Max Healthcare Institute Limited — Q3 FY25 earnings call

Call held 31 Jan 2025

Management summary

Max Healthcare reported a strong Q3 FY25, achieving over 30% year-on-year growth in key financial metrics, significantly boosted by recent acquisitions and the rapid breakeven of its new Dwarka hospital. The company continues its strategic expansion, including new asset-light projects in Thane and Mohali, while actively progressing various brownfield and greenfield capacity additions. Management also addressed pricing dynamics, particularly for institutional and insurance payors, and provided updates on its diverse business units.

Highlights

  • Network gross revenue of Rs. 2,381 crores, up 34% YoY and 7% QoQ.

  • Network operating EBITDA of Rs. 622 crores, up 32% YoY and 10% QoQ.

  • Dwarka hospital achieved EBITDA breakeven in December 2024, a record 6 months from launch.

  • Max Lucknow reported 58% YoY revenue growth and 94% YoY EBITDA growth.

  • Jaypee Noida contributed Rs. 112 crores gross revenue with 21% operating EBITDA margin.

Concerns

  • Forest approval for 550 beds at Max Vikrant (Saket Complex) is delayed due to Supreme Court proceedings.

Key financials

  1. Network Gross Revenue ₹2,381 Cr +34%YoY
  2. Network Operating EBITDA ₹622 Cr +32%YoY
  3. Network Operating EBITDA Margin 27.3%
  4. Profit After Tax (pre-exceptional) ₹390 Cr +15%YoY
  5. Average Occupancy (Network) 75%
  6. Occupied Bed Days (OBDs) Growth 36% +8%QoQ
  7. ARPOB (Network) ₹75,900
  8. International Patient Revenue ₹201 Cr +28%YoY

What they filed

Q1 FY27: revenue up 16.7%, net profit up 4.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,707 1,868 1,910 2,028 2,135 +25%2,068 +11%2,143 +12%2,366 +17%
EBITDA451 499 512 523 575 +27%538 +8%606 +18%598 +14%
Net profit282 239 319 308 491 +74%301 +26%342 +7%323 +5%
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

  • New Units
    ₹323 Cr Gross Revenue
  • Existing Units
    16% Revenue Growth7% ARPOB Growth28.6% EBITDA Margin₹82.6 lakh Annualized EBITDA per bed
  • Max@Home
    ₹55 Cr Top Line24% Top Line Growth
  • Max Lab
    ₹41 Cr Gross Revenue22% Gross Revenue Growth
  • Max Lucknow
    58% Revenue Growth94% EBITDA Growth
  • Max Nagpur
    22% Revenue Growth50% EBITDA Growth
  • Jaypee Noida
    ₹112 Cr Gross Revenue₹23 Cr Operating EBITDA21% Operating EBITDA Margin
  • Max Dwarka
    ₹59 Cr Revenue₹5 Cr EBITDA Loss

Capital allocation

high confidence
  • Capex ₹362 Cr
    • Ongoing capacity expansion projects and upgradation of facilities at acquired hospitals ₹362 Cr
    During the quarter, Rs. 362 crore was deployed towards ongoing capacity expansion projects and upgradation of facilities at acquired hospitals
  • Debt Net ₹1,608 Cr · 0.7× EBITDA
    Consequently, net debt for the Network stood at Rs. 1,608 crores at the end of December 2024. ... We are at 0.65x at this point in time after the Jaypee acquisition.
  • M&A Jaypee Healthcare Limited Acquisition · Closed · Consideration ₹[object Object] (cash)

    Integration into Network

    Reported gross revenue of Rs. 112 crores with an operating EBITDA of Rs. 23 crores at a margin of 21% in the third quarter.

    Additionally, Jaypee Healthcare Limited became a wholly-owned subsidiary of the Company during the quarter. Jaypee Noida is presently being integrated into our Network and reported a gross revenue of Rs. 112 crores with an operating EBITDA of Rs. 23 crores at a margin of 21% in the third quarter. ... Rs. 1,716 crore (net of cash at Jaypee Healthcare Limited) was used for Jaypee acquisition.
  • Liquidity Liquidity disclosed
    Overall free cash flow from operations was Rs. 303 crores.

Guidance & targets

Capacity

  • Mohali (Zirakpur) beds Capacity · High confidence 400 beds

    Previously 250 beds → 400 beds

    The Board has also provided its approval for enhancing the capacity of our upcoming asset-light 'built-to-suit' hospital in Mohali (Zirakpur) to 400 beds from 250 beds planned previously.

    — Abhay Soi

  • Thane hospital commissioning Capacity · 2028 · High confidence 2028
    The hospital is expected to be commissioned in 2028.

    — Abhay Soi

  • Max Lucknow additional beds Capacity · almost immediately · High confidence 140 beds
    Further, we are awaiting in-principal approval for the existing 13th to 17th floors for hospital use, which will add another 140 beds almost immediately.

    — Abhay Soi

  • Max Nagpur balance beds EC Capacity · March 2025 · High confidence March 2025
    For the balance beds on additional floors, we are expecting the environmental clearance (EC) to come by March 2025.

    — Abhay Soi

  • Max Nagpur project completion Capacity · 24 months thereafter · High confidence 24 months thereafter
    Project completion should take another 24 months thereafter.

    — Abhay Soi

  • Nanavati Phase 1 completion Capacity · within 3-4 months · High confidence within 3 to 4 months
    The project continues to be on schedule and we expect completion within the next 3 to 4 months.

    — Abhay Soi

  • Max Smart (Saket Complex) completion Capacity · Q1 FY26 · High confidence Q1 FY26
    The project is on track and we expect its completion within Q1 FY '26.

    — Abhay Soi

  • Mohali (155 beds) completion Capacity · Q1 FY26 · High confidence Q1 FY26
    155 beds at Mohali - Interior work is in progress and we expect its completion again by Q1 FY '26.

    — Abhay Soi

  • Gurgaon Sector-56 first phase completion Capacity · end Q3 FY26 · High confidence 300 beds by end of Q3 FY26
    500 beds at Sector-56 Gurgaon - Structural work is in progress. We expect completion of the first phase of 300 beds by the end of Q3 FY '26.

    — Abhay Soi

  • Zirakpur, Mohali completion Capacity · within 30 months · High confidence within 30 months
    Project is expected to be completed within 30 months.

    — Abhay Soi

Pricing

  • Institutional price increase Pricing · within 1-2 months · High confidence within a month or two
    We are still expecting that as it is long overdue. Our belief is that it should come within a month or two.

    — Abhay Soi

  • Insurance price change Pricing · every two years · High confidence 12-13% every two years
    The price change on insurance every two years is about 12-13% at best.

    — Abhay Soi

ARPOB

  • Thane ARPOB growth ARPOB · annually · High confidence 7-8% annually
    Three years later, it should be more, as you are aware that ARPOB is growing by 7-8% every year.

    — Abhay Soi

  • Mohali ARPOB growth ARPOB · annually · High confidence 7-8% annually

    — Abhay Soi

Profitability

  • ROCE for new asset-light models Profitability · stable state · High confidence 35% stable state
    35% ROCE in a stable state on the whole hospital

    — Abhay Soi

  • ROCE for Max Healthcare (asset-light) Profitability · High confidence beyond 100% effectively
    Our ROCE goes beyond 100% effectively.

    — Abhay Soi

  • EBITDA margin for new asset-light models (post Ind AS) Profitability · High confidence 5-6% lower than mature hospitals
    It should depend on what the maturity of the hospital is, but I think it should be lesser by 5-6%.

    — Yogesh Sareen

  • EBITDA margin for Nagpur Profitability · High confidence 20-25% range

    Previously 10-11% → 20-25% range

    Our target is 20-25% range, and we are at 10-11% range as of now.

    — Yogesh Sareen

Operations

  • Max Lucknow new bunker operational Operations · July · High confidence July
    In Lucknow, for example, the new bunker is yet to get ready and is expected to be operational by July.

    — Abhay Soi

What to watch in Q4 FY25

Institutional price increase

next quarter
Current Expected within 1-2 months
Target Announcement/implementation of price increase

Why it matters

Potential positive impact on ARPOB and margins from institutional payors.

We are not expecting a price increase on the insurance side, we were looking at a price increase on the institutional side. We are still expecting that as it is long overdue. Our belief is that it should come within a month or two.

Risks & concerns

  • Delay in forest approval for Max Vikrant (Saket Complex)

    medium

    Forest approval for 550 beds at Max Vikrant (Saket Complex) is delayed due to Supreme Court proceedings in relation to tree felling, but management expects it to be resolved soon.

    Management acknowledged

Q&A highlights

8 direct
Flat QoQ revenue for existing units despite weak Q3 Direct
Q3 is typically a weak quarter because you have festivals in this quarter, and if you see the history, you will find that typically the revenues come down by 2-3% and EBITDA also drops by 3-4% in this quarter. Despite the history, this time it is flat and in fact the overall EBITDA has improved over Q2. ... in the Diwali month, typically you will see the occupancy drop to around 65-70% range, but this time we had very healthy occupancy even during Diwali, and that is what has made all the difference in this quarter.

Clarifies the seasonality of the business and highlights better-than-expected performance due to strong Diwali occupancy, indicating resilience.

Asked by Amey Chalke

Price increase for insurance schemes / institutional side Direct
We are not expecting a price increase on the insurance side, we were looking at a price increase on the institutional side. We are still expecting that as it is long overdue. Our belief is that it should come within a month or two. But let's see what happens on that. On the insurance side, it happens on a rolling basis. That means whichever insurance contracts come offline every two years, you get the new rates over there.

Provides specific timelines and mechanisms for price adjustments, indicating potential for ARPOB improvement from institutional payors.

Asked by Amey Chalke

Debt levels and funding for future projects Direct
So, our upper limit is 2.5x net debt-to-EBITDA, but we are far from that. The new ones that we have announced such as Mohali (Zirakpur) as well as Thane, they are both asset-light models. ... Now other than that, we are looking at Rs. 500-600 crore over the next 3-4 months of CAPEX towards the brownfields and then thereafter. But yes, our overall cap is 2.5x net debt-to-EBITDA. This would include not only current CAPEX but also any further inorganic growth or whatever else we may do, including on and off-balance sheet debt. We are at 0.65x at this point in time after the Jaypee acquisition.

Reassures investors about the company's conservative debt policy and ability to fund future growth through asset-light models and within comfortable leverage limits.

Asked by Damayanti Kerai

CGHS rate revision and its impact Direct
That's right. We are expecting some revisions to come up in CGHS rates that will also impact the other PSU business. The gap earlier used to be 44% between our cash rates and our institutional, and now it has come down to 36%. The delta has reduced. On top of that, we are expecting better rates coming through on CGHS now. But we have been expecting this for some time. Our hope is that this comes in this quarter.

Highlights a potential positive catalyst for institutional revenue and margin improvement, with an expectation of it materializing soon.

Asked by Damayanti Kerai

Institutional bed share and its impact on profitability Direct
See, what happens is that as we add new hospitals or new capacities, your institutional business is going to go up with that. Our endeavour is not to reduce institutional business. Our endeavour is to accommodate growth in our preferred channels of business. But if we can do both, we do not have a problem doing it. ... But having said that, even with the lower rates, your EBITDA per bed is higher simply because you have got operating leverage when you are adding brownfield capacity on existing hospitals.

Clarifies the company's strategy regarding institutional patients, emphasizing that it's used to fill capacity and leverage fixed costs, leading to higher EBITDA per bed even with lower rates.

Asked by Damayanti Kerai

Investment outlay for asset-light projects (Mumbai/Thane and Mohali) Direct
Essentially, it's going to be medical equipment, which will be let's say about Rs. 150-200 crores. But that only happens at the end when it's constructed – the last 3-6 months or whatever. Yes, it's about Rs. 30 lakh per bed, but it's all back-ended. Medical equipment comes after the entire project is almost complete.

Provides clarity on the capital expenditure for asset-light models, indicating lower upfront investment and back-ended costs primarily for medical equipment.

Asked by Prashant Nair

Thane Hospital lease structure and call option Direct
There are two things. It's not five years or three years. It's actually 15 years. ... Second is that after 12 months of operations, we have a call option on it. We can acquire it at any point of time. We can acquire it and sell it down to a REIT. We can acquire it and nominate somebody else or whatever else it is. ... It's at cost and a very nominal yield on the real money spent on the project.

Details the favorable asset-light structure for Thane, including a long lease and a strategic call option to acquire at cost, minimizing capital commitment while retaining flexibility.

Asked by Rishi Mody

IRDAI guidance on senior citizen insurance policy price hikes and potential negotiation impact Direct
No, there is no rate negotiation impact. In fact, we see a benefit from it because the number of people who may be going out of the insurance net because their premium goes up, there is a step jump in that premium, now won't go out of the insurance net because of this. It's more palatable. As far as premium is concerned, there is no rate negotiation for different age groups. It's not cut that way. I mean, the cost is cost right, whether it's for a senior citizen or a junior citizen from our standpoint.

Management clarifies that IRDAI guidance is not expected to lead to rate negotiation impact and may even be beneficial by retaining more patients within the insurance net.

Asked by Rishi Mody

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

Max Healthcare reported a robust Q3 FY25, achieving over 30% year-on-year growth across key parameters including revenue, EBITDA, and occupied bed days. Network gross revenue reached Rs. 2,381 crores, a 34% increase YoY, while network operating EBITDA grew 32% YoY to Rs. 622 crores, resulting in a 27.3% margin. Profit after tax (before exceptional items) also saw a 15% YoY growth to Rs. 390 crores. The company's average occupancy stood at 75%, up from 73% in Q3 last year, with occupied bed days growing 36% YoY.

New Unit Performance and Integration

The company's recent acquisitions and greenfield projects significantly contributed to growth. The new greenfield hospital in Dwarka achieved EBITDA breakeven in December 2024, a record 6 months from its launch, reporting Rs. 59 crores in revenue and an EBITDA loss of Rs. 5 crores for the quarter. Max Lucknow demonstrated strong performance with 58% YoY revenue growth and 94% YoY EBITDA growth, while Jaypee Noida, now a wholly-owned subsidiary, contributed Rs. 112 crores in gross revenue and Rs. 23 crores in operating EBITDA at a 21% margin. These new units collectively reported a gross revenue of Rs. 323 crores in Q3.

Strategic Expansion and Asset-Light Model

Max Healthcare is expanding its footprint with a new 500-bed asset-light 'built-to-suit' hospital in Thane, expected to be commissioned in 2028, marking its third such transaction. This model aims to drive future growth and maximize return on capital employed (ROCE) with minimal investment, targeting a 35% stable state ROCE for the hospital and effectively over 100% for Max Healthcare. The company also approved enhancing the capacity of its upcoming Mohali (Zirakpur) hospital to 400 beds from the previously planned 250 beds.

Capacity Expansion Projects Update

Several capacity expansion projects are progressing on schedule. Max Lucknow will add 140 beds almost immediately, with 64 beds commissioned in January and another 64 in February 2025. Nanavati's Phase 1 (268 beds) is expected to complete within 3-4 months, and Max Smart (Saket Complex) (400 beds) is on track for completion in Q1 FY26. The first phase of 300 beds at Sector-56 Gurgaon is anticipated by the end of Q3 FY26. However, the 550-bed Max Vikrant (Saket Complex) project faces delays due to pending forest approval.

Payor Mix and Pricing Dynamics

The company expects a price increase on the institutional side within one to two months, which is considered long overdue. Management noted that the gap between cash rates and institutional rates has narrowed from 44% to 36%, with expectations for better rates from CGHS. For insurance, price adjustments occur on a rolling basis every two years, typically yielding a 12-13% increase, reflecting an annual medical inflation of about 6%. Management also clarified that the IRDAI guidance on senior citizen insurance policy price hikes is not expected to negatively impact rate negotiations.

PHF Profitability and Operational Efficiency

Max Healthcare's strategic business units, Max@Home and Max Lab, continued to report significant growth, with Max@Home's top line growing 24% YoY to Rs. 55 crores and Max Lab's gross revenue increasing 22% YoY to Rs. 41 crores. The company also discussed the profitability of its Partner Healthcare Facilities (PHFs), noting that fee structures are revised every two years. Donations from PHFs to other trusts are part of their objective clauses and do not impact the company's tax status, with any upstreamed funds subject to a 25% tax.

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