Max Healthcare Institute Limited (543220) Q3 FY2026 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 from CDR India. Thank you, and over to you, Mr. Suraj.

Thank you . Good morning, everyone, and thank you for joining us on Max Healthcare's Q3 and 9M 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 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 Earnings Call for the Third Quarter and 9 months ended December 2025. We are pleased to share that the network delivered its 21st consecutive quarter of year-on-year growth in quarter 3 despite excessive unanticipated seasonal softness due to lack of vector-borne diseases and transitionary external factors. Revenue increased by 10% year-on-year, while operating EBITDA grew by 4%. Overall occupancies remain strong and ramp-up of the new brownfield beds progressed in line with our expectations. During the quarter, we commissioned 63 brownfield beds at Nanavati Max, of which 45 beds are currently occupied. At Max Mohali, 53 brownfield beds were commissioned in second quarter, of which 46 beds are currently occupied. The remaining beds at both hospitals are expected to be commissioned during the fourth quarter of this current year, FY '26. The incremental bed capacity at both these locations is already EBITDA and margin accretive. At Max Smart, infrastructure for around 200 beds, along with operation theaters and OPDs is ready for commissioning, and we are currently awaiting the occupancy certificate, which is expected by the end of February. We also took an important step to expand our geographic presence in Western India to develop a 450-bed hospital on a prime piece of land in Pune, but this will be developed by 2030. In addition, driven by the exceptional ramp-up in operations at Max Dwarka, the Board has approved the addition of another 260 beds at the existing site, taking the hospital's total capacity to 560 beds. On a sequential basis, revenue and EBITDA were impacted primarily due to a temporary shift towards institutional patients following the disruption in cashless services with stand-alone health insurance -- insurers, which was fully restored towards the end of the quarter. Performance was also affected by the discontinuation of select high-value patented chemotherapy drugs in light of the revised CGHS pricing guidelines and by the reduction in GST on drugs and consumables. Further, the results reflected pre-commissioning expenses related to brownfield bed additions and other nonrecurring costs. Looking ahead, with cashless services now fully restored, upward revision in CGHS tariffs expected to fully kick in by April 2026 and margin accretive incremental capacity coming on stream, we believe the network is well positioned to continue delivering sustained growth. Now coming to the third quarter performance highlights. Average occupancy for the network stood at 74%, compared to 75% in third quarter last year and 77% in the trailing quarter despite an 8% year-on-year increase in operational bed capacity. Occupied bed per day -- occupied bed days were up by 7% year-on-year, but dipped by 4% quarter-on-quarter due to seasonality. Average revenue per occupied bed ARPOB for the quarter was INR 77,900, registering a 3% growth year-on-year and 1% sequentially. Network gross revenue stood at INR 2,608 crores compared to INR 2,381 crores in the third quarter last year and INR 2,692 crores in the previous quarter. This reflects an increase of 10% year-on-year. Digital revenue from online marketing activities, web-based appointments and digital lead management was INR 803 crores, accounting for approximately 31% of overall revenue. Website traffic crossed 71 lakhs sessions during the quarter, growing by 44% year-on-year. International patient revenue was INR 230 crores, registering a growth of 14% year-on-year and accounting for 9% of the revenue from hospitals. Network operating EBITDA stood at INR 648 crores, reflecting a growth of 4% year-on-year. Network operating EBITDA margin was 26.1% for the quarter, compared to 27.3% in the third quarter FY '25 and 26.9% in the trailing quarter. Margin was largely impacted by payer mix change, pre-commissioning expenses for brownfield beds and GST rate changes. Annualized EBITDA per bed for the network stood at INR 71 lakhs versus INR 73 lakhs in both third quarter FY '25 and the previous quarter. Profit after tax for the network after exceptional items was INR 344 crores against INR 316 crores in the third quarter last year and INR 554 crores in the previous quarter. During the quarter, there were exceptional items aggregating to INR 55 crores relating to impact of the code on wages 2019 and provision for stamp duty on the merger of 2 of our subsidiaries. The network generated free cash flows of INR 281 crores during the quarter, INR 408 crores was deployed towards ongoing capacity expansion projects and facility upgrades and new units. Net debt for the network stood at INR 2,166 crores compared to INR 2,067 crores at the end of September 2025, while the net debt-to-EBITDA ratios continue to be less than 1. Continuing our efforts to support the local communities, we provided free treatment to approximately 40,000 patients from economically weaker sections of the society worth INR 61 crores at hospital tariff. Both our strategic business units continue to deliver steady growth in revenue and profitability. First, Max@Home reported a revenue of INR 68 crores, reflecting a robust 23% year-on-year growth. It offers 16 specialized service lines across 15 cities with over 56% repeat transactions. Max Lab reported a revenue of INR 47 crores, reflecting 13% year-on-year growth. It provides services in over 60 cities and serves more than 5 lakh patients during the quarter. Now moving on to the status of our expansion projects coming on stream in the next 2 to 3 years. Max Lucknow, the current capacity of the hospital stands at 413 beds, and we expect this to increase to around 500 beds by the end of this financial year. The radiation bunker and nuclear medicine services have now commenced at the hospital. 500 beds at Sector 56 Gurgaon, the pace of work at site has picked up post grab-related disruptions. We now expect to commission the first phase by end of H1 FY '27. 100 beds at Nagpur, we have received consent to establish and civil work has started. We expect to complete this project within 24 months as communicated earlier. 400 beds at Zirakpur, Mohali project work continues to be on track, and we are scheduled to commission the hospital in FY '28. 200 beds at Max Vaishali, we are awaiting environmental clearance and approval of building plans to commence the work on site. We expect to complete the project in 24 months post receipt of these approvals. 397 beds at Patparganj, all approvals have been received and barricading work is complete. New design for D-wall has been firmed up and the project is now expected to be completed by FY '29. And finally, coming to the overview of the company performance for the 9 months ended December 2025. Network gross revenue stood at INR 7,874 crores, reflecting a strong growth of 19% year-on-year. Overall, network operating EBITDA grew by 16% year-on-year to INR 1,956 crores, translating to a margin of 26% and EBITDA per bed of INR 71 lakhs. In the 9 months, we generated INR 960 crores of free cash flow from operations after interest, tax, working capital changes and routine CapEx. Further, INR 1,299 crores was deployed towards ongoing expansion projects and facility upgrades at newer units, INR 131 crores towards land purchase at Vaishali and INR 146 crores was distributed as dividend. With this, we open the floor for any questions you may have.

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

My first question is on your oncology contribution. So during the quarter, obviously, we saw some softness, which you attributed to discontinuation of patented chemo drugs for institutional patients. So do you think you can go back to the prior level of contribution from oncology? And what could drive it back?

Well, when you say contribution, this is high-value drugs. So the pricing was high in terms of the revenue, but the margins were not substantive, I mean, compared to the rest of the business. So do you mean in terms of revenue? Or do you mean in terms of margins?

In terms of revenue, when we look at the contribution from oncology, I think it is part of the presentation, it's around 24% or so compared to 26%, 27% last year. So I was referring from that context.

This impacts CGHS patients only. I mean, the institutional patients. So this is the high-value drugs, okay, which were low-margin drugs, which were being used for actually the institutional patients. What they've done is actually, now you have to sell them below your purchase cost. So obviously, everybody has discontinued it.

And the contribution to the revenue mix may increase, but it's a future additional number. Just that it was increasing in the past as well for last 4, 5 years as an outcome of what was happening in the society, right? So directly with the number increase should follow the same trajectory, let's say.

So we see this as like a onetime adjustment and then going ahead the growth will be...

So we continue to talk to CGHS, right? So there's a lot of noise among the CGHS patients, among the institutional patients, right? For example, the CGHS has their own dispensary to supply these medicines. They said that they will like to supply these medicines to patient. That means when the doctor -- drug is required when the doctor writes the prescription. They pay to the dispensary when the medicine from the dispensary, CGHS dispensary, right? Now similar tariff has been applied to ECHS patients also, but ECHS doesn't have any dispensary, right? So obviously, there's a lot of noise out there. And let's see what -- how the things shape out. But we are in continued discussion with the CGHS. We -- obviously, they want to first supply it themselves. Secondly, they are saying otherwise, we will give it to you at 70% of the MRP, right? Our margins are less than 20% in these drugs. So there's no question about supplying these drugs, right? Because I can't -- we can't cash out of these drugs while supplying these drugs. So I think that's where the discussion is on. We are asking CGHS to give us some top-up in terms of cost-plus basis, right? So if my cost is, let's say, INR 80, then I'm saying give me some margin, 10%, I'll be quoted to supply at INR 88 rather than supply at INR 70, right, because I'm buying that INR 80.

So we believe it is the error on their part when they revise the CGHS days, this is something which doesn't make sense because if you -- these are branded drugs and if your margins are, let's say, less than 20%, way less than 20%, then you have to supply them at a 30% discount to MRP, then obviously, nobody is going to supply and you're going to have a problem. So we've been talking to them, but because the government and everybody sort of agrees, but I guess you have to go [indiscernible] .

Sure. And in oncology, again, I guess, we heard about some doctors team departure, et cetera. So has team fully back in strength? And what kind of further pickup we can see in the oncology space, leaving aside the CGHS issue, which will, I think, cleared in some quarters to come?

See, typically, what happens is that in organizations like us, if there is a departure of a certain clinician of a particular this thing, there are almost immediate replacements from equivalent institutions. So in this particular case, while you may have heard of the noise of departure, there's already been an addition and there were big advertisements in the papers, you may have seen it. So we hired a very, very large team who's just joined us from our peer, who sort of replaced that particular team, who's actually gone to the peers. So it's been effectively been a swap effectively.

My last question is on your regulation with the insurance partners. So have you like done renewing all the insurance contract for this cycle and you have nothing left spending on that part? As you mentioned, I...

2 things or 3 things. I mean, of course, this was disruptive in some manner to us in this quarter. It didn't happen in the previous quarter, but it was. And you may have also read in the papers today that number of complaints of insurance companies actually moved up by 54% in this quarter. So obviously, there was a lot of noise because of this sort of disruption. But all of it has been restored. We have got an increment and there's also a mechanism which has been put in place that there will be annual increments rather than sort of now having sunset period. Typically, your insurance contracts expire and those negotiations take time. So now a process has been put in place where at least with these insurance companies, there's automatic renewal on pre-agreed sort of increments.

So these annual increments, it's already like pre-agreed or how this mechanism will work out? .

That's right.

It's annual revision for all the contracts now instead of, say, 2 to 3 years cycle.

Not all. These are all [indiscernible] companies.

One where we had the issues, right? So you know the whole issue started from the tariff revision. We were asking for price increase. They were asking for price reduction. That's where this whole statement started. So eventually, we got a price increase. And also got the price increase this time, we also sorted that out for the next year. I would say. So there's a mechanism in place now. So hopefully, they'll live up to it. And so we shouldn't have the same kind of statement coming up there. But this is only with the companies that we have problem, right? 4 companies basically.

So how many companies -- sorry, 4 companies.

4 insurance companies. So now it was 4, there's not only this thing. But like Yogesh said, this was the issue at the end of the cycle. Now mechanism is put in place that you have automatic renewal of that. So you don't have -- we shouldn't have these issues coming into the next cycle or anything like that now.

Next question comes from the Shaleen with UBS.

Am I audible?

Hi Shaleen?

Continuing from some of the question asked by the previous participant, possible to get the quantum of increment -- and like -- or at least can we compare like what kind of increment will be getting compared to the past year for insurance company?

So Shaleen, tough to really give it to on the call like this, right? So we got an increment, right, that's for sure. It's a moderate one, but then I won't give you a number.

But is it in the ballpark of kind of increment?

It's not adverse. It is in the ballpark of what you believe. [indiscernible] and it's in the same ballaprk, yes.

One concern which we kind of -- there's a debate this happened with these 4 companies, can it happen with others as well? So do you think that -- do you think that can happen second? Do you think that this kind of mechanism can smoothen out? Are you trying to do this?

I think clearly, there are learnings when something like this happens, right? I think it has also led to a lot of noise both ways and main convenience to patients, not only our patients, but also to insurance patients. And you would have read there's a big article in today about the number of complaints, which have sort of increased. And hopefully, everybody sort of -- kind of learned from it. By the end of the day, and I keep saying this, I said, look, medical inflation is in very low single digits. If your ARPOB is only 8% or 9%, typically, historically has been growing, that has included growth in oncology by 25-odd percent, growth in robotics by 40-odd percent growth in international patients, et cetera. I mean if you actually back it all off, what is the real growth in apples-to-apples medical costs. And then you apply it to 70% because 30% is an MRP in any case, which are drugs, right? So I don't think there is much sort of play there. I mean you hear of anecdotally, these issues, those issues and so on and so forth. But the fact of the matter is this is the apples-to-apples inflation only being this much, right?

Fair enough. Fair enough. . Moving on, I heard part of your initial maybe I missed something. I heard that you talked about the EBITDA contribution from Nanavati and -- new facilities in Nanavati and Saket has already accretive. So is it fair to -- is it possible to understand that obviously, when you started, there will be some incremental cost which would have hit you in the quarter? Is it possible to quantify that kind of cost.

I think what happens is that, see, and this is something we've guided to in the past where people have sort of had concerns on capacity expansion, et cetera. We've always said that essentially, what you're doing is you're moving cash from your balance sheet and you're creating an asset. right? Because of the operating leverage, it is almost -- I mean, you don't have suppression of margins. In fact, it is -- breakeven is almost immediate and is accretive also very, very quickly, okay? And this is what we've seen in the past, and I think this is what we demonstrated by both of these. You know the cost -- I mean whatever little cost there is also for every incremental bed which gets commissioned now, okay, your margins will only expand. And we've had 39% and 30%, respectively, I think, margins from both these units, okay, where we only started about 50-odd -- 70-odd beds, right? I mean as you are going to be adding beds and all of those beds are coming through now as we speak and will be all through by -- before end of March. So you're going to see a big -- you should have -- you should continue on this accretive journey. Now the question is what is the sort of this thing. Now if we've had grab 4 delays and et cetera, in this thing, and yes, of course, we, I think, built close to 2.5 million square feet over the last 3, 3.5 years, okay? And the fact of the matter is there has been a delay of 3 to 4 months, I think collectively, if you look at it. And nothing has actually moved out more than 6 months from a time line standpoint. But at one point of time, yes, I mean, this is what we had guided in terms of time, et cetera. On other standpoint, you look at it, okay, 3-year projects will take another 4 to 5 months, but it's perhaps faster than what most developers deliver from that standpoint. And we, of course, continue to ask more of ourselves and there's been a lot of learnings in this. The fact of the matter is that pre-commissioning, okay, those costs have been sitting in of this thing. But it's not as if they are sitting and not contributing. If you bring doctors along, they perhaps don't contribute as much, but they do contribute to the previous facility. So it's a little difficult to dissect the costs from that standpoint because there's no management cost like I already explained, okay? Largely, the clinician cost is the same. So you want to bring housekeeping people, you want to bring nurses, you train them up the front-end staff and so on and so forth, okay? But they're also training in the current facilities. You overstaff in the current facility and then you're going to start to move them into the new one. So I mean, it's a little difficult to thread that cost out because it's not like the typical greenfield.

Basically, the reason to ask you a lot of things have happened in the third quarter and that has kind of hurt our profitability. . We understand that there's going to be a step jump from third quarter or fourth quarter in terms of profitability because a lot of things have been corrected and even new specific facilities, if you just help us understand what kind of a step because one...

So I think these are the smaller factors which have affected the profitability. If you ask the 2 big factors perhaps which have affected it would be, in my mind, would be first and foremost is the seasonality, right? Last year, right up till Diwali, we had a very, very strong vector-borne season, okay, and large occupancies because of dengue and so on and so forth, which has happened historically as well. This year, okay, there were extensive sort of -- there wasn't really -- I mean this rainy period continued straight into winter. There was no really stagnation of water from that standpoint. Normally, what happens is your rainy season gets over, there's a humid sort of this thing and then winter starts. So in this period is when you have the vector-borne disease. But this year, the rains continued right into the foot of winter and then winter started. So there was no humid period for that kind of -- so we had very bad seasonality. So I mean, you've seen results of other sort of companies as well, particularly North-based companies, and you see this effect. And the second was, of course, disruption. Now when the disruption happened of the [indiscernible] companies, we've replaced all of that with institutional because that's the easier part to replace it with. So you see the institutional businesses move up, right? So occupancy didn't get impacted, but your quality of revenues got impacted and therefore, your profitability.

So Abhay, any sense on this quarter, like fourth quarter fiscal like almost end of February, right?

I'm not able to give you a guidance. I've never given a guidance on forward-looking numbers. But we typically only give it in terms of the new capacities which will come in and what the current sort of run rate of that is like in the past. So I will continue on it.

Last question from my side, if I can. And this is more on the industry level question. So a lot of debate again on this as well, it's like too much capacities are coming, too many hospitals are coming in certain micro market [indiscernible] hospital is not just the local market, it's also the intercity market, where I also come from, right? So I know that -- but what's your take on it, right? Do you think that a lot of hospitals coming in Gurgaon can impact Saket or customer are different? Do you think there will be enough demand because there's enough intercity travel happening. So I just want to hear your thoughts.

So look, I think there are 2 or 3 things here. I think if you look at it on a holistic level, okay, I think over the next 4 to 5 years, there are about 22,000 beds which are coming up across the country. right? I mean it doesn't really move things over -- over 5 years, the capacity increment of, let's say, a CAGR of about, I think, 5% per year. If I look at -- okay, let's look at specifically Gurgaon. Now if a couple of hospitals are coming out of Gurgaon and we happen to be actually one of them, right? So I think I'm less likely to sort of take a hit at Saket or anywhere else because if any of my doctors want to move to Gurgaon, then they will choose my hospital, right? This is sort of easier if that location advantage is valuable to somebody. With that said, what this does, in some manner is, okay, when new hospitals come in, and what happens after these 2 hospitals or 3 hospitals, which have come up? I mean, there isn't a visibility of another hospital coming up in the next 5 years because if that was coming up, that some plans would have already getting passed and something would have been built, which is not the situation, right? Now when that happens, okay, there may be some temporary disruption of costs, right? So your cost -- your clinician cost at that point of time may go up because, a, you're attracting in that new place in your hospital, let's say, when we put up Gurgaon and we are going to be approaching doctors and bring them, you are paying them more than what they're perhaps earning in the peers. If somebody is trying to take your doctors again, they are going to offer something more. So temporarily for some time, the cost goes up. But that's also a temporary factor, right? Eventually, okay, if there's any cost inflation, it does get passed off to the customer, and that's what we've seen historically. I mean it's not the first time that you're seeing all of this capacity come up. I mean if you look at the numbers, now we are building another 400 beds are coming up in Saket, which is the center of the city. Now it's very different from Gurgaon. Gurgaon typically doesn't affect [indiscernible] but Gurgaon will affect other hospitals in Gurgaon. I mean normally, it would have affected my small hospital in Gurgaon, but I'm coming up with a big hospital in Gurgaon, right? I mean if there were hospitals coming up in Mumbai, they'll affect the hospital, but a brownfield will always be derisked.

And directionally what you were asking earlier, right from our own [indiscernible] to our sites, right? So capacity that we created in Mohali occupied, Nanavati, occupied. Gurgaon also converges the entire Haryana, Rajasthan directionally comes here, so there's significantly very, very large pool of demand [indiscernible] Gurgaon..

We have lost the line of the participant. We'll take our next and is from the line of Karan Vora with Goldman Sachs.

First question is with respect to -- the first question is with respect to insurance. So just wanted to get a sense what would be the rough share of, say, top 5 insurers for us as a percentage of hospitals revenue? And when we set up a new hospital, 2 ways. One is a greenfield and the other one is when we do a new tower in the existing setup, how easy or difficult is the impanelment? So do we get the same rates as our other hospital in the same city or we have to negotiate from scratch? How does that work? That's my first question.

So on a brownfield, you don't need to negotiate because the same hospital license just sort of continues into the new -- so in case of brownfield, you don't -- there is no rediscussion or reimpanelment, what is happening continues. In case of a new hospital, that means a new hospital license, right? If you don't have the impanelment terms already agreed, then you need to impanel. That means you will make those applications for hospital. That's for a new hospital.

Okay. Got it. And so even -- sorry, go ahead.

Yes. So Karan, most of the insurance companies, we have agreed a category of the hospital. It's TAT 1, TAT 2, TAT 3, TAT 4, right? So whenever a new hospital comes up, the discussion is always which category will it fall in, right? So for example, Dwarka now is in TAT 2. Saket is TAT 1, so it's basically that discussion, then the rates automatically applies, it's not that we have to get into a negotiation for each hospital separately, right? So we have a set of rates. And obviously, we agree, let's say, for TAT 1, we know TAT 1 to TAT 2 difference is so much. TAT 2 to TAT 3 difference is so much, so that's how the tariff that drives the insurance company. So typically, it's not that we have to get into discussion with each hospital. But the discussion is which TAT will it fall in.

And the top 4 insurance companies would contribute about 24%, 25% of the group revenue.

And just one clarification here. So when you say we have categories determined so how long does it take? So when, say, for example, Gurgaon, whenever it comes online in the next 1 or 2 quarters, what is the expectation of the full impanelment across insurer? Like does it take 3 months, 6 months, 12 months? Any rough sense there?

Within 6 months.

And my second question is with respect to...

Yes, yes. Because typically, you require NABH, right? You require NABH and to get NABH, you typically require 6 months of data. Even your institutional patients, okay, take about 6 months to onboard. And you have different rates for NABH and non-NABH. So I think the first gating item for a new hospital would be to get NABH. Also concurrently various licenses in a greenfield, you need such as transplant licenses, is that, et cetera, et cetera. So it's not as if on a brownfield, all existing licenses continue. In a greenfield, you need to apply for each one of those, blood bank license, this license, that license. It's sort of -- if you can't just start doing liver transplant or kidney transplant or whatever it is. So a full range of services doesn't start.

So basically, broadly 6 to 9 months is where you can get the NABH accreditation as well as the insurance impanelment. That's the rough sense we should have.

That's right. But I mean, it depends now hospital to hospital. Now of course, this was the same in Dwarka as well for us. But as you are aware, we started Dwarka last July, right? . By now, you already fully occupied on the 300 beds, a way before now you hopefully occupied on the 300 beds. And you're already planning a brownfield another 200. And we had a breakeven within 6 months over there, right although because it was cash patients, et cetera. So it's about how you also sequence it, right? So I think the very important part over here is how do you preserve cash flow, how do you sequence your bed. Now I could have started all 300 beds or 250 beds over there and so on and so forth. You have to forecast the number of beds, you have to plan accordingly and you have to staff accordingly. If you're going to staff all the beds, all those thing, then you're going to lose money, be it with a brownfield or a greenfield or whatever. So I think that is somewhere you need to be a little more tactful about it. I mean our total loss for Dwarka in 6 months till breakeven about INR 30 crores up to breakeven, the total loss was INR 30 crores. In a brand-new market, in a greenfield in a micro market, where we don't have presence.

And my second question is with respect to -- I think, Abhay, you mentioned on the -- in the opening commentary that we should be back with respect to growth from Q4 onwards. So just wanted to get a sense. So do we foresee a step -- like a stepped or phased manner of recovery growth that Q4, you might be partially back and Q1, you should be fully back? Or from Q4, it's like it's a complete clean quarter and there should be no one-offs or no deterrent from Q4 itself?

I think the big deterrent on our growth has been capacity. I mean, essentially, if I go beyond the seasonality of it and whatever onetime disruptions which are back to normal and so on. I mean everything that we've acquired over the last thing or the new capacities that we set up have been ramping up very well and not ramping the growth over there, 2 years back, the issue was where is growth going to come from because already -- I mean, the factories are operating at very high capacity and the growth was going to be coming in from -- essentially from capacity addition. And there has been that delay, right, of a quarter or 2 or whatever. So now that it's online, then we should be back to trajectory.

And the last question is with respect to Gurgaon. Sorry, if I missed in the opening remarks, like do we expect it to commission like by Q4 end or Q1? And what would be the impact like maybe a quarter or 2 impact of losses from Gurgaon since it's like a large greenfield? Any color there will behelpful.

I think we'll be -- this thing H1. I think towards the end of H1 is when you should be able to sort of commission that the first phase over there. And I mean, I'm not going to give you a guidance on the losses. But I mean, you have a history in front of you. So you've seen what this thing has been the recent history and so on and so forth. Because -- and I'll tell you why I'm not doing that, right? I mean, because it is a function of the clinicians you're able to get and what sort of thing you're able to start. I'm happy to make a bigger loss over a shorter period of time and to have a deeper trough that essentially means that I've been able to get the clinicians also day 1 in the greenfield.

Next question comes from the line of Vivek Agrawal with Citigroup.

So one question on CGHS, ECHS rate revision. So you earlier talked about approximately INR 200 crores kind of a positive impact on revenues, but that is including the impact of discontinuation of some patented drugs, et cetera, right? So is it possible for you to split it like what is the absolute impact of rate revision? And how much of that is likely to be netted off from a discontinuation of patented drugs.

Vivek, we already said that net is INR 200 crores, right? So obviously, there is netted of the onco effects, because onco is part of that MOU, when the price got revised. So I would say it will be probably 280 minus 89, right? But I must also mention to you that this whole of price increase hasn't happened in quarter 4 -- quarter 3. ECHS has revised the prices only in December. Some of the PSU are asking for new budgets, et cetera, to increase the prices with CGHS levels. And also, in view of the super specialty rates within the definitely will be available for 1st April, right? So to my mind, the full impact of this will start to come from quarter 1 of next year. But I think a large part will start to flow from quarter 4. And also, I must mention that -- I also must mention that Vivek there is a negative impact of GST both on the revenue side and the margin side, right? So I think if I net that out, then you have to net out another INR 60 crores out of INR 200 crores number. So it will be INR 140 crores number on a sustained positive impact this is in the margin.

So actually, is it right to understand right, like the impact of the discontinuation of patented drug, et cetera, or the negative impact as well as including the GST, et cetera. So that is largely in this particular quarter. Basically the GST plus discontinuation of patented drug is there in the quarter and that the positive impact, let's say, around INR 280 crores only on the rate revision that is likely to come from...

No, no, Vivek, the INR 200 crores is sustained impact of CGHS prices. So the onco effect will continue because under their MOU, they are saying you will have to give discounts on the chemotherapy by 30%, right? So you only -- some of the drugs where the margin was less than 30%, where the margin was more than 30%, we still continue to supply, but still at a lower revenue, right? So there's impact [indiscernible] on the CGHS price increase of the oncology drugs. One is that we're discounting some drugs, some we are giving 30% discounts. So both impacts will be, as I said, INR 80 crores. So INR 280 crores minus INR 80 crores, So this INR 80 crores is sustained effect, right? So that means net is INR 200 crores, and then you have to reduce out of that the GST impact. So INR 140 crores is the net impact is if you ask me on the ongoing basis. So it's not one time [indiscernible] that means you will have both going forward.

Understood. This is helpful. And just one more question again on insurance, right? It looks like that it has been targeted towards Max, while we aren't seeing this kind of impact and for the other -- or some of your other peers, et cetera, in Delhi NCR. So any specific reason for this, basically why it has been targeted towards Max? Separately, what kind of the safeguards that you have that the other insurance companies, let's say, does not do it again in future?

I think, hopefully, everybody has learned from it. Because I don't think the disruption is only for Max. I think the disruption would also be for other insurance companies. And there's the reason that other insurance companies did not join in. I think it just sort of made some more media this time. And it's been disruptive to patients, right? And the patients are also customers of the insurance companies. And therefore, you've seen higher amount of complaints and all the issues that everybody else stepping in.

Understood. And last question on institutional patient share, right? So it has gone up quite a bit, 36% and part of this disruption. So any color how to look at this number, let's say, 1 year down the line or 2 years down the line?

Well, I think the important thing is that when you're coming up with capacity, okay, the more capacity you come up with, you will have institutional, exactly to what extent is another matter. But the fact of the matter is you're still EBITDA per bed is higher on -- even with the lower rates, right, for this capacity addition. That is what you are kind of demonstrating right now.

Next question comes from the line of Bansi Desai with JMorgan.

So my first question is on the growth of our existing hospital beds. So traditionally, if we see barring any seasonality impact, you still managed to see good low teens kind of growth for our existing beds despite the fact that they've been operating at like 75% plus occupancy levels, partially, it could be because of higher onco share or robotics, et cetera, which you mentioned. But as we go forward, do you think theoretically, this has to normalize at some point in time? And for us, therefore, what could be the levers which can keep the growth momentum high over the next 2, 3 years?

Look, I think seasonality, if you look at the past 10 years has been a reality, right? I mean it's not -- and it has -- the big difference is last year, okay, you had big seasonality. And this year, you had actually no seasonality. So it's a little bit of a double whammy. So I mean if you look at the numbers last year, I think you had some 30%, 35% growth as a group year-on-year basis, right, in quarter 3. So it was a very high sort of this thing. A lot of it was also due to a little higher part on the seasonality. And whereas this time, it's lower. Now having said that, the big jump in the current year was going to be coming through capacity addition, right? And clearly, there has been a quarter 2 to delay as far as that is concerned. So that is something we should have contributed to increase in revenue. And I think as in when you sort of start getting that on stream, you're going to have that.

Yes. So Abhay, actually, I was just trying to say that if I actually look at this quarter and if I map it over a 2-year CAGR, this number still suggest a 20% CAGR over 2 years. So if I remove that seasonality impact, and this is beside the fact that we've not added as many beds. So what I was trying to understand is that it does mean that our existing beds are still growing well in that low teens rate. And we've seen that peers that most mature beds beyond a point once you reached your optimal occupancy levels, will probably come down to high single-digit kind of growth rates, et cetera. So I was just trying to understand that from our side, if seasonality were to remain favorable, then do we continue to see the kind of growth that we've seen.

I think, look, two aspects to it, okay? One is -- One is I'm not looking at peaks and troughs as far as seasonality is concerned, and I'm just looking at, okay, on a static basis, if you were to put a line straight line [indiscernible] , what the mean is, right? So I'm not looking at extensive seasonality or it happening or not happening. So that's one. I think secondly, in terms of existing beds are concerned, we've always sort of guided that there are levers, I mean some of the levers [indiscernible] because we are opening new beds. But the fact of the matter is there is higher institution business, which kind of get -- be getting distilled through it. But it gets [indiscernible] by the fact that we open new beds, again there are levers in the current capacity. It's not as if they aren't. I mean it depends how you look at it, how you bifurcate this. I don't know if I'm relating to what you're seeing or not.

I think also a tenement our job is to make sure that even existings hospitals grow, right? So they can grow one on the ARPOB side, [indiscernible] et cetera, and the other is also adding more beds in these hospitals, right? So that's what we're doing. We're trying to do brownfield expansion, where in the main campus and you add more beds in this existing hospitals grows, right? So there's no existing bed versus [indiscernible] it's a one hospital that we're trying to grow, right? For example, wherever we have higher occupancies, we try to -- that brownfield bed there [indiscernible] existing hospital now in Dwarka is existing hospital, right? So we are adding 260 beds there. So that will make the existing hospital grow.

But it doesn't mean that in Dwarka, okay, while [indiscernible] putting the additional beds over there, okay, your current mix, okay, is more sort of attuned to -- because you've almost got 50% institutional patients over there. And in the first year, you're going to ramp up capacity, you're going to take all sorts of business. And as you go along, okay, you're going to see that distilling.

And my second question is more clarificatory in nature. You mentioned that the GST rate has also had a bearing on our margin. So just wanted to understand this would have not impacted our absolute EBITDA, right? It was just impacted our margins because your realization go down.

No, no [indiscernible] because when you billed to the patients, the bill is in MRP, you have -- you don't say the GST on the margin because these goods are used for delivery of [indiscernible] services, right? So there is an impact on that.

So that's how Yogesh led to INR 200 crores net of this thing and then minus another INR 60 crores for this thing. You come in about INR 140 crores as a result of this entire CGHS revision as well as GST.

Because I would assume that GST realization or EBITDA would have been net of that tax amount, right?

[indiscernible] on separately. I will make you see why this impact on margins.

Next question comes from the line of Tushar Manudhane, Motilal Oswal Financial Services Limited.

Sir, first, clarification, the top 4, 5 insurance companies from the 25% of the insurance business, right?

Yes.

Yes, secondly, we've been doing roughly INR 400 crores -- INR 420 crores plus/minus sort of a CapEx per quarter. But FY '26, I guess, the target is up to INR 1,900 crores. So are we on track to do that kind CapEx?

Yes.

What typically happens, a lot of the CapEx is back ended. Don't necessarily relate work done to CapEx. I don't think it works in tandem necessarily.

So when you will do tariff per projection, you'll always do a conservative projection, right? That's how we plan for it. We don't want the project to suffer because of financial closure et cetera. So this is always -- you always [indiscernible] be spending less than what we're projecting with those of the fact that we project a conservative number.

Even if I take roughly INR 400 crores, INR 450 crores per quarter sort of a CapEx, subsequently for FY '27, also, it will be higher CapEx, right? I'm not referring to bed addition. I'm not even connecting that to bed addition. I'm just referring to the amount that would spend for the new hospitals effectively.

I think, you have the number already in the slide. We'll be revisit the number at the end of March in any case, and then probably we'll float the ew numbers, but as of now...

They are fairly conservative numbers. So I mean, you would certainly not be doing more than that.

And given the current sort of cash flow, which is like roughly INR 300 crores plus cash flow from operations, I'm referring to. So does it mean that you still have some more debt coming on balance sheet?

I think the incremental beds that we're getting on stream now, they will start to give us operating margin. And we mentioned that all these beds are EBITDA as well as margin accretive. So you obviously expect better cash flow from these operations now that the new beds get operationalized. .

So which means effectively INR 2,100 crore net debt is that the number in FY '27 as well. Does that -- I mean is that the safe assumption? .

I think last time was also the question was asked, it will go up by around INR 500 crores to INR 600 crores in terms of net debt, but it will be still less than [indiscernible] unless we do any M&A, et cetera.

And just lastly, Smart, there has been like almost 5, 6 months delay. So -- and still like the regulatory approval is to come through, so February '26, is that sort of now largely certain or that might get pushed for this?

So as far as Max Smart is concerned, the original time given was FY '28. This project has taken us about 24 to 25 months, in its entirety. We expect approvals by end of Feb. It's just got ready now, and we just applied for approval. So there will be no delay in approvals. I want to put that also in place. So it's not as if the project has been lying ready and sort of approvals is what is delaying, okay? I think the project has been delivered now and approvals have been sort of this thing and we're expecting at end of Feb. In fact, whatever attendant approvals are, they've been coming through very, very quickly and very smoothly. Actually, in this one, we've been sort of, like I said, ahead of schedule. This one and Zirakpur, we have seem to be ahead of schedule.

The last question comes from the line of Nitin Agarwal with DAM Capital.

Abhay, you've talked a couple of times about the Dwarka hospital and the fact that we've seen encouraging progress on it to go in for expansion. If you can just give us some more color on what's been the progress -- financial progress of the hospital in terms of where it's reached right now, which prompted you to go for expansion at this early stage?

We're already operating at close to 80% capacity -- 75% capacity, although almost half of the business continues to be institutional. Like I said, early -- the life cycle of a sort of a hospital, you would first think ramp up occupancy, okay? And you ramp up occupancy with all sorts of business, then you start distilling it. So we're already doing 20-plus percent -- 20%, 22% margins over there -- 20% margins at Dwarka, okay? While 50% of the business is institutional, when we put up capacity now going forward, it will take us at least 2 years to put up that capacity. That means in the better part of 2 years, I would not have beds easy to survive from 75%, we'll probably go to 85%. So I will be distilling it my beds, that means you already see month-on-month, there is more and more cash and insurance patients coming through and the institutions are reducing. And therefore, you'll see the margins move up, right? So that's the encouraging part..

And secondly, on the Jaypee Hospital, can you give us any update on the progress on that?

So Jaypee Hospital is doing well now. I think the occupancy has improved over the period in the hospital. So are you looking for some specific numbers for that?

I'm just curious in terms of where -- from where you acquired to where it's come to, what the distance we've covered in terms of performance improvement in the business?

So I think if I take Y-on-Y, it will be more than 30% growth, right? We took this in last -- same quarter last year. So the revenue is up by 30%, 35% range. EBITDA is also up accordingly. Obviously, I'm not giving you the specific numbers in terms of revenue setup, but I think that's the state it is. So -- and when I say 30% increase in revenue, that obviously means that the revenue has come down first because when we acquired the hospital, we stopped all the referrals, et cetera, the revenue tanked a bit and then we brought it back. So this 30% growth Y-o-Y same quarter is basically after that dip, which happened in the first quarter after acquisition and then we build it up. So the real growth would actually be around 40%. So the real [indiscernible] around 40%.

And in terms of profitability, is it now closer to your network profitability? How far is it from there?

No, it is not. It's less. So I think the first endeavor was to stabilize the operations. We had a lot of complaints in that hospital, right? So we were working on that. I think the margin is probably 3%, 4% lower than the overall margin that we have in the network.

And secondly, when we look at our business for the next couple of years, the EBITDA per bed for us has been a pretty dramatic journey, which we've had over the years, around 75 million to 7.5 million to 8 million is where we are at. I mean, does the network EBITDA stabilize around that? Or do you see opportunities for us to significantly increment it from these levels? And how should we think about EBITDA per bed take a 2-, 3-year view from here?

No. We don't go to a direction for chasing EBITDA per bed also as a base, right? So our trajectory is to deploy capital efficiently to yield -- to have yields on the capital that may be...

We have a lower EBITDA per bed, you have to focus on ROCE over there, right? I mean we're not focusing on making EBITDA per bed or ARPOB accretive or whatever. We are focusing on ROCE.

And last one. Over the next 2 years, from where do we see our operational beds sort of fitting out, we are about [indiscernible] operational beds right now. Where do we end up in the next 2 years?

I think higher than 4,800, I think now you're adding another, what 2,000 beds now and other 1,500, including Gurgaon. So that's 6,500 and by '28, we should be adding 8,000 [indiscernible]. I think it's on -- added up in the presentation.

About 8,500 beds.

[indiscernible] By '28, '27, '26, '29, [indiscernible] how many beds, how many brownfields, how many greenfields.

With respect to the delays and all that you foresee by the time we finish F '28, you still [indiscernible] more or less in the same ballpark that we had in the presentation is what I meant.

That's right. So I mean we've given it out in the presentation, updated numbers. This current quarter, this will be updated for any delay.

Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone, for joining us today. We appreciate all your time. We look forward to interacting with you again next quarter. Thank you very much.

Thank you. On behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.