Narayana Hrudayalaya Ltd

Narayen Hrudayalya Q3 concall highlights -

Current capacity -

Northern region - 4 hospitals, 1140 beds

Western region - 2 hospitals, 355 beds

South region - 6 hospitals, 2100 beds

Eastern region - 8 hospitals, 2050 beds

Cayman Islands - 1 hospital, 110 beds

Revenues at 1128 cr vs 960 cr yoy,up 17 pc

EBITDA - 254 cr vs 173 cr yoy,margins at 23 pc

Gross borrowings - 780 cr

Cash and cash equivalents - 560 cr

Enough space to fund massive capex lined up for next 2 yrs through a mix of borrowings, cash on books and internal accruals

Intend to spend Rs 1000 cr each on capex in FY 23,24 respectively. Rs 680 cr already spent in FY 23

Out of this, green field capex for FY 23,24 at Rs 200 cr each. Rest is brownfield andmaint. Capex earmarked for Cayman Islands at Rs 800 cr ( aprox )

03 hospitals ( Mumbai, Gurugram, Dharamshala ) are of recent vintage. These generated a revenue of Rs 110 cr, up 17 pc yoy, EBITDA at 9.3 pc. Gurugram, Dharamshala to reach 15 pc kind of EBITDA in 2-3 Qtrs

Most of Cayman capex towards new Oncology block and a new Hospital

New Onco block at Cayman Island to go live by Q1 FY 24. Expect to ramp up quickly as there is no radio based Onco therapy at Cayman

New capex of Rs 2000 ( over FY 23,24 ) will double the gross block

Gross margins improving continuously from Q1 to Q2 to Q3

Company believes, Q3 gross margins are sustainable

Govt scheme patients are about 20-22 pc of total Mix. Have been making representations to revise Govt rates as current rates were last revised long time back and are currently kind of unviable

Expect gradual increase in ARPOB in India business. Don’t expect big jumps

Cayman Islands continues to be a tax free zone. So, no tax for new facility as well

Had Acquired an Ortho hospital in Bangalore for 200 cr in Oct last Yr. Already generating a EBITDA margin of 30 pc

Expect new Cayman hospital to be commissioned by Mid CY 24

Cayman EBITDA margins currently at 40 pc!!! Don’t expect any margin dilution once radio Onco block kicks off in Apr 23

Disc: holding, biased



Narayen Hrudayalaya Q4 concall highlights -

Consolidated Q4 financials -

Revenues - 1222 vs 941 cr. India contibution - 977 cr, Caymen islands - 232 cr
EBITDA - 276 vs 172 cr, Margins at 23 vs 18 pc. India margins at 19 pc
NP - 173 vs 69 cr !!!
ROCE @ 28 pc - Industry leading

India business zone wise revenue contribution for FY 23 -

Bengaluru- 37 pc
South Peripheral - 6 pc
Kolkata - 27 pc
East Peripheral - 10 pc
West - 6 pc
North - 14 pc

Have decided to set up a Health Insurance subsidiary to provide affordable healthcare to patients

Mumbai Hospital has turned EBITDA positive in Q4 (+ 2.8 pc). Gurugram hospital’s EBITDA margins were (+3 pc). Dharamshila (Delhi) Hospitals’s Q4 EBITDA margins were 16pc. These three r relatively newer hospitals

Aiming for Gurugram and Mumbai to reach 15-17 pc margins in 3-5 yrs

Cayman Island Hospital’s new Onco block has gone live in Q1

Along with health insurance, also going to set up primary care centres in various residential areas. These are capex light centres

Capex for FY24- aprox 150 cr to acquire land parcel in Kolkata for Greenfield expansion

Plus another aprox 900 cr earmarked for capex in FY 24. 700 cr shall be from bank funding, rest from internal accruals. Debt/EBITDA to remain in comfortable zone

Cayman Subsidiary’s cash to continue to stay in Cayman. Company will work out a capex plan for Cayman separately

India business continues to have about 200 cr plus cash surplus

Cayman business running at 40 pc + EBITDA. New Onco block won’t be margin dilutive. There will be some margin dilution once the new Cayman Bay hospital comes online in Q1 next yr. Its a 50-55 bed facility

In FY 24, company heading into an election year. There may be some margin pressure and increase in receivables due company’s exposure to Govt business

International patients count at 8.5 pc of total vs 6.5 pc yoy

Cost of Debt ( for expansion ) should be around 8-8.5 pc

Bed additions in India will only happen in FY 25. In the mean time, working to improve throughput and efficiencies. There is a lot of space for improvement in these areas. These improvements will get reflected in ROCE, EBITDA, ARPOBs etc

Kolkata Greenfield expansion decided upon after exhausting all other options. In Bengaluru, there is no such problem as ample land is avlb in near vicinity

Disc: holding from lower levels, core portfolio holding


Sharing this interesting image. Looks like NH is in a sweet spot

Disc: Not invested


Narayana Hrudayalaya - All time high Quarterly profits and revenue in Q1 Fy 24


If I’m reading this right prices have increased on average by only 74% in 23 years. That’s less than 1% inflation!

Despite being in healthcare services, I missed NH (Narayana Health) and regret the same. I did consider it from time to time, but I thought that due to the philanthropic nature of Dr. Devi Shetty, the margins would be depressed. However, it turns out they have one of the highest margins, which I believe is due to their focus on productivity and efficient operations.

Let me share one more good thing about NH and Dr. Devi Shetty. DDS for healthcare is what Deepak Parekh is to banking. NH is the among very (very) few large (or small) player that does not work with commission agents or facilitators to attract international patients. This automatically increases their margins and I appreciate them a lot for that. Just thought to share good thing about somebody…


Hi sir, given the PE is just 30 and below the median PE (as per Screener), do we still not have valuation comfort here? What are your thoughts on current valuations of NH?

Last 3 yrs PE trend of NH -

For hospitals, tracking PE is probably not the most appropriate metric as that gets skewed due to high depreciation and interest costs that are front ended. EV/EBITDA is a better metric here.

It might be slightly higher on the historical range of that metric. What we need to analyse is future EBITDA and your EV/EBITDA estimate based on business growth vs current to understand margin of safety. In my opinion, it is fairly to slightly above fairly valued today but runway for growth in business is there with a lot of brownfield capex done and underway in FY24.

Disc: I don’t own NH. I have it in my watchlist and track it.


@paramjeetsingh I may not be expert in valuation hence you may ignore my opinion. as aditya indicated PE may not be right parameter. I suggest to watch How to Evaluate Hospital Stocks | India's Hospital Industry | Apollo, Max Healthcare, Fortis & More - YouTube - you may find it useful. As am not adding as I found valuation streatched, but that doesn’t mean it won’t go up - but am not comfortable to pay 21000 cr for profit of 700 cr. Most hospital seems at pick OPM at this stage - hence PE seems optically low.


P/OCF is also a very relevant metric. Its below 20 for NH.

1 Like

Hi fellows, sharing here a few of the valuation criteria by Aditya Khemka of InCred on Pharma Sector overall. This is taken from this YouTube Video

Hope this helps.


Based on this Narayana with EV/EBITDA of 19.2 is currently cheapest amongst the peers.

Apollo - 35.8
Max - 37.3
Fortis - 22.1
Rainbow - 26.9



  • ROCE: 8.37 %
  • ROE: 2.04%
  • CFO to EBITDA: 80.7 %
  • Debt to equity: 1.05


  • ROCE: 31.6 %
  • ROE: 33.1 %
  • CFO to EBITDA: 97.1 %
  • Debt to equity: 0.41

EV/EBITDA shouldn’t be the only deciding factor when determining undervaluation of a stock. Sometimes there is a reason why a stock is cheap.


NH concall Q1 FY24.pdf (997.4 KB)

Summary of Transcript of Earnings Call for the quarter ended 30th June 2023


  1. New Hospitals Performance: The company’s new hospitals are performing as expected, showing resilience and adaptability.
  2. Tax Strategy: Utilizing deferred tax credits to achieve a lower tax rate in the current year.
  3. Strategic Expansion: Focus on expanding coverage in target markets like Bangalore, indicating a clear growth strategy.


  1. High Costs: The company faces challenges with high construction and salary costs, which could impact profitability.
  2. Revenue Decline in Cayman Islands: The average revenue per patient in the Cayman Islands business is declining, indicating potential issues in that market.
  3. Lack of Clarity on Expansion Plans: The company is in “learning mode” regarding the number of clinics or expansion plans, which may indicate uncertainty in strategic planning.


  1. Cost Structure Optimization: There’s an opportunity to radically change the cost structure, potentially leading to increased profitability.
  2. Market Share Growth: The company is exploring ways to double the market share of organized players, indicating potential growth opportunities.
  3. Investments in Growth: The company is investing to sustain current revenue and EBITDA growth, with new capacity expected in 3.5 years, providing opportunities for future expansion.


  1. Seasonal Fluctuations: The company experienced a dip in Q1 due to seasonality, indicating vulnerability to seasonal trends.
  2. Potential Margin Dilution: With new capacity coming online, there may be expected margin dilution, which could impact profitability.
  3. Competitive Landscape: While not explicitly mentioned, the company’s focus on doubling market share and changing cost structures may indicate a highly competitive environment, posing potential threats.

Overall, the tone of the management seems to be one of cautious optimism, transparency, and responsiveness, while the participants appear to be inquisitive, concerned about specific issues, and interested in the company’s future prospects.


My notes of 11th August 2023 Concall

Cayman Division and New Hospital Performance

  • Cayman Island division maintains strong margins after oncology block commissioning.
  • Margin sustainability a point of focus for upcoming quarters.
  • Radiotherapy block’s capital-intensive nature doesn’t impact margins.
  • Larger hospital commissioning in FY25 to bring margin dilution due to increased fixed costs.
  • Pre-commissioning phase involves costs for manpower, nurses, and doctors.

New Hospital Performance

  • Progress with newer hospitals largely on track.
  • Q1 experienced a slight dip due to seasonal factors, rebound expected in subsequent quarters.
  • Mumbai division aims for breakeven or slight EBITDA positivity by year-end.
  • Strategic investment focus on Bangalore, Kolkata, and Cayman divisions for growth.
  • Sequential investments planned for new hospitals to drive accelerated growth.
  • Confidence in steady performance and growth trajectory for new hospital divisions.
  • Cohort’s QoQ revenue steady at 115 crores, marking 9.1% YoY growth.
  • EBITDA margins for new hospital cohort surpass 5%, indicating healthy financial performance.

Headroom for Growth in Indian Healthcare

  • Current statistic: India has 0.7 beds per thousand people, below WHO recommendations of 1.7 to 2.
  • Achieving European norms (2 per thousand) challenging due to factors like evolving medical practices and shorter hospital stays.
  • Over 50% of current bed capacity is unorganized, indicating significant untapped potential.
  • Organized sector (PE-backed, listed, and organized hospitals) constitutes less than 10% of total bed capacity.
  • Public sector holds 40%, leaving ample room for further organization.
  • Organized sector poised to grow through professionalization and market share acquisition.
  • India’s vast population ensures growth potential for decades.

Strategic Geographic Expansion: Long-Term Approach

  • Uniform demand for medical services across city tiers.
  • Surgery needs persist consistently regardless of town size.
  • Current priority: Strengthen existing network due to high demand and waitlists.
  • Concentrated efforts to enhance bed and operation theater capacities.
  • Next step: Expand around existing hospitals, fostering strong referral systems within a State.
  • Macro demand exists throughout India.
  • Current strategy centers on maximizing existing infrastructure’s potential.

Tax Regime Transition and Deferred Tax Impact

  • Previous tax regime utilized due to brought forward losses and MAT credits.
  • Transitioned to the new tax regime after settling these matters.
  • Deferred tax asset turned into a credit due to lowered tax rate.
  • Effective India tax rate reduced to about 18%.
  • Parent tax rate around 26%-27% with an additional 9% deferred tax credit (one-time occurrence).
  • FY25 projected to have a lower tax rate as the 9% deferred tax credit won’t apply.

Comfortable Capex and Debt Management

  • Guided Capex for the year: Approx. 1130-1140 crores (Cayman + India combined).
  • Current financial position robust, surpassing Q4 of the previous year.
  • Net Debt stands at a mere 19 crores.
  • Expected 60%-70% Capex financed via debt in both India and Cayman.
  • Gross Debt and Net Debt to rise, with Net Debt increasing by about 550-600 crores.
  • Despite debt increase, Net Debt to EBITDA ratio projected to remain favorable (<0.60 or 0.65).

Sparsh Acquisition and Performance Update

  • Current quarter’s Sparsh revenues in line with plans.
  • Healthy EBITDA margin of approximately 34% achieved.
  • Sparsh unit acquired in Q3 of the previous year.
  • Previously acquired team integrated.
  • Effective cost controls implemented, projected overheads at around 23% of revenue.
  • Leveraging benefits from existing hospital operation for enhanced EBITDA margins.
  • Steady growth evident, EBITDA margins progressed from 30% to 34% in Q1.
  • Anticipate continuing positive trend in upcoming quarters.
  • Acknowledgment of existing headwinds while maintaining positive outlook.
  • Aiming to deliver EBITDA percentages consistent with the previous financial year’s performance by FY24 end.

Investment’s Revenue and Profit Impact

  • Investment designed to sustain current revenue and EBITDA growth without adding beds.
  • Focus on upgrading aging equipment and enhancing operational efficiency.
  • Notable growth achieved (~20%) in the previous year without bed additions.
  • Achieved through optimizing throughput and operational processes.
  • Investment yields immediate accretive outcomes in terms of profitability.
  • Enhancements contribute to Return on Capital Employed (ROCE) improvement.
  • Strategic emphasis on maximizing efficiency for revenue increase.
  • Allocating investments to expand OTs, ICUs, Labs, and Diagnostics.
  • Additional throughput capacity achieved at existing cost levels.
  • Strategic focus on maintaining margins until capacity expansion (expected in 2-3 years).
  • Continued growth through efficient utilization of resources and expansion of capabilities.

Narayana Health Integrated Care: Strategy and Progress

  • Pilot of Integrated Care launched across six Bangalore locations.
  • Early stage with promising traction: 30,000 transactions, 45 million revenue.
  • Focus on building integrated model, addressing customer needs.
  • Current emphasis on achieving coverage for target market in Bangalore.
  • Clinics expansion based on demand and capacity required.
  • No fixed numbers for expansion plans at this learning stage.
  • Clinics to meet subscribers’ needs, provide in-home medicine, and childcare services.
  • Emphasis on building capacity to serve integrated plan subscribers.
  • Iterative process for clinic expansion, driven by fulfilling customer requirements.

ARPOB Growth Strategy and Outlook

  • ARPOB growth tied to efficiency improvements and procedure complexity.
  • Focus on quicker discharges, increased daycare procedures, and specialized areas.
  • Maturing hospitals and investments in robotics contribute to gradual ARPOB improvement.
  • Company adopts cautious stance in providing guidance.
  • Anticipated ARPOB growth, but not heavily reliant on price increases.
  • Strategy centers on enhancing operational efficiencies and diversifying procedures.

Health Insurance Segment Progress and Timeline

  • Applied to IRDAI for standalone health insurance company approval.
  • Actively engaged with the regulator to secure necessary approvals.
  • Timeline challenging to determine precisely due to regulatory and operational requirements.
  • Focus on obtaining approvals and ensuring systems readiness.
  • Aim to commence operations as soon as feasible, but no specific timeframe provided.

Expanding Specialties and Narayana Clinics

  • Narayana Clinics provide holistic healthcare services.
  • Blend of primary and secondary care at Narayana Clinics.
  • Specialties tailored to location-specific demographics.
  • Overcrowding eased by handling routine checkups at clinics.
  • Chronic ailments managed via convenient video consultations.
  • Patients benefit from regular monitoring and reduced hospital visits.
  • Narayana Clinics situated alongside hospitals for seamless care.
  • Referrals made to major hospitals for specialized and complex cases.
  • Strategic placement in various city areas for accessibility.
  • Initial focus on Bangalore’s southern region for clinic placement.
  • Enhancing patient outcomes, convenience, and healthcare quality.

India Operation Growth Drivers and Price Hikes

  • Growth primarily fueled by increased footfalls, occupancy, and throughput.
  • Focus on Orthopedics and Oncology departments resulted in slight uplift.
  • Enhanced ability to discharge patients faster and utilize daycare mode.
  • Volume increase in patient services and efficient treatment contributed.
  • Some realization increase from pricing adjustments and efficiencies.
  • Shift in payer mix with higher percentage under insurance programs.
  • International segment remains stable; cash segment decreased.
  • Annual price hikes in the low single-digit range.
  • Balancing cost increases with efficiencies to maintain sustainable pricing.

International Business Strategy and Growth Focus

  • International patient volumes have shown growth quarter-on-quarter.
  • Focus on core market of Bangladesh; reducing reliance on intermediaries.
  • Shifting towards direct engagement model and digital marketing.
  • Domestic and digital activities offer more resilience against travel disruptions.
  • Anticipating reduction in international medical travel as neighboring countries develop.
  • Increasing healthcare infrastructure in neighboring countries impacting demand.
  • Core focus on digital and domestic activities; reducing emphasis on international marketing.
  • Positive trend in international patient volumes but not aiming to reach pre-COVID levels.

Disc: Invested. No transactions in last 30 days.


What a visionary! 100 mn families that get unserved in the middle,let’s try and serve them :slight_smile:


Has anyone seen clinics getting opened? Used them in their city? Any feedback will be deeply appreciated!

Not in my city, but their Google reviews are very good