Nephrocare Health Services Limited (NEPHROPLUS) Earnings Call Transcript & Summary

Ladies and gentlemen, we will welcome you all to Q3 and 9 Months FY '26 Earnings Conference Call of Nephrocare Health Services Limited hosted by Ambit Capital. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company and may involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand over the call to Mr. Gaurav Tinani from AMBIT Capital. Thank you, and over to you, sir.

Thank you, Pari. Good day, everyone. On behalf of AMBIT Capital, I welcome you all to the Q3 and 9 months FY '26 Earnings Conference Call of Nephrocare Health Services Limited. We are pleased to have with us the management represented by Mr. Vikram Vuppala, the Chairman and Managing Director; Mr. Kamal Shah, the Co-Founder; Mr. Rohit Singh, Group Chief Executive Officer; and Mr. Prashant Goenka, Group Chief Financial Officer. We will have the opening remarks from the management, followed by a question-and-answer session. Thank you, and over to you, sir.

Thank you, Gaurav. Good evening, everyone. Thanks for joining this call. This is our first earnings call. I would also like to thank all our guests, teammates, shareholders and partners enabling us to list on December 17 on the Indian Stock Exchanges and for their continued trust and confidence in NephroPlus. Since this is a maiden call, I would want to spend some time on the Indian health care industry, dialysis market at a macro level and also key insights about our company itself. Later, our senior leadership team will share more details, including the Q3 FY '26 and 9 months FY '26 operational and financial highlights. Post that, we'll open the floor for a Q&A session. Speaking on the India health care industry, it operates through a complex interplay between public and private sectors, with service delivery historically dominated by private service providers and financed largely through out-of-pocket expenditure. Good news is that in recent years, government has increased health care spending as a percentage of GDP, helping to reduce financial vulnerability among households. Beyond traditional hospitals, the private sector is increasingly driving the evolution of India's health care delivery through rapid growth in non-hospital settings such as diagnostic labs, single specialty clinics such as dialysis, IVF, oncology, home health care and telemedicine platforms. This shift reflects a broader move towards more accessible, specialized and cost-efficient care models. Single specialty providers have evolved from small hospital settings more towards clinic-based models as many high-frequency procedures with low complication risk can effectively be managed outside a tertiary care hospital setting. The transition from an unorganized to an organized market, coupled with scalable business model and strong unit economics has significantly accelerated the growth of single specialty providers. Key growth drivers for single specialty include superior clinical expertise, enhanced patient experience, improved affordability, better access and also rapid adoption of technology. Now let me spend some time on the dialysis business itself. Rising NCDs, noncommunicable diseases, such as diabetes and hypertension are causing increasing incidence of chronic kidney disease, which is called CKD globally. If CKD is not managed well, over time, it leads to the last stage of CKD, which is called Stage 5, also called end-stage renal disease, which means both the kidneys have failed completely. At that time, you either require a dialysis to survive or a transplant. Dialysis just replicates kidney function. It removes excess fluids in the body and also it removes toxins from the bloodstream. Now dialysis business has many unique characteristics, and hence, it is needed to understand it separately rather than grouping it among other health care service providers. 5 distinct characteristics of this business are, firstly, each dialysis session lasts 4.5 hours, including the actual session time of 4 hours and the pre and post-treatment time. And dialysis clinics can only offer 3 sessions per day per machine. morning session, afternoon session and evening session. Hence, it's a fixed capacity business, almost like airlines, which have fixed number of seats on a plane. The only major way to grow this business is to keep adding seats or capacity, and that is how all the global dialysis networks have grown across the world. Secondly, dialysis is a life-sustaining chronic treatment that our guests need 3 times a week. Hence, proximity to their home is very important. And hence, it is -- it requires a widely distributed network with small to medium clinics to trade -- to take the treatment closer to patients' homes. As real estate in any clinic is limited, the only major way to increase capacity is to add new clinics to any dialysis network. While airlines will be happy with 100% utilization, dialysis clinics cannot go beyond 85% as we need to keep some spare capacity for patients coming in breathless and requiring urgent dialysis. Thirdly, globally, dialysis is a reimbursed business as it's very expensive. Think 3 times a week translates at a $20 price point translates to roughly INR 2.5 lakhs per year for every patient in India, which excludes other hospitalization costs, medication costs and various laboratory costs for these patients. India operates at the lowest price point in the world, while middle-income markets operate at 5 to 7x our price and developed world operates at 10 to 20x our price. Across the world, hence, dialysis treatment is reimbursed by either insurance or some form of government payment. Even today in India, more than 30% of the patients pay out of pocket, which becomes quite a significant burden on their families. Fourth, unlike other single specialty businesses, dialysis is a monoline business. For everyone, anyone with kidney failure, it is a standardized single line of treatment that lends itself to scaling in a distributed network fashion. Unlike others, paramedical staff play a much bigger role in dialysis service rather than super specialists like nephrologists, which again lends itself to scaling to Tier 2, Tier 3 markets where nephrologist availability is very limited. Fifth, any dialysis network requires massive scale and complete 100% operational focus to achieve sustainable margins in this business. We, in fact, were EBITDA negative for 11 years as we scaled aggressively to reach that critical mass after which the operating leverage started to kick in. At small scale, no one can make decent margins regardless of price point as it's a high fixed cost business. Also, there are so many cost items in a dialysis service. If 100% focus is not provided, there will be many leakages, which will reduce the margin significantly. Now let me talk about NephroPlus specifics. NephroPlus was founded 16 years ago by Kamal Shah and me, to truly redefine dialysis care in India. As co-founder himself is on dialysis for the last 28-plus years, we understand customer needs, wants and wishes better than any other dialysis network in the world. In 2010, dialysis was almost like a death sentence wherein nephrologists would just ask patients to settle their financial matters, ask them not to work, ask them not to travel. Average life expectancy was less than 1 year. Kamal and I, we truly wanted to change the way dialysis was done. We figured out a way to eliminate cross-infections in dialysis, which would otherwise affect 1/3 of the patients on dialysis. These cross-infections were hepatitis C, hepatitis B or HIV. We also wanted that truly patient-centric care based on Kamal's own experiences was provided in every single NephroPlus clinic. Every clinic was designed with cheerful interiors, Wi-Fi access, certified paramedical staff and with the staff who genuinely cared for our guests' well-being. We started as a stand-alone dialysis network in Hyderabad with our first 2 clinics in 2010, but then realized Indian market was not yet ready for outpatient stand-alone clinics. We understood that people with kidney failure, while they are severely immunocompromised, the government still did not recognize stand-alones at that time. And hence, dialysis routinely was almost always performed inside hospital settings in India. While this is not true for the rest of the world, throughout the world, other than India and Indonesia, dialysis is performed in a stand-alone outpatient setting, whereas in India, it's slowly over the next 5 to 10 years, it will convert into stand-alone and hopefully so with Indonesia. When hospitals started asking us to manage their dialysis departments, that's when in 2011, we pivoted to a captive or shop-in-shop model, wherein we started partnering with hospitals in a mutually beneficial revenue share model. Now historically, hospital used to run dialysis departments on their own in India. Why would they want to partner with us? As mentioned earlier, you require massive scale in dialysis and 100% focus in dialysis to generate sustainable margins in this business. Massive scale is needed for 4 reasons: one, to derive synergies from procurement of specialized equipment and consumables. Two, build capacity to recruit a large number of specialized paramedical staff like nurses and technicians. Three, to have your own in-house biomedical team to optimize your biomedical costs, which can get very expensive. Four, to develop technology products to monitor quality and overall operations in a widely distributed network setting. Now hospitals due to their very low scale in dialysis service do not make any margin, and hence, it is not their focus. Their profit drivers will be much more acute care departments like the way we say CONGO, cardiac, ortho, neuro, gastro, onco, rather than dialysis, routine dialysis service. But then why do hospitals in India offer dialysis services? Because the nephrologists want a large dialysis unit for their practice and also because hospitals make good returns from adjacencies of dialysis service, such as transplants, ICU admissions, lab investigations, pharmacy sales and fistula procedures. But hospitals should ideally be focusing on complex acute care and not a maintenance dialysis care. Now hospitals can still get these margins from the stated adjacencies if they partner with NephroPlus. As NephroPlus team delivers great clinical outcomes and service levels and dialysis volume grows significantly, the adjacencies value also grows commensurately for the hospital. Now this model is proven in India with as close as 300 private hospitals, including majority of the large hospital chains having partnered with NephroPlus to run their dialysis departments. But even now in India, 80% of the dialysis market is unorganized, which means hospitals are running in 80% of the clinics, dialysis departments on their own. This unorganized market is slowly and surely getting converted to organized market, and this trend will continue over the next 10, 20, 30 years. Now identifying this as a strength, NephroPlus undertook measured expansion across India with our hospital partners. After our expansion in Hyderabad, we expanded to other cities in South India first and then North India and later in West India and finally, in East India. And now we are catering to -- with hospital partners across 25 states and more than 290 cities across in a pan-India format. Secondly, we also have forayed into public-private partnership projects, PPPs across 4 states, namely Andhra, Bihar, Uttarakhand and Karnataka. Across all health care PPPs, dialysis PPPs have been the most successful projects in India so far. Government has realized that it cannot provide dialysis services very efficiently. Think of Air India, just to get the picture. And it has realized that they should only be a payer and regulator in this service, wherein private partner brings scale and efficiency, along with expertise for the benefit of poor patients. It's a single line of treatment for every single patient. So billing is very straightforward and verifiable. We at NephroPlus are very selective about which PPPs we participate. We did only 4 PPPs in the last 16 years. So every few years, we come across a very good PPP, we participate and try to win. Majority of the PPPs, we bid, but we lose because our price point is higher because our quality is better. This has been beneficial for us, too, as we get good volume at good contribution margins, which feeds into our efficiency engine. Then came international expansion in 2020. In early 2020, when Kamal and I were thinking about next wave of growth at NephroPlus, we realized that we could either grow vertically into other adjacencies of dialysis or grow horizontally in dialysis into other countries. We realized that we have become very good at dialysis, and we wanted to double down on it as globally, it's an $80-plus billion market and expand into other geographies. We explored Southeast Asia, Middle East to begin with, found Philippines to be a decent market, entered it with a small acquisition and then kept on growing over the last 5-plus years. Today, in 5 years, we have become the third largest network there, which puts us in a strong leadership position, and we may be getting into #1 position in the next few years. In 2022, we won a good dialysis PPP project in Uzbekistan, which the Ministry of Health floated there, which was a global tender, and it has been a good ROCE accretive project for us. Two years ago, we created a JV in Saudi Arabia to set up our operations there. Currently, it is in an investment phase, but over the next several quarters, Saudi Arabia will start generating top line and bottom line for us. With higher realizations in these international markets, we have substantially increased our revenue per treatment while maintaining decent margins and accretive ROCEs due to our India platform. Going forward, we'll continue to be 100% focused on dialysis market without any distractions and go deeper into existing geographies via organic and inorganic expansion and explore new geographies to expand our global presence. Our growth will come from 3 drivers. First, existing clinics ramp up on a little bit of volume, little bit of price wherever possible. And this growth is fairly predictable in nature. Second, roll up of clinics in existing countries. This is a lumpy business, but is reasonably predictable on an annual basis. Third, most importantly, foray into new countries or do large acquisitions or PPP projects, for which we cannot put a time line and hence, is not predictable at all. On this backdrop, speaking of our guidance going forward, we'll want to maintain a revenue CAGR guidance of 15% to 20% over a period of 3 to 4 years. We cannot give any guidance for the short term or on an annual basis. The third growth driver, which I mentioned before, is a big needle mover for us, but it is quite unpredictable. In a particular year, we may have solid growth from the third growth driver. Next year, we may not. But overall, on a steady-state basis, we should be growing revenue at a CAGR of 15% to 20% over a period of 3 to 4 years. We hence we will not be giving any annual guidance. As we scale, we are gaining operating leverage and we'll continue expanding over the coming years. In parallel, we are investing significantly in technology to drive efficiencies across NephroPlus, while continuing to unlock deeper synergies from these investments. Despite progress, large proportion of dialysis patients, particularly in emerging markets, still lack access to quality care. Over the past 16 years, NephroPlus has worked to close this gap through a strong focus on patient-centric care, clinical excellence and expanded access in Tier 2 and Tier 3 cities. Looking ahead, we remain firmly committed with singular focus to our vision of enabling people on dialysis worldwide to lead long, happy and productive lives. Our journey has just begun. Now you must have seen strong results in Q3 FY '26 and 9 months FY '26 that we published last night. We had few favorable drivers such as Philippines price increase in October '24 and also a few acquisitions we did in Philippines. And the recent CGHS price increase in India also helped. Please do not expect such kind of growth in future results, too. And as I said, expect 15% to 20% revenue CAGR over 3 to 4 years' time period. That's the right way to look at our business. I now request our Co-Founder, Kamal Shah for his opening remarks. Over to you, Kamal.

Thanks so much, Vikram, for that good overview of the industry and dialysis ecosystems. Just a little bit about me and what sets NephroPlus apart from the others. I am a dialysis patient, and I have been on dialysis for more than 28 years now. I lead a completely normal life. I work full time, exercise every morning, travel extensively. I've been through all modalities that a patient with kidney failure undergoes. Now kidney transplant is the ideal solution for kidney failure. Unfortunately, worldwide, there is an acute shortage of organs and very few people actually end up getting a kidney transplant. The rest have to undergo dialysis. Recognizing this profound need and the significant gap between supply and the need for good quality care, Vikram and I founded NephroPlus, a truly patient-centric dialysis network where patients are placed at the center of our universe. In India and much of the world, there is a misconception that once somebody gets on to dialysis, it is pretty much the end of life as they know it. Life gets reduced to going for dialysis, returning home and lying on the bed until the next dialysis session. Our belief is somewhat different. If we could deliver high-quality dialysis consistently and with empathy, our patients could get their lives back. They would be able to lead normal lives that is work, exercise, travel and have fun. One of the most important decisions we made at that point was to stop calling the people we serve as patients and instead call them guests. The word patient we felt had a negative connotation. When you hear the word patient, the image that probably comes to your mind is one of a bedridden sick individual. But dialysis patients need not be like that. We wanted a more positive word to be brought in and the word guest tied in beautifully to our Indian culture of Atithi Devo Bhava. When we opened our first center in 2010, the response from our guests was overwhelmingly positive. They felt cared for, respected and supported, and they deeply appreciated the quality of care we provided and continue to provide. Over the years, NephroPlus has grown and evolved to become Asia's largest dialysis service provider, and we will continue to grow. Yet one thing remains unchanged and will never change, and that is our guest-centric approach. Thank you.

Thank you, Kamal. Good evening, everyone, and welcome to NephroPlus first earnings call. We are pleased to report strong performance with the revenue growing 32% year-on-year in quarter 3 and 37% in the 9 months of financial year '26. Adjusted profit after tax increased by 71% in quarter 3 and 103% in 9 months this financial year. We are encouraged by our ability to sustain this growth momentum over the years and through the current 9-month period. To begin with, I would like to spend some time on the Indian dialysis industry and key trends. Chronic kidney disease, CKD, prevalence in India is estimated at 8.7%, affecting nearly 12.4 crore people as of 2024. However, diagnosis remain extremely low with only 7% of the patients identified, highlighting a significant need for greater awareness and screening. Among diagnosed patients, approximately 42 lakhs had ESRD end-stage renal disease in 2024, yet only 3 lakhs received dialysis, indicating a large underserved market. Dialysis demand is growing rapidly. The number of dialysis patients is projected to increase by approximately 3 lakhs in 2024 to 5.2 lakhs by 2029. It's a CAGR of 12.7% with over 3 lakh new ESRD patients new year every year and only 5,000 dialysis clinics nationwide, capacity remains inadequate and unevenly distributed. At NephroPlus, we identified these gaps early and have systematically scaled our network through stand-alone clinics, public-private partnership contracts and captive clinics within the hospital partnerships. This structured approach has enabled us to address unmet demand and improve access to high-quality dialysis care nationwide. Now let me share some perspective on how the dialysis segment has evolved in the developed markets. In developed markets, dialysis evolved from a hospital-based service to predominantly a stand-alone clinic model in the 1980s, driven by limited hospital real estate, lower setup cost, thus faster scalability and a dialysis-specific manpower-led delivery model. Today, over 65% of new dialysis patients in developed economies are treated in stand-alone clinics, supported by insurance coverage and technological advances that enable monitoring of network level clinical outcomes. The sector has also consolidated with large players such as DaVita, Fresenius Medical Care acquiring smaller providers. In contrast, dialysis in India remain largely fragmented. As the market matures with rising incidents, deeper insurance penetration and greater government funding, it is expected to shift towards organized dialysis-focused clinics. NephroPlus is well positioned to benefit from this transition and the long-term growth story opportunity. Speaking of NephroPlus and strategies ahead, we have built a strong brand and leading presence in India and the markets that we operate in. We are approximately 50% of the organized market share in India. Going forward, our strategy is to grow and further cement our leadership position. As Vikram mentioned, our growth will come from 3 drivers and allow me to elaborate on them. First, ramp up volumes and capacities at our existing clinic. This growth is relatively predictable as patients require scheduled weekly treatments by expanding capacity and growing our patient base and by implementing a modest price increase, we can further strengthen our business performance. Second, roll up of our new clinics in our existing markets. In India, we will deepen our presence by expanding our footprint through the takeover of existing clinics, which we call the brownfield clinics and selectively setting up new greenfield facilities. Internationally, we will continue to strengthen our presence in markets such as the Philippines and Uzbekistan. In short span, we have become the third largest player in Philippines, and we plan to further densify our network through new clinic openings and targeted acquisitions of local providers. In Uzbekistan, due to our strong stakeholder relationships and operational expertise, we have secured approval from the Ministry of Health to expand capacity by opening 2 new small clinics in Karakalpakstan region. Our ability to replicate a lean cost structure at scale and to deliver operational efficiencies position us well for strong profitability with operating leverage expected to improve further as revenues grow. The third big growth lever is acquisition of large network or a sizable PPP or a new market entry. We cannot predict the time lines for these, but NephroPlus is actively engaged in markets and has demonstrated success in this category as well. Our country selection framework is centered on 4-key criteria: demand, depth and scale, ensuring sufficient patient volume for operational efficiencies and faster breakeven, policy and reimbursement visibility with a clear preference for markets that have established reimbursement mechanism and government or insurance-supported dialysis program. Third, political and regulatory stability, focusing on regions with predictable health care regulations and long-term policy continuity. Fourth, repatriation clarity. Ensuring transparent and efficient framework for cash flow repatriation back to India. Lastly, on business continuity and predictability, our business model provides a good degree of visibility into revenue growth and profitability. Based on our existing bed capacity, patient pool and rising treatment volumes across the current network, we can forecast next quarter's revenue with reasonable certainty. The primary source of variability stems from the timing of new capacity additions. However, once these assets are part of the network, our historical experience indicates strong performance. That said, while we have clear annual targets, confidence in the clinic roll-up strategy, planned capacity additions, visibility at the quarter level still remains limited. As a result, there can be spillovers in execution from one quarter to the next. Therefore, it is prudent to view our performance on an annualized basis rather than a quarterly basis. As stated, the most uncertain aspect of our growth is acquiring a large network, securing sizable PPP or entering a new geography, given regulatory constraint and market understanding. However, once we acquire our established operations, we are highly confident in our ability to transition, scale and achieve profitability over time, an outcome we have demonstrated in Philippines and Uzbekistan. International revenues now contribute approximately 41% of the total revenue in the 9-month period of financial year '26, up from 12% in financial year '23. This growth underscores our ability to leverage India platform in higher-priced geographies. With this, I hand over the call to Mr. Prashant Goenka, Group Chief Financial Officer, who will take you through the operation and financial performance before we move to the question and answer round. Thank you.

Thank you, Rohit. A very warm welcome to everyone. I will now take you through our performance and our journey over the years, explained through key operational and financial metrics. On the operational front, in our dialysis business, the most critical metric to track is patient volumes. Patient volumes are the single most important driver of scale, operating leverage and ultimately, return on capital employed for the business. If you look at our historical trajectory, patient volumes have demonstrated healthy and consistent growth. Between FY '23 and FY '25, patient volumes grew at a healthy CAGR of around 20%, increasing from 22,890 patients to 33,076 patients. This momentum has continued into the current year. On a 9-month FY '26 basis, patient volumes stood at over 36,055 compared to 31,657 in 9-month FY '25, reflecting a year-on-year growth of 15%. Moving to treatment volumes, which represent the total number of dialysis sessions performed during a period, we have seen a similar upward trend. Treatments increased from 2.3 million in FY '23 to 3.3 million in FY '25, reflecting our expanding network and higher utilization. During Q3 FY '26, treatment volumes stood at 0.98 million compared to 0.84 million in Q3 FY '25, a growth of 17.7%. On a 9-month FY '26 basis, treatments reached 2.85 million, up from 2.43 million in 9 months '25, registering a 17% year-on-year. Now coming to revenue per treatment or RPT. This metric has been a key value driver for us. The primary factor influencing RPT growth has been our increasing penetration into international markets, which typically operates at significantly higher price points compared to India. Over the years, as we have added new geographies and scaled existing operation, this has translated into a steady improvement in RPT. RPT increased from INR 1,912 in FY '23 to INR 2,275 in FY '25, representing a 9% growth over the period. This trend has further strengthened in FY '26. In Q3 FY '26, RPT stood at INR 2,642, marking a 12% growth over the corresponding quarter last year. On a 9-month FY '26 basis, RPT improved to INR 2,574, reflecting a strong 17% year-on-year increase. Overall, the combination of these 3 operating metrics, which is steady patient additions, higher treatment volume and improved revenue per treatment continues to strengthen [Technical Difficulty] and reinforces our confidence in the long-term scalability and the returns profile of the business. Now coming to the financial performance of the company. Over the years, we have steadily scaled our operations across multiple formats and geographies. This has meaningfully improved our market penetration and is clearly reflected in our financials. If you look at our historical performance, the growth has been consistent. Between FY '23 and FY '25, our revenues increased 1.8x, rising from INR 437 crores to INR 733 crores. This scale-up has enabled significant operating leverage, resulting in a healthy improvement in profitability. EBITDA grew 3.5x from INR 49 crores in FY '23 to INR 167 crores in FY '25, a [Technical Difficulty] expansion from 11.1% to 22%. On the bottom line, the improvement has been equally noteworthy. Profit after tax improved from a loss of INR 12 crores in FY '23 to a profit of INR 67 crores in FY '25, marking a clear turnaround in the business and beginning of an inflection point. Overall, this financial trajectory reflects the benefits of scale, operating discipline and our diversified operating model, and it provides a strong foundation for the next phase of the growth. Speaking of our Q3 and 9-month FY '26 performance, we delivered healthy growth across all key financial metrics. Revenues continue to scale meaningfully. In Q3 FY '26, revenue increased to INR 258 crores from INR 197 crores in Q3 FY '25, reflecting a 32% year-on-year growth. For the 9 months, ended FY '26 revenue grew to INR 733 crores compared to INR 537 crores, registering a healthy 37% growth. EBITDA performance also remained robust, driven by operating leverage and improved scale. On a Q3 basis, our adjusted EBITDA, which excludes the expenses related to Saudi operation stood at INR 63 crores in Q3 FY '26 compared to INR 44 crores in Q3 FY '25, representing a 43.1% year-on-year growth. The adjusted EBITDA margin also expanded to 24.3%, up from 22.4% in the same period last year. For the 9-month period, adjusted EBITDA, excluding Saudi expenses increased to INR 175 crores from INR 115 crores, reflecting a 52% growth. The margins also improved from 23.9% to 21.5%. Profitability at the bottom line also showed improvement. In Q3 FY '26, adjusted PAT was [ INR 34 crores ] with a margin of 13% compared to INR 20 crores and 10% margin in Q3 FY '25. For the 9 months, adjusted PAT increased to INR 85 crores with a margin of 12% compared to INR 46 crores and 8.5% margin in 9 months '25, representing a strong 86% year-on-year growth. Now one thing to note here, the adjusted PAT in 9 months FY '26 includes 2 things. First, we have excluded a INR 37.2 crores finance cost, which came due to a CCPS conversion done before the IPO. This conversion is a noncash item, notional in nature and onetime. We have also excluded INR 2.2 crores of Saudi expenses, which is currently in the setup phase and does not contribute to the operating income. Now coming to the balance sheet side of things. Return on capital employed is the most relevant metric for evaluating our business as it captures both operating performance and the capital intensity of the model, including account receivables, which are structurally higher in our business. And therefore, ROCE serves as a primary filter for all capital allocation decisions. This disciplined capital allocation has already translated into a meaningful improvement in ROCE from 10% in FY '24 to 18.7% in FY '25. Building on this trajectory, annualized ROCE supported by continued discipline in capital deployment is expected to be 24.7% in FY '26, improving from 18.7% in FY '25. Coming to the cash and the debt side of things. Net debt remained negative at INR 283.6 crores as of 9-month FY '26, reflecting a healthy surplus cash position that positions us well to fund our expansion strategy. We maintain a very strong [ onus ] mindset with a consistent focus on cash conversion. This is reflected in our cash flow to EBITDA conversion of [Technical Difficulty] operating cash flow of INR 153 crores. Overall, if you look at the result, it reflects disciplined execution and capital allocation. With meaningful headroom in the global dialysis market, we remain focused on scaling responsibly, maintaining cash discipline and supporting sustainable long-term growth. With this, I'll open the floor for Q&A.

[Operator Instructions]. The first question is from the line of Sakshi Pratap from [ Wise Investments. ]

Congratulations on a great set of numbers. I truly appreciate the company you have built in the health care space. So my question is that you're present in the international markets, and I assume we have been able to generate healthier margins compared to the local players in that geography. So if you could throw some light on what edge does NephroPlus have over the local players to generate such healthy margins?

Yes. Thanks for the question. I think this reflects the platform that we have built in India over the last 16 years, right, Sakshi, wherein when we operate at a $20 price point in India, which is the world's lowest, we did not have any luxury of any inefficiency in the way we operate. So we have looked at each and every single cost item and optimized it very well. And with scale, it further continues to be optimized. There are 4 levers, I would say, that help us create this India platform play. First lever is, efficient cost structure for the consumables. In the emerging markets, consumables is the biggest cost item in dialysis service. So we have done multiple things such as negotiating with the global suppliers directly instead of distributors. We have figured out how to optimally consume material in each of these line items. Thirdly, we have also started doing contract manufacturing of some of the low complexity consumables. That's lever number one. Lever number two is we have figured out the optimal human resource staffing strategy, wherein we have set up training academies in every country that we operate. For example, in India, we have 10 academies across the country, which constantly create fresh paramedical staff that gets absorbed in our own network. Now with this efficient inflow of junior therapists, we manage the pyramid in each of our dialysis clinics optimally, wherein people who do not get promoted over a long period of time will move to the other players, other dialysis network while the pyramid is optimally maintained. And thirdly, the biomedical team that we have built in-house has significantly helped us reduce the biomedical cost compared to taking CMCs and AMCs from the manufacturers who are aligned towards larger repairs, more expensive repairs, we invest in preventive maintenance of our equipment. We figure out what is the most optimal repair that we need to do. We're using the spare parts we have in our warehouses. Thirdly, we also figured out how to revamp the machines to extend the life of the machines by another 3 to 4 years compared to the market. The fourth lever in the India platform story is the optimal usage of technology to reduce the overheads to manage a distributed network, be it overseeing quality, overseeing operations, overseeing financial audits. All these levers, we have optimized to have the much lesser overhead compared to other networks. These are the 4 levers, Sakshi. Hope this was helpful for your understanding.

The next question is from the line of Madhav Marda from FIL Industries.

My first question was on the Saudi business. Great to see that I think we've already got a contract there or about to win the contract. So could you give some sense in terms of how that ramps up for us? And how that business will shape up in the next 2 to 3 years?

Thank you, Madhav. Saudi -- we entered Saudi market 2 years ago in a joint venture with a publicly listed company, Tibbiyah. Over the time period, we have formed the company, we have established a team there. And then now as we speak, we are at a -- we have also signed up a captive unit with a partner hospital they call Riyadh Hospital. And at the moment, as we speak, we are in the license acquiring stage for that unit. So once we acquired the license, we would be demonstrating our capabilities in that country. And then eventually, you would expect the business to flow in. So Saudi to me is a couple of quarters from now, we would see the investments that we have done for the past 2 years will start translating into some revenue.

Okay. That's quite positive. So any sort of broad sense in terms of the next couple of years, how many patients -- how many guests that we could target in the Saudi market? Any broad thoughts would be helpful.

So Madhav, as I said, that we are at a stage of first establishing and starting our operations there. So once we have executed and demonstrated our service there, then only we would have a visibility of any other aspect there.

Understood. Understood. And the other question I had was in terms of the growth guidance that we've given. So revenue guidance is well received, 15% to 20%. On the margin side, next couple of years, I think we're already at 24.3%, like you said, adjusted for the cost for Saudi. Can margins directionally move higher? Even if you're not giving a quantitative guidance yet, like should we assume some improvement in margins over the next couple of years?

Yes, Madhav, this is Vikram. Essentially, the margins will be in that kind of level, right? If you open a new geography, then the first year of that new geography may pull down the margin by 1% or 150 basis points. But as the volume increases in existing geographies, the operating leverage kicks in. So reasonably healthy in that range is what I would say.

So you think with this current margins that we have, we should stay in that range given we'll be making some investments for new geographies as well.

Yes. I mean, roughly in that range, I would say, depending on how many -- how much new geography pans out, the initial investments or the initial time period that we need to invest there to get to steady state. But in that ballpark is a good way to look at it.

Got it. Sir, just last question from my side. Like in terms of the incremental growth that we expect in the next few years, the 15%, 20%, how much -- do we expect more of the incremental growth to come from the international markets or the India market? Or will they grow at a similar pace in the next 2, 3 years?

So Madhav, Rohit here. As we mentioned that you have seen the trend that in financial year '23, our international business contributed close to 12%. And now for these 9 months of FY '26, it is already 41%. So we expect this to be inching up slowly, again, depending on the geography and the quantum that we do. So it would be hard to kind of look at the ratio, but I think we have already kind of had a decent increase in this blend. But the next will be -- is a factor of any other geography that you open up. But we are positive of increasing our footprint in the existing places that we are already operating on.

Sir, the only reason I ask is if the international mix for us naturally moves higher in the next couple of years, that should anyway be margin accretive for the business, right, because international is a higher-margin business. So that should help the blended margin profile for the business, right?

Yes, we would want to believe so. But again, that's a factor of which market we enter into, what is the cost structure and how things are. So it's very hard to predict as of now. But as we take any steps, we'll kind of be able to give more light to that. But having said so, as Prashant has mentioned, all our decisions would be based on the ROCE factors that any investment that we do would be ROCE accretive and we will be conscious of that fact.

Got it. Sir, can I ask one last question on the capital allocation. Maybe next 1 year or 2 years, how much do we expect to invest organically? And on the inorganic side as well, if there's any framework that you could share, that would be helpful.

Madhav, this is Prashant Goenka here. I think as Vikram and Rohit mentioned, we are very focused on one metric, which is ROCE. Because ROCE account for all the capital that gets allocated and along with that working capital and AR cycle. So when we look at the projects, we very closely look at the ROCE profile. And at a portfolio level, at a platform level, we try to get into projects which are ROCE accretive in nature. So that has been the nature of our focus for the last many years, and that will remain the focus going forward. In terms of the capital expenditure, we typically invest anywhere between INR 100 crores to INR 125 crores historically. And like Vikram and Rohit mentioned, it's difficult to predict the future, but that's the historical number.

The next question is from the line of Devang Patel from Sameeksha Capital.

My first question was on the 13% growth in revenue per treatment that we had in Q3 Y-o-Y. Could you break that down into how much of that comes from price hikes we've got in different geographies? And how much of that has come because of mix change?

So Devang, Rohit here. Thanks for the question. As we said that we have had an increase in the proportion of international revenue to 41% here. So that has translated to higher RPTs. But at the same time, India also, we have been very conscious in selecting projects where the RPTs are at a company average range. So at NephroPlus, we look at the blended RPTs because that's the approach. It's a platform play. We don't break it as per geography or the regions. So probably in a short to medium term, one lever would play on -- in the second phase could be another lever playing in, but largely, the balance would be maintained. Hence, we would look at a platform level.

Could you give a guidance on what kind of growth one can expect over 3 years within the 15% to 20% revenue growth that you mentioned?

So RPT, typically, we would be very hard to kind of comment because dialysis as a business has a very lumpy price increases wherever geographies that we operate on. So once the prices increase stays there for some time, insurances or government as a payer, only cash area is where we have leverage of increasing. So it's a lumpy price increase. Hence, it's difficult for us to predict that what would be the RPT change in the coming years. But as I said, typically, we would be conscious of any new geographies that we open up, and that would also have a impact on the overall network level RPT.

Okay. Secondly, for Saudi Arabia, you mentioned average treatment cost is $300, but it's also a shop-in-shop model with a revenue share. So both things considered, is that geography going to be margin accretive for us versus what our other international geographies make on a steady state?

So good question. Again, any geography that we enter to, the basic fundamentals remain in place, right? So if we have decided to go or partner with any hospital, it has obviously cleared the internal thresholds to be starting operations there. So I can give that comfort that it has cleared internal thresholds. But having said so, given it's our first center and there are significant amount of investments in the team building that we have done there. So the real play that we will see would be a few quarters ahead, and we will get more clarity as we demonstrate our operations there.

Okay. And lastly, you mentioned operating cash flow of, I think, INR 153 crores. Could you just clarify 9-month OCF because first half was about INR 28 crores. And what kind of steady-state OCF to EBITDA conversion one can expect?

Yes. So as you rightly mentioned, 9-month OCF is INR 153 crores. Our OCF by EBITDA ratio for the 9 months is 65%. So I think it has been fairly healthy. And I think in our business, it's difficult to predict the OCF or give any guidance on the OCF by EBITDA ratio. But we have a very strong focus on a daily basis, we maintain a very, very strong intensity on converting all our earnings into cash, and it is reflected in our OCF number as well as the ratio number. So we will continue to focus on maintaining a healthy number as we have currently.

[Operator Instructions] The next question is from the line of [ Abdulkader ] from ICICI Securities.

Congratulations on a good set of numbers. Sir, my first question is with regards to your expansion. So basis on the disclosure, what we had done on the RHP, where are we in terms of expansion at the end of this quarter in India and in Philippines? And second would be in terms of acquisitions. So sir, I mean, what is the space exactly you would be more keen on acquiring assets, whether it would be in India on your private clinic side or it would be in Philippines, that would be of utmost importance to you?

Abdul, this is Rohit, this side. Thanks for the question. So to address the first part of it that are we in line on the expansion piece with our RHP, I think we are in line with our expansion. But a good way to look at our business would always be to look at the session count because ultimately, the revenues are multiplied by the session and the RPT. But to answer your piece, I think we are in line with the RHP that we -- the numbers that we have mentioned in the RHP. Second part on the acquisition front, I think we voiced it out in our strategy as well that we want to increase our footprint in our existing geographies. So if there is any interesting acquisition opportunity that is coming either in India or Philippines or any other place that we operate in, we would be very keen on. And if you are looking at any other new geography opening, we are absolutely flexible in all modes of growth, whether it is acquisition, whether it is partnering with government or taking participate in any of the project, NephroPlus has capabilities of that piece as well. So I think we'll be fairly flexible. But to answer your piece, we'll be keen in our existing geographies as well.

Got it. And sir, would it be possible for you to share what was your India region RPT growth for the quarter or for 9 months?

Abdul, the right way to look at it is that we keep it at the platform level so that -- because we have growth complementing from both areas. So we always observe it at the platform level. So I think consolidated is already shared.

The next question is from the line of [ Vivek ] from Emkay Global.

Congratulations, sir, on a good set of numbers. So I just wanted to get a deeper understanding of this business model. So in that context, I have a 2-part question. Firstly, with regards to the revenue mix and unit economics, could you break down the revenue contribution across captive PPP and stand-alone models? And within that, how do the economics look, in particular, the revenue sharing mechanics for the captive business and the rental expense, both as a percentage of sales for the stand-alone clinics? Add to that, also if you could briefly explain how revenues are recognized for the captive and the PPP models? And are any major captive contracts up for renewal in the near term? So that's my first question. I can go for the second question or you can answer this and then we can go to the second one.

Sure. Yes. I think in terms of the question around unit economics and other details, I think the right way to look at our business is at the consolidated level. As Vikram and Rohit mentioned, it's a platform play. It's the fact that we have been operating in India for the last 16 years at $22 price point in India. That has given us a platform that when we take it to international markets, we are able to generate higher margins than the local competition and also create a ROCE accretive returns for the company as a whole. So from a modeling point of view, if you are looking to model our company, I think the right way to look at the business would be to understand all the unit economics at the consol level and the details for which can be easily obtained from the financial statements that are uploaded on our website as well as the exchanges. I think you had a second question around realization, the renewal rate of the captive clinics. So in terms of the renewal rate of captive clinics, as Vikram mentioned, we have more than 300 hospital partners. We have 4 PPP contracts. Our renewal track record over the last 16 years has been very, very good in the high 90% range. And we anticipate to keep the renewal rate healthy as we move forward.

Yes. Just to add to Prashant's point on the renewal, we have had fairly high renewal rate, close to 95% plus in the captive and close to 100% in PPP. But -- that's the past, right? I think in general, what we need to understand is outsourcing, the hospitals realize that they don't make enough margins in dialysis and NephroPlus is putting in the CapEx, taking care of operational, hassle cost, delivering better net margins for them. So that theme continues. The logic continues, right? And there were a few instances where we did not renew a few contracts, wherein the hospital partners were not good pay masters. Ultimately, the quality of earnings is also important for NephroPlus. And every quarter, every few quarters, we ourselves terminate a few hospital partners, captive partners. So again, the onus always at Nephroplus is long-term focus, good quality of earnings, good sustainable relationships. We do not do anything for the short-term optimization. It's always for the long-term sustainable, better financials and healthy financials.

Understood. Just on the renewal part, if you could help me explain in the revenue share for the captive model, what is -- how does that revenue sharing model work? Like what is the percentage of our income that we share with the hospitals given that you said that we set up the clinic in the captive -- on the captive side of things as well. So if you could throw some light on that?