Fortis Health.

Fortis Healthcare's Q3 FY25 performance was largely driven by its Hospital business, which reported a 16.8% year-on-year revenue growth to INR 1,623 crores. The segment's operating EBITDA margin improved by 200 basis points to 20%, contributing significantly to the consolidated operating EBITDA of INR 375 crores (up 32% YoY). Key metrics like occupancy rate increased to 67% from 64% in Q3 FY24, and ARPOB saw a 9.9% increase, reaching INR 2.45 crores per annum, reflecting strong operational efficiency and a favorable case mix.

The Diagnostic business (Agilus) recorded a 3.5% year-on-year revenue growth, reaching INR 342.3 crores in Q3 FY25. While operating EBITDA improved to INR 49 crores (14.4% margin) from INR 33 crores (10% margin) in Q3 FY24, the segment's performance was still impacted by extensive rebranding efforts and associated marketing costs. Excluding these one-off^📎 expenses, the adjusted operating EBITDA margin stood at a healthier 21.3%. Management anticipates these rebranding expenses to taper off towards the end of the financial year, with a target of 8-10% growth by Q2/Q3 next year.

Fortis continued its portfolio rationalization strategy by divesting the Richmond Road Hospital in Bangalore in December 2024, a small facility that had incurred an INR 8 crore EBITDA level loss last year. This divestment is part of a broader strategy to improve overall profitability. Concurrently, the company is focused on brownfield expansion, with plans to add 350-400 beds year-on-year. The Manesar greenfield facility, which became operational this quarter, incurred an operating loss of INR 12-13 crores but is targeted to breakeven by Q1 FY26 at INR 9 crores per month revenue.

The company maintained a healthy balance sheet with a net debt-to-EBITDA ratio of 0.41x as of December 31, 2024. In December 2024, Fortis successfully raised INR 1,550 crores through non-convertible debentures. Leveraging these funds and internal accruals, Fortis consolidated its stake in Agilus by acquiring an additional 31.52% from private equity investors, increasing its total equity holding to 89.2%. Post this acquisition, the gross debt stands at INR 2,300 crores and net debt at INR 2,000 crores at the consolidated level.

Growth in the Hospital business was significantly driven by key specialties such as Oncology (30% growth), Neurosciences (18% growth), Cardiac Sciences, Gastroenterology, Orthopedics, and Renal Sciences, which collectively contributed 62% to the overall Hospital business revenue. International business revenue grew 17% to INR 132 crores, maintaining an 8% contribution. Digital channels also played a crucial role, with revenues from website, mobile applications, and digital campaigns growing 36% year-on-year and contributing 29.9% to overall hospital revenues in Q3 FY25.

Management provided guidance for FY25, targeting a Hospital business operating margin of around 20.5% and a Diagnostic business margin of 21-22%. For the medium term, ARPOB growth is expected to be in the 5-6% range, and overall hospital revenue growth around 14-15% year-on-year. The total annual capex requirement is estimated at INR 900 crores, with INR 600 crores allocated for expansion and INR 300 crores for maintenance. The consolidated tax rate, which was 9% this quarter due to a deferred tax asset booking, is expected to normalize to around 25% next quarter.