Narayana Hrudayalaya Q3 Profit Surges 103%; Eyes India Expansion

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AuthorSimar Singh|Published at:
Narayana Hrudayalaya Q3 Profit Surges 103%; Eyes India Expansion
Overview

Narayana Hrudayalaya reported a stellar Q3 FY26 with consolidated profit after tax soaring 103% year-on-year to ₹372 crore on revenue growth of 16% to ₹1,218 crore. The company highlighted strong performance in its Indian operations, driven by specialized surgeries and margin improvements. Management reiterated a focus on maintaining leverage below 2.5x net debt to EBITDA and plans significant capex for domestic expansion, while navigating the integration of its UK acquisition.

Narayana Hrudayalaya Q3 FY26: India Business Soars, UK Integration Underway

Narayana Hrudayalaya's consolidated profit after tax surged 103% to ₹372 crore in Q3 FY26, with revenue growing 16% year-on-year to ₹1,218 crore.
Reader Takeaway: India profit soars on specialty care; UK integration and North India receivables are near-term watchpoints.

What just happened (today’s filing)

Narayana Hrudayalaya Limited (NHL) announced a robust Q3 FY26 performance, driven by significant profit growth in its India business. The company cited successful transformation programs and payor mix optimization as key drivers.

The Bangalore cluster demonstrated strong performance, attributed to growth in robotic cardiac surgery and high-end specialty services. NHL is strategically consolidating its presence in core Indian markets: Bangalore, Delhi, and Kolkata.

In a move to enhance efficiency, NHL has integrated its clinic program into the main entity to better manage synergies and costs. The company is aiming to maintain a net debt to EBITDA ratio below 2.5x on a consolidated basis.

Why this matters

The strong earnings underscore NHL's operational efficiency and success in its core Indian market, particularly in complex, high-margin procedures. This financial strength is vital as the company undertakes a major strategic expansion into the UK.

However, the integration of the UK acquisition (Practice Plus Group) is a significant undertaking. While management aims for EPS neutrality, it's currently dilutive to ROCE (Return on Capital Employed). Navigating this international venture while bolstering domestic growth requires a careful balancing act.

The backstory (grounded)

Narayana Hrudayalaya Limited operates a chain of multi-specialty hospitals in India, focusing on affordable, high-quality healthcare services, particularly in cardiac care. Founded by Dr. Devi Shetty, the company is known for its 'health city' model, integrating various healthcare services and aiming for cost efficiencies. It has a presence in India across multiple cities and has expanded internationally, notably with its UK operations.

The company completed a significant acquisition of a majority stake in the UK-based Practice Plus Group (PPG) in April 2023, funded by GBP 150 million in debt and GBP 45 million in equity. NHL plans substantial capital expenditure, estimated around INR 3,000 crore, primarily for expanding its flagship hospitals in India. Management is actively working on integrating its clinic program into the main hospital entity (NHL) to capture synergies and manage costs.

What changes now

  • Shareholders can expect continued focus on high-margin specialty services driving India's profit growth.
  • The substantial INR 3,000 crore capex plan signals a commitment to expanding NHL's domestic footprint and capabilities.
  • The UK expansion, while strategic, will likely continue to be a near-term focus for integration and cost management.
  • Optimization efforts, including clinic integration, aim to improve operational efficiencies and capture synergies.
  • The company's financial leverage is closely monitored, with a target to keep net debt to EBITDA below 2.5x.

Risks to watch


  • Receivables Risk: The company faces receivable challenges with certain scheme payors in North India, potentially affecting volume decisions and cash flow.

  • Competition: Increased competition in key markets like Bangalore and North India could lead to short-term cost pressures.

  • UK Volatility: Predicting insurance loss ratios for the UK entity can be challenging due to large claims and inherent market volatility.

  • ROCE Dilution: The leveraged buyout of the UK acquisition is initially dilutive to the company's ROCE.

Peer comparison

Narayana Hrudayalaya's peers, including Apollo Hospitals, Fortis Healthcare, and Max Healthcare, also reported strong Q3 FY26 results, indicating a healthy sector.

Apollo Hospitals Enterprise Ltd, India's largest hospital chain, reported a 38% YoY rise in consolidated profit to ₹239 crore on 14% revenue growth. Fortis Healthcare's consolidated PAT grew 24% YoY to ₹142 crore on a 13% revenue increase. Max Healthcare Institute Ltd posted consolidated PAT of ₹344 crore, up 15.5% YoY, with revenue up 13.6%. NHL's profit surge of 103% outpaced its key competitors in the quarter.

Context metrics (time-bound)

  • Consolidated Profit After Tax (PAT) stood at ₹372 crore for Q3 FY26.
  • Consolidated Revenue from Operations reached ₹1,218 crore in Q3 FY26.
  • Management guidance targets maintaining a Net Debt to EBITDA ratio below 2.5x on a consolidated basis.
  • The UK acquisition of Practice Plus Group was funded by GBP 150 million in debt and GBP 45 million in equity.
  • Practice Plus Group's margins are reported as 8.5-9% pre-IFRS and 12% post-IFRS.
  • The company plans approximately INR 3,000 crore in capital expenditure for its India operations.

What to track next


  • Progress on the integration and breakeven timeline for the UK's Practice Plus Group Birmingham unit.

  • Execution of the significant INR 3,000 crore capex plan for Indian flagship hospitals.

  • Resolution of receivable issues and competitive pressures in North India.

  • Sustainability of high profit growth and margin expansion achieved in the India business.

  • The company's leverage position and its adherence to the net debt to EBITDA target.

  • Any further updates on technology infusions and payor mix optimization strategies.

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