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Shalby Limited

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Shalby Limited Q1FY27 Earnings Call Highlights

Financials

Shalby Limited is an integrated healthcare group founded by Dr. Vikram I. Shah, with a strong leadership position in joint replacement and a growing presence across multiple medical specialties. The company operates 13 hospitals with 2,200+ beds across 10 cities in India, supported by 1,150+ doctors, 4,500+ employees and 30+ specialties. It has served more than 3.5 mn patients and performed over 1,75,000 joint replacement surgeries since inception. Alongside its hospital business, Shalby has an international healthcare presence through Shalby International and an implant business with manufacturing capabilities in the USA. The company is focused on clinical excellence, specialty diversification, technology adoption, prudent capital allocation and expansion through both owned and asset-light operating models.


Business Background

  1. Consolidated revenue increased 11.74% YoY to ₹331.22 crs in Q1FY27, while EBITDA rose marginally by 0.12% YoY to ₹41.59 crs. Consolidated PAT increased 51.70% YoY to ₹10.95 crs, despite lower PBT.
  2. Hospital business delivered 23,895 inpatient visits and 9,326 surgeries in Q1FY27, up 6.2% and 3.5% YoY, respectively. Occupancy improved to 51% from 45%, while occupied beds increased 9.8% YoY.
  3. Shalby International revenue increased to ₹26.2 crs from ₹23.3 crs in Q1FY26, with patients coming from 60+ countries and international patients contributing 42% of revenue. The facility recorded 1,200+ IP and 4,650+ OP visits during the quarter.
  4. Shalby MedTech consolidated revenue increased 53% YoY to ₹47.2 crs in Q1FY27, driven by strong growth in Shalby MedTech Limited and the US business. Consolidated EBITDA improved to ₹1.7 crs from a loss of ₹7.5 crs in Q1FY26.
  5. Arthroplasty remained the largest specialty, contributing 41% of hospital revenue in Q1FY27, while the company continued to diversify into oncology, cardiac sciences, neurology, nephrology, critical care and general medicine.
  6. The company maintained a strong clinical footprint with 13 hospitals, 2,200+ beds, 1,150+ doctors and 4,500+ employees, having served 3.5 mn+ patients and completed 1,75,000+ joint replacement surgeries since inception.


Strategic Outlook

Q1: What were the key consolidated financial highlights for Q1 FY27?

A1: Consolidated revenue grew 11.6% YoY to Rs. 338.6 crore compared to Rs. 330.4 crore in Q1 FY26. EBITDA reached Rs. 49 crore (14.5% margin). Profit After Tax (PAT) stood at Rs. 10.5 crore (3.1% margin) versus Rs. 7.7 crore in the prior-year period. Net debt stood at Rs. 163 crore with a gearing ratio of 0.46x.


Q2: How did the standalone hospital segment perform during the quarter?

A2: Standalone hospital revenue grew ~7% YoY to Rs. 259 crore. EBITDA came in at Rs. 47.8 crore (18.4% margin) and PAT was Rs. 25 crore. Bed occupancy improved to 51% (701 occupied beds vs. 639 in Q1 FY26), with an ARPOB of Rs. 44,711 and an average length of stay (ALOS) of 3.69 days.


Q3: What progress was made at Shalby International (the Gurgaon unit)?

A3: Gurgaon unit revenue grew to Rs. 26.2 crore (up from Rs. 23.2 crore) with an ARPOB of Rs. 91,326. International business contributed 42% of its operating revenue. Notably, the unit achieved EBITDA breakeven for the first time since acquisition, delivering a sustainable 7% EBITDA margin.


Q4: What was the performance summary for the MedTech business?

A4: Consolidated MedTech revenue jumped 53% YoY to ~Rs. 47 crore, driven primarily by Shalby MedTech India (SNTL), which grew 98% YoY to ~Rs. 36 crore. Consolidated MedTech EBITDA was positive at ~Rs. 1.7 million, marking its fourth consecutive quarter of positive EBITDA.


Q5: What key drivers are expected to improve hospital margins in upcoming quarters?

A5: Key drivers include operationalizing radiation bunkers, active Third-Party Administrator (TPA) rate renewals expected to yield a 5% to 7% revenue uplift, margin expansion from Gurgaon, and strong top-line momentum (~30% YoY growth) in units such as Krishna, Mohali, and Naroda.


Q6: Why did MedTech bottom-line losses increase quarter-on-quarter despite higher revenues?

A6: The sequential expansion in losses was driven primarily by non-operational factors: foreign exchange fluctuations (forex losses in Q1 vs. forex gains in Q4) and full depreciation on intangibles and past capital expenditures. Operational gross margins are projected to expand by 100–200 bps quarterly going forward.


Q7: What measures are being taken to improve US MedTech profitability and achieve double-digit EBITDA margins?

A7: Cost-optimization initiatives implemented in Q1 will reduce cash flow requirements by Rs. 3 crore per month. An additional vendor/process implementation targeted for Q4 FY27 will reduce cash requirements by another Rs. 3 crore per month, setting up the segment to achieve double-digit EBITDA margins.


Q8: Why is the company not recognizing Deferred Tax Assets (DTA) on US MedTech losses?

A8: DTA is recognized for the hospital segment. However, on US MedTech operations, management is taking a conservative accounting approach and omitting DTA recognition for now. Management will re-evaluate DTA recognition as US operations turn profitable.


Q9: What is the full-year FY27 margin outlook for the hospital division?

A9: While Q1 margins experienced temporary pressure (18.4% vs. 21.6% YoY) due to onboarding new doctors and specialties, management remains strongly confident of reaching upward of 20% EBITDA margins for the full year as new specialties ramp up.


Q10: What is the trajectory for Gurgaon (Shalby International) to turn PBT/PAT positive?

A10: Occupancy at Gurgaon is projected to reach 30%+ by Q3/Q4. Based on current specialty deployment and cost structures, management expects the unit to turn PBT and PAT positive within 6 to 9 months.


Q11: Why did the group’s effective tax rate decrease during the quarter?

A11: The hospital segment transitioned to the new tax regime, permanently lowering the tax rate from 35% to 26%. Consequently, the group’s overall effective tax rate fell from 66% in Q1 FY26 to 47% in Q1 FY27.


Q12: What is the roadmap for improving Return on Capital Employed (ROCE)?

A12: ROCE stands at ~9.5% for standalone hospital operations and ~7% at the group level following heavy historical capex (~Rs. 150 crore in beds, bunkers, and MedTech). With future capex requirements expected to be minimal, ROCE is targeted to reach industry benchmarks of 11%–13% within 1 to 2 years.


Q13: Can you clarify the ICRA rating adjustment and the nature of the Rs. 129 crore Kotak credit facility?

A13: ICRA adjusted the credit rating from A+ to A while improving the outlook from Negative to Stable as part of a procedural assessment. The Rs. 129 crore Kotak facility is not new incremental debt; it is a debt refinancing/restructuring that lowers average borrowing costs by ~30 basis points.


Q14: How is management managing working capital as government payer mix increases to 32%?

A14: While the government mix rose to 32% (vs 24% YoY), higher government rates (such as super-specialty rates at the Krishna unit) were successfully renegotiated. To protect the cash conversion cycle against longer recovery timelines, automated recovery tracking platforms and streamlined bill-submission workflows have been deployed.


Business Strategy

  1. Management is focused on increasing hospital occupancy and leveraging available bed capacity to drive organic growth, with operational leverage expected to support a targeted improvement in ROCE.
  2. The company plans to strengthen its position as a global leader in joint replacement while continuing to build centres of excellence across oncology, cardiac sciences, neurosciences, critical care, general medicine and transplants.
  3. Mumbai remains an important expansion market, with the Asha Parekh Hospital planned with 200 beds by 2030-31. The company is targeting expansion within its development budget to access key local markets.
  4. Shalby MedTech is expected to deepen its presence in existing implant markets while expanding into upcoming geographies including Assam, Odisha, Uttar Pradesh and Uttarakhand in India and Argentina, Peru, Colombia, Iran, Iraq and Paraguay internationally.
  5. The company will continue investing in high-impact training programmes and skill development to build a stronger medical and professional talent base, supporting service quality and long-term growth.
  6. Management remains focused on prudent capital allocation, technology adoption and operational efficiency, with the objective of improving profitability and doubling ROCE through higher utilisation and operating leverage.


Key Highlights

Q1 FY27:

  1. Revenue from operations: ₹331.22 crs (↑11.74% YoY)
  2. EBITDA: ₹41.59 crs | EBITDA Margin: 12.56% (↓146 Bps)
  3. PAT: ₹10.95 crs | PAT Margin: 3.31% (↑87 Bps)



FY26:

  1. Revenue from operations: ₹1,141.43 crs
  2. EBITDA: ₹142.75 crs | EBITDA Margin: 12.51%
  3. PAT: ₹9.95 crs | PAT Margin: 0.87%


Performance

  1. Shalby continues to leverage its leadership in arthroplasty while diversifying into cardiac sciences, oncology, neurosciences, critical care, general medicine and transplant services to broaden its specialty mix and growth opportunities.
  2. The company intends to improve occupancy across its hospital network, with around 40% of total bed capacity available to support organic growth while requiring limited incremental capex.
  3. Shalby is pursuing a sustainable capex-light model by becoming a preferred operations and management partner through revenue-sharing arrangements, enabling expansion while maintaining prudent capital allocation.
  4. The company is leveraging technology and digital systems to improve medical outcomes, enhance patient reach and satisfaction, and expand its 24x7 homecare services across additional markets.
  5. Shalby MedTech is expanding its implant business across domestic and international markets, with existing operations across India, North America, Japan, Indonesia and other markets, while pursuing approvals for additional geographies.
  6. The company is strengthening its people and partner ecosystem through recruitment, retention, training and leadership development, while building stronger relationships with healthcare professionals and channel partners.


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