Conference Call with Narayana Health (Narayana Hrudayalaya) Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen to the full earnings transcript. 

Call Participants: Dr. Emmanuel Rupert – CEO, Mr. Viren Shetty – COO, Mr. Kesavan Venugopalan – CFO, Ashish Sukhija - From the team, Mr. Debangshu Sarkar - Head Of Mergers & Acquisitions & Investor Relations

Introductory remarks from Dr. Emmanuel Rupert

Good afternoon to all! We are pleased to close FY20 on a strong note with significant objectives achieved in our operational profit as recorded by the consolidated EBITDA growing by 33% YoY.

This is as per the new accounting treatment for leases per IND AS 116 effective 1st April which resulted in Rs 183 million increase in EBITDA and decrease of Rs 75 million in PAT for Q4FY20 and Rs 408 million increase in EBITDA and decrease of Rs 209 million in PAT for 12M FY20 on a like-to-like basis (pre-IND AS 116). It is important to note that we have been able to achieve this despite the material impact of Covid-19 pandemic on our operations in March which traditionally is the strongest month of the year. 

As against 11.9% YoY growth for the period of 11 months ended February 2020, our consolidated revenue for the month of March 2020 registered a degrowth of INR 0.45 billion as compared to March 2019. Notwithstanding the same, the momentum generated in the last few quarters ensured a healthy 10.3% YoY growth in our consolidated revenue for FY20, adjusted for Whitefield facility for like-to-like comparison. Our emphasis on consolidation of operations with portfolio rationalization through exits of operations through Whitefield and Durgapur units during the year has ensured all round growth across the network. This has resulted in revenue of our Indian operations growing at 9.7% YoY in FY20 with over 30% growth in EBITDA on a like-to-like Pre-IND AS 116 basis, adjusted for the Whitefield unit. 

Continuing its impressive performance trajectory, our international operations at Cayman Islands registered over 45% YoY growth in its FY20 EBITDA on like-to-like pre-IND AS 116 basis with over 12% YoY revenue growth for the same period. This comprehensive performance resulted in robust cash approval from operations via INR 2.1 billion for the year, post servicing of the capital expenditure and financial expenses.

This helped us to deliver healthy return ratios for FY20 at 23% ROC excluding the fact of the three near units and 14.4% at consolidated level on a cash deployed basis, that is adjusted for accounting treatment of IND AS 116 before government grants. 

Our all round consensus is that we maintained a very strong balance sheet with healthy capital gearing and liquidity profile. Adjusted for cash and bank balance of INR 1.1 billion and further INR 0.7 billion of liquid current investment as on March 31, 2020. Our consolidated net debt is INR 5.3 billion with FY20 consolidated EBITDA of INR 4.1 billion on pre pre-IND AS 116 basis, translating into a net debt by EBITDA of 1.3x on a trailing 12 months basis. We believe this thus provides us a lot of competitive advantages especially in this testing time. Amongst the new units, in line with our expectation, our operations at Dharamshila Narayana Super Speciality Hospital at Delhi which has broken even as EBITDA level in Q3FY20 has now broken even at EBITDA level Q4FY20. 

Continuing a strong growth momentum for the fiscal year FY20, the category of our hospitals, non-clerkship, free new hospitals delivered an impressive 58.9% EBITDA growth on like-to-like pre-IND AS 116 basis, resulting in a healthy EBITDA margin of 14.7% when adjusted for the Whitefield unit.

Our hospitals at Ahmedabad, Jamshedpur and Guwahati which had collectively broken even at EBITDA level in FY19 continued its upswing in FY20 while registering an EBITDA margin of 9% with all the three hospitals being green on standalone basis. To further strengthen this category, we have planned investments across civil as well as medical infrastructure across centers. We are in the process of adding capacity select units while briefing up the service lines with the radiation oncology program already launched in the Bangalore unit during the last fiscal. 

We have plans to kickstart in-patient procedures from March which subsequently got affected by the Covid-19 pandemic induced lockdown. We remain confident that this centre being a strategic fit for NH, shall act as an extension of the recent cluster leveraging upon the operational synergies emerging out of the region. Our focus on performing IND quarterly procedures like bone marrow transplant, heart and liver transplant along with changing specialty mixing and increasing international patients. With this continued focus on cutting the advanced clinical program, some of the key achievements in the last quarter are Narayana Super Specialty Hospital, Gurugram successfully operating a rare case of adenoid cystic carcinoma of trachea. It is very rare with incidence of 1-2 per million of population.

Narayana Institute of Cardiac Sciences, Bengaluru successfully performed a heart transplant on a 4-year-old patient, the youngest patient in the state to have undergone a heart transplant. Narayana Superspeciality Hospital, Howrah successfully treated a rare case of a baby suffering from ALCAPA. Narayana Superspeciality Hospital, Gurugram successfully performed endovascular procedure of dural fistula embolization patient diagnosed with complex torcular dural fistula with severe intracranial venous hypertension. Recognizing the power of digitization over the last couple of years, we have embarked upon a host of initiatives focussing upon driving patient’s safety, efficiency, data security amongst other things.