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Q2 FY24 performance review – Hospitals and diagnostic centers

Growth outlook remains strong for hospitals and lab chains as positive cash flow is generated, which companies are persistently investing in expanding their network through M&A and organically.

Amid a strong post-Covid recovery, India’s hospital sector is witnessing a surge in capital expenditure (CapEx) as major entities expand capacities and diversify regionally. This sector has witnessed the highest CapEx in the past decade during FY23, and this trend is expected to continue through FY24.

The stability in operating profitability, rising surgical volumes, a diversified payer mix, and increasing occupancy levels are predicted to keep leverage at manageable levels over the next couple of years.

The private healthcare sector has also seen robust demand, thereby attracting investments. Private equity firms have shown interest in acquiring significant stakes in established hospital groups, and this trend is expected to continue.

India’s diagnostics market has grown significantly in the last two decades. Currently valued at ₹1.166 lakh crore and growing at a CAGR of 11.5 percent, the diagnostics industry in India has experienced significant transformations in recent years. The Covid-19 pandemic became a catalyst that forced many diagnostic centers to increase their capacities to produce more accurate results quicker than usual.

Poly Medicure Limited forges its new brand identity

Himanshu Baid
Managing Director,
Poly Medicure Limited (Polymed)

Since our establishment in 1997, Polymed has undergone a remarkable transformation, evolving from a niche manufacturer to a comprehensive solution provider in the field of medical devices. Over the past two decades, our journey has been characterized by continuous innovation, an unwavering commitment to quality, and an expansion of our offerings to meet the dynamic needs of healthcare professionals and institutions.

Adapting to the evolving healthcare landscape, we have navigated technological advancements and industry demands. Today, we proudly stand as a one-stop solution provider, offering a diverse portfolio of cutting-edge medical devices and integrated solutions to meet the ever-expanding requirements of modern healthcare ecosystems.

As we evolve and grow as a company, we believe that our visual identity should also evolve to better represent who we are and where we are headed. The new logo is a visual representation of our commitment to advancing healthcare through innovation, quality, and customer satisfaction.

Polymed has established a distinctive and remarkable position in the healthcare industry by prioritizing a patient-centered approach. With a substantial emphasis on R&D, we have been granted over 370+ patents across an extensive product portfolio, covering vascular access, renal care, transfusion, and diagnostics. Furthermore, Polymed is poised to enter the fields of critical care and cardiology.

Through unwavering commitment to innovation, Polymed has effectively addressed key therapeutic domains, including infusion therapy, dialysis, respiratory care, cardiology, oncology, urology, gastroenterology, critical care, blood collection and management, anesthesia, surgery, and wound drainage.

Today, the company stands as an exemplar in the medical devices industry, holding the distinction of being India’s largest exporter of consumable medical devices for an impressive 10 consecutive years. Our products reach over 125+ countries, solidifying our well-deserved reputation as a foremost player in the medical devices sector.

The company’s industry dominance is reinforced by an extensive manufacturing infrastructure, boasting 12 state-of-the-art facilities spread across the globe. These cutting-edge plants collectively produce over 1 billion medical devices annually, meticulously designed to meet the most stringent global standards of quality and safety.

That momentum gathered during the pandemic has been maintained following a rise in the prevalence of lifestyle, chronic, and communicable diseases, which often require diagnosis. There has also been a boost in corporate patronage, with more organizations collaborating with hospitals and diagnostic centers to have their employees undergo health screenings and checkups. On their part, many of the diagnostics players have invested in more advanced technologies. This has given the country leverage to stand among the comity of nations who thrive in the sector.

Diagnostics consist of pathology testing and imaging services, with pathology tests accounting for 60 percent of the market share. The radiology market is growing rapidly due to the surging demand for imaging services, while pathology testing is expanding as more people undergo preventive health checks. The market includes unorganized/local standalone labs, hospital-based labs, and corporate entities. The four largest entities are Dr Lal PathLabs, Metropolis Healthcare, SRL Diagnostics, and Thyrocare Technologies.

Companies are focusing on home visits to provide convenience for patients. They are digitizing the home visit segment through artificial intelligence (AI) and machine learning (ML) techniques. This has spurred the entry of startups specializing in home visit diagnostic services. Additionally, they are expanding their networks by targeting Tier-II and Tier-III cities.

IVD industry to undergo significant transformations

Thomas John
Managing Director,
Agappe Diagnostics Ltd

In 2024, the in vitro diagnostics (IVD) industry is set to undergo significant transformations, with key focus on technology and growth.

Molecular diagnostics, next-generation sequencing, 5-Part hematology and point-of-care testing (POCT) will remain at the forefront. Additionally, the immunology segment, particularly chemiluminescence immunoassay (CLIA), is likely to witness substantial growth, owing to its high sensitivity and specificity, making it ideal for diagnosing autoimmune diseases, infectious diseases, and allergies.

Personalized medicine is tailor made for an individual’s genetic makeup and medical history, and it will continue to be a driving force in the IVD industry. In 2024, there will likely be an even greater emphasis on developing diagnostic tests that enable more targeted and effective treatments with better accuracy.

Further, infectious disease testing is expected to remain a central focus in the IVD industry, with a particular emphasis on molecular diagnostics
for detecting infectious parameters.

POCT will continue to gain traction in 2024. These tests provide quick results at or near the patient, reducing the time to diagnosis and enabling timely interventions. The convenience and accessibility of POCT will further drive its adoption, especially in remote or resource-constrained areas.

The global IVD market will likely continue its steady growth trajectory in 2024. Factors, such as an aging population, increasing healthcare awareness, and the growing demand for early disease detection will contribute to this expansion.

The IVD industry will need to remain vigilant regarding regulatory changes. Evolving regulations, which may vary by region, will play a significant role in shaping market access and product development. Staying compliant with these changing requirements will be crucial for the industry players.

As discussed, the immunology segment, 5-part hematology business, molecular diagnostics (especially in the infectious disease segment), and POCT solutions are expected to be the key drivers of growth in the coming year as prevalence of key diseases like diabetes, cardiovascular, cancer, infectious, etc., continue to drive testing of routine as well as novel esoteric tests. Especially, the disease burden continues to be high among the developing and underdeveloped countries, which will drive the diagnostic tests in all areas of IVD.

Q2 FY24 PERFORMANCE REVIEW
LEADING HOSPITALS
Apollo Hospitals
Apollo Hospitals reported strong all-round Q2 FY24 performance.

Highlights during the quarter

  • Consolidated revenues grew by 14 percent year-on-year (YoY) to ₹4847 crore.
  • Healthcare services revenues grew 12 percent YoY, to ₹2547 crore.
  • Apollo HealthCo revenues grew 17 percent YoY to ₹1945 crore; GMV of Apollo 247 at ₹726 crore – 16 percent QoQ growth.
  • Apollo Diagnostics revenues crossed landmark of ₹120 crore in a quarter, growth of 19 percent YoY; well-poised at run rate of ₹500 crore annually.
  • Consolidated EBITDA before 24/7 operating cost and ESOP charge stood at ₹825 crore; 11 percent YoY growth.
  • Apollo HealthCo is on track for cash break-even in Q4 FY24.
  • Consolidated PAT for healthcare services at ₹314 crore, 11 percent YoY growth.
  • Consolidated PAT (including Apollo HealthCo and AHLL) at ₹233 crore, 14 percent YoY growth.

Apollo Hospitals recently celebrated its remarkable 40-year journey in delivering exceptional healthcare services to patients in India and around the globe. During the second quarter of FY24, Apollo Hospitals continued its mission of expanding its presence across India.Apollo Hospitals expanded its footprint in Eastern India by acquiring a partially built hospital in Kolkata, with a total capacity of 325 beds. This addition marks Apollo’s second hospital in Kolkata, complementing their flagship facility in the city. With this acquisition, Apollo now has five hospitals in Eastern India, solidifying its position as the leading healthcare provider in the region. The total bed count in the Eastern region is over 1800, with plans for an additional 700 beds over the next three years, bringing the total bed count in the region to 2500.

The company entered into binding agreement for a 250-bed new hospital asset in Pune, expandable to 425 beds. This marks Apollo’s entry into the city of Pune, one of the most promising and fastest-growing cities in India, with a significant demand supply gap of high-quality healthcare beds for the local population as well as for drain-in markets. With this expansion, Apollo will have over 1000 beds in Maharashtra, including Mumbai, Pune, and Nashik.

Aster DM Healthcare
Aster reported strong Q2 revenue and EBITDA performance.

Highlights – Q2 FY24

  • Q2 FY24 revenues up 18 percent YoY to ₹3317 crore;
  • Q2 FY24 EBITDA up 21 percent YoY to ₹393 crore.
  • Q2 FY24 India revenues up 23 percent YoY to ₹934 crore; EBITDA grew 19 percent to ₹157 crore.
  • Q2 FY24 GCC revenues up 16 percent to ₹2383 crore; EBITDA grew 23 percent YoY to ₹236 crore.
  • Operational revenue grew 18 percent YoY to ₹3317 crore versus ₹2816 crore in Q2 FY23.
  • EBITDA grew 21 percent YoY to ₹393 crore versus ₹324 crore in Q2 FY23.
  • Excluding new hospitals and non-recurring exceptional items, PAT grew 46 percent to ₹67 crore.

Key highlights – H1 FY24

  • Operational revenue grew 19 percent YoY to ₹6532 crore versus ₹5478 crore in H1 FY23.
  • EBITDA grew 28 percent YoY to ₹791 crore versus ₹620 crore in H1 FY23.
  • Excluding new hospitals and non-recurring exceptional items, PAT grew 77 percent YoY to ₹162 crore, compared to ₹91 crore in H1 FY23.

Update on Restructuring. The company has been periodically updating its stakeholders on the ongoing restructuring process of its GCC business to help unlock value for shareholders. Negotiations with the shortlisted majority bidder are at an advanced stage. The promoters intend to continue to participate in the GCC business and to hold a stake in the buyer entity along with the shortlisted bidder. Given the size and complexity of the proposed restructuring, the process has taken longer than expected, but the company is working to bring this to a conclusion soon. The transaction remains subject to finalization and execution of definitive documents and appropriate corporate approvals, including approval from the board and shareholders of the company. The group continues to believe strongly in the underlying premise of the transaction, which is that separating the two businesses will maximize value for shareholders.

Azad Moopen
Founder Chairman and Managing Director,
Aster DM Healthcare

In Q2 FY24, our consolidated revenue witnessed an impressive 18 percent YoY growth, reaching ₹3317 crore, attributed to the successful ramp-up of new hospitals initiated in the last two financial years. Our consolidated EBITDA showed resilient growth, reaching ₹393 crore, reflecting a 21 percent YoY increase. This growth was further amplified by various cost-saving initiatives, emphasizing our commitment to operational efficiency.

Both the businesses delivered a healthy growth in revenues and EBITDA. India revenues up 23 percent YoY to ₹934 crore and EBITDA grew 19 percent YoY to ₹157 crore during the quarter. GCC revenues were up 16 percent YoY to ₹2383 crore and EBITDA grew 23 percent YoY to ₹236 crore for the quarter.

We are delighted to announce the successful completion and operational launch of Aster Whitefield Hospital’s phase 2 expansion, increasing the total capacity to 347 by adding 286 beds. The inauguration of the hospital in its enhanced form marks a significant milestone, with Block D currently in expansion mode, aiming to achieve a 506-bedded hospital.

Regarding the restructuring process, negotiations with the shortlisted bidder are at an advanced stage. The company is working to bring this process to a conclusion soon. We continue to believe strongly in the underlying premise of the transaction, which is that separating the two businesses will maximize value for shareholders.

Fortis Healthcare Limited
Fortis Healthcare has been showing signs of promising growth. The company’s revenue growth has been accelerating, and it has been profitable over the last twelve months.

Fortis Healthcare Q2 FY24 hospital EBITDA was in line with the estimate, led by divestment of Arcot Road unit and seasonality. Though hospital margins improved to some extent in Q2, further margin improvement in hospital segment is expected aided by improving case and payer mix, cost rationalization initiatives, and divestment of non-profitable assets. Resolution of legal issues and further monetization of non-profitable assets would be a key additional trigger for re-rating.

Highlights for the quarter ended September 30, 2023

  • Q2 FY24 hospital business revenues grew 12 percent to ₹1452.6 crore versus ₹1297 crore in Q2 FY23. Hospital business revenues grew 7.3 percent versus the trailing quarter.
  •  Revenue growth was primarily driven by a healthy improvement in ARPOB, number of occupied beds, and an improved case mix.
  • Occupancy stood at 68.7 percent in Q2 FY24, marginally lower than 69.6 percent in Q2 FY23.
  • ARPOB grew 11.8 percent to ₹2.21 crore for Q2 FY24 from ₹1.97 crore in Q2 FY23.
  • Q2 FY24 diagnostics business gross revenues were at ₹360.3 crore versus ₹351.2 crore in Q2 FY23*.
  • Net debt to EBITDA was at 0.29 versus 0.44 (basis annualized EBITDA of Q2 FY24 and Q2 FY23, respectively). Net debt was at ₹393 crore as on September 30, 2023 versus ₹340 crore as on March 31, 2023.
Fortis Healthcare Limited
Period Q2 FY24 Q1 FY24 Q2 FY23 H1 FY24 H1 FY23
Occupancy 68.7% 63.7% 69.6% 66.1% 67.5%
ARPOB
(₹ crore)
2.21 2.19 1.97 2.19 1.96
ALOS (days) 4.20 4.19 4.39 4.20 4.31

Hospital business highlights
The revenue contribution from the company’s key medical specialties, viz., oncology, orthopedics, renal sciences, cardiac sciences, neurosciences, and gastroenterology to overall hospital revenues increased to 61.2 percent in Q2 FY24 from 60.5 percent in Q2 FY23.

  • These top six specialties grew 13.4 percent in Q2 FY24 as compared to the corresponding previous quarter.
  • Revenue from gastro sciences, oncology, and renal sciences grew by 23.7 percent, 22.3 percent, and 19.4 percent, respectively, versus the corresponding previous quarter.
  • Many of the company’s key facilities, i.e., Noida, Anandpur, and FEHI recorded healthy growth in revenues and witnessed margin expansion, both versus the corresponding and the trailing quarter.
  • International patient revenues stood at ₹126.7 crore, a growth of 15.6 percent over Q2 FY23 and 10.6 percent over Q1 FY24. International patient revenue contribution increased to 8.3 percent of hospital revenues versus 8.0 percent in Q2 FY23 and Q1 FY24.
  • Revenues from digital channels, viz., website, mobile application, and digital campaigns witnessed a growth of 27.6 percent in Q2 FY24, compared to Q2 FY23 and 22.4 percent growth compared to Q1 FY24. Digital revenues contributed 25.6 percent to the overall hospital business revenues in Q2 FY24 versus 22.5 percent in Q2 FY23.
  • During the quarter, the company on-boarded eminent clinicians in the medical specialties of oncology, renal sciences, neurology, cardiology, and general surgery.
  • The company further augmented its medical infrastructure by commissioning medical equipment, noticeably, LINAC, cathlabs, and ortho robots in some of its key facilities such as Noida, Anandpur, ShalimarBagh, and FMRI.

In September 2023, the company has filed the draft red herring prospectus (DRHP) for a proposed IPO of Agilus Diagnostics, its diagnostics business vertical.

Dr Ashutosh Raghuvanshi
MD and CEO,
Fortis Healthcare Limited

Our consolidated revenues in Q2 FY24 have grown 10.1 percent to ₹1770 crore with operating EBITDA margins at 18.6 percent. Our hospital business has seen a significant improvement versus the trailing quarter with margins expanding 320 bps and are also better than Q2 of the previous year. Operating margins in the hospital business were at 18.4 percent, better than 18.2 percent on a YoY basis. This is attributable in part to a stronger case mix and growth in medical tourism revenues. Our focus on improving our specialty mix has led to a 13.4-percent growth cumulatively in our top six specialties, with surgical contribution improving to 61.2 percent versus 60.5 percent in Q2 of the previous year. This is also reflected in the 11.8-percent growth witnessed in ARPOB, which stood at ₹2.21 crore. We have commissioned new medical equipment, such as LINAC and ortho robots at select facilities, such as Noida, Shalimar Bagh, and FMRI, and have further bolstered our clinical talent; onboarding clinicians in a number of specialties including amongst others oncology, neurology, and renal sciences. These, along with our brownfield bed expansion plans and a continuing focus on inorganic opportunities, are expected to drive further growth in the business.

Max Healthcare Institute
Max Healthcare Institute reported a 39.5-percent YoY fall in consolidated net profit for the September quarter (Q2 FY24) at ₹276.68 crore, down from ₹457.35 crore recorded for the same period last year. The fall has been attributed to the impact of a one-time reversal of deferred tax liability amounting to ₹244 crore. Max’s revenue from operations rose to ₹1363 crore, a 19-percent YoY increase.

  • QoQ PAT grew by 15.2 percent, while revenue grew by 6 percent.

However, the above figures do not include the revenues from three of its hospitals, Max Smart Super Specialty Hospital, Max Saket Super Specialty Hospital (East wing), and Max Balaji Hospital (Max Hospital, Patparganj) that are partner healthcare facilities and hence not part of the listed entity.

If the revenues from these partner facilities are added, which Max has also included in its investor presentation, then the net profit for the September quarter grew by 26 percent to ₹338 crore, while the revenue from operations rose to ₹1827 crore, a 17-percent YoY jump, thanks to a 13-percent jump in average revenue per occupied bed (ARPOB) during the quarter.

The ARPOB improved to ₹74,600 in Q2 FY24 versus ₹66,000 in Q2 FY23. Meanwhile, the bed occupancy also increased by 3 percent YoY to 77 percent in the September quarter. Another reason for the rise in revenue is the better specialty and patient mix. The oncology department, including chemotherapy and radiotherapy, increased its share in Max’s revenue to 25.3 percent from 22.7 percent in Q2 FY23.

International patient revenue also grew by 25 percent YoY, taking its share in revenue to 9 percent this quarter. Both in-patient occupancy and out-patient consultations grew in Q2.

Abhay Soi
Chairman and Managing Director (CMD),
Max Healthcare Institute Limited

The Q2 results were in line with the expectations and reflect the continuous focus on execution at the grass-root level. We are well poised to absorb the addition to network bed capacity in the coming years, while we evaluate mergers and acquisitions (M&A) targets for inorganic growth.

The hospital’s total expenses increased by 16 percent in comparison to the same period last fiscal, with the main drivers being growing employee benefit expenses and the purchase of drugs, consumables, and implants.

On further expansion, Max Dwarka has applied for an occupancy certificate and the company looks forward to operationalizing the hospital in Q4 FY24. We continue to see attractive opportunities for significant investments in the sector.

Narayana Hrudayalaya Limited
Narayana Hrudayalaya (NARH) reported healthy EBITDA at ₹0.31 crore (up 26 percent YoY), 11 percent beat to its estimate. Both India (₹1.9 billion, up 28 percent YoY) and Cayman (USD 14.6 million, up 20 percent YoY) reported healthy profitability. This growth momentum is expected to sustain. The company reiterated its aggressive CapEx plan mainly toward its core and high-performing regions, such as Bangalore, Kolkata, and Cayman, which enhances growth visibility. Despite CapEx intensity going up, RoE/RoCE is expected to remain healthy at ~25 percent. The FY24E and FY25E EBITDA stands increased by 7 percent and 4 percent respectively. Faster ramp up in new Cayman unit (operationalize from H1 FY25) will be a key.
Narayana Hrudayalaya Limited’s financial results for Q2 FY24 ended September 30, 2023.

Narayana Hrudayalaya Ltd
In ₹ crore Q2 FY24 Q2 FY23 YoY (%)
India revenue 1052.7 917.9 14.7
Cayman revenue* 260.7 231.4 12.7
Consol revenue 1305.2 1141.6 14.3
Consol EBITDA 326.5 274.9 18.8
EBITDA margin 25.0 24.1
PAT 226.7 168.9 34.3
PAT percent 17.4 14.8

*Cayman includes HCCI and EICL entities, numbers are converted from USD to ₹ at 82.44 for Q2 FY24, and 78.55 for Q2 FY23.

Dr Emmanuel Rupert
Managing Director and Group CEO,
Narayana Hrudayalaya Limited

The second quarter delivered strong performance after a steady first quarter of the fiscal year. We are pleased to report the highest-ever revenue on a quarterly basis, with profitability sustaining at high levels, driven by higher patient volumes across our units. HCCI continues to contribute significantly to the overall performance achieving the highest-ever revenue and profitability on a quarterly basis, also supported by the new radiation oncology block, which continues to see good traction. The new entity NHIC has delivered strong growth this quarter, led by significantly higher patient transactions and increased collections, remaining on track as per the plan.

We have changed our company logo to align with our vision to offer integrated healthcare services to the mass market at the highest quality and a new motto to take care of all our patients.

Medanta (Global Health Limited)
Global Health Limited is one of the largest private multi-specialty tertiary care providers operating in the North and East regions of India.

Pankaj Sahni
Group CEO and Director,
Medanta (Global Health Limited)

We are pleased to report that the company continues to deliver strong YoY and sequential growth across key performance indicators. The growth was seen at both matured and developing units, driven by higher patient volumes, underpinned by bed growth, doctor additions and technology advancement. During the quarter, we have received NABH accreditation for Patna hospital; this accreditation reflects our commitment to deliver highest quality healthcare in underserved markets. Our Noida hospital construction is on track and is expected to commence operations by FY25 end. As we move forward, we remain committed to execute our planned strategies while maintaining highest quality and ethics as demonstrated by our Medanta Model of Care.

Highlights for the quarter ended September 30, 2023

  • Total income of ₹8647 million; growth of 24.5 percent YoY.
  • EBITDA of ₹2336 million; growth of 35.7 percent YoY.
  • EBITDA margins improved from 24.8 percent in Q2 FY23 to 27 percent in Q2 FY24.
  • Profit after tax was at ₹1252 million; up by 46.1 percent YoY.
  • Average occupied bed days increased by 17.8 percent YoY, representing an occupancy of 64.9 percent in Q2 FY24.
  • ARPOB grew by 4.8 percent YoY to ₹61,003; in-patients count increased by 19.4 percent and out-patient count increased by 23.2 percent YoY.
  • Developing hospitals (Medanta Lucknow and Medanta Patna) revenue share increased from 27 percent in Q2 FY23 to 31 percent in Q2 FY24, amounting to ₹2643 million. Developing hospital EBITDA share increased from 33 percent in Q2 FY23 to 38 percent in Q2 FY24 amounting to ₹897 million
  • Matured hospitals registered strong growth of 19.5 percent YoY and EBITDA growth of 32.8 percent YoY amounting to ₹6064 million and ₹1545 million respectively.
  • Revenue from international patients increased by 20 percent YoY to ₹507 million, driven by increased volumes and realization.
  • OPD pharmacy business continues to register strong growth. Revenue increased by 39 percent YoY from ₹215 million in Q2 FY23 to ₹298 million in Q2 FY24

Shalby Limited
Shalby Limited reported robust growth in revenue and profitability in Q2 FY24.

Highlights for the quarter ended September 30, 2023

  • Consolidated revenues of ₹243.4 crore, growth of 17.5 percent YoY and 1.4 percent QoQ.
  • Consolidated EBITDA of ₹58.1 crore, growth of 37.1 percent YoY and 21.9 percent QoQ.
  • Consolidated EBITDA margin at 23.9 percent versus 20.5 percent in Q2 FY23 and 19.9 percent in Q1 FY24.
  • Consolidated PBT of ₹42.6 crore, growth of 48.6 percent YoY and 29.3 percent QoQ.
  • Consolidated basic EPS of ₹2.57 during the quarter, growth of 32 percent QoQ.

Hospital operational highlights

  • In-patient count (including day care) of 22.652, growth of 21.6 percent YoY.
  • Total surgery count of 7,771, growth of 14.2 percent YoY.
  • Occupancy rate at 54 percent in Q2 FY24 versus 49 percent in Q2 FY23.
  • ARPOB during the quarter was 36,136, growth of 8.1 percent YoY.

Shanay Shah
President,
Shalby Limited

It has been a strong quarterly performance in Q2 FY24, wherein our hospital business has delivered ever-highest operating margin at 26 percent on account of operating leverage, supported with increasing self-pay and insurance patients YoY and QoQ, which resulted into higher double-digit ROCE at 23 percent on an annualized basis.

Hospital business revenue and EBITDA grew by 22 percent and 31.6 percent YoY respectively in Q2 FY23. The number of occupied beds at 678 increased by 13.14 percent YoY in Q2 FY24 on account of increased volumes. The payer mix is better with the higher self-pay and insurance patients in the second quarter of FY24, as compared to the previous quarter. Our core specialties like arthroplasty, oncology, cardiac science, orthopedic, critical care and general medicine, and neurology contributed 83 percent to the revenues in Q2 FY24. Our homecare business continued to grow by 62 percent YoY in Q2 FY24.

Shalby has grown its international presence in other new geographies like UAE, Oman, Bangladesh, and Nepal through partnerships to conduct regular OPDs and healthcare camps in Q2 FY24, and has plans to conduct surgeries as well at these locations.

We have closed the quarter with a net cash balance of ₹705 million at the group level and are well positioned to fund our strategic growth plans.

KIMS Hospitals
Krishna Institute of Medical Sciences Ltd. (KIMS) reported a 4.5-percent YoY decrease in net profit at ₹101 crore for the July–September period.

The hospital operator’s revenue for the quarter came in at ₹655 crore, reflecting a 14.3-percent rise YoY from ₹573 crore in the year-ago period.

EBITDA (earnings before interest, taxes, depreciation, and amortization) was reported to be ₹177.2 crore in the quarter against ₹152 crore in the same period last year.

EBITDA margin for the July–September quarter was reported to be 27.2 percent as against 27 percent for the same period a year ago.

Bed occupancy in Q2 FY24 at 76.4 percent, up by 3.8 percent on YOY basis.

ARPOB at ₹31,140 in Q2 FY24, 6.5 percent growth YOY basis.

KIMS
In ₹ crore Q2 FY24 Q2 FY23 Q1 FY24
Total income 655.36 573.28 609.14
Net profit 101.29 106.07 86.67
EPS 11.50 12.14 10.10
EBITDA 180.15 489.64 160.18

LEADING DIAGNOSTIC CENTRES
Dr Lal PathLabs Limited
Dr Lal PathLabs has been meeting diagnostic requirements of the nation for several decades. And next year shall be celebrating 75 years of its existence.

The company reported robust performance this quarter.

Key financial highlights for the quarter
Revenue for Q2 FY24 came in at ₹601 crore against ₹534 crore last year same quarter, a growth of 12.6 percent. In the first half FY24, total revenue is ₹1142 crore versus ₹1037 crore last year, a growth of 10.2 percent. Revenue realization per patient for Q2 FY24 is ₹798 as against ₹746 last year in the same quarter, an increase of 7 percent led by price increase, test mix, and higher contribution of SwasthFit.

EBITDA for Q2 FY24 came in at ₹178 crore as compared to ₹144 crore in Q2 FY23. EBITDA margin for Q2 FY24 is 29.6 percent versus 26.9 percent in Q2 last year. In first-half FY24, EBITDA is ₹324 crore versus ₹261 crore same period last year with a margin of 28.4 percent versus 25.2 percent last year same period.

PAT for Q2 FY24 came in at ₹111 crore versus ₹72 crore in Q2 FY23. PAT margin is at 18.4 percent for Q2 FY 24 against 13.6 percent for Q2 FY23. In first-half FY 24, PAT is ₹194 crore versus ₹131 crore last year with a margin of 17 percent against 12.6 percent.

EPS in Q2 FY24 is ₹13.2 versus ₹8.6 in Q2 FY23. With this, EPS for first-half FY24 is ₹23.1 against ₹15.6, last year.

Total CapEx for first half is ₹27 crore, primarily on account of new infra and investment in technology.

The strong performance in Q2 FY24 may be attributed to market activation and execution across all geographies, including that of suburban. Investments in 35 hub labs across the country are bearing results now, and expansion program in Tier-III-plus towns continues to show encouraging results.

Overall, the company is moving the right levers to optimally set a growth trajectory that will give sustainable growth.

Metropolis Healthcare Ltd.
Metropolis Healthcare Ltd. reported another quarter of moderate volume growth of ~10 percent in core business (ex-Covid, public private partnership contract) on back of +9 percent volume in Q1.

Margin was impacted by one-time receivables write-off (~1 percent) and the more recurring investment in lab network (added seven labs in Q2). The company reiterated its lab and service center expansion plans – additional 90 labs (to 270) and 1800 service centers (to 5500) by 2025.

A change in the management shift on revenue generation from B2C versus earlier focus on B2B was seen; reckon being in new places, where Metropolis brand may not have any recall, plus the focus on B2C may lead to a tough task of scaling up expanded lab infra.

Overall, volumes have not matched the pre-Covid run rate despite the larger sourcing infra built up, particularly by franchises.

Result highlights
Core business (ex-Covid, PPP contract) revenue growth of 13 percent driven by 10 percent patient volume and 3 percent rise in patient realization.

Wellness grew by 27 percent backed by 21 percent volume growth; contribution at 14 percent of sales.

B2C (52 percent of sales) up 16 percent YoY with volume growth of 14 percent; B2B clocks 8 percent volume and 12 percent revenue growth.

HiTech revenues up 17 percent YoY supported by 14 percent volume growth.

Margin at 24 percent impacted by doubtful debt provision (1 percent) and investment in lab expansion (1.2 percent).

Agilus Diagnostics Limited
Agilus Diagnostics, a subsidiary of Fortis Healthcare, is looking to raise around USD 200 million. It has filed its draft red herring prospectus (DRHP) with market regulator Securities and Exchange Board of India (SEBI) for an Initial Public Offering (IPO). The IPO involves an offer-for-sale of 1.42 crore shares by entities like International Finance Corp and NYLIM Jacob Balls India Fund III LLC. The deal will be run by Citi, Axis Capital, and ICICI Securities. With the industry median for P/E at 54.4 (top 4 players), given the lowest margin profile of the business, the valuation of Agilus will be in the range of USD 600 million to USD 900 million.

Diagnostic business saw a net revenue growth of 2 percent YoY (5 percent QoQ) to ₹317.4 crore, contributing 17.9 percent to total revenues, as compared to ₹310.1 crore in Q2 FY23, with a 19.3-percent contribution to total revenues, and ₹303.3 crore in Q1 FY24, with 18.3 percent contribution.

Diagnostic business EBITDA came in at ₹62.5 crore in Q2 FY24, as compared to ₹66.2 crore in Q2 FY23, and ₹66.2 crore in Q1 FY24.

In H1 FY24, Agilus Diagnostics business gross revenues were at ₹702.9 crore versus ₹683.8 crore in H1 FY23. There is a clear need for Agilus to focus on the operational performance of the business. The PAT margin for Agilus is approximately 400 basis points lower than the average PAT of the peers and 600 basis points lower than the EBITDA margin. While the focus needs to be on growth, only growth can deliver margins and thus benchmark return on investment.

Thyrocare Technologies Limited
Thyrocare Technologies has posted net profit of ₹20.34 crore for the period ended September 30, 2023 as against net profit of ₹17.30 crore for the period ended June 30, 2023. The company posted net profit of ₹15.43 crore for the period ended September 30, 2022.

Thyrocare Technologies has reported total income of ₹150.17 crore during the period ended September 30, 2023 as compared to ₹135.87 crore during the period ended June 30, 2023. The company reported total income of ₹136.59 crore during the period ended September 30, 2022.

Its overall revenue saw a growth of 10 percent YoY, driven by 20 percent growth of franchise business and around 22 percent growth in partnership business, excluding API and B2G. As far as the EBITDA margin is concerned, standalone normalized EBITDA margin remains flat at 30 percent, compared to the same quarter last year. EBITDA margin in NHL stood at 6 percent versus 17 percent YoY, mainly due to the age machines coming out of the CMC period and increased transportation cost due to the increased volume of FDG and plasma sales. Consolidated normal EBITDA margin remained stable at 29 percent same quarter last year.

Krsnaa Diagnostics Ltd.
Krsnaa Diagnostics Ltd., a frontrunner in the field of PPP diagnostics is expanding its presence across India, ensuring advanced diagnostic services that are not only accessible but also economically viable even in the remotest areas.

In the second quarter of FY24, total revenue from operations experienced a notable upsurge reaching ₹155 crore making a 27-percent YoY growth. Its Q2 FY24 regular EBITDA reached ₹32 crore, a 4-percent YoY growth and maintaining a healthy margin of 21 percent, with net profit amounting to ₹10.5 crore with a margin of 7 percent.

The H1 FY24 total revenue stands at ₹295 crore, demonstrating a 25-percent YoY growth. In terms of Q2 FY2023, top-line grew by 27 percent YoY and 11 percent quarter-on-quarter. Normalized EBITDA exhibited an increase reaching ₹74 crore, demonstrating 25 percent YoY growth, along with a substantial margin of 25 percent. Normalized net profit stood at ₹35 crore, reflecting 18 percent YoY growth, a margin of 12 percent.

Regular EBITDA has reached ₹64 crore showing an 8-percent YoY growth with a margin of 22 percent. Regular net profit has also displayed a growth reaching ₹25 crore with a margin of 9 percent. Taking a closer look at the balance sheet, the company currently holds a gross debt of ₹109 crore while maintaining a cash and cash equivalent worth ₹236 crore as of September 30, 2023. It continues to uphold a net debt-free status. Receivables as on Q2 FY24 is 97 days.

Krsnaa Diagnostics Limited
In ₹ crore Q2 FY24 Q2 FY23 Q1 FY24
Total income 159.61 127.21 143.80
Net profit 10.50 15.34 14.64
EPS 3.35 5.73 4.66
EBITDA 35.95 34.89 35.59

Vijaya Diagnostics Centre Limited
Vijaya Diagnostics Centre Limited maintained a healthy business performance in Q2 FY24, along with a steady 18-percent YoY non-Covid revenue growth, it also recorded a 15-percent QoQ growth, demonstrating the strengthening of its core business. The consolidated revenue for the current quarter stood at ₹139 crore as against ₹121 crore in the corresponding quarter of the last year, registering an overall YoY growth rate of 15 percent. EBITDA for the current quarter stood at ₹57 crore as compared to ₹49 crore in the corresponding previous quarter, registering a YoY growth rate of 18 percent. The EBITDA margin was healthy at 41.3 percent in the current quarter, marking a YoY increase of 90 basis points. The profit after tax for the current quarter stood at ₹33 crore and the PAT margin was also healthy at 24 percent.

Suprita Reddy
Managing Director and CEO,
Vijaya Diagnostic Centre Limited

Making progress in line with our plan for strategic expansion, we consistently strive to strengthen our expansion efforts with thorough market study and research, and to extend all under one-roof comprehensive model of business even to Tier-II cities and new geographies. Our objective is to address the customers’ need, position ourselves as the customers’ brand, and stand out in the diagnostic space as one of a kind in every region, geography. This approach has always resulted in a generous acceptance of our brands and consistent progress in our business performance wherever we expanded, and we believe that it will continue to be so in the days to come.

Highlights – Q2 FY24

  • Revenue up 15 percent at ₹138.9 crore versus ₹120.8 crore.
  • EBITDA up 17.7 percent at ₹57.4 crore versus ₹48.7 crore.
  • Margin at 41.3 percent versus 40.36 percent.
  • Net profit up 43.1 percent at ₹33.6 crore versus ₹23.5 crore
  • Revenue from operations increased by 15 percent YoY to ₹1388.6 million. Non-Covid revenue witnessed an 18.3 percent YoY growth.
  • Non-Covid revenue growth was essentially volume driven.
  • The up-trend both in radiology and pathology segments reinforces the effectiveness of integrated business mode.
  • Wellness share in Q2 FY24 was up at 13 percent as against 12 percent in Q2 FY23, leading to QoQ growth of 19 percent.
  • Revenue contribution from B2C segment stood at 95 percent.
Vijaya Diagnostic Centre Ltd
In ₹ crore Q2 FY24 Q2 FY23 Q1 FY24
Total income 145.61 124.05 126.76
Net profit 33.57 23.47 26.38
EPS 3.26 2.29 2.57
EBITDA 64.12 52.05 53.83

Outlook
There are multiple opportunities for private companies in the healthcare space in India. Value creation can be done by creating platforms via acquisitions and integration to create scale in a highly fragmented industry. The industry in India will see significant demand for platforms that can acquire and effectively integrate smaller businesses.

Growth outlook remains strong for hospitals and lab chains as positive cash flow is generated, which companies are persistently investing in expanding their network through M&A and organically.

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