Q1 2027 Fortis Healthcare (India) Ltd Earnings Call

Speaker #1: Ladies and gentlemen, good day and welcome to the Fortis Healthcare Limited Q1 FY27 earnings conference call. As a reminder to all participants, lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Operator 3: Ladies and gentlemen, good day and welcome to the Fortis Healthcare Limited Q1 FY27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Kalra, Head of Investor Relations. Thank you, and over to you, sir.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.

Speaker #1: I now hand the conference over to Mr. Anurag Kalra, Head of Investor Relations. Thank you, and over to you, sir.

Speaker #2: Thank you, Elric. Ladies and gentlemen, a very good morning and good afternoon, and thank you for taking the time to join us on the Q1 FY27 earnings call.

Anurag Kalra: Thank you, Aldric. Ladies and gentlemen, very good morning and good afternoon, and thank you for taking the time to join us on our Q1 FY27 earnings call. The call is being chaired by our MD and CEO, Dr. Ashutosh Raghuvanshi. With him, we have our Chief Financial Officer, Mr. Vivek Goyal. From Agilus Diagnostics, we have the MD, Mr. Vijender Singh, and the Chief Financial Officer, Mr. Akshay Tiwari. We will start with some opening comments on the quarter gone by Dr. Raghuvanshi. Post which, Mr. Vijender will take you through his thoughts on the diagnostics business for the quarter, and then we can open the floor for question and answers. Over to Dr. Raghuvanshi.

Speaker #2: The call is being chaired by our MD and CEO, Dr. Ashutosh Raghuvanshi, and we also have our Chief Financial Officer, Mr. Vivek Goel. From Edgeless Diagnostics, we have the MD, Mr. Vijendra Singh, and the Chief Financial Officer, Mr. Akshay Tiwari.

Speaker #2: We will start with some opening comments on the quarter gone by by Dr. Raghuvanshi. Post which, Mr. Vijendra will take you through his thoughts on the diagnostics business for the quarter, and then we can open the floor for questions and answers.

Speaker #2: Over to Dr. Raghuvanshi.

Speaker #3: Thank you, Anurag. Good morning, everyone, and thank you for taking the time to join us on our Q1 financial year 2027 earnings call today. At the outset, I would like to welcome Mr. Vijendra Singh, who has recently joined us as MD and CEO of Agilus Diagnostics.

Ashutosh Raghuvanshi: Thank you, Anurag. Good morning, everyone, and thank you for taking time to join us on our Q1 financial year 2027 earnings call today. At the outset, I would like to welcome Mr. Vijender Singh, who has recently joined us as MD and CEO of Agilus Diagnostics. I shall dive right into the quarterly results and share my thoughts on the business performance and way forward. Building on the momentum of previous year, we have made a positive start to the financial year, delivering a steady Q1 performance across both our hospitals and diagnostic businesses. We reported consolidated revenue of INR 2,545 crores, a growth of 17.5% over Q1 of financial year 2026. Noticeably, our hospital business revenues have grown by 19% to INR 2,187 crores, while Q1 financial year 2027 diagnostic business gross revenue has grown up by 10.2% to INR 407 crore versus the previous corresponding quarter.

Speaker #3: I shall dive right into the quarterly results and share my thoughts on the business performance and way forward. Building on the momentum of the previous year, we have made a positive start to the financial year, delivering a steady Q1 performance across both our hospitals and diagnostics businesses.

Speaker #3: We reported consolidated revenue of INR 2,545 crore, a growth of 17.5% over Q1 of financial year 2026. Notably, our hospital business revenues have grown by 19% to INR 2,187 crore, while Q1 financial year 2027 diagnostic business gross revenue has grown by 10.2% to INR 407 crore, compared to the previous corresponding quarter.

Speaker #3: Our consolidated operating EBITDA, pre-ESOP expenses, increased by 15.8% to INR 568 crore, delivering a margin of 22.3% versus 22.6% in Q1 of financial year '26.

Ashutosh Raghuvanshi: Our consolidated operating EBITDA pre-ESOP expenses increased by 15.8% to INR 568 crores, delivering a margin of 22.3% versus 22.6% in Q1 of financial year 2026. The hospital business reported an operating EBITDA of INR 471 crore, which translates into a margin of 21.5% compared to 22.1% in Q1 of financial year 2026. Performance of the quarter also includes recent acquisitions primarily related to the new hospital acquisitions in Punjab and Bengaluru and the leased facility in Delhi NCR. Excluding the impact of these facilities on a like-to-like basis, operating EBITDA margin in the quarter was similar to Q1 of financial year 2026 at 22%. The operating EBITDA margin of the diagnostic business for the quarter improved to 23.9% from 23% in Q1 of financial year 2026. Our consolidated reported profit after tax before exceptional items for the quarter increased by approximately 4% to INR 263 crores.

Speaker #3: The hospital business reported an operating EBITDA of INR 471 crore, which translates into a margin of 21.5%, compared to 22.1% in Q1 of financial year '26.

Speaker #3: Performance for the quarter also includes recent acquisitions, primarily related to the new hospital acquisitions in Punjab and Bengaluru, as well as the lease facility in Delhi NCR.

Speaker #3: Excluding the impact of these facilities on a like-to-like basis, operating EBITDA margin for the quarter was similar to Q1 of financial year '26, at 22%.

Speaker #3: The operating EBITDA margin of the diagnostic business for the quarter improved to 23.9% from 23% in Q1 of financial year '26. Our consolidated reported profit after tax, before exceptional items for the quarter, increased by approximately 4% to ₹263 crore.

Speaker #3: On the balance sheet front, the company's net debt stands at INR 2,233 crore, with a net debt-to-EBITDA ratio of 1.01 as of June 30, 2026, as against 0.92x on June 30, 2025.

Ashutosh Raghuvanshi: On the balance sheet front, the company's net debt stands at INR 2,233 crores, with a net debt to EBITDA ratio of 1.01 as of 30 June 2026, as against 0.92x on 30 June 2025. The increase in net debt compared to INR 1,869 crore as on 30 June 2025, was primarily due to the acquisitions done last year. A bit of flavor on the hospital business. Our hospital occupancy in Q1 of financial year 2027 remained steady at 69% compared to the corresponding period last year. However, the number of occupied beds increased by approximately 17% to 3,418 beds compared to 2,928 occupied beds in Q1 of financial year 2026. After factoring in our recent acquisitions, the hospital business recorded an increase in ARPOB of 2.6%, reaching INR 2.71 crores per annum.

Speaker #3: The increase in net debt, compared to INR 1,869 crore as on 30 June 2025, was primarily due to the acquisitions done last year. A bit of flavor on the hospital business: our hospital occupancy in Q1 of financial year 2027 remains steady at 69%, compared to the corresponding period last year.

Speaker #3: However, the number of occupied beds increased by approximately 17% to 3,418 beds, compared to 2,928 occupied beds in Q1 of financial year '26. After factoring in our recent acquisitions, the hospital business recorded an increase in RPOF of 2.6%, reaching INR 2.71 crore per annum.

Speaker #3: Our key specialties, such as renal sciences, neurosciences, and orthopedics, witnessed year-on-year revenue growth of 28%, 27%, and 23%, respectively. In 14 of our facilities, we have reported operating EBITDA above 20% during the first quarter of financial year '27.

Ashutosh Raghuvanshi: Our key specialties such as renal sciences, neurosciences, and orthopedics witnessed year-on-year revenue growth of 28%, 27%, and 23% respectively. In 14 of our facilities, we have reported operating EBITDA above 20% during Q1 of financial year 2027. These 14 facilities together contributed over 70% to the hospital revenues. In comparison to financial year 2026, we had 13 of our facilities operating EBITDA margin above 20%. Several of our key hospitals, such as Jaipur, Noida, Faridabad, and Mulund, witnessed margin expansion compared to the corresponding quarter of previous year and the trailing quarter. In addition, many of our key facilities, such as Mulund and Faridabad, registered revenue growth in excess of 20% compared to the corresponding previous period. Our bed expansion plans continue to progress well. During the quarter, we added approximately 100 operational beds through brownfield expansion, primarily across our Noida, Amritsar, and Jalandhar facilities.

Speaker #3: These 14 facilities together contributed over 70% to the hospital revenues. In comparison to financial year ’26, we had 13 of our facilities operating EBITDA margin above 20%.

Speaker #3: Several of our key hospitals, such as Jaipur, Noida, Faridabad, and Mulund, witnessed margin expansion compared to the corresponding quarter of the previous year and the trailing quarter.

Speaker #3: In addition, many of our key facilities, such as Mulund and Faridabad, registered revenue growth in excess of 20% compared to the corresponding previous period.

Speaker #3: Our bed expansion plans continue to progress well. During the quarter, we added approximately 100 operational beds through brownfield expansion, primarily across our Noida, Amritsar, and Jalandhar facilities.

Speaker #3: We also recently entered into an O&M agreement for a 300-bedded greenfield multi-speciality hospital to be developed in Cuttack. This marks Fortis Healthcare's entry into Odisha, further expanding our presence in growth markets.

Ashutosh Raghuvanshi: We also recently entered into an O&M agreement for a 300-bedded greenfield multi-specialty hospital to be developed in Cuttack. This marks Fortis Healthcare's entry into Odisha, further expanding our presence in growth markets. Revenue from international business grew 13.3% compared to Q1 FY26 to reach INR 174 crores. The contribution of international business revenue stood at approximately 8% in Q1 FY27, on the similar lines as Q1 FY26. We continue to invest in our medical infrastructure by extending advanced robotic capabilities across our network, reinforcing our commitment to clinical excellence and technology during the quarter. We installed da Vinci Xi soft tissue robot at Faridabad Fortis Escorts Heart Institute, Okhla, and Ortho Robot at Jalandhar and Faridabad. Our board has also approved installation of a proton facility at our flagship hospital in Gurgaon as well. Coming to the diagnostic business.

Speaker #3: Revenue from international business grew 13.3% compared to Q1 of financial year '26 to reach INR 174 crore. The contribution of international business revenue stood at approximately 8% in Q1 of financial year '27, similar to Q1 of financial year '26.

Speaker #3: We continue to invest in our medical infrastructure by expanding advanced robotic capabilities across our network, reinforcing our commitment to clinical excellence and technology during the quarter.

Speaker #3: We installed the DaVinci XR soft tissue robot at Faridabad Fortis Escort Heart Institute, Okhla, and the Ortho Robot at Jalandhar and Faridabad. Our board has also approved installation of a Proton facility at our flagship hospital in Gurgaon as well.

Speaker #3: Coming to the diagnostic business, as part of our ongoing network expansion strategy, the total number of new customer touchpoints reached 4,493 as of June 30, 2026.

Ashutosh Raghuvanshi: As part of our ongoing network expansion strategy, the total number of new customer touchpoints reached 4,493 as of 30 June 2026. The penetrative and specialized portfolio revenues in Agilus' overall revenue grew 27% and 13% respectively in Q1 FY27 compared to the corresponding previous period. In addition, the diagnostic business continues to witness an improvement in its products and customer mix, supported by a higher contribution from B2C segment. We expect the growth momentum in revenue and improvement in operating EBITDA margin to continue going forward. With that, I would like to conclude my remarks. We believe both our hospital and diagnostic business are well-positioned to sustain their growth momentum, backed by a strong balance sheet. We will continue to evaluate inorganic growth opportunities that are aligned with our cluster strategy and have potential to create meaningful synergies.

Speaker #3: The penetrative and specialized portfolio revenues in Edulis' overall revenue grew 27% and 13%, respectively, in Q1 of financial year '27, compared to the corresponding previous period.

Speaker #3: In addition, the diagnostics business continues to witness an improvement in its product and customer mix, supported by a higher contribution from the B2C segment. We expect the growth momentum in revenue and improvement in operating EBITDA margin to continue going forward.

Speaker #3: With that, I would like to conclude my remarks. We believe both our hospital and diagnostic businesses are well positioned to sustain their growth momentum, backed by a strong balance sheet.

Speaker #3: We will continue to evaluate any organic growth opportunities that are aligned with our cluster strategy and have the potential to create meaningful synergies. With that, I would like to hand over the call to Vijayant for his comments.

Ashutosh Raghuvanshi: With that, I would like to hand over the call to Vijay for his comments. We are very excited for him to join us, and we welcome him once again to the company.

Speaker #3: We are very excited for him to join us, and we welcome him once again to the company.

Speaker #1: Thank you, Dr. Raghuvanshi, and good morning, everyone. Thank you for joining us today. On behalf of Edulis Diagnostics, I extend a warm welcome to all of you to discuss our performance for the first quarter of 2027.

Vijender Singh: Thank you, Dr. Raghuvanshi, good morning, everyone. Thank you for joining us today. On behalf of Agilus Diagnostics, I extend a warm welcome to all of you to discuss our performance for Q1 FY27. FY27 has been a steady start for Agilus. During the quarter, we continued to execute on our strategic priorities while strengthening our business across both consumer and institutional segments, investing in advanced diagnostics and improving operational efficiencies. While the market remains competitive, our focus continues to be on building a stronger, more resilient business that is well-positioned for sustainable long-term growth. During the quarter, we reported gross revenue of INR 407 crore, reflecting a 10.2% year-on-year growth over Q1 last year. Operating EBITDA grew to INR 97 crore, while operating EBITDA margins improved from 23.9% compared to 23.0% in the corresponding quarter last year.

Speaker #1: FY27 has seen a steady start for Edulis. During the quarter, we continued to execute on our strategic priorities by strengthening our business across both consumer and institutional segments.

Speaker #1: We are investing in advanced diagnostics and improving operational efficiencies. While the market remains competitive, our focus continues to be on building a stronger, more resilient business that is well positioned for sustainable long-term growth.

Speaker #1: During the quarter, we reported gross revenue of INR 407 crore, reflecting a 10.2% year-on-year growth over Q1 last year. Operating EBITDA grew to INR 97 crore, while operating EBITDA margins improved to 23.9%, compared to 23.0% in the corresponding quarter last year.

Speaker #1: These results reflect not only healthy business momentum but also the benefits of our continued focus on productivity, operating leverage, and a richer tax. Operationally, we processed approximately 10.5 million tests during the quarter and expanded our network with gross additions of over 200 customer touchpoints.

Vijender Singh: These results reflect not only healthy business momentum, but also the benefits of our continued focus on productivity, operating leverage, and a richer test mix. Operationally, we processed approximately 10.5 million tests during the quarter and expanded our network with the gross additions over 200 customer touchpoints, further strengthening our reach across the country. We also saw continued momentum in our consumer business with the B2C/B2B revenue mix improving to 53/47 in Q1 FY27 from 51/49 in Q1 FY26. We continue to see a favorable shift in our portfolio mix with the contribution from preventive portfolio increasing to 14% in Q1 FY27 from 12% in Q1 FY26. While the specialized portfolio contribution improved to 35% from 34% over the same period. Higher realizations per test and per patient reflect increasing adoption of specialized diagnostics and a favorable shift in our portfolio mix.

Speaker #1: Further strengthening our reach across the country, we also saw continued momentum in our consumer business, with the B2C:B2B revenue mix improving to 53:47 in Q1 FY27.

Speaker #1: From 5,149 in Q1 FY26, we continued to see a favorable shift in our portfolio mix, with the contribution from the preventive portfolio increasing to 14% in Q1 FY27 from 12% in Q1 FY26.

Speaker #1: While this specialized portfolio contribution improved to 35% from 34% over the same period, higher realizations per test and per patient reflect increasing adoption of specialized diagnostics and a favorable shift in our portfolio mix.

Speaker #1: Innovation continues to be a key pillar of our growth strategy. During the quarter, we achieved an important milestone by successfully completing our 1,000 whole-exam sequencing tests on our NovaCX platform at our global reference laboratory in Mumbai.

Vijender Singh: Innovation continues to be a key pillar of our growth strategy. During the quarter, we achieved an important milestone by successfully completing over 1,000 whole-exome sequencing tests on our NovaSeq X platform at our global reference laboratory in Mumbai. This milestone reflects the growing adoption of advanced genomic testing and reinforces our commitment to making precision diagnostics more accessible to clinicians and patients across India. Beyond genomics, we continue to invest in digital capabilities while supporting long-term sustainable growth. Looking ahead, we remain optimistic about the opportunities before us. Rising health awareness, increasing demand for preventive healthcare, and growing adoption of specialized diagnostics continue to create a favorable environment for the industry. With our expanding network, strong scientific capabilities, and continued investments in innovation and technology, we believe Agilus is well-positioned to sustain profitable growth and create long-term value for all our stakeholders. Thank you.

Speaker #1: This milestone reflects the growing adoption of advanced genomic testing and reinforces our commitment to making precision diagnostics more accessible to clinicians and patients across India.

Speaker #1: Beyond genomics, we continue to invest in digital capabilities while supporting long-term, sustainable growth. Looking ahead, we remain optimistic about the opportunities before us. Rising health awareness increases demand for preventive healthcare, and the growing adoption of specialized diagnostics continues to create a favorable environment for the industry.

Speaker #1: With our expanding network, strong scientific capabilities, and continued investment in innovation and technology, we believe Edulis is well positioned to sustain profitable growth and create long-term value for all our stakeholders.

Speaker #1: Thank you.

Speaker #2: Thank you, Vijayantra. Ladies and gentlemen, we shall now open the floor for questions and answers. May I please request the moderator to begin?

Anurag Kalra: Thank you, Vijendra. Ladies and gentlemen, we shall now open the floor for question and answers. May I please request the moderator to begin.

Speaker #3: Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.

Operator 3: Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Tauseef with BNP Paribas. Please go ahead.

Speaker #3: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.

Speaker #3: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Tawsif with BNP Paribas.

Speaker #3: Please go ahead.

Speaker #2: Good morning, and thanks for the opportunity. I have a couple of questions on your ESOP. Assuming that most of the ESOPs were given to doctors, I wanted to understand what was the criteria behind choosing the pool of doctors that you decided to incentivize with ESOP?

[Analyst] (BNP Paribas): Good morning, and thanks for the opportunity. A couple of questions on your ESOP. Assuming that most of the ESOP were given to doctors, wanted to understand what was the criteria behind choosing the pool of doctors that you decided to incentivize with ESOP, whether it was a broad-based strategy on India or whether currently it was only for hospitals in Delhi NCR, assuming the competition expected to heat up.

Speaker #2: Was it a broad-based strategy for India, or was it currently only for hospitals in Delhi NCR, assuming the competition is expected to heat up?

Speaker #4: Nur Tawsif, thank you for your question. The strategy and the philosophy of ESOPs is the was the primary consideration and there was a lot of deliberation and we decided that ESOP should be not only a tool to sort of recognize people's contribution but at the same time also be as a tool of how the organization functions in the future and how it performs in the future.

Ashutosh Raghuvanshi: No, Tauseef. Thank you for your question. The strategy and the philosophy of ESOPs was the primary consideration. There was a lot of deliberation, and we decided that ESOP should be not only a tool to sort of recognize people's contribution, but at the same time also be as a tool of how the organization functions in the future and how it performs in the future. Both components were kept in mind as to how the scheme was designed. A broad-based scheme was designed across the network. It is not only limited to Delhi NCR, but it is across our network in all the different zones.

Speaker #4: So both components were kept in mind as to how the scheme was designed, and a broad-based scheme was designed across the network. It is not only limited to Delhi NCR, but it is across our network in all the different zones.

Speaker #2: Just a follow-up question again on ESOP. Also, was this a pre-planned move to build loyalty, or did the company observe some uptick in poaching attempts from competitors, especially in Delhi NCR?

[Analyst] (BNP Paribas): Just a follow-up question again on ESOP. Was it a pre-planned move to build loyalty, or did the company observe some uptick in poaching attempts from the competitors, especially in Delhi NCR?

Speaker #4: Yeah, see, as far as the poaching activity is concerned, that keeps on happening periodically. We are not overly concerned about that.

Ashutosh Raghuvanshi: Yeah. See that as far as the poaching activity is concerned, that keeps on happening periodically. We are not overly concerned about that. We believe that our brand attracts the best possible clinicians because we provide an environment with good clinical infrastructure and an environment to function clinically independently. With that, I think we are an attractive magnet for clinicians. We are not overtly concerned about that. The idea was that the doctors participate in the growth of the organization and their interests and the company's interests are aligned. Clinicians help in many, many ways for the performance to improve in terms of controlling of the consumption, for instance, other efficiency measures which are necessary to have a better profitability profile. All those things, they become partners. That was the philosophy. It was not a reactionary approach.

Speaker #4: We believe that our brand attracts the best possible clinicians because we provide an environment with good clinical infrastructure and an environment to function clinically independently.

Speaker #4: So with that, I think we are an attractive magnet for clinicians, so we are not overtly concerned about that. But the idea was that the doctors participate in the growth of the organizations, and their interests and the company's interests are aligned.

Speaker #4: So clinicians' health, in many, many ways, too, for the performance to improve in terms of controlling the consumption, for instance; you know, other efficiency measures which are necessary to have a better profitability profile.

Speaker #4: partners. So that was the philosophy. It was not a reactionary approach; it was a very well-thought-out, calibrated strategy, which was planned over a period of about one and a half years before we actually implemented.

Ashutosh Raghuvanshi: It was a very well-thought calibrated strategy, which was planned over a period of about one and a half years before we actually implemented.

Speaker #2: That's helpful. What is the ESOP charge? What should we assume for FY27 and the next two fiscals? And after a soft start to the hospital business on the EBITDA margin front, can we expect at least a 100 basis point improvement in EBITDA margin at a consolidated level for FY27?

[Analyst] (BNP Paribas): That's helpful. What is the ESOP charge one should assume for FY27 and next two fiscal? After a soft start to the hospital business on the EBITDA margin front, can we expect at least 100 basis improvement EBITDA margin at a consolidated level for FY27?

Speaker #1: Yeah. So, first, as per your question about the charge—what charge it will be bearing—you're right. The charge will be there for the next three years and so on.

Vivek Goyal: Yeah. As per your question about the charge, what charge it will be bearing, you are right. The charge will be there for next three year and so. The charge will initially be higher because it depend on the vesting, and then it will gradually come down. As regard the margin guidance, we still maintain the margin guidance because overall, all this should also contribute to the better operating performance overall because of this initiative.

Speaker #1: And the charge will initially be higher because it depends on the vesting. And then it will gradually come down. And as regards the margin guidance, we still maintain the margin guidance.

Speaker #1: Overall, all this would also contribute to better operating performance. This is because of this initiative.

Speaker #2: That's helpful. I'll get back in the queue.

Param Vora: That's helpful. I'll get back in the queue.

Speaker #3: The next question comes from the line of Neha Manpuriya with Bank of America. Please go ahead.

Operator 3: The next question comes from the line of Neha Manpuria with Bank of America. Please go ahead.

Speaker #2: Yeah, thanks for taking my question. Vivek sir, on the margin—just to be sure—the 25% margin by FY28 is obviously pre-ESOP. Would that be a fair understanding?

Neha Manpuria: Yeah, thanks for taking my question. Vivek, sir, on the margin, just to be sure, the 25% margin by FY28 is obviously pre-ESOP. Would that be a fair understanding?

Speaker #1: Yeah, at that time, of course, the ESOP was not approved, Neha. But as I said, the ESOP charge has now come, and there will be some adjustment in the cost also, and there will be some improvement in the operating performance also because of the ESOP.

Vivek Goyal: Yeah, at that time, of course, the ESOP was not approved, Neha.

Neha Manpuria: Correct.

Neha Manpuria: As I said, the ESOP charge has now come, and there will be some adjustment in the cost also, and there will be some improvement in the operating performance also because of the ESOP. Ultimately, whatever initiative we take, it should contribute to the operating performance. I am confident with all these things, with some cost reduction, some improvement in the efficiency and the revenue, we will able to maintain the margin. Just on this point, like the earlier person was asking question about the doctor poaching. Generally, it is an industry practice. Whenever the doctor poaching happened, we end up for increasing the cost. We hope that that cost will be curtailed to a great extent. All these initiatives have some plus, some minus, but ultimately it is beneficial. That's why company and the board has decided to roll this piece of offer.

Speaker #1: Ultimately, whatever initiative we take, it should contribute to the operating performance. And I am confident with all these things—some cost reduction, some improvement in the efficiency and revenue—we will be able to, you know, maintain the margin.

Speaker #1: Just on this point, like the earlier person who was asking a question about doctor poaching. Generally, it is a must-be practice that whenever doctor poaching happens, we end up increasing the cost.

Speaker #1: We hope that that cost will be curtailed to a great extent. And all these initiatives, you know, have some plus, some minus, but ultimately, it is beneficial. That's why, you know, the company and the board have decided to roll out this ESOP.

Speaker #4: Yeah. And Neha, if I may just add the, you know, the our guidance and our target does not change because we have several brownfield facilities which are coming online now and like the FMRI facility has just got ready and, you know, the final approvals are coming in place now.

Ashutosh Raghuvanshi: Yeah. Neha, if I may just add.

Neha Manpuria: Yeah

Ashutosh Raghuvanshi: Our guidance and our target does not change because we have several brownfield facilities which are coming online now, and like the fMRI facility has just got ready and the final approvals are in place now. We would see some upside of that. At the same time, our Manesar facility has been continuously improving, that is also going to significantly change the numbers. We are pretty confident that we are still on track.

Speaker #4: So, we would see some upside from that. At the same time, you know, our Manesar facility has been continuously improving, so that is also going to significantly change the numbers.

Speaker #4: So, we are pretty confident that we are still on track.

Speaker #2: Understood, sir. This is very helpful. My second question is on Manesar and Greater Noida. I think both of these facilities people understand, but Manesar and Noida are both below 10% margin.

Neha Manpuria: Understood, sir. This is very helpful. My second question is on Manesar and Greater Noida. I think both of these facilities, people here understand, but Manesar and Noida are both below 10% margin, and that is one of the reasons you mentioned for the muted margins in this quarter. How much time do you think we get to 20% margins in both these hospitals? Manesar, if you could give us some color on how much bed we have operationalized, et cetera, to help us get comfort on that margin improvement.

Speaker #2: And that's one of the reasons you've mentioned for the, you know, muted margins in this quarter. When do you think—how much time do you think it will take to get to 20% margins in both these hospitals?

Speaker #2: Manisar, if you could give us some color on how much better we are operationalized, etc., to help us get comfort on that margin improvement.

Speaker #4: So, Manisar, we have operationalized about 187 beds, and the rest of the facility is also ready as and when the occupancy goes up. Currently, occupancy is about 60% on the currently installed beds.

Ashutosh Raghuvanshi: Manesar, we have operationalized about 187 beds, and the rest of the facility is also ready as and when the occupancy goes up. Currently, it is about 60% occupancy on the current installed beds. As that occupancy increases, we should be able to open more beds as we are just in the process of getting the final approval for the last two floors as well. Civil work and other things are completed. The second thing which is happening in Manesar is our radiation oncology equipment is under installation. By the month of November, that should be installed. Once that is commissioned, then this hospital will become a comprehensive oncology center. The growth in this top line has been as per our expectation. The profitability has not been in line with what we had expected.

Speaker #4: So, as that occupancy increases, we will be—we should be able to open more beds as we adjust in the process of getting the final approval for the last two floors as well.

Speaker #4: Civil work and other things are completed. The second thing which is happening in Manesar is our radiation oncology equipment is under installation. So, by the month of November, that should be installed.

Speaker #4: Once that is commissioned, then this hospital will become a comprehensive oncology center. The growth in this top line has been as per our expectation.

Speaker #4: So, the profitability has not been in line with what we had expected. However, we expect that the dynamics of the hospital will dramatically change once we have the oncology setup commissioned by the end of this calendar year.

Ashutosh Raghuvanshi: We expect that the dynamics of the hospital will dramatically change once we have the oncology setup commissioned by the end of this calendar year. On the other hand, Noida is also showing steady increase. Month on month, we are seeing about 8%, 10% growth on the revenue side. It's more a question of occupancy. As we acquire more clinical talent, which we have been doing, we should expect good occupancy here as well. Both these hospitals, by the year-end, certainly be in the mid-teens as far as EBITDA is concerned, if not higher.

Speaker #4: On the other hand, Noida is also showing a steady increase. Month on month, we are seeing about 8–10% growth on the revenue side. So, it’s more a question of occupancy.

Speaker #4: So, as we acquire more clinical talent, which we have been doing, we should expect good occupancy here as well. So both these hospitals, by year-end, will certainly be in the mid-teens as far as EBITDA is concerned, if not higher.

Speaker #2: This is very helpful, sir. Thank you so much.

Neha Manpuria: This is very helpful, sir. Thank you so much.

Speaker #3: The next question comes from the line of Karan Vora with Goldman Sachs. Please go ahead.

Operator 3: The next question comes from the line of Param Vora with Goldman Sachs. Please go ahead.

Speaker #2: Thank you for taking my question. So, the first one is again about getting a slightly better sense of the hospital EBITDA margin. I think for this year, our original guidance was around 150 to 200 bps margin expansion.

Param Vora: Thank you for taking my question. The first one is, again, slightly getting a better sense on the hospital EBITDA margin. I think for this year, our original guidance was around 150 to 200 basis points margin expansion. That though will be ex-ESOP, right? Like, while FY28 we are reiterating our 25% normalized margin or reported margin, this year that will be ex-ESOP, and that's first clarification I wanted. Secondly, how do we achieve that 25% EBITDA margin? Can you explain in a bit more detail, like, what are the cost levers? Or is it pure operating leverage? What are some of the building blocks for that?

Speaker #2: That, though, will be ex-ESOP, right? Like, while for FY28 we are reiterating 25% normalized margin or reported margin, but this year, that will be ex-ESOP.

Speaker #2: That's the first clarification I wanted. Secondly, how do we actually achieve that 25% EBITDA margin? Can you explain that in a bit more detail?

Speaker #2: What are the cost levers, or is it purely a function of operating leverage? What are some of the building blocks for that?

Vivek Goyal: Sure. Param, earlier guidance which we have given, that was obviously not included with ESOP cost because it was not rolled out by that time. As Dr. Saurabh said, it has taken a lot of deliberation at company management level and board level, and after that, this was rolled out. That was not a part of that. Having said that, as I said earlier, we are still maintaining our guidance. It may be quarter-on-quarter may not be that way. Like in this quarter, there is a dip if we consider ESOP cost. Overall in 2 years' time, we are quite hopeful we will be reaching to 25%. As regards the levers are concerned, one is there are new units which earlier Neha has pointed out. These units in the ramp-up stage.

Speaker #1: Yeah. So Karan, the earlier guidance which we had given obviously did not include this ESOP cost because it had not rolled out by that time.

Speaker #1: As Dr. Sava said, it has taken a lot of deliberation at the company management level and board level, and after that, this was rolled out.

Speaker #1: So, that was not a part of that. But having said that, as I said earlier, we are still maintaining our guidance. It may, you know, be quarter on quarter—it may not be that way.

Speaker #1: Like this quarter, there is a dip if we consider ESOP cost. But overall, in two years’ time, we are quite hopeful we will be reaching 25%.

Speaker #1: As regards the levers, one is that there are new units, which, as Neha had pointed out earlier, are in the ramp-up stage. In the current EBITDA margin trajectory, these units have contributed negatively by 0.4% to the overall EBITDA margin.

Vivek Goyal: In the current EBITDA margin trajectory, these units have contributed negatively by 0.4% to the overall EBITDA margin. I am expecting this should contribute maybe at 1% positive. That itself is a big delta. The new doctors which we have taken and new teams which we have added in almost all the 4 units, we are quite hopeful they will start doing good because it takes time for doctors to settle. Thirdly, there is some charge relating to the legal cost in the current quarter because of the ongoing Delhi High Court hearings, which you people are aware. There were intense hearings which has happened last quarter as well as in this quarter. That legal cost has also burdened the profitability if we compare with the Q1 of the last year.

Speaker #1: I am expecting this would contribute maybe 1% positive. So that itself is a big delta. Then the new doctors which we have taken and new teams which we have added in almost all the four units—we are quite hopeful they will start doing good, because it takes time for doctors to settle.

Speaker #1: And thirdly, you know, there is some charge relating to the legal cost in the current quarter. Because of the ongoing daily High Court hearing, which you people are aware of, there were intense hearings which happened last quarter as well as in this quarter.

Speaker #1: And that legal cost has also burdened the profitability if we compare it with the quarter one of last year. And lastly, and this is also a very important point, the provision for doubtful debt has slightly gone up for this quarter.

Vivek Goyal: Lastly, which is also a very important sign, the provision for doubtful debt has slightly gone up for this quarter because there is certain delay in getting collection from the government payer as well as some of the TPA. The team is working on that, and I think that will also be plugging back. We will be able to plug back. There is another lever is on the existing hospital where the occupancy is less and we are seeing some sign of improvement in those hospitals, specifically in BG Road and Mulund, the BG Road particularly where the occupancy is quite low. These are the main levers I will say towards the EBITDA margin improvement and to reach us to 25% level.

Speaker #1: Because there is a certain delay in getting collections from the government payer as well as some of the TPAs, the team is working on that.

Speaker #1: And I think that will also be plugging back. We will be able to plug back. And there is another lever, which is the existing hospitals where the occupancy is less.

Speaker #1: And you know, we are seeing some signs of improvement in those hospitals, specifically in BG Road and Mullum, you know. BG Road particularly, where the occupancy is quite low.

Speaker #1: So these are the main levers, I will say, for our EBITDA margin improvement and to reach us to the 25% level.

Speaker #3: Okay, got it. And my second question—

Param Vora: Got it. My second question is with respect to the expansion plan. Can you just rehash, let's say over the next 3, 4 quarters, what are the beds we are expecting to operationalize, which all facilities?

Speaker #2: This is with respect to the expansion plan. So can you just rehash, let's say over the next three to four quarters, what are the beds we are expecting to operationalize?

Speaker #2: Which all facilities?

Speaker #1: Yes. In the first quarter, we have operationalized 100 beds, and we expect to operationalize another 400 beds in the remaining three quarters of the company.

Vivek Goyal: Yeah. In Q1, we have operationalized 100 beds, and we are expecting to operationalize another 400 beds in the remaining 3 quarters of the company. The major contribution will be from our selective hospital of FMRI, where all the work has been completed. We have applied for occupancy certificate. We may expect that at any time, maybe this month itself. That will give us 200 more beds. Then there are other expansions which are on target. We are doing quite well in terms of our bed expansion plan.

Speaker #1: The major contribution will be from our selective hospital of SMRI. All the work has been completed. We have applied for occupancy certificates.

Speaker #1: We may expect that at any time, maybe this month itself, and that will give us 200 more beds. And then there are other expansions which are on target.

Speaker #1: So, we are doing quite well in terms of our bed extension plan.

Speaker #3: Got it, thanks. Just one quick housekeeping question. This ESOP charge—what is the annual number we are expecting this year and next year?

Param Vora: Got it. Thanks. Just one quick bookkeeping one. This ESOP charge, what is the annual number we are expecting this year and next year?

Speaker #1: Yeah, so this charge is, you know, dependent upon the ESOP vesting and the period, and the number of people to whom the option is given.

Vivek Goyal: Yeah. This charge depend upon the ESOP vesting and the number of people to whom the option is given. Because it is applicable, the ESOP was rolled out from 23 April. Q1 it is 4 lakh number of days. The rest of the quarter, if number of employees remain the same, the charge will be somewhere around INR 40 crore per quarter. Thereafter it should fall down to around INR 30 crore. In Q3, it should be around INR 25 crore per quarter.

Speaker #1: So, because it is applicable, the ESOP was rolled out from 23rd April. This year, this quarter, it is for a lesser number of days. For the rest of the quarter, if the number of employees remains the same, the charge will be somewhere around ₹40 crore.

Speaker #1: Per quarter.

Speaker #2: 40 crore per quarter.

Speaker #1: And thereafter, it should fall down to around 30. And in the third quarter, it should be around 25 crore per quarter.

Speaker #3: Got it. Thanks. The next question comes from the line of Damyanthi Kerai with HSBC Bank. Please go ahead.

Param Vora: Got it. Thanks.

Operator 3: The next question comes from the line of Damayanti Kerai with HSBC Bank. Please go ahead.

Speaker #2: Yeah, hi. Thank you for the opportunity. Again, a quick clarification: the 25% margin guidance, which you are maintaining—that is including ESOP cost, which you think will be offset by a number of factors discussed earlier.

Damayanti Kerai: Yeah. Hi. Thank you for the opportunity. Again, a quick clarification. The 25% margin guidance which you are maintaining, that is including ESOP cost, which you think will be offset by a number of factors earlier discussed. Is that the correct understanding?

Speaker #2: Is that the correct understanding?

Speaker #1: Yes, we are aspiring to achieve a 25% EBITDA margin after absorbing the ESOP cost.

Vivek Goyal: Yes. We are aspiring to achieve 25% EBITDA margin after adjusting the ESOP cost.

Speaker #2: Okay, thank you for that. My question is on your growth expansion strategy. So, during the quarter, you announced you are entering the Odisha market.

Damayanti Kerai: Okay. Thank you for that. My question is on your growth expansion strategy. During the quarter you announced you are entering the Odisha market. Earlier, my understanding was you generally take a cluster-based approach to expand into a particular market, which can be seen in your presence in Delhi, NCR, and Bengaluru, et cetera. Now, how do you select market or how do you go about when you try to expand beyond your traditional markets? Some bit of understanding on that will be helpful.

Speaker #2: So, earlier, my understanding was you generally take a cluster-based approach to expand into a particular market, which can be seen in your presence in Delhi NCR and Bangalore, etc.

Speaker #2: So now, how do you select markets, or how do you go about it when you try to expand beyond your traditional markets? Some bit of understanding on that would be helpful.

Speaker #1: Yes. Yes. No, Damyanthi, our strategy has not changed. We remain focused on the existing clusters. If you would have noticed, the hospital in Odisha is only an O&M project.

Ashutosh Raghuvanshi: Yes. No, Damayanti, our strategy has not changed. We remain focused on the existing clusters. If you would have noticed, the hospital in Odisha is only an O&M project. We are not committing any capital to that market at the moment. However, it is important for us to continue to focus, as I said, on the existing clusters, and we are evaluating opportunities in the clusters where we are present. We hope that we will be able to conclude certain opportunities here pretty soon in the clusters where we are present. At the same time, we also recognize that we will have to consider going to newer markets, especially the ones which have huge future potential and are secondary in nature and which we primarily have not been there. This is more for learning.

Speaker #1: So we are not committing any capital to that market at the moment. However, it is important for us to continue to focus, as I said, on the existing clusters, and we are evaluating opportunities in the clusters where we are present.

Speaker #1: And we hope that we will be able to conclude certain opportunities here pretty soon in the clusters where we are present. But at the same time, we also recognize that we will have to consider going to newer markets, especially the ones which have huge future potential.

Speaker #1: And our secondary nature, which we primarily have not been there. So, this is more for learning, and then, depending on how these institutions perform in future, we have the option, with the O&M partner, to participate in the growth of that region.

Ashutosh Raghuvanshi: Depending on how these institutions perform, in future, we have option with the O&M partner to participate in the growth of that region. Otherwise, we are still focused only on the clusters we are present, Bengaluru, Delhi NCR, Punjab, Mumbai metropolitan region, and Kolkata. We remain focused on that. Of course, we are managing hospitals in Hyderabad and Chennai as well. We will, in future, consider what positioning we want to take in those two cities. We want to always grow only in clusters because there are a lot of synergies which come operating in a given market. We are looking forward to quite a few opportunities, and hopefully we should be able to conclude some.

Speaker #1: So otherwise, we are still focused only on the clusters where we are present: Bangalore, Delhi NCR, Punjab, Mumbai Metropolitan Region, and Calcutta. So we remain focused on that.

Speaker #1: Of course, we are managing hospitals in Hyderabad and Chennai as well, so we will, in future, consider what positioning we want to take in those two cities.

Speaker #1: But we want to always grow only in clusters because there are a lot of synergies which come from operating in a given market. So, we are looking forward to quite a few opportunities and hopefully we should be able to conclude some.

Speaker #2: Sure. I also want to hear some updates on the ONM hospital, which you undertook for Gleneagles. So, compared to when it came under your operation and now, what kind of performance improvement have we seen?

Damayanti Kerai: Sure. Also, want to hear some updates on the O&M hospital which you undertook for Gleneagles. Compared to when it came under your operation and now, what kind of performance improvement we have seen, if you can specify some metrics, et cetera.

Speaker #2: If you can specify some metrics, etc.

Speaker #1: Yes. Yeah. If we kind of speak specific for this hospital, but in general, there's a lot of improvement is there. And as you know, we have entered into this agreement only last year.

Ashutosh Raghuvanshi: Yeah.

Vivek Goyal: Yeah. We can't speak specific for this hospital, but in general, there's lot of improvement there. As you know, we have entered this arrangement only last year, so there is lot of evolution, there is lot of recruitment of new doctors and new teams has taken over there. We are seeing a very healthy improvement in the operating margin in this facility. Having said that, we can't give any specific numbers. We understand.

Speaker #1: So, there is a lot of evolution. There is a lot of, you know, recruitment of new doctors, and new teams have taken over there.

Speaker #1: And we are seeing very healthy improvement in the operating margin in these facilities. But having said that, we can't give any specific number.

Speaker #1: We understand.

Speaker #2: But suffice it to say that you have broadly stabilized the operations there, as you mentioned, and margins are moving in a positive trajectory there.

Damayanti Kerai: Suffice to assume, you have broadly stabilized operations there, as you mentioned, margins are moving in a positive trajectory there.

Speaker #1: Yes, so currently, Damyanthi, we are managing only the five hospitals, and we are not managing the Mumbai hospital, which is a separately managed hospital. In these hospitals, we have improved the existing facilities and the operations.

Ashutosh Raghuvanshi: Yes. Currently, Damayanti, we are managing only the five hospitals, and we are not managing the Mumbai hospital, which is a separately managed hospital. In these hospitals, we have improved the existing facilities and the operations. However, it is still not, I would say, completely stabilized. We have not brought it to the Fortis standard. That will take some time. Our expectation is that it should take at least two, three quarters or maybe around four quarters before we can say that these are fully stabilized.

Speaker #1: However, it is still not, I would say, completely stabilized. We have not brought it to the fourth standard, so that will take some time.

Speaker #1: Our expectation is that it should take at least two to three quarters, or maybe around four quarters, before we can say that these are fully stabilized.

Speaker #2: Okay, that's helpful. And my last question is, Dr. Raghuvanshi, you have highlighted that adding oncology to new units will be one of the key boosters for margins, etc.

Damayanti Kerai: Okay. That's helpful. My last question is, Dr. Raghuvanshi, you have highlighted adding oncology to new units will be one of the key booster for margins, et cetera. If you can talk a bit, among all the new units, et cetera, or in the earlier release also, where oncology is yet to be added, which units are still missing that part?

Speaker #2: So, if you can talk a bit—among all the new units, or even the earlier units—where is oncology yet to be added?

Speaker #2: And yeah, I think that's my question. Which units are still missing that part?

Speaker #1: Yes, sure. As I just mentioned in an earlier question, at Manesar, we are in the phase of installing the equipment. That will be ready by the end of this calendar year.

Ashutosh Raghuvanshi: Sure. As I just mentioned in an earlier question is that Manesar, we are in the phase of installing the equipment. That would be ready by the end of this calendar year. There are two units where the work is just starting on a secondary block at the brownfield expansion in Faridabad and in Amritsar as well. Sorry, three units, Amritsar and Jaipur. These three units will also become full cancer hospitals as well. This is in the pipeline at the moment.

Speaker #1: And there are two units where the work is just starting on a secondary block at the Brownfield expansion in Faridabad and in Amritsar as well—sorry, three units: Amritsar and Jaipur.

Speaker #1: These three units will also become full cancer hospitals as well, so this is in the pipeline at the moment.

Speaker #2: Okay. Thank you, and wishing you all the best.

Damayanti Kerai: Okay. Thank you and wishing you all the best.

Speaker #1: Thank you so much.

Ashutosh Raghuvanshi: Thank you so much.

Speaker #3: The next question comes from the line of Deepti Rajulapathi with Access AMC. Please go ahead.

Operator 3: The next question comes from the line of Deepti Rajolapalli with Axis AMC. Please go ahead.

Speaker #2: Hi. Thank you for the opportunity. It's very good to hear that you're bringing proton therapy to the Delhi NCR region. I just wanted to understand the Capex and timelines for this.

Deepti Rajolapalli: Hi. Thank you for the opportunity. It is very good to hear that you are bringing proton therapy to Delhi NCR region. I just wanted to understand CapEx and timelines for this.

Speaker #1: So it is under finalization. So it will be in the range of ₹250-odd crore.

Vivek Goyal: It is under finalization. It will be in the range of INR 250 crores.

Speaker #2: Okay, understood. And one more question. Got it. Okay. And second question is on the O&M. In any of your O&M, which is performing really well, do you have a call option in the current plan?

Deepti Rajolapalli: Okay. Understood. One more question.

Vivek Goyal: Including installation.

Deepti Rajolapalli: Got it. Okay. Second question is on the O&M. In any of your O&M which is performing really well and you have a call option in current plan?

Speaker #1: Yeah, so we don't have too many ONMs at the moment, and there is no call option in any of the two or three hospitals which we are operating.

Ashutosh Raghuvanshi: Yeah. We don't have too many O&Ms at the moment, and there is no call option in any of the two or three hospitals which we are operating. On the other hand, the Gleneagles assets is a different matter, where we are in discussions with IHH to see how we can proceed.

Speaker #1: So, on the other hand, the Gleneagle assets are a different matter, where we are in discussions with IHH to see how we can proceed.

Speaker #2: Understood. Thank you so much.

Deepti Rajolapalli: Understood. Thank you so much.

Speaker #3: The next question comes from the line of Aman Goyal with IIFL Capital. Please go ahead.

Operator 3: The next question comes from the line of Aman Goyal with IIFL Capital. Please go ahead.

Aman Goyal: Yeah. Thank you, sir. Thank you for the opportunity. My question is on the diagnostic business. We are reporting only 19% top-line growth, whereas industry is growing at 15%, especially our growth was largely on the account of realization improvement, whereas industry has witnessed strong demand growth. Can you provide some color on what are the challenges we are facing? Is this related to still rebranding or all?

Speaker #4: Yeah, thank you, sir. Thank you for the opportunity. So my question is on the diagnostics business. We are reporting only 9–10% top line growth, whereas the industry is growing at 15%.

Speaker #4: And especially, our growth was largely on account of realization improvement, whereas the industry has witnessed strong demand growth. So, can you provide some color on what are the challenges we are facing?

Speaker #4: Is this related to just the rebranding, or to everything?

Speaker #1: Okay, thank you. I think since it's been 10 days since I joined the organization, we will probably rework our plans. But our strategy continues to focus on maintaining growth, including operating leverage from a profit point of view.

Vijender Singh: No, thank you. I think since it's been 10 days, I joined the organization and probably we'll rework our plans. Our standing continues to maintain growth, including operating leverage from profit point of view. Our guidance continue to be maintained, double-digit profit margin. Of course, we'll come back with some of our major plans. Yes, when you look at our data, I think we are in the right direction as far as B2C business is concerned, which is more sticky, more profitable, and also kind of helping us in building our infrastructure, keeping in mind our B2C ratio growing from 53% to at least 55% and 58% in next few time from now. I think we are on track, and probably it's a great opportunity to be associated with Agilus, because Agilus comes with lot more scientific legacy. We are going to leverage that.

Speaker #1: And our guidance continues to be to maintain double-digit profit margin. And of course, we'll come back with some of our major plans. But yes, when you look at our data, I think we are in the right direction as far as the B2C business is concerned, which is more sticky and more profitable.

Speaker #1: And also kind of helping us in building our infrastructure, keeping in mind our B2C ratio growing from 53% to at least 55% and 58% in the next few quarters from now.

Speaker #1: So, I think we're on track, and probably it's a great opportunity to be associated with Agilus because Agilus comes with a lot more scientific legacy.

Speaker #1: So we are going to leverage that. But yes, we are on the right track. That's what, as of now, I can say.

Vijender Singh: Yes, we are on the right track. That's what as of now I can say.

Speaker #4: Okay, thank you, sir. So, my next question is—

Aman Goyal: Okay. Thank you, sir. My next question-

Speaker #1: Yeah, if I can just add a little bit—yeah, I could just add because Mr. Raden Singh has just come on board, and you must be aware that he carries a huge body of experience on building scale.

Ashutosh Raghuvanshi: Yeah, if I can just add a little bit. Yeah, I could just add because Mr. Vijender Singh has just come on board, and as you might be aware, that he carries a huge body of experience on building scale. We are very privileged to have him, and we do recognize that there has been a muted growth or rather kind of a stagnant period for some time, and that was a variety of factors, including the brand change, et cetera. Now those things are getting stabilized. As they're getting stabilized, we have about 10% growth seen in the last quarter, and a lot of it has come from volume growth as well. This is definitely a sign of revival. We have done a little bit of a kind of a transformation project where we have rationalized some of our lab network along with the customer touchpoints.

Speaker #1: So, we are very privileged to have him, and we do recognize that there has been a muted growth, or rather, a kind of a stagnant period for some time.

Speaker #1: And that was due to a variety of factors, including the brand change, etc. Now those things are getting stabilized. As they are getting stabilized, we have seen about 10 percent growth in the last quarter.

Speaker #1: And a lot of it has come from volume growth as well, so this is definitely a sign of revival. We have done a little bit of a kind of transformation project, where we have rationalized some of our lab network along with the customer touchpoints.

Speaker #1: So that journey now will be accelerated under the new leadership and new management. So, with that, we are very confident that we will be able to bring it to a similar level.

Ashutosh Raghuvanshi: That journey now will be accelerated under the new leadership and new management. With that, we are very confident that we will be able to bring it to the similar level. Region-wise, we have seen that after we have started some focused efforts in, say, NCR, our growth in this region has been pretty good, and we are going to replicate the same thing in other regions as well. You are right that the growth has been slower than the other industry players. We are completely on the path that we will be able to achieve similar levels within, say, next few quarters.

Speaker #1: Region-wise, we have seen that after we started some focused efforts in, say, NCR, our growth in this region has been pretty good. And we are going to replicate the same thing in other regions as well.

Speaker #1: So, you are right that the growth has been slower than the other industry players. But we are completely on the path, and we believe that we will be able to achieve similar levels within, say, the next few quarters.

Speaker #4: Okay. Thank you, sir. Good to hear. So, my next question is on the hospitals segment and our specialty mix. We have seen a 200 basis point decline in the on-call business.

Operator 2: Thank you, sir. Good to hear. Sir, my next question is on the hospital segment on our specialty mix. We have seen the 200 basis points decline on Onco business. Is this related to chemo business or are there any other factor also?

Speaker #4: Is this related to the chemo business, or are there any other factors as well?

Speaker #1: Yeah, yeah, you are absolutely right. The chemo business is the one which has impacted this. Some of our regional hospitals—all the hospitals in Punjab, as well as Jaipur—have a large number of ECHS beneficiaries.

Ashutosh Raghuvanshi: You're absolutely right. The chemo business is the one which has impacted this. Some of our regions, all the hospitals in Punjab as well as Jaipur, have large number of ECHS beneficiaries. Some of our hospitals in NCR have large number of CGHS beneficiaries. In all these categories, the chemo drug pricing mechanism, which they have come up with 30% discount on MRP, is the one which is causing this dip. As you would have seen that earlier on, we were growing in oncology about 23% and 24%, but now that has come down to only about 5%. We still feel that oncology is going to be a big growth driver in terms of volumes, and we are focusing a lot on radiation as well as building the expertise on the surgical side of oncology and providing comprehensive care.

Speaker #1: Some of our hospitals in NCR have a large number of CGHS beneficiaries. And in all these categories, the chemo drug pricing mechanism—which they have come up with, a 30% discount on MRP—is the one that is causing this dip.

Speaker #1: And as you would have seen earlier on, we were growing in oncology by about 23–24 percent. But now, that has come down to only about 5 percent.

Speaker #1: But we still feel that oncology is going to be a big growth driver in terms of volumes, and we are focusing a lot on radiation as well as building the expertise on the surgical side of oncology.

Speaker #1: And providing comprehensive care. And that would drive our growth in oncology in the future. But certainly, it is going to be in the range of 10-12 percent and not like 27 percent, which it used to be earlier.

Ashutosh Raghuvanshi: That would drive our growth in oncology in future. Certainly it is going to be in the range of 10% and 12% and not like 27%, which used to be earlier.

Speaker #4: Okay. So my last one is on clinicals. Can you give us the absolute management fees we have generated from clinicals this quarter? I mean, we have a 2–3% O&M contract with the clinicals.

Aman Goyal: Okay. Sir, my last one is on Gleneagles. Can you give us the absolute management fees we have generated from Gleneagles this quarter? I mean, we have a 2% to 3% O&M contract with the Gleneagles.

Vivek Goyal: Yeah. We are adhering to that agreement. As per that agreement, we are eligible for 3% fees of the revenue. That we are getting completely.

Speaker #1: We are adhering to that agreement as per that agreement. We are eligible for 3% fees of the revenue, and that we are getting.

Speaker #1: Completely.

Speaker #4: So, how much did we generate, I mean, book for this quarter?

Aman Goyal: How much did we generate, I mean, book for this quarter?

Speaker #1: Around 6 crore.

Vivek Goyal: Around INR 6 crore.

Speaker #4: Okay, thank you. Thank you so much.

Aman Goyal: Okay. Thank you so much.

Speaker #3: The next question comes from the line of Abdul Puranwala with ICICI Securities. Please go ahead.

Operator 3: The next question comes from the line of Abdul Puranwala with ICICI Securities. Please go ahead.

Speaker #5: Hi, sir. Thank you for the opportunity. So my first question is with regards to your occupancy. So this quarter we understand it was kind of flattished because of the beds what you were adding.

Abdul Puranwala: Yeah. Hi, sir. Thank you for the opportunity. My first question with regards to your occupancy. This quarter, we understand it was kind of flattish because of the beds what you are adding. If I look at your 14 facilities, which is contributing to the bulk of EBITDA, that is already having an occupancy of close to 74%. Sir, how should we look at growth of these hospitals? That is question number 1. Second is, for this balance six hospital in the range of, say, 10% to 20% margin. There seems to be some occupancy room, but if I look at previously, the numbers what you shared in FY26, their occupancy has kind of slid down. If you could help us understand on both these aspects.

Speaker #5: But if I look at your 14 facilities, which are contributing to the bulk of EBITDA, they are already operating and have an occupancy of close to 74%.

Speaker #5: So, sir, how should we look at growth for these hospitals? That is question number one. And second, for the balance six hospitals in the range of, say, 10 to 20 percent margin?

Speaker #5: There seems to be some occupancy room. But if I look at, previously, the numbers you have shared—NFI 26—their occupancy has kind of slid down.

Speaker #5: So, sir, if you could help us understand both these aspects.

Speaker #1: Yeah, so we are consistently operating at around 70 percent occupancy on the enhanced base. If you see, this occupancy is after taking into consideration the new unit, where some renovation work is going on.

Vivek Goyal: Yeah. We are now consistently operating at around 70% occupancy on the enhanced base. If you see these occupancies after taking into consideration the new unit where some renovation work is going on, for example, in our Bangalore unit and the other new unit which we have taken. The occupancy is impacted because of that to some extent, but still it is at around 70% occupancy. As regard lever for ramping up the occupancies, one is these new units including Manesar, this Yeshwanthpur facility, Greater Noida facility. They have lot of scope and we are seeing the occupancies going up as we are strengthening these networks with better clinical talent and better marketing efforts. There are some big units which are still there with lower occupancies. Bangalore BG Road is one of them. Again, this is a big lever for us to improve the occupancy level.

Speaker #1: For example, in the Bangalore unit, and the other new unit which we have taken, the occupancy is impacted because of that to some extent.

Speaker #1: But still, it is at around 70 percent occupancy. As regards the lever for ramping up the occupancies, one is these new units.

Speaker #1: Including Maneswar, this Yeshwantpur facility, Greater Noida facility, there is a lot of scope and we are seeing the occupancy going up as we are strengthening these networks with Bacta’s clinical talent.

Speaker #1: And Bacta marketing efforts—there are some big units which are still there with lower occupancy. Bangalore BG Road is one of them. So again, this is a lever, this is a big lever for us.

Speaker #1: So, to improve the occupancy level, I think all these levers will be good enough to ramp up occupancy going forward by another 2 to 3 percent.

Vivek Goyal: I think all these levers will be good enough to ramp up the occupancy, going forward by another 2 to 3 percentage points.

Speaker #1: Percentage point.

Speaker #5: Got it. And so the next one is on your bed expansion plan at SMRI. So I heard you out when you mentioned it. But in the 25% margin guidance that you're providing, sir, at FMRI, how are we thinking about margins playing out in the next one or two years?

Abdul Puranwala: Got it. The next one is on your bed expansion plan at FMRI. I heard you out when you called out on your guidance and the levers for it. In the 25% margin guidance what you are providing at FMRI, how are we thinking about margins to play out in the next 1 or 2 years?

Speaker #1: Yeah, FMRI is already operating at a very decent EBITDA margin. It is around this number—25 percent, type of number. And with the new beds coming in, we expect on the larger base it will be able to maintain that occupancy and EBITDA margin.

Vivek Goyal: Yeah. FMRI is already operating at a very decent EBITDA margin. It is around this number, 25% type of number. With the new beds coming in, we expect on the larger base it will be able to maintain that EBITDA margin and there will be some improvement rather in this EBITDA margin. Initially it will be like a status quo type of EBITDA margin. Going forward, there will be improvement in the EBITDA margin because you have to add some talent, you have to add some new players to ramp this type of bed capacity. We are confident that there will not be any margin drop initially, but there will be improvement in the margin.

Speaker #1: And there will be some improvement, rather, in this EBITDA margin. Initially, it will be like a status quo type of EBITDA margin. Going forward, there will be improvement in the EBITDA margin.

Speaker #1: Because you have to add some talent. You have to add some new players to absorb this type of bad capacity. But we are confident that there will not be any margin drop initially.

Speaker #1: But there will be improvement in the margin.

Speaker #5: Got it, sir. Thank you. I will get back in the queue.

Abdul Puranwala: Got it, sir. Thank you. I will get back in the queue.

Speaker #3: The next question comes from the line of Sayan Mukherjee with Nomura Holdings. Please go ahead.

Operator 3: The next question comes from the line of Saion Mukherjee with Nomura Holdings. Please go ahead.

Speaker #5: Yeah, thank you for taking my question. I just wanted to ask, what is your capex guidance for this year? Also, last year we saw some acquisitions and inorganic moves.

Saion Mukherjee: Yeah, thank you for taking my question. Sir, just wanted to know what is your CapEx guidance for this year and also, last year we have seen some acquisitions, inorganic moves. Is that something which we can expect this year as well?

Speaker #5: Is that something we can expect this year as well?

Speaker #1: Yeah. Sayan, if I can take this question. Generally, we are expecting growth because we are in the growth phase, and we have this 2,000-bed expansion in the line.

Vivek Goyal: Yeah. Saion, if I can take this question. Generally, we are expecting because we are in the growth phase and we have this 2,000 bed expansion in the line. Without taking any acquisition thing into consideration, we will be consuming around 50% of our EBITDA for our growth, which is brownfield expansion which is going on. Plus some of the initiatives like Dr. Raghuvanshi had mentioned for enhancing our technical capabilities like proton and other therapies which we are investing in, including robotic surgeries.

Speaker #1: So, without taking any acquisition into consideration, we will be consuming around 50 percent of our EBITDA for our growth, which is brownfield expansion that is going on.

Speaker #1: Plus, some of the initiatives, like Dr. Raghuvanshi has mentioned, for enhancing our technical capabilities, like Proton and Abbott Therapeutics, which we are investing in.

Speaker #1: Including robotic services.

Speaker #5: And sir in organic moves?

Saion Mukherjee: Sir, inorganic moves?

Speaker #1: So in organic, we are actually looking at it, and there are some deals which we are actually pursuing. Until those are concluded, we can't speak much about those deals.

Vivek Goyal: Inorganic, we are actually looking at it and there are some deals which we are actually pursuing. Until those are concluded, we can't speak much on those deals, we have to wait for getting further details.

Speaker #1: So we have to wait to get further details.

Speaker #5: And we could expect them to be in your focus clusters only, right? Is that a fair assessment to make? Okay. And sir, go ahead.

Saion Mukherjee: We could expect them to be in your focus clusters only, right? Is that a fair-

Vivek Goyal: Yes

Saion Mukherjee: assessment to make? Okay.

Vivek Goyal: Yes.

Saion Mukherjee: Sir the second one, I don't know, I mean, you might have explained, but I just wanted to understand on the ESOP side. The policy, is it largely to the doctors and how many doctors or what percentage of people and doctors have been awarded these ESOP and what has been the criteria here?

Speaker #5: Yeah, and the second one, I don't know. I mean, you might have explained— I just wanted to understand on the ESOP side, like, what's the policy?

Speaker #5: Is it largely to the doctors, and how many doctors, or what percentage of people or doctors, have been awarded these ESOPs? And what has been the criteria here?

Speaker #1: So it is not only to doctors, first of all. It is to doctors and some senior staff of the company. Roughly, it is around 55% to 60% to doctors, and the balance is to administrative staff, including operators.

Vivek Goyal: Sir, it is not only to doctors' staff also. It is to doctors and some senior staff of the company. Roughly it is around 55% to 60% to doctors and balance to administrative staff, including operators.

Speaker #1: So, I think the proportion may go up and down depending upon the need to provide this ESOP. Right now, it is at this level.

Saion Mukherjee: Okay.

Vivek Goyal: I think the proportion may go up and down depending upon the need to provide these people. Right now it is at this level.

Speaker #5: I see. Okay. Sir, I think you mentioned attrition. Is that an issue in the industry in general that you have seen? Is it increasing?

Saion Mukherjee: I see. Okay. Sir, I think you mentioned about attrition. Is that an issue in the industry in general you have seen? Is it increasing any particular geography where you've seen that as an issue, given all the expansion that is happening? Incrementally, as a trend, are you seeing more attrition in the hospital sector?

Speaker #5: Any particular geography where you have seen that as an issue, given all the expansion that's happening incrementally? I mean, as a trend, are you seeing more attrition in the hospitals sector?

Ashutosh Raghuvanshi: Sir, not really any kind of pattern we can see. However, within the micro markets when a new hospital opens, then obviously there will be some disturbance in that local geography. That pattern we have seen. As a general, some region, there is a lot of attrition happening, that is not the case. It is just within small micro markets, like for example, in Noida, as you are aware that couple of new hospitals opened up and that did create little flutter across all the hospitals actually, and there were some changes. I think it is at par with what happens in normal course of business. We are not unduly concerned about it because the supply of the clinical talent has improved significantly. The younger generation has started coming out after the seats have been increased in medical colleges about 15 years back.

Speaker #1: Not really, any kind of pattern we can see. However, it is within the micro markets—when a new hospital opens, then obviously there will be some disturbance in that local geography.

Speaker #1: So, that pattern we have seen. But as a general, if some region is there where a lot of attrition is happening, that is not the case.

Speaker #1: It's just within small micro-markets. Like for example, in Noida, as you are aware, a couple of new hospitals opened up, and that did create a little flutter across all the hospitals actually.

Speaker #1: And there were some changes, but I think it is at par with what happens in normal business. Because of business, we are not unduly concerned about it.

Speaker #1: Because the supply of clinical talent has improved significantly. The younger generation has started coming out, after the seats were increased in medical colleges about 15 years back.

Speaker #1: So, all those people have started coming out, finishing their training. So, gradually, over the next few years, you will see that this will not be that big a problem.

Ashutosh Raghuvanshi: All those people have started coming out finishing their training. Gradually over the next few years you will see that this will not be that big a problem.

Speaker #5: Okay, okay. Thank you, sir, and I will join back. Thank you. Thank you.

Saion Mukherjee: Okay. Thank you, sir, and I'll join back. Thank you.

Speaker #3: The next question comes from the line of Gopal Bhatt with Baroda BNPP. Please go ahead.

Operator 3: The next question comes from the line of Gopal Bhatt with Baroda BNPP. Please go ahead.

Speaker #4: Hi, yeah. Just a quick follow-up. I think an earlier participant asked about the on-call share going down. I heard that you maybe were impacted by the ECHS segment.

Gopal Bhatt: Hi. Yeah, just a quick follow-up. I think an earlier participant asked on the Onco share going down. I heard that you maybe were impacted by the ECHS segment, but that is broadly flat if I look on year-on-year. Just any comment there.

Speaker #4: But that is broadly flat if I look year-on-year. So, just any comment there, if—yeah.

Speaker #1: Yeah, so uh, within that segment, there are pluses and minuses both which have happened. So, a lot of diagnostic tests, investigations, procedure prices have gone up.

Ashutosh Raghuvanshi: Within that segment there are pluses and minuses both which have happened. Lot of diagnostic tests, investigations, procedure prices have gone up. Whereas at the same time, the prices of chemotherapy, et cetera, have gone down. The net effect is not significant, but it has moved to other specialties, the revenue. That is why you will see the ECHS contribution remains same. The oncology as a division, that growth has become muted because of that. Also our base has been increasing continuously. Since the growth was very high for about four or five years, the base has also become very large.

Speaker #1: Whereas at the same time, the prices of chemotherapy, etcetera, have gone down. So the net effect is not significant. But the revenue has moved to other specialties.

Speaker #1: That is why you will see the ECHS contribution remains the same. But the oncology as a division—the growth has become muted because of that.

Speaker #1: And also, our base has been increasing continuously. So, since the growth was very high for about four or five years, the base has also become very large.

Speaker #4: Okay. Got it. Thank you.

Gopal Bhatt: Okay, got it. Thank you.

Speaker #1: Thank you.

Ashutosh Raghuvanshi: Thank you.

Speaker #3: The next question comes from the line of Nilay Parekh with Perpetuity Ventures. Please go ahead.

Operator 3: The next question comes from the line of Nilay Parekh with Perpetuity Ventures. Please go ahead.

Speaker #1: Thank you, sir, for taking my question. So, my question was regarding the revenue and margin guidance for our diagnostics business. Also, could you throw some more light on the specialty and preventive mix for the next two years?

Nilay Parekh: Thank you, sir, for taking my question. My question was regarding this revenue and this margin guidance for our diagnostic business. Can you throw some more light on this specialty and this preventive mix for the next two years? Thank you.

Speaker #1: Thank you. Can you repeat the question? I could not check here properly. Hello? Am I audible, sir? Hello? Hello? Yeah. Hello? Yeah. Please. Yeah.

Vivek Goyal: Can you repeat the question? I could not hear properly.

Nilay Parekh: Hello, am I audible, sir? Hello.

Vivek Goyal: Yeah.

Nilay Parekh: Hello.

Vivek Goyal: Yeah, please go ahead.

Speaker #1: Yeah. So wanted to yes. So wanted to know this revenue and margin guidance for our this diagnostic business and also some key additional this insights on our this preventive as well as this speciality mix for the next two years.

Ashutosh Raghuvanshi: Yeah.

Nilay Parekh: Wanted to know this revenue and margin guidance for our diagnostic business and also some key additional insights on this preventive as well as this specialty mix for the next two years. Hope my question is audible to you.

Speaker #1: Hope my question is audible to you. So, you are asking about revenue margin prediction for the diagnostic business. Am I right? Yes. Yes. Yes, you are correct.

Vivek Goyal: You are asking the margin prediction for the diagnostic business, am I right?

Nilay Parekh: Yes. You are correct.

Speaker #1: Yeah. So, coming to the diagnostic business doctors, as I mentioned earlier, we have already achieved double digit revenue growth. And with our focused approach and the new team on the ground, we are expecting the revenue growth to be around 23–24 percent.

Vivek Goyal: Yeah. Diagnostic business, Dr. Abhijit earlier mentioned, we have already achieved a double-digit revenue growth. With our focus up close and the new team on the ground, we are expecting the revenue growth to be around 12% to 13%, and EBITDA margin should be in the range of 24%, 25%. For the remaining part.

Speaker #1: Sorry, 12 to 13 percent. And EBITDA margin should be in the range of 24 to 25 percent for the remaining part of the current year.

Speaker #3: Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing remarks.

Operator 3: Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Speaker #1: Thank you, ladies and gentlemen. If there are any further follow-up queries, questions, or clarifications, please feel free to reach out to us. We will help you as best as possible.

Ashutosh Raghuvanshi: Thank you, ladies and gentlemen. If there are any further follow-up queries, questions, clarifications, please feel free to reach out to us. We'll help you as best possible. Thank you once again and have a good day.

Speaker #1: Thank you once again, and have a good day.

Speaker #3: Thank you sir. Ladies and gentlemen on behalf of Fortis Healthcare that concludes this conference call. Thank you for joining us and you may now disconnect your lines.

Operator 3: Thank you, sir. Ladies and gentlemen, on behalf of Fortis Healthcare, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.

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