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How should we look at margin expansion from the 20.5%-21% reported this year? Should the step change in margins continue toward mid-20s where peers are? And where is Manesar in terms of ramp-up and when does it reach breakeven?

On margin expansion, we are sticking to our guidance earlier where we said we want to achieve a margin expansion nearer to the some of the best competitors. You can expect like 2% growth in the forthcoming years also, similar to what we have seen in the current financial year.

Regarding Manesar ramp-up and breakeven timeline.

We are currently operating at about 40% occupancy, but we have commissioned only 90 beds. Another 120 beds we will commission as the occupancy levels go up. We expect that on the entire bed capacity, which is 120 plus 90, we will have about 50% occupancy by the end of this year. The exit should be at least 50%-plus occupancy. The uptake of this hospital has been very good. Some of the programs, which we had anticipated that we will start a little later, we are preponing them and we are going to put up the oncology, radiation oncology suite, which was planned earlier for 2 years from now within this year.

Would it be fair to assume that at 50% occupancy, we achieve breakeven on Manesar?

I think so. Even before that, we should expect a breakeven.

On the diagnostics business, revenue momentum remains in low single digits but margins have moved up. Is there any provision write-back in the margin number? And how confident are we of growing high single digits in diagnostics given Agilus brand is nearly 2 years old?

In diagnostic business also, we have seen now the increase in the revenue as well as the margin. The brand change effect is now behind us, and we are seeing a double-digit type of growth number in the diagnostic business henceforth. Regarding one-offs, this year there is a one-off relating to the brand transition and some one-offs relating to legal fees and contingent consideration for past acquisition. This will discontinue from this year onwards, and FY '25-'26 there will be normal type of EBITDA margin we are expecting.

You believe based on Agilus momentum currently we are confident of double-digit revenue growth — is that correct?

Yes. This is what we are targeting.

And margins would be in the mid-20s as we scale up revenue?

It should be around 23% ultimately and then moving towards 25% in a couple of years' time.

How should we look at revenue guidance for fiscal '26? Can you break it down into volume and ARPOB?

Revenue-wise, we expect to grow around 14%-15%, similar number. This time last year we saw 9% type of ARPOB growth and balance growth is coming from the volume. I'm expecting it will be the reverse this time, around 5%, 6% in the ARPOB growth and the balance is from the volume side. Volume growth is mainly coming from some of the brownfield expansion which has been completed — mainly Noida and Faridabad — and also from the capacity ramp-up in the form of better occupancy than last year.

So volume growth goes to almost double at 10%? What are the occupancy assumptions? How should we model that?

We are aiming around 70%-71% occupancy level at the overall level because this brownfield expansion is on the existing facility and these hospitals anyway operating at 50% type of occupancy level. So I think we will not be facing any challenge in occupancy side. And plus the Manesar facility, as Dr. Raghuvanshi alluded, it is ramping quite well.

How many operating beds did we end fiscal '25 with and what is the expected addition this year?

We ended fiscal 25 with a bed capacity of around 4,024 because we have taken out certain beds also in the Richmond Road. And we will be adding around almost 1,000 beds in the current time. Noida — 150 beds. Faridabad, which has completed and will be operationalized in the first quarter. Manesar, we will be opening further beds, expecting around 200 beds. FMRI, we will be completing it — the benefit in the last quarter, the 220 beds capacity expansion. BG Road is another one. And also the Jalandhar facility, which will be in our fold maybe by this month end.

What's the margin profile of Jalandhar currently?

Their occupancy currently at about 60%, 62% and the margins are about 22-odd percent.

With a lot of bed additions — brownfield, greenfield, acquisition — are we confident of 150-200 bps margin expansion for the hospital business this year?

Yes, yes. So we are quite confident. And last year also, we have demonstrated 2% margin improvement and similar thing we are expecting this financial year. So we are quite confident on that.

What is the quantification of the write-offs and the changes mentioned? What are the one-offs in hospital revenues?

One-offs is basically there is some impairment charge we have to take, mainly coming because of this Ludhiana 2 facility where the performance level is not up to mark. Based on the future profitability and cash flow, we have to adjust the carrying value of the assets. Also, some write-off impairment for our investment in Sri Lanka assets where the stock price movement and currency movement affect the carrying value. There is also a positive write-back of impairment done earlier for our Faridabad unit because performance has improved tremendously. The total net impact is around INR 89 crores for this financial year. And for this quarter, it is INR 54 crores.

Last quarter you mentioned rebranding expenses would taper off by end of FY '25. Will there be any carryover? What is driving the Q-o-Q margin variance in diagnostics with flat revenue? And how many beds are expected from BG Road in FY '26?

Regarding the brand-related one-off expenses — those are done already. In this year, you will not find those as one-off items. The margin expansion despite flattish revenue is because we have built in a lot of efficiencies in the lab network, the CTPs versus the lab network we have rationalized. There are several other initiatives on the cost side. We have also upgraded our infrastructure on the diagnostics side. We have opened a new lab of genomics in Gurgaon and a new lab for transplant immunology in Bangalore. We believe that high-end test volume with a higher ARPOB will also drive growth in the coming year. Regarding the number of beds in BG Road is 140 beds.

Most competitors are targeting Tier 1/2 cities with large 400-500 bed facilities. Your recent acquisitions — Manesar, Jalandhar — seem more Tier 3/4 and smaller. Is that the way forward?

No. We have already stated our growth strategy is a cluster-based strategy. In Punjab we have approximately 800 beds spread over 4 facilities. Jalandhar is a strategic fit. Out of choice, we are not going into any new geographies, Tier 2 or Tier 3 kind of geographies. But Punjab as a state is important to us. Manesar is almost part of the growing Gurgaon — not really a Tier 2 or Tier 3 kind of situation. It is a very upcoming area within the Greater Gurgaon area. And Manesar also has additional FSI, which will take this hospital size to 450 beds. Within our clusters — Bengaluru, Kolkata, Punjab, Delhi NCR and Greater Mumbai — we will be seeking more opportunities and looking at hospitals in the range of about 350-bed-plus.

When you mentioned diagnostics margins getting to 23% and then 25%, is that basis gross revenues or net?

Net revenue only. Net revenue.

You have around 5 hospitals in the sub-10% margin bracket and a few in 10-15%. Are there more assets you would look to rationalize or are you done with that exercise?

We do have work to do in a couple of hospitals still in terms of improving, but we believe those are strategically important and exit is not an option. More or less, we are done as far as rationalization is concerned. On the performance side, 3 hospitals: Escorts Delhi, where we have been consistently achieving EBITDA of about 10%-14% and are going above 15%; Jaipur, which is recovering with healthy revenue trends after leadership and infrastructure changes; and Vashi, which has specific challenges being part of a government hospital with free patient obligations and some clinician attrition.

For Escorts Delhi — would 15%-plus be close to what the hospital has achieved in the past as part of Fortis? Or is the ceiling higher?

No, this is actually better than what it has ever achieved.

Is the Y-o-Y margin drag in Q4 largely due to Manesar performance, or are there other one-offs at the EBITDA line item?

The one-offs I referred to are exceptional gain and loss shown separately as per accounting standard below EBITDA. Regarding EBITDA margin side, there is no one-off one-off. But provision for doubtful debt has been slightly on the higher side compared to Q4 of last year. There was a positive write-back of provision in Q4 previous year due to very healthy collections, and this quarter it was not there. That has resulted in some impact on margins. Apart from that, there is nothing abnormal and unusual.

Can you quantify the provision write-back recovery from the past quarter not there this quarter, as well as the Manesar drag?

Manesar drag — we have budgeted the EBITDA loss of around INR 20 crores for the half year; it will be less, around INR 12 crores type of EBITDA loss which we have budgeted also, and it is there in the financial. In the next coming year, it should be some positive EBITDA number. Regarding the doubtful debt provision, for the quarter it is INR 22 crores as against a negative provision (i.e., income) of INR 7.5 crores in the corresponding quarter previous year.

For the 200 bps margin expansion guidance, how important are the sub-10% hospitals turnaround to achieve that?

For these hospitals to really come to the category of 20-plus is not something we have considered. We believe that the turnaround of these 3 hospitals is going to take 6 months or 1 year or maybe longer. So we have not considered that when we say that we are expecting about 2% of increase in our profitability profile. So these hospitals are important strategically for the long term. But in short term, whatever guidance has been given is not considering that these hospitals have come to a 20-plus category.

For the FY '26 bed addition, what should be the general breakeven timeline — 6 to 9 months or closer to 1 year? These are brownfield towers at existing sites.

Since these are brownfield, absorption is pretty fast. Location to location, it will differ. However, we expect that we will open beds as the occupancy levels go up. Currently, these hospitals are operating about 75% to 80% occupancy levels. So we expect that this should happen in 6 months' time.

For the 900-bed addition next year, should we factor it in as back-ended in the second half or will some beds get commissioned in the beginning of the year?

We can — we should assume 50-50 because, as I mentioned, FMRI bed expansion is happening at the last quarter. And similarly, the BG Road also will be in the second half, we are expecting. And rest of the beds will be commissioned in the first quarter itself.

You purchased the Fortis brand under auction. How much was the royalty you were paying earlier in absolute numbers and in percentage? And does the 150-200 bps margin expansion guidance include the savings from this royalty or is it over and above?

The royalty, as per the old agreement we are providing in the books till last year is 0.25% plus GST, which comes to around 0.3% impact on the EBITDA margin, positive impact on the EBITDA margin post acquisition of this brand. That will be the positive impact of the brand acquisition, 0.3% roughly on the net revenue of the hospital business. And that has been factored in while I guided the margin expansion of 2%.

Can you also give the same figures for the SRL brand that was converted into Agilus?

SRL also the same, 0.25% plus GST was the brand royalty applicable until we were using SRL brand. And now because we have moved to our own brand, Agilus brand, so there is no brand royalty right now.

What has been the growth rate across the industry for medical tourism and how has Fortis been working on it?

We have seen about 17% growth in Quarter 4 on year-on-year. However, in the current geopolitical situation, we expect that there may not be a similar growth this year. But overall, to our context, about 8% of our revenue comes from international patients. We expect that to remain stable. However, we are not seeing very huge growth in this.

With respect to brownfield acquisition, what impact will it have on debt levels? And do we expect margins to recover quickly compared to greenfield competitors?

There will not be any incremental debt for brownfield expansion. It will be funded through internal accruals. So there will be no incremental impact. This expansion is happening in units which are already operating at 75%-80% type of occupancy level. So we should not be facing much challenge in ramping up these beds and it should start contributing immediately.

Can we expect legal costs to fall down in coming quarters now that we have paid for the brand deal? What is your outlook on legal costs?

The legal and other legacy cost is taking away almost 1% of our EBITDA margin. That will continue till we're able to resolve these court cases because there is still 1 court case pending in Delhi High Court where regular hearing is happening. And plus, the entity structure also — Project Crystal — where we are trying to simplify the organizational structure. Although the Delhi NCLT has given the favorable order, we are also expecting order from the Chandigarh NCLT and then it will be simplified. This year at least it will continue. From next year onwards, we should see some reduction in this cost.

About Fortis winning auctions for all the Fortis trademarks — would that be any kind of value unlocking?

We are going to save some money which we were providing for the royalty for the brand because now we own the brand and that is a positive advantage for us.