first one.
Yeah.
One-off is not like one-off, one-off. It is exceptional gain and loss which, as per accounting standard only, we have to show separately. That one-off, I explained what is those one-off exceptional gain or losses. There are losses for Ludhiana II impairment and impairment of investment in Lanka, and there is some impairment loss right back actually for the Faridabad unit. That is shown like an exceptional gain or loss. Regarding your other questions, the EBITDA margin side, there is no one-off, one-off, but provision for doubtful debt has slightly on the higher side if we compare with the quarter four of the last year. There was a positive right back of provision in the last quarter previous year. This quarter, it was not there.
Last quarter, we got very healthy collection in the last quarter itself, and as a result, there was a write-back of provision which we have provided based on the aging of the data. That has resulted into some improvement in the margin. Apart from that, there is nothing abnormal or unusual.
Would you be able to call out the number in terms of the recovery for the past quarter which is not there for this quarter, as well as the Manesar drag, if any?
Yeah. First, I'll tell you about the Manesar drag. Manesar, we have budgeted also the EBITDA loss of around INR 20 crore for this year. No, for the half year, it will be less.
Correct.
Yeah. It is around INR 12 crore type of EBITDA loss which we have budgeted also, and it is there in the financial.
Twelve crore loss is built into this financial, which hopefully in the next coming year, it should be some positive EBITDA number should be there. As regard your quantification thing is concerned, the provision for doubtful debt for the quarter is INR 22 crore. As against, there was a negative provision for doubtful debt. That was the income side, INR 7.5 crore corresponding quarter previous year.
Sure. Just one clarification on Manesar. INR 12 crore was there as a drag from the third quarter as well, and there was a INR 12 crore drag in the fourth quarter as well, or?
Sure. Just one another point. When you look at the margin matrix and when you're guiding for the 200 basis points margin expansion at the hospital level, in terms of your internal assumptions, how important are these hospitals such as Bashi, Jaipur?
Basically, whichever hospitals are there, below the 10% in the margin matrix, important for you to achieve the 200 basis points broader direction margin expansion? This is something that has not been considered to a large extent to provide you that, let's say, margin of safety to that extent. Basically, how important are these less than 10% margin hospitals turnaround important to your guidance for the 200 basis points margin expansion going forward?
For these hospitals to really come to the category of 20 plus is not something we have considered. We believe that the turnaround of these three hospitals is going to take six months to a year or maybe longer. We have not considered that when we say that we are expecting about 2% of increase in our profitability profile.
These hospitals are important statistically for the long term, but in the short term, whatever guidance has been given is not considering that these hospitals have come to a 20-plus category.
That's very helpful. One last quick follow-up in terms of the dedication for SI26. A large part of that would be ground-peeling nature on new towers as such. What should be the general break-even timeline that we should work with? Should it be somewhere around six- to nine-month period or somewhere closer to one-year period? Again, these are towers at the existing sites, so maybe it would help us understand a bit.
Yeah. Since these are ground-peeled, the option is pretty fast. Location to location, it will differ. However, we expect that in six months, we will open beds as the occupancy levels go up.
Currently, these hospitals are operating about 75-80% occupancy levels. We expect that this should happen in six months' time.
Harsh, that will help you. Thank you.
Thank you.
Yeah. Thank you. All the best.
We'll take our next question from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah. Thanks for taking my question. Most of the questions are answered. Just one follow-up on the 900 bed addition next year. This bed addition, should we factor in back-end it in the second half of this year, or do you think that some of the hospitals will get commissioned, even some of the beds will get commissioned in the beginning of the year as well?
Yeah. We should assume 50/50 because, as I mentioned, FMRI bed extension is happening at the last quarter.
Similarly, the BG Road also will be in the second half we are expecting. The rest of the beds will be commissioned in the first quarter itself.
Okay. Particularly on the BG Road, the occupancy still looks around 60%. Is it ideal to open one more floor there, or do you think we need to wait for that occupancy to go up?
Yeah. We are adding more clinical talent and modalities as well. Obviously, we will commission the beds; they will be ready for being commissioned. Capacity will be available to us, but we will keep on commissioning as and when the occupancy levels go up. With the addition of clinical beds and modalities, we believe that the occupancy numbers will go up.
Sure, sir. Thank you so much. I will join back. Thank you.
Thank you.
We'll take our next question from the line of Abhishek Jain from InvestWell Agent. Please go ahead.
Hello. Can you hear me?
Not very clear. Can you use your handset mode, please?
Yeah, sure. Just a moment. Hello?
Yes. Please go ahead.
Yes. Hello. Yeah. Sir, the question is we have purchased the clinical drive and the doctor. Can you tell me how much was the royalty we were paying earlier, both in absolute numbers and in percentage level? And the margin expansion that we are expecting for the current year of 50 basis points is 20 to 100 basis points is fine. Does this include the savings from this royalty payment, or it is over and above the reason that we are expecting?
Yeah.
The royalty, as per the old agreement we are providing in the books last year, is 0.25% plus GST, which comes to around of the revenue. That means 0.3% impact on the EBITDA margin, positive impact on the EBITDA margin post-acquisition of this grant. That will be the impact of the brand acquisition, positive impact, 0.3% roughly on the net revenue of the hospital business. That has been factored in while I guided margin expansion 2%.
Okay. Thank you. Can you also give the same figure for the SRL grant that you have converted into exhibits?
Yeah. SRL also the same 0.25% plus GST was the brand royalty applicable till we were using SRL brand. Now, because we have moved to our own brand, Agilus brand, there is no brand royalty right now.
The figure that you are saying is 0.3%, correct?
Including GST. Because GST is applicable.
Excellent. Thank you very much, sir. That's it from my side. Thank you.
Thank you. We'll take our next question from the line of Abhishek Wani from Dalal Street Investment Journal. Please go ahead.
Hello. Am I audible now?
Yes. Please go ahead.
Yeah. Sir, I want to know about the medical tourism prospectus business for the Fortis. What has been the growth rate across the industry, and how has Fortis been working on it?
Yeah. We have seen about 17% growth year on year. However, in the current geopolitical situation, we expect that there may be, there may not be a similar growth this year. Overall, to our context, about 8% of our revenue comes from international patients. We expect that to remain stable.
However, we are not seeing very huge growth in this.
Okay. And sir, with respect to the brownfield acquisition, what impact will it have on our debt levels? And do we expect the margin to recover quickly as opposed to our competitors who have been working with greenfield acquisition?
Yeah. There will not be any incremental debt for brownfield expansion. It will be funded through internal approval. There will be no incremental impact. As I mentioned in the earlier comment, this expansion is happening in the unit which is already operating at 75%-80% type of occupancy level. We should not be facing much challenge in ramping up this bed, and it should start contributing immediately.
Yes. Okay.
Sir, with respect to the legal costs, can we expect that the legal costs will fall down in coming quarters as we are already paid for the brand deals? What is your outlook on legal costs?
Yeah. The legal and other legacy cost is taking away almost 1% of our EBITDA margin. I will say that will continue till we are able to resolve these court cases because there is still one court case pending in Delhi High Court where the regular hearing is happening. Plus, the entity structure also, the project crystal, we called it, where we are trying to simplify the organization structure. Although the Delhi NCLT has given the provisional order, we are also expecting order from the Chandigarh NCLT, and then it will be simplified. This year, at least, it will continue.
I think from next year onward, we should see some reduction in this cost.
Thank you, sir. Thank you. All the best for the future.
Thank you. We'll take our next question from the line of Nirali Shah from Ashika Institutional Equities. Please go ahead. Nirali? Yeah. The line is on your side.
Yes. I just had a few very quick questions. So far, I think that we see today just a little view on that. ISS is increasing damages from Daiichi. So just wanted some color, some view on that.
Yeah. That's a litigation which is happening in Japan between ISS and Daiichi. Being a subjudiced matter, we can't really comment on that.
Okay. Okay. And about the Fortis winning auction for all the Fortis trademarks, so would that be any kind of value unlocking?
Yes.
We, as the previous caller was asking, I'm going to save some of the money which we were providing for the royalty for the brand because now we own the brand, and that is a positive advantage for us.
Okay. Thank you.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to management for closing comments. Over to you.
Thank you, ladies and gentlemen, for your time. If there are any follow-up questions, we are always available either through email or on phone. Please do reach out to us. Thank you and have a good day.
Thank you. On behalf of Fortis Healthcare Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.