Medi Assist Healthcare Services Limited — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

Medi Assist Healthcare Services Limited reported strong financial performance for Q3 and 9M FY25, driven by robust growth in Premium Under Management, particularly in the retail segment. The company highlighted its focus on technology for automation and fraud prevention, alongside strategic acquisitions like Paramount TPA. Management expressed confidence in navigating industry dynamics, including medical inflation and competition, by leveraging its operational efficiencies and strong ecosystem partnerships.

Highlights

  • Total income for 9M FY25 was INR 550 crore, growing 14.3% YoY.

  • Operating revenue for 9M FY25 was INR 534.4 crore, a growth of 40.2% YoY.

  • EBITDA for 9M FY25 was INR 113.4 crore, up 17.7% YoY, with a margin of 21.2% on operating revenue.

  • PAT for 9M FY25 was INR 69.9 crore, a growth of 53.6% YoY, translating to a 12.7% margin on total income.

  • Premium Under Management (PUM) reached INR 15,829 crores as of December 31, 2024, growing 16.6% YoY (adjusted for acquisitions).

  • Retail PUM grew 31% YoY to INR 2,050 crores, contributing to a 60 bps increase in market share to 19.8%.

  • The company processed over 6 million claims in 9M FY25 and added three new private insurance companies to its retail book.

Key financials

  1. Total Income ₹550 Cr +14.3%YoY
  2. Operating Revenue ₹534.4 Cr +40.2%YoY
  3. EBITDA (excl. Other Income) ₹113.4 Cr +17.7%YoY
  4. EBITDA Margin (on Operating Revenue) 21.2%
  5. PAT ₹69.9 Cr +53.6%YoY
  6. PAT Margin (on Total Income) 12.7%
  7. Premium Under Management ₹15,829 Cr +16.6%YoY
  8. Net Cash Balance ₹266.5 Cr
  9. Contract Liability ₹227 Cr

What they filed

Q1 FY27: revenue up 34.1%, net profit up 62.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue39 34 43 44 61 +56%57 +68%64 +49%59 +34%
EBITDA17 7 20 14 25 +47%18 +157%24 +20%17 +21%
Net profit10 4 11 8 18 +80%12 +200%14 +27%13 +63%
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

  • Government Business
    10.3% Revenue Contribution
  • International Benefits Business
    4.9% Revenue Contribution
  • Group PUM
    ₹13,779 Cr PUM14.7% Growth
  • Retail PUM
    ₹2,050 Cr PUM31% Growth

Guidance & targets

Profitability

  • Effective Tax Rate (ETR) Profitability · March 2025 · High confidence 18-19%

    From 14% today

    The ETR for the same reason stands at roughly around 14%. We, however, believe that for the full year, it will bounce back to 18 to 19-odd percentage by March 2025.

    — Sandeep Daga, CFO

  • Adjusted Quarterly Margin Profitability · Quarterly (steady-state) · Medium confidence 22%-odd
    If we adjust for the one-time adjustments and considering that during the last one year, we have gotten the benefits of the integration of the past acquisitions, we are heading in the right direction and on a quarterly basis, we are somewhere closer to 22%-odd as such once we discount the one-time aberration which we saw.

    — Sandeep Daga, CFO

Acquisition

  • Paramount TPA Acquisition Completion Acquisition · Q4 FY25 · Medium confidence within the current quarter
    So, at this point of time, we will stick to what we said when we signed the transaction that we believe it will be within the current quarter, but it's difficult to say because we are already in February and we are awaiting the IRDAI approval.

    — Niraj Didwania, Head, Investor Relations

  • Paramount TPA Top Line Growth Acquisition · FY24 numbers · Low confidence some amount of growth
    We would continue to have some amount of growth on the FY '24 numbers.

    — Niraj Didwania, Head, Investor Relations

Risks & concerns

  • Softness in employment numbers impacting Group business growth

    medium

    Management noted 'softness in the growth in employment numbers' which affects the Group business segment.

    Management acknowledged

  • Vintage drag leading to a spike in incidents as portfolio grows

    medium

    Management acknowledged 'vintage drag' causing a spike in incidents but expects it to normalize over time with new lives being added.

    Management downplayed

  • Downward pressure in Group pricing due to intense competition and EoM regulations

    medium

    An analyst raised concerns about downward pressure on Group pricing; management stated this works in their favor by emphasizing customer experience and loss ratio control.

    Analyst acknowledged

  • Industry-wide concerns about claims not being in control for retail-focused insurers

    medium

    An analyst highlighted industry complaints about uncontrolled claims; management responded by emphasizing their focus on fraud prevention, medical inflation management, and superior claims experience.

    Analyst acknowledged

Areas of evasion (2)

  • Exact timing and usage of fundraise (due to regulatory limitations)
  • Detailed pro forma numbers for Paramount TPA (due to limited public information)

Q&A highlights

2 direct
Fundraise plans, Deferred Tax Asset (DTA), and subdued non-government revenue growth Partial
On the Deferred Tax Asset, there was a reversal on account of the Raksha merger, the approval of which we got during December. As a result of which, there was a one-time reversal on the deferred tax liability which we had created when we acquired Raksha. So, this was a one-time benefit which we got during the quarter, the impact of which happens to be roughly around 8-odd crores for the quarter as such. The ETR for the same reason stands at roughly around 14%. We, however, believe that for the full year, it will bounce back to 18 to 19-odd percentage by March 2025. ... from time to time, the Company keeps evaluating its capital structure and capital allocation strategy. Satish did mention in his opening remarks that we see a very favorable environment for future growth opportunities. ... as per the LODR, we are not able to comment on timing and exact usage, but it will be updated.

Reveals a one-time DTA benefit impacting ETR and clarifies the strategic rationale for fundraise while adhering to disclosure limitations.

Asked by Madhukar Ladha, Nuvama Wealth Management

Increase in other expenses leading to margin decline and rationale for insurers using TPAs Direct
The increase in the other expenses is primarily attributed to the one-time transaction costs which have been booked. And also, Q3 also happens to be the seasonal event where we had conducted an event which Satish alluded to in the beginning where we initiated some thought leadership initiatives for Raksha Prime and got in all the stakeholders of the corporate, the insurance partners and the network hospitals under one group. So, one-time expenses like this got incurred which is attributable to increase in the overall other expenses. ... This is all about customer experience. This is all about fraud, waste and abuse control. This is all about technology, and lastly all about the quality of the network pricing and the medical inflation that our CEO just spoke about.

Explains the temporary nature of margin compression due to one-time costs and reiterates the core value proposition of TPAs to insurers beyond just cost.

Asked by Pradyuman, PK Dey Advisors

Paramount acquisition timeline and pro forma, and why insurers with 'worse claims experiences' still prefer in-house vs. TPAs Direct
Our experience in the last two acquisitions, which was Medvantage and Raksha is that it's anywhere between a 4-4.5 and goes up to a 6-month approval cycle. Post that, there could be a 30 to 45 day period of actual closing actions... we believe it will be within the current quarter... Paramount acquisition... top line in FY '24 and a single digit adjusted EBITDA margin... I think it's a great question, Akshay. And probably that's also the reason why, like Niraj alluded to in the previous question, about 70-75% in the Group business is already managed by TPAs, right? ... Clearly, I think our focus has been in blending customer experience delivery with focusing on what's important for the insurers, which is fraud, waste, and abuse prevention and managing medical inflation...

Provides an estimated timeline for the Paramount acquisition and clarifies the strategic advantages of TPAs in managing claims and improving policyholder experience, especially in the Group segment.

Asked by Akshay J, Xponent Tribe

2 min read 6 chapters

Detailed narrative

Q3 & 9M FY25 Financial Performance Overview

Medi Assist reported a total income of INR 550 crore for the nine months ended December 31, 2024, marking a 14.3% year-on-year growth. Operating revenue, excluding other income, stood at INR 534.4 crore, demonstrating a robust 40.2% growth over the same period last year. EBITDA for the nine months was INR 113.4 crore, up 17.7% YoY, with a healthy margin of 21.2% on operating revenue. Net profit after tax (PAT) grew significantly by 53.6% YoY to INR 69.9 crore, achieving a 12.7% margin on total income.

Premium Under Management (PUM) and Market Share Growth

The company's Premium Under Management (PUM) reached INR 15,829 crores as of December 31, 2024, reflecting a 16.6% year-on-year growth after adjusting for acquired companies. Group PUM grew by approximately 14.7-15% to INR 13,779 crores, while Retail PUM showed a strong 31% year-on-year growth, reaching INR 2,050 crores. This performance contributed to a 60 basis points increase in market share, bringing Medi Assist's share of health insurance premium administered to 19.8% as of December 2023.

Operational Efficiency and Technology Initiatives

Medi Assist continues to prioritize customer experience and operational efficiency, processing over 6 million claims in the nine months of FY25. The company has established 'hubs of excellence' for claims processing to enhance efficiency and comply with master circular requirements. Technology remains a core focus, with initiatives like 'Raksha Prime' minimizing discharge wait times for over 65,000 patients and the 'Maven Fraud Detection Engine' delivering 2.5x year-on-year growth in savings for insurers through fraud prevention.

Paramount Acquisition and Capital Strategy

The acquisition of Paramount TPA, signed in August 2024, is awaiting regulatory approvals and is expected to conclude within the current quarter (Q4 FY25). Paramount TPA reported a top line of INR 153 crores in FY24 with a single-digit adjusted EBITDA margin, and Medi Assist expects some growth on these numbers. The company is also evaluating its capital structure and allocation strategy, noting a favorable environment for future growth opportunities, though specific details on fundraise timing and usage are currently under regulatory disclosure limitations.

Industry Tailwinds and Government Focus on Healthcare

Management highlighted positive industry tailwinds, including the Union Government's increased focus on health insurance and healthcare penetration in India. The raising of FDI limits to 100% in the insurance sector and the proposed healthcare coverage for gig workers under PM Jan Arogya Yojana were cited as significant steps. These developments are expected to provide a stronger foundation for the future growth of India's health insurance industry.

Addressing Industry Challenges and TPA's Role

Medi Assist addressed concerns regarding medical inflation, vintage drag, and competitive pressure in Group pricing. Management asserted that their focus on fraud, waste, and abuse prevention, technology, and network pricing helps control medical inflation, keeping it below 5% in their portfolio. They emphasized that TPAs play a critical role in improving policyholder experience and delivering value to insurers, with more insurers partnering with Medi Assist, including three new private insurers added in the retail book.

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