Max Healthcare Institute Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Brownfield capacity surge, operating leverage ahead: Over 20% additional brownfield capacity commissioned across three hospitals in the last two quarters, with all beds ready to operationalize in 2-3 months; management expects significant operating leverage as these ramp up.
• ARPOB and oncology share dipped on a deliberate drug exit: ARPOB of INR 77,900 absorbed a temporary ALOS increase and the discontinuation of select high-value chemotherapy drugs for institutional patients, which also pushed oncology's inpatient revenue share down to 21% from 26% YoY.
• CGHS rate revision delivered most of its net INR 140 crore benefit: INR 100-110 crore of the annualized net benefit has already flowed in, with INR 30-40 crore still to come; super-specialty rates have started in two hospitals and are expected to roll out across more during the year.
• Greenfield pipeline is fully loaded, with one near-term delay: The Gurgaon Sector 56 hospital is now targeting commissioning by the end of FY27, a couple of months later than planned, while the board approved a new INR 1,400 crore, 700-bed Lucknow greenfield.
• What to watch next quarter: The pace at which newly commissioned brownfield beds convert into occupied beds and ARPOB, whether the Gurgaon project stays on its revised timeline, and any movement from CGHS on the chemotherapy drug discount policy.

Brownfield Ramp-Up & Operating Leverage

• Phased commissioning complete: Over the last two quarters, more than 20% additional brownfield capacity was commissioned across Mohali, Nanavati, and Max Smart; all beds are ready to be operationalized over the next 2-3 months, with clinical and non-clinical talent already onboarded.
• ALOS distortion is temporary: Average length of stay rose 9% because opening new beds across multiple locations simultaneously tends to lift ALOS temporarily; this shows up as higher occupancy and lower ARPOB, a dynamic that should normalize as the new capacity matures.
• Occupancy held above 75% despite the increased bed base, and available operational bed capacity rose 8% alongside an 8% increase in occupied bed days.
• Noida is approaching network-level occupancy: Occupancies crossed 64-65% in Q4, revenue improved sequentially, and doctors have been hired; management sees a path to 75% occupancy and may soon add a brownfield expansion there.
• Dwarka set the precedent for fast breakeven: The Dwarka greenfield was guided to break even in one year but did so in six months; the consolidated EBITDA loss in the first six months was about INR 35 crore, shrinking to under INR 10 crore by the end of the twelve-month period.

Soi: "When you move from like, let us say, in Noida, when you move from the 65% to that 75-80%. You see at 50-55%, you break even right, most units. At 60-65%, you start doing very well, but the real juice starts coming from that 60-65% up to that 80%-odd occupancy that we do."

Oncology Mix Shift & the CGHS Drug Exit

• High-value chemotherapy drugs were discontinued for institutional patients because the government now requires a 30% discount to MRP; earlier, these drugs were dispensed at MRP with 15-16% margins flowing to EBITDA, so the new economics made them unviable.
• Oncology's inpatient revenue share fell to 21% from 26% in Q4 FY25 and 24% in Q3 FY26; the discontinued drugs were day-care treatments, and their removal also knocked 5-6% off oncology occupied bed days because some day-care patients also required overnight admission.
• Annual billing impact was about INR 200 crore, and the effect was felt most by Max due to its high oncology and institutional business proportion; management does not expect oncology's share to recover to 25-26% and sees it hovering around 21-22%, with other specialties filling the gap.
• Patients may migrate to the unorganized sector or smaller nursing homes for these drugs, a dynamic management flagged as a policy concern rather than a competitive threat.

Soi: "It does not seem to stand to reason, because it is not as if our margins are any different from the price at which perhaps the government is buying it."

CGHS Rate Revision: What Flowed & What Is Pending

• Gross benefit of INR 200 crore, net INR 140 crore after GST impact; of the net annualized benefit, INR 100-110 crore has already flowed in, and INR 30-40 crore is yet to come.
• All except super-specialty rates have started flowing; a very large part is already in, with a small portion of about INR 25-30 crore per annum left to be phased out over this year.
• Super-specialty rates have begun in two hospitals, and management expects more hospitals to receive them during the course of the year.
• The drug discount policy remains unresolved: management hopes CGHS will reconsider the 30% discount requirement but declined to pin down a timeline, calling it difficult to forecast.

Greenfield & Expansion Pipeline

• Gurgaon delay was operational, not structural: Labour went back for Bengal elections and an LPG crisis left workers unable to cook; management is now serving meals to all 1,100-1,200 labourers on site and expects no further delay.
• Gurgaon breakeven is targeted within FY28, with Phase 1 breaking even inside that initial block before the balance of beds rolls out.
• Lucknow's long-term vision is ambitious: management sees Gomti Nagar potentially reaching close to 2,000 beds over the next decade, built in a phased manner.

Soi: "I think in fiscal '28, we will be looking at breaking even within the year."

New Unit Performance & Doctor Cost Dynamics

• Recent acquisitions are contributing meaningfully: Lucknow's EBITDA is roughly 5x of its acquisition level, and both Nagpur and Noida are adding meaningfully; Dwarka is already at 80-85% occupancy and planning a brownfield.
• Kalinga Hospital is already profitable, generating about INR 10 crore in annual EBITDA; management does not see a risk of it turning negative even as business practices are corrected.
• Doctor costs are lumpy but should ease: end-2024 saw 25-30% more capacity added across Dwarka, Jaypee, Sahara, and Alexis Nagpur, and this year started a phased rollout of 20%+ more capacity; doctor fees of INR 435 crore should start seeing operating leverage, with percentages coming down marginally.
• New hospital openings create local talent pressure: when new hospitals enter a micro-market, existing clinicians negotiate higher compensation; management calls this a natural phenomenon that normalizes across the industry and gets passed through to patients over time.
• Revenue growth levers are structural: if occupied bed days do not grow, ARPOB growth alone delivers about 6-7%; the role is to add beds where occupancy is 80-85% to ensure OBD growth continues.

Soi: "It is a natural phenomenon. It gets a little lumpy sometimes. But it is not as if it is not passed through - you will see this normalize across the board. I am not just saying it for Max, but I believe for the entire industry."

Full-Year FY26 & Capital Allocation

• FY26 headline numbers: revenue growth of 16%, EBITDA growth of 14%, PAT growth of 22%; free cash generation of INR 1,541 crore against INR 1,627 crore deployed toward expansion.
• New unit EBITDA drag was not quantified: management declined to break out the drag from new hospitals in Q4 or the full year, saying it is very tough to do because patients mingle across towers and towers get re-specialized; on a consolidated basis, there is no real pressure on margins.
• Dwarka oncology center is yet to start construction and is expected to begin next month.

Guidance & Commitments

Key Metrics