Fortis Health.

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 item^📎s increased 42.8% to ₹899 crores.

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.

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.

The diagnostics business, Agilus, demonstrated a significant turnaround, with its operating EBITDA margin (excluding one-off^📎s) 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.

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.

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.

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 item^📎s 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.