Fortis Healthcare Limited — Q4 FY25 earnings call

Call held 21 May 2025

Management summary

Fortis Healthcare delivered a strong financial performance in Q4 and FY25, marked by robust revenue and EBITDA growth, particularly in the hospital segment. Strategic initiatives included the acquisition of the Fortis brand, increased stake in Agilus Diagnostics, and significant bed capacity expansion. While net debt rose due to the Agilus acquisition, management remains confident in continued margin expansion and double-digit growth, despite ongoing exceptional items and legal costs.

Highlights

  • Consolidated Revenues for FY25 grew 12.9% YoY to ₹7,783 crores, driven by a 14.8% growth in the hospital business to ₹6,528 crores.

  • Consolidated Operating EBITDA for FY25 increased 25.3% to ₹1,588 crores, with the margin expanding 200 bps to 20.4% from 18.4% in FY24.

  • Hospital business operating EBITDA margins improved from 18.6% to 20.5% in FY25, contributing approximately 84% to both consolidated revenue and EBITDA.

  • Hospital occupancy improved to 69% in FY25 from 65% in FY24, leading to a 5% increase in occupied beds to 2,838.

  • The acquisition of the 'Fortis' brand and trademarks for ₹200 crores is expected to positively impact EBITDA margin by 0.3% by eliminating royalty payments.

Concerns

  • Net debt increased to ₹1,694 crores as of March 31, 2025, resulting in a net debt-to-EBITDA ratio of 0.93x, up from 0.17x on March 31, 2024, primarily due to NCD issuance for Agilus stake acquisition.

  • Exceptional items, with a net impact of approximately ₹89 crores for FY25 (₹54 crores for Q4), included impairment charges for Ludhiana 2 facility and Sri Lanka assets, partially offset by write-backs for Faridabad.

  • Legal and other legacy costs continue to impact the EBITDA margin by approximately 1%, with management expecting reduction only from next year onwards as court cases are resolved.

Key financials

  1. Consolidated Revenue ₹7,783 Cr +12.9%YoY
  2. Consolidated Operating EBITDA ₹1,588 Cr +25.3%YoY
  3. Consolidated Operating EBITDA Margin 20.4%
  4. PAT before exceptional items ₹899 Cr +42.8%YoY
  5. Hospital Occupancy 69%
  6. ARPOB ₹2.42 Cr +9%YoY

What they filed

Q1 FY27: revenue up 17.4%, net profit up 2.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,988 1,928 2,007 2,167 2,331 +17%2,265 +17%2,365 +18%2,545 +17%
EBITDA435 375 435 491 556 +28%506 +35%532 +22%537 +9%
Net profit193 254 188 267 329 +70%197 −22%271 +44%273 +2%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Hospital Business
    ₹6,528 Cr Revenue (FY25)20.5% Operating EBITDA Margin (FY25)₹1,701 Cr Revenue (Q4 FY25)21.9% Operating EBITDA Margin (Q4 FY25)
  • Diagnostic Business
    ₹1,407 Cr Gross Revenue (FY25)22% Operating EBITDA Margin (FY25, ex-one-offs)₹348 Cr Gross Revenue (Q4 FY25)23.4% Operating EBITDA Margin (Q4 FY25, ex-one-offs)

Capital allocation

high confidence
  • Capex ₹700 Cr
    • Capacity expansion
    • Augmenting medical infrastructure (high-end equipment)
    Just to highlight, our capital expenditure in financial year '25 stood at approximately INR 700 crores, reflecting our confidence to further scale up operations both in terms of capacity expansion and augmenting medical infrastructure.
  • Debt Net ₹1,694 Cr · 0.9× EBITDA
    • New borrowing Raised through issuance of non-convertible debentures to fund Agilus stake acquisition. ₹1,550 Cr
    Coming to the balance sheet side, the company's net debt on 31st March, 2025 stood at INR 1,694 crores, while the net debt-to-EBITDA of 0.93x as on March 31, 2025, as against 0.17x on 31st March 2024.
  • Dividend ₹1/share (final)
    To begin with, I'm pleased to inform that the Board has recommended a dividend of INR 1 per share, which is equivalent to 10% of the face value for the third consecutive year, subject to the approval of shareholders.
  • M&A Fortis brand and trademarks Acquisition · Closed · Consideration ₹[object Object] (cash)

    Strategic move to own the brand and eliminate royalty payments.

    Eliminates 0.3% EBITDA margin royalty cost, factored into 2% margin expansion guidance.

    Recently, the company successfully acquired the 'Fortis' brand and trademarks, for a consideration of INR 200 crores.
  • M&A Shrimann Superspecialty Hospital (Jalandhar) Acquisition · Pending regulatory · Consideration ₹[object Object] (cash)

    Strengthens presence in Punjab region, adds 228 beds with potential to increase to 450+ beds.

    Adds 228 beds, potential to increase to 450+ beds, increasing Punjab bed count to ~1,600 beds.

    As part of company's inorganic growth strategy, Fortis signed definitive agreement in February 2025 to acquire Shrimann Superspecialty Hospital in Jalandhar, Punjab along within adjoining land parcel for INR 462 crores. This acquisition will add 228 beds to our network and offers the potential to increase the facility's total capacity to over 450 beds. ... This transaction is expected to be consummated very shortly.
  • M&A 31.52% stake in Agilus Diagnostics Acquisition · Closed

    Consolidated stake in Agilus, FHL now holds 89.2% equity.

    Funded by NCDs (₹1,550 crores) and internal accruals.

    Leveraging these funds, along with internal accruals, we have consolidated our stake in Agilus by acquiring 31.52% stake from our private equity investors. As a result, FHL now holds 89.2% equity stake in Agilus.
  • M&A Richmond Road Hospital (Bangalore) Divestment · Closed

    Part of portfolio rationalization strategy.

    Third facility divested by the company.

    Continuing with the portfolio rationalization strategy, we divested business operation of Richmond Road Hospital in Bangalore in December of 2024. This is the third facility divested by the company after the divestment of Malar facility and Vadapalani facility in Chennai.
  • Liquidity Liquidity disclosed Brownfield expansion will be funded through internal accruals, without incremental debt.
    Yes. So there will not be any incremental debt for brownfield expansion. It will be funded through internal accruals. So there will be no incremental impact.

Guidance & targets

Revenue

  • Hospital Business Revenue Growth Revenue · FY26 · High confidence 14-15%
    Vivek this side. So, revenue-wise, we expect to grow around 14%-15%, similar number.

    — Vivek Goyal

ARPOB

  • Hospital Business ARPOB Growth ARPOB · FY26 · High confidence 5-6%
    So I'm expecting it will be the reverse this time, around 5%, 6% in the ARPOB growth and the balance is from the volume side.

    — Vivek Goyal

Volume

  • Hospital Business Volume Growth Volume · FY26 · High confidence 8-9%
    So I'm expecting it will be the reverse this time, around 5%, 6% in the ARPOB growth and the balance is from the volume side.

    — Vivek Goyal

Margin

  • Hospital Business Margin Expansion Margin · forthcoming years · High confidence 2%
    You can expect like 2% growth in the forthcoming years also, similar to what we have seen in the current financial year. So similar margin expansion growth we are expecting next financial year.

    — Vivek Goyal

  • Diagnostics Business EBITDA Margin (Net Revenue, ex-one-offs) Margin · a couple of years · High confidence 23% ultimately, moving towards 25%
    It should be around 23% ultimately and then moving towards 25% in a couple of years' time.

    — Vivek Goyal

Occupancy

  • Overall Hospital Occupancy Occupancy · forthcoming · Medium confidence 70-71%
    Yes, we are aiming around 70%-71% occupancy level at the overall level because this brownfield expansion is on the existing facility and these hospitals anyway operating at 50% type of occupancy level.

    — Vivek Goyal

  • Manesar Hospital Occupancy Occupancy · by the end of this year · High confidence 50%
    We expect that on the entire bed capacity, which is 120 plus 90, we will have about 50% occupancy by the end of this year. The exit should be at least 50%-plus occupancy.

    — Ashutosh Raghuvanshi

EBITDA

  • Manesar Hospital EBITDA Loss EBITDA · H1 · High confidence less than ₹20 crores
    Yes. So Manesar so first, I tell you about the Manesar drag. So Manesar, we have budgeted also the EBITDA loss of around INR20 crores for this, for the half year, it will be less.

    — Vivek Goyal

Capacity

  • Bed Capacity Expansion Capacity · next couple of years · High confidence 2,000 beds
    Our expansion strategy continues to focus on deepening our cluster presence. We plan to ramp up bed capacity by approximately 2,000 beds over the next couple of years.

    — Ashutosh Raghuvanshi

  • Bed Additions (Current Time) Capacity · current time · High confidence 1,000 beds
    And we will be adding around, how much, almost 1,000 beds in the current time.

    — Vivek Goyal

Costs

  • Legal & Legacy Costs Impact on EBITDA Margin Costs · from next year onwards · Medium confidence reduction

    From 1% today

    Yes. So the legal and other legacy cost is taking away almost 1% of our EBITDA margin. ... I think from next year onwards, we should see some reduction in this cost.

    — Vivek Goyal

Market context

  • Diagnostics Business Revenue Growth Revenue · henceforth · High confidence double-digit
    So, the brand change effect is now behind us, and we are seeing a double-digit type of growth number in the diagnostic business henceforth.

    — Vivek Goyal

  • Jaipur Hospital Margin Profile Margin · 6 months to year-end · Medium confidence healthy
    So, we expect that in 6 months to by the end of the year, we should have a healthy margin profile in Jaipur as well.

    — Ashutosh Raghuvanshi

What to watch in Q1 FY26

Hospital Business Margin Expansion

Next quarter and subsequent quarters
Current 20.5% in FY25, 21.9% in Q4 FY25
Target Continued expansion towards 22.5% (2% growth on 20.5%)

Why it matters

This is a key driver of overall profitability and aligns with management's core strategy for the hospital business.

You can expect like 2% growth in the forthcoming years also, similar to what we have seen in the current financial year. So similar margin expansion growth we are expecting next financial year.

Risks & concerns

  • Ongoing Legal and Legacy Costs

    medium

    Legal and other legacy costs continue to impact approximately 1% of EBITDA margin due to unresolved court cases and organizational structure simplification, with reduction expected only from next year onwards.

    Management acknowledged

  • Geopolitical Situation Impact on Medical Tourism

    low

    The current geopolitical situation may prevent similar high growth in international patient revenue this year, though the contribution is expected to remain stable at 8% of revenue.

    Management acknowledged

  • Impairment Charges

    low

    Exceptional items for FY25 included impairment charges for Ludhiana 2 facility and Sri Lanka assets, resulting in a net impact of approximately ₹89 crores.

    Management acknowledged

Q&A highlights

7 direct
Hospital Margin Expansion & Manesar Ramp-up Direct
You can expect like 2% growth in the forthcoming years also, similar to what we have seen in the current financial year. So similar margin expansion growth we are expecting next financial year. ... We expect that on the entire bed capacity, which is 120 plus 90, we will have about 50% occupancy by the end of this year. The exit should be at least 50%-plus occupancy. ... I think so. Even before that, we should expect a breakeven.

Management provided specific guidance on hospital margin growth for future years and detailed the ramp-up and breakeven expectations for the new Manesar facility, crucial for future profitability.

Asked by Neha Manpuria

Diagnostics Business Growth & Margins Direct
So, the brand change effect is now behind us, and we are seeing a double-digit type of growth number in the diagnostic business henceforth. ... It should be around 23% ultimately and then moving towards 25% in a couple of years' time.

Management clarified that one-off rebranding costs are behind them and provided clear targets for double-digit revenue growth and significant EBITDA margin expansion in the diagnostics segment.

Asked by Neha Manpuria

FY26 Hospital Revenue & Volume/ARPOB Mix Direct
So, revenue-wise, we expect to grow around 14%-15%, similar number. And this time last year, the year we have completed, we have seen 9% type of ARPOB growth and balance growth is coming from the volume. So I'm expecting it will be the reverse this time, around 5%, 6% in the ARPOB growth and the balance is from the volume side.

This question elicited specific guidance for FY26 hospital revenue growth and a detailed breakdown of the expected contributions from ARPOB and volume, which is vital for financial modeling.

Asked by Shyam Srinivasan

Quantification of Exceptional Items Direct
So that, along with there is some write-off impairment we have to take for our investment in Sri Lanka assets where, as you know, the Sri Lanka stock price movement and the currency movement both affect the carrying value of the investment. So these are the 2 big items. ... So, the total net impact is around INR 89 crores for this financial year. And for this quarter, it is INR 54 crores.

Management provided a clear quantification and explanation of the exceptional items impacting profitability, offering transparency on one-time financial adjustments.

Asked by Shyam Srinivasan

Expansion Strategy - Cluster vs Greenfield Direct
No. You see, we have already stated that our growth strategy is a cluster-based strategy. ... But out of choice, we are not going into any new geographies, Tier 2 or Tier 3 kind of geographies. But Punjab as a state is important to us. ... So we have been actively looking at it. Unfortunately, nothing has materialized so far. But we are pretty hopeful that at least few of those discussions we will be able to culminate into actual projects now. And those will be purpose-built hospitals.

Management clarified its strategic focus on cluster-based expansion and brownfield growth within existing geographies, while also acknowledging the pursuit of greenfield opportunities in specific markets like Mumbai.

Asked by Bino Pathiparampil

Low Margin Hospitals Turnaround & Margin Expansion Partial
For these hospitals to really come to the category of 20-plus is not something we have considered. We believe that the turnround of these 3 hospitals is going to take 6 months or 1 year or maybe longer. So we have not considered that when we say that we are expecting about 2% of increase in our profitability profile.

Management provided an update on the turnaround efforts for low-margin hospitals but clarified that their full recovery to 20%+ EBITDA is not factored into the immediate 2% margin expansion guidance, setting realistic expectations.

Asked by Prashant Nair

Fortis Brand Royalty Savings Direct
Yes. So, the royalty, as per the old agreement we are providing in the books till last year is 0.25% plus GST, which comes to around 0.3% impact on the EBITDA margin, positive impact on the EBITDA margin post acquisition of this brand. So that will be the impact of the brand acquisition, positive impact, 0.3% roughly on the net revenue of the hospital business. That has been factored in while I guided the margin expense of 2%.

The company quantified the financial benefit of acquiring the Fortis brand, detailing the 0.3% EBITDA margin improvement and confirming it's included in the overall margin guidance.

Asked by Abhishek Jain

Outlook on Legal & Legacy Costs Direct
Yes. So the legal and other legacy cost is taking away almost 1% of our EBITDA margin. And I will say that will continue till we're able to resolve these court cases because there is still 1 court case pending in Delhi High Court where the regular hearing is happening. ... I think from next year onwards, we should see some reduction in this cost.

Management acknowledged the ongoing drag of legal and legacy costs on EBITDA margins and provided a timeline for when investors might expect to see a reduction in these expenses.

Asked by Abhishek Wani

3 min read 7 chapters

Detailed narrative

Strong Financial Performance in FY25

Fortis Healthcare reported robust financial results for FY25, with consolidated revenues growing 12.9% year-on-year to ₹7,783 crores. This growth was significantly driven by the hospital business, which saw a 14.8% increase in revenues to ₹6,528 crores. Consolidated operating EBITDA surged 25.3% to ₹1,588 crores, leading to a margin expansion of 200 basis points, reaching 20.4% from 18.4% in FY24. The hospital business alone achieved an operating EBITDA margin of 20.5% and contributed approximately 84% to both consolidated revenue and EBITDA. Profit after tax before exceptional items increased 42.8% to ₹899 crores.

Strategic Acquisitions and Divestments

The company executed several strategic moves, including the acquisition of the 'Fortis' brand and trademarks for ₹200 crores, which is expected to yield a positive impact of 0.3% on the EBITDA margin by eliminating royalty payments. Fortis also increased its equity stake in Agilus Diagnostics to 89.2% by acquiring an additional 31.52% from private equity investors, funded by a ₹1,550 crore NCD issuance and internal accruals. Furthermore, Fortis signed an agreement to acquire Shrimann Superspecialty Hospital in Jalandhar for ₹462 crores, adding 228 beds with expansion potential to over 450 beds, while divesting Richmond Road Hospital in Bangalore as part of its portfolio rationalization strategy.

Capacity Expansion and Operational Improvements

Fortis is actively expanding its bed capacity, with plans to ramp up approximately 2,000 beds over the next couple of years, including around 1,000 beds currently being added. Key additions include Fortis Manesar (350-bedded, commencing operations in September 2024), 150 beds in Noida, and new capacity in Faridabad becoming operational in Q1. Hospital occupancy improved to 69% in FY25 from 65% in FY24, increasing occupied beds by 5% to 2,838. Digital initiatives, such as the rollout of the EMR outpatient module in 12 additional facilities, are enhancing patient care and operational efficiency.

Diagnostics Business Turnaround and Outlook

The diagnostics business, Agilus, demonstrated a significant turnaround, with its operating EBITDA margin (excluding one-offs) improving to 22% in FY25 from 19.6% in FY24, and reaching 23.4% in Q4 FY25. Management expects double-digit revenue growth for the segment going forward, driven by network efficiencies, infrastructure upgrades, and a focus on high-end tests. The company aims for the diagnostics EBITDA margin to ultimately reach 23% and move towards 25% in a couple of years, with the impact of brand transition now behind them.

Future Margin and Revenue Growth Guidance

Management expressed confidence in achieving a 2% margin expansion in the hospital business in the forthcoming years, consistent with FY25 performance. For FY26, hospital revenue is projected to grow 14-15%, with 5-6% attributed to ARPOB growth and the remainder from volume. The turnaround of low-margin facilities like Escorts Delhi, Jaipur, and Vashi is a focus area, with Escorts expected to stabilize around 15-16% EBITDA margin, though their full recovery to 20%+ EBITDA is not yet factored into the immediate margin guidance.

Debt Position and Capital Allocation Strategy

As of March 31, 2025, net debt stood at ₹1,694 crores, leading to a net debt-to-EBITDA ratio of 0.93x, an increase from 0.17x in the previous year, primarily due to the NCD issuance for the Agilus stake acquisition. Capital expenditure for FY25 was approximately ₹700 crores, allocated towards capacity expansion and medical infrastructure. The company plans to fund brownfield expansions through internal accruals, avoiding incremental debt, and has recommended a dividend of ₹1 per share for the third consecutive year.

Impact of Legal and Exceptional Items

The company continues to face legal and other legacy costs, which currently impact approximately 1% of the EBITDA margin. Management anticipates a reduction in these costs from next year onwards, contingent on the resolution of ongoing court cases and organizational structure simplification. For FY25, exceptional items resulted in a net impact of approximately ₹89 crores, primarily stemming from impairment charges related to the Ludhiana 2 facility and Sri Lanka assets, partially offset by positive write-backs for the Faridabad unit.

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