Marcellus adding NH to their portfolios is a good news. I guess they have added it to both Little champs and Rising Giants portfolios. It means the business might be fundamentally sound. Not sure about the valuations as Marcellus have always been criticised for holding stocks at high valuations. I hope they have tweaked their strategy regarding valuation after such big backlash. But overall good news.
5 Likes
Yes government after 2914 is focusing on infra , road , and made in India . It takes time .
The results seem nice and the margins are good too, but the capex guidance for 2025 is too much. Company guided for same kind of capex for FY24 also but it seems the plan has not worked out as expected. Now, for FY25 also, the company has set huge capex targets. Can anyone tell their views on this?
Disc. Invested. Baised
5 Likes
The stock has entered stage 4 on weekly charts after a long time. Big players have decreased their stake in the company in this quarter. Also, green field capex projected for the FY25 is over 1000 crores and due to this margins are likely to take a hit in future. I was checking last year’s PPT and the management projected a capex of over 1000 crores for the FY24 as well. However, combined fixed assets and CWIP on the balance sheet have increased by only 570 crores compared to last year. Please correct me in case I have missed or miscalculated anything.
PS : Invested and have lost 28% gains in the last 3-4 months.
10 Likes
Im expecting it to bounce back from this level,
Looks like there was a gap to be filled.
Will hold till 50dma crosses 200 dma
Disc. No reco
3 Likes
Which gap are you referring to? Can you also elaborate on the bouncing back part?
Naman, cant see the charts. Can you post them again please?
Strange. It’s visible to me - Narayana Hrudayalaya Ltd - #143 by Naman_Gupta1
Is it not visible to you?
1 Like
Add 242cr of depreciation charges, and, trying to recall my memory Management did comment (in Q4FY24 concall) some Capex slipped into FY25. Will re-check once transcript is out.
1 Like
Q4 FY24 Concall
Financial Performance
- Revenue and Profitability:
- Highest ever revenue and profitability margins for FY 2024.
- Q4 consolidated revenue: INR 12,794 million (4.7% YoY growth, 6.3% QoQ growth).
- Q4 consolidated EBITDA: INR 3,184 million (24.9% margin, up from 23.8% in Q4 FY 23).
- FY 24 consolidated revenue: INR 50,183 million (10.9% YoY growth).
- FY 24 consolidated EBITDA: INR 12,275 million (24.5% margin).
- HCCI Cayman Performance:
- Q4 revenue: USD 30.5 million (3.1% YoY growth).
- FY 24 revenue: USD 123.9 million.
- FY 24 EBITDA: USD 58 million.
Balance Sheet and Liquidity
- Strong Liquidity Profile:
- Group cash and liquid investments: INR 12.58 billion.
- Gross borrowings: INR 14.41 billion.
- Net debt position: INR 1.84 billion (as of 31st March 2024).
- Net debt to equity ratio: 0.06.
- Capital Outlay:
- Capital expenditure: Over INR 9 billion for hospital transformations, repairs, biomedical expenses, and greenfield projects.
Clinical Achievements
- Health City Bangalore:
- 19 TAVIs, 19 robotic cardiac surgeries, and 255 Minimal Invasive cardiac surgeries in Q4.
- Over 1000 Minimal Invasive cardiac surgeries in FY 24.
- 16 solid organ transplants and 89 robotic surgeries in Q4.
- Bone preservation surgery with 3D printed model and ovary preservation surgery for ovarian cancer.
- RN Tagore Hospital Kolkata:
- Trans-axillary Perceval Plus Suture-less aortic valve replacement using Central Cannulation technique (first in the country).
Digital Transformation
- Digital Initiatives:
- Launch of comprehensive purchase model on ATHMA platform for supply chain management.
- Launch of ‘Namah’ nursing app in February, saving 5000 person hours.
- Over 95,000 discharge summaries certified via ‘Aadi’ mobile app.
- 19.73% increase in lab throughput through ATHMA Lab Information System.
- Patient kiosks introduced in three hospitals.
- Narayana Health app monthly active users: 200,000+ with a 4.8 rating on Google Play Store.
Business Expansion and Growth
- Narayana Health Integrated Care:
- Q4 revenue: INR 68 million (highest so far).
- Over 43,250 patient transactions.
- Focus Areas:
- Upgrading clinical and non-clinical operations.
- Transforming patient service levels.
- Increasing throughput and building more capacity.
- Investing in digital patient outreach channels.
- Improving operational efficiencies.
India Business Performance
ARPOB Increase and Discharge Decline
- ARPOB (Average Revenue Per Occupied Bed): Increased by almost 10%.
- Discharges: Declining trend across the network.
- Reasons:
- Comparison with a high base from post-COVID rush in Q4 FY 23.
- Infrastructural transformations, including changes in bed configurations to private and semi-private rooms, reducing peak admission bed availability.
- Focus on payor segments, leading to improved IP average revenue per patient (highest level of INR 1.31 lakh).
- Anticipation of volume rationalization correction over time.
Revenue Growth Outlook
- Historical Revenue Growth: 14-15% per annum, which is unsustainable.
- Recent Growth: 4-5% growth in the last two quarters.
- Future Expectations:
- Focus on efficiency, capacity utilization, payor mix, and digital initiatives.
- Aim to achieve double-digit revenue growth until expansions are completed.
Cayman Business Performance
Q4 Revenue Growth
- Q4 Revenue: Weak growth observed.
- Reason:
- Near commissioning of the new hospital, limiting the addition of new services and capacity.
- Expected growth post-commissioning with 3-4 new service lines.
New Hospital Commissioning
- Inauguration: Scheduled for July.
- Patient Treatment Start: Early August, subject to inspections and compliance sign-offs.
Average Revenue Per Patient
- Q4 Decline: From USD 35.3k to USD 29.1k.
- Reason:
- Change in case mix with fewer high-end, high-complexity specialties as revenue grows.
- Shift to specialties and services with lower revenue per patient but higher volume and viable business.
- Transition to more daycare and short-stay procedures expected to continue this trend.
- Long-term Outlook: Focus on overall revenue growth rather than quarterly fluctuations.
Bed Expansion Plans
Focus Areas
- Primary Locations:
- Bangalore: Major expansion focus.
- Kolkata: Significant but secondary focus compared to Bangalore.
Specific Projects
- Health City Campus, Bangalore:
- Expansion on existing land.
- Over 300,000+ square feet construction.
- Mix of rooms, ICUs, OTs, multi-level car parks, and state-of-the-art setup.
- Rajarhat, Kolkata:
- New land acquired.
- 300,000+ square feet construction to start by mid-Q3 FY 25.
- Land Acquisition Cost: INR 180 crores including registration.
- Capital Employed: Estimated INR 1,000 crores for a 1,000-bed facility over ten years.
- Construction Timeline: Expected to be operational by FY28.
- Break-Even: Anticipated within 2-3 years post-construction.
- Additional Bangalore Location:
- Recently acquired land in upmarket area.
- Construction to commence within 5-6 months.
- Future Greenfield Projects:
- Shortlisting land parcels in focus cities where Narayana Hrudayalaya currently lacks presence.
Total Construction Area
- Overall Expansion: More than 800,000 to 1,000,000 square feet of new construction starting from mid to end of Q3 FY 25.
Financial Investments
Capital Expenditure
- FY 25 Greenfield Capex: Estimated at INR 1,000 crores.
- Includes expansion projects and new constructions.
- Routine Biomedical and Maintenance: Additional INR 300 crores.
- New Cayman Facility: Additional INR 250 crores in the final stage.
Timeline and Capacity
- Construction Start: Mid-Q3 FY 25.
- Online Beds: Expected within 2-3 years, closer to 3 years.
Cayman Islands Operations
Outpatient Increase
- Outpatient Volume Growth: Increased from 7,000 to 10,000.
- Impact on Inpatient Services: Expected to translate into higher inpatient volume over time.
- Day Care Focus: Emphasis on endoscopy, colonoscopy, CTs, MRIs, and pharma sales, classified under outpatient services.
Insurance Business Expenses
Current Quarter P&L
- NHIC and NHL Expenses: Combined expenses of INR 11.5 crores.
- Main Expense: Majority directed towards the clinics business.
Jaipur Unit Operations
Insurance Procedure Issues
- Current Status: Ongoing discussions with the state government.
- Operational Adjustments: Shift from medical management to procedural and surgical patients.
- Surgical Count Increase: Significant rise in surgical procedures.
- Revenue Recovery: Recovered approximately INR 1 crore of the lost revenue.
- Performance Metrics: 12% growth in top line and over 40% increase in EBITDA compared to Q3.
Growth and Base Impact
Base Comparison
- High Base Impact: Last year’s high base affects current growth projections.
- Future Projections: Difficult to estimate; post-COVID catch-up growth might normalize in the next 2-3 years.
Capacity Constraints
- Bottlenecks: Current growth is limited by capacity, not demand.
- Infrastructure Expansion: Significant infrastructure projects and expansions are underway to alleviate constraints.
Demand Dynamics
- Unmet Demand: No shortage of demand; investments in outreach, clinics, and insurance programs to attract patients.
- Revenue Broadening: Focus on increasing outpatient and preventative services, similar to the Cayman Islands model.
Sectoral Impact
Economic Slowdown
- Impact on Healthcare: Minor impact from economic cycles (e.g., wedding season, festivals) but generally minimal due to healthcare’s essential nature.
- Long-Term Demand: Sustained by population growth, aging population, and increasing healthcare needs.
Cayman Islands Operations
Expansion Details
- Current Capacity: 110 beds.
- Future Capacity: Additional 60 beds.
- Focus on Daycare Services: Emphasis on daycare and throughput rather than just bed count.
Profitability Improvement in Lesser Profitable Units
Key Hospitals
- Gurugram: Transitioned from break-even to EBITDA positive.
- Mumbai (SRCC): Achieved single-digit positive EBITDA.
- Dharamshila: Consistently achieving double-digit EBITDA margins.
Combined Performance
- EBITDA Margin: Around 9% combined.
- Revenue Base: 115 crores for the quarter.
Drivers of Improvement
- Clinical Infrastructure: Enhanced clinical capabilities and specialties.
- Volume Growth: Increased volumes and occupancy have helped spread costs.
- Focus on NCR: NCR is a major focus for expansion and consistent performance.
Future Margin Improvement
- Dharamshila: Consistently over 15% EBITDA margin with potential for growth.
- Gurugram: Stabilized and consistent, with continued consolidation expected.
Funding of Capex
Total Capex
- Budgeted Capex: Over INR 1,600 crores for the coming year.
Funding Mix
- Internal Accruals: Approximately 20%.
- Debt: Approximately 80%.
Debt Details
- Current Gross Debt: INR 1,400 crores (India + Cayman).
- Projected Gross Debt: Expected to increase to around INR 2,400 crores with planned borrowing.
- Net Debt: Expected to be around INR 1,200 crores in the worst case.
Cash Utilization
- Cash on Hand: Approximately half of the gross debt.
- Cayman Cash: Significant cash parked in Cayman Islands, not ideal for repatriation to India due to tax implications. Exploring opportunities to invest Cayman funds outside India.
Historical and Future Capex Utilization
Recent Capex
- Past Two Years: Approx. INR 1,000 crores each year.
- Focus: Improving throughput and capacity within existing hospitals.
Future Growth Potential
- Short-Term: Continued growth within existing capacity through efficiency improvements and small additions.
- Medium-Term: Major expansions to come online in the next 2-3 years, driving significant growth.
Tax Rate
Current and Future Tax Rates
- Current Year: 15.5% due to deferred tax credit benefit from rate transition.
- Next Year: Expected average tax rate of 26% for India business; Cayman business at zero tax.
Cayman Islands Expansion
New Hospital Impact
- Revenue Growth: Expected increase in revenue post-commissioning.
- Margin Dilution: Anticipated margin dilution due to fixed costs of the new hospital until break-even is achieved.
Operational Costs
- Cost Structure: Costs related to the building’s size are consistent, but operational staffing and costs will vary.
Choice of Indicator
- Preference for ARPP:
- Provides a more accurate reflection of realization per patient.
- Less susceptible to manipulation compared to ARPOB.
- Reflects the evolving trend towards daycare procedures and outpatient services.
Rationale
- Shift in Medical Field:
- Daycare procedures increasingly common, occupying beds without inpatient status.
- ARPP aligns better with changing healthcare landscape.
Differentiation of Narayana Services
Geographic Coverage
- Cutting-Edge Services for All:
- Narayana offers advanced treatments regardless of patient’s paying capacity or class.
- Example: High usage of robotic procedures, even for non-cancer surgeries.
Outcome Monitoring
- Stringent Outcome Monitoring:
- Emphasis on closely monitoring outcomes to ensure quality and value for patients.
- Ensures patients receive the best-in-class care and outcomes.
Pricing Strategy
Predictable vs Unpredictable Procedures
- Package Pricing vs Open Billing:
- Package pricing for predictable clinical pathways provides clarity to patients.
- Open billing for unpredictable procedures.
Competitive Pricing
- Lower Prices Compared to Competitors:
- Narayana’s prices generally lower due to high predictability of procedures.
- 80%-90% of procedures have predictable costs, offering clarity to patients.
Supreme Court’s Observations on Cost Procedures:
- A judge’s remark highlighted the need to assess the implementation of the Clinical Establishments Act across states, suggesting the enforcement of CGHS rates if necessary.
- Stakeholder discussions ensued, involving government officials, State Health Ministers, and Industry Associations, addressing the practical challenges of establishing a uniform pricing standard.
- Concerns were raised about the impracticality of imposing uniform pricing, emphasizing the importance of differential pricing to cater to the diverse economic demographics of India.
- The focus shifted towards promoting transparency in billing practices across all healthcare sectors, acknowledging the societal importance of meeting patient needs and expectations at various price points.
Occupancy Levels and Capacity Utilization
- Current Occupancy:
- Occupancy levels around 60%.
- Historical peak occupancy reached 75%-78%.
- Difficult to define a theoretical limit due to dynamic nature of healthcare services.
Margins and Profitability Outlook
- Short-Term Margins:
- Cayman hospital expected to be dilutive initially.
- Indian hospitals may not fully offset Cayman’s impact.
- Cost inflation impacting margins despite efficiency gains.
- Medium-Term Margins:
- Improved throughput and performance may positively impact margins.
- Medium-term margin improvement anticipated.
- Timeline: 18 to 24 months.
Daycare Services and Revenue Growth
- Annualized Revenue Growth:
- Outpatient revenue growth at approximately 14%, including Daycare services.
- Value of Services:
- Emphasis on delivering high-value services through Daycare procedures.
- Improved throughput by conducting procedures with same-day discharge.
Expansion Plans for Outpatient Capacity
- NHIC Entity:
- Establishment of Narayana Hrudayalaya Integrated Care (NHIC) for clinic expansion.
- Each clinic involves a moderate investment of 1-2 crores.
- Targeting 20-30 clinics per year to enhance outpatient capacity.
12 Likes
I believe next 2 years are going to be tough.
Cayman will come live and depreciation will go up which will impact margins. Expecting ramp up at moderate speed.
NCR cluster improving but most probably won’t have much poistive impact on overall margins as it is still small part of overall revenues.
Can’t expect much growth from Bengaluru and Kolkata as they are already at peak levels.
Key things to watch:
Clinics setup in Bangalore and how they can debottleneck the hospitals and what sort of OPD it can handle as indicated in Q4 concall.
What traction their in house developed applications can gather, very interesting to watch this. As this has the potential to become big in Saas area.
What opportunities they can find overseas as they are sitting on huge cash in Cayman entity.
Don’t expect much from Insurance biz. Immediately as this is going to be long term play.
Next 2 years will give opportunity to accumulate the stock. I’m expecting immense growth coming in in FY29-30 when stars will align again.
Disc.: Invested and biased, will add more at lower levels as this is a very very long term play from hereon.
15 Likes
what is their plan in FY 29-30?
New capex will complete 2-3 years and should reach good utilization, Cayman will be performing, Insurance biz. shall start showing some fruits. Plus clinics biz. will have clear direction. All will have enough time.
Expecting that we’ll see another capex announcement in NCR region by then and something overseas as well.
5 Likes
Success of this scheme will not only define Narayana’s future but can also impact of business models of hospital chains in India for years to come and can change the relationship between insurance companies and hospitals. Hoping this will help improving patient care in our country
17 Likes
What could be the impact of insurance venture on NH balance sheet? Could it be drag in short term at least?
3 Likes
In my opinion, balance sheet should start looking stronger as the premium start flowing in. The real test though would be once the claims start coming in.
Does anybody know if they have setup a separate department for maintaining good underwriting standards and hired experts from the industry?
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Yes you are right and I was reffering to claims piece… if their underwriting skills are not great it can really backfire… but on positive side, it will help bring more business for NH hospitals (apart from premium money)… it probably needs more deep dive…
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Also the insurance arm can be a feeder into the main hospitals. Once scaled, this could give them good visibility into health history of patients so visibility for surgeries required would be better.
2 Likes
