Rainbow Childrens Medicare Limited — Q4 FY25 earnings call

Call held 26 May 2025

Management summary

Rainbow Children's Medicare delivered a steady Q4 despite an unusually quiet season for pediatric volumes, which management described as a one-off. The company is entering a heavy expansion phase with 250 beds coming online in the next two quarters and a clear roadmap for Gurugram by 2027. Financial health remains a core strength, with high cash conversion and a debt-free balance sheet supporting all planned growth through internal accruals.

Highlights

  • Revenue for Q4 FY25 grew 8.5% YoY to ₹370.1 crores; full-year FY25 revenue reached ₹1,515.9 crores, up 16.9%.

  • EBITDA for the quarter stood at ₹114.7 crores with a margin of 31%; FY25 EBITDA was ₹489.9 crores (32.3% margin).

  • PAT for Q4 increased 10.7% YoY to ₹56.5 crores; full-year PAT grew 11.9% to ₹244 crores.

  • Overall occupancy rate for Q4 was 46.5%, with mature hospitals at 52.2% and new hospitals at 35.6%.

  • Cash position remains robust at ~₹700 crores as of March 31, 2025, supporting a ₹650 crore 3-year capex plan.

  • International revenue declined significantly to ₹30.7 crores in FY25 from ₹44 crores in the previous year due to visa challenges.

  • The company plans to add 250 beds in H1 FY26 across Rajahmundry (100) and Bengaluru (150).

Key financials

  1. Revenue ₹370.1 Cr +8.5%YoY
  2. EBITDA Margin 31%
  3. PAT ₹56.5 Cr +10.7%YoY
  4. Occupancy Rate 46.5%
  5. ARPP (Inpatient) 5.6% +5.6%YoY
  6. Cash Position ₹700 Cr

What they filed

Q1 FY27: revenue up 22.7%, net profit up 1.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue404 382 354 335 408 +1%394 +3%408 +15%411 +23%
EBITDA143 130 111 100 141 −1%131 +1%129 +16%115 +15%
Net profit77 67 55 52 73 −5%66 −1%59 +7%53 +2%
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

  • Pediatrics
    70% Revenue Share
  • Mother Care (Maternity & Fertility)
    30% Revenue Share2.9% Fertility Revenue Share70% Fertility YoY Growth

Guidance & targets

Margin

  • Pre-Ind AS EBITDA Margin Margin · FY26 · High confidence 25%+
    As our CMD Dr. Ramesh has guided, it is safe to assume a minimum EBITDA margin of 25%. And, as we’ve done this year with 26.6%, we will aim to exceed that.

    — Vikas Maheshwari, Group CFO

Revenue

  • Revenue CAGR Revenue · Next 3-5 years · Medium confidence 18-20%
    I would expect it to be late teens to 20%.

    — Dr. Ramesh Kancharla, CMD

Capex

  • Total Capital Expenditure Capex · Next 3 years · High confidence ₹650 crores
    Yes, it remains the same. There’s no change to the guidance or the timelines at this point.

    — Dr. Ramesh Kancharla, CMD

Capacity

  • New Bed Additions Capacity · H1 FY26 · High confidence 250 beds
    ~250 beds are going to be added to the new beds. ~150 beds in Bangalore across the 2 spokes and ~100 beds at regional spoke in Rajahmundry.

    — Dr. Ramesh Kancharla, CMD

  • Gurugram Project Completion Capacity · CY 2027 · Medium confidence Oct-Nov 2027
    So overall, we're targeting completion in around 26 to 28 months from now. That's the current estimate from our project team.

    — Dr. Ramesh Kancharla, CMD

Risks & concerns

  • International Business Decline

    medium

    Revenue dropped from ₹44cr to ₹30.7cr due to visa issuance challenges in key markets like Bangladesh and Sudan.

    Management acknowledged

  • Margin Pressure from New Beds

    low

    Adding 250-280 beds typically creates a 0.5% to 1% drag on EBITDA margins in the short term.

    Both acknowledged

  • Seasonality and Volume Volatility

    low

    Q4 was unusually quiet for pediatrics (35% of business subdued), but management views this as a one-off deviation from long-term trends.

    Management downplayed

Areas of evasion (1)

  • Specific M&A targets (understandable due to confidentiality).

Q&A highlights

2 direct
ARPOB Decline vs. ARPP Growth Direct
While full-year ARPOB was down 3.4%, the ARPP increase shows strong underlying revenue efficiency. So, ARPP is a more stable and relevant indicator, especially since ALOS is often outside our control.

Explains that the perceived decline in revenue per bed is actually due to longer patient stays (ALOS), while revenue per patient is actually increasing.

Asked by Damayanti Kerai, HSBC

Competition in Core Markets Direct
But unless someone has the patience, commitment, and deep understanding required to build a children’s hospital, it’s going to be very difficult to succeed... You can’t scale them the same way as multispecialty hospitals.

Management highlights the high barrier to entry and specialized nature of pediatric care as a moat against multispecialty competitors.

Asked by Rahul Jeewani, IIFL Securities

M&A Strategy and Cash Utilization Partial
Yes, we’re actively working on M&A opportunities. We hope to update you soon, but it's a bit premature to discuss details right now.

Confirms that the company is looking to deploy its ₹700 crore cash pile for inorganic growth, though specific targets remain undisclosed.

Asked by Rahul Jeewani, IIFL Securities

2 min read 5 chapters

Detailed narrative

Operational Performance and Volume Trends

Q4 FY25 was characterized by a 'modest' performance due to an unusually quiet season for pediatric care, which affected approximately 35% of the business including OPD visits and intensive care. Despite this, outpatient and inpatient volumes grew by 3% and 4% respectively for the quarter, while deliveries saw a 6% uptick. For the full year, the company maintained robust growth with outpatient volumes up 12% and inpatient volumes up 10%.

Aggressive Capacity Expansion Roadmap

Rainbow is entering a significant growth phase, planning to add 250 beds in the first half of FY26. This includes a 100-bed regional hospital in Rajahmundry expected by the end of Q1 FY26 and two spoke hospitals in Bengaluru (Electronic City and Hennur) totaling 150 beds by the end of Q2 FY26. Project work has also commenced on a 130-bed regional hub in Coimbatore, with a 20-24 month completion timeline.

Financial Resilience and Margin Guidance

The company reported a healthy EBITDA margin of 31% for Q4 and 32.3% for FY25. Management has set a conservative internal benchmark for a pre-Ind AS EBITDA margin of over 25%, even when accounting for the 0.5% to 1% margin pressure typically associated with new bed additions. Cash generation remains a highlight, with ₹481.2 crores generated from operations, representing a 90% conversion rate from EBITDA.

Strategic Shift: ARPOB vs. ARPP

Management addressed concerns regarding a 3.4% decline in full-year ARPOB by highlighting a 7.7% rise in Average Length of Stay (ALOS). They urged investors to focus on Average Revenue Per Patient (ARPP), which grew by 5.6% YoY. This shift in metrics suggests that while beds are occupied longer, the underlying revenue efficiency per patient remains on an upward trajectory.

Growth Drivers: IVF and Tertiary Care

The IVF business is emerging as a key growth driver, now operational in 12-13 hospitals and growing at nearly 70% YoY. It contributed 2.9% to Q4 revenue. Additionally, the company is strengthening its tertiary care capabilities, having performed its first pediatric liver transplant in Chennai and securing a transplant license for its Bengaluru hub.

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