Fortis Healthcare Limited (FORTIS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Fortis Healthcare Ltd. Q2 and H1-FI27 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 dash turn four. Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Kalra, Head Investor Relations at Fortis Healthcare Ltd. Thank you, and over to you, sir.

Thank you. Very good afternoon. Good morning, ladies and gentlemen, and thank you for joining us on our quarter to FY27 earnings call. The call is being chaired by our CEO and MD, Dr. Ashutosh Ragovanshi. With him, we have our Chief Financial Officer, Mr. Vivek Goyal. From Agilis Diagnostics, the CEO, Mr. Vijendra Singh, joins us, and with him is Akshay Tabari, the CEO of Agilis. I have my colleague Amit Ujmi as well. We will begin with some opening comments on the results by Dr. Raghavanchi, and then Vijendra will take you through the key highlights of the diagnostics business before we open the floor for questions and answers. Over to Dr. Raghavanchi.

Thank you, Anurag. Good morning, everyone, and thank you for taking time to join us for our Q2 Financial Year 27 earnings call today. I would like to wish you all a very happy Dhanteres and happy Diwali as well. Let me begin by taking you through our quarterly and half-yearly performance, along with the key developments across our businesses. Building on the momentum from the first quarter, we continued to deliver healthy growth in Q2, with both our hospitals and diagnostic businesses performing well. The first half of financial year 27 reflects sustained revenue growth, an expanding operational footprint, and continued advancement of our strategic initiatives. We reported consolidated revenues of INR 2,735 crores for the quarter, registering a growth of 17.3% over quarter 2 of financial year 26. The hospital business recorded a revenue growth of 18.6%, with revenues reaching 2,340 crores. While the diagnostic business reported gross revenues of INR 448 crores, reflecting an increase of 12.2% over INR 400 crores in the corresponding quarter last year. Our consolidated operating EBITDA pre-ESOP expense grew by 19.2% over quarter 2 of financial year 26 to INR 663 crores. With operating EBITDA margins improving to 24.2% in financial year 27 from 23.9% in the corresponding quarter last year. The hospital business reported operating EBITDA of INR 545 crores with margins improving to 23.3% from 22.9% on quarter 2 of financial year 26. The diagnostic business also recorded a marginal improvement in operating EBITDA margin to 26.2% in Q2 of financial year 27 compared to 26.1% in Q2 of financial year 26. Our consolidated profit after tax, excluding gains from exceptional items, increased by 4% to INR 317 crore in the current quarter compared to INR 305 crore in the corresponding previous period. Let me now take you through the H1 financial year 27 performance of the company. During the first half of the financial year, our consolidated revenue stood at INR 5,280 crores, representing a growth of 17.4% over H1 of financial year 26. The hospital business continued to be the primary growth driver, with revenue increasing 18.8% to INR 4,527 crores, while the diagnostic business recorded gross revenue of INR 855 crores, registering growth of about 11.2% over INR 768 crores in the corresponding previous period last year. Our consolidated profit after tax, excluding gains from exceptional items, grew by 3.8% to INR 581 crores in H1 of financial aid 27 compared to INR 559 crores in H1 of financial aid 26. On the balance sheet front, the company's net debt stands at INR 2,188 crore, with a healthy net debt to EBITDA of 0.87x as on September 30, 2026, as against 0.96x on September 30, 2025. Let me now turn to the key highlights of our hospital business. Occupancy improved to 72% in Q2 compared to 71% in the corresponding quarter last year. The number of occupied beds increased by 9% to 3,616 from 3,318 in Q2 of financial year 26. ARBP also grew by 6.8% to INR 2.1 lakh compared to INR 1.96 lakh. During the quarter, our key specialties, including renal sciences, neurosciences, and orthopedics, recorded a year-on-year revenue growth of 27 percent, 28 percent, and 30 percent, respectively. During the quarter, 15 of our hospital facilities reported operating EBITDA margin exceeding 20 percent, collectively accounting for about 84 percent of the hospital business revenues. In comparison, in financial aid 26, we had 13 of our facilities with operating EBITDA margin above 20%, contributing 76% to the hospital revenues. Revenue from international business grew 12.4% compared to Q2 of financial year 26 to reach INR 190 crores and contributed approximately 8% to the overall revenues in Q2 financial year 27 on similar lines as Q2 of financial year 26. Revenue from digital channels such as our website, mobile application, and digital campaigns witnessed a 18.6% year-on-year growth. Digital revenues contributed 29.5% to the overall hospital revenue in Q2, which is similar to the corresponding previous period. Our network expansion initiatives have also progressed through a combination of acquisition and strategic partnerships. Recently, we completed the acquisition of the 110-bedded Subna Hospital in Bangalore, taking our hospital bed capacity in the region to approximately 1,000 beds. The facility has potential to expand to 150 beds. In addition, we entered into a long-term healthcare services agreement for a 400-bedded Greenfield super-speciality hospital to be developed in Ashok Vihar, New Delhi, by Safe Sundar Lal Jain Charitable Eye Hospital Society. These developments will further consolidate our presence in Bangalore and Delhi NCR clusters, respectively. In addition to the above, it would also be pertinent to highlight that we are also making very good progress in our other focus clusters, such as Mumbai, Kolkata, and Hyderabad, evaluating strategic M&A opportunities, including built-to-suit sale and built-to-suit lease models. All these growth initiatives are expected to drive network synergies and strengthen our competitive positioning in these select micromarkets. Alongside such capacity expansion, we continue to strengthen our clinical capabilities and invest in advanced medical infrastructure across the network. Turning to the diagnostic business, our network expansion efforts continued during the quarter with the number of customer touchpoints reaching 4,551 as of September 30, 2026. Within the portfolio, revenue from wellness and specialized testing in Q2 financial year 27 grew by 28% and 14% respectively. The wellness segment's contribution to overall revenue improved to 15% during the quarter, compared to 13% in Q2 of financial year 26. The business also recorded a favorable shift in its customer mix, with the contribution from B2C segment increasing to 54% from 52% in the corresponding previous quarter. With that, I would like to conclude my remarks. Both our hospital and diagnostic businesses continue to deliver healthy growth supported by network expansion and strengthening clinical capabilities. Going forward, we will remain focused on deepening our presence across existing clusters and pursuing inorganic opportunities that are strategically aligned to our growth objectives and offer meaningful potential for operation synergies. Thank you so much. I will now hand over the call to Mr. Vijendra for his comments.

Thank you, Dr. Akhubanshi. Good morning, everyone, and thank you for joining us today. On behalf of Agilus Diagnostics, I extend a warm welcome to all participants as we discuss our performance for the second quarter of FY27. The diagnostic industry continues to evolve, driven by increasing healthcare awareness, technological advancements, and rising demand for specialized testing. Against this backdrop, we remain focused on strengthening our market position, expanding access to quality diagnostics, and building capabilities that support sustainable long-term growth. During the quarter, we reported gross revenue of INR 448 crore compared to INR 400 crore in the corresponding quarter last year, reflecting a year-on-year growth of 12.2%. Operating EBITDA pre-ease of expenses stood at INR 118 crore compared to INR 104 crore in Q2 FY26, with operating EBITDA margins at 26.2% for the quarter. For the first half of FY27, gross revenues grew 11.2% to INR 855 crore from INR 768 crore in H1 FY26. Operating EBITDA pre-ESOP expenses stood at INR 215 crore compared to INR 189 crore in the corresponding period last year, while operating EBITDA margins improved to 25.1% from 24.6% in H1, FY26. Our performance reflects continuing focus on execution, productivity enhancements, and disciplined investments in growth opportunities. During the quarter, patient volume grew by 5.8% year-on-year, and 9.9% quarter-on-quarter, demonstrating the strength of our network, brand, and customer engagement initiatives. Operationally, we processed 11.39 million tests during the quarter, compared to 10.62 million tests in the corresponding period last year, representing a growth of 7.2%. We also expanded our network with gross addition of approximately 300 customer touchpoints, further strengthening our presence across key markets and emerging micromarkets. The B2C versus B2B revenue mixed to that 54 is to 46 in Q2 FY27 compared to 52 is to 48 in Q2 FY26, reflecting the continued strength of our consumer business while maintaining a balanced channel presence. For the first half of FY27, we conducted 21.85 million tests compared to 20.75 million tests in H1 FY26, representing a growth of 5.3%. During the period, there has been a gross addition of over 500 customer touchpoints across our network, enhancing accessibility and strengthening our market presence. The B2C-B2B ratio revenue mix stood at 53-47, compared to 52-48 in H1 FY26, reflecting sustained momentum in the consumer segment. Innovation and specialized diagnostics remain important growth drivers for Agilers. As part of our focused approach to strengthening advanced diagnostics capabilities, we continue to invest in next-generation technologies and expand access to specialized testing across our network. We are currently deploying GeneXus systems to further enhance our capabilities in next-generation sequencing and molecular diagnostics. These investments will improve access to advanced testing, optimize turnaround times, and reinforce our position in precision diagnostics. Alongside this, we continue to invest in digital capabilities, laboratory automation, and workflow optimization to enhance efficiency and deliver a seamless experience for patients and healthcare partners. Looking ahead, we remain focused on expanding our network, strengthening our specialized diagnostics portfolio, and improving operational efficiencies. With growing awareness of preventive healthcare and increasing role of advanced diagnostics in disease management, we believe we are well positioned to capture emerging opportunities, while continuing to deliver sustainable growth. That's it from my side. Thank you.

Thank you, Vijinder. Ladies and gentlemen, we will now open the floor for questions and answers. May I request the moderator to begin, please?

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask the question. First question is from the line of Neha Manpuria from Bank of America. Please, go ahead.

Yeah, thanks for taking my question. My first question is on the bed expansion, you know, chart that was provided this time. I see that, you know, you've mentioned about 2,200 peds, you know, which includes inorganic acquisitions and BPs. I just wanted to understand, you know, how much visibility we have on this, you know, especially the greenfield part of the expansion. I mean, is there a number, you know, in terms of the greenfield expansion that you would like to highlight? And what would be the priority market, you know, for this, you know, inorganic acquisition that we are looking at or at greenfield expansion?

Yeah, so, Neha, we have complete visibility on these, and we have timelines in which we will be able to deliver these beds, and this scales down to about, like, next three to four years. The strategy we have always stood by is to create focused clusters, and we continue to remain in that. The only difference you would have noticed in my statement is that we have also added Hyderabad as a possible cluster, where we have already two facilities of Glen Eagles, which we are managing. So we would definitely look to strengthen that cluster. But at the same time, our focus on NCR as well as Bangalore and Mumbai and Kolkata and Punjab remains as it is. So we would like to deepen our presence in all these clusters. So, as far as the split of these bed numbers is concerned, I would request Vivek to add to that.

Sure. So, this year, we are targeting to achieve, add around 500 plus bed. Plus, there is one occasion which Dr. has just mentioned about Sona in Bangalore. So, with that, we will be adding around 600 bed in the current financial year itself. Then, you know, there are brownfield expenses going on that should add around 200 bats every year for next two years. And there will be big jump we are expecting. We are expecting the financial year 2030. By which time, our two major brownfield expenses in Mahali and... Salimar Baab should be completed, and thereafter we expect balance will be coming in the next financial year. So this is how these 2000 beds roughly will be operationalized.

This 500 beds that you mentioned, this is an asset that you were looking at after that.

Yeah, out of that, this includes five, this five, actually it is around 600 bats, 100 bats is, we have acquired through this, and balance is ground field expansion, which is mainly coming from this SMRI expansion, and NOIDA we have added, we have added Faridabad, Manishar we have, we are ramping up the capacity, so all those bats are counted in this.

Thank you, Mr. Holmes. Just a clarification on the strategy with the Bangor acquisition. It seems like a fairly small asset, you know, 150 beds. I know we have two other small assets in that market. Historically, I think we've mentioned that, you know, we are doing a lot of brownfield additions in our facilities given to build scale to improve profitability. So in that context, you know, why buy an asset with just $150,000, you know, in a market-like time slot, you know, where we're also seeing peers as fairly large capacity?

Yeah, no, I think Bangalore as a city has been growing well, and we believe in our cluster strategy. So all these hospitals are serving different micro markets within the larger Bangalore area. And I think this makes us, as you know, that there are several players over there, and there are a couple of dominant players as well. So it is important for us to be relevant and attract good clinical talent, and for all that, we need to have scale and an ability to offer our physicians a larger platform. So with all that, I think we are not looking at the moment for any further acquisitions, but there are certain brownfield expansions which are not part of what we have mentioned, But those we are planning at the moment. So as and when those form up, we will inform all of you about that. But definitely, these are the facilities where we have a lot of expansion program in Bangalore, like the Yashwantpur facility, which is the People Tree Hospital. There, the next block is being constructed. Similarly, we will be expanding Sukhna with another 50 beds, and there is an additional capacity which has to come up in BG Road facility as well. And we have the Glen Eagle Hospital also, which we are managing. So with that, we have about eight facilities in Bangalore, and that gives us a good widespread in that geography. But at the end of it, the strategy is to grow in different clusters. So Bangalore is an important cluster, so we want to strengthen it. Similarly, we would like to strengthen other clusters as well. And we strongly believe that there is enough demand over there. So that is why we are focused on that. But we are not focused only on that. We are focused on the other clusters as well.

Sorry, one last question, if I may. In the Delhi NCR market, if you could give us an update on fMRI, how monitor is progressing, and are we seeing any doctorate solution, et cetera, you know, despite the piece of given...

As far as FMRA is concerned, the new block is ready for some time. It is waiting for some final approvals. We are likely to receive those approvals within this month. All the final inspections, et cetera, have happened, and hopefully we should be able to commission all those hospital beds pretty soon. We have been able to attract some good clinical talent in the last couple of months from the local market and from elsewhere. We have not had any major attrition at the moment in fMRI, and I think we have sufficiently ring-fenced our clinical workforce because we provide them a very comprehensive... with a mix of academic research and a good environment for them to practice. So, FMRI, I think, is doing... As far as Maneser is concerned, the facility has been ramping up continuously. It is now producing positive EBITDA, double-digit EBITDA, low double digits, and we expect that it will continue to perform well. Thank you. So from the first quarter of next year, we will certainly see a jump because of the addition of a comprehensive cancer center in Maneser as well. So that is also quite on track. The other thing is that we always used to discuss about FEHI and its performance in many A few years back, now that is performing very well, and it is touching almost 20% in terms of EBITDA, so we are very delighted with that.

That's very helpful. Thank you so much.

Thank you very much. Next question is from the line of Shams from Goldman Sachs. Please go ahead.

And relative performance of the different...

I'm sorry, John Trump, can you repeat your question from the beginning, please?

Yeah, thank you. Good morning. I was just asking a question on the slide 21, cluster-wise regions. So while our headline numbers have grown like 19%, I was just looking at the intra-region divergence. I think we have seen Punjab grow much slower. Mumbai is also slower. So any qualitative comments on that? And also, if you could strip out what the ex-acquisition, if there are any in the base, if there are in the recent quarter, but not there in the base. My question comes from, you know, have we kind of been growing slower than all our other listed peers? Because most of them have reported higher growth. I'm making an assertion. But I just want to understand, is there something? Thank you.

Yeah, Siam. Hi, good morning. If I can take this question. You know, we have seen a different growth in almost all the clusters. Cluster we have particularly pointed out about Punjab. There we are actually facing capacity constraint. As I mentioned in the earlier question, there is a big extension going on in two of our big unit, Amrishar as well as in Mahali, which are underway. And once that, and both of that will add around 500 plus bed in the total bed capacity in that cluster, right now all the unit are, you know, achieving a occupancy level of above 70% and some units are above 75% also. So actually there is some capacity constraint in Punjab. Apart from that, I think other regions are growing quite fast. We will not like to compare ourselves with the competition because each competitor is having its own dynamic, is having its own, you know, growth plan and operating in different geographies also.

Okay, that's helpful. Second question is on the margin matrix. I know you put an EBITDA star now, which is pre-ESOP expenses, but does this matrix change dramatically if we, and I don't know how you put pre-ESOP for all the hospitals. So is that the reason why the disclosure is this way? And does it change the matrix very dramatically if we were to somehow apportion the ESOPs across the hospitals?

Yeah, so, the EBITDA we are showing prior to ESOP, the reason being because it is a non-gas item first of all, and it was, the scheme was rolled out post, you know, completion of our budgeted exercise at the beginning of the year. So, that's why we thought it is clear to show EBITDA without ESOP, as it is non-gas, as I said. Secondly, as we got the impact of it in the reported EBITDA, it is around 1.5%. ESOP is taking out 1.5% of the revenue. So, that means if you want to see there is reported EBITDA anyway in the financial, but it is having impact of 1.5%.

Got it. So, and no change, right, for the what were 140 crore full year ESOP numbers that we were talking about?

Yes, here it will be around that number. Of course, it will depend upon if we are able to achieve higher revenue. This ESOP number is fixed, the revenue base keeps on changing, and we expect revenue base to grow much higher. So that will be the only change, but it will not be substantial.

Got it. Just a last question on the diagnostics. I think when we look at, again, sorry, I'm going to compare with listed peers, we are half the volume growth, 5% volume growth. I think if you called out, even test growth is 6-7%. Most of the peers are 10-13%, for example, on either patient or sample. So is there a plan where we will bridge the gap relative to some of the peers?

Yeah, see, right now, if you look at our test mix, I think it's improving, especially wellness piece, where the contribution has gone up to 15% from 12% earlier. And secondly, on the specialized also, our contribution growth has been significant. So by increasing focus in our key markets, by going deep, opening more and more, you know, centers, and when you look at our B2C, B2C contribution is now 54%. And that itself is a good sort of, you know, showcase as far as, you know, future is concerned. So I'm sure that with these initiatives, our volume growth will definitely be sort of, you know, coming, improving from now on.

Vijayan, and lastly, what is our outlook for this year from Diagnostics Business Presbyterian, both on revenue and margins, if you could just reflect on that.

See, our FY27 group expectation remains in the 12% to 13% range as of now. We believe the impact of grant transition is largely behind us, and we expect growth to strengthen further as awareness is improving. And secondly, certain initiatives which I mentioned will take sort of, you know, So, in a few quarters, definitely we will look at mid-teens growth, and then from there, probably we will target to be back to industry growth. Thank you. All the best.

Thank you very much. Participants, you may press star and one to ask the question. Next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.

Yeah, hi. Thank you for the opportunity. My first question is with regards to the acquisition of what we have done in Bangalore and the overall occupancy. So if I see that slide, you know, it talks about the occupancy being at close to 63%. Question number one is, you know, in Bangalore, as compared to your other regions, why is the occupancy, you know, still ramping up or we have kind of hit the turf there? And second is, with the kind of acquisition, you're doing a 110-bed facility, which has scope to add a few more, but it still looks like a pretty smaller hospital. So what's the rationale behind, you know, acquiring a smaller hospital as compared to, say, your peers operating in the same region, which would have much higher, bigger facility? I mean, the question I'm trying to ask is basically from an operating metrics perspective, how would you think about the dynamics working in this region?

Yeah, I think before we go to the occupancy numbers, I would like to answer the strategic part, what you asked. You see, there are different types of hospitals which serve different kinds of, you know, micro markets and different kind of patient profile. This hospital is located in a densely populated area, and there are few hospitals in Bangalore, which we have, which are also of very small size. Actually, our Rajaji Nagar facility, which is about 6-7 kilometers away from the hospital we have acquired, is only 60 beds. So, there are models where, you know, both kind of hospitals are required and they serve different purpose. So, for example, this hospital will serve more to the immediate community, whereas some hospital, like the people tree, which we had acquired a little earlier, will become a larger hospital and will have about 350 beds along with all the facilities. So basically, it is two different formats of hospitals which work as an aggregated cluster in a given geography. Which would probably have advantages in terms of a lot of synergies which happen, the market positioning, visibility in a particular city or state, and all those advantages are there. So that is precisely the reason why we have chosen this. We do look at larger hospitals as flagship hospitals, but we are not averse to go. which are community hospitals and more secondary in nature, secondary care, I mean, and that forms a cluster which serves the community well and people can go for their immediate needs to their neighborhood hospital and for complex cases, they can go to the larger hospital. So that's how it works. I would request Rake to add on about the occupancy current figures.

Yeah, so your observation is correct. The occupancy level in this region is slightly on the lower side and this we are highlighting in all our previous calls also. There is a big hospital at Benegatta Road which is operating at occupancy level around 58%. Though the occupancy level has gone up from the earlier one and now we are seeing much higher occupancy and we hope that this hospital will start performing in line with our other hospital. Having said that, profitability-wise, this hospital is doing quite well, but yes, there is a scope to improve further occupancy, and team is working on the ground, and that is the main reason why this hospital is, the cluster is showing a lower occupancy. Apart from this particular hospital, there are two new hospitals we have added. One is the TMI, which is in Yeshwanpur, We have added last year, and that is still in the ramp-up phase. So there also the occupancy level is quite low. So that is the main reason for lower occupancy. But both these hospitals are very good hospitals in this cluster, in a very good micro market. And we are quite confident that the occupancy will come in line with our other hospital in the same cluster in the overall network.

Sure, sir. Understood. Very good. Thank you. And one more question from my end. So if I look on a Q&Q basis, then I believe you have added close to 300 doctors in this particular quarter. So the hiring happened across the board or is there any particular hospital where you look to add more clinical talent?

Yeah, so, you know, we continuously try to keep on engaging more and more clinicians for our network. Some of the hiring has happened in the new hospitals which we have acquired, so that is a significant number, as well as the many hospitals where the capacity expansion is happening. Also, we have hired new teams over there. Even in our flagship hospital FMRI, we have been able to hire a new clinical talent as well. So, we have good clinicians in head and neck surgery, in rheumatology, in neurology, and several other specialties we have hired even in the existing hospital. So it's a spread all across the network, not specific to a unit.

Got it. And last one from my end, sir, is there any update, any status quo on the forensic audit which was ordered by the court? Any update you would have got from the auditors if you can update us? Thank you.

Yes, so as far as the forensic audit is concerned, the auditors have been appointed as you're aware, and they have sent a requisition for information to us. We have submitted the necessary information to them. Court had originally indicated that this audit should be completed in six months' time, so we are looking forward to getting this behind us.

Got it. Thank you.

Thank you. Next question is from the line of Dwanisha from the ESV Mutual Fund. Please go ahead.

Hi, thank you for the opportunity. So I had one question. Firstly, now that a large part of the hospital beds are already operating at 72% based on your hospital margin matrix, how should we think about the margins from here? Also, I believe the guidance may have to be revisited. So if you could help us understand FY27 and then FY28 margin guidance, that would be helpful on the hospital's business.

Yeah, so occupancy level is 72%. We feel there are still scope for further improving the occupancy level. One hospital we have discussed in the previous question, which is in Bangalore, and many hospitals which are in the ramp-up phase like Manesha, and some new hospital which we have built in the system, there is a scope for further ramp-up occupancy, and that will add to the profitability also. So, our margin guidance more or less remain intact, though the challenge which we have highlighted in the last call, that remain, we still do got the OP from the FMRI unit, our faxib hospital, which will, we should give some boost to the profitability margin. So, that is one area where if we are able to do well, we will able to improve the margin. Plus, the two units are still in the ramp of pay, which is money, sir, and people tree. And both are on the upward trajectory, but, you know, there is some stress in the profitability because of that. So, we expect the end of the current financial year, the EBITDA margin should be flat. And future financial year, we will not like to comment on the margin in the present circumstances. There's a lot of noise around drug price and other things. So, we will restrain ourselves from putting any guidance for the future margin. And we will see how things progress in the forthcoming quarters.

Got it. I'm just on the drug price capping, at least for the 137 oncology drug.

Sorry, can you speak a little louder, please?

Yeah, I was mentioning at least for the drug margin capping on the 137 cancer drug. Is there any update on what kind of impact would be there? Or if you could directionally explain how is your oncology split across medical and surgical?

Yeah, so it is very difficult to, this circular is very recent. We are still figuring out how it will be impacting the margins and all. So we will not be able to give you any specific number about this. Of course, it will be a negative impact on the profitability. The drugs are generally contribute around one third of the oncology revenue. And not all drugs are part of this. And there are certain packages also. And, you know, so that's why it is very difficult to give a specific number. As a hospital industry, we always prize ourselves. We don't see product-wise profitability. We always see, you know, the specialty-wise profitability. And that's why to figure out how much it will be impacting, it will take some time. So I will not be able to give any... Number in the palimpsal.

Danny, do you have any follow-up? Okay, thank you.

Next question is from the Lionstein Mukherjee from Namora. Please go ahead.

Yeah, thanks for taking my question. Sir, you talked about 2,000 beds, greenfield and inorganic over the next three to five years. If you can talk about whether most, I mean, approximately how many of them? Would be, you think, in the tier one cities, how many of them would be like tertiary care versus, you know, some of the secondary care acquisitions that you have done? So if you can give a color on the nature of this green field and inorganic that can happen over the next three to five years, and also, like, how much would be the commitment in terms of capital required for this particular expansion?

Yeah, so the built-to-suit sale as well as built-to-suit lease model is we are looking at in a couple of places, and as far as the geographical locations are concerned, some of these hospitals are in Tier 2 cities, I would say, And then we are also looking at some in the Tier 1 cities, namely Calcutta, Hyderabad, and Mumbai. So this is the general spread. We have clear visibility on these. As far as the greenfield ones are concerned, they would be adding up in, I would say, for maybe three years from now. Now the beds would come in three years from now, but one or two projects which we are looking at are of different nature, and they may add up beds over the next one year or so. So that is the general. Split of these. And one or two, as I said, we are looking at a couple of opportunities in tier two cities, but large cities with large market. And as far as CAPEX is concerned, I'll request you to join us.

Sure, sir. So, Siang, first of all, this 2,000 BATS which we are talking about is the BATS which we have already either contacted or the expansion is in pipeline. So, we expect this number will be much higher in next three to four years because we are in continuous acquisition and, you know, we are actively looking for greenfield projects. Some of the projects which Dr. Abhansi just mentioned were not being included in this number also.

So, I'm just wondering if you can talk about, like, out of this 2000, so Greenfield, so this is already visible to you, so how much of this will be Greenfield, which you are already planning, and it will come up in the next two to five years? Like, out of this 2000.

All the 2000 beds are not in, nothing in Greenfield, actually, in this 2000 beds. Yeah, one expansion is in Greenfield, where, you know, we have intend to some arrangement with some trust in Delhi, and that should be coming in next four years time, and that will be Greenfield bed of 400 bedded capacity. Others are all brownfield expansion in the existing hospital only. The Greenfield project, which Dr. Gowansi is saying, are not included in this, and it will be over and over that. So, we expect civilian number may be next two years time to be added in this list going forward. As we got another question of how much capex we are committed for this already committed capex. It is roughly around 3,500 crore and it is spread over next say three and a half years time.

No, sir, just to get a clarification. So what you're saying is this 2000 does not include much of green fees. It basically is the acquisitions that you're currently pursuing or partnerships or acquisitions that you're currently pursuing.

Acquisition which has already been completed and brownfield expenses which are in pipeline. So that together will create 2000 bets. And we have not included granical beds into it. We have not included, you know, the greenfield extension which we are talking about in this. In fact, 2000 beds does not include even that the other hospital I have told, 400 bedded hospital, that is over and above that 2000 beds, the greenfield project which I have told in NCR.

Okay. The other question is on the Bangalore acquisition which you have announced. As Dr. Agubanshi mentioned that, you know, it's sort of a community hospital. So such opportunities that you have, is it something where you are able to acquire the hospital on a negotiated basis with the current promoters or these are like bidded out and all the participants or key competitors in that micro market really bid for them?

Yeah, so I think it is a project-specific thing. This was, you know, direct negotiation with the owner, you know, depending on our relationships in the field, we get some opportunities from time to time. Not everything goes for bidding, so yes, this particular one was a bilateral negotiation.

Okay, sir, you have talked about 270 crore, I think what was announced, and then you will also invest in expansion and upgradation of the site. So what would be the total capex for the total site when it goes to 150 crore? How much should we assume? And in terms of average revenue per patient, given the nature of… dollar average for Bangalore and EBITDA margin, like what a long-term, like how should we think about margin from the side?

Yeah, so this is 270 crore, which we have paid for acquiring this, including land and building, plus there will be stamp duty cost. Then we are planning to expand it by another 40 beds over a period of time, plus, you know, the renovation of this facility to bring it at 40 standard. All put together, it will be another 140 odd crore number. And as we got the profitability, future profitability of this unit, we expect this unit should be, you know, doing as per our existing clusters in this region, like some of the units, though they are small, they are doing quite well in terms of operation material, like occupancy in one of the hospital, we are doing 80% plus, it is 92 beds hospital in Nagarabhavi. And so we expect a similar type of occupancy and similar type of profitability of around 25%, not immediately, but over a period of time.

Okay, but ARPP would be slightly lower, right, compared to your company average or cluster average, given the nature of the site.

Yeah, company average will be lower because it may not be having a high, you know, cost, this facility like Onco and things like that, but it will still be, like the unit I am comparing, Nagarbawi, it will be in line with that unit, which is around 2 crore per bet.

Okay. Last one question. All these acquisitions that you do, what's the benchmark in terms of IRR or payback period that you follow? I mean, is there a benchmark that you look at? If you can share that.

Yeah, there is an internal benchmark which we have created, which is approved by our board also. So generally, we don't touch any project which is having IRR of below 15% and payback of above 8 to 10 years. But having said that, these are all financial metrics. Sometimes we ignore these financial metrics to Thank you. Take care of the larger picture, larger strategic picture or objective of the organization. And these are just a benchmark to see whether the project is doing well in the financial metrics or not.

Thank you.

Thank you very much. Next question is from the line of Amman Goyal from IFL Capital. Please go ahead.

Yeah, thank you for the opportunity. Sir, I just want to understand what is the composition of ARPP growth, whether it is case-mixed-led, DR, price-mixed-led, and can you call out the IP volume growth since we have made some changes in our presentation?

Yeah, so the growth in this number is generally attributed to the case mix. The price increase capability is very little in this industry. So generally it is a higher case mix, more robotic surgeries, more doing more complex cases, and that is attributed mainly this growth. If you are, to your specific question, if you are asking how much is contributing, price increase contributing into it, it will be around 1.5 percentage point.

And the IP volume growth, since we have given the ARPP number.

Yeah, so volume growth in IP is around 13% if we are comparing with the corresponding quarter previous year.

Okay, okay. And sir, since Bangalore, we have grown 26% year-on-year basis. Can you call out the ex-people tree growth in Bangalore? And what is the cluster margin profile? Where does it fall in the cohort, margin cohort for what is, whether it is above 20% or the cluster except people tree?

Yeah, people tree is relatively a new unit, and there is some innovation work is going on. It is not contributing much, actually. The people tree inclusion or exclusion will not impact much the growth. As we got margin profile of this cluster is concerned, excluding people tree, we are in line with our other group. It is performing better than the overall, you know, company average EBITDA margin.

And, sir, last one on the capex, you have given the 3,500 crore capex for this brownfield, greenfield. I think that is not including your inorganic opportunity. So, for that, what is the target capex we are for? I mean, what is the capital allocation we plan for this inorganic opportunity?

Yeah, so the amount I have quoted is whatever we have committed till date. Okay, so as Dr. Hoansi made in his initial comment, the leverage position of the company is quite well. We are generating decent cash flow to support this type of capex, plus there will be room for further acquisition through the internal approval itself. Having said that, our parent IHH has expressed very openly that they want to increase their stake to above 50%. At the current market price, this will give us additional capital of 10,000 crore over a period of time. So, I think capital is not a constraint here. I think the constraint is getting the right opportunity at the right price. Capital, at least as I see our financial and, you know, the other things in mind, it is not a constraint for the group.

Okay, and sir, what is our target to repay this 2200 crore debt? I mean, how can we model it?

Yes, this will depend upon our acquisition capability, actually. If we are able to acquire more, then that number may go up and down a little bit. But if we are not going at the steady speed with this, this debt will be able to repay in two years' time, actually.

Okay, thank you so much. That's from my side.

There's a lot of debt in the current financial aid itself.

Okay. Thank you. Thank you. Thank you.

Thank you very much. Next question is from Lennar Damyantikirayan from HSBC. Please go ahead.

Hi. Thank you for the opportunity. Dr. Raghu Banji, you mentioned a different format. Hospitals serve different purposes and markets like Banguru. So just wanted to understand what kind of potential cost synergies could be possible between hospitals which are different in size but are located in the same city.

Yes, so there are multiple ways where Synergy's work in a network of hospitals. Like one of the hospitals which Vivek mentioned, it is a 96-bedded hospital in Nagarbavi in Bangalore, and that hospital is doing phenomenally well. Its occupancy level is about 85 percent. Profitability is above 25 percent, close to 30 percent, I would say. And it's a small hospital, but it is getting a lot of clinical help from our BG Road facility. So many of our clinicians go to different hospitals who are well-established clinicians and have large practices and large teams. So they cover multiple hospitals, and that gives their patients the ability to go to a hospital, which is convenient to them. So that's how it works overall. Then the administration of the entire cluster also gets sort of shared. And the same team is able to manage, you know, another 100, 200 beds as well. So that is how these synergies work. And more than anything else, there is another factor, which is the presence in the local market, the brand visibility of a particular group of hospitals, that also becomes an added advantage. It also becomes a magnet for clinicians to join a group which has options available in various...

Sure. So, that's why, like, the small format hospital should not be constrained in terms of, say, the margins which they can deliver.

Yes, yes, that has been our experience. We have a few hospitals in the network which are smaller hospitals, but they are part of a larger cluster. There are some large hospitals and a brand identity is there. So most of them produce a margin profile which is in line with a large hospital. Because the cost also in a smaller hospital typically remains controlled.

Sure. My second question is on your Glenegal O&M footprint. So since you took over the O&M contract, if you can update us on the improvement which you have seen for the portfolio in terms of, say, higher occupancy or better margin profile.

Yeah, if I can answer this question, the clinical O&M arrangement we have just started in a year back, and it is a quite, you know, complicated type of operation in the sense to hospital in Hyderabad, which where, you know, 40 is not present, one in Chennai and other Bombay, and Bombay is not in fact in under O&M. So, we expect the team is taking some time to understand and stabilize the SIP actually. And I think the first year has gone mainly to stabilize the SIP. Recruiting more doctors, the facility directors and things like that. The IT systems are also getting updated. So first year is more or less understanding the market, understanding the business model, and making changes as per POTE standard. I think next year onward, we should be seeing some improvement in the operation. Right now, the operation is almost slated. There is no much improvement in the operation.

Sure. Thank you for the response. All the rest.

Thank you very much. Next follow-up question is from the land of Neha Manburiya from Bank of America. Please go ahead.

Yeah, thanks for taking my question. Just one question. Wait, when you mentioned that the margin for FI27 would be lavish, do you mean, I think last year we did about 22% margin, so this is 22% 40% margin that we should be building? And is the 25% margin for FY29 still intact, or is that dangerous than in light of the regulation?

Yeah, so, Neha, I was saying, flattest margin in line with last year's margin, which is around 22%. So, we are expecting that type of margin. As you know, there are a lot of noise going around about this industry, about the drug caps and other things. And some circular has come, which will be effective in November. And we are expecting some more turmoil may be coming. So that's why it will be difficult for me to give any guidance for coming year unless I see how much impact it will be there. If there is no impact, of course, we will be meeting those 29 margin guidance which we have given. Once this thing settle, we will be able to see how much we will be able to recover, how much we will not be able to. That's why I am restraining myself from giving any guidance for the future year. For the current year, it will be flat as the margin I am expecting, which is in line with the previous year.

So, Neha, if I may add, you know, the industry has seen lots of price controls happening in the past as well. So, we are fairly confident that, you know, eventually the business model will evolve, change, maybe. So, there may be temporary blips here and there, but eventually I think we are, as an industry, we are going to be all right, And certainly, we are confident that we should be able to do that. But right now, since we are not able to assess exact quantum, so that's why we are not able to give that. But we are fairly confident that we should be able to sort of mitigate this over a period of time and reach normal levels of profitability.

Thank you. And just one last question, the flattish margin is 4 T's off, right? Thank you very

much. Next question is from the line of Atul Minosha, an independent investor. Please go ahead.

Yeah, hello. Thanks for the opportunity. My question is on the IHH stake increase. If IHH stake increase is dependent upon the forensic audit, are they correlated, or if there is any update on the timeline, because that will, you know, give some capital to the balance sheet.

Yeah, so there is no constraint in IHC increasing its stake because that has been clarified right at the Supreme Court when the earlier decision came in 23. So that is not something which is in question. What is in question is only what happened at the time of dissipation of shares by the ex-promoters. So IHS has got absolutely no issue in increasing its stake in Fortis, and the court doesn't in any way suggest that. So that is not a problem at all, and we have sought a lot of legal opinions from multiple sources, and there is no such constraint.

So, it means it is up to the IHS to decide when and what time they have to increase it, right? That is all it boils down to.

Yeah, it also depends on Fortis, because as and when we have a requirement of fresh capital, then only we will be approaching them for it. So, of course, it is their decision to when they want to put and now what content they want to put. But, yes, it is a decision which is pursuant to what Fortis's fund requirements are. And as Vivek was mentioning earlier, the balance sheet being good for our current expansion, etc., we are well capitalized, and we have the ability to do all those expansions from within the internal networks and some bit of debt. So, we will do that at the right time, whenever we require additional funds, or they have a desire to increase this.

Thank you. As there are no further questions, I'll now hand the conference over to Mr. Indra Khadra for closing comments.

Thank you. Thank you, ladies and gentlemen. Thank you for taking the time to join us on the call today. If there are any follow-up questions, queries, please feel free to reach out to us. We will try and help you as best possible. Thank you once again and wishing you all a happy Diwali. Take care.

Thank you very much. On behalf of Fortis Healthcare Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.

Thank you.