HCG - HealthCare Global Enterprises Limited Share Price

The management of Healthcare Global Enterprises Limited (HCG) outlined a positive outlook focused on long-term growth driven by strategic expansion, precision oncology, and operational efficiency. Key highlights include:

1. Strategic Partnership & Growth: KKR's entry as a majority stakeholder (replacing CVC) is expected to bolster long-term growth. HCG aims to expand its network of 25+ comprehensive cancer centers and infusion clinics, prioritizing personalized, precision medicine through genomics, AI, and research integration.

2. Financial Performance: Q3 FY25 revenue reached a record INR 559 crores (19% YoY), with adjusted EBITDA at INR 92.3 crores (16.5% margin). Nine-month revenue stood at INR 1,638 crores (16% YoY). Oncology (ex-Milann) grew 21% with a 20% EBITDA margin.

3. Operational Strength:

   • Volume Growth: OPD footfall rose 9%, chemotherapy sessions grew 19%, LINAC utilization hit 60%, and bed occupancy improved to 55%.
   • Emerging Centers: Kolkata (+40% revenue), South Mumbai (+28%), and Borivali (+11%) showed strong momentum.

4. Margin Expansion: Margins are expected to improve by 1"“1.5% in FY26, driven by operational leverage, reduced losses in South Mumbai (targeting breakeven by FY26), and normalization post-seasonality.

5. Acquisitions & Capex: MG Hospital (Vizag) contributed INR 25 crores (24% margin) in Q3. Capex for FY25 is INR 275 crores, with focus on brownfield expansions and operationalizing new centers.

6. Challenges & Recovery: Geopolitical issues impacted international patient inflows (3.5"“4% of revenue), but recovery is anticipated by Q4.

7. Debt & Milann: Net debt (ex-leases) is INR 650 crores, deemed manageable. Milann (fertility) faces challenges but aims for turnaround via andrology focus and potential divestment.

The management remains confident in outperforming industry growth through clinical excellence, asset-light expansion, and strategic investments in technology and research.

Question 1:
Congratulations to the team on the deal. So, a couple of questions on the contours after the deal. So, CVC, we understand will continue to hold 9% stake and Dr. Ajai obviously retains a stake of 10.8-odd percent in the company. So, could you just help us understand if KKR makes you open offer of 26% post buying 51% in the company, and in terms of the total holding between CVC, KKR, and Dr. Ajai, will probably potentially go up to 95%, 96%, right? Because it's 10 plus 9% plus potential 77% with KKR, including the open offer price. So how should we read that?

Answer:
KKR will acquire up to 54% equity from CVC. Post-transaction and open offer, KKR's stake may reach 54"“77%, depending on open offer participation. CVC's stake reduces to ~9.9%, classified as public shareholders. Dr. Ajai remains a co-promoter. Total promoter holding (KKR + Dr. Ajai) could reach up to 77%, subject to open offer outcomes.

Question 2:
And sir, in terms of your role now at the organization, the press release mentions that you are no longer in executive capacity. So does that mean you'd be more like a financial investor with the company with limited routine operations, or how does that work?

Answer:
Dr. Ajai transitions to non-executive Chairman, focusing on clinical research, academics, and strategic growth. He retains involvement in genomics, proteomics, and outcomes research but steps back from daily operations. His role emphasizes advancing precision oncology and HCG's research initiatives.

Question 3:
How do you see the margin trajectory shaping up over the next year?

Answer:
Q3 FY25 EBITDA margin dipped to 16.5% due to seasonal revenue softness. Margins expected to rebound in Q4 and expand by 1"“1.5% in FY26, driven by operational leverage, improved modality mix, and reduced losses from new centers. Established centers aim for 13"“14% growth, exceeding market rates.

Question 4:
If you can just mention how the Bombay centers are progressing both Borivali and the South Bombay center in terms of the EBITDA performance? And what was it last year? And what do we expect in the coming year?

Answer:
South Mumbai's EBITDA loss narrowed to INR10"“12 crores in FY25 (vs. higher losses previously), targeting breakeven by Q1 FY26. Borivali performed steadily. International patient challenges (geopolitical/visa issues) impacted South Mumbai, but recovery is expected. Kolkata grew 40% Y-o-Y, contributing positively.

Question 5:
With the KKR acquisition coming in, will there be any material change in your business plans than what you've been guiding over the last, say, 3 or 4 quarters or so?

Answer:
No immediate operational changes. Focus remains on organic growth, brownfield expansions, and operational efficiency. Future strategies, including M&A, will align with KKR's long-term vision. Current priorities include integrating recent acquisitions (e.g., MG Vizag) and improving margins.

Question 6:
What would be our outlook on the international patient business in South Mumbai center? And are we seeing any recovery on that front?

Answer:
International patient revenue (3.5"“4% of total) declined in Q3 due to Bangladesh visa restrictions. Recovery to Q2 levels expected in Q4 FY25, with normalization in FY26. Geopolitical resolution and medical visa resumption critical for sustained growth in this segment.

Question 7:
What would be the timeline for open offer?

Answer:
Open offer timelines adhere to regulatory processes. KKR will disclose details per SEBI guidelines. No specific date shared, but the transaction is subject to standard regulatory approvals and market conditions.

Question 8:
Sir, just one question on your debt level. So now it's at about INR1,500-odd crores, and we've seen in the past that it has been increasing consistently. So, what kind of debt levels would you be comfortable at, and when do we see debt repayment starting from?

Answer:
Net debt (excluding leases) is INR650 crores, deemed manageable. Capex of INR275"“280 crores annually (FY25"“26) includes maintenance and growth. Post-FY26, capex normalizes to ~INR100 crores. Debt covenants are met comfortably, with no near-term repayment pressures.