Max Healthcare to focus on acquisitions, brownfield development for growth: CMD
- Soi had earlier said that the company had planned ₹6,000 crore expenditure over the next three-and-a-half years to fund expansion through internal accruals. The company aims to increase its capacity to 9,000 beds, from about 5,000 beds currently. A little more than 4,000 beds are operational.
Max Healthcare is focused on inorganic expansion, including development of brownfield assets as well as acquisitions, to drive growth, its chairman and managing director Abhay Soi said on Thursday.
The Delhi-headquartered hospital chain’s board on Thursday approved an agreement to set up a 500-bed hospital in Thane, Maharashtra, under a built-to-suit model with VR Konkan Pvt Ltd. An addendum to a previously executed agreement for a built-to-suit hospital in Mohali was also approved by the board, increasing bed capacity from 250 to 400.
In a built-to-suit model, a property is custom-built, based on the specific requirements of the tenant or owner.
“The growth is going to come from inorganic [expansion],” Soi told Mint in an interview. “The opportunity is plenty, we’re already operating at high occupancy, as far as existing hospitals are concerned,” he added.
“As far as we are concerned, brownfields, greenfields, as well as acquisitions, all three are routes for inorganic growth,” Soi added.
Max has a significant brownfield ramp-up planned for the next six months, and has also completed several acquisitions in the last few quarters. Soi expects the capacity expansion to synergise in a year’s time. “Next year we’re going to be entering a glory period effectively,” he said.
Expansion planned
The company will see a large-scale brownfield ramp-up with 268 beds in Nanavati, Mumbai, 155 beds in Mohali, and 400 beds in Saket, Delhi, being added in the next six months. In the next 11-12 months, the company plans to add 500 beds to its Gurugram facility as well, Soi added.
In the quarter ended December, the company completed the acquisition of The marquee Jaypee Hospital, Noida, spread over 18 acres.
The company's Dwarka (Delhi) hospital achieved ebitda (earnings before interest, taxes, depreciation, and amortization) breakeven within a record six months of its launch in the June quarter. “In addition, at our recently-acquired hospitals in Lucknow and Nagpur, we have demonstrated a 67% and 118% YoY ebitda growth respectively within 9 months of acquisition,” Soi added.
The built-to-suit model, also executed by the company in its greenfield Dwarka hospital, is a lucrative model for them. “It makes a lot of sense for us because, typically our return on capital employed (ROCE) is northwards of 35%, whereas, 85% of the capital cost is incurred in terms of land building and finishing the building by the developers at about 8 to 9% yield. So we give them the yield and…our own returns increase significantly,” Soi said.
“Pretty much all our profits in the past so many years, we’ve reinvested [in inorganic growth],” Soi said.
He had earlier said that the company had planned ₹6,000 crore expenditure over the next three-and-a-half years to fund expansion through internal accruals. The company aims to increase its capacity to 9,000 beds, from about 5,000 beds currently. A little more than 4,000 beds are operational.
Double-digit revenue growth
Max on Thursday reported a 34% year-on-year jump in gross revenue to ₹2,381 crore in the quarter ended December, and a 32% rise in operating ebitda to ₹622 crore.
While its profit after tax (PAT) before exceptional items stood at ₹390 crore in Q3FY25, as opposed to ₹338 crore in the corresponding period last year, overall PAT declined 6.5% to ₹316 crore.
The company's profitability was hit by a one-time cost of ₹74 crore paid to the Yamuna Expressway Industrial Development Authority to secure permission for a change in Jaypee Healthcare Ltd's shareholding prior to acquisition, the company said.
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