Max Healthcare Institute Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Seasonally soft quarter, secular ARPOB story intact: Occupied bed days dipped 1% YoY on a tough dengue comp, but ARPOB grew double digits, driven by case mix, international patients and insurance penetration, factors management calls secular.
• Lucknow entry opens a large, under-served market: The 550-bed Sahara Hospital acquisition marks a foray into central UP, a region management likens to Europe in population with only "one and a half" corporate hospitals.
• Brownfield expansion on track, Dwarka imminent: Dwarka's 300-bed hospital is nearing commissioning with leadership hired and costs already on the books; Nanavati, Mohali and Gurgaon projects remain on schedule for FY25.
• Margins absorbed one-off headwinds: EBITDA margin of 27.9% carried ~₹25 cr in additional charges (doubtful debts, phantom stock reversal, GST, litigation), masking underlying operational performance.
• What to watch next quarter: The pace of Lucknow integration post-close, Dwarka's initial occupancy and loss trajectory, and whether the secular ARPOB drivers sustain into a seasonally strong Q4.

Volume & Seasonality

• Occupied bed days fell on a one-off dengue comp: Last year's Q3 saw an unusual 76% Diwali-month occupancy from a dengue surge; this year's absence drove a 1% YoY OBD decline, concentrated in internal medicine and pediatrics (down 12%). Adjusted for that influx, OBDs actually rose.
• OPD growth slowed for the same reason: The 3% outpatient growth reflects fewer patients visiting without the vector-borne disease spike, not a structural demand shift.
• Seasonal pattern holds: Q2 and Q4 are the strongest quarters; Q1 sees costs step up, Q3 sees revenue step down. OBD fluctuation from dengue effects runs 1–3% in either direction.
• Capacity constraints are reshaping the case mix: When occupancy runs near threshold, smaller surgeries get delayed and more patients shift to daycare, lifting the quality of work and ARPOB. Management noted that if beds were magically available, occupancy would rise more and ARPOB would rise less.

Soi: "if I had a magic wand in my hand and I could put up beds adjacent to each one of the hospitals, then what you would see is the higher uptick on occupancy and lower on ARPOB. There is always an interplay between the two."

ARPOB & Payor Mix

• ARPOB growth is case-mix driven, not price-led: Higher-end surgeries, international patients and insurance proliferation are the engines; none of this is built on one-time price changes. Management believes these drivers are secular and should read into next year.
• Institutional channel grew share by design: The company consciously increased institutional bed share in a seasonally weak quarter. Even within that channel, ARPOB rose on mix (more oncology/chemotherapy) and a focus on higher-end specialties, with price contributing only ~4%.
• International patient ARPOB rose 9% on case mix alone: Prices for international patients are linked to self-pay rates and revised only in April, so the entire Q3 increase reflects a richer procedure mix.
• International business grew 25% YoY: Growth has held at this pace for several quarters, supported by government actions (fast-tracked medical visas, reduced visa prices, global promotion). Management described it as a "trickle effect", incremental at a 25% CAGR but not yet exponential.
• Institutional tariff revision had a net muted impact: PET CT tariffs were cut ~50% (an outcome management believes was an error and is in talks to revise upward), while cardiac tariffs increased ~₹4 cr, for a net annualized impact of just ₹6 cr.

Soi: "My belief has been that, they seem pretty secular and that should read into next year as well. None of this is based on one time price changes, etc."

Margin & Cost Detail

• EBITDA margin of 27.9% absorbed ~₹25 cr in one-offs: The quarter carried a doubtful debts provision, a phantom stock option reversal, GST on variable management fees and a one-time litigation cost. These collectively weighed on YoY margin growth.
• PAT improved on operating flow-through and lower finance costs: The bottom line benefited from EBITDA improvement passing through and a reduced interest burden.
• Dwarka costs are already on the books: The unit head, key functional heads and certain doctors have been appointed, with their costs sitting in this quarter's P&L. The hospital is expected to be up and running very shortly, starting with ~100 operational beds out of an initial ~160.
• Dwarka loss guidance is textbook, with ambition to beat it: Management cited a textbook loss of ₹40–50 cr for a hospital of this size and a 12–18 month breakeven, but hopes to perform better on both counts. No granular month-by-month trajectory was provided.
• Brownfield expansion delivers superior incremental margins: At Shalimar Bagh, where beds were added at 40%+ of existing capacity, new beds skewed toward institutional business. Even at lower ARPOB, operating leverage made EBITDA per bed and operating margin from incremental beds significantly better than existing beds.

Expansion Projects

• All major projects are largely on schedule despite GRAP enforcement in NCR.

• Saket Complex will be brought on in tranches: The first 300 beds are expected to fill quickly, mirroring Shalimar Bagh's experience. The second 300 will be needed soon after; the last 300 only if demand supports, with the option to stall fitting out if softness appears.
• FY28+ capacity is a placeholder, not a commitment: It reflects potential on land parcels but has no Board approval to spend. Lucknow's land could theoretically support another 3,500 beds post-2028, but this is not committed.

Soi: "We could have a very quick occupancy of the first 300 beds. And very soon thereafter we are going to be ready for additional capacity."

Lucknow Acquisition & Market Entry

• Sahara Hospital, Lucknow, adds 550 beds and a foothold in central UP: The transaction is expected to close in Q4, with consolidation from the date of closing. The plan covers infrastructure improvement, operational bed capacity augmentation, medical talent addition and IT integration.
• UP is framed as a deeply under-penetrated market: Management noted the state's population is the size of Europe with only "one and a half" corporate hospitals; Max's entry makes it "two and a half." The company is looking at Lucknow for many more healthcare facilities.
• Performance catch-up is promised within two years: Management expressed confidence that all Lucknow beds will be in condition "perhaps better than" any other Max hospital and will catch up with peers on every financial parameter, if not exceed them. No interim milestones were given.
• Expansion approach beyond Lucknow is active but not aggressive: The company is looking at 20–21 cities and is prepared to go to others, but priorities do not shift exclusively toward UP. Adding 3–4 hospitals in one to two years is described as manageable because the rest of the pipeline is brownfield.

Soi: "UP's population is the size of Europe and literally it's got only one and a half corporate hospitals over there right now as we speak. Besides, hopefully, when we get in, we will become two and a half."

Clinical & Adjacent Businesses

• Oncology is growing across three streams: Surgical (robotics volumes doubled YoY, better ALOS, higher EBITDA per bed), radiation (LINAC innovations), and medical (immunotherapy, CAR-T cell therapy launched at Max Vaishali in collaboration with ImmunoACT).
• Max@Home grew 24% YoY with over 50% repeat transactions.
• Max Lab grew 20% YoY and is now present in 41 cities.

Guidance & Commitments

Key Metrics