FORTIS - Fortis Healthcare Ltd Share Price

During the Q3 FY '26 earnings call, management of Fortis Healthcare provided a positive outlook for the company, indicating sustained growth in both the hospital and diagnostics segments. For Q3 FY '26, consolidated revenues reached INR 2,265 crores, a 17.5% increase year-on-year. Hospital revenues increased by 19.4% to INR 1,938 crores, while diagnostic revenues grew by 7.3% to INR 327 crores. The operating EBITDA for the quarter rose by 34.8% to INR 505 crores, yielding a margin of 22.3%, up from 19.4% in Q3 FY '25.

Looking at the nine-month performance, consolidated revenues were INR 6,763 crores, reflecting a growth of 17.1%. Notably, the operating EBITDA margin improved by 300 basis points to 23%. Management reported a net debt of INR 2,547 crores, with a net debt-to-EBITDA ratio of 1.24x as of December 31, 2025.

Forward-looking initiatives include the successful acquisition of the 125-bedded People Tree Hospital in Bengaluru for INR 430 crores, which will enable expansion to over 300 beds. Management also highlighted the opening of a new specialized mental health care facility, Adayu, in Gurugram. An additional 750 operational beds were added this year. Furthermore, they foresee targeting around 400 new beds in FY '27, primarily through brownfield expansions at existing facilities.

In terms of doctor hiring for expanded capacities, management expressed confidence in attracting talent due to Fortis' strong brand presence. They predict stable ARPOB growth of about 4-5% annually and emphasized an ongoing focus on maintaining margins through strategic expansions and operational efficiencies. Overall, management remains optimistic about achieving a 20% top-line growth in FY '27 while also improving margins by an additional 150 basis points.

Here are the major questions asked during the Q&A session of the Fortis Healthcare Limited earnings transcript, along with detailed responses:

1. Question: "How should we think about the People Tree acquisition in Bangalore, considering it's running sub-optimally? Will it require additional investment?" Answer: "We see the facility requiring some investment to meet Fortis standards. The first phase will be manageable in cost. We will also start expansion work to increase capacity to 300 beds. Thus, we expect this facility to evolve into a high-end, fully equipped super-specialty hospital over the next 3 to 4 years."

2. Question: "What would the organic bed addition next year be, excluding acquisitions?" Answer: "Next year, we are targeting around 400-plus beds in brownfield expansion. This includes enhancements primarily driven by the FMRI expansion, which we aim to commission by April."

3. Question: "What's the revenue contribution from Gleneagles for this quarter?" Answer: "We earned INR5 crores as O&M fee this quarter. Excluding Bombay, Gleneagles generated revenue of INR172 crores with an EBITDA of approximately 3% after absorbing our fees."

4. Question: "Have you started seeing impacts from higher CGHS and ECHS rates?" Answer: "Yes, we are beginning to see positive results from CGHS. However, ECHS still poses some uncertainties due to drug pricing issues. We anticipate benefits as clarity improves."

5. Question: "Can you provide details on your international patient revenue and its scalability?" Answer: "International patient revenue has stabilized at 8-9% of total revenue. We are focusing on markets in the West, East Africa, and the Middle East to enhance this segment, but geopolitical factors do affect the growth sustainably."

6. Question: "What's the expected guidance for FY '27 considering your thoughts on continuing growth?" Answer: "We're on a growth trajectory; while I cannot provide specific numbers, we expect a continued upward trend in revenue and margins. The brownfield expansions we discussed will bolster our performance."

7. Question: "What are your expectations regarding ARPOB growth in the coming years?" Answer: "We anticipate a 4-5% increase in ARPOB annually, driven by a mix of pricing powers and case complexity, particularly in oncology services."

8. Question: "Could you clarify your approach towards brownfield and greenfield expansions in the future?" Answer: "We plan an aggressive brownfield approach to strengthen existing clusters, along with some greenfield projects. This includes ongoing expansions in Jalandhar and potential additions in Greater Noida."

9. Question: "How do you see the competitive landscape amidst new entrants?" Answer: "Our competitive edge lies in our infrastructure, brand legacy, and physician engagement. Our commitment to clinical excellence continues to attract talent and retain our market position."

10. Question: "Regarding the potential equity raise by IHH, what should we expect in terms of timing and amount?" Answer: "The cooling period for additional equity will conclude in May, and we expect clarity on the amount and structure of potential investments thereafter. We are focused on balancing our balance sheet for future expansions."