Healthcare Global Enterprises Limited — Q3 FY25 earnings call

Call held 6 Mar 2025

Management summary

HCG reported strong Q3 FY25 results with 19% YoY revenue growth and 23% PAT growth, driven by robust performance in emerging and established oncology centers. Despite seasonal weakness and geopolitical impacts on international patient volumes, the company maintained a healthy 16.5% adjusted EBITDA margin. Management expressed confidence in continued growth, margin expansion, and the strategic partnership with KKR to drive long-term expansion and focus on precision oncology and research.

Highlights

  • Revenue grew 19% YoY to INR 559 crores, indicating strong business momentum.

  • Adjusted EBITDA increased by 15% YoY to INR 92.3 crores, with PAT growing 23%.

  • Emerging centers demonstrated robust performance with 25% YoY growth, including Kolkata at 40% and South Mumbai at 28%.

  • Patient bed occupancy rate improved from 52% in Q3 FY24 to 55% in Q3 FY25, reflecting better facility utilization.

  • OPD footfall increased by 9% and chemotherapy sessions grew by 19%, showcasing rising patient trust and engagement.

Concerns

  • Adjusted EBITDA margin for Q3 FY25 stood at 16.5%, a dip from Q2's 18.5% due to seasonal festivities and holidays.

  • South Mumbai center's international business was subdued due to geopolitical issues and medical visa restrictions, impacting profitability.

  • Milann business revenue continued to decline, though a turnaround is anticipated.

Key financials

3 periods

Headline

  • Revenue
    ₹559 Cr
    YoY +19%
  • Adjusted EBITDA
    ₹92.3 Cr
    YoY +15%
  • Adjusted EBITDA Margin
    16.5%
  • PAT Growth
    23%
    YoY +23%
  • OPD Footfall Growth
    9%
    YoY +9%
  • Chemotherapy Sessions Growth
    19%
    YoY +19%
  • Patient Bed Occupancy Rate
    55%
  • Total ARPOB
    ₹44,284
    YoY +3.5%

9M

  • FY25 Revenue
    ₹1,638 Cr
    YoY +16%

9M FY25

  • Effective Tax Rate
    3%

What they filed

Q1 FY27: revenue up 13.4%, net profit up 166.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue554 559 585 613 647 +17%633 +13%652 +11%695 +13%
EBITDA102 88 106 108 123 +21%110 +25%125 +18%122 +13%
Net profit21 8 7 6 21 +0%-8 −200%4 −43%16 +167%
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

  • Oncology Business (post MG Hospital Vizag)
    24% Growth
  • Emerging Centers
    25% Revenue Growth65% EBITDA Growth₹66,000 ARPOB12.3% ARPOB Growth
  • Kolkata Centers
    40% Revenue Growth42× EBITDA Growth
  • South Mumbai Center
    28% Growth
  • Established Centers
    20% Revenue Growth14% EBITDA Growth₹42,798 ARPOB2.8% ARPOB Growth
  • Borivali Center
    11% Growth
  • Core HCG Centers (ex-Milann)
    21% Revenue Increase16% EBITDA Growth20% EBITDA Margin
  • Oncology Centers (ex-Milann, multispecialty, MG Vizag)
    18% Revenue Increase14% EBITDA Growth21% EBITDA Margin

Capital allocation

high confidence
  • Capex ₹275 Cr
    • Already deployed for FY25 ₹172 Cr
    Our capital expenditure for the year is estimated to be INR275 crores, of which INR172 crores has already been deployed.
  • Debt Gross ₹1,500 Cr · Net ₹650 Cr
    Debt levels, currently, we are very comfortable with all the banking covenants that we have. What you mentioned includes capital leases. However, if we were to exclude capital leases, then our net debt, particularly from the banking, is about INR650-odd crores.
  • M&A MG Hospital Vizag Acquisition · Integrated

    Instrumental in enhancing our footprint in the region, allowing us to further expand our services and strengthen our presence in one of the key markets for cancer care.

    Contributed INR25 crores with an impressive margin of 24%.

    During the quarter, we consolidated operations of MG Hospital in Vizag. This acquisition has been instrumental in enhancing our footprint in the region... Mahatma Gandhi Memorial Hospital, which contributed INR25 crores, with an impressive margin of 24%.
  • M&A HCG (majority stake) Acquisition · Announced

    KKR acquired majority stake from CVC, becoming a new partner for long-term growth.

    KKR will acquire up to 54% of equity in HCG from CVC. Upon completion of the transaction and open offer, KKR is expected to hold an equity stake of between 54-77%.

    CVC has sold its majority of the stake to KKR. And at this point, we welcome KKR as our partner... KKR will acquire up to 54% of equity in HCG from CVC. Upon completion of the transaction and open offer, KKR is expected to hold an equity stake of between 54-77%.

Guidance & targets

Profitability

  • EBITDA Margin Expansion Profitability · next financial year · Medium confidence 1% to 1.5%
    So the margin from current levels, we should see expanding in the next financial year, close to about 1% to 1.5% compared to FY25

    — Ashutosh Kumar

  • South Mumbai Center Loss Reduction Profitability · next financial year · High confidence at least INR 1 crore
    However, we do expect the reduction of losses in South Mumbai by at least INR1 crores, and by quarter 1 of next financial year, we should be seeing the center breaking even and expand from there.

    — Ashutosh Kumar

  • South Mumbai Center Breakeven Profitability · Q1 next financial year · High confidence breaking even

    — Ashutosh Kumar

  • South Mumbai Center FY25 EBITDA Loss Profitability · FY25 · High confidence INR 10-12 crores
    South Mumbai it will be in the range of almost about INR10 crores, INR10 crores to INR12 crores.

    — Ashutosh Kumar

Volume

  • Established Centers Growth Volume · going forward · High confidence 13% to 14%
    So I think we should continue to grow upwards of 13%, 14% in our established centers.

    — Ashutosh Kumar

Revenue

  • International Patient Business Recovery Revenue · Q4 FY25 · Medium confidence Q2 level
    We expect Q4 to go back to Q2 level, and then going forward, in the coming year, we feel that, that should get normalized.

    — Raj Gore

  • International Patient Business Contribution Revenue · going forward · Medium confidence 3.5% to 4%
    So it is about 3.5% to 4%, and we expect it to maintain that going forward.

    — Raj Gore

Capex

  • Annual Capex Capex · FY25 and FY26 · High confidence INR 275-280 crores
    Primarily, in the current year, FY '25, and next financial year, FY '26, is where we are expecting lumpy capex to happen, which would be in the range of almost about INR275 crores to INR280 crores per annum.

    — Ashutosh Kumar

  • Maintenance Capex Capex · per annum · High confidence INR 100 crores
    Of that, close to about INR100 crores per annum would be about our maintenance capex.

    — Ashutosh Kumar

  • Post FY26 Maintenance Capex Capex · post FY26 · High confidence around INR 100 crores (with inflation)
    Post that, it should normalize to around about INR100 crores of maintenance capex thereafter, with some inflation in that.

    — Ashutosh Kumar

What to watch in Q4 FY25

South Mumbai Center Breakeven

Q1 next financial year
Current FY25 EBITDA loss of INR 10-12 crores
Target Breakeven

Why it matters

Turnaround of this key emerging center is crucial for overall profitability and growth.

However, we do expect the reduction of losses in South Mumbai by at least INR1 crores, and by quarter 1 of next financial year, we should be seeing the center breaking even and expand from there.

Risks & concerns

  • Geopolitical issues impacting international patient business

    medium

    Geopolitical issues and Indian government restrictions on medical visas for Bangladesh impacted international patient volumes, particularly in the South Mumbai center, leading to a subdued Q3 performance.

    Management acknowledged

  • Milann business revenue decline

    medium

    Milann's revenue declined due to its former founder starting new competitive centers nearby, particularly in Kumara Park and J.P. Nagar.

    Management acknowledged

  • Seasonality impacting Q3 margins

    low

    Q3 is a seasonally weak quarter due to festivities and holidays, leading to a slight dip in EBITDA margin from Q2's 18.5% to 16.5%.

    Management acknowledged

Q&A highlights

8 direct
KKR Stake and Promoter Classification Direct
KKR will acquire up to 54% of equity in HCG from CVC. Upon completion of the transaction and open offer, KKR is expected to hold an equity stake of between 54-77%, and this is based on what happens in the open offer. I will be also classified as co-promoter.

Clarifies the new ownership structure and Dr. Ajai's continued role as co-promoter, addressing concerns about control post-acquisition.

Asked by Aditya Khemka

Dr. Ajai's Role Post-Transaction Direct
I will be Chairman of the Board, and with clear involvement in clinical excellence, research, and academics. I will not be as of now also, my role in operations is very limited. So certainly, I will be limited or not in operations, sir.

Details the shift in Dr. Ajai's role from executive capacity to a focus on strategic areas like research and academics, indicating a leadership transition.

Asked by Aditya Khemka

Next Year Margin Trajectory Direct
So the margin from current levels, we should see expanding in the next financial year, close to about 1% to 1.5% compared to FY25

Provides specific guidance on expected margin improvement for the upcoming fiscal year, including the impact of new centers.

Asked by Gautam Rajesh

South Mumbai Center Turnaround and FY25 Loss Direct
However, we do expect the reduction of losses in South Mumbai by at least INR1 crores, and by quarter 1 of next financial year, we should be seeing the center breaking even... South Mumbai it will be in the range of almost about INR10 crores, INR10 crores to INR12 crores.

Offers a clear timeline and financial target for the turnaround of a key emerging center, addressing concerns about its current profitability.

Asked by Sagar Tanna

Milann Business Strategy and Turnaround Direct
But I'm happy to say that things are turning around... we are very happy to report that we have a strong andrology department in Milann which will really propel our growth... And now I believe we are over that cycle, and we will see significant improvement as we move forward. And also, we will look at the opportunity to divest at the right time.

Explains the strategy for the Milann business, highlighting a new growth area (andrology) and the potential for eventual divestment, clarifying the future of this non-core asset.

Asked by Devang Patel

Future Growth Strategy (Organic vs. Inorganic) Direct
Going forward, our strategy will be... certainly making sure existing centers reach the full potential of growth... we will certainly look at merger acquisitions as we did in Vizag, where we will look at where there are strategic opportunities for us to see a dedicated oncology for us to grow.

Outlines a dual growth strategy combining organic expansion of existing and new centers with opportunistic inorganic acquisitions, to be discussed with the new partner KKR.

Asked by Sakshi Pratap

Debt Levels and Comfort Direct
Debt levels, currently, we are very comfortable with all the banking covenants that we have... our net debt, particularly from the banking, is about INR650-odd crores. We are very comfortable at this level and considering the growth and the capex investment that we have outlined for the current year as well as for the next year, we will be comfortable within our debt positions.

Reassures investors about the company's debt position, clarifying net debt figures and expressing comfort with current leverage given growth plans.

Asked by Dhruv Shah

Ongoing Capex Timelines Direct
We are broadly on time on operationalizing our centers. Yes.

Confirms that the company's capex plans for new centers and expansion are proceeding as scheduled, indicating effective execution.

Asked by Dhruv Shah

2 min read 7 chapters

Detailed narrative

Strategic Partnership with KKR and Leadership Transition

KKR has acquired a majority stake in HCG from CVC, positioning itself as a long-term partner. Dr. B.S. Ajaikumar will transition to Chairman of the Board, focusing on research, clinical excellence, and academics, with a limited role in daily operations. This strategic shift aims to leverage KKR's expertise for long-term growth, including potential mergers, acquisitions, and organic expansion, while maintaining a strong emphasis on precision oncology and research.

Robust Q3 FY25 Financial Performance

HCG delivered a strong Q3 FY25 performance, with revenue growing 19% year-on-year to INR 559 crores. For the nine months ended December 31, 2024, revenue reached INR 1,638 crores, marking a 16% growth. Adjusted EBITDA for Q3 FY25 stood at INR 92.3 crores, a 15% YoY increase, with PAT growing 23%, demonstrating resilience despite the seasonally weak quarter.

Operational Efficiencies and Patient Engagement

The company reported a 9% increase in OPD footfall and a 19% growth in medical oncology (chemotherapy sessions), indicating strong patient trust and expanding patient base. Capacity utilization for LINAC machines was maintained at 60% despite the addition of 7 new machines in the last 12 months, and patient bed occupancy improved from 52% in Q3 FY24 to 55% in Q3 FY25, highlighting optimized facility usage.

Strong Growth Across Centers and Modalities

Emerging centers were a key growth driver, achieving 25% YoY revenue growth and a 65% increase in EBITDA. Kolkata centers notably grew 40% in revenue and 42x in EBITDA, while the South Mumbai center saw 28% growth. Established centers also contributed significantly with a 20% YoY revenue increase and 14% EBITDA growth, with total ARPOB growing 3.5% to INR 44,284.

Capital Allocation and Debt Management

HCG's capital expenditure for FY25 is estimated at INR 275 crores, with INR 172 crores already deployed. The company anticipates lumpy capex of INR 275-280 crores per annum for FY25 and FY26, including INR 100 crores for maintenance. Management expressed comfort with the current net debt of approximately INR 650 crores (excluding capital leases), stating it is well within banking covenants and sufficient for planned growth and capex.

Milann Business Turnaround and Strategic Review

The Milann fertility business, which previously faced revenue decline due to competitive pressures from its former founder, is now showing signs of a turnaround. Management highlighted the development of a strong andrology department as a key growth driver. While expecting significant improvement in the coming quarters, the company will also evaluate opportunities for divestment at the appropriate time.

International Patient Business Recovery Outlook

The international patient business, particularly impacting the South Mumbai center, experienced a subdued Q3 due to geopolitical issues and Indian government restrictions on medical visas for Bangladesh. Management expects a recovery to Q2 levels in Q4 FY25 and normalization in the coming year, with the segment's contribution projected to stabilize at 3.5-4% of total revenue going forward.

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