Unihealth Hospitals Limited (UNIHEALTH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to UniHealth Hospitals Limited H1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Samiksha Ramteke from Kirin Advisors. Thank you, and over to you, ma'am.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of UniHealth Hospitals Limited. From management team, we have Dr. Akshay Parmar, Managing Director. Now I hand over the call to Dr. Akshay Parmar. Over to you, sir.

Good afternoon, everyone, and thank you for joining us today. We've had a very exciting and encouraging first half to this FY, marked by strong operational momentum across our India and Africa businesses. Our hospitals, clinical programs, consultancy services and export and distribution verticals continued to perform well, supported by rising patient volumes, broader specialty coverage and a steady execution across all regions. This performance reflects the strength of our integrated India-Africa model and the clear progress we are making in expanding our footprint and enhancing the depth of our services. From a financial standpoint, we delivered a very strong performance in the first half. Consolidated total income grew by 55% to INR 70 crores, driven by healthy traction across our hospital operations and allied businesses. EBITDA more than doubled to INR 35 crores, supported by an expansion of 1,212 basis points in the EBITDA margin to 49.76%. The consolidated net profit for the period more than tripled to INR 28.6 crores with profit attributable to the equity shareholders of UniHealth Hospitals Limited, increasing from INR 5.12 crores to INR 15.1 crores. The company's EPS improved to INR 9.8, reflecting the profitability strength of our model. Our stand-alone performance was equally encouraging, with total income growing 80%, EBITDA rising 127% and the margins strengthened meaningfully to 69%. Overall, first half of this FY has demonstrated strong operational discipline, improving scale benefits and a clear positive trajectory as our India Africa platform expands. Africa continued to remain a strong pillar of our performance with Uganda contributing to the largest share of our growth. The expansion of capacity, addition of new clinics and strong demand across specialties, including orthopedics, spine, IVF among others, supported healthy traction to the first half. Our IVF and fertility services in Uganda also continued to gain scale, reinforcing our commitment to developing clinical depth in high-demand super specialty areas. At the same time, our India expansion is taking shape as planned. The commissioning of our 52-bed facility in Navi Mumbai was a major step. And our upcoming 200-bed Nashik hospital equipped with state-of-the-art intensive care units, modular and robotic operating theaters, advanced cath lab, comprehensive diagnostics and a complete range of specialty and super specialty clinical services is progressing well for commissioning early next calendar year. These facilities form the foundation of our India network and position us to scale up to 500 to 600 beds as planned in the Golden Triangle of Maharashtra over the next 24 to 36 months. From a broader industry perspective, government policies across India and Africa continue to create a strong tailwind for our business model. In India, higher healthcare allocations, expansion of Ayushman Bharat and the push towards digital health and AI-driven care, combined with the requirement of over 3 million new beds by 2030, align directly with our current and upcoming projects. Growth in e-health, medical tourism and clinical innovation further enhances our ability to deliver efficient tech-enabled care. Meanwhile, Africa's significant infrastructure gap, rising disease burden and a $30 billion investment requirement creates substantial opportunities for private providers. These structural tailwinds position us well to scale our India Africa network while addressing critical needs across both these regions. Our consultancy vertical continues to be a strong contributor with over 1,300 beds being extended to required services across India and Africa. This vertical not only adds high-margin revenue, but also strengthens our institutional partnerships and expand our project pipeline. Our pharmaceutical and consumables distribution business remains extremely active, supported by established India-Africa supply chains. With opportunities now being explored to also tap into the domestic distribution market, in tandem with the expansion of the footprint of UMC Hospitals in India, replicating the model and success that the company has achieved in Africa and aiming to expand the margins by ensuring effective resource allocation of the procurement and inventory management teams across these 2 verticals of the company, simultaneously also benefiting by lowering the cost of inventory for the hospital facilities coming up in India. Simultaneously, with the commissioning of our hospital in Navi Mumbai, we have reenergized our medical value travel segment and expect a steady flow of international patients from within the UMC Hospitals network across Africa to our facilities in India to being -- starting from the coming calendar year. Looking ahead, we remain committed to a disciplined and steady expansion plan. The new secondary care hospital in Mwanza, Tanzania, is expected to be operational by the end of this financial year. And we continue to add super specialty services and new clinics in Uganda. Over the next 2 to 3 years, we expect to add another 400-plus beds in Africa through greenfield facilities and strategic partnerships. A stronger balance between India and Africa will be an important step for us as new facilities come on stream. We also remain focused on margin improvement through operational efficiency and optimized service mix and scale benefits. In parallel, we are building centers of excellence in critical care, orthopedics and spine, ophthalmology, oncology, cardiology and diagnostics, where long-term demand remains strong across both Indian and African markets. With the commissioning of facilities in India, we are also moving forward towards the intended aim to ensure an optimized geographical balance to the consolidated revenue that the company generates, contribution to the consolidated top line of the company not being more than 1/3 from a single country overseas, allowing the company to minimize and mitigate any perceived geopolitical or currency depreciation risks in the future. Considering that a larger proportion of the payer mix from our patients in India will be from cash and insured segments, the company in the coming few quarters anticipates better cash flows and expects the trade receivable days on a consolidated basis to start coming down. Furthermore, with the company having completely repaid its bank debt in Uganda as of 30th September 2025, going forward, it expects significant free cash flow to be available to the Uganda unit to allow it to allocate a part of it towards capital investments needed to add boost to super specialties and expand its clinical network, while simultaneously also use the funds to repay part of the debt extended to the unit by Unihealth Hospitals Limited, allowing the company to reallocate these funds for expansion in India and Tanzania. Overall, we are steadily moving forward towards our medium-term vision of 1,000-bed integrated India-Africa healthcare platform. With clear visibility on commissioning time lines and consistent progress across all business verticals, we believe we are well positioned to deliver sustainable growth while expanding access to quality, affordable healthcare across underserved regions. I thank you for your time, for your trust that you continue to place on us. The first half of financial year 2025-'26 has reinforced the strength of our model, and we remain focused on disciplined execution across all markets. We appreciate your engagement, and I would now be pleased to take any questions that any of the participants may have. Thank you.

[Operator Instructions]. The first question comes from the line of Shubham Jain from Ayu Health.

Congratulations on a good set of numbers. I have a couple of questions. First question is that in the last con call, you have said that the Navi Mumbai and Nashik Center, like one of them will be operational by July and then other one by December and January. But I think due to certain delays, I think now further dates have been revised. So sir, what is the date that now you are looking at for the commissioning of these two hospitals in India?

So Navi Mumbai, we had anticipated it to be operational by July. We became operational in the first week of October. Actually in Dussehra, we did a soft launch and we became operational. The delay was due to certain statutory approvals, which took time. Unfortunately, by the time we put in all the papers for the approval, the corporation offices were in a festive mode for Ganpati followed by Navratri, and that led to a little bit of a delay. But now we are fully operational, and we are accepting patients across all specialties at Navi Mumbai. Regarding Nashik, the intended plan was December. We still are working towards it. The facility is nearly complete. Installations of various equipments are going on right now. This process will be completed by December. Statutory approvals, again, are something that the applications have begun with. We are waiting for an exact time line related to that. Based on our experience in Navi Mumbai, we anticipate that some of these statutory approvals might take a bit longer. And that is the only reason that we've redefined the commissioning date to next calendar year. We are looking at maybe sometime around January, February for all approvals to come in and commission the services in totality. One more point, it's a 200-bed facility, but we are phasing out the commissioning. So we will be commissioning the complete facility with all services at one go because we do not want to start with OPDs and then defer inpatient services or other specialties to a later date. And that is also one more reason why there may have been a small delay, both in Navi Mumbai and a possibility of the same in Nashik, so that everything is onboarded at the same time.

Got it. Sir, another question is that, obviously, I mean, the results have been great. But basically one of the concerns that at least I had was the receivables have increased to INR 112 crores, right, in the September results that we have seen. So sir, just wanted to understand like what is the aging of the receivables? And are the receivables primarily from the Africa region? And because what -- at least my understanding is that hospital is a very working capital-intensive business. So to manage the working capital, are you going to raise some debt as we grow? Or are we going to manage this internally?

Right. So in terms of the total debtors, you rightly mentioned, it's about INR 112 crores as of 30th September. Since right now, for this period, majority of our revenues from the hospital segment continue to come from Uganda. The debtors also, the largest proportion is from the Ugandan entity. Of this INR 112 crores, a major proportion of the debtors is the Uganda People's Defense Forces, which is the Ministry of Defense, Uganda, for which we have been the preferred hospital and healthcare partner over the years. So of the INR 112 crores, almost INR 82-odd crores -- INR 82.08 crores is the outstanding to be received from the Ugandan Ministry or the Ministry of Defense. Now over the last few years, 3 to 4 years that we have been catering to them with respect to the healthcare services, there has never been a challenge with respect to under recovery or the risk of bad debt because that is eventually the government of Uganda, which is the payer. And their cycle for payment is between about 9 months to 12, 13 months, but the payments come in that cyclical manner over the years. So even right now, as we speak, the payments till September 2024 are all clear, and we are expecting payments for the next 2, 3 months to be received before the end of December. And that is the cycle that they have followed because of which we've got these debtors. Going forward, like I just mentioned in my opening remarks as well that with Indian operations coming in, with operations coming in from Tanzania sometime in the coming years, the consolidated debtors, though the number may increase a little, the trade receivable days will start coming down because in India, we will be looking mainly at cash and insurance patients. So even if I'm talking about insurance segment, the payments out here have come in about 30, 35 days on the higher side. So that will allow us to improvise on the cash flow considerably as we go forward on a consolidated basis.

Understood. Sir, if I can ask just one more question? I saw that the EBITDA margins have improved a lot. Is there any particular reason? And can we assume that the margins have gone -- are we sustainable as we move forward? Or like what will be the sustainable OPM margin that we can look at?

So there is a specific reason to the increase in the EBITDA margin. In the health care industry, typically, what happens is that you've got certain fixed costs. So once we -- the first, what we call, critical point is your breakeven point. Post that, you start turning profitable or EBITDA positive. Now as the revenue starts growing, these fixed costs remain the same. The addition, say, of INR 100 worth of revenue, the only added expense is going to be the cost of inventory or the cost of sales, that the medicines and the consumables. The cost of manpower, which accounts for almost 1/3 or more of the total cost does not really change drastically because we are not adding in additional nurses or technicians or senior management members to cater to this increased revenue because this increased revenue is mainly due to increased occupancy and addition of super specialty. So out here, overall, when we increase that revenue, the proportion of expense for that particular revenue jump is less than 50%, that allows a very high EBITDA margin for the increased revenue, which then reflects on the total EBITDA margin. So that is the reason. Now for the mature entities, yes, these EBITDA margins more or less will be sustainable. I will not say that will be exactly at the same level because there are fluctuations depending upon different seasons and a variety of other factors. But yes, for the mature businesses, for example, Uganda, more or less with a deviation of about 1.5 to 2 percentage, the EBITDA margin will remain the same. Where on a consolidated basis, a slight dip is expected due to the rapid expansion that we are undertaking. So with the addition of newer facilities in India and expanding facilities in East Africa also, the initial 12 to 18 months when these facilities are actually being set up and operations have just begun, the patients have just started coming in, at that point of time, the EBITDA margins for these units will be pressurized to some extent till we achieve the breakeven point and go beyond. So at that point of time, on a consolidated basis, the top line will increase considerably because of the addition of this revenue, but the margin, the EBITDA percentage is likely to come down, which will then, again, start climbing up once these units become mature units in a period of about 18 to 24 months.

Got it. And sir, is there any ballpark figure? Like as you scale the Indian business, like what margins we can see at the EBITDA -- the OPM margin?

I would not comment on UMC Hospitals, but typically, as an industry, if I look at the segment in which we are, so we are talking about hospitals, which are in the 50- to 200-bed tertiary care segment, you have EBITDA margins ranging between 18% to 24% and then climbing up as you achieve scalability, as your brand grows to somewhere closer to 30%. So if I talk about Max, Apollos, the big giants, they will be 30% plus/minus. If I look at one step lower, they will be in the range of about 24%, 25%. So the ideal margins ranges between 18% to 30%, 31% for an Indian health care setup for tertiary care specialty hospitals, I mean super specialty hospitals. In our case, we will also be looking at the same range. Achieving that would be a time line of somewhere between 12 to 36 months in a growing manner.

[Operator Instructions] The next question is from the line of Harshit Khadka from RoboCapital.

Am I audible?

Yes.

Congratulations on a good set of numbers. Sir, my first question is on taxation. We can see that the tax for H1 and even for FY '25 remains quite low. So could you help us understand the key reasons behind it? And what should be a sustainable tax rate going forward?

So the reason why the taxation remains quite low is that effective 1st of July 2024, the company received an income tax holiday for a period of 10 years for its Uganda business. I would have mentioned it even earlier in my previous earnings call. And because of this, the income tax that we need to pay is not there anymore for Uganda, which is the most profitable unit for now. So that results in a significant tax savings for the company and the group on a consolidated basis. But as we go forward, definitely, the tax amount will start creeping up as other business units start becoming profitable because we do not have a tax break or a tax holiday in India or at the moment for any other unit in Africa, which is in Tanzania. So other than Uganda, there's no tax holiday. But yes, right now, Uganda contributes majorly to the top line. And we've got a 10-year tax holiday effective 1st of July 2024 to 30th of June 2034. So that benefit will continue to be there for the coming 9 years also.

So my second question is on the Indian operations. So FY '27 will be the first full year of operations for both our hospitals, Navi Mumbai and Nashik. So what would be the level of revenues you are targeting from both the hospitals? And what would be their margin profile look like regarding -- as it is a first year of operations, so would the margins be lower or in what range would they be?

So yes, that will be the first full year. Now Navi Mumbai is already commissioned. So with the start of that financial year, Navi Mumbai more or so would be a stable operation to a large extent. That is a smaller facility. It's a 52-bed facility in a catchment area, which has the perfect requirement for a facility that we've put up. So for the next financial year, I do expect a 60% to 70% occupancy rate for this particular facility, effectively giving me an occupied bed strength of about 30 beds on a daily basis. The expected or the targeted -- not expected, the targeted revenue to be achieved would be in the range of about INR 25,000 to INR 28,000 as the average revenue per occupied bed per day, which translates to nearly about INR 1 crore on an annualized basis. So yes, for Navi Mumbai, the targeted revenue would be somewhere beyond INR 30 crores for that financial year. And from there on, then we will be looking at growth in the numbers based on improved revenue -- I mean, improved occupancy and addition of certain super specialty procedures at that point of time. When it comes to Nashik, with the start of the next financial year, it would also be just about the commissioning period of that hospital. So I will be discounting the first quarter, which we will be perhaps not having a very high occupancy rate. Effective from the second quarter onwards, I do expect Nashik to achieve an occupancy of somewhere around 50%. Since it's a bigger facility, it is not going to be extremely easy to achieve 65-odd percent occupancy to begin with. So of the 200-bed capacity, I do expect about, say, 90 to 100 beds to be occupied on a daily basis for at least 3 quarters. The targeted revenue generation per bed for the first year for Nashik will also be very similar, which is about INR 25,000 to INR 28,000 per day for each occupied bed, translating to about INR 1 crore on an annualized basis. So yes, for Nashik, if I am to look at it at about 85 to 100 beds on a daily basis occupied, then I will be targeting a revenue of about INR 100-odd crores from that facility. So, safe to say, both these facilities put together, next financial year, the target internally for the management would be to achieve at least INR 125-odd crores in terms of the top line.

Got it, sir. And what would be their margin profile look like?

So the margins, like I mentioned right now, on an industry average, it's about 18% to 30%. For the first year, obviously, they will be pressurized significantly. There will be higher costs in terms of marketing and everything, onboarding of certain consultants. So from that perspective, initially, we expect the EBITDA margins to be on the lower side. So we will be targeting an EBITDA between 15% to 20%. That would be the sweet spot for us to achieve. Operational breakeven for all the facilities that we've put till date, all business verticals that we've put till date over the last 15 years of the company, we've achieved an operational breakeven within the first year. And the idea for the team is to replicate that even for the new units that we are putting up. So Navi Mumbai or Nashik, the target would be to breakeven within the first year. So yes, about 15-odd percent would be the ideal EBITDA that should be achievable for both these facilities put together for that financial year, somewhere around 15% to 18%, I would say.

The next question is from the line of Hitesh from LTI Mindtree.

Congratulations on the good numbers. I think most of the questions have been answered, but I just want to know like this 52-bed hospital, how are the margins that will go? So you mentioned like it will be like 12 to 36 months, but how will the margins look like in the first year?

Like I mentioned just recently, the margins for the first year, we will be targeting an EBITDA margin of somewhere around 15% to 18% for the first year of operations. Now if I'm to break it up, in Navi Mumbai, I may be expecting a slightly higher margin compared to Nashik. Two reasons; one, it is a smaller facility. So from an operational perspective, it is way easier; and second, it is in a very sweet spot when it comes to the location. The consultants who've already gotten empaneled with the facility, they are among the big names in the region, and they are very, very comfortable with the infrastructure that we've developed. So putting all these things together, I do expect the margins to cross 20% for FY '26-'27 for Navi Mumbai, we inch towards 24%, 25%. But on a consolidated basis, between Navi Mumbai and Nashik, the target would be somewhere between 15% to 18%.

Okay. And it's been almost 1, 1.5 months. How do you see the response of this facility?

The response has been encouraging. I wouldn't say that the numbers are big. We started with Dussehra as a soft launch. Initial couple of weeks, we did not really encourage too many patients. It was a period that we utilized to invite all our empaneled doctors and surgeons to come in, see the facility once it was ready, give their feedback on what the gaps were in terms of certain instruments, certain tools, certain equipments that they would need when they undertake procedures and surgeries at our facility. So the first month was mainly spent towards this and catering to basic outpatient services on a diagnostic basis. Now we are equipped completely. The feedback from all the doctors have come in and have been catered to. So hopefully, in terms of proper numbers, I expect these to start flowing in sometime from mid-December onwards. So in the month of December, we are planning to launch what we internally call the UMC Health Mahotsav, which will actually launch the facility in the region in terms of a widespread marketing campaign, following which we do expect a sizable number of patient base to start coming in.

And going forward, which geography would you want to focus more? Like currently, we have Uganda majority in our top line and bottom line and India will soon contribute in a healthy manner. So what will be our focus area? Will it be Africa? Will it be India? Will it be both? How do you see it going forward? And what revenue split do you expect in these geographies going forward in the medium term?

So in the medium term, our focus will be equally spread across both these. Both have their reasons and challenges and benefits. So when it comes to India, the opportunity to scale up significantly in terms of the numbers is there. When it comes to Africa, it's a higher margin game out there because scalability is not easily achievable because the population metrics is very different. The payer mix is very different. To scale up, you need to jump from one country to the other, which changes almost everything, right from rules and regulations to the geopolitical requirements. So out there within the same country, the opportunity lies in adding super specialty services, which are lacking out there and playing on the margin that we can achieve. Whereas in India, the opportunity lies in scaling up higher. So out here, it will perhaps not be possible for anyone to achieve a 35%, 40% EBITDA margin in the healthcare setup. But what is achievable is going from a 500-bed capacity to a 5,000-bed capacity in an extremely short tenure period. So you've got opportunities right from greenfield to brownfield to acquisitions out there. So for us at Unihealth, the focus will be both so that we have a very healthy mix. We have the advantage of being the first-mover in Africa. So there's no real competition when it comes to a peer from India having a presence in the geographies that we are. So we would like to capitalize on that position, derive strength from there in terms of the profitability and the margin and use that to allow us to expand rapidly in India. So maybe going forward, in terms of absolute numbers, top line and bed capacity, maybe in a 5- to 7-year period, India would contribute more compared to Africa. But when it comes to a consolidated profitability, the margins in Africa on an EBITDA level might be slightly higher than they will be in India. Second, from a promoter and management team perspective, like I am based out of Mumbai, Dr. Anurag, the other promoter, he is based out of Uganda. So he relocated to Uganda in 2017, and he's based out of Kampala, which gives the company considerable strength in pursuing this expansion plan simultaneously in Africa and India because we've got one half of the company, which is based out of Kampala, allowing us to expand rapidly in East Africa. The other half based out of Mumbai, allowing us to expand in India. Third, over the last 7 years, I mean, when we started, connectivity was still a small challenge. There were no direct flights to a lot of places, including Uganda. But as we speak today, we've got direct connectivity, direct flights flying from Mumbai to the entire East African belt. So whether it's Tanzania, Dar es Salaam, whether it's Uganda, which is Entebbe, Kenya, which is Nairobi, Ethiopia, which is Addis Ababa, you've got direct flights. So it's a direct 5.5-hour flight, allowing the management team also to crisscross effectively without wasting too much time, allowing us to ensure that our doctors are also able to travel frequently to do OPD camps, to do surgical camps at UMC facilities in Africa, which is allowing us to scale up our super specialties out there. And the last bit, Unihealth started as a medical value travel company, which is where the initial strength of the management and the team was. And that is now getting reenergized between UMC Hospitals to begin with. So going forward, we're going to have a lot of super specialty work, which will be referred from our own facilities in Africa to our facilities in India. This will not only give us a jump in the revenue, but considerable margin addition will also happen because these patients, like any other medical tourist in India, will be charged higher than a domestic patient. And that margin addition will also be significant because it is a 2-way, this thing. It is from a UMC facility to another UMC facility, we do not really have any person who's referring a patient or any professional company where a fee is payable. So from that perspective, the scenario for medical tourism within the network also will start working very well for the group in the coming 12 to 24 months.

The next question is from the line of Ankur from Genuity Capital Markets.

Doctor, what is the constant currency growth, revenue growth this H1, if I ignore the currency movement?

The currency fluctuation in terms of the top line would take away about, I think, INR 1.2 crores, INR 1.3 crores. That is the foreign exchange gain loss -- or rather the gain that the company has had during this period. So that would be the difference. Other than that, it remains the same. So if I'm talking about a INR 66-odd crores top line, then about INR 1.2-odd crores has to be negated from that.

Can you just run this by facility by facility, which facility has shown the maximum growth in revenue year-on-year?

Right now, to be true for this H1, the major facility or the major operational facility has been only Uganda. 89% plus revenue contribution has come in from the Ugandan unit. So the other units were mainly not towards the hospital side. They were towards consultancy services, pharmaceutical and distribution. So from a hospital healthcare -- I mean, from a hospital service perspective, it's mainly Uganda for this H1.

And which of these, let's say, 3, 4 contributors have seen the maximum year-on-year growth?

So almost all verticals have seen, consulting services would not have increased in the same manner in the same proportion. The highest growth was from the hospital segment. Then came in the pharma and distribution segment and then the consultancy segment in terms of absolute growth.

So Uganda, what was the occupancy in H1?

Occupancy in H1 was -- yes, it was roughly around 72%.

And how many beds?

120 beds is the total strength that we have. And the average occupancy was about 72%, so about 85, 86 beds on a per day basis.

And what was this in H1 last year?

Last year H1, the occupancy was somewhere around 62%, 63% -- 62.4%, 62.5%.

And then how many beds last year?

The same bed capacity, 120. We haven't expanded till now. Going forward, we will be expanding the bed capacity. So we are in the process of exploring the opportunity to add certain secondary care centers. So we will not be expanding bed capacities in the same unit, but we may be adding -- like we're adding clinics, we may be open to adding certain secondary care facilities, which may be in the range of 15 to 25 beds where the primary and secondary care services will be provided. And for tertiary care services, the patients will be referred to the main hospital.

And what is the ARPOB jump?

Last year, it was somewhere around INR 24,000, INR 25,000. This first half of the year, it was just about INR 40,000 plus.

And what drove such a significant jump in ARPOB?

Addition of certain super specialties, addition of ICU beds. So what we did was though on an absolute number, we've not really added beds. They remain at 120. We've reconfigured some of the beds internally and created ICU -- expanded the ICU services. So one, ICU because they bill more. Second was addition of super specialties like IVF since January, which actually took traction post April. And third was, we've increased the frequency of our Indian doctors flying in to Uganda to do surgical camps. So we've had a spine surgeon who has been flying in almost every 6 weeks for the first half of this year, and that has allowed us to expand rapidly on the spine and ortho department and increase revenues from there.