1. About Business:
Business Overview:
Narayana Hrudayalaya (Narayana Health) is one of India’s largest multi-specialty hospital chains, founded by Dr. Devi Shetty in 2000. The company focuses on providing affordable and high-quality healthcare services, particularly in cardiac care and oncology.
Business Model:
- Operates multi-specialty and single-specialty hospitals across India and a few international locations (e.g., Cayman Islands).
- Focuses on cost-efficient healthcare through process optimization and economies of scale.
- Expanding into tertiary and quaternary care services in cardiology, nephrology, neurology, oncology, orthopedics, etc.
- Uses a hub-and-spoke model—major hospitals act as hubs, while smaller centers (spokes) handle basic care.
2. Most Important thing to look for in Financial Statements.
| Income Statement | Narayana |
| Sales Growth | 10.91% Y-o-Y, 7.26% Q-o-Q |
| OPM | 23% |
| NPM | 15% |
| Depreciation | Going Up |
| Int/Ebitda | 0.10X |
| Earnings Growth Last 3 Yeas | 365% |
| Balance Sheet | Narayana |
| Debt/Equity | 0.53 |
| Capex | Yes |
| WC | -9 Days |
| Sales/Fixed Assets | 1.2 |
| Cash+Investment | 329 cr |
| Debt Burden | 22.0% |
| B/S Stronger Over Time | Yes |
| Narayana | Mar-21 | Mar-22 | Mar-23 | Mar-24 |
| DU Pont ROE | -1% | 23% | 28% | 27% |
| Net Profit Margin | -1% | 9% | 13% | 16% |
| Sales/Total assets | 0.93 | 1.18 | 1.08 | 0.89 |
| Financial Leverage | 2.48 | 2.11 | 1.96 | 1.95 |
Here are the primary reasons for the increase in EBITDA margins for Narayana Hrudayalaya over the last three years:
- Focus on Quality Revenue and Improved Payer Mix: Higher profitability from a strategic shift in revenue streams.
- Operational Efficiencies: Cost reduction and better service delivery.
- Increased Occupancy and Footfalls: Better utilization of facilities.
- Higher ARPOB (Average Revenue Per Occupied Bed): Enhanced revenue generation per patient.
- Turnaround of New Hospitals: Improved performance and profitability of newer facilities.
- Strategic Expansion: Focus on debottlenecking and expanding high-performing regions.
3. Management Analysis
1. Was there any fraud, financial irregualrities , Sebi related issues in Narayana Hrudhayala
No
2. Change in Promoter Holding
No
3. Related Party Transaction
Not Material
4. Cash Flow GEneration- Cum PATv/s Cum CFO
Cum PAT 2040 V/s Cum CFO 4315
5. Community Insights
6. Financial Discipline CFO/PAT>80%
212%
4. Fundamental Analysis
| | | | Narayana |
| 1 | Profitability | | | |
| - | ROE & ROCE>15 %, If not , can they go above 15% | | | 27% |
| - | Margins- Fluctuating or Expanding Consistently? | | | 23-28% |
| 2 | | | | |
| - | Operating Leverage | | | |
| - | Company V/s Peers | | | |
| - | Is the base favourable for next 2-3 Quarters | | | Yes |
| 3 | Cash Flow & Debt | | | |
| - | Converting Profits into Cash | | | Yes |
| - | D/E Ratio | | | 0.53 |
| 4 | Growth Potential | | | |
| - | Industry Headwinds/Tailwinds? | | | Tailwinds |
| - | What is Variant Perception | | | |
| Deleveraging | New Orders | Acquisition | |
| Margin Expansion | Cost Cutting | Govt. Incentives | |
| Better Product Mix | Demerger | Higher VAP | |
| Volume Growth | Capex Live | |
5. Peer 2 Peer Analysis
| Particulars | Narayana | Apollo | Max |
| Average Daily Revenue Per Occupied Bed | 41095.89 Rs | 59073.0 Rs | 76200.0 Rs |
| Hospital Occupancy Rate | 51.17 % | 68.0 % | 78.0 % |
| Average Length Of Stay | 4.3 Days | 3.34 Days | 4.1 Days |
| Operational Beds | 5789.0 . | 7942.0 . | 3949.0 . |
| 5 yr Average ROE | 17.6 % | 12.37 % | 7.39 % |
| P/E | 34.38 | 88.74 | 107.99 |
| 5yr Avg Operating Profit Margin | 16.76 % | 12.91 % | 20.36 % |
| Profitability Ratios | | March 2015 | March 2016 | March 2017 | March 2018 | March 2019 | March 2020 | March 2021 | March 2022 | March 2023 | March 2024 | Remarks |
| Gross Margin (%) | NH | 75.02 | 76.01 | 76.79 | 75.6 | 75.97 | 76.17 | 73.76 | 75.44 | 77.87 | 78.6 | |
| APOLLOHOSP | 50.16 | 50.85 | 50.4 | 51.08 | 51.54 | 51.11 | 46.17 | 48.35 | 48.39 | 48.55 | |
| MAXHEALTH | 69.48 | 72.2 | 73.69 | 75.37 | 78.45 | 79.48 | 76.3 | 76.56 | 79.79 | 79.31 | |
| Op Profit Margin (%) | NH | 9.21 | 10.98 | 12.18 | 9.65 | 10.31 | 13.65 | 7.32 | 17.92 | 21.67 | 23.26 | The difference is due to employee cost of 16.61 % of Max and 20.15% of NH. therefore , NH has low NPM compared to Max, |
| APOLLOHOSP | 14.19 | 10.95 | 9.74 | 9.6 | 11.05 | 14.06 | 10.73 | 14.9 | 12.34 | 12.54 |
| MAXHEALTH | 6.64 | 7.22 | 8.73 | 6.52 | 8.6 | 8.37 | 15.3 | 23.84 | 26.9 | 27.4 |
| Net Profit Margin (%) | NH | -1.23 | 1.32 | 4.42 | 2.25 | 2.07 | 3.8 | -0.55 | 9.24 | 13.41 | 15.74 | |
| APOLLOHOSP | 6.56 | 3.63 | 3.05 | 1.42 | 2.45 | 4.04 | 1.42 | 7.2 | 4.93 | 4.71 |
| MAXHEALTH | -3.27 | -1.58 | 0.98 | -1.2 | -0.18 | 5.57 | -5.48 | 15.37 | 24.19 | 19.56 |
| ROE (%) | NH | -2.18 | 2.42 | 8.62 | 4.96 | 5.47 | 10.47 | -1.28 | 22.98 | 28.46 | 27.38 | NH asset turns is 0.89X and Max asset turns is 0.45. Therefore inspite of High NPM of Max its having less ROE . |
| APOLLOHOSP | 10.72 | 6.78 | 6.67 | 3.61 | 7.08 | 13.62 | 3.27 | 18.77 | 13.22 | 12.96 |
| MAXHEALTH | -4.46 | -1.97 | 1.32 | -1.78 | -0.31 | 2.31 | -2.44 | 9.63 | 14.89 | 12.58 |
6. Risk
- Supreme Court order on Standardisation of rates
- Apollo insurance biz was later acquired by HDFC Ergo.
- Next 3-4 Years slow Growth bcoz of Greenfiled Capex.