Max Healthcare Institute Limited ($543220)

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. Suresh Digawalekar from CDR India. Thank you, and over to you, sir.

Thank you, Nirav. Good morning, everyone, and thank you for joining us on Max Healthcare's Q4 and 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'll have a forum for an interactive Q&A sense. . Before we begin, I would like to point out that statements made today 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 earnings call for fourth quarter and full year ended March 2026. Let me begin by highlighting that over the last 2 quarters, we have rolled out field commissioning of more than 20% additional brownfield capacity across our hospitals in Mohali, Nanavati, Mumbai and Max Smart in Delhi. All the beds will be ready to be operationalized over the next 2 to 3 months. Further, we expect to add another 10% capacity once our 500-bed greenfield hospital in Gurgaon is commissioned during the year. We have already onboarded clinical and nonclinical talent for these capacities and expect significant operating leverage to come through as operations progressively ramp up. We're also pleased to share that we have completed the acquisition of a controlling stake in Kalinga Hospital Limited this month. Kalinga owns and operates a 250-bed hospital on a prime 10-acre land parcel in the heart of Bhubaneshwar which also allows us for future brownfield expansions at that facility. The acquisition marks our entry into Eastern India and provides us a strong platform with established clinical programs and significant potential for future expansion at the existing site. We have firmed our plans to revamp and expand the facility. Further, the Board has approved an investment of INR 1,400 crores for the construction of a 700-bed greenfield hospital at Shaheed Path, Lucknow. This investment reflects our continued confidence in the region where we have seen encouraging momentum since the acquisition of our existing facility. The proposed hospital will add a meaningful bed capacity and position us to serve the growing demand for high-quality health care services in one of North India's important health care markets. With respect to the fourth quarter performance, the network delivered its 22nd consecutive quarter of year-on-year growth with the revenue increasing by 10% and operating EBITDA by 8%. As we move into FY '27, our priorities remain focused on scaling the recently commissioned capacities, integrating Kalinga Hospital into the network and progressing our outlined expansion projects, including the Sector 56 Gurgaon Hospital. At the same time, our existing hospital operations continue to provide a steady foundation supported by strong clinical capabilities and consistent execution across the network. This positions us well to deliver sustained growth while maintaining capital discipline. Now coming to the fourth quarter performance highlights. Average occupancy for the network continued to be more than 75% despite increase in operational bed capacity with most of the units operating at near optimal capacity. Occupied bed days were up by 8% year-on-year and 4% quarter-on-quarter. Average length of stay was temporarily higher by 9% compared to Q4 last year, characteristics due to multi-location capacity rollout simultaneously. Average revenue per occupied bed for the quarter stood at 77,900. This was after absorbing the impact of higher average length of stay and discontinuation of select high-value chemotherapy drug for institutional patients. Network gross revenue stood at INR 2,664 crores compared to INR 2,429 crores in Q4 last year and INR 2,608 in the previous quarter. This reflects an increase of 10% year-on-year and 2% quarter-on-quarter. Due to discontinuation of select high-value chemotherapy drugs for institutional visions share of oncology and inpatient revenue dropped by 21% from 26% in Q4 FY '25 and 24% in Q3 FY '26. Excluding oncology, gross revenue grew by 15% year-on-year and 5% quarter-on-quarter. International patient revenue was INR 227 crores registering a growth of 12% year-on-year and accounting for 9% of the revenue from hospitals. Digital revenue from online marketing activities, web-based appointments and digital lead management was INR 838 crores, accounting for approximately 31% of overall revenue. Website traffic crossed 90 lakh sessions during the quarter, growing by 39% year-on-year. Network operating EBITDA stood at INR 682 crores, reflecting a growth of 8% year-on-year, 5% quarter-on-quarter. Network operating EBITDA margin was 26.8% for the quarter compared to 27.2% in fourth quarter FY '25 and 26.1% in the trailing quarter. Annualized EBITDA per bed for the network stood at INR 7,300,000 versus INR 7,400,000 in FY '25 and INR 7,100,000 in the previous quarter. This was also reflective of the higher average length of stay. Profit after tax for the network was INR 387 crores against [indiscernible] the network generated free cash flow of INR 581 crores during the quarter, INR 328 crores was deployed towards ongoing capacity expansion projects and facility upgrades at newer facilities. Net debt for the network stood at INR 1,908 crores compared to INR 2,166 crores at the end of December '25, and the net debt-to-EBITDA ratio continues to be less 1. Continuing our efforts to support the local communities, we provided pretreatment to approximately 42,000 patients from economically weaker section of society worth INR 59 crores at hospital tariff. Both our strategic business units continue to deliver steady growth in revenue and profitability. Max@Home reported revenues of INR 73 crores, reflecting a 30% 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 52 crores, reflecting 14% year-on-year growth. It provides services in over 60 cities and nearly 6 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 426 beds, and we expect this to increase to 570 beds over the next 2 quarters. 500 beds at Sector 56 Gurgaon. The Interior and works have started. We are targeting to commission this facility by the end of this year. 100 beds at Max Nagpur, project work continues to be on track, and we expect commissioning by FY '28. 400 beds at Mohali, structural work is ongoing, and we are on schedule to commission the hospitals in FY '28. 260 beds at Max Dwaraka, building plan admission is underway, and the project is expected to take 24 months to complete. 200 beds at Max Vaishali. We are waiting building plan approvals while all other clearances in place, projects is expected to take 24 months post receipt of approvals. 400 beds at Max Patparganj, wall work construction has started, and we expect commissioning by FY '29. And finally, coming to the overview of the company's performance for the full year ended March 2026. During the year, we have initiated phase commissioning of nearly 20% additional brownfield capacity across the network. Network gross revenue stood at INR 10,538 crores, reflecting a growth of 16% year-on-year. Overall network operating EBITDA grew by 14% year-on-year to INR 2,638 crores, translating to a margin of 26.2% and EBITDA per bed of INR 72 lakhs. Profit after tax for the network increased to INR 1,631 crores compared to INR 1,336 crores in FY '25, registering a growth of 22%. During the year, we generated INR 1,541 crores of free cash from operations after interest, tax, working capital changes and routine CapEx. Further INR 1,627 crores was deployed towards ongoing expansion projects and facility upgrades and newer units. INR 131 crores towards land purchases 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 is from the line of Neha Manpuria from Bank of America Securities.

My first question is on the brownfield beds that we've added. When do we start seeing them contributing to EBITDA more meaningfully? Did I hear it correctly, that all of these brownfield beds will be commissioned in the next 2 quarters. So, second quarter, third quarter is when they should start showing up more meaningful in EBITDA.

No. So they're already contributing to EBITDA. So it's not any form of negative contribution really. But what happens is that you sort of -- you get the better end of things as you go along because right now, we've -- out of the total 1,000-odd beds we've initiated lesser amounts. It's a phased rollout. So it's like, let's say, if you have 400 beds at Max Smart, which are being rolled out in a phased commissioning, you would have started with about less than 100 beds about 100 beds over there. So as you open up the balance base over the next 2, 3 months, September, the next couple of quarters, you will see the entire operating leverage as the balance beds get occupied because your costs related to even the brownfield are not linear effectively. .

Okay. And is it fair to be that the occupancy in these ramping up should not be a problem. We should get to a fairly good level of occupancy as soon as we start these beds, that should not be a problem, right? That would be a fair assumption .

Yes. So I mean it's a 2-way thing. I mean we don't open beds if you don't have occupancy, but what we've seen is a very good ramp-up of that occupancy. And therefore, you've seen in spite of new beds opening up, okay, occupancy remains high. But having said that, I almost -- I must also point out what is embedded within it is also higher a loss. So what tends to happen is you're just a little more efficient when you don't have the beds. When you open up the new beds, there's a tendency for the loss to increase. It's likely temporary in nature. We tightened it again, but you've seen the loss has gone up by about 8%, 9%. So the impact of that is that shows up in both your ARPOB and occupancy, although occupancy is sort of some a little higher, your ARPOB comes through a little lower.

Okay. Understood. My second question is on Gurugram that how we are now expecting Gurugram commissioning by the end of this fiscal year? I mean I'm not sure if I picked that up correctly.

Yes, That's right. We are expecting commissioning by the end of the year. Yes.

Okay. And we shouldn't be expecting any further delay on that because that's been pushed out a few times now.

That's right. That's right. .

Okay. And sorry, one last question, if I may. On the Bhubaneswar asset that we have acquired, this will start integrating from first quarter itself? Or is there any approval, et cetera, that we can require before closing this .

So first quarter, we already acquired the majority stake. So we will be consolidating .

Okay. I have a few more questions, but I'll get back in the queue. .

Next question is from the line of Bansi Desai from JPMorgan.

So just again on Gurugram, how should we think about the operationalization of beds, assuming we commission towards the end of fiscal '27? What will be the Phase 1 operationalization? And what is the count that we should expect in fiscal '28?

So I think in fiscal '28, we will be looking at breaking even within the year. I mean it's a greenfield, as you're aware. Having said that, our experience with the Dwaraka Greenfield, again, we operationalized it. We guided to a 1-year breakeven. We actually broke even it in 6 months. We had an operating loss, consolidated loss in the first 6 months of I think about INR 35 crores, INR 40 crores. But by the end of the year, I think it was less than INR 10 crores that we are sort of -- so even if that number is more or less in this case, it's not a meaningful change to perhaps what the projections are going to be. .

But in terms of beds, are we expecting phase-wise manner of operationalization here because of the 500...

Yes. So you always do it even tactically, you do it in that manner. So physically, beds come out in phases, but also tactically because if you have 500 beds, it doesn't -- day 1, you won't have occupancy of 500 beds. So you don't operationalize or staff all the 500 beds. So if I take the example of Dwaraka, we had 300 beds, we started with 40 beds we ramped up occupancy, broke even with the 140. So the balance beds started to start yielding as we go along. You're seeing a similar sort of story play out in the brownfield right now. And with respect to even the greenfield at Gurgaon, you're going to start with, let's say, about 200-odd beds. And once you kind of break even within that, then you start rolling out the balance beds.

Understood. That's clear. And my second question is on the onco share decline that we've seen in while clearly, the reason highlighted is a discontinuation of chemo drugs, but it still feels a bit sharp, given we had quantified onco-drug impact to be about INR 80-odd crores. So if you could help us understand what has happened here? And by when do we expect this to reverse? .

So I think there are 2 things. You have onco drug because this is day care, right? You have onco drugs margins, which are sort of -- which were coming out a little perverse to us. So discontinuation of these high-value drugs not only impacts our top line, but also impacts your related OB days, occupied bed days which are related to it because some of the patients which are coming for this thing are also admitted at night. So it has a knock-on effect on that as well. So our OB days have sort of come down by about 5% to 6% I mean, which is related to this.

So I mean, do we have a plan in place, how do we replace it? What alternative protocols would you have .

Bansi, basically some of it is permanent because we know that we'd not be able to do this sort of a business on the minus margin basis. So I think to be -- as you've also seen in this quarter, although the OPDs have deep on in oncology, but we have overall grown the OPD, right? That means the other specialty has been able to try to compensate for it. So then that's the plan even going forward, that we don't expect the margin -- the share of Antonio come back to 25%, 26% as it was a year. It will continue to be hover around 21%, 22%. And we will then have the other specialties to fill up that.

Got it. And the rate revision benefits, has that started to flow through in Q4 .

All of that the super specify rate. So I think in a very large part is already in, but there is a small part, which is left out, which is around INR 25 crores, INR 30 crores per annum. That will be phased out over the year in this year. So I think some -- in two hospital it started to come, but balance is still pending. But that's all in this quarter. We're expecting that to be in the next few months yes. .

Next question is from the line of Damyanti Kerai from HSBC.

My first question is clarification. Abhay, mentioned you are rolling out beds in a phased manner, even for say facility like Smart. So help me to understand this better. In the past, whenever you have opened a commission brownfield facility, I understand the ramp-up happened much faster than what we are seeing right now. So according to you, anything has changed since then, that's why you're going for more gradual phased way of beds.

We've always opened brownfield in a phased manner, brownfield or greenfield, I mean it's always been opened in a phased manner. And it is opened in a phased manner because the as soon as any part of a new facility, any flows are ready, okay, there's always a tearing need for those floors. And you've seen that play out in the occupancy as well. So we try to put it to work as soon as possible. So whichever flows are ready, and it's the same at Nanavati, it's the same at Mohali. It's the same as Smart. It's been the same in the past at Shalimar Bagh or Vaishali or -- I mean every facility, which we've rolled out has been rolled out in this manner.

So far, we mentioned in the speech also, our available capacity options at have went up, gone up by 8%. So the OPD has gone up 8%. As and when the bids are ready, they are being taken up. In context, also Smarts that this is a 26, 27 months of projects starting, right? So typically a project of this size takes about 36 months because we are taking up projects to operations within a shorter time flowback hence, they are being taken off floor by floor.

Sure. And when it comes to ramp-up of some of the newer facilities. You mentioned about Dwaraka. Similarly, can you update on the status of the Noida unit, how it is ramping up in terms of occupancy, et cetera, last quarter, if I remember correctly, you mentioned there are some issues which you are trying to resolve. So if some update you can share on Noida unit.

Dwaraka has been the occupancy of 70...

You're talking about Noida, or Dwaraka.

Noida, Noida one.

So the Noida has ramped up well now in this quarter, right? So the occupancies have been more than -- around 60%, 65%, right? So there's further room to grow. But on the revenue side, it's done well compared to last quarter. And we see -- there has been doctors also in that hospital. And so I would say we are happy with where we are with Dwaraka this with respect to Noida when it comes to quarter-on-quarter growth.

Yes, I think it's pulled around very well. And in terms of EBITDA growth, also it's a very, very -- it's a substantial growth that we've seen over there. It's well on its way.

It's in line with our expectations, right? It's not falling?

Yes. Yes, yes, absolutely. I'm very encouraged by the last quarter and more .

Okay. And it can very well go to the network level occupancy of pay 75% of growth.

Absolutely. Absolutely. I think maybe shortly, we'll need more -- we'll need to do a brownfield lower there and add more beds as well.

Okay. Good to hear. And my second question is actually a clarification on discontinuation of oncology drug. You mentioned 5% to 6% OBD got knocked off because of it. Just wanted to understand, these drugs are like high in terms of ticket size, et cetera. But were they meaningful contributor at the EBITDA level also? .

Yes, earlier, they were given a MRP, and we had 15%, 16% margin on those. So that used to flowed to the EBITDA.

It was a 16% margin because you have to give a 30% discount to MRP. So we sort of discontinued it, right? .

So earlier, there was contributed to EBITDA. So that when we did to the price impact of the CT adjust we netted that also. And through that it's absorbed through the prices.

We suggested I think it's a INR 200 crores net benefit...

INR 140 after GST.

But the CGHS, the rate revision, we've got higher rates, but you got capped out on this high-value drugs. So from a CGHS standpoint, the net benefit was INR 200 crores, but there was also, I think, a impact of GST, which is a separate listing net of it was INR 140-odd crores would be the net benefit.

Okay. So that is no longer there, right? that...

Sorry?

INR 200 crores, you mentioned it's a gross number? And then when you include the GST impact, et cetera, INR 140 crores is the number, which was coming from it.

Of this INR 30 crores, as I mentioned in superspecialty rates, which is not yet flowed in. So that is about INR 100 crore, INR 110 crores has flowed in about INR 30 crores to INR 40 crores is yet to flow, yes. This is all been numbers, right? .

Sorry, just -- another INR 30 crores flow out from here? .

So out of INR 140 crores, INR 30 crores, INR 40 crores is yet to flow in about INR 100 crores to INR 110 crores is already to on an annualized basis.

Okay. Okay. Got it. Got it. And I think my last question is on the pipeline projects, which you indicated, which are coming up in '28 or so. Is any facility there where we are seeing some delays, et cetera, in terms of approvals? Or it's just like completion of the facility, which should be done as for your indicated time line. So any regulatory clearance or any other clearances which are due?

No, nothing, no regulatory clearance is pending over and above what has been anticipated. In the past, there has been delays because -- we've had delays because of shortage of manpower because there's been LPG crisis and there has been no sort of gas at this thing. So the shortage of manpower from that standpoint. Forest approval because there was an issue with respect to Delhi transplantation where the Supreme Court has taken cognizance of I think the governor there was a matter of -- I think the Governor [indiscernible] matter because of which gets a stalled. So these are not typically regulatory approvals, which have sort of this thing. But I think we had issues and incidents with respect to pollution and shutdowns of construction or free transplantation or Iraq war causing shortage of LPG and therefore, man power not showing up at site. .

Next question is from the line of Karan Vora from Goldman Sachs. .

The first question is with respect to our doctor costs. So we see that our doctor costs have gone up and we've hired in advance. But just wanted to get a sense on which all -- for which all expansions have we hired and which are the hospitals where further doctor additions are still pending, which might hit the cost line item in the next 1 to 2 quarters? .

So I think -- okay, I think it's a very good question. So there are two things. end of '24, 2024, we essentially added close to 25% to 30% more capacity. This was through whether it was Barka, whether it was the JP acquisition, Sahara sometime before that or Alexis in Nagpur. This year, we've already started a phase rollout of 20% plus more capacity. Which includes Mohali, Punjab, Nanavati, Mumbai Smart as well as we added more beds in Lucknow as well. So we've seen a meaningful -- somebody asked me a question before this about Noida. And we've seen meaningful improvement over there because we've expanded our doctor base. So that is one place. We've seen the same in Lucknow where we are ramping up. We've seen the same in Smart. We've seen the same in Nanavati, Mumbai. We've seen the same in Mohali. All of these new ones which are coming, we added doctors. Even Dwarka, now it's operating at 80%, 85% capacity. But through the year, it had, through the last quarter, we had added some more people over there as well. So yes, so I think it's been pretty much quite secular across the portfolio because we've been, it's multi-location, there has been addition of the -- you're going to see the same thing in Bhubaneswar now because we will add manpower over there. Although it should not move the overall needle simply because there's just one hospital. But the minute of doing it a 4 or 5 multi-locations and then one point of time, you're going to see a little bit of lumpiness.

Okay. Got it. So that ...

Acquisition -- so like the reason I mentioned in end of '24 when we kind of distinct when you start hiring, when you do sudden acquisitions, it's not as if you are able to do all your hiring in the next 6 months or 12 months or whatever. It takes time. It also moves in a phase manner. Particularly if there's competition in those areas. .

Okay. Got it. Got it. And sir, just to better understand, so this INR 435 crore for doctor fees in Q4, that should not materially change going forward, at least for the next few quarters. Is that a fair way to think about it? .

Yes, it should actually start getting operating leverage in fact. So my belief is that marginally all of this percentage start coming down. .

Got it. Got it. And this Kalinga Hospital. So any start-up losses or any -- like what about breakeven time lines? How should we think about that? .

It's already profitable. I think there's about INR 10-odd crores of EBITDA. So you're not starting with the negative .

INR 10 crores per quarter. .

Annual, annual.

Okay. Got it. And so we've -- unlike some other places where we had to discontinue businesses, right, because we wanted to streamline practices. All those things have been taken care of. And even after that, we should be able to maintain broadly that EBITDA run rate. So no chance of it going into negative, that's what I'm trying to...

So let me just correct you, even in the other places, where we corrected the business behavior, so to say, even there, it is going to negative, we just mean less profit. None of the acquisitions have been -- none of these acquisitions have been loss making or even after taking over when we did got or actions we took, it did not go into a negative directory. Even in this case, I mean, INR 10 crores positive, and we've just done the acquisition. So you want to listing. And what we are taking some acquisitions, you still won't see meaningful negative numbers or anything like that. .

And the last question would be with respect to the new units or whatever we've operationalized in the last 12 to 15 months, how have their overall revenue and margin trajectory look like? Any color there will be helpful.

So yes, I think the -- yes, so the 12 to 15 months, okay? So I would basically.Before rolling out this 20%, 25% capacity rollout that we've recently done over the last, let's say, 3 to 5 months yes? The previous generation for about 12 months or 13 months, we did not really add any capacity. We added it before that, okay, again, which was a little lumpy. We did Lucknow, we did Nagpur. We did Dwaraka, we did Jaypee, right? So are those the 4 you're referring to? .

Yes, yes.

Okay. I think all 4 have done significantly well. I mean I can tell you, Lucknow, for example, is doing pretty much 5x of EBITDA what we acquired it for. The meaningful addition in Nagpur, in Noida also, we've seen that Dwaraka is not only operating at 80%, 85% capacity utilization, but we're already planning a brownfield over there of another 200-plus beds. In fact, oncology bunker over there and the oncology center over there is in Dwarka yet to start, which is going to start by next month. So that should read even further sort of benefit. So we are seeing those benefits come through. .

Yes. But you're seeing it, you're going to see a bit of a hockey stick there because you have the benefit. When you move from like, let's say, in Noida, right? When you move from the 65% to that 75%, 80% you see at 50%, 55%, you bring you right, most units .

At 60%, 65%, you start doing very well. But the real start coming from that 60%, 65% up to that 80-odd percent occupancy that we do. .

Next question is from the line of Tushar Manudhane from Motilal Oswal.

Thanks. This was more on the Lucknow side, while we have a very decent land bank as far Sahara hospital is concerned. And of course, in the history, you see Shaheed path land was also acquired more or less at the similar time line how are we evaluating in terms of which line bank to sort of set up? I understand for Shaheed path. But if you could help understand how are we going to sort of utilize both the land banks and build up Lucknow sort of hospital network.

So I think it's a very good question. We have a land bank. It's about 27 acres of land in Shaheed path, which is right in the heart of the...

Sir, 27 acres at Gomti Nagar.

Yes, 27 acres is Gomti Nagar, which is right in the heart of Lucknow and 5-plus acres, which is on Shaheed Path. We are expanding our capacity over the next few months, you will see a capacity of Gomti Nagar go up to about 570 beds. What we intend to do is we intend to start another hospital, okay? We want to have a multi-strategy of about 700 beds in Shaheed Path, which will be really operating in a phased manner. It should take about 3 years to build it. Simultaneously, we believe we'll be running out of capacity at Lucknow at Gomti Nagar as well. So we'll be adding another 200 to 300 beds over there. So you're going to have a multi-pronged strategy. I think 1 doesn't have much to do with the other because these are 2 locations, which means we will have two sets of doctors and cities. It allows you to do that. You see if we have one in terms of the strength of senior clinicians, you have 1 Chairman cardiology, 1 Chairman, oncology, 1 Chairman this thing, it becomes a choke point for other sort of senior personnel coming in. When you have multiple locations, it allows you to do that. And we've seen that advantage play out for us in Delhi in other places that we like the whole cluster approach. Then you have benefits of brownfield but it's also beneficial to have a cluster approach and then have brownfields emerging at multiple locations.

Understood. So this is not so much more sort of a cannibalizing given that it's hardly a 14 kilometer distance, it will be more like a multilocation playing.

No, absolutely Absolutely. .

So also on the Shaheed Path. The capacity can go up to roughly 890 beds, right? So I mean, there's more we can build there after -- even after this 700 beds.

So it gives -- I mean it reflects the kind of confidence you have on this Lucknow as a location, building up such a strong almost it will be about 1,000, in fact, more than 1,000 plus sort of a bet size eventually and not like immediately, but over a period of time.

No, no absolutely. I mean I -- let me put it this way. I see over the next decade, even probably Gomti Nagar. Okay, going close to perhaps close to 2,000 beds, is that one location. We will do it in a phased manner. We have the land bank over there. And the kind of ramp-up we are seeing is -- because I mean our clinical programs are very strong over there.

Understood. That was one. Second, sir, are you seeing the risk of these medicines being taken directly by the, let's say, health care or CGHS in other therapies? .

No. This is basically what -- firstly, we have a larger amount of -- because of being in Delhi, we have a larger amount of institutional business, which was coming to our Delhi sort of hospitals. And this impacts that largely. What they basically said is that look, you can't have -- you have to provide a 30% discount to MRP. Right? And so it's not they have selected the drugs. They said all medicines at a 30% discount to MRP. Now what happens is any medicines where you have or alternatively CGHS, patients can get the medicine from CGHS. So from a hospital standpoint, if your margins are less than 30%, then you probably discontinue it because it becomes loss-making, but the patient has an alternative option of buying it from the CGHS dispensary. But our present margins and our present this thing on a drug-on-drug basis also is reflective of that action. And it's not a government action. It's a CGHS price revision. So you get some and you some, I guess. The next benefit is INR 200 crores. After GST, which is a separate sort of fit that we got, it becomes INR 140 crore benefit.

I got you. Sir, just that clarification, this is onco therapy specific or this is more between CGHS doing it across the therapies?

Across the Board, all medicines. Sorry, onco medicines. Chemotherapy medicines.

Yes, which is why I was trying to ask that is this getting expanded to other therapies where the patient...

This is the first time they made any changes on the price between 14 years, right? .

Understood. And practically, if CGHS is able to provide the medicines on a timely basis? Or do you think the patient will come back to the hospital pharmacy or the hospital.

You know the answer to that.

Tushar, there's obviously [indiscernible] . I think there is a lot of no monthly pension, et cetera.

We've been able to understand that they're reconsidering it. But again, one doesn't know till -- because there has been a lot of representation made even by patients on this, right? .

The problem is that this also applies to ECHS, for example and other PSUs. But while CGHS has dispensary to dispense this ECHS and other PSUs don't have the dispensary and they cannot access CGHS dispensary. So the problem with some of these drugs are then not accessible to them.

So effectively, this should sort of start getting reflected back probably in maybe some time in future.

Sorry, it should get reversed you're saying? .

Yes. .

I mean it stands to reason.

Understood.

Otherwise, we will have service men who are not able to access these, which is presently the case.

Got it. Got it. And just lastly, with Gurugram, we had to sort of start second half. So is it like now we are indicating in for a few months, sort of taking some time. Is that the way to think about? .

No, that is right. We were seeing second half and now when we send second half, we mean middle of second half and now it's end of this thing. But I think it's been two issues over here. One was a lot of labor goes back during elections. particularly Bengal elections. It's a bit of a festive season from them from that standpoint. So yes, so a lot of -- we had a lot of reduction in manpower at the sites. . Second is also the LPG issue. Most labor, they cook their own food and et cetera. So we had disruption over there because the labor did not have LPG we've started serving lunches for -- and meals for all labor at our sites now. order to surpass that, but it sort of take -- because the labor is not on our books, there's a contracted labor. So there's a particular method that you have to sort of follow to even initiate that because literally, we got about 1,100 to 1,200 people on to Gurugram site working. So you have, our kitchen is supplying to the 1,100 to 1,200 people, their meals and so on and so forth. But yes, I think these are issues which have caused a delay or a couple of months.

Okay. And just lastly, if I may, just one more, if I may squeeze in with respect to doctor talent cost, given the kind of spread addition and starting of hospitals by multiple corporates probably over the last maybe couple of years and subsequently over the next 4 to 5 years. Are you seeing this doctor talent cost sort of the negotiating power moving to doctors from corporate.

So I think there are 2 things. Firstly, it's not a new phenomenon that hospitals come up in locations where there are existing hospitals. And it's not as if in any micro market, it's like you've got 5 hospitals and 3 more have come up or 4 more have come up. It's pretty much been one here and one there and so on. But when that happens, you online tend to negotiate their own sort of compensations and now they does go up from that standpoint. But having said that, it does sort of even out and it is it is transferred over a period of time to the patient because eventually, you install a 10%, 12% PAT margin business is capital intensive, we are reinvesting, et cetera. So I'm not -- I mean, it's a natural phenomenon. It gets a little lumpy, a little lumpy sometimes. But it's not as if it's not passed through. You will see this normalize across the board. I'm not just seeing it for sort of Max, I would believe for the entire industry. .

Next question is from the line of Aditya Chedda from Incred Asset Management. .

It seems like content regarding the discontinuation of chemo drugs due to MOU conditionalities, this is specific to Max Healthcare in a region or this is industry-wide pan-India. And if I understood it correct, it had a knock of negative impact on revenue to the tune of INR 130 crores, and they had around 16%, 17% EBITDA margins, if you can help clarify that? .

So firstly, no, this is an industry-wide phenomenon. Secondly, as a proportion of its business, Max perhaps does the maximum amount of oncology business. And then within that, I mean, if you actually see, we probably do the maximum amount of institutional business, which is CGHS, et cetera. So although it's an industry-wide phenomenon, the impact would be felt maximum at MAX for these reasons.

The overall impact of the drug of the distorted order growth in the drug prices. Top line -- your top line reduces by INR 200 crores, basis this.

Sorry?

This is the annual number. Annual billing of chemotherapy drug will come down by INR 200 crores with all of this discount issue.

Next question is from the line of Abdulkader Puranwala from ICICI Securities.

Just a follow-up on this CGHS part. So if I see the contribution from CGHS, it's barely move the needle. And where our oncore revenues are seeing a sizable tie-up. And within that, if you could help us understand that what pushing off your CGHS revenues actually comes from oncology and how should we look at assets as well? .

No. So obviously, there is a less impact on the impact for this. This is chemotherapy -- so when you discontinue the drug billings or providing the use patients, right? So there's a impact on the revenue, but there's no impact on the bed. But nevertheless, there are some of these patients who also done surgeries in the network and also some of these patients are also that admitted to the hospital. So to that time, the OPDs, the orthopaedics for oncology patients have turned down by now 6% Y-o-Y, right? Now your costs are within the overall CGHS business, how much in oncology. So that will be probably around 35%, 40% now.

It used to be 50% as it's reduced to 40% now.

Understood, sir. And sir, then on your existing work that is prior to any bed additions that you have done, in terms of the steady state revenue and EBITDA growth, sir, how should we look at in terms of your, say, bed network, what you had developed for '25 or for '26. And the levers of growth, would it be more ARPOB driven? There's some element of case mix as well, which can help to at least post a single digit kind of a growth .

I think, basically, there are 2 elements which make the revenue grow up. One is the ARPOB other is the OBD, so we have -- now that we -- even the existing hospitals, we are adding more back, right? So there's a brownfield expansion that we're talking about in Mohali, in Nanavati, even Lucknow and Smart, that question is not really -- our role is to mass that where we have 88 occupancies and we add more better there and try and ensure that there is OPD growth also, right? . So if we don't have OPD growth, then you only go would be the ARPU growth rate, which will be, let's say, 6%, 7% of the revenues. But our role is to ensure that wherever will find this situation coming up there, then we add more. .

And sir, last 1 from my end. Would it be possible to quantify the EBITDA track with the new hospitals would have had in Q4 and for the full year '26?

No, it's very tough to do it. This one you do it in the probably first month or first 2 months, but then the patients start to mingle right. So when you put another brownfield tower you won't be able to spare the revenues or EBITDA of tower 1 and 2 time. Because what you also, for example, do certain specialties into a tower versus b tower. So when you move those specialties, then wherever you move it from those beds get occupied by other specialties and where you move that gets to both will have its own -- let's say if I move oncology to new tower that becomes a Honda. So in the previous place where it was occupying will be those we get occupied by other specialties, whereas in the new tower will have largely oncology will have different ARPOBs and different existing, et cetera. .

But on a consolidated basis, what we've seen is there's no real pressure on margins. So effectively, I think...

Next question is from the line of Lavanya from UBS Group.

Just a clarification on chemo drugs, again, sorry, here, we are losing out on OPD also. So if it's only the dispensary and the drugs to who are -- I mean, to whom we are losing the OPD patients in general, the 5% to 6% impact on OPD, clarification on that will be great? And -- so far -- I mean until now, you are seeing a full impact of this chemo drugs, at least, right? That's correct.

So in quarter 4 has already had the full impact, we started to stop this in October last year. So to that extent, quarter 4 has the full impact of all these motors. And what we haven't done is the full impact of the price gain on the CGHS side, which will come out starting this quarter. So as I said, 2 of the hospitals have done is to specialty rates. And during the course of the year, we'll have more hospital also being those rates. On the other customer that you have on the OPD. Well, the small and nursing homes to mentation we don't -- we believe they are able to do that or whatever. So whatever the practices, they go to perhaps the disorganized sectors smaller nursing homes. .

Okay. Okay. Got it. And how do we expect any resolution or this is going to be there for the next couple of quarters and until the base of Q3, like it will start to...

Look, I think, like I said earlier, it doesn't seem to stand to reason, right? So it's not as if -- because it's not as if our margins are any different from the price at which perhaps the government is buying it. these are medicines like KEYTRUDA, which is the largest and the fastest-growing oncology medicine in the world. And they don't make any exceptions for anybody in terms of what the margins are, for example. One is that. Secondly, the CGHS and CGI rate applied to the other public sector undertaking and other sort of panels like ECHS, servicemen and so on. Whilst CDSS patients have an option of procuring the drug directly from the CGHS dispensary or their pharmacy. The CHS the PSUs don't have that option because they don't have those pharmacies. So of course, a lot of people are complaining a lot of patients are complaining to -- because they're unable to access these at least KEYTRUDA and they have to sort of move to other medicines. And it's not necessary -- look, every patient is different, right? For some patients, it is necessary for a mean this in their arm I guess they're finding it difficult to source this -- so we are facing -- finding a lot of complaints, and I'm sure so is the CGHS and thing. And we are hoping that they will reconsider this. They should -- but you are asking for time lines and it's difficult to pin that down.

Okay. Got it. So just a clarification, ECHS on the PSU patients are seeing disruption to the treatment for the last 6 months or they are moving out to other medicines, whatever is alternate available.

Same thing, same they're going to behave the same way as the CGHS.

Yes. There are other alternative to some of these medicines.

It's not that there are no alternatives to it, there are alternatives, okay? But they may not be preferred alternatives from a clinical standpoint. The question is efficacy. If a doctor believes that this particular branded drug has more efficacy for a particular patient may not be a B patient, but for A particular patient. I mean, very simply, each one of us affects differently to different paracetamol. Affects sort of differently to even a different antibiotic, that's how in chemo.

Thank you very much. Ladies and gentlemen, we'll take that as the last question. I'll now hand the conference over to the management for closing comments.

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

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