Max Healthcare Institute Limited (543220) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Max Healthcare Institute Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suraj Digawalekar from CDR India. Thank you, and over to you, Suraj.

Thank you, Michelle. Good morning, everyone, and thank you for joining us on Max Healthcare Q2 and H1 FY '26 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. We will begin the call with opening remarks from the management, following which, we will have the forum open for an interactive Q&A session. Before we begin, I would like to point out that some statements made in today's discussion 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. Thank you, and over to you, Abhay.

Good morning, everyone, and thank you for joining us on Max Healthcare's Second Quarter and First Half of Financial Year 2026 Earnings Call. We are pleased to report that the network has maintained its strong growth momentum through the first half of FY '26. For the second quarter, revenue grew by 21% year-on-year, while operating EBITDA increased by 23%, thereby extending our track record to 20 consecutive quarters of consistent growth. Importantly, this performance reflects the continued strength of our core operations with existing units achieving revenue growth of 14% and EBITDA growth of 19%. Building on this strong performance, we continue to enhance our capacity and service offerings through brownfield expansions. At Mohali, the new 160-bed brownfield tower has been commissioned, including the additional radiation oncology program. At Nanavati-Max, the new 268-bed brownfield tower is set to be commissioned this week. And at Max Smart, the new 400-bed brownfield tower will be ready for commissioning within the next 30 days. Alongside our expansion efforts, we also streamlined our corporate structure. Divestment of hospitals in Chitta and Anoopshahr was completed in September 2025. Further, the merger of our 2 wholly owned subsidiaries was approved by the honorable NCLT Chandigarh Bench with an appointed date of October 5, 2024, which has resulted in a onetime benefit of INR 149 crores during the quarter. After long last, CGHS has revised the prices effective October 13. While some of it is still to kick in, we expect a favorable impact of over INR 200 crores once fully implemented. Further, with regard to insurance renewals, there was an impasse with certain players leading to temporary stoppage of cashless facilities. The same has been resolved. Now coming to the second quarter performance highlights. Please note that the term existing units hereafter refers to the network facilities that were operational prior to Q3 FY '25, while Jaypee Hospital are categorized as new units. Average occupancy for the network stood at 77% compared to 79% in second quarter last year and 76% in the trailing quarter. Existing units reported occupancy levels of over 79% Occupied bed days were up by 19% year-on-year and 4% quarter-on-quarter. Average revenue per occupied bed for the quarter was INR 77,300, registering a 1% growth year-on-year. For the existing units, like-for-like ARPOB grew by 3% year-on-year and remained stable sequentially. Network gross revenue stood at INR 2,692 crores compared to INR 2,228 crores in the second quarter last year and INR 2,574 crores in the previous quarter. This reflects an increase of 21% year-on-year and 5% versus trailing quarter. Of this, new units contributed to INR 144 crores, while the existing units delivered a 14% like-for-like revenue growth, driven by an increase of 11% in occupied bed days and 3% in ARPOB. Digital revenue from online marketing activities, web-based appointments and digital lead management rose to INR 803 crores, accounting for approximately 30% of the overall revenue. Website traffic crossed 79 lakh sessions during the quarter, growing by 53% year-on-year and 15% quarter-on-quarter. International patient revenue reached INR 231 crores, registering a growth of 25% year-on-year and 11% quarter-on-quarter. Network operating EBITDA stood at INR 694 crores, reflecting a growth of 23% year-on-year and 13% quarter-on-quarter. Of this new units contributed INR 23 crores, while the existing units delivered 19% like-for-like growth in EBITDA. Network operating EBITDA margin was 26.9% for the quarter. Existing units reported an EBITDA margin of 27.5%, higher by 90 basis points year-on-year and 200 basis points sequentially. Annualized EBITDA per bed for the network stood at INR 73 lakhs, like-for-like; EBITDA per bed for existing units was INR 76 lakhs, reflecting a 7% year-on-year growth. Profit after tax for the network was INR 554 crores against INR 349 crores in second quarter last year and INR 345 crores in the previous quarter. This includes onetime favorable tax impact of INR 149 crores pursuant to the merger of Crosslay Remedies and Jaypee Healthcare. Excluding this impact, PAT stood at INR 406 crores, reflecting 16% year-on-year growth. The network generated free cash flows of INR 291 crores during the quarter. There was a buildup of accounts receivable in the institutional segment, which impacted the cash flow from operations. INR 456 crores was deployed towards ongoing capacity expansion projects and facility upgrades at new units, while INR 146 crores was distributed as dividend. As a result, net debt for the network stood at INR 2,067 crores compared to INR 1,755 crores at the end of June 2025. Continuing our effort to support the local communities, we provided free treatment to approximately 44,000 patients from economically weaker sections of the society was INR 61 crores at hospital tariff. Both our strategic business units continued to deliver steady growth in revenue and profitability. Max@Home reported revenue of INR 63 crores, reflecting a robust 20% year-on-year growth. It offers 15 specialized service lines across 50 cities with over 60% repeat transactions. Max Lab reported a revenue of INR 54 crores, reflecting a 16% year-on-year growth. It provides services in over 60 cities and served more than 6 lakh patients during the quarter. Now coming to the status of our expansion projects. Max Lucknow. The current capacity of hospital stands at 413 beds, and we expect this to increase to 550 beds by end of this financial year. The onco radiation program, including PET/CT will be launched in the next 2 weeks. 500 beds at Sector 56 Gurgaon. The project is progressing well at site, while [indiscernible] had some impact on the pace of work. 100 beds at Max Nagpur. We have received environmental clearance and are awaiting the consent to establish. We expect to complete the project within 24 months post receipt of the CTE. 397 beds at Patparganj, all approvals have been received and barricading work is complete. The project is expected to be completed by FY '28. 550 beds at Max Vikrant Saket. The project will start immediately upon commissioning of the 400 beds at Max Smart. We expect to complete this project within 40 months. 400 beds at Zirakpur Mohali project is continuing faster than anticipated and is now expected to be completed by end of calendar year 2027. 140 beds at Max Vaishali, demolition of the existing structure is complete and approvals are in process. We expect to complete this project in 24 months post receipt of the requisite approvals. 500 beds at Thane, master plan for the site have been finalized by the partners. The project is expected to be delivered in 42 months. 250 beds at Pitampura Delhi, the partner is expecting the building plan approvals during the quarter, post which the project is expected to take 36 months. And finally, moving on to the overview of the company's performance for the first half of financial year 2026. Network gross revenue stood at INR 5,266 crores, reflecting a growth of 24% year-on-year. Of this, new units contributed INR 278 crores, while the existing units delivered a 17% like-for-like revenue growth. Overall, network operating EBITDA grew by 23% year-on-year to INR 1,308 crores, translating to a margin of 25.9% and EBITDA per bed of INR 71 lakhs, while existing units delivered an EBITDA margin of 26.5% with EBITDA per bed of INR 74 lakhs. In the first half, we generated INR 679 crores of free cash flow from operations after interest, tax, working capital changes and routine CapEx. INR 891 crores was deployed towards ongoing expansion projects and facility upgrades at new units. INR 131 crores was spent towards land purchases and brownfield expansions at Max Vaishali and INR 146 crores was distributed as dividend. With this, we open the floor for any questions that you may have.

[Operator Instructions] The first question is from the line of Damayanti Kerai from HSBC.

My first question is to Abhay. So what we have heard, there has been some senior doctor departure from your team in NCR hospitals. So first, have you rehired the required doctors? And what kind of impact was there, if any?

Yes. So we've -- it's -- that level of isolation is normal. You have certain teams always sort of move out, new teams come in almost immediately. And that is what has happened. So we don't expect any impact.

So approximately, like what is the attrition rate in your doctor's team, which you said is in line with the normal trend?

1% of doctors, less than 1% of the doctors.

When the new facility comes another 0.5% happens.

Yes. So some new facility comes another 0.5%. So you could say, between 1% to 1.5% at best. I mean anecdotally, 2 or 3 doctors leave or certain doctors leave it doesn't change. We have got close to 6,000 doctors, right?

Okay. Okay. So no impact as such and then it's a normal trend. Okay.

Absolutely.

Okay. My second question is on your settlement with issues on the insurance company. So has like all the matters now been put to rest and do you have any further contracts which are coming up for negotiations and there might be some updates there?

So Damayanti, first of all, we are -- whatever we have in terms of these 3 [indiscernible] companies that we already sorted and not only sorted for now, but we are also sorted for future in the sense that when we concluded this arrangement. Now we also agree the next [indiscernible], right? Yes, there are other companies also which are up for renewal this time, for example, including [indiscernible] and other insurance companies. So those negotiations are underway, I would say.

But these sort of impasses happen once every few years, and we don't expect a repeat of this.

Okay. So -- but we haven't heard such instances in recent past. So that's what I was a bit curious whether things are now put in place for permanently and then we might not see similar situations coming up.

We've had suspension of cashless facilities or others in the past also that happened 3 years ago a [indiscernible].

We have had [indiscernible] also 1.9%.

And everyone else, but there is all actively active catch-up [indiscernible].

Okay. Okay. And one last question. You said CGHS revision when it happens fully like for your portfolio exposure, that will be additional INR 200 crores kind of revenue which will come in?

That's right.

Okay. And approximately, like in your portfolio, what has been the tariff increase after this division comes into effect very broadly?

So Damayanti, I can't give you the numbers of what the increase is because obviously, it's a negotiation with the insurance companies. But I think CGHS part is clear, right? CGHS is around 10% of the overall revenue will go up. So we have around INR 2,000 crores of revenue. So we will have a 10% jump up there with all this additional revenue. But this is a net increase because certain medicines, et cetera, also they've capped the rate. So the real net increase.

The next question is from the line of Tushar Manudhane from Motilal Oswal.

So firstly, on the international patient question side.

Tushar, I am sorry to interrupt you. Tushar, your audio is not clear.

Am I audible?

Yes.

Sorry, sorry for that. So just on the international patient side where the growth has been quite robust even this quarter, almost 25%. So if you could just sort of help break down into volume and realization growth?

So most of it was volume growth. I don't think there's any increase in the ARPOB there in that segment. So you can assume that 25% volume growth.

And more so, sort of -- if you could also elaborate in terms of the geographies, like in terms of diversification.

No. So broadly, the geographies remain the same. Like we mentioned in the past, it's Middle East, it's Eastern Europe, it's the African cluster and so on. I don't want to give specific countries because that's where the information is.

Got it, sir. And lastly on this clarity, the MSS Saket 400-bed hospital in terms of the time line for the commissioning? Or is -- I missed -- I probably missed it on the opening remarks, if you have already highlighted.

So perhaps you did. So both Max Nanavati, that's the Bombay hospital, we're doing deep cleaning there. So within this week, we're expecting it to be commissioned and Max Smart within the next 30 days.

Got it, sir. And so how do you see the scale up now that post commissioning, not literally in terms of numbers, but in terms of the time line, in terms of ramp-up of occupancy or maybe the EBITDA breakeven?

EBITDA breakeven is almost immediate. I don't think there's any -- we've stated that in the past since brownfields, we don't have the EBITDA drags necessity.

We take the next question from the line of Andrey Purushottam from Cogito Advisors.

Congratulations for the consistent set of good results. I had just 2 questions. One is that your profit growth after correcting is 16% year-on-year which lags a little behind EBITDA and revenue growth. Is there any insight you can provide to us on this?

So obviously, you would have seen that the finance costs have gone up, and also [indiscernible] or because we have new hospitals added right in the quarter 3 last year. And the EBITDA margin is lower and we have borrowings to really fund those equations. So in that as the EBITDA growth comes in level with the other hospitals, you'll find that this number will start to go in the same factor.

Yes. Last year, Jaypee wasn't there, right? So that's about INR 2,000 crores of acquisition was done.

Okay. My second question was, I wanted your view on ARPOB. Are you getting a feeling on what is the internal discussion in the company that the ARPOB is kind of -- the rate of growth of ARPOB is becoming slower, at least that's what optically it looks like. If -- I first want to know whether you this assessment from our side is something that you share. And if so, is there any discussion on what to do about ARPOB going forward?

So the ARPOB growth is Y-on-Y 3% but it's also the impact of the new hospitals that we acquired and we started last year, right? If I take that out for a minute and say all the existing hospital means the ones which were operating before December '24, then the ARPOB growth is 7%, right? So it's basically the impact of the mix, which is bringing this number down because last year, Q2 -- so the share of the new hospital has gone up now. And for example, and Lucknow and Nagpur and Dwarka, that's what is bringing down. But on a like-to-like basis, we don't have any concern, right? It's still in the range of 6% to 7% that we used to have earlier.

Congratulations for a good set of results. And I also like the disclosures that you make in your presentation, they're very comprehensive. So we appreciate that as investors.

The next question is from the line of Amit Thawani from Clear Blue Capital Advisors LLP.

My first question is on insurance. I think you have spoken about the issues in insurance that we had this quarter. And because of that, our growth in insurance has actually been one of the lowest amongst all our peers. And then you have mentioned that the cashless has been reinstated. Can you confirm that for December quarter, like we've already -- we've done with half of November and October, are we back on track? I mean, with industry level growth in insurance business in -- our insurance business?

I think you need to look at it on an overall basis, right? I mean insurance may -- growth may have come down, but your cash growth may -- if you're not doing cashless, what happens. It's not necessary that you lose the patient. The patient also gets converted to cash pay, right, because he can pay later. Because he doesn't necessarily change the hospital because of which. I think what you need to look at is the overall occupancy between cash and this -- what was the impact? And you don't see any major impact on the occupancy of the hospital, right? So that's what you need to see.

Right. Just by -- I mean, my only worry is that are we doing more institutional business because the insurance patient is not coming, but that doesn't seem to be the case.

That is a seem the case and you see the cash business has moved up, and you'll see what the occupancy between cash and insurance because that's fungible, right?

Right, right, right. That is fungible.

If you come to me as a doctor, okay, you use your insurance while you can. If you can't, then you'll just sort of pay cash, right, [indiscernible] sort of impact. And if you do believe there was an impact then the point is just that going forward, you will see the benefit of it because all of it is now back to normal, right?

Got it. Got it. Our cash flows were weak. And as you rightly mentioned, it's because of our institution business. Just wondering because now we are coming up with Nanavati and Saket. Do we expect some kind of further deterioration because of this?

No, no. Institutional payments are -- have historically also been lumpy, right? So they don't necessarily come on this in -- there are certain months is a buildup because various PSUs and so on and so forth, whether it's ECHS, CGHS, and all, they run a lot of budgets, then they write to the ministry, get to budget, get them replenish and they pay. So they have been lumpy in the past as well. So it's nothing to be sort of concerned about.

So we don't expect further deterioration in the cash flows?

No, not at all. I mean, even this is not a deterioration. You see it as a onetime listing, in next quarter, you'll probably see a large amount of cash flows coming through. If you go [indiscernible] a year, it will pretty much be the same number of days. This [indiscernible] at a point of time, lumpiness happens in institutional payments.

Got it. Got it. I understood. My last question is on Mohali. So we added 160 beds, but the presentation shows an operational increase of 53 beds only. So is it that the next 107 beds will move into operational in Q3? And the Mohali is an O&M agreement with the government, so I mean, because in O&M, the entire revenue doesn't get recognized. So does that mean that these beds really don't have a material impact on our P&L?

No, no, two things. One is Mohali is a revenue share. So let's say, 5% of our revenue is given to the government. We're recognizing the wholesale. So that's one. Second is, as far as the beds are concerned, the entire tower has 160-odd beds. Now all the floors, you don't wait for the last bed, last [indiscernible] to be put to commission the whole thing, okay? For example, on 160, the first 4 floors are ready and we start the first 4 floors, okay? And the rest of the floors as and when they come online, you start there.

So in Q3, how much will get operational in Mohali?

As we speak, there are 90 beds which are operational out of the 53, right? Out of that 160, 53 was made operational from 1st of August. So that means the impact in the quarter is around 35 beds because you will have to do the weighted average, right? And that's the reason why you see the number to -- operational capacity will be lower. But I think going forward, it's -- I mean we obviously not start beds there. As we see the occupancy, we'll open more beds. But quarter 3, we'll be having all the beds ready.

We'll open them as we see the demand there, right? .[indiscernible]

Got it. Got it. And in Lucknow and Noida, we are seeing a lot of interest from a lot of our peers as well. They are coming out with some big capacities. Any comments on the competitive intensity out there?

Not really. The Noida capacity, I mean, it doesn't come overnight. It's been under construction for the last 4 years. Any competitor coming up with any capacity has been constructing for the last 4 to 5 years. So it's always been the existing. In fact, we purchased Jaypee later. That was like we fell from the sky and purchased it, right? So I mean that is the cold start.

Okay. My last question, on the ARPOB growth, Yogeshji mentioned we are trending at about 6% now this quarter. Is that a fair comment for our existing units?

We are around 7% ARPOB increase. If I take the existing unit. When I say the existing, this means units which were operating in December '24 before.

So this December quarter is clocking a 7% on our pre-existing units?

Not December quarter, I'm talking September quarter. We have not spoke on given any guidance on the -- guidance on the Q3.

I'm saying that in the September quarter, that the number of 3.3% that we have ARPOB increase. If I take out the impact of the new hospital that we added, right, in quarter 4 of FY '25, then the increase in the existing hospital is 7% in the ARPOB, around 6.8%.

[Operator Instructions] The next question is from the line of Kritika Damani from Prospera Financial Solutions.

Congratulations on a strong quarter. My first question is that you have occupancy of over 75% and a consistent trend on the ARPOB because of the strategic push in your high equity care like the new oncology-focused hospital. Since the [ mature ] case mix naturally increases the average length of stay, how are you balancing this trade-off to maintain patient throughput at your already busy hospitals?

Sorry, what's the question exactly? .

What the occupan ... [indiscernible]

What I want to know is like how are you balancing the trade-off to maintain the patient throughput in your -- because your average length of stay is really high. So I just want to know about that.

You do it through -- by opening new capacities, you do it through improving your patient services, your discharge times and so on and so forth, right? Having said that, you have to keep it by one thing when a hospital is full. It's not a hotel. So it's not like people are sitting in the emergency and I say, look, 12:00 a.m., I can send them away by saying my hotel is fully booked, please go somewhere else, right? There will be a point of diminishing returns where patients -- people have -- will wait in emergency, waiting for the bed, then they have to wait sometimes for 6 hours, sometimes 1 day for 1.5 days, complaints increase. You try to do your best, but we're also in the job of serving every patient who's coming over there. So I think that is a very important differentiation.

My second question is that for the first half of your FY '26, can you quantify what percentage of your total hospital revenue came from the international patients? And what is the yield profile of this business? Like how does the ARPOB and the average length of stay for an international patient compared to that of the domestic patient portfolio?

It's about 90% of the revenues and I think typical ARPOB is about 30% higher for international patients compared to our normal -- compared to our average. I think [indiscernible] or 2x -- 1.2x because people who come for international stay are coming from more acute diseases, right?

Right. And last question is that your asset light divisions like the Max Lab and Max@Home are posting excellent revenue growth. So my question is about the profitability and capital efficiency. For the first half FY '26, what is the consolidated EBITDA margin? And what is the long-term margin target for these segments as it scales?

That's already there in the investor release, right? So the Max Lab reports an EBITDA margin of around 16%, right? And the [indiscernible] business, right, the [indiscernible] EBITDA would be around 20%. But if I take the global EBITDA, that will be probably more than the hospital EBITDA, right? So that's the EBITDA margin that we have.

I mean these also subdued right now like you mentioned, we are growing at a fast pace because we're investing for the growth.

The next question is from the line of Neha Manpuria from Bank of America.

Abhay, last call, you had mentioned that in probably 6 months' time, we should start seeing traction in Noida with insurance empanelment. So is that on track? Should we start seeing that improvement in Noida, let's say, in the December, March quarter? And at what point do you see Noida getting to, let's say, mid 25% margins?

It think Noida is already at 25% margin.

Noida is around 18%.

18% margin. Yes, yes. So I think insurance empanelment all of that has happened as far as Noida is concerned.

Well, on Q-on-Q, you see that there is an 8% growth in Noida. And the EBITDA margin has also grown compared to last quarter. So we do expect that -- and it's -- if you split up the revenue of this hospital since January of this year, it's every month is higher than the previous month. So I think we've seen this [indiscernible] We hope that this will come to that level.

I think it wasn't insurance empanelment. It was licenses for various sort of clinical programs, which had to come through such as transplant and so on and so forth. All that has come through. So now we are seeing the sort of higher [indiscernible] with that.

What's the occupancy in Noida currently then?

So it's around 62%.

62%. Okay. So this, therefore, should improve as we see these -- I mean, as you've seen these new clinical programs getting added, right?

That's right.

Okay. Understood. My second question is on Dwarka. What's the occupancy in Dwarka on our operational bed and what margins are Dwarka at currently?

I think we're doing about close to 80%. What is the [indiscernible].

Dwarka is 81% plus occupancy in the quarter. We have 285 beds operational now. So it's a 300-beded hospital. So once we get the oncology ward, then we'll be able to vacate some onco [indiscernible] beds and move them there and have this hospital capacity restored to 300 beds. The EBITDA margin -- you want to mention the EBITDA margin, Yogesh?

Well, I would say it will be around 15%.

Okay. Okay. Okay. Understood. So I was just -- sorry.

The trajectory for a greenfield would be that you sort of ramp up the occupancy, right?

That's correct.

After that, you see expansion of margins.

Yes. So it would then -- in that case, given that we are at 80% occupancy already for Dwarka, Dwarka should -- I mean by next day, it should be in line with corporate average in terms of margins. Would that be a fair assumption?

Hopefully, we'll be getting -- yes, that should be the case. But do keep in mind, even oncology bunker is not operational over there right now, right?

Okay. .

I mean that will -- I think.

Yes. So it has a very high level of, I would say, the PSU bed occupancy. So we have to bring that down as we -- so basically, the idea as us to fill up the cost through, and then we'll start to distill the payer mix. So I think we are at a stage where we have to -- we started to do that now.

Yes. So you're going to see higher ARPOBs, you're going to see improvement in expansion of margins. You're going to see that happening through both patient mix, clinical mix, including higher amount of share of oncology. Once the radiation oncology starts over there, you're also going to see us planning and implementing another 200 beds in that site. I think the idea is to do the brownfield because like I said, we already run out of capacity, right?

Yes. Understood. Okay. Because I was just wondering about the ARPOB growth of 3%, including all hospitals, except for Noida, right? That's what your existing ARPOB growth that you mentioned. Given that I'm assuming Lucknow and Nagpur should have also seen very strong ARPOB growth. The 3% number and the 7% that you mentioned for existing network, how should I read those two numbers?