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    Health.Global

    HCG
    Healthcare·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

    5

    • 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

    3

    • 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.

    What Changed2

    vs Q4 FY25

    Guidance items7 → 10 (+3)Risks discussed2 → 3 (+1)
    Key financials

    Metrics

    10

    Periods

    3

    Headline

    8
    • 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%

    9M

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

    9M FY25

    1
    • Effective Tax Rate
      3%

    Segment breakdown

    Oncology Business (post MG Hospital Vizag)
    24% Growth
    Emerging Centers
    25% Revenue Growth65% EBITDA Growth66,000 Rs ARPOB12.3% ARPOB Growth
    Kolkata Centers
    40% Revenue Growth42x EBITDA Growth
    South Mumbai Center
    28.0% Growth
    Established Centers
    20% Revenue Growth14.0% EBITDA Growth42,798 Rs 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 Increase14.0% EBITDA Growth21% EBITDA Margin
    List

    Capital allocation

    4
    high confidence
    CategoryHeadline
    Capex

    ₹275 crores

    Debt

    Gross ₹1,500 crores · Net ₹650 crores

    M&A

    MG Hospital Vizag

    acquisition · integrated

    M&A

    HCG (majority stake)

    acquisition · announced

    Guidance & targets

    10
    CategoryTargetPriority
    Profitability
    EBITDA Margin Expansion
    1% to 1.5%
    		Medium
    Profitability
    South Mumbai Center Loss Reduction
    at least INR 1 crore
    		High
    Profitability
    South Mumbai Center Breakeven
    breaking even
    		High
    Profitability
    South Mumbai Center FY25 EBITDA Loss
    INR 10-12 crores
    		High
    Volume
    Established Centers Growth
    13% to 14%
    		High
    Revenue
    International Patient Business Recovery
    Q2 level
    		Medium
    Revenue
    International Patient Business Contribution
    3.5% to 4%
    		Medium
    Capex
    Annual Capex
    INR 275-280 crores
    		High
    Capex
    Maintenance Capex
    INR 100 crores
    		High
    Capex
    Post FY26 Maintenance Capex
    around INR 100 crores (with inflation)
    		High

    South Mumbai Center Breakeven

    Q1 next financial year
    CurrentFY25 EBITDA loss of INR 10-12 crores
    TargetBreakeven

    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.

    How to verify

    key_financials.segment_breakdown[name='South Mumbai Center'].metrics[label='EBITDA']

    Risks & concerns

    3
    RiskSeverity

    Geopolitical issues impacting international patient business

    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

    medium

    Seasonality impacting Q3 margins

    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

    low

    Milann business revenue decline

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

    medium

    Q&A highlights

    8

    “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

    2 min read7 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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⏳.

    07

    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⏳.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.