Narayana Hrudayalaya Ltd.

Narayana Hrudayalaya reported an overall revenue growth of 11% on a quarter-on-quarter and year-on-year basis for Q4 FY25. The India business, excluding international patients, demonstrated a robust growth of 14-15% in the quarter. Management highlighted that this growth was primarily driven by throughput initiatives, higher-order procedures, better payor mix, and an improved bed mix, without significant new capacity additions. The company aims to sustain this organic growth trajectory in line with market performance and past achievements.

The Cayman business achieved strong margins of 45% in Q4 FY25, with management confident that $45 million will serve as the new sustainable revenue base going forward^⏳. The hospital has been very well received, with new departments like urgent care, emergency (trauma center), obstetrics, gynecology, pediatrics, and neonatal care contributing to the growth. While margins are at a good level, the focus will now shift towards revenue growth rather than further margin expansion, as it wouldn't be sensible in the long term to improve margins at the expense of tapping into a larger revenue base.

For FY25, the integrated care and insurance business segments recorded a cash burn (loss) of INR 65 crores. Management indicated that these losses are expected to grow in the current year due to expansion plans, including adding new clinics and cities. However, this growth is part of a broader investment strategy, with a total investment horizon of approximately INR 400 crores over 3 to 4 years. The company is carefully managing this investment to stay within the set financial limits.

The projected capital expenditure for FY26 is approximately INR 425 crores. This includes INR 300 crores for regular capex (replacement, maintenance, and new capacities within existing facilities) and INR 450 crores for greenfield and brownfield capacity investments, contributing to a total project cost of INR 2,800 to 3,000 crores over the next three years. The company plans to fund 60-65% of its overall capex through debt, with 80% for new projects and 50% for regular maintenance. Gross debt is currently above INR 2,000 crores, with a cash corpus of INR 1,600 crores, and a debt-to-equity ratio of 0.15, providing significant headroom for borrowing.

Narayana Hrudayalaya has strategically ramped down its international medical tourism patients since 2018. While international patient revenue contributed INR 40 crores in Q4 FY25, it is expected to decline to zero eventually. Management views this as a positive for margins, as international patients typically represent a lower realization book. The company is now primarily focused on the significant domestic opportunity and catering to Indian customers and those within the close vicinity of its hospitals, rather than actively pursuing international medical tourism.

The company is heavily investing in digitization, aiming to be the most digitally efficient healthcare institution globally. This involves building a large team in Bangalore to develop technologies that create a seamless patient journey, eliminate paper from departments, and provide instant data access for doctors. This focus on digitization is crucial for lowering costs, reducing inefficiencies, and enabling sustained revenue growth without adding physical beds, as evidenced by the company's ability to grow revenues despite reducing bed count since 2016.