NH - Narayana Hrudayalaya Limited Share Price

Management Outlook and Key Points:

1. Cayman Expansion & Overseas Growth:

• The new Cayman hospital's outpatient services (commissioned in December 2023) are seeing strong initial traction, with emergency/inpatient services starting in January 2024. Margins are recovering post-Q2 lows, with ~85% costs already absorbed. Full service lines (e.g., obstetrics) will be operational by March 2024, driving future revenue.
• Acquired a 4% stake in a Bahamas hospital (synergies with Cayman) for strategic entry into the Caribbean. No immediate US expansion plans.

2. India Business Performance & Expansion:

• New hospitals (Gurugram, Dharamshala, SRCC): Combined Q3 revenue ~INR 130 Cr, EBITDA improving (from 3% in Q3 FY24). Gurugram/Dharamshala leading growth; SRCC (Mumbai) to turn EBITDA-positive in Q4.
• Greenfield focus: Prioritizing projects in core markets (Bangalore, Kolkata) due to challenges in acquiring cost-effective brownfield assets. Long-term target IRR of 15%+ for expansions.
• Occupancy: Stable (~60%), with efficiency-driven revenue growth over bed additions.

3. Clinics & Insurance (Integrated Care):

• Targeting 50 clinics/year (Bangalore/Kolkata), with controlled burn (~INR 14.5 Cr quarterly). Insurance product Arya (outpatient + inpatient coverage) launched; positioned for long-term growth.

4. Margins & Cost Efficiency:

• India gross margin improved via lean operations and favorable procedure mix. Cayman margins to stabilize post-cost absorption.

5. Financial Strategy:

• Debt/EBITDA ratio to remain ≤3, funded via internal accruals and project financing.

Outlook:

• Cayman: Margins to recover steadily; worst behind. Growth driven by new services and insurance integration.
• India: Organic growth via new hospitals/clinics; cautious brownfield acquisitions.
• Long-term: Focus on integrated care (hospitals + clinics + insurance), operational efficiency, and strategic Caribbean expansion.

1. Question on the scale-up of the new Cayman facility
Prithvi: "Is it possible for you to provide some color on the scale-up of the new facility? Which departments have been commissioned, how is the response, etc.?"
Answer: Outpatient services began in December 2024, with emergency, inpatient surgeries starting in January 2025, and obstetrics/neonatal care planned for mid-February. Q3 results reflect only December outpatient revenue. Costs were 85% absorbed, with strong initial demand validating the investment thesis.

2. Follow-up on Cayman margins
Prithvi: "Is it fair to assume margins will be sequentially better?"
Answer: Q2 saw 5-7% margin dilution due to pre-revenue costs. Q3 recovered close to historical EBITDA levels despite 85% cost absorption. The worst (Q2) is behind; future margins depend on revenue growth as services scale.

3. India new hospitals' revenue and margins
Prithvi: "Breakup of new hospitals' revenue and margins for India business?"
Answer: Combined EBITDA for Gurugram, Dharamshala, and SRCC improved to ~% in Q3 (vs. 3% in Q3 FY24). SRCC was marginally negative, Gurugram slightly positive, and Dharamshala at high double-digits. Total revenue for the three was ~INR 130 crore.

4. India occupancy vs. last year
Chat question: "Occupancy of India business this year vs. last year?"
Answer: Occupancy remained stable, slightly below 60%, comparable YoY despite seasonal weakness.

5. Utilization of Cayman cash proceeds and expansion
Yash: "Utilization of Cayman cash? Prospects in other regions/US entry?"
Answer: Proceeds fund India dividends. Recent 4% stake in Bahamas (Caribbean) targets medical tourism synergies. No US plans; focus remains on India and strategic Caribbean markets.

6. Cayman patient mix (locals vs. tourists)
Yash: "Split of Cayman patients: residents vs. international?"
Answer: Competitive reasons prevent disclosure, but Cayman serves a mix of local and medical tourism patients, with Bahamas being a key referral source.

7. Gross margin improvement drivers
Damyanti: "What led to strong gross margins?"
Answer: Efficiency gains (tight cost control) and favorable procedure mix during a lean quarter boosted margins despite seasonal weakness.

8. Operating expense outlook
Damyanti: "Is Q3 cost structure the new baseline?"
Answer: Cayman costs are largely baked in. India's Q4 operating costs will align with Q3 but scale with higher revenue. Incremental salary hikes may lift costs in Q1 FY26.

9. Spire Healthcare acquisition plans
Chat question: "Controlling stake in Spire Healthcare?"
Answer: Clarified no intent to acquire Spire, citing a Rule 2.8 disclosure under the UK Takeover Code restricting bids.

10. Bahamas investment rationale
Prithvi: "Why a 4% stake in Bahamas?"
Answer: Strategic entry into a high-potential Caribbean market, offering optionality for future expansion. Synergies in procurement/strategy and attractive valuation drove the decision.

11. Expansion strategy (brownfield vs. greenfield)
Prashant: "Brownfield bed additions vs. greenfield delays?"
Answer: Brownfield acquisitions are rare due to high prices. Focus is on greenfield projects (e.g., Bangalore HSR) with 3-year lead times. Existing hospitals prioritize yield over bed additions.

12. Aggressiveness of expansion
Yash: "Should lower cost of capital justify aggressive expansion?"
Answer: Capex aligns with customer proximity needs, not just rates. Growth targets integrated care (clinics, insurance) while maintaining debt discipline (15%+ IRR threshold).

13. Brownfield acquisition criteria
Deekshant: "Ideal brownfield opportunity?"
Answer: Core markets (Bangalore, Kolkata, Delhi, Raipur), compliant infrastructure, and viable returns (15%+ IRR). Price and location are critical.

14. Stem cell therapy in Cayman
Deekshant: "Stem cell focus in Cayman?"
Answer: Only FDA/CE-approved therapies (e.g., CAR-T with Immuneel) are pursued. Unproven applications (e.g., orthopedics) require rigorous clinical governance approval.

15. Clinic/insurance venture updates
Nitin: "Progress on clinics and insurance?"
Answer: Targeting 50 clinics/year in Bangalore/Kolkata, with INR 14.5cr quarterly burn. Launched "Arya" insurance (outpatient/inpatient coverage). Long-term vision ties clinics to insurance uptake.

16. Senior citizen insurance policies
Deekshant: "Senior citizen coverage?"
Answer: Current policies allow senior inclusion with risk-based premiums. A dedicated product (priced higher) is under development for 2025, emphasizing comprehensive coverage.

17. Funding Capex and Cayman staffing
Deven: "Capex funding and Cayman doctor attrition?"
Answer: 80% debt-funded (10"“20-year tenures), 20% internal accruals. Cayman attrition is low, but hiring is challenging due to relocation commitments.

18. Strategic importance of Cayman
Chat question: "Why Cayman?"
Answer: Validates NH's model in high-reimbursement markets, offers operational learnings, and serves as a Caribbean hub. Medical tourism from the US remains limited due to systemic barriers.