Max Healthcare Institute Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Acquired assets are scaling fast, not just filling beds: Lucknow and Nagpur together delivered Rs. 130 crore revenue with 26% EBITDA margin, while the new Dwarka greenfield is already at 41% occupancy and expected to break even before year-end.
• Jaypee Noida acquisition is the next big swing: Acquired for Rs. 1,660 crore enterprise value, management calls it the "Rambagh Palace" of Noida and plans to expand it from 376 to 480 beds by December 2025, with another 450-500 bed tower to follow.
• ARPOB growth is mostly efficiency, not price: ARPOB grew 7% YoY, or 8-9% adjusted for the immigration business drop, but only 2 percentage points came from price increases; the rest is process efficiency, payor mix and case mix shifts.
• The capacity distillation cycle is a deliberate strategy: Management runs high-end surgical mix when capacity is tight, then deliberately adds institutional business when new brownfield beds open, trading ARPOB for occupancy and higher absolute EBITDA per bed.
• What to watch next quarter: Whether Dwarka hits its breakeven target, the pace of Jaypee integration once the deal closes, and whether immigration business normalizes from Q4 as guided.

Acquired & Greenfield Asset Performance

• Lucknow and Nagpur integration complete: Combined revenue reached Rs. 130 crore in Q2, growing 40% YoY and 32% QoQ; combined EBITDA nearly doubled to Rs. 33 crore with a 26% margin.
• Lucknow margin runway still long: Oncology is only 7-8% of Lucknow revenue versus 26-27% for the Network; a new LINAC machine and bunker are ready, new clinical teams hired, and 140 additional beds (50% more capacity) will provide significant operating leverage when completed by December 2024.
• Dwarka ramp-up on track: The greenfield reported Rs. 33 crore revenue with an EBITDA loss of Rs. 18 crore at 41% occupancy and ARPOB of Rs. 80,000; management expects it to be the fastest greenfield breakeven in the company's history, targeting breakeven before the end of this financial year.
• Dwarka TPA empanelment is the unlock: It takes 3-6 months to sign all TPA contracts; by end of December 2024 all empanelment should be complete, and from January 2025 onward management expects more than 30% of Dwarka revenue from TPAs.
• Brownfield expansions cost far less to ramp: Brownfield projects at Nanavati, Max Smart Saket and Mohali use existing contracts, licenses and most doctors, with only junior consultants and residents as new hires, unlike greenfield Dwarka which required staffing two months before operations began.

Soi: "We have no doubt that this will play out the same way as Lucknow, Nagpur or even better."

Jaypee Hospital Noida Acquisition

• Deal structure and timeline: Enterprise value of Rs. 1,660 crore; call and put options have been exercised and the full acquisition is expected to wrap up within days. A Rs. 62 crore transfer charge has already been paid to the Yamuna Expressway Industrial Development Authority for the shareholding change.
• Immediate capacity expansion: Management plans to increase operational beds from 376 to 430 by March 2025, and to upwards of 480 by December 2025, within the existing structure and in a matter of a few quarters.
• Medical equipment investment: Rs. 150-200 crore is planned for equipment upgrades to support the expansion to 480 beds.
• Next phase already in sight: After reaching 480 beds, management intends to embark on building another 450-500 bed tower, which will take 2-2.5 years to complete.
• Program strengthening planned: Medical programs in urology, medical oncology, gastroenterology and neurosciences will be strengthened, mirroring the playbook used at Lucknow and Nagpur.
• Clean asset with no legacy issues: Management confirmed there are no pending litigations, title is clear, and all claims have been fulfilled. The smaller Bulandshahr and Anoopshahr assets that came with the deal are not meaningful and no value was attributed to them; management is deciding whether to focus them on CSR or wrap them up.

Soi: "It's like you can make a new hotel in Jaipur, but there is only one Rambagh Palace. So Jaypee is that Rambagh Palace in Noida."

Capacity Strategy & the Distillation Cycle

• The distillation playbook: When the Network runs at high occupancy (81% in Q2), lower-end clinical and payor mix is deprioritized, pushing ARPOB higher. When new brownfield capacity opens, management deliberately switches on institutional and lower-end payor business, which lowers ARPOB but raises occupancy and EBITDA per bed through operating leverage.
• Nagpur as proof of concept: Nagpur operated at 55-60% occupancy before signing institutional business; afterward ARPOB stayed muted but occupancy rose above 90% and EBITDA more than doubled.
• Saket cycle mapped out: At the main Saket facility there is currently no institutional business because capacity is full. When 375 new beds open at Max Smart in April-May 2025, institutional patients will be taken on again. Over 3-4 years that mix will distill upward, and when the Vikrant tower's 550 beds come online, the institutional cycle begins again.
• Capacity constraint is the growth ceiling: Management frames the brownfield pipeline as the answer to running out of capacity, not a response to competitive supply entering the market.

Soi: "At some stage, once we come up with new capacity at Max Smart, we will start taking on more institutional patients. But again, over a period of time, we will distil it. But then, in the third phase 3-4 years later, when Vikrant comes again, we will start doing taking institutional business. So, you keep playing that game."

Revenue & Margin Drivers

• ARPOB growth is structurally driven: ARPOB grew 7% YoY; adjusted for the immigration business drop (a high-ARPOB segment that fell 44%), underlying growth was 8-9%, of which only 2 percentage points came from price. The rest reflects process efficiency, payor mix improvement and case mix shifts.
• EBITDA per bed is the north star: Management explicitly prioritizes EBITDA per bed over percentage margins, because high-end surgeries like liver and heart transplants reduce percentage margins but increase absolute EBITDA value. Medical patients deliver higher percentage margins but lower absolute value.
• Institutional business is quietly repricing: While institutional business has diminished marginally as a share of revenue over recent quarters, its ARPOB has almost doubled and rates are now approaching cash rates.
• International business growing despite headwinds: International patient revenue grew 12% both YoY and QoQ, even as patient footfalls from Bangladesh and Yemen contracted due to political unrest. Offices in approximately 16 countries, built over the last 2-3 years, are driving a 20% CAGR that outstrips overall company growth.
• Immigration business normalization expected: The immigration medical business, which dropped 44% and is a high-EBITDA-margin segment, is expected to normalize from Q4 onward.

Sareen: "ARPOB is growing by 7% and if we really adjusted for the drop in immigration business, it would be 8-9% growth in APROB, of which only 2% is because of price. Rest all is efficiency in terms of processes, as well as payor mix and case mix."

Brownfield & Greenfield Expansion Pipeline

• Near-term capacity wave: Over the next 12 to 15 months, Nanavati, Mohali and Max Smart Saket will all come through in the April-June 2025 window, representing a significant ramp-up in available beds.
• Vikrant delay is a known risk: The 550-bed Max Vikrant tower at Saket faces a forest approval delay due to Supreme Court proceedings, though management expects resolution fairly soon. The 375 beds coming at Max Smart in April-May 2025 are expected to fill quickly and run out of capacity before Vikrant beds arrive.
• Lucknow tower next: After the 140-bed addition, a 450-bed tower is planned with contractors to be appointed shortly.
• Inorganic pipeline remains open: Management has the balance sheet and bandwidth for more acquisitions if marquee assets become available, citing Sahara and Nagpur as precedents for one-off opportunities.

Soi: "Some people will ask me the question like you are asking me that look you're at full capacity, where do you go from here? So, the answer to that is that's what the brownfields are for and some other people tend to ask that look there's so much capacity coming in the country, why are you putting up more capacity? Well, this is the reason we are putting it up. Because we have run out of capacity."

Guidance & Commitments

Key Metrics