Vaidya Sane Ayurved Laboratories Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Revenue fell 9% but EBITDA tripled: FY25 revenue declined ~9% YoY on weaker clinic footfall, yet EBITDA jumped 199% (325% in H2) as management executed a deep cost reset across employee, raw material, and other expenses.
• The cost base has been structurally reset: Employee costs dropped from ₹25 crore to ₹18 crore through KRA/KPI-driven optimization, and management calls this the optimized level going forward, removing a major drag on future earnings.
• A demand-side inflection is the explicit FY26 bet: New patient footfall fell 19% in FY25, but the enrollment ratio improved, and management is targeting 12,000–13,000 new patients per month plus ~20% YoY revenue growth, supported by a new brand ambassador and ground-level marketing.
• Bed capacity is set to nearly double: A new 30-bed Vadodara hospital is operational, and management plans to add ~200 beds in FY26 across Khopoli, Nagpur, and Vadodara, with a 1,000+ bed ambition over 2–3 years.
• What to watch next quarter: Whether the Sonu Sood campaign converts into the promised 30% patient volume increase, the pace of insurance and CGHS empanelment, and any evidence that the 16% EBITDA margin guide is indeed conservative.

The FY25 Cost Reset

• Employee cost optimization: A calculated, 12-month process of setting stringent KRAs and KPIs at the department level brought employee costs from ₹25 crore to ₹18 crore. Management stated this is the optimized level and does not expect materially higher costs going forward.
• Other expense rationalization: Other expenses fell from ₹41 crore to ₹34 crore through cuts in advertisement, professional fees, transport, traveling, telephone, and rent.
• Raw material cost shift: Purchase costs dropped from 26% to 18.70% of revenue as raw material procurement moved into inter-company transactions, changing the cost structure.
• Internal process overhaul: Three areas were strengthened: manufacturing and quality SOPs, HR processes including travel reimbursement, and medical processes where better patient outcomes are expected to drive word-of-mouth and reduce marketing spend.

Rohit Madhav Sane: "This is a very good optimization of employee costs that we have done. And I'm actually proud about it because this is what the real thing would be and this, I don't think so. Going ahead, much more higher employee costs would be the case."

The Demand Problem and the Turnaround Bet

• What drove the revenue decline: Total revenue fell 9–9.5% YoY because of a 6% drop in total clinic footfall and a 19% drop in new patient footfall. Management attributed the full-year drop to the first 2–3 months being lost.
• Care plan resilience: Despite new patient footfall falling from roughly 1 lakh to 82,000–85,000, the company sold nearly the same number of care plans (33,500 vs 33,800), meaning the enrollment ratio improved.
• Seasonal pattern: Q4 is the strongest quarter; Q1 is the weakest as people travel post-Diwali and invest in health for the New Year, while in Q1 touring and native-place visits reduce footfall. Q2 picks up but festivals like Ganpati create hurdles.
• The marketing pivot: The company shifted from digital-only channels to ground-level outreach and direct engagement, and onboarded Sonu Sood as brand ambassador with campaigns rolling out from the first week of April 2025.
• Revenue growth target: Management expects ~20% YoY growth month-on-month in total revenue, and 30% more patients per month this year. When pressed on the monthly run rate by March 2026, the answer was ambiguous between month-on-month and year-on-year framing.
• Price increase under study: The company plans to increase rates in the coming few months and is currently conducting patient surveys to inform the decision.

Hospital and Bed Expansion

• Vadodara hospital operational: A new 30-bed facility became operational in April 2025, scalable to ~100 beds over the next 12–15 months.
• FY26 bed addition plan: Management targets adding ~200 beds: 100 extra beds in Khopoli, 20–40 in Nagpur, and 60–70 more in Vadodara. Construction is expected to take about 12 months.
• Long-term ambition: The 2030 target is to establish roughly 1,000 clinics, more than 1,000 beds, and equal outpatient support facilities, focusing on tier 1 and tier 2 cities across India.
• Clinic network as of March 2025: 333 clinics total, comprising 21 company clinics, 54 OPDs and mini clinics, and 266 franchise clinics, plus 4 cardiac prevention and rehabilitation hospitals in Khopoli, Nagpur, Visakhapatnam, and Vadodara.
• Clinic expansion plan: 30 additional new clinics planned for FY26 across Gujarat, Madhya Pradesh, Karnataka, and Maharashtra.

Insurance and Accreditation: The Payer-Mix Unlock

• Insurance empanelment progress: The company is now empanelled with 5–6 leading insurance companies and more than 14 TPAs, including Star Health Insurance. Khopoli Hospital and the newly started Kondhali Nagpur Hospital are cashless facilities.
• NABH accreditation status: Khopoli and Nagpur Kondhali hospitals are fully NABH accredited. Vizag has applied and is expected to be streamlined in the next 3 months. Vadodara is in the process of applying, with fees to be paid within a week.
• CGHS pipeline: Khopoli Hospital has a CGHS audit date fixed and a visit scheduled, with approval expected within a few weeks. Nagpur will follow the same process. Vizag and Vadodara will pursue CGHS and other government agency approvals after securing NABH.
• GIPSA approval: An audit is already planned, and approval is expected within a couple of months.
• Insurance coverage aspiration: Management aspires to match allopathic standards of 60% insurance coverage as Ayush coverage in policies increases, and expects to have the highest number of TPA and insurance company tie-ups in the coming 12 months, targeting a minimum of 10–12 insurers.
• Corporate partnerships: The company fulfilled checkup orders for more than 80,000 police personnel and an equal number of Konkan Railway employees, and has initiated tie-ups with JSW and Reliance.

Product and Service Mix Evolution

• Revenue split: Clinics contribute ~86% of total revenue; hospitals contribute ~14%. Hospital revenue stood at ₹23.20 crore and clinic revenue at ₹64 crore, though management declined to split clinic revenue into separate product and service components.
• Profitability disclosure gap: When asked for profitability by segment, management stated "18% is from hospital and 10% is from product and services" but did not provide absolute profit figures or clarify whether the 10% refers to clinic margin or product margin.
• Care plan expansion: The company started with 4 disease areas and now has 9–10 care plans, including cholesterol management, PCOD management, and gut detox. Cardiac patients are being further segmented into low EF, blockages, and post-plasty rehab. At least 10–15 new care plans are targeted for addition this year.
• Short-term care plans introduced: New plans for insomnia, PCOD, and GERD run about 3–4 months with follow-up for at least a year.
• Call center and tele-support: An inbound and outbound call center started in the last 2–3 months, and tele-support is being launched for patients unable to visit clinics, with medicine delivery through logistic support.
• Medical tourism exploration: The company is in conversation with two agencies, one for African countries and one for GCC countries. Online consultations have started, and care plans have been created for 7–10 day stays at Khopoli and Nagpur. Management expects to speak confidently on this in the next couple of months.

Margin Outlook and Guidance

• FY25 EBITDA surge: EBITDA increased 199% in FY25 and 325% in H2, driven by cost control, improved product mix, and operational efficiencies.
• FY26 margin guide: Management guided for consolidated EBITDA margin to reach about 16% for the full year, with PAT around 11–12%. When an analyst challenged that margins should be much higher given 80–84% gross margins and revenue scale, management acknowledged the point but said it is being conservative.
• Longer-term EBITDA ambition: Management is targeting more than 20% EBITDA as a whole in the coming years, but is not sure whether that is reachable by FY27.
• Employee cost outlook: Employee cost is expected to stay around ₹18 crore in the coming year, with management committed to keeping it optimized.
• Intangible asset build: Intangible assets rose from ₹2 crore to ₹7 crore, including ₹4 crore for Brand Madhavbaug, reflecting investment in advertising materials, content, and collaterals for the Sonu Sood campaign.
• Bad debt write-off: Franchisee fees were written off because a group of franchisees who approached for investment in 2022/2023 later lost interest in the SFO model.

Rohit Madhav Sane: "You are absolutely right. The margins would be much higher, no doubt about it. I am trying to be conservative right now. As I go ahead, you will see the changes happening in and the margins growing."

Guidance & Commitments

Key Metrics