Nephrocare Health Services Ltd (NEPHROPLUS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (IIFL Capital): Ladies and gentlemen, good day, and welcome to Nephrocare Health Services Q2 FY '27 Earnings Conference Call hosted by IIFL Capital. 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. Naman Bagrecha from IIFL Capital. Thank you, and over to you, Mr. Bagrecha.
Naman Bagrecha (IIFL Capital): Thank you. Good morning, everyone. On behalf of IIFL Capital Services Limited, I welcome you all to Quarter 2 and H1 FY '27 Earnings Conference Call of Nephrocare Health Services Limited. We are pleased to have with us management team represented by Mr. Vikram Vuppala, Chairman and Managing Director; Mr. Kamal Shah, Co-Founder; Mr. Rohit Singh, Group CEO; and Mr. Prashant Goyenka, Group CFO
Naman Bagrecha (IIFL Capital): Healthcare Services Limited. We will have opening remarks from the management, followed by a Q&A session. Thank you, and over to you, Vikram.
Vikram Vuppala (Nephrocare Health Services Ltd): Thank you. Thanks, and good morning, everyone. Thank you for joining our Q2 FY '27 earnings call. With me are Kamal Shah, co-founder; Rohit Singh, our group CEO; and Prashant Goenka, our group CFO. I'm happy to note that we continue to grow healthily, as reflected in our H1 FY '27 numbers. Dialysis business is all about scaling up volume. As volume increases, the overheads get amortized over a larger base of revenue and margins continue to improve over a period of time. Few strategic initiatives to strengthen the platform need upfront investments which give results after a few quarters. Also, as we enter new markets, there will always be initial couple of years of suboptimal margins in those new geographies. But with time, our India platform model kicks in and starts making that country platform more and more efficient. Hence, you may see a bit of volatility in the short-term margins, but we're quite clear that we'll be focusing on revenue growth, and the leverage will kick in over a period of time. I am excited that we finally opened NephroPlus network in Kazakhstan last quarter. As we mentioned earlier, there are three growth levers for NephroPlus. The first is existing clinics and existing geographies, second is new clinics in existing geographies. Third lever, which is a big lever, is opening new geographies. Now, opening new geography is a key pillar for growth, and as we said, this will happen every 12 to 18 months. Since we have already been present in Uzbekistan over the last four-plus years, Kazakhstan is a natural geographical extension, and the market dynamics here are similar to Philippines, private clinics empaneled with government reimbursement program. The two clinics we acquired in Kazakhstan are a good starting point for us to better understand the local market nuances before we start scaling this network in Kazakhstan. We're also happy to state that we have technically qualified in the Saudi Arabia's Ministry of Health tender, which we have spoken about earlier. We are one of the 12 providers and the only one from Asia who qualified to bid for four regions of this tender. All the large global dialysis networks and all the major Saudi hospital groups are qualified, and hence this will be a very competitive process. While we're doing everything we can to improve the chances of winning this tender, of winning a region, by no means we can assure you that we will be one of the winners in this process. As we plan to enter more international markets, we recently launched a new initiative called NIDA, NephroPlus International Dialysis Academy. Still very early days, but the intent is to train a lot of nurses from Philippines and India who already provide the nurses for the global dialysis market, and help plug the supply shortage of nurses in many of the new international markets like Saudi Arabia and many other markets that we may foray in the future. Also, there is a lot of attention these days on capping of margins on pharmaceutical products sold in healthcare facilities in India. We just want to let you know that pharmacy products account for less than 1% of our overall revenue, and we do not make much margins on that small base. Hence, we do not expect to see any major impact even if these guidelines make their way from cancer care products to dialysis related products. Overall, we continue to be bullish on our growth prospects in India as well as other markets we operate in. With that, I hand over to Rohit.
Rohit Singh (Nephrocare Health Services Ltd): Thank you, Vikram. Good morning, everyone. I will cover the quarter, then each of our markets, and conclude with our clinical and platform initiatives. The quarter, Q2 revenue grew 23.5% year-on-year to 303 crores, taking H1 revenue to 585 crores, up 24%. Adjusted EBITDA for H1 was 135 crores at a margin of 23%. We ended September with 38,814 guests, up 10% year-on-year. Treatments grew faster, up 12% in the quarter, while revenue per treatment improved by 10% to 2,785. Our network now stands at 570 clinics across six countries, with 500 in India, 70 international. We added clinics in India and the Philippines during the half, and entered Kazakhstan, and started our clinic in Saudi Arabia. Let me take each market in turn now. India, we run 500 clinics across 314 cities, serving more than 33,000 guests, with around
Rohit Singh (Nephrocare Health Services Ltd): in tier two and tier three towns. Captive partnerships in private hospitals remain our core model and primary engine of growth. In public private partnership, Bihar continues to scale, and we are rolling out our Tamil Nadu contract as well. We also secured a contract for six clinics in Haryana. India is more than our largest market, it is the platform itself. 16 years of standardized protocols, processes, and governance that we now replicate abroad. NephroPlus is a dialysis platform built in India for the world. Philippines, we crossed 55 clinics, adding 11 this year, including 10 acquisitions in the first half. The market has around 900 clinics, with the long tail of 500-plus clinics owned by individuals running one or two clinics. That fragmentation gives us multi-year visibility for roll-ups, complemented by a greenfield strategy. Uzbekistan, we serve more than 1,450 guests across six clinics in three provinces. Our Tashkent clinic is a 165-bedded, remains the largest clinic in the world, and business is stable there. Kazakhstan is our new newest market, entered this quarter through the acquisition of two clinics in Almaty. The country has around 12,000 dialysis patients across 150 clinics, with universal coverage and prices of roughly $75 to $80 per treatment. Our focus is now to integrate the Almaty clinics and grow from there, including through acquisitions that meet our thresholds. We expect about a year to reach a steady-state margins. Saudi Arabia, our first clinic in Riyadh is now operational and home dialysis has started in both Riyadh and Jeddah. The Ministry of Health tender has been issued, covering about 11,720 patients across four clusters. We are one of the 12 providers who have technically qualified and are eligible to bid. So, we expect this to be competitive. Bids are due in Feb February 2027. Until the awards are known, Saudi remains an investment phase for us. Clinical quality and people, NephroPlus Dialysis Index, our composite clinical score is now being rolled up from guest-level to clinic and cluster-level, giving us a single lens on clinical perform performance across the network. NIDA, our Nurse Academy launched this year, is building a pipeline of renal nurses for our international clinics. Access to trained renal nurse is a real constraint on international expansion and we intend to solve it structurally rather than market by market. GFR, our CKD care platform, is in the pilot stage. We have begun onboarding select patients for trials. It remains in pilot and we will share more details in future. This is a clear focus, reaching patients earlier in the disease well before they need dialysis. Looking ahead, our priorities remain unchanged. Scale the India platform, continue growing in the Philippines, integrate and expand the new market we just entered, continue exploring new geographies, stay disciplined in execution, and keep clinical quality and guest centricity as the foundation of our business. With that, I hand over to Prashant.
Prashant Goenka (Nephrocare Health Services Ltd): Thank you, Rohit. And good morning, everyone. Let me walk you through numbers and address the key queries around margins. Revenue, H1 FY27 revenue was 585 crores, up 23.6% year-on-year. Q2 revenue was 303 crore, up 23.5% year-on-year and 7.7% over Q1. Revenue per treatment rose 9.7% to 2,785 for the first half year, driven mainly by international mix, which reached about 47% of revenue, up from 42% in FY26. Coming to EBITDA and margins, adjusted EBITDA for the first half year was 134 crore, up 15.3% at 23% margin. Q2 adjusted EBITDA was 68.9 crore, up 3.3% year-on-year and 5.8% over Q1, at a 22.7% margin. A word on how to read our year-on-year margin comparison. Last year we were a private company with an annual audit cycle. Our quarterly numbers therefore had more variability and provisions were trued up during the year-end audit. This year, as a listed company, our numbers are now reviewed by auditors every quarter, so those true-ups happen as we go. Our quarterly margins this year are therefore not directly comparable with the same quarter last year. Q2 FY26 27.1% margin is a case in point. The more meaningful benchmark is our full year FY26 margin, which already reflects the year-end adjustments.
Prashant Goenka (Nephrocare Health Services Ltd): On that basis EBITDA margin was 23.8% in FY26 against 23.0% in H1 FY27, a reduction of about 80 basis point. Margins have remained largely within the target range. Some of this compression is due to higher other expenses, which rose from 18.2% in FY26 to 20% in the first half. That reflects the investment in international business development and new country teams, technology, the cost of being a listed company, and a model based ECL provisioning that grows with revenue. The clinic level lines improved. Materials or COGS fell about 95 basis point to 22% of revenue. Professional and hospital fees fell about 83 basis point to 18.4% of revenue. Employee cost was broadly stable. The margin moderation is investment in future growth and not weaker unit economics. Now coming to profit, adjusted PAT was 76.1 crore, up 34.7% with margin up 107 basis point to 13%. Finance costs fell from 51 crore to 5.3 crore, after we repaid borrowings from IPO proceeds, and other income rose to 15.1 crore. Our share of Saudi JV loss was 7.5 crore for the first half, shown below EBITDA, and added back in the adjusted PAT. Now coming to cash flow and capital deployment, as I indicated in the earlier call, as a company we are very focused on cash flow on a daily basis and very disciplined on capital allocation. Operating cash flow for the half year was 89 crore, about 67% of our adjust- adjusted EBITDA of which 52.4 crore came in Q2. This reflects our strong focus on cash conversion and quality of earnings. We deployed about 102 crore in the first half year. We expect FY27 capital deployment to exceed FY26 165 crore, as we build out our newest geography. We remain comfortably net cash, which cash deposit and investment of about 507 crore against the borrowings of 80 crore as of 30th September. And overall, we are in a good position to drive both our India and international growth strategy. Coming to the guidance, we reiterate our medium term guidance of 15% to 20% revenue growth over 3 to 4 years. We do not give annual guidance. With that, we open the floor for questions.
Moderator (IIFL Capital): Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press "*" and "1" on your touchtone telephone. If you wish to remove yourself from the question queue, you may press "*" and "2". 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 Akshay Thakur with Helios Capital. Please go ahead.
Akshay Thakur (Helios Capital): Thanks for taking my question. My first question is on so there were some discussions happening with respect to qualitative eligibility for tender submission in India. Is there any update on that recently or still eligibility for tenders is based on price?
Vikram Vuppala (Nephrocare Health Services Ltd): So, this is Vikram. I'll take this question. NHSRC, which is part of the Union Health Ministry recently came up with a recommendation of QCBS based tendering model to all the states. QCBS is quality and cost based selection process, right? But as we all know, health is a state subject. The states can listen to the QCBS recommendation or the states can disregard and use their own price based. So, we're seeing a mix of QCBS as well as few of the tenders continue to be on an L1 price model. It depends state-by-state, but the good news is that compared to 5 years back more and more tenders are now coming based on QCBS model where NephroPlus probability of winning increases significantly.
130 more turns of this transcript: log in to Stocksigma to read the full call.