“We continue to be on an inorganic path; we see great opportunity in tier-2 and tier-3 cities,” said Abhay Soi, chairman and managing director of Max Healthcare, in an interview with ET.
“We have excess cash on our books, which means we are debt free, we continue to generate cash, with the latest two acquisitions even more (cash generation),” Soi added.
Soi said there 20-21 tier-2 and tier-3 cities across India, where he intends to go.
“We presently have a presence in Mohali (Chandigarh), Bathinda, Dehradun, and now we have added Lucknow and Nagpur. We continue to have a focus on tier-2 and tier-3 cities,” he said.
“There are lots on the table, we continue to look and evaluate. Even these two acquisitions (Lucknow and Nagpur) were in discussions for a long time, each one of these has its own timelines,” Soi said.If there are compelling acquisition opportunities, Max Healthcare is comfortable to raise debt funding of up to 2.5 times the earnings before interest, tax, depreciation, and amortisation (EBITDA), he said. The operating EBITDA for FY24 of Max Healthcare stood at Rs 1,907 crore.Soi said he doesn’t see any equity requirement, unless there is a large compelling acquisition opportunity.
“We have quite a bit of elbow room (for acquisitions).”
Max Healthcare generated free cash from operations of Rs 1,336 crore in FY24 of which Rs 441 crore has been deployed for ongoing capacity expansion projects, Rs 97 crore was paid to shareholders towards dividend. Further, Rs 1,509 crore was spent for recent acquisitions including purchase of land in Lucknow. Net cash at the end of FY24 stands at Rs 22 crore.
For FY24, the gross revenue stood at Rs 7,215 crore representing a 16% YoY growth.
Soi, who owns 23.7% of Max Healthcare, has transformed the company into an industry beating one in terms of EBITDA margins and return on capital employed (RoCE) with tight leash on cost control.
Max Healthcare has an operating EBITDA margin of 27.8% and ROCE of 35%.
Soi expects FY25 will be driven by a changing clinical mix that includes more complex procedures like transplants, robotic surgeries, cardiac procedures, neuro, and oncology surgeries, along with contributions from new hospitals in Nagpur and Lucknow, and an upcoming hospital in Dwarka, New Delhi.
“We have added 500 more beds through acquisitions of Nagpur and Lucknow, which are already profitable ones, but given the fact that they are operating at 60% occupancy, we believe there is opportunity for hockey stick growth over there. We will be having incremental growth, we are coming with 300 beds in Dwarka in early part of June, that pretty much gives us 800 beds for the whole year,” Soi.
“I am sort of focused on EBITDA per bed because we would do higher quality work of higher value, we would rather do Rs 10 lakh surgery with 20% margin than a two-lakh rupees surgery with 50% margin, our EBITDA per bed is increasing 14%-15%.”
Max has completed acquisitions of Alexis Hospital, Nagpur, for Rs 395 crore and Sahara Hospital, Lucknow, for Rs 993 crore. Both the hospitals were renamed Max Super Specialty Hospital Nagpur and Max Super Specialty Hospital Lucknow in the fourth quarter of FY24.
Max operates 19 hospitals with over 4000 beds with a significant presence in North India. The company is planning to double its capacity in the next 3-5 years through both brownfield and greenfield expansions.
