NH - Narayana Hrudayalaya Limited Share Price

Management's outlook for Narayana Hrudayalaya Limited emphasizes sustained growth, especially in the Integrated Care segment and the upcoming expansions in both domestic and international markets. The Integrated Care business is expected to ramp up significantly in revenue, aiding in the overall growth trajectory.

Following are key forward-looking points provided by management:

1. Cayman Operations: Management anticipates the stabilization of patient volumes in Cayman following the commissioning of a new hospital, with growth expected to resume over the next few quarters. It was noted that the Cayman Hospital business could achieve $200 million in revenue with EBITDA margins between 40% and 42%. The management reassured that the core economics of the Hospital business would remain unchanged despite short-term revenue fluctuations.

2. Integrated Care Business: This segment is expected to transition towards breakeven by the end of FY26 or the first quarter of FY27, though it will carry a different margin profile compared to the Hospital business. The management reported early traction with significant employer partnerships, and a robust response to offerings in the external market.

3. Insurance Offerings: The insurance segment aims to see significant adoption with currently about 6,000 lives covered. Management expects this business to improve as they refine their offerings and expand distribution channels. They have identified a cash burn in this segment but remained focused on establishing a sustainable operational model.

4. New Hospital Expansions: The company is planning several new hospitals by FY27 and FY28. Management indicated that the break-even characteristics will be comparable to market averages, albeit with some initial margin impact due to higher startup costs.

5. Capex Plans: Management outlined a commitment of around INR 450 crores for capital expenditures aimed at enhancing service offerings, with further additional investments anticipated for new hospital constructions and technology integration across operations.

6. Long-Term Growth Intent: There is a clear emphasis on maintaining complex procedural volume growth, particularly in oncology and advanced medical technologies, thereby enhancing overall patient experience and leading to increased revenue across the board.

These strategic initiatives underline management's focus on leveraging current capacities while investing in future growth avenues, aiming for healthy long-term returns.

1. Question: Anesh, can you explain the sequential decline in discharges and OP patient numbers in Cayman? Is it just volatility, or is there a structural change?

   Answer: You're correct; we see quarterly volatility, especially with new hospital openings where initial numbers fluctuate. Historically, new hospitals experience unexpected dips. We expect stabilization in the coming quarters as we ramp up. We remain confident in the growth trajectory.

2. Question: What accounts for the INR 20-25 crores sequential EBITDA decline for the Cayman business?

   Answer: The decline includes a minor revenue decrease in hospital operations. Integrated Care has different margins, affecting overall EBITDA. While the hospital's fundamental economics remain stable, we've seen variations in patient mix affecting revenue, which we expect to normalize over time.

3. Question: Can we expect Cayman Hospital's revenue to stabilize at $200 million with a 40-42% EBITDA margin?

   Answer: Providing precise guidance is challenging. However, we anticipate that, while the revenue mix may lean towards lower-margin OP cases, underlying profitability shouldn't fluctuate significantly. We remain committed to healthy growth in absolute earnings.

4. Question: How do you plan to breach the operational losses in Integrated Care?

   Answer: Integrated Care launched in January and has received a positive response. Although it's currently loss-making, we expect it to break even by year-end or early next year. The goal is to integrate these services into our broader ecosystem for long-term stability.

5. Question: Will Integrated Care's losses peak in this quarter and decline in the coming quarters?

   Answer: That's difficult to ascertain. While I'd anticipate a narrow range in loss percentages, absolute numbers depend on upcoming revenues. Unlike hospitals, Integrated Care won't show wild fluctuations, but some variability is expected based on claims and other factors.

6. Question: Are all intended services in the new Cayman unit already operational?

   Answer: Yes, all services have been activated, but it will take time for them to fully mature and reach their potential. While we've commenced operations, we won't see immediate results across all service lines.

7. Question: What's the growth outlook for the Integrated Care segment regarding future revenues?

   Answer: We're optimistic; we've established partnerships with major employers and organizations. While the segment may not have high margins initially, it's part of our ecosystem strategy to guarantee stable, long-term earnings as we scale.

8. Question: When will the new hospitals be operational, and what will the break-even timeline look like?

   Answer: The new hospitals are expected to take about a year to operationalize. As for break-even, it will depend significantly on local market dynamics, providing revenues at competitive rates while managing costs effectively.

9. Question: What is the expected interest cost regarding your Capex projects, and what is the peak debt target?

   Answer: We're targeting a gross debt of around INR 2,400 crores over the next three years. Our leverage ratio will ideally remain at around 2.5-3, which accommodates our planned expansions while positioning us sustainably.

10. Question: Given your insurance initiatives, how do plans address pre-existing conditions and age demographics?

Answer: Our approach emphasizes no waiting periods for pre-existing issues through comprehensive health screenings. While we aim to cater to older demographics, we need to balance risk and affordability, crafting suitable products for varying age groups.

These questions were navigated concisely, maintaining the core elements and forecasts as requested, while ensuring comprehension of strategic directions and operational metrics.