Metropolis Healthcare Ltd (METROPOLIS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Metropolis Healthcare Limited Q2 and H1 FY '27 earnings conference call hosted by BNP Paribas. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tauseef Shaikh. Thank you and over to you, Mr. Shaikh.
Tausif Shaikh (BNP Paribas): Good morning, everyone. I welcome you all for the Metropolis
Tausif Shaikh (BNP Paribas): Care's 2Q FY '27 and first half earnings concall. I, Tausif Shaikh, India analyst at BNP Paribas for pharma healthcare would like to thank the management for giving us the opportunity for hosting the call. From the Metropolis team, we have the senior management led by Ameera Shah, Chairperson, Whole-time Director; Surendran Chemmenkotil, Managing Director; Sameer Patel, Chief Financial Officer; and Mohan Menon, Chief Marketing Officer. Now, we'll hand the call to Ameera, ma'am, for her opening remarks. Over to you, ma'am.
Ameera Shah (Metropolis Healthcare Ltd): Hi. Good morning, everyone, and thank you for joining us today for the Q2 FY '27 earnings conference call of Metropolis Healthcare. I am joined by Surendran, Managing Director; Sameer Patel, CFO; Mohan Menon, CMO; and the rest of our leadership team, along with SGA, our investor relations partner. We've uploaded our investor presentation on the exchanges and the website, and I hope all of you have had a chance to go through it. Let me start with the headlines for the first half. For the past few years, our growth was around 12% to 13% organically per year. However, over the last four to six quarters, we've stepped that up to 15% to 16% with revenue growing at 16.2% for H1 FY '27, ahead of our stated guidance. Importantly, we have delivered this step-up in growth while expanding EBITDA margins by 190 basis points to 26.2% EBITDA margin for the first half, and this is without any price increase so far in the year. As we move forward, we are optimistic of continuing similar growth and margin trajectory for the rest of the year. What gives us more confidence is that this is not just a one-off. Over the last two years, we've been deliberately putting in place the foundation to sustain and accelerate this growth, while continuing to expand margins. A denser network of centers around our labs, a richer business mix led by Specialty and TruHealth, standardizing our laboratory platforms, significant technology upgrades across business, and a disciplined approach in our inorganic strategy. It's also worth noting that we delivered this growth in a quarter where the monsoon was one of the weakest in over two decades, with rainfall about 13% below normal and highly uneven across regions. The seasonal rise in acute and infectious diseases such as dengue, malaria, typhoid, and viral fevers was therefore sporadic and varied significantly across geographies. Despite this, we still grew around 16%, reinforces an important part of our business model, that our growth is not only dependent on seasonal spikes in demand. It's also driven by the underlying strength of our portfolio across chronic disease management, preventive care, and specialty testing alongside the continued expansion of our network. Let me now share perspective on the industry, the regulatory environment, and our strategic priorities. The broad picture of the industry remains consistent with what we had shared with you before. The market is stable and the structural shift from unorganized to organized segment continues, driven by a greater emphasis on quality and accuracy, rising demand for specialty testing, technology-led convenience, and the move to preventive healthcare, and wider access in tier 2 and tier 3 markets. Diagnostics is not merely a price-driven business, it is a fundamental business driven by science, accuracy, service, quality, and the trust of doctors and patients. Putting in a simple way, the market is moving towards quality and science, and that's exactly where Metropolis has been built to compete. What is new today and what I would like to spend time on is the increasingly constructive role of government towards healthcare. Over the past several months, we've seen the government move to raise the bar on the diagnostics industry on quality, transparency, and access, rather than controlling price. Together, these developments move the industry in a direction that clearly favors organized compliant players like Metropolis over unorganized, which do not necessarily focus on quality and self. Firstly, on price cap on pharma products for hospitals. There has been a lot of discussion around pricing control on drugs and consumables sold by hospitals. Let me be clear that this has no bearing on our business either financially or operationally. These measures are aimed at hospital pricing, they do not extend to diagnostics and there is no move towards price capping or price parity in our segment. Diagnostic pricing at organized chains is also transparent and in most cases, significantly lower than comparable tests in a hospital setting. Second, the display of rates at centers. The requirement to display rates at centers at the point of service is a welcome change and one we fully support. For us, it changes very little operationally. At Metropolis, the patient already knows the price upfront, we collect the payment, and then we deliver the service. In a hospital, it's usually the reverse, where the service is delivered first and the patient discovers the bill afterwards. Mandatory display of rates brings the rest of the industry closer to the way we already operate. It reduces the information gap that opaque, unorganized players have relied on, and allows patients to compare like-for-like on price and quality. When the comparison is transparent, we believe our accreditation, our test menu, and our service standards will speak for themselves. Third, the NMC advisory on digital authorization of reports. The National Medical Council Commission has recently clarified that
Ameera Shah (Metropolis Healthcare Ltd): certified medical practitioner can remotely review and authenticate lab and pathology reports using a recognized digital signature, subject to clear safeguards. This is a meaningful enabler for us in three ways. Number one, it improves quality. Every report is reviewed by a qualified pathologist exercising independent professional judgment. Our lab information systems already maintain complete audit trails, authentication logs, time stamps, and signing credentials on each report, thereby enabling us to target a wider network base for specialty testing while the talent pool resides at one location. We can now route a report to the right expert wherever they sit, rather than relying only on whoever is on site. A complex hematology or oncology case in a small town can be reviewed by a specialist in our reference laboratory with the same rigor as a case processed in Bombay. Second, it supports our rural and tier 3 expansion. One of the practical restraints in smaller towns has been the availability of qualified pathologists on site. Remote authorization allows us to set up mini labs in these markets faster with a central pool of pathologist supporting them while also improving turnaround times and enabling round-the-clock reporting. Taken together, we see the evolving regulatory landscape as a clear tailwind. History has shown that whenever formal regulation is introduced, business shifts more rapidly from unorganized to organized. We expect diagnostics to follow the same path, and we are well-positioned not just to adapt to these changes, but to benefit from them. Now, let's focus on our key strategic priorities for CORE. Science and technology remain at the forefront. Science has always been at the heart of Metropolis, and we continue to invest ahead of the curve. In genomics, we are extending our capabilities across oncology, reproductive health, and rare and inherited disorders. We see genomics a significant long-term growth opportunity and one where scientific depth, interpretation expertise, and clinician trust are decisive. We continue to invest in automation and AI across our labs and are deploying AI across the value chain, from sample logistics and lab operations to report validation, customer engagement, quality improvement, TAT, and productivity. Lastly, data protection and patient data is a responsibility we take very seriously. We are well advanced in aligning our systems and processes with the Digital Personal Data Protection Framework, which further strengthens the trust patients and doctors place in us. Let me now spend a moment on preventive healthcare, which we see also as one of the more exciting growth areas for our business. Over the past few years, preventive care has clearly moved into the mainstream. Consumers today are far more health conscious and proactively choosing regular checkups and early screenings rather than visiting a lab only when they fall ill. This trend is translating into strong performance for us, with our preventive health care revenues growing at about 20% per year. To build on this momentum, we have been adding allied services such as basic radiology, doctor consultations, and vital checks across our network in our own centers. This gives us a clear advantage in prescription completion because patients can now complete their entire set of recommended tests and consultations with us in one place under one trusted brand. Looking ahead, we will be piloting some new models in preventive health care in line with our strategy of building a strong ecosystem of allied services around our core diagnostics business. We look forward to updating you on our progress once the pilots are completed. Speaking of our recent acquisitions and inorganic pipelines, all the acquisitions we have done over the past year are performing well and integrating smoothly into the network. Deepti in Dehradun and Scientific in Agra are both growing in line with the company average while delivering margins higher than the com- overall company margins, which validates both our selection and our integration approach. Core Diagnostics is a strong example of how we create value through strategic acquisitions, driving both revenue growth and margin improvement. On the revenue front, the acquisition has strengthened our capabilities in high-end specialized testing in oncology, an area where only a handful of players in the country have the required expertise, while providing access to new clinician and patient segments. Importantly, cross-selling CORE's specialized testing portfolio across our wider Metropolis network, along with upselling high-end tests to our existing customer base, is driving strong transac- traction in the specialty segment, which continues to grow at about 20%. At the same time, leveraging oncology CORE's oncology and genomics portfolio across our network has accelerated the growth of our own genomics business. On margins, CORE was at breakeven when we acquired it a year and a half ago, and today it is delivering near double-digit margins. Taking into account the acceleration of our genomics business, we estimate that in the past year, our IRR on the CORE acquisition is at about 13%, and this will only accelerate in H2 as revenue growth increases and margins expand. We have also completed a planned restructuring of the CORE team, and with that now in place, our focus shifts to
Ameera Shah (Metropolis Healthcare Ltd): creating revenue for us. Together Core, Dopic and Scientific have increased our revenue contribution from North India to about 17% of our domestic revenue and we expect this share to rise as these businesses scale. Currently the north zone is the fastest organically growing region for us on the back of in house execution. Combined with our on ground presence and established brand equity, these acquisitions have allowed us to penetrate deeper into these markets. We see this as a stepping stone particularly for targeting micro markets where there is a persistent gap between demand and quality supply. Let me also share how we're thinking about the M&A market today because it shapes the deals we choose to do and the ones we choose not to do. Broadly, there are two kind of businesses in the market. Poor quality businesses that are up for sale and struggling to find buyers, and some good quality businesses which have been acquired at very high valuations. We have looked at these deals but passed on them as it's not possible to earn a decent IRR. The math here is important. When a diagnostics business is acquired at 18 to 20 multiple of EBITDA, the return depends heavily on margin expansion. But diagnostics is not like the pharma industry where the back-end can be easily integrated and synergies flow through quickly. In our experience, margins in an acquired diagnostics business first fall during integration as quality, systems, people and processes are brought up to standard. And then may recover, but almost never than the level higher than when they started. Therefore, at those entry multiples, the IRR on such deals works out to be less than 10%. In contrast, when we acquire businesses at reasonable valuations and then create the value ourselves over 3 years through our brand, test menu, specialty portfolio, logistics and procurement, the IRR generated can be closer to 20%. That is the approach we have followed with Dopic, Scientific and Core. Looking ahead, we will continue to actively evaluate M&A opportunities, especially in North India, across pathology and ancillary services, but we will prioritize deals that generate higher IRR rather than pay very high valuations just to buy revenue. Acquiring established local brands at the right price gives us a head start in each micro market from where we can expand into the surrounding peripheral markets by adding tests, building more organized logistics and sample movement and deepening our connect with doctors and patients through digital channels and tech platforms. I'm now going to ask Surendran to go through the operational and financial performance of Q2 and H1, but before that, just wanted to announce that the company has declared an interim dividend of ₹1 per share. Thanks Surendran, over to you.
Surendran Chemmenkotil (Metropolis Healthcare Ltd): Thank you Ameera and good morning everyone. Quarter 4 has been another strong quarter for us with revenue growth of about 16% ahead of our stated guidance. Importantly, we have seen healthy growth across both B2C and B2B channels, strengthened our presence in the TruHealth and specialty segments and delivered broad-based growth across all geographies spanning metropolitan markets to tier 3 and tier 4 towns. This demonstrated the strength of our diversified business model and our ability to drive growth across channels, segments and markets. Patient volumes grew by 10% and test volume around 11% with the balance coming from a richer test mix and better realization. Importantly, this growth has been delivered without any price increase. For the first half as a whole, revenue grew by 16.2%, a clear step up from 12% to 13% we have delivered in recent years. While margin expanded by 190 bps to 26.2%, reflecting the operating leverage in our business. Given the consistency of this performance and the momentum we are carrying into the second half, we expect this strength to continue through the rest of the year. I would also like to address a point widely discussed in the industry in the recent past. The price revision in CGHS rates has support supported growth for several players in the in the sector. Our revenue contribution from CGHS is minimal so our growth has been purely volume and mix based. Turning into channel performance and and the delivery of other segments, our B2C revenue grew by 17% in quarter 2 as well as in H1 of the year driven by sustained double-digit growth in patient and test volumes which increased by 13.5% and 11% respectively. Patient acquisition was supported by digital engagement, focused micro marketing campaigns and growing brand across geographies and segments. Growth was broad-based across both mature and newer centers with existing centers delivering same-store growth of 10% and improved retail productivity while newer centers continued to ramp up. During the quarter, we added 116 collection centers taking our net additions to 700 over the last 24 months. The labs established in FY25 and '26 are also gaining traction and we are further strengthening their reach through an expanding network of collection spokes to drive higher throughput. Our B2B
Surendran Chemmenkotil (Metropolis Healthcare Ltd): has grew 15 percentage reflecting our focused approach on of partnering with hospitals, clinicians, and quality-led institutions where our science expertise and specialty portfolio give us a clear edge. Within B2B, patient volume grew by 7 percentage and test volume grew by 11 percentage, which means partners are sending us more tests per patient, a clear sign of growing wallet share. We continue to add new lab and hospital partnership during the quarter, and B2B partner network has now crossed 9,000 partners. Our partner portal continue to make it simpler for partners to work with us, with better visibility, quicker turnaround, and seamless access to our full test menu. On TrueHealth and specialty, both our strategic growth engines continue to deliver strong performance. Specialty grew around 20 percentage, supported by wider adoption of advanced tests, deeper engagement with clinicians, and cross-selling of core oncology portfolio. We added 43 specialty and super specialty tests in the first half of the year, giving us further headroom for growth. Specialty also creates a halo effect to our routine business. A patient who comes to us for a specialty test naturally prefers to complete all their tests in one place. TrueHealth, our preventive healthcare franchise, also grew 20 percentage driven by integrated wellness offerings and focused digital acquisition. Packages that include radiology are gaining traction, supported by add-ons such as doctor consultations, vital checkups, and ECG. We are now adding this allied services not only in our own centers, but also across the mature franchisee network, which helps us improve prescription completion and of offer patients complete healthcare experience under one trusted brand. Speaking of our performance region-wise, our growth has been broad-based geographically, and not restricted to our core geographies. Our Tier 3 and rural centers led the way with around 20 percentage revenue growth, and together they account now for 26 percentage our domestic revenue, reflecting the success of our expansion beyond the metros. All the four geographical regions shown good growth again in this quarter, more particularly North. North India strengthened by acquisitions now contributes to around 17 percentage domestic revenue. Let me share our focused areas for the second half of the year. Accelerated center additions, both to cover the peripheral areas around our newer labs and to go deeper in existing markets. So faster B2B partner addition with sharper focus on specialty-led partnership. Mini hubs, to bring testing closer to the patient, add basic radiology and allied services, and improve turnaround times. Increasing retail and center productivity by getting more out of every existing center. And, of course, continued focus on Tier 2 and Tier 3 markets, where improving access to healthcare is creating a large and growing base of new patients. Now let me speak about the margin trajectory and in the improvements that we have done. EBITDA margins for the quarter two stood at 27.2 percentage, an expansion of 180 basis points year-on-year, well ahead of our guidance of 125 to 170 basis points. This improvement came from volume-led operating leverage, disciplined cost management, and steady progress on our productivity agenda. What gives us confidence is that now margin expansion is sustainable as clearly visible in our operating metrics. Productivity per employee has improved as our manpower base has fairly remained stable for the last many quarters, even as test volumes grew around 10 percentage to 11 percentage year-on-year. We are growing the business without growing the team in proportion, thereby increasing productivity and operating leverage. Sample process per lab have increased per day, so each lab is processing higher volumes on the same fixed cost base. Gross margin improvement has been our prime focus. Our laboratory platform transition, which I talked earlier, standardizes our network on a common test menu, equipment, reagents, and turnaround times while consolidating vendors, will be completed in quarter three, which will aid the growth gross margins. Also richer test mix will support uptick in gross margins. We are progressively replacing many manual processes with technology across operations, from sample logistics to reporting and back back back-office functions. Network density is increasing as we add centers around existing lab, taking our center-to-lab ratio from 24 to 1 towards 30 to 1, and then 35 to 1 over the next 2 years. Our business mix continues to premiumize as specialty genomics and TrueHealth continues contribute a growing share of revenue.
Surendran Chemmenkotil (Metropolis Healthcare Ltd): integration capabilities across our laboratories. Through HL, we are also working towards seamless integration of hospital portals with our systems, empowering our hospital partners with streamlined workflows, better connectivity and greater ease of doing business with Metropolis. We are also transforming our finance function, and have launched a comprehensive program to re-engineer our end-to-end finance processes across all work workstreams. Alongside these initiatives, we are scaling our AI applications, across customer engagement, laboratory operations and quality. Together, these technology investments will make us faster, more data driven and more productive, while strengthening the overall experience of our customers and partners. Lastly, on the pricing front, our last price increase was implemented in January 25, and we are currently evaluating the possibility of the next price revision, maybe early next year. This is being considered in light of the increase in our operating input cost, transportation and logistics cost, service cost, amongst many other expense, expenses. Given our strong volume trends and the structural shift towards trusted, organized players, we believe there is a room for a calibrated price increase, enabling us to pass on a portion of these cost increases without any meaningful impact on volumes. Our approach will be data driven with extent of the revision determined for each micromarket based on peer benchmarks and market share, competitive, intensity and brand equity. We estimate a rollout of this in quarter four for part of the business. With this, I hand over the call to Sameer, who will take us through the financial highlights, and thank you, and over to you, Sameer.
Sameer Patel (Metropolis Healthcare Ltd): Thank you, Surendran, and good morning, everyone. Let me briefly walk you through the key financial highlights for Q2 FY27. Q2 FY27 revenue stood at INR 497 crore with a growth of 16% year-on-year, supported by 10% growth in patient volumes and 11% growth in test volumes. B2C and B2B revenue for the quarter grew 17% and 15% respectively, on year-on-year basis. Our focus segment continued to perform well. TruHealth contributed 17% of revenue and grew 20% on year-on-year basis, while specialty contributed 40% of revenue and grew 20% on year-on-year basis. With respect to Q2 margin, EBITDA stood at INR 135 crore, growing 24% year-on-year. EBITDA margin expanded 180 basis points to 27.2%. PAT stood at INR 75 crore, growing at 43% year-on-year. PAT margin expanded 290 basis point to 15.2%. This PAT margin is highest post-COVID period. On the balance sheet front, our net working, our net working capital days stood at 13 days compared to 16 days in FY26. This is through efficiencies that we're building. Our cash and liquid investments stood at 348 crore as on 30th September 2026, compared to 203 crore as on 31st March 2026, building a strong cash position to fund further our organic and inorganic growth. With this, I open the floor for question and answer.
Moderator: Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Surya Narayan Patra with PhillipCapital India Private Limited. Please go ahead.
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