MAXHEALT 23jun22

Company Report
Max Healthcare (MAXHEALT) ADD

Health Care Services
June 23, 2022
INITIATING COVERAGE
Sector view: Attractive
The efficient practitioner. Max stands out among hospital peers given its best in- CMP (`): 366
class operating metrics and razor-sharp focus on costs and capital efficiency. Despite
Fair Value (`): 410
the ongoing expansion, we expect Max to deliver a healthy 14.9% EBITDA CAGR over
FY2022-26E led by improvement in payor mix and normalcy in international footfalls. BSE-30: 52,266
We initiate coverage on Max with an ADD rating and an SoTP-based FV of
Rs410/share, offering a 12% upside from CMP.
Robust execution to elicit sustained strength across metrics
Max is the second largest private hospital chain in India in terms of revenues, with focus on
high-end tertiary and quaternary care (~70% of hospital sales). In our view, the management
team’s execution focus is best captured in its ability to drive industry-leading operating and
financial metrics without undermining clinical outcomes. Max’s EBITDA per occupied bed is 1.5-
2.0X higher than peers. We expect its ARPOBs to stay higher than peers due to rising
contribution from metros and complex procedures.
Growth drivers: improved mix, doubling of capacities to drive growth
We believe the pruning of institutional mix to 15% of beds from 31% in FY2022 can alone
drive 25% higher EBITDA over the next 2-3 years. Also, from 5.5% in FY2022, Max aims to
improve international sales mix to 15% by FY2023-end. This, along with steady traction in case
mix and bed additions, will drive 14.8% sales CAGR over FY2022-26E. We expect a better mix
to offset gradual profitability ramp-up of new beds leading to 14.9% EBITDA CAGR over
FY2022-26E.
Strong FCF generation supports organic and inorganic growth aspirations
Max’s growth strategy is to double its capacity to 7,442 beds over FY2022-28E with lower
capital intensity. Given its healthy balance sheet, sturdy FCF generation and its unparalleled
M&A track record it continues to actively scout for value-accretive M&A opportunities. Despite
the ongoing expansion phase, we estimate Max to cumulatively generate healthy Rs18.3 bn FCF
over FY2023-26E. We expect Max to report 15.3% RoIC in FY2026E.
Ahead of the curve; initiate with ADD rating with FV of Rs410
We assign a 24X Jun 2024E pre-Ind AS-116 EV/EBITDA multiple to Max, a slight premium to
Alankar Garude, CFA
APHS due to judicious capital allocation and superior execution. Max Lab and Max@Home
contribute less than 2% to our SoTP. While high concentration from Delhi NCR is a key risk, we
believe it remains an attractive market due to strong patient footfalls amid lower bed density.
Samitinjoy Basak
Other risks include significant delay in payor mix recovery and fallout in agreements with
managed hospitals and trusts.
Company data and valuation summary
Company data Stock data High Low Price Performance 1M 3M 12M

Rating: ADD 52-week range (Rs) 458 236 Absolute (%) 0.0 10.1 40.8
Rel to BSE-30 (%) 3.8 19.5 41.6
CMP (Rs): 366 Price at close of: 23-Jun-22
Capitalization Forecast/valuation 2022 2023E 2024E
Market cap (Rs bn) 355 EPS (Rs) 8.6 10.0 11.3
Promoter (%) 51 EV/EBITDA (X) 26.7 24.7 21.6
Free float (%) 49 P/E (X) 42.5 36.7 32.3
Shares outstanding (# mn) 970 RoIC (%) 13.7 12.6 12.5 kspcg.research@kotak.
com
Source: Bloomberg, Company data, Kotak Institutional Equities estimates Contact: +91 22 6218
6427
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Health Care Services Max Healthcare
TABLE OF CONTENTS
Valuation: Initiate with ADD, with an FV of Rs410/share ........................ 5
Growth strategy: Improved mix, doubling capacities to drive growth .... 12
Razor-sharp focus on operating and capital efficiency .......................... 32
Key risks: Sales concentration, stagnant mix, fallout in agreements ...... 39
Financials: We expect robust 14.9% EBITDA CAGR over FY2022-26E .. 42
Company profile: Metro centric player with solid execution record ....... 52
Industry overview: Indian healthcare industry – going strong ................ 60
The prices in this report are based on the market close of [June 23, 2022].
2 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Max Healthcare Health Care Services
Exhibit 1: Max Healthcare financial snapshot

March fiscal year-ends, 2019-26E (Rs mn, %)
Net revenues EBITDA EPS (adjusted) RoIC
(Rs mn) Growth (%) (Rs mn) Margin (%) Growth (%) (Rs mn) Growth (%) (%) Growth (bps)
2019 35,722 4,776 13.4 2.7 8.1
2020 39,908 11.7 6,863 17.2 43.7 5.6 106.0 15.6 749 bps
2021 36,007 (9.8) 6,085 16.9 (11.3) 5.1 (8.0) 17.8 221 bps
2022 51,709 43.6 13,431 26.0 120.7 9.1 76.8 13.7 -405 bps
2023E 54,671 5.7 14,482 26.5 7.8 10.0 10.0 12.6 -117 bps
2024E 61,145 11.8 16,591 27.1 14.6 11.3 13.6 12.5 -1 bps
2025E 72,912 19.2 19,003 26.1 14.5 13.5 18.8 13.2 63 bps
2026E 89,798 23.2 23,380 26.0 23.0 17.1 27.1 15.3 210 bps
Source: Company, Kotak Institutional Equities estimates
Exhibit 2: Max Healthcare KPIs

March fiscal year-ends, 2019-26E
Units 2019 2020 2021 2022 2023E 2024E 2025E 2026E

Overall
Net revenues Rs mn 35,722 39,908 36,007 51,709 54,671 61,145 72,912 89,798
EBITDA margin % 13.4 17.2 16.9 26.0 26.5 27.1 26.1 26.0
Network hospitals
Bed capacity # 3,354 3,371 3,371 3,412 3,512 3,8 12 4,98 1 5,731
Operational beds # 3,242 3,233 3,233 3,274 3,349 3,613 4,433 5,173
Occupancy rate % 72.1 72.5 64.7 74.5 74.4 72.9 67.5 67.6
ARPOB Rs/day 40,8 69 45,243 45,358 55,68 4 57,334 60,165 63,068 66,522
ALOS days 4.4 4.3 5.1 4.7 4.3 4.2 4.4 4.4
Net revenues Rs mn 34,853 38,728 34,652 49,569 52,131 57,863 68,891 84,924
EBITDA margin % 13.8 17.6 17.1 26.8 27.4 28 .1 26.9 26.8
Max Lab
Number of patients thousands 215 348 660 1,370 1,653 2,352 3,058 3,914
Realizations/patient Rs 1,127 1,18 2 998 757 750 742 727 713
Net revenues Rs mn 242 411 659 1,038 1,239 1,746 2,224 2,790
EBITDA margin % 0.7 3.5 10.1 1.2 0.5 5.5 8 .1 10.2
Max@Home
Net revenues Rs mn 626 768 696 1,103 1,301 1,536 1,797 2,084
EBITDA margin % (3.8 ) 2.0 12.1 13.2 14.0 14.3 14.5 14.8
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Exhibit 3: We forecast 17.2% adjusted EPS CAGR for Max over FY2022-26E
Network summary financials, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Profit and loss
Net revenues 35,722 39,908 36,007 51,709 54,671 61,145 72,912 89,798
Gross profit 25,320 28,544 26,273 38,206 40,675 45,675 54,174 66,720
EBITDA 4,776 6,863 6,085 13,431 14,482 16,591 19,003 23,380
Pre-Ind AS-116 EBITDA 4,776 6,372 5,345 12,939 14,114 16,231 18,642 22,995
Depreciation & amortisation (1,856) (2,077) (2,161) (2,484) (2,887) (3,330) (3,800) (4,052)
EBIT 2,920 4,786 3,924 10,947 11,595 13,261 15,203 19,328
Interest expense (1,553) (2,147) (1,875) (1,118) (1,061) (1,085) (894) (698)
Profit before tax 1,638 2,963 (441) 9,799 11,514 13,396 15,910 20,730
Tax & deferred tax (183) 33 (499) (1,432) (1,842) (2,411) (2,864) (4,146)
Net income (adjusted) 1,454 2,996 4,955 8,796 9,672 10,985 13,046 16,584
EPS (adjusted) (Rs) 2.7 5.6 5.1 9.1 10.0 11.3 13.5 17.1
Balance sheet
Fixed assets (incl. goodwill) 33,760 36,390 72,050 79,230 83,550 90,580 98,040 1,02,040
Cash & equivalents 3,240 4,110 6,660 6,150 5,451 8,949 11,072 20,000
Inventories 860 940 740 830 1,215 1,698 2,228 2,993
Total assets 57,708 66,592 82,871 91,114 96,531 1,08,372 1,19,929 1,35,763
Borrowings 20,680 19,260 11,280 9,180 10,680 11,180 9,180 7,180
Lease liabilities — 2,440 1,980 2,020 1,805 1,580 1,332 1,035
Total liabilities 27,281 32,732 25,491 23,934 19,679 20,535 19,046 18,296
Shareholders' equity 30,427 33,860 57,380 67,180 76,852 87,837 1,00,883 1,17,467
Total equity and liabilities 57,708 66,592 82,871 91,114 96,531 1,08,372 1,19,929 1,35,763
Cash flow statement
Net cash generated from / (used in) operating activities 4,013 6,422 6,137 10,426 11,824 13,066 14,466 16,827
Capex (3,656) (4,707) (7,771) (9,664) (7,207) (10,360) (11,260) (8,052)
Net cash generated from / (used in) investing activities (6,288) (9,294) (18,932) (9,694) (7,207) (9,340) (9,960) (6,452)
Interest paid (962) (2,147) (1,875) (1,118) (1,061) (1,085) (894) (698)
Principal payment of lease liabilities — (250) (460) (290) (215) (225) (248) (297)
Net cash generated from / (used in) financing activities (2,872) 614 (4,839) (3,069) (5,316) (229) (2,383) (1,448)
Change in cash and equivalents (5,147) (2,258) (17,633) (2,337) (699) 3,498 2,123 8,927
Free cash flow to firm 357 1,464 (2,094) 472 4,402 2,481 2,958 8,478
Ratios
EBITDA margin (%) 13.4 17.2 16.9 26.0 26.5 27.1 26.1 26.0
RoAE (%) 4.8 9.3 (2.1) 13.4 13.4 13.3 13.8 15.2
RoCE (%) 5.1 9.1 13.2 12.5 11.6 11.5 11.8 13.0
RoIC (%) 8.1 15.6 17.8 13.7 12.6 12.5 13.2 15.3
CROCI (%) 7.9 11.6 8.7 13.3 13.2 13.0 13.0 13.4
Net debt / EBITDA (X) 3.7 2.2 0.8 0.2 0.4 0.1 (0.1) (0.5)

VALUATION: INITIATE WITH ADD, WITH AN FV OF RS410/SHARE

We initiate coverage on Max with an SoTP-based FV of Rs410/share. We assign a 24X multiple to Jun 2024E
pre-Ind AS-116 EBITDA, a premium to the 22X EV/EBITDA multiple we ascribe to APHS’ hospital segment. In
our view, Max’s hospital segment deserves a premium over peers owing to (1) judicious capital allocation
amid the ongoing expansion plan, (2) superior execution and (3) better hospital return metrics. We do not
assign any optionality coming in from further M&A notwithstanding Max management’s fine turnaround
track record. Less than 2% of our SoTP for Max is being contributed by Max Lab and Max@Home.
We expect Max to offer 12% upside from CMP

Well-positioned to leverage its forte in high-end tertiary and quaternary care
Max remains well-positioned to leverage its position as a high-end tertiary and quaternary
We expect a better
healthcare service provider in an underpenetrated healthcare market. Driven by seamless
mix to offset gradual execution driving robust 40% EBITDA CAGR over FY2020-22 and significant ramp-up in
ramp-up of new beds profitability surpassing Street expectations, Max’s stock has delivered staggering 242%
leading to 14.9% absolute returns over the past two years. Along with further improvement in payor and case
EBITDA CAGR over mix for existing beds, Max will double its bed capacity over the next five years, largely
FY2022-26E through asset-light models of brownfield and Operations & Management (O&M) expansion.
We expect Max to deliver healthy 14.8% revenue CAGR over FY2022-26E driven by steady
growth in ARPOB and normalcy in international footfalls. We expect 14.9% EBITDA CAGR
over FY2022-26E driven by a better mix amid continued focus on cost efficiencies. We
expect Max to report healthy 15.3% RoIC in FY2026E.
Our FV implies 13.8% and 14.7% 10-year sales and EBITDA CAGRs, respectively
The hospital business is characterized by long gestation period of projects along with levered
balance sheet, which makes EV/EBITDA the right approach to value such businesses. We
assign a 24X multiple to Jun 2024E pre-Ind AS-116 EBITDA, a premium to the 22X
EV/EBITDA multiple we ascribe to APHS’ hospital segment. In our view, Max’s hospital
segment deserves a premium over peers owing to (1) judicious capital allocation amid the
ongoing expansion plan, (2) superior execution and (3) better hospital return metrics. We do
not assign any optionality coming in from further M&A, especially given Max management’s
fine turnaround track record. Max stands out among peers, given its focus on asset-light
models of expansion (through O&M contracts and medical service agreements), which is
reflected in its balance sheet strength (lowest net debt/equity of 0.03X versus other Indian
peers) and best in-class operating metrics for the network. We value the diagnostics
segment at 16X Jun 2024E pre-Ind AS-116 EBITDA (40% discount to our implied target
multiple for Dr Lal Pathlabs) and the Max@Home business at 2X Jun 2024E sales. We initiate
coverage on Max with an SoTP-based FV of Rs410/share. Our FV implies healthy 13.8% and
14.7% 10-year sales and EBITDA CAGRs, respectively.
Network financials are a better indicator of Max’s financial health

Within consolidated financials, Max reports financials for its owned and managed healthcare
facilities (which are under O&M agreements). We note the consolidated financials do not
include financials for partner healthcare facilities (PHFs). We highlight that Max has
significant exposure to PHFs, which accounted for 32% of network revenues in FY2022.
Max provides exclusive healthcare services to PHFs across various specialties for a service fee.
Although PHFs are technically not owned by Max, these facilities have long-term medical
service agreements with Max and are functionally similar to owned and managed healthcare
facilities. As a result, we believe network financials are a better indicator of Max’s financial
health.

Exhibit 4: We value Max at Rs410 /share

SoTP valuation, March fiscal year-end, 2024E (Rs mn)
Jun-2024E Multiple Value

SOTP valuation (Rs mn) (X) Rs mn
Network hospitals pre-Ind AS-116 EBITDA 16,487 24.0 395,682
Max Lab EBITDA 117 16.0 1,873
Max@Home sales 1,601 2.0 3,202
Enterprise value 400,757
Net debt 2,231
Minority interest —
Equity value 398,526
Number of shares (mn) 970
Fair value per share (Rs) 411
Current price per share (Rs) 366
Upside (%) 12.2
Source: Kotak Institutional Equities estimates
Exhibit 5: Max’s 1-year forward EV/EBITDA chart

March fiscal year-ends, 2020-22 (X)
1 Year fwd EV/EBITDA Mean Mean + 1SD Mean - 1SD

35
30.5
30
25.6
25
20
18 .8
15
12.1
10
0
Jul-21
Jun-21
Mar-22
Mar-21
Sep-20
Jan-21
Apr-21
Sep-21
Jan-22
Apr-22
Nov-20
Nov-21
Oct-20
Oct-21
May-22
May-21
Feb-22
Feb-21
Aug-20
Aug-21
Dec-20
Dec-21
Source: Bloomberg, Kotak Institutional Equities estimates

Max surpasses peers in most key operating metrics
Exhibit 6: Max is trading at a premium to peers due to higher EBITDA growth expectations
EBITDA CAGR (X-axis) vs FY2024E EV/EBITDA multiple (Y-axis), March fiscal year-ends, 2022-25E (%, X)
25
Max
Apollo
20
FY2024E EV/EBITDA (X)
Narayana
15 Fortis
KIMS
10
Aster DM
5
0
10 11 12 13 14 15 16 17 18
EBITDA CAGR (%)
Notes:
(a) For Max EBITDA CAGR is from FY2022-26E, for others it is FY2022-25E.
Source: Bloomberg, Kotak Institutional Equities estimates
Max’s EBITDA per EBITDA per occupied bed

occupied bed is 1.5- Over the past three years, Max has delivered the second highest EBITDA per occupied bed
2.0X higher than (behind Rainbow) among the major Indian hospital peers. We highlight that Max’s EBITDA
other general multi- per occupied bed is 1.5-2.0X higher than other general multi-specialty hospital chains like
specialty hospital APHS, Fortis, Medanta, KIMS and others. Led by higher ARPOB, increased utilization and
chains like APHS, continued cost efficiencies, we expect Max to report a 5% CAGR in EBITDA per occupied
bed over FY2022-26E to Rs6.7 mn.
Fortis, Medanta,
KIMS and others
Exhibit 7: Max’s EBITDA per occupied bed is much superior to other multi-specialty hospitals
EBITDA per occupied bed, March fiscal year-ends, 2020-22 (Rs mn)
5.9 2020 2021 2022

6
5.5
4.2
4 3.6
3.5
2.9 2.9 2.9
2.7
2.5 2.4 2.4 2.4
2.2
2.0 2.1 1.9 2.0
2
1.5 1.5 1.5 1.5
1.3 1.2 1.2
0.9
0
Rainbow Max Apollo KIMS Fortis Narayana HCG Aster (India) Medanta
Notes:
(a) FY2022 data for Medanta is not available.
Source: Companies, Kotak Institutional Equities

Average revenue per occupied bed (ARPOB)
As of FY2022, Max As of FY2022, Max has the highest ARPOB among listed Indian peers. This is despite an
inferior payor mix. In our view, Max’s ARPOBs are higher than peers due to (1) higher metro
has the highest
focus with 84% of capacity being in metros and (2) greater proportion of high-end surgeries
ARPOB among listed
and procedures. Given most of the expansion over the next five years is in the metros, Max
Indian peers will have 95% of its capacity in the metros by FY2027. Having a higher presence in the
metros ensures availability of specialists. As a result, the company is able to focus a lot more
on liver, kidney, lung and heart transplants. Share of surgical procedures to revenues for
Max stood at 58% in FY2022, higher than peers. Led by an improving payor mix, normalcy
in international patient footfalls, better case mix and 2-3% annual price hikes, we expect
Max to report a 4.5% ARPOB CAGR over FY2022-26E.
Exhibit 8: Max’s ARPOBs are highest among listed Indian peers

ARPOB, March fiscal year-ends, 2020-22 (Rs ‘000/day)
80 2020 2021 2022
60 56
49 49 50
48
45 45 46
44 43 42 42
40 41
40 37
34 33 33 34
29 30 28 30
25
21
18
20
0
Max Fortis Apollo Rainbow Narayana HCG Aster (India) KIMS Medanta
Notes:
(a) Apollo reports ex-Covid ARPOB. ARPOB of other companies include vaccination revenues.
(b) FY2022 data for Medanta is not available.
Occupancy
A heavy presence in At 75%, Max’s FY2022 occupancy levels were higher than all of its peers, barring KIMS. A
heavy presence in Delhi NCR, where bed density is low, is a key supporting factor driving
Delhi NCR, where
higher occupancies. Max has 2,463 beds in Delhi NCR, which operate at an occupancy rate
bed density is low, is
of 80%+. We highlight this occupancy figure implies the blended occupancy across day and
a key supporting night. Max’s daytime occupancies often reach 90%+ levels. Some of the flagship facilities
factor driving higher like Saket operate at 95%+ daytime occupancies during peak periods.
occupancies

Exhibit 9: Max has second highest occupancies among its domestic peers aided by its strong metro focus
Occupancies, March fiscal year-ends, 2020-22 (%)
100 2020 2021 2022
80
80 75 73 75
69 68 68
65 66
61 63 63
56 58 56
60 55 55 55
52
48 49
43 45 43
40 34 34
20
0
KIMS Max Aster (India) Fortis Apollo HCG Rainbow Narayana Medanta
Notes:
Average length of stay (ALOS)
At 4.7 days in FY2022, Max has a relatively higher ALOS than most of its peers due to a
higher emphasis on critical care. 30% of Max’s beds are in critical care, higher than its peers.
There is a greater focus on ensuring continued investments in medical technology to
facilitate complex procedures like organ transplants. As Max continues to work on improving
its case mix and increasing the share of high-end services, we expect it to sustain these levels
of ALOS.
Exhibit 10: Higher emphasis on critical care leads to a higher ALOS for Max as compared to its domestic peers
ALOS, March fiscal year-ends, 2020-22 (days)
2020 2021 2022

8
6 5.5
5.1
4.7 4.8 4.84.8
4.2 4.3 4.3
3.9 3.9 4.0
4 3.7 3.6 3.7 3.6 3.9
3.5 3.5
3.2
2.9 2.8 2.8
2.3 2.3 2.3
2
0
HCG Rainbow Aster (India) Fortis Apollo Max KIMS Narayana Medanta
Notes:

As of FY2022, Max Bed capacity and operational beds

th
ranks 5 in terms of As of FY2022, Max ranks 5th in terms of bed capacity and 4th in terms of operational beds,
th
bed capacity and 4 among its Indian peers. Higher proportion of operational beds to bed capacity signals better
in terms of utilization, due to strategic geographical advantage. We highlight that Max has embarked
operational beds, on an aggressive expansion plan to double its network bed capacity over the next five years.
Post completion of this expansion phase, we expect Max to be among the top 3 hospital
among its Indian
chains in India as measured by bed capacities.
peers
Exhibit 11: Max ranks 5th in terms of bed capacity among Indian hospitals
Bed capacity, March fiscal year-ends, 2020-22 (#)
10,209
12,000 2020 2021 2022

10,261
9,911
9,000
6,725
6,58 4
6,597
6,000
4,398
4,250
3,757
3,905
3,693
3,371
3,561
3,371
3,412
3,064
3,004
3,064
2,036
2,176
2,141
2,071
1,944
1,475
3,000
1,500
1,296
0
Apollo Narayana Fortis Aster (India) Max KIMS HCG Rainbow Medanta
Notes:
Exhibit 12: Max ranks 4th in terms of operational beds among Indian hospitals
Operational beds, March fiscal year-ends, 2020-22 (#)
7,409
2020 2021 2022

7,8 75
7,491
8,000
5,992
6,011
5,8 59
6,000
3,8 07
3,931
3,233
3,274
3,257
3,233
4,000
2,68 6
2,8 99
2,564
2,530
2,246
2,234
1,719
1,8 27
1,702
1,579
1,517
1,132
1,157
2,000
1,001
0
Apollo Narayana Fortis Max Aster (India) KIMS HCG Rainbow Medanta
Notes:

We expect Max to trade at a premium to listed Asian peers

Asian hospital stocks are trading at 18.9X Jun 2024E EV/EBITDA. Compared to other Asian
listed hospital peers, we believe Max deserves to trade at a premium to reflect (1) higher
growth led by improvement in mature hospitals as well as capacity expansion, (2) superior
operating performance driving better margins and (3) razor-sharp focus on driving return
ratios through largely an asset-light model.
Exhibit 13: Max trades at a premium to other listed Asian peers

Valuation of Asian hospitals, March fiscal year-ends, 2021-25E
Fair value Current price PER (X) EV/Sales (X) EV/EBITDA (X)
Indian hospitals Rating (Rs) (LC) 2022 2023E 2024E 2025E 2022 2023E 2024E 2025E 2022 2023E 2024E 2025E
Apollo Hospitals ADD 4,710 3,851 72.7 53.3 39.4 30.4 4.0 3.4 2.9 2.5 26.6 24.6 20.4 17.1
Aster Dm BUY 240 175 18.5 15.4 13.1 10.5 1.3 1.2 1.1 1.0 9.3 8.0 7.2 6.5
Max Healthcare ADD 410 366 42.5 36.7 32.3 27.2 6.9 6.6 5.9 4.9 26.7 24.7 21.6 18.9
Narayana Hrudayalaya ADD 645 628 37.5 35.0 29.5 25.6 3.6 3.2 2.9 2.8 20.3 17.6 15.7 14.2
Fortis Healthcare NR NA 236 32.1 37.4 29.2 24.0 3.4 3.2 2.8 2.5 18.2 16.9 14.7 12.8
HCG NR NA 290 70.0 82.5 43.2 25.9 3.4 3.0 2.8 2.5 20.0 16.7 14.3 11.1
KIMS NR NA 1,155 27.6 24.7 22.0 18.8 5.7 4.2 3.7 3.2 18.1 15.1 13.1 11.5
Mean 43.0 40.7 29.8 23.2 4.0 3.5 3.2 2.8 19.9 17.7 15.3 13.2
Median 37.5 36.7 29.5 25.6 3.6 3.2 2.9 2.5 20.0 16.9 14.7 12.8
Fair value Current price PER (X) EV/Sales (X) EV/EBITDA (X)
Asian hospitals Rating (Rs) (LC) 2021 2022E 2023E 2024E 2021 2022E 2023E 2024E 2021 2022E 2023E 2024E
IHH Healthcare NR NA 6 31.5 34.0 29.9 26.8 3.9 3.7 3.5 3.2 16.5 15.1 14.1 13.2
Dallah Healthcare NR NA 108 37.6 29.4 23.2 20.0 5.5 4.8 4.3 3.8 24.3 22.1 19.4 17.9
Mouwasat Medical Services NR NA 218 37.7 34.8 29.0 25.0 10.5 9.4 7.9 7.1 28.8 27.4 23.1 19.2
Bangkok Dusit Medical Service NR NA 25 49.4 39.2 35.2 31.4 5.4 4.8 4.5 4.2 22.9 20.6 19.0 17.3
Bumrungrad Hospital NR NA 176 115.0 48.7 37.3 33.2 11.2 8.6 7.5 6.9 51.3 29.9 24.0 21.7
Mean 54.3 37.2 30.9 27.3 7.3 6.3 5.5 5.1 28.8 23.0 19.9 17.9
Median 37.7 34.8 29.9 26.8 5.5 4.8 4.5 4.2 24.3 22.1 19.4 17.9
Notes:
(a) 2022, 2023, 2024, 2025 represent calendar year ends for global hospitals and fiscal year ends for domestic hospitals
(b) Stocks under coverage values based on KIE estimates, non-covered stocks based on Bloomberg consensus estimates
Source: Company, Bloomberg, Kotak Institutional Equities estimates

GROWTH STRATEGY: IMPROVED MIX, DOUBLING CAPACITIES TO DRIVE GROWTH

While Max’s announced growth strategy with lower capital intensity will double its bed capacity to 7,442
beds over FY2022-28E, the company continues to actively scout for acquisitions. For Max, any expansion will
be either in markets wherein Max is already present or where few competitors are present and are
generating healthy returns. For the existing beds, we expect lower institutional business contribution to be a
critical sales driver. This, in addition to normalization of international patient footfalls and steady
improvement in case mix and occupancies, will drive 14.8% revenue CAGR over FY2022-26E. We build in 4.5%
ARPOB CAGR over FY2022-26E driven by improved payor mix, higher international footfalls, 2-3% annual
price hikes and gradual improvement in the clinical mix.
Tactical expansion to double capacities over FY2022-28E to 7,442 beds
Given most of the Max’s facilities are strategically concentrated in key cities like Delhi NCR and Mumbai. The
company has a well-defined roadmap of capacity expansion to propel its long-term growth,
expansion over the
without causing a significant drag on profitability. Max has planned significant expansion
next five years is in
projects over the next five years. Four key projects were announced in FY2022 itself, (1) The
the metros, Max will company has exclusive rights via a medical services arrangement with Vikrant Foundation for
have 95% of its a 500-bed hospital in Saket, (2) acquisition of two land parcels over 11 acres in Gurugram to
capacity in the metros add over 1,000 beds, (3) asset-light expansion of 300 beds in an under-construction hospital
by FY2027 in Dwarka and (4) acquisition of stake in Eqova Healthcare (Patparganj) leading to addition
of 400 beds in East Delhi. Overall, these four transactions will add 2,200 beds to the
network, out of which Max plans to operationalize 1,500 beds in the next 4-5 years. For
Max, any expansion will be either in markets wherein Max already has a presence or a
couple of key competitors are present and are generating healthy margins.
Exhibit 14: Max is following a hybrid model of expansion, setting up 4,000+ beds in a span of 6 years
Construction timeline of hospitals, March fiscal year-ends, 2022-28E (Rs mn, #)
Existing New bed Bed Commencement of Commencement of Capex

beds additions capacity construction operations (Rs mn)
Brownfield expansion
Max Super Speciality Hospital, Shalimar Bagh 28 0 100 38 0 2QFY22 2HFY23 1,120
Max Super Speciality Hospital, Mohali 220 190 410 4QFY22 2HFY24 1,990
Max Smart Super Speciality Hospital, Saket 250 350 600 4QFY22 1HFY25 6,8 40
Nanavati Max Hospital, Mumbai 328 329 657 4QFY22 2HFY25 4,350
Eqova Healthcare, Patparganj — 250 250 3QFY24 1HFY26 2,350
Max Super Speciality Hospital, (East Block) Saket (a) 320 300 620 4QFY24 1HFY26 3,600
Max Smart Super Speciality Hospital, Saket 600 250 8 50 3QFY25 1HFY27 2,300
Nanavati Max Hospital, Mumbai (b) 657 111 768 2QFY25 2HFY27 2,8 30
Eqova Healthcare, Patparganj 250 150 400 Post FY2028 Post FY2028 1,600
Max Super Speciality Hospital, (East Block) Saket (a) 620 200 8 20 Post FY2028 Post FY2028 2,400
Max Smart Super Speciality Hospital, Saket 8 50 500 1,350 Post FY2028 Post FY2028 4,950
Greenfield expansion
Max Hospital, Gurugram - Sector 56 50 300 350 4QFY23 2HFY25 4,020
Max Hospital, Gurugram - Sector 56 350 200 550 3QFY24 2HFY26 2,68 0
Max Hospital, Gurugram - Sector 53 42 500 542 Post FY2028 Post FY2028 6,700
Asset light expansion
Dwarka Hospital — 300 300 3QFY22 1HFY24 1,500
Notes:
(a) All expansions are in Vikrant foundation, which is a PHF. Due to negligible contribution as of FY2022, it has been included with the already existing
PHF, Saket Complex (East Block).
(b) 160 beds need to be demolished before commencement of Phase 2. So, there is a 271-bed addition on gross basis.
(c) Capex excludes maintenance capex and land acquisition costs for greenfield facilities.

 The Saket complex is Max's largest block, with three facilities in close proximity, delivering
Currently, Max Saket a contiguous hospital strip in the key micro-market of South Delhi. It is Max's primary
is operating at an revenue generating block, and also outperforms other facilities, in terms of operating
EBITDA per occupied performance. Currently, it includes three facilities – West Block, East Block and Max Smart.
bed of Rs8 mn, which The brownfield capacity expansion entails the current capacity to be supplemented with
is one of the highest (1) 1,100 beds in Max Smart in three phases and (2) 500 beds at Vikrant Foundation in
two phases. Max has acquired the right to aid development of a 500-bed hospital on 3.5
in the country,
acres of land of Vikrant Foundation, which falls between the three existing facilities in
maintaining Saket. This strategic acquisition paves the way for an integrated medical complex spread
occupancy of higher over 23 acres of land with a potential 2,300+ beds. This will be one of South Asia's
than 75% largest private integrated healthcare complexes. Currently, Max Saket is operating at an
EBITDA per occupied bed of Rs8 mn, which is one of the highest in the country,
maintaining occupancy of higher than 75%.
Exhibit 15: The Vikrant Foundation land which falls between Max’s existing facilities in Saket
Vikrant Foundation, March fiscal year-end, 2022
Source: Company, Kotak Institutional Equities
 Gurugram. Max has completed purchase of two land parcels in Gurugram aggregating
to 11.4 acres for addition of 1,000 beds for Rs3 bn. This will be in addition to the already
existing 72-bed Alpha Hospital. While Max is generally averse to greenfield expansion, we
note this is an opportunistic expansion considering the prime location as well as high
profitability in the city. Gurugram is one of the most profitable hospital markets with
competitors too operating at high occupancy and ARPOB. Max’s existing hospital in
Gurugram has an annual EBITDA per occupied bed of greater than Rs8.5 mn, one of the
highest in the country. This facility has daytime occupancies surpassing 95%. In addition,
Gurugram can potentially cater to a larger international patient pool than most of Max’s
hospitals in Delhi.
 Dwarka. Max has entered into a 60-year exclusive O&M agreement in Dwarka. This is an
8.5 acre land which can be expanded to 900 beds. Initially, Max will construct a 300+ bed
hospital in this attractive micro-market through its asset-light model. While Max will be
paying a yield of ~8% to the developer, its investment will be restricted to one-third of
the project cost, thereby leading to higher RoCEs. This facility is expected to be
commissioned in 1HFY24.

 Patparganj (Eqova Healthcare). Max has entered into an agreement to acquire Eqova
Healthcare in a phased manner. It will have long-term exclusive rights to aid development
of and provide medical services in the 400-bed hospital to be set up on 2.1 acres of land
owned by Nirogi Charitable and Medical Research Trust. This will add to Max’s existing
402 bed hospital, which is located 800 meters away. The existing facility at Patparganj is
operating at 81%+ occupancy over the past few years, resulting in delayed admissions
and limiting Max’s ability to expand its clinical programs. The new hospital will help Max
strengthen its presence in the underserved market of East Delhi. Also, the new hospital is
strategically located on the Delhi-Meerut expressway. Max expects to commission 250
beds by 1HFY26 in the first phase. The overall project cost would be Rs6.5+ bn, which
will be incurred over the next 5-7 years.
Exhibit 16: The existing 20-bed facility of Nirogi Trust at Patparganj, which will be demolished
Eqova Healthcare, March fiscal year-end, 2022
Apart from the above four projects, Max has three on-going brownfield projects, which will
A chunk of Max’s
add further 1,030 beds in the next 4-5 years. A chunk of Max’s land bank lies in close
land bank lies in close
proximity to its existing facilities, which is a key advantage. We expect the already existing
proximity to its land bank to help reduce Max’s capex per bed to Rs9-10 mn from prevailing market rates of
existing facilities, Rs13 mn. There remains a high focus on recruiting senior clinicians and strengthening of
which is a key medical programs. Given the high occupancies at which most of Max’s hospitals in Delhi are
advantage operating, doctors face shortage of operation theatres and out-patient chambers. Post the
expansion, on-boarding doctors should be relatively easier. Given latent demand, we expect
the brownfield expansion to enable Max to attract patients faster and help divide personnel
costs across a large base by concurrent utilization of medical talent.
 Nanavati. This facility, situated on a 3.5 acre land strip in the heart of Mumbai, was
originally managed by Radiant, and Max now has entered into an O&M agreement with
Nanavati Trust. Max intends to add 600 beds (net addition will be of 440 beds post
demolition of 160 beds before commencement of the second phase), in the Nanavati
Max Hospital. The first phase involves addition of 339 beds by 3QFY25. It will be followed
by demolition of 160 beds before construction of the second phase begins. The second
phase entails addition of another 271 beds which will be operational in 3QFY27. Once
both the phases are completed in FY2027, there will be 760 census beds in Nanavati.
Total outlay for expansion of Nanavati is Rs7.2 bn.

Exhibit 17: Ongoing construction of the first phase of expansion at Nanavati

Nanavati, March fiscal year-end, 2022
 Mohali. The state government of Punjab has allotted Max additional land adjoining to its
existing hospital in Mohali. This will enable addition of another 190 beds.
 Shalimar Bagh. Expansion at Shalimar Bagh commenced in Sep 2021. 100 additional
beds at Shalimar Bagh will be operational from 3QFY23.
We believe breakeven Thus, in total, Max will be adding 2,680 beds in the next five years with capex of Rs37 bn,
which will be funded by internal accruals. We also note that Max’s leverage remains at
timelines for Max are
comfortable levels with Rs4.4 bn net debt (including put option liability of Rs1.39 bn related
lower than peers due
to Max’s phased acquisition of Eqova Healthcare) as of Mar 2022, implying net debt to
to its higher metro EBITDA of 0.33X. As per Max, brownfield hospitals take 3-4 months to break even, while a
mix, presence of land greenfield project like Gurugram should break even in 12-15 months. We believe breakeven
bank and significantly timelines for Max are lower than peers due to its higher metro mix, presence of land bank
higher focus on and significantly higher focus on operating efficiencies. Going forward, from a cluster
operating efficiencies perspective, Pune and Bengaluru are suitable targets for expansion. In terms of geographies,
Max’s pecking order of preference for expansion is North, West, South and East India. In our
view, Mumbai, Pune, Lucknow, Kanpur, Patna, Ranchi would be among the key cities in
which Max would be keen on expanding.

Exhibit 18: Max’s gross debt remains at comfortable levels Exhibit 19: We expect Max to turn net cash positive in FY2025
Gross debt metrics, March fiscal year-ends, 2019-26E (Rs bn, X) Net debt metrics, March fiscal year-ends, 2019-26E (Rs bn, X)
Gross debt (Rs bn) Net debt (Rs bn)

Gross debt (incl. put option liabilities) (Rs bn) Net debt (incl. put option liabilities) (Rs bn)
Gross debt/EBITDA (X) Net debt/EBITDA (X)
30 5 30 3.7 4
4.3
25 21
24 4 20 1717 15 3
21 21 19
18 3 10 5 6 2
2.2 5 5 3 4 2 3
2.8 11 12 11 11
12 11 12
12 9 2 0 1
9 9 7 7 (2) (2)
1.9 0.8
6 0.5 1 (10) 0.4 (0.5) 0
0.3 0.2 0.1 (0.1)
0.7 0.7 0.7 (13) (13)
0 0 (20) (1)
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2019
2020
2021
2022
2023E
2024E
2025E
2026E
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates
Exhibit 20: Max plans to add 2,680 net beds over the next five years
Bed expansion plan, March fiscal year-ends, 2022-28E (#)
2022 2023E 2024E 2025E 2026E 2027E 2028E

Consolidated hospitals
Max Super Speciality Hospital, (West Block) Saket 201 201 201 201 201 201 201
Max Hospital, Gurugram 92 92 92 392 592 592 1,092
Max Super Speciality Hospital, Mohali 220 220 220 410 410 410 410
Max Super Speciality Hospital, Shalimar Bagh 28 0 38 0 38 0 38 0 38 0 38 0 38 0
Max Super Speciality Hospital, Dehradun 201 201 201 201 201 201 201
Max Super Speciality Hospital, Bathinda 200 200 200 200 200 200 200
Max Super Speciality Hospital, Vaishali 378 378 378 378 378 378 378
New hospital, East Delhi — — — — 250 250 400
Bed capacity 1,572 1,672 1,672 2,162 2,612 2,612 3,262
Managed healthcare facilities
Nanavati Max Hospital, Mumbai (a) 328 328 328 657 657 768 768
BLK-Max Super Speciality Hospital, Rajendra Place 540 540 540 540 540 540 540
Dwarka Hospital — — 300 300 300 300 300
Bed capacity 868 868 1,168 1,497 1,497 1,608 1,608
Partner healthcare facilities
Max Super Speciality Hospital, (East Block) Saket (b) 320 320 320 320 620 620 8 20
Max Super Speciality Hospital, Patparganj 402 402 402 402 402 402 402
Max Smart Super Speciality Hospital, Saket 250 250 250 600 600 8 50 1,350
Bed capacity 972 972 972 1,322 1,622 1,872 2,572
Total beds 3,412 3,512 3,812 4,981 5,731 6,092 7,442
Notes:
(a) 160 beds need to be demolished before commencement of Phase 2. So, there is a 271-bed addition on gross basis.
(b) All expansions are in Vikrant foundation, which is a PHF. Due to negligible contribution as of FY2022, it has been included with the already existing PHF,
Saket Complex (East Block).

Exhibit 21: Max plans on spending Rs91.6 bn over the next five years to fund its capex
Capex split, March fiscal year-ends, 2022-27E (Rs bn)
Growth capex (consolidated hospitals) Maintainence capex

Growth capex (PHFs) Maintainence capex (PHFs)
12 0.5
0.4
0.7
9 2.7 3.8
1.7 0.6
0.4 0.7
1.1
1.0 1.4
6 2.9
4.1
7.3 1.7
3 6.0 6.3 5.7 1.6
2.7
1.8
0
2022 2023E 2024E 2025E 2026E 2027E
Reduction of institutional business to improve payor mix

Even as Max has been outperforming its peers and generating higher ARPOBs, we believe it
Based on our analysis,
still has further room for improvement, led by a better payor mix. As of FY2022, 31% of
we believe the Max’s beds were catering to institutional patients (government and public enterprises
pruning of insurance-sponsored patients). Compared to 20% sales contribution from institutional
institutional mix to 15% patients for Max in FY2022, institutional patients constituted 7% and 15% of FY2022
of beds can alone hospital sales for Apollo Hospitals and Fortis, respectively. Pricing for these beds is at a 40%
drive 25% higher discount to its regular hospital rates for cash, third-party commercial healthcare insurance
and international (CTI) patients for similar procedures. For example, in hospitals like
EBITDA over the next
Gurugram, which have no institutional business, Max’s FY2022 ARPOB is as high as
2-3 years
Rs86k/day. The institutional beds have a positive contribution margin, but a negative EBITDA.
Institutional patients, albeit providing a minimum guarantee of supply, lead to lower
realizations and suboptimal utilization of hospital infrastructure.
Since Radiant’s takeover, contribution of institutional beds has declined by 600 bps over
FY2020-22. However, we believe the drop could have been higher had it not been for the
pandemic. Assuming no further disruption from Covid, Max has guided for improving the
payor mix by reducing the institutional bed share from 31% to 15% within the next two
years. This will make more census beds available for higher ARPOB patients. Based on our
analysis, we believe the pruning of institutional mix to 15% of beds can alone drive 25%
higher EBITDA over the next 2-3 years. This can alone lead to a boost of 350-400 bps to
Max’s EBITDA margins. We have not built this transition completely in our estimates as we
believe there might be operational challenges in implementing this change. The company
remains confident though as evidenced from its recent transition in Saket where despite
scheme patients being discontinued for OPD services, footfalls were not impacted much.

Exhibit 22: Max has 20% revenue share from scheme patients, as compared to 7-15% for its peers
Payor mix by revenue share, March fiscal year-end, 2022 (%)
Self-paid International Insurance and TPAs Institutional

100
7
15 20
22
80
35
24 35
60 37
7 4
7
40 6
51 50
20 43
38
0
Apollo Narayana Fortis Max
Exhibit 23: Max aims to cut institutional mix from 31% to 15% Exhibit 24: Institutional patients contribute 20.1% sales for Max
Payor mix by bed share, March fiscal year-ends, 2019-22 (%) Payor mix by revenue share, March fiscal year-ends, 2019-22 (%)
International Institutional Self-paid TPAs & Corporates Institutional International

TPAs & Corporates Self-paid, TPAs & Corporates 100 3.9 5.5
100 2.0 2.8 11.9 11.1
5.8 5.3
23.2 20.1
80 22.1
80 34.2 31.3 22.8
37.3 36.6
60
60 32.1 36.9
22.9 25.5
38 .7 38 .5
40 34.2 34.8 40
20 20 42.4 41.3 40.8 37.5

22.7 23.3 25.1 27.4
0 0
2019 2020 2021 2022 2019 2020 2021 2022
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities
Exhibit 25: Pruning of institutional mix can alone drive 25% higher EBITDA over the next 2-3 years
Financial benefit from change in bed mix, March fiscal year-ends, 2022-24E (Rs mn, %)
2022 2024E CAGR (%)

ARPOB split
Institutional ARPOB (Rs/day) 38 ,000 38 ,000
Non-institutional ARPOB (Rs/day) 62,000 62,000
Institutional mix at 15% beds in FY2024
Overall ARPOB (Rs/day) 54,560 58 ,400
Revenues (Rs mn) 51,709 56,144 4.2
EBITDA (Rs mn) 13,431 16,757 11.7
EBITDA margin (%) 26.0 29.8 38 7 bps

Normalization of international patient footfalls to aid ARPOB further
ARPOB for Recovery in medical tourism is another lever for boosting ARPOB. International medical
tourism is the most premium segment for hospitals as ARPOB for international patients is
international patients
75-80% higher than domestic patients. We note despite much higher ARPOBs, margins for
is 75-80% higher
international patients are only a tad better than Max’s company average owing to payments
than domestic made to facilitators. A lot of international patients travel to India, primarily for high-end
patients medical surgeries due to affordable clinical care. As of FY2019, annual footfalls of medical
tourists in India stood at 0.7 mn. India has been a preferred destination to gain access to
quality health services for patients in neighboring countries (Bangladesh, Sri Lanka), the
Middle East and Africa. In India, there are around 37 Joint Commission International (JCI)
accredited hospitals and 513 National Accreditation Board for Hospitals and Healthcare
Providers (NABH) accredited hospitals. Clinical outcomes in NABH-accredited hospitals are
comparable to those at internationally recognized facilities. The majority of JCI hospitals are
centered in a few locations throughout the country, including Delhi and Mumbai. The Indian
government has announced initiatives like (1) 'Heal in India', in which the government is
looking to promote India's medical facilities and infrastructure through a new campaign,
with plans to standardize processes and treatment packages for foreign nationals, and (2)
'Ayush Visa', in which the government will introduce a special category for foreign nationals
who want to come to India for medical treatment.
Exhibit 26: We forecast a 4.5% CAGR for ARPOB over FY2022-26E

ARPOB, March fiscal year-ends, 2019-26E (Rs/day)
80,000
66,522
63,068
60,165
60,000 55,68 4 57,334
45,243 45,358
40,8 69
40,000
20,000
0
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Exhibit 27: International patients have higher ARPOB compared to all other payor segments
ARPOB of Max’s payor mix, March fiscal year-end, 2020 (Rs/day)
120,000 110,250
90,000
63,000
56,700
60,000
38 ,000
30,000
10,000
0
Self-paid International Insurance and TPAs Institutional EWS (Economically
weaker section)
International patient volumes for Max to almost completely normalize by 2QFY23
Max has been at the Max has been at the forefront of medical tourism, aided by its considerable presence in the
metro cities, along with well-connected travel facilities and allied services. We note Radiant
forefront of medical
has been an early mover and has been focusing on this segment in the BLK hospital since
tourism, aided by its
CY2012. Before the pandemic, international patient share by value stood at 11+% for Max,
considerable presence compared to 5.5% in FY2022. Max aims to take this contribution to 15% by FY2023E end.
in the metro cities, Currently, international patient footfalls have reached 90% of pre-Covid levels for Max. Top
along with well- 15 countries constitute 70% of Max’s international sales. Max intends to set up a global
connected travel direct-to-fly franchise, similar to some hospital chains in Thailand. As travel restrictions
facilities and allied subside, we expect international patient volumes to almost completely normalize by 2QFY23.
services Exhibit 28: Iraq and Afghanistan constituted 41% of international patients in India in CY2019
Key countries and regions contributing to medical tourism in India, March fiscal year-end, 2019 (%)
Africa, 15
CIS, 11
Iraq, 18
Middle East, 7
Others, 26
Afghanistan, 23
Source: Ministry of Tourism, Kotak Institutional Equities

Exhibit 29: Foreign medical tourists coming to India had been rising until the onset of the pandemic
Medical tourism growth in India, March fiscal year-ends, 2014-30E (‘000, %)
Foreign tourists for medical purpose ('000, LHS) %total tourists (RHS) 3,000
3,000 10
8
2,250
6.4
6.1
6
4.9 4.9
1,500
4
2.9
2.4 700
750 640
430 500 2
18 0 230
0 0
2014 2015 2016 2017 2018 2019 2030E
Despite Max’s high sales concentration, Delhi NCR remains an attractive market
As of FY2022, 77% As of FY2022, 77% of Max’s network hospital revenues came from Delhi NCR. While high
concentration from Delhi NCR is certainly a risk for Max, we highlight that Delhi NCR
of Max’s network
remains an attractive market owing to three factors – (1) dominant domestic healthcare hub,
hospital revenues
(2) strong international patient footfalls and (3) lower bed density. Delhi NCR continues to
came from Delhi NCR be a dominant healthcare hub given less tertiary bed additions beyond the cities and also
due to continuous population migration into Delhi NCR. Local medical tourism is particularly
higher for complex procedures and super-specialties. Given that Delhi NCR region has a
well-developed hospital infrastructure, it attracts patients from the neighboring states. This
indicates willingness of people from nearby markets to travel in order to access quality
healthcare facilities. ~20% of Max’s footfalls are from upcountry areas. As of FY2022,
upcountry business contributed 16% to Max’s overall network sales. For Max, upcountry mix
is higher in Delhi NCR at 20% of sales, compared to less than 10% in Mumbai (Nanavati).
Apart from its domestic attractiveness, Delhi NCR is an important market for international
medical tourism due to its strong connectivity and quality healthcare infrastructure. As per
Ministry of Tourism, Delhi NCR constitutes 42-45% of international patient footfalls coming
to India. Despite the high domestic and international demand, Delhi’s bed density of 2.7
beds per 1,000 population is much lower than all Indian metros, except Kolkata. Thus, in our
view, Delhi NCR remains an attractive market for Max.

Exhibit 30: Delhi NCR attracts the highest international patient footfalls across India
International patient footfall distribution across Indian cities, March fiscal year-end, 2020 (%)
Hyderabad, 6 Others, 15
Mumbai, 12
Chennai, 24
Delhi NCR, 44
Source: Ministry of Tourism, Kotak Institutional Equities
Exhibit 31: Delhi NCR has one of the lowest bed densities Exhibit 32: Delhi NCR has the lowest quality bed density
Beds per 1,000 population, March fiscal year-end, 2021 (#) Quality beds per 1,000 population, March fiscal year-end, 2021 (#)
5 1.0
4.0 4.0 0.8
0.8
4 0.8
3.3 3.6
3.0 0.6
3 2.7 0.6
2.3
0.4 0.4
2 0.4
1 0.2
0 0.0
Delhi NCR
Bangalore
Hyderabad
Pune
Kolkata
Chennai
Mumbai
Bangalore
Delhi NCR
Hyderabad
Chennai
Mumbai
Source: Yatharth DRHP, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Exhibit 33: Delhi NCR enjoys a higher ARPOB as compared to other key Indian cities
ARPOB across key cities, March fiscal year-end, 2021 (Rs '000/day)
60
50
46 45
45 42
33
30
15
0
Delhi NCR Chennai Mumbai Bangalore Hyderabad
Exhibit 34: List of well-known hospitals in Delhi NCR region along with bed capacity
Hospitals in Delhi NCR, March fiscal year-end, 2021
Bed capacity as of FY2021

Key private hospitals in Delhi NCR
Medanta Medcity - Gurugram 1,259
Indraprastha Apollo Hospital 718
Sri Gangaram Hospital 675
BLK Max Super Specialty Hospital 538
Max Hospital Saket (East and West block) 521
Batra Hospital 500
Yatharth Super Speciality Hospital - Greater Noida 450
BLK Max Super Specialty, Patparganj 402
Yatharth Super Speciality Hospital - Noida Extension 400
Artemis Hospital, Gurugram 400
Key government hospitals in Delhi NCR
Lok Nayak Jai Prakash Narayan Hospital 1,597
Dr. Ram Manohar Lohia Hospital 1,532
Safdarjung Hospital 1,531
AIIMS 1,162
GB Pant Hospital 714
Source: Yatharth DRHP, Kotak Institutional Equities

Superior case mix compared to peers
Max generates 70% Max generates 70% of its hospital revenues from high-end surgeries like solid organ
transplants, organ-specific oncology procedures, revision joint replacement surgeries, etc.
of its hospital
Contribution of complex tower specialties to overall sales is higher for Max and Apollo
revenues from high-
Hospitals, compared to other listed hospital chains. Max provides healthcare services across
end surgeries secondary, tertiary and quaternary care specialties with a rich case mix dominated by
treatments in fields of oncology, cardiac sciences, neurosciences, renal sciences, orthopedics
and minimal access metabolic and bariatric surgery (MAMBS). High-end tower specialties
include complex procedures, high-end surgeries, which require developed medical
technology like robotics, AI and perfect execution. Consequently, these specialties yield
higher realizations. Continued focus on high end treatments, investments in latest medical
infrastructure, and an array of super-specialty hospitals provides Max an edge in these
treatments. At 30%, Max has the highest proportion of beds allocated to critical care
among its peers. For patients from all over the country, as well as outside India, seeking
quality medical care, Max is one of the preferred destinations. Max is credited with carrying
out one of the largest oncology programs in India and is the largest provider for bone
marrow transplants in Asia.
Exhibit 35: Within specialties, Max has higher contribution from oncology, cardiac, neuro and orthopedics
Specialty mix, March fiscal year-ends, 2019-22 (%)
2019 2020
Orthopaedics, Orthopaedics,
11.2 Renal sciences, 10.7
8 .8 Renal sciences,
Neuro sciences, Liver and biliary Neuro sciences, 9.4
9.7 sciences, 2.5 10.1
Liver and biliary
sciences, 2.9
Internal medicine,
11.3 Internal medicine,
Cardiac sciences, 8 .6
Cardiac sciences,
12.5 13.1
OBGY and OBGY and

pediatrics, 5.8 pediatrics, 6.7
MAS and general
surgery, 4.8 MAS and general
surgery, 5.3
Pulmonology, 4.2
Oncology, 19.6 Oncology, 20.5 Pulmonology, 3.6
Other specialties, Other specialties,
9.6 9.1
2021
2022
Renal sciences,
8 .4 Liver and biliary Renal sciences,
Orthopaedics, 6.1 sciences, 2.4 Orthopaedics, 8 .3 8 .7
Liver and biliary
Neuro sciences, Neuro sciences, sciences, 3.3
9.0 Internal medicine, 9.3
17.4
Internal medicine,
12.4
Cardiac sciences, Cardiac sciences,

11.1 11.7
OBGY and
OBGY and
pediatrics, 4.4
pediatrics, 4.9
MAS and general
surgery, 4.1 MAS and general
surgery, 4.9
Pulmonology, 9.3 Pulmonology, 7.0

Oncology, 20.2 Oncology, 20.8
Other specialties, Other specialties,
7.6 8 .7

Exhibit 36: Max generates 54% sales from its tower specialties
Specialty mix comparison, March fiscal year-end, 2020 (%)
Cardiac sciences Oncology Neuro sciences Orthopaedics Others

100
80
46 46
59 59
60
11 10
40 10 12 6 8
8
11 15
20 10
20
7
21 17
13 11
0
Max Apollo Fortis KIMS
We expect occupancy levels to hover around 67-74% over FY2023-26E

Max’s occupancy levels have been higher than most peers leading to the company
announcing the extensive expansion phase. Due to the Omicron wave, occupancy in
4QFY22 at 67.9% was impacted by a decrease in OPD footfalls and total admissions (both
Covid and non-Covid). Aided by recovery in non-Covid footfalls, Max expects sustainable
occupancy to stabilize at 77-78% over the next few quarters. We expect further recovery in
Max’s OPD volumes, which would serve as a funnel for its IP volumes. However, due to the
on-going expansion, we factor in network occupancy levels around 67-74% over FY2023-
26E for Max.
Exhibit 37: We expect Max to operate at 67.6% occupancy in FY2026E

Occupancy, March fiscal year-ends, 2019-26E (%)
Exhibit 37:
80
74.5 74.4
75
72.5 72.9
72.1
70
67.5 67.6
64.7
65
60
55
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Well-positioned to tap future inorganic growth opportunities
From an M&A Given the healthy balance sheet, strong FCF generation and its strong M&A track record,
Max continues to focus on value-additive inorganic growth. Max is aiming to fortify its
perspective,
current position in existing core markets or in new Tier 1 markets where demand/supply
operating assets
mismatch is very high through inorganic pursuits. From an M&A perspective, operating
would be a priority, assets would be a priority, followed by build-to-suit assets. Max is exploring acquisition
followed by build-to- opportunities in key cities, Maharashtra, certain cities in South India like Bengaluru as well as
suit assets acquisition opportunities in its existing markets. Max has an experienced management team
that has successfully executed acquisitions including BLK (CY2009), Nanavati (CY2014) and
Max Hospitals (CY2020). Despite the ongoing expansion phase, we estimate Max to
cumulatively generate Rs18.3 bn FCF over FY2023-26E, leading to a strong net cash position
of Rs12.8 bn by FY2026E. Net debt to EBITDA stands at 0.2X currently and the company is
also comfortable with stretching its gross debt to EBITDA to 2.5X to fund acquisitions. We
expect Max to fund its future inorganic endeavors with a combination of internal accruals
and debt. As demonstrated with BLK, Nanavati and Max Hospitals, we expect the company
to be judicious in terms of M&A target valuations and derive significant synergies and
operating efficiencies from its acquired assets.
Exhibit 38: Max has a healthy EBITDA to OCF conversion rate Exhibit 39: Max has a healthy PAT to FCF conversion rate
OCF as %EBITDA, March fiscal year-ends, 2019-26E (Rs bn, %) FCF as %PAT, March fiscal year-ends, 2019-26E (Rs bn, %)
Operating cash flow (Rs bn, LHS) Free cash flow to equity (Rs bn, LHS)
30 %EBITDA-OCF conversion (RHS) 110 %PAT-FCF conversion (RHS) 47.8
12 36.3 50
100.9
24 14.5 17.1
100 8
8 (5.5)
93.6 0
17 (23.6)
18
4
13 14 90 4
12 2 2
8 4.0 10 (70.3) (50)
12
0
6 6 80 (1) (1) (0)
76.1 (100)
6 4 8 1.6 (4) (122.8 )
77.6 78 .8 72.0
0 70 (8) (6) (150)

2019
2020
2021
2022
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2023E
2024E
2025E
2026E
Max Lab – one of the largest diagnostic service providers in North India
Max’s wholly owned diagnostics subsidiary, Max Lab, provides non-captive pathology
services outside of its hospitals. Max Lab has a strong presence in Delhi NCR and as per Max,
is now the third largest diagnostic service provider in North India, behind Dr Lal Pathlabs and
SRL. Max has an aspiration to be among the Top 5 players by sales in India in diagnostics. As
of Mar 2022, Max Lab had 760 active clients across 25 cities. Similar to FY2022, the
company plans to again double its patient touch points in FY2023. The entity also has 25
company-owned collection centers and offers 2,500+ tests in its test menu. These company-
owned company-operated stores enhance visibility and serve as a benchmark for the
franchisees. Max is in the process of opening its first independent lab in Noida in the next
few months. Max Lab serves both B2B and B2C customers. While the B2C segment growth
is being driven by proliferation of collection centers (owned and partnered) and home
collection services, inclusion of partner facilities fuels B2B development. Currently, 25% of
diagnostics sales come from the wellness segment. The management expects this to increase
towards 35% contribution. We note Max continues to invest in this business and has
augmented the leadership team of Max Lab. Max Lab aims to add more third-party
managed collection centers, pick-up locations in medical clinics, and Hospital-based Lab
Management (HLM) as it looks to build scale. There also has been higher focus on brand
building aided by several initiatives to boost the brand recognition.
Max Lab to grow at 28% CAGR over FY2022-26E
Max Lab expects to Max Lab is planning to leverage the strong Max brand name in North India, provide an
enhanced customer experience and have a lower turnaround time than competitors. Max
reach Rs2.5-3 bn
Lab is aiming for aggressive expansion through increased network coverage and M&A
sales in 2-3 years with
options because it has an asset-light and scalable setup. Max Lab expects to reach Rs2.5-3
industry level margins bn sales in 2-3 years with industry level margins. FY2023 will be an important year for
expansion in Uttar Pradesh for Max Lab. In our view, given the business is still at a gestation
stage and incurring likely higher outreach expenses, it is operating at sub-optimal
profitability. Max remains keen on making opportunistic acquisitions in diagnostics at
reasonable valuations.
Exhibit 40: We model 28% CAGR in sales for Max Lab Exhibit 41: We model Rs85 mn Covid sales in FY2023E
Max Lab sales, March fiscal year-ends, 2019-26E (Rs mn, %) Max Lab sales split, March fiscal year-ends, 2019-26E (Rs mn)
Net Max Lab revenues (Rs mn, LHS) Non-Covid revenues (Rs mn) Covid revenues (Rs mn)
3,000 % yoy growth (RHS) 3,000
2,790 80
69.7 2,224
60 2,250
2,000 60.2 57.5 1,746
40 1,500
1,239 2,790
1,038 40.9 85 2,224
1,000
659 325 1,746
27.4 25.4 20 750
411 1,154
242 19.4 272
712
242 411 38 7
0 0 0
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2019
2020
2021
2022
2023E
2024E
2025E
2026E
Exhibit 42: We forecast 3.9 mn patients in FY2026E for Max Lab Exhibit 43: We forecast 10.2% margin for Max Lab in FY2026E
Max Lab patients, March fiscal year-ends, 2019-26E (‘000, Rs) Max Lab EBITDA, March fiscal year-ends, 2019-26E (Rs mn)
Number of patients ('000, LHS) Reported EBITDA (Rs mn, LHS)

1,000 15
Realizations/patient (Rs, RHS) EBITDA margin (%, RHS)
1,18 2
1,127
6,000 1,200 800
998 10.1 10.2
10
757 900 8 .1
750 742 727 3,914 600
4,000
3,058 5.5
713 600 400
2,352 28 5
3.5 5
2,000 1,653
1,370 18 0
300 200
660 96
348 0.7 67
215 2 14 1.2 13 6
0.5
0 0 0 0
2019
2020
2021
2022
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2023E
2024E
2025E
2026E

Exhibit 44: A company owned and operated Max Lab center Exhibit 45: Collection point within the Max Lab center
Max Lab, March fiscal year-end, 2022 Max Lab, March fiscal year-end, 2022
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities
Max Lab’s pricing is significantly higher than newer competitors
Our analysis suggests Our analysis suggests that pricing of Max Lab is 2.5-3.5X higher than the cheapest
organized alternative, even for specialized and semi-specialized tests. Given the focus on
that pricing of Max
building an integrated health-tech business model comprising e-diagnostics, e-pharmacies,
Labs is 2.5-3.5X
e-consultations and other services, we expect competition from top-tier, well-funded online
higher than the aggregators to remain elevated. While the pricing aggression by the newer entrants might
cheapest organized not be entirely sustainable over the longer run, unlike the PE-funded run for regional players
alternative, even for over CY2013-18, this time around the competition is from well-entrenched organized
specialized and semi- players. Our discussions with most of these new entrants indicate they have well laid out,
specialized tests multi-year business plans and appear to be in this for the long haul. As of now, Max is
banking on limited doctor connect, lesser reliability, lower specialized test options and
operational challenges in expanding geographical presence to be key growth barriers for the
online entrants.
Exhibit 46: Average pricing of Max Lab and incumbents is 2.5-3.5X higher than the cheapest organized alternative in Delhi NCR
Pricing and premium of various players over cheapest alternative, June 2022 (Rs, %)
Pricing of a sample bouquet of 9 tests (Rs, LHS) Premium to cheapest organized alternative (%, RHS)
6,000 300
5,190
5,060 5,110
4,8 20
5,000 250
4,000 200
3,405
2,775 2,8 30 2,700
3,000 2,475 2,600 150
2,100
2,000 1,475 100
1,000 50
0 0
Healthians
MFine
MediBuddy
Max Lab
Metropolis
Netmeds
Thyrocare
Dr Lal
Tata 1mg
Redcliffe
SRL
PharmEasy

Exhibit 47: Pricing comparison for a bouquet of routine, semi-specialized and specialized tests in Delhi NCR
Test prices, June 2022 (Rs)
Dr Lal Metropolis SRL Thyrocare Max Lab PharmEasy Tata 1mg Netmeds Healthians Redcliffe MediBuddy MFine
Test type Test
Glucose fasting 80 70 70 80 80 200 120 75 250 100 70 30
Calcium 170 18 0 170 200 18 0 100 200 100 200 150 140 70
Routine SGOT 170 160 220 200 170 200 200 135 150 150 150 55
SGPT 170 160 220 175 170 175 160 135 150 150 150 55
HbA1c 440 500 470 300 450 400 400 350 750 300 350 200
Thyroid profile (T3, T4, TSH) 550 500 550 300 540 250 200 270 250 200 450 135
Semi- Lipid profile basic 960 700 770 500 8 20 450 450 320 250 350 250 230
specialized Vitamin B12 1,100 1,000 1,050 650 1,100 500 550 450 350 300 430 250
Vitamin D 25-Hydroxy 1,550 1,550 1,540 1,000 1,600 500 550 640 350 400 610 450
Pancreatic cancer marker 1,350 1,250 1,600 750 1,390 500 1,020 8 00 200 - - 68 0
Specialized
HBV DNA load 7,500 6,900 4,500 - 6,000 - 4,760 2,400 2,700 6,000 4,000 2,000
Notes:
(a) We have not accounted for Tata 1mg's recent limited period promotional offers, valid till 30th June, 2022
Max@Home – low insurance coverage a limiting factor
Similar to Apollo Under Max@Home, Max provides quality and accessible homecare at patients’ doorsteps.
Max@Home is like an extension of Max’s hospital services, which includes ICU@Home,
24/7, Max has built
Nursing@Home, diagnostics and also Pharmacy@Home. Its service offerings include nursing
multi-channel access
care, attendant care, critical care nursing, medicine delivery, home sample collection, rehab
for patients, allowing medicine, X-ray at home, ECG at home, health check-up at home, nursing procedures,
them to book services doctor visits, medical rooms, adult immunization, among others. It aims to expand its
via the web and portfolio to include services such as dialysis at home, and dental check-up at home. Similar
mobile app to Apollo 24/7, Max has built multi-channel access for patients, allowing them to book
services via the web and mobile app. Max@Home mostly serves in Delhi NCR, Dehradun,
Chandigarh with a nascent presence in Mumbai. The Quality Accreditation Institute – a
member of the ISQua (International Society for Quality in Healthcare) has recognized
Max@Home, thus reaffirming the quality of care offered in patients' homes. This segment is
operating at 12-13% EBITDA margin with an opportunity to expand margins with topline
growth given the high fixed costs in the business. According to Redseer Consulting, the
Indian home healthcare industry is expected to grow at a CAGR of 11-13% to US$11-13 bn
by CY2025, up from US$5.4 bn in CY2020. The organized segment is expected to grow at a
CAGR of 40% to US$300 mn by CY2025. Homecare services are around 40% less
expensive than comparable hospital treatments. However, lack of insurance coverage
remains a hindrance in growing this segment significantly. We forecast revenue CAGR of
17.2% for Max@Home over FY2022-26E. Over the same period, we anticipate
Max@Home’s EBITDA margins to increase from 13.2% in FY2022 to 14.8% in FY2026E.

Exhibit 48: Pharmacy@Home is one of the services of Max@Home

March fiscal year-end, 2022
Exhibit 49: We build high teens growth for Max@Home Exhibit 50: We forecast 14.8% EBITDA margin in FY2026E
Max@Home sales, March fiscal year-ends, 2019-26E (Rs mn, %) Max@Home EBITDA, March fiscal year-ends, 2019-26E (Rs mn)
Net Max@Home revenues (Rs mn, LHS) Reported EBITDA (Rs mn, LHS)
8,000 80 1,000 20
% yoy growth (RHS) EBITDA margin (%, RHS)
14.8
58 .5 800 14.0 14.3 14.5
60 13.2 15
6,000 12.1
600
40 10
4,000 22.7 400
18 .0 18 .0 17.0 16.0 308
261
20 220 5
2.0 18 2
200 145
1,797 2,08 4 84
2,000 1,536
696 1,103 1,301 0 15 0
626 768 0
(9.4) (24)
0 (20)
(200) (3.8 ) (5)
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2019
2020
2021
2022
2023E
2024E
2025E
2026E

Further step up in digital initiatives on the cards
We expect Max’s Through its digital strategy, Max has been focusing on leveraging its strong brand, track
record of robust customer care, medical service network and clinical expertise. Max’s digital
digital investments to
platform allows users and doctors to (1) conduct video consultations, connecting users and
continue to be
healthcare professionals remotely, and (2) book medical appointments online, upload
elevated over the prescriptions and directly order medicines. Max’s online offering enables it to develop an
next few years, with a integrated healthcare service portfolio including e-pharmacy, e-consultations, e-diagnostics,
planned 60% yoy maintenance of patients’ medical records and homecare packages. As of 4QFY22, revenue
increase in its digital contribution from the digital channel (which constitutes lead generation from website and
budget in FY2023 app) accounted for 13% of total network revenues. Max is very clear about not investing in
a health-tech platform like 24/7. The focus is on leveraging digital in multiple other ways.
There are a number of digital initiatives being implemented in-house to streamline
operations. These include feedback management of healthcare service professionals and
patients, attendance management of employees through use of biometric tools among
others. We expect Max’s digital investments to continue to be elevated over the next few
years, with a planned 60% yoy increase in its digital budget in FY2023.
Exhibit 51: Max is running digital initiatives on a pilot basis across its facilities
March fiscal year-end, 2022

RAZOR-SHARP FOCUS ON OPERATING AND CAPITAL EFFICIENCY

Led by Mr Abhay Soi and a strong leadership team, Max has been able to turn around the underperformance
of most of its facilities, thereby improving margins and also deleveraging the balance sheet. Cost
management and capital allocation has been the leadership’s forte. We expect Max to continue with its
prudent capital allocation policy by focusing on brownfield and build-to-suit models with opportunistic M&A
and addition of land parcels in adjoining areas. Owing to its largely asset-light strategy, the company has the
ability to swiftly achieve EBITDA breakeven within 3-4 months for brownfield projects. After posting a
remarkable 1,260 bps EBITDA margin improvement over FY2019-22, we expect the obstinate focus on RoIC
metrics across its hospital network to result in 15.3% RoIC in FY2026E.
Focus on less capital intensive models provides edge to Max’s expansion strategy
7 out of 12 hospitals Max has followed a four-pronged approach for expansion to efficiently deploy its capital – (1)
owned and operated hospitals, (2) leased and operated hospitals (land on long-term lease),
in Max’s network are
(3) revenue sharing with partners (land and building owned by partners) and (4)
completely owned by
management of hospitals for a management fee. Seven out of 12 hospitals in Max’s
the company, while network are completely owned by the company, while others are on lease, revenue share or
others are on leased, O&M models.
revenue share or
Max has largely followed an asset-light model for its expansion wherein the company
O&M models partners with government bodies, charitable trusts and other non-profit organizations to set
up/manage hospitals. In order to implement this strategy, Max is seeking partnerships with
real estate developers, wherein the owner constructs the property, and Max would operate
and manage the facility in lieu of a revenue share or fee.
The company has leveraged its strong brand name and track record in the Delhi NCR region
to position itself as a partner-of-choice for such partners to operate and manage their
healthcare facilities. We believe Max’s hybrid model is a more efficient model for expansion
versus capital-intensive models often used by peers, and provides the company a distinct
advantage to scale its operations and develop a strong presence in its core market of Delhi
NCR. Moreover, the asset-light models also make it easier for the company to exit specific
assets if their performance is not up to the mark.
Exhibit 52: Max intends to double its bed capacity over FY2022-28E
Bed expansion outlay, March fiscal year-ends, 2022-28E (#)
Consolidated hospitals Managed healthcare facilities Partner healthcare facilities

8,000
6,000 2,572
1,872
1,622
1,322
4,000 1,608
972 1,497 1,608
972 972 1,497
868 1,168
2,000 868
3,262
2,612 2,612
2,162
1,572 1,672 1,672
0
2022 2023E 2024E 2025E 2026E 2027E 2028E

Striking a balance between cost optimization and clinical excellence
The management has Cost rationalization has been a key forte of the management team, as evidenced from the
significant cost savings at Max hospitals post acquisition, operational turnaround of the BLK
realized overall
hospital in Delhi, meaningful improvement in operating and financial metrics at Nanavati
annual sustainable
Hospital, and closure of economically unviable facilities like Pitampura and Greater Noida.
cost savings of Rs3.3 Over the past two years, Max has been delivering industry-leading EBITDA margins, owing to
bn post Radiant’s its agile expense management. There was an extensive one-on-one mapping done between
acquisition of Max Radiant and Max to identify gaps in Max. The cost-saving measures incorporated by the
company include (1) renegotiation of supplier contracts to curb raw material inflation, (2)
matching physicians' pay-outs in accordance with their duties and responsibilities, (3)
reduction in doctors' minimum guarantee fees, and (4) reduction of other overheads. As a
result of its cost-efficiency measures, Max implemented Rs2.2 bn cost savings in FY2020 and
another Rs1.1 bn cost savings in FY2021. Thus, the management has realized overall annual
sustainable cost savings of Rs3.3 bn post Radiant’s acquisition of Max. Steered by a very
granular focus, the cost savings have been achieved across multiple functions and cost line
items. We highlight that within this entire cost-saving exercise, the largest item was just
Rs120 mn. In our view, while focus on cost efficiencies will continue going forward, any
meaningful boost to margins from significant cost savings are unlikely as the company works
on repurposing costs.
Exhibit 53: Cost of medical consumables has declined by 240 bps for Max over FY2020-22
Cost of medical consumables as % sales, March fiscal year-ends, 2020-22 (%)
60 2020 2021 2022

54
52
49
40
28 27 29 30 31
26 25 26
24 24 25 24 24
23 22 22 22 22
21 20
20 17
15 16
0
Fortis Rainbow KIMS Narayana HCG Max Aster Apollo Medanta
Notes:

Exhibit 54: Max has reduced staff costs by 370 bps over FY2020-22
Staff costs as % sales, March fiscal year-ends, 2020-22 (%)
40 2020 2021 2022
34
32 32
30 28
26
24 25
23
21 22 21 21
19 19 20
20 18 17
16 17 16 17
15 16 15
12 12
10
0
Rainbow Apollo KIMS HCG Fortis Narayana Max Aster Medanta
Notes:
Exhibit 55: Doctor fees (as % of sales) for Max are lower than most of its peers
Doctor fees as % sales, March fiscal year-ends, 2020-22 (%)
2020 2021 2022

30
25
23
22 22 22
21 21 21
20 20 20 20 20 20 20 20
19
20 18
14 15 15
9
10 8 7 8 8
0
Aster Max Narayana Fortis Apollo KIMS Rainbow HCG Medanta
Notes:

Exhibit 56: Max has reduced SG&A spends by 340 bps over FY2020-22
SG&A costs as % sales, March fiscal year-ends, 2020-22 (%)
2020 2021 2022

40
29 30
30
25 25
23 23
21 21 21 20 21 21
20 19 19 20
20
16 17
15 16
14 15 15 14
11 11
10
0
KIMS Max Aster Rainbow Narayana HCG Apollo Fortis Medanta
Notes:
Our checks indicate positive feedback from the doctor community in Delhi NCR
Our discussions with 18+ doctors in Delhi NCR suggest that the cost initiatives post Radiant’s
Our discussions with takeover of Max have had no negative impact on the clinical outcomes. These checks are
18+ doctors in Delhi also supported by the continued strong franchise of BLK and Nanavati hospitals (erstwhile
NCR suggest that the Radiant hospitals) among the doctor and patient community despite similar efficiency
cost initiatives post improvement measures being incorporated in these hospitals over the past decade. From a
Radiant’s takeover of patient perspective, Max underwent significant repairs and maintenance and incorporated
various patient services, initiated a robust patient feedback mechanism with a quick
Max have had no
turnaround for addressing complaints. Also, Max was among the first hospital chains to
negative impact on
offer its facilities for Covid patients. We note that there has been very low churn among
the clinical outcomes Max’s key specialist doctors post Radiant’s takeover.
Robust turnaround track record of BLK and Nanavati before Max takeover
Even before the Max turnaround, the management’s sharp focus on harnessing efficiencies
is visible from its successful integration of BLK and Nanavati hospitals.
BLK has witnessed a noteworthy turnaround in the past decade
When Radiant gained operational control of BLK in Delhi in CY2010, BLK was a lossmaking
entity at the operating level with very low occupancy levels. Under Radiant, the hospital
witnessed a remarkable turnaround. Radiant recruited doctors with a higher focus on
competency rather than popularity. Also, there has been a focus on equity-based nursing
(similar patient cohorts being clubbed together). Radiant worked on building complexities by
enhancing specialities including bone marrow transplants, oncology and joint replacements.
Since then, we note that BLK has conducted 1,200 bone marrow transplants and has one of
the largest bone marrow transplant centers outside of the US. Radiant also built a team to
focus on international patients as early as CY2012. As a result, pre-Covid, BLK had ~30% of
sales and 10% of footfalls from international patients. On the cost side, BLK was one of the
first hospitals to set up a costing department in CY2013. There has been a tremendous
focus on operational efficiencies and the management has been diligently measuring its
progress across 140 parameters. Further aided by indirect cost management including
activity-based costing and better supply chain management, BLK achieved breakeven within
three years and now generates 18%+ EBITDA margins.

Exhibit 57: BLK’s sales reported a 28.5% CAGR over FY2011-20 post Radiant’s takeover
There has been a BLK sales, March fiscal year-ends, 2011-20 (Rs mn, %)
tremendous focus on BLK revenues (Rs mn, LHS) % yoy growth (RHS)
operational 8,000 80
68 .9 70.4 7,090
efficiencies and the
management has 5,990
6,000 60
5,210
been diligently 5,020
4,48 0
measuring its
3,78 0
4,000 32.9 40
progress across 140
parameters 2,8 30
2,130 33.6 18 .5 18 .4
2,000 15.0 20
1,250 12.1
740 3.8
0 0
2011
2012
2014
2015
2018
2019
2013
2016
2017
2020
Exhibit 58: Remarkable turnaround in BLK’s profitability

BLK EBITDA, March fiscal year-ends, 2011-20 (Rs mn, %)
BLK EBITDA (Rs mn, LHS) EBITDA margin (%, RHS)

1,500 30
21.3 1,290
17.1 1,140
1,200 20
12.9 1,070
8 .5 9.8 8 90 19.0 18 .2
900 10
0.9
58 0
600 0
(8 .8 ) 370
300 240 (10)
(20.3) 20
0 (20)
(150) (110)
(300) (30)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Exhibit 59: Reception area of BLK hospital

BLK hospital, March fiscal year-end, 2022
A similar turnaround has been seen in Nanavati as well
Even as BLK’s turnaround was under progress, Radiant Life took over operations of Nanavati
hospital in Mumbai in CY2014. At that time, the hospital was reporting a measly ARPOB of
Rs12,000 and negative EBITDA margin of 20% with annual cash burn of Rs600 mn. Since
the takeover by Radiant, EBITDA margins of Nanavati have seen a healthier trend aided by
several cost-saving measures. There has been clearly a focus on driving revenues along with
cost-optimization measures. Given the scale added post the Max acquisition, procurement
costs have reduced. The Max brand has also helped in attracting doctors. Currently,
Nanavati is operating at ARPOB (ex-Covid) of Rs70k. There has been a focus on building
tower specialities with increasing focus on transplant programs. International mix is 2-4% of
Nanavati’s sales.
Bed to employee ratio Currently, the hospital is operating at 9-10% EBITDA margin, much lower than the company
coverage due to higher doctor costs as well as higher employee costs. Despite the
in Nanavati is
operational turnaround, due to legacy reasons and a unionized workforce, employee cost (as
elevated at 8X
percentage of sales) of Nanavati at 35-36% is much higher than 21.3% average for the
compared to 5.5-6X network. Bed to employee ratio in Nanavati is elevated at 8X compared to 5.5-6X for other
for other Max Max hospitals. Max has recently established a voluntary retirement scheme (VRS) for
hospitals qualified employees who (1) have worked for the company for more than 10 years and (2)
are at least 40 years old but less than 59 years old as on September 4, 2021. This scheme (to
be conducted in 2-3 phases) should enable Max to control its employee expenses, through
downsizing of excess staff. Depending on the success of the VRS for qualified employees,
there is further scope for margin improvement. In addition to employee costs, doctor costs
(as percentage of sales) at 20% are higher in Mumbai than other cities. While there is no
institutional business at Nanavati, the facility has 20% EWS beds. As a result, Nanavati is
currently delivering EBITDA margins in the low teens, as compared to 20%+ margins of
other hospitals in the Max network.

Exhibit 60: Nanavati’s sales reported a 19% CAGR over FY2015-20 post Radiant’s takeover
Nanavati sales, March fiscal year-ends, 2015-20 (Rs mn, %)
Nanavati revenues (Rs mn, LHS) % yoy growth (RHS)

4,000 40
3,58 0
3,28 0
29.7 2,98 0
3,000 30
23.3 2,400
1,8 50 24.2
2,000 20
1,500
9.1
1,000 10
10.1
0 0
2015 2016 2017 2018 2019 2020
Exhibit 61: Turnaround in Nanavati’s profitability is in the process

Nanavati EBITDA, March fiscal year-ends, 2015-20 (Rs mn, %)
Nanavati EBITDA (Rs mn, LHS) EBITDA margin (%, RHS)

300 260 10
3.7 4.3
200 7.3
0.4 140
110
100 0
(4.3) 10
0
(100) (10)
(8 0)
(15.3)
(200)
(230)
(300) (20)
2015 2016 2017 2018 2019 2020

KEY RISKS: SALES CONCENTRATION, STAGNANT MIX, FALLOUT IN AGREEMENTS

High revenue concentration from Delhi NCR, delayed recovery in payor and case mix, failure to execute cost
savings measures, and fallout in agreements with partner healthcare facilities remains key risks. Retention of
specialist physicians and medical staff, increasing regulatory headwinds and competitive pressures are other
risk factors. While high concentration from Delhi NCR is a key risk, we believe it remains an attractive market
due to strong patient footfalls amid lower bed density.
High revenue concentration from Delhi NCR
As of FY2022, 77% As of FY2022, 77% of Max’s network hospital revenues came from Delhi NCR. Among its
17 network facilities, eight hospitals and four medical centers are located in Delhi NCR and
of Max’s network
one hospital each is located in Mumbai, Mohali, Bathinda and Uttarakhand. We note that
hospital revenues
flagship centers typically account for significant revenues and profits for most hospital chains.
came from Delhi NCR However, in case of Max, the skew is higher. While high concentration from Delhi NCR is
certainly a risk for Max, we highlight that Delhi NCR remains an attractive market owing to
healthy upcountry footfalls, strong international patient inflow and lower bed density. Also,
we expect contribution from mature facilities to decline as newly set up/acquired facilities
scale up.
Exhibit 62: 77% of Max's FY2022 hospital sales came from Delhi NCR
Hospital wise sales, March fiscal year-end, 2022 (%)
Medical centres, 7
Bathinda, 2 Saket (East block),
Gurugram, 4 14
Dehradun, 5
Saket (West block),
Saket
6
Mohali, 7
Max Smart (Saket),
7
Shalimar Bagh, 8
Nanavati, 10 BLK, 16
Patparganj, 11 Vaishali, 11
Source: Kotak Institutional Equities estimates
Delayed recovery in payor mix
Lowering of Lowering of institutional patient mix from 31% of volumes to 15% in the next two years is
expected to be an important ARPOB driver for Max. Pricing for these beds is at a 40%
institutional patient
discount to its regular hospital rates for cash, third-party commercial healthcare insurance
mix from 31% of
and international (CTI) patients for similar procedures. We note there can be operational
volumes to 15% in challenges in implementing this change. Secondly, even as we expect international footfalls
the next two years is to almost completely normalize by 2QFY23, there can be further delays contingent on the
expected to be an pandemic situation in India as well as in other countries. International medical tourism is the
important ARPOB most premium segment for hospitals as ARPOB for international patients is 75-80% higher
driver for Max than domestic patients. Any significant delay in reducing the institutional mix as well as
normalization of international footfalls can impact our ARPOB estimates.

Fallout in agreements with managed hospitals and trusts

Max operates and manages the Managed Healthcare Facilities pursuant to O&M agreements
and provides medical services to the Partner Healthcare Facilities under various medical
services agreements. Max has these arrangements with various societies and trusts that own
them, which are typically charitable institutions. Although they are not owned by Max, the
In terms of revenue,
Partner Healthcare Facilities contribute to revenues by fees for healthcare services, pursuant
the Partner to various arrangements. In terms of revenue, the Partner Healthcare Facilities contributed
Healthcare Facilities 33.1%, 33.2%, 36.8% and 31.8% of FY2019, FY2020, FY2021 and FY2022 network
contributed 31.8% of hospital sales respectively. These Partner Healthcare Facilities are also a source of significant
FY2022 network financial exposure for Max, including through trade receivables, loans and corporate
guarantees. For example, as of CY2020, the company had receivables amounting to Rs6.2
hospital sales
bn from Devki Devi Society, Balaji Society and Gujarmal Modi Society, the trusts which own
the Saket (East Block), Patparganj and Max Smart (Saket) hospitals respectively. These
receivables include performance deposits, advances in the form of loans and security
deposits given to the relevant healthcare providers/ trust hospitals. While Max periodically
values its receivables in accordance with relevant accounting standards, there can be a risk
on these receivables. Also, any tax implications in the future owing to the master service
agreement (MSA) structure cannot be ruled out.
The proportion of yearly gross receipts payable is determined beforehand and remains
unaltered until the expiry of the relevant O&M agreement or the prescribed periods. Hence,
Max may be compelled to pay deficits of agreed retained earnings in the agreements, and its
revenues may be stagnant. One of the O&M agreements has non-compete exclusivity terms,
which may prevent Max and its affiliates from participating in competitive activity within a
certain geographic radius throughout the life of the agreement. In addition, the O&M
agreements require Max to secure and maintain all licences for the building of additional
facilities and the running of hospitals, which it may be unable to do on time. Furthermore,
the parties' mutual assent may be used to prolong the agreements. However, there is no
guarantee that, when the original terms of the various O&M agreements expire, Max will be
able to extend all or any of the agreements on commercially viable terms. Besides, the O&M
agreements give Max's counterparties extensive termination rights in the case of specific
circumstances characterized as substantial breach, and there is no guarantee that the
agreements will not be terminated on this basis.
Delays in land acquisitions and regulatory approvals

Max’s expansion model relies on securing attractive assets and being partner of choice for
trusts and other hospitals. While the capital efficient approach prima facie looks attractive, it
is not without risks. As allocation of land and buildings is contingent on approvals from
government and other bodies, timelines for commissioning of facilities and therefore future
revenue growth can be significantly disrupted in case there are delays in approvals, deal
finalization and allocation of assets. For instance, in CY2019, the company’s plans to open
the Max Super Specialty Hospital in Vaishali were postponed due to a delay in receiving a
license from the state pollution control board to operate the facility.
Increasing regulatory challenges in the healthcare sector

The hospital industry is subject to extensive government regulations. As a result, Max is
required to obtain and maintain a number of statutory and regulatory registrations, permits,
and approvals under central, state, and local government rules in India, generally for carrying
out its business and for each of its facilities, with the exception of certain approvals required
in relation to the day-to-day operations of the Partner Healthcare Facilities. Max is also
accredited by NABH for hospitals, nursing excellence, blood banks, NABL, Green OT
certification, and JCI. The regulatory permits that it requires are normally provided for a set
period of time and are renewable at the end of that period.

Pursuant to a circular issued by the Government of Delhi, Max is mandated to provide free
medical treatment to patients from economically disadvantaged groups, up to 25% of OPD
consultations, and to reserve 10% of IPD beds for patients from economically disadvantaged
groups. It is mandatory in Mumbai to fulfil charity responsibilities at Nanavati Hospital. If
Max increases the number of available beds at such hospitals, which will result in increased
expenditures for treating patients from economically weaker groups, operating margins
would suffer. Also, any pricing caps by the government, particularly on services, can be a
meaningful setback.
Further stake sale by KKR
We note KKR’s stake Currently, Kayak Investments Holding (KKR) owns 27.5% stake in Max Healthcare, while
23.1% is owned by Mr Abhay Soi, Chairman & MD, Max Healthcare. Thus, put together, the
has steadily declined
promoters own 50.6% stake in the company. We note KKR’s stake has steadily declined
from 49% as of Mar-
from 49% as of Mar-2021 to 27.5% as on date. Any further stake sale over the near-to-
2021 to 27.5% as of medium term remains a distinct possibility.
date
Exhibit 63: KKR's stake in Max has steadily declined from Mar-2021 to Jun-2022
Shareholding pattern, March fiscal year-ends, 2020-22 (%)
Kayak Investments Holding Mr Abhay Soi Public & others

100
30 25 30
80 39
49 49
23
60 23 22
23
40 23 23
47 52 49
20 38
28 28
0
Mar-20 Sep-20 Mar-21 Sep-21 Mar-22 Current

FINANCIALS: WE EXPECT ROBUST 14.9% EBITDA CAGR OVER FY2022-26E

We expect Max to deliver healthy 14.8% and 14.9% revenue and EBITDA CAGRs over FY2022-26E driven by
steady growth in ARPOB, normalcy in international footfalls and ongoing expansion. On an overall network
basis, Max operates at an ARPOB of Rs55,684 /day as of FY2022, which we expect to grow at a 4.5% CAGR to
Rs66,522 /day in FY2026E. We expect network occupancies to hover around 67-74% over the next four years.
Despite planned doubling of capacities, we believe Max will generate cumulative FCF of Rs18.3 bn over
FY2023-26E. We expect Max to report healthy 15.3% ROIC in FY2026E, slightly diluted by new bed additions
and their gestation periods.
14.8% revenue CAGR over FY2022-26E led by higher ARPOB and bed additions
We expect Max to deliver healthy 14.8% revenue CAGR over FY2022-26E driven by steady
Max’s network
growth in ARPOB, normalcy in international footfalls and ongoing expansion. Max’s network
revenues consist of
revenues consist of consolidated (owned and managed healthcare facilities) and PHFs. We
consolidated (owned forecast a 15% revenue CAGR for the consolidated facilities over FY2022-26E driven by (1)
and managed 4.6% ARPOB CAGR over the same period from current levels of Rs60,302 to Rs72,254 and
healthcare facilities) (2) operational beds increasing from 2,304 to 3,655. We expect Saket, BLK, Gurugram,
and partner Nanavati and Vaishali to be the key revenue engines for Max hospitals by FY2026E.
healthcare facilities Saket (East block), Patparganj and Max Smart constitute the three PHFs. Of these, Saket
(PHFs) operates at record ARPOBs of ~Rs80k/day. Within PHFs, we forecast a 12.7% revenue CAGR
for the partnered facilities over FY2022-26E driven by (1) 4% ARPOB CAGR over the same
period from current levels of Rs57,639 to Rs67,356 and (2) operational beds increasing from
970 to 1,572.
On an overall network basis, Max operates at an ARPOB of Rs55,684 as of FY2022, which

we expect to grow at a 4.6% CAGR to Rs66,537 in FY2026E. We expect network
occupancies to be in the range of 67-74% over the next four years.
As of FY2022, Max Lab and Max@Home cumulatively contribute ~4% to network sales. By
FY2026, we expect their cumulative contribution to increase by 100 bps to ~5% led by rapid
expansion and benefit from Max’s digital initiatives.
Exhibit 64: 96% of Max’s FY2022 sales are contributed by the hospital business
Revenue split, March fiscal year-end, 2022 (%)
Max Lab, 2.0
Hospitals, 95.9
Max@Home, 2.1

Exhibit 65: We forecast 14.8% sales CAGR over FY2022-26E Exhibit 66: We forecast 74-75% gross margins over FY2023-26E
Network revenues, March fiscal year-ends, 2019-26E (Rs bn, %) Network gross profit, March fiscal year-ends, 2019-26E (Rs bn, %)
Net revenues (Rs bn, LHS) % yoy (RHS) Gross profits (Rs bn, LHS) % gross margin (RHS)
120 43.6 50 80 80
67
40
90 78
90 60 54
30
73
46
61 20 41 76
11.7 55 23.2 38
60 52 19.2 40 74.3
10 29
40 26 74
36 36 11.8 25 74.7
74.4 74.3
5.7 0 73.9
30 20
73.0 72
(10) 70.9
(9.8 ) 71.5
0 (20) 0 70
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2019
2020
2021
2022
2023E
2024E
2025E
2026E
Better payor mix and cost efficiencies to boost EBITDA margins

Despite Max doubling its bed capacity over the next five years, owing to its less capital
Among the hospitals,
intensive expansion, we expect the drain on EBITDA margins to be compensated.
Dehradun is the only Nevertheless, brownfield hospitals take 3-4 months to break even, while a greenfield project
leased facility like Gurugram should break even in 12-15 months for Max. All the planned expansion is in
the vicinity of existing flagship hospitals in major metros/tier-1 cities, which in turn should
result in faster EBITDA turnaround for new beds compared to the industry norm of 2-4
years. Key margin levers include (1) reduction of institutional bed mix from 31% to 15%, (2)
additional manpower cost savings from Nanavati hospital and (3) continued cost efficiency
measures.
We expect network and consolidated hospital EBITDA margins to remain range bound over
FY2022-26E on account of the ongoing expansion. Among the hospitals, Dehradun is the
only leased facility. Rental costs for Max amount to Rs350-400 mn per annum, thereby
leading to pre-Ind AS-116 EBITDA margin of 25.6% in FY2026E versus FY2022 level of 25%.
We expect Max Lab to gradually gain traction and improve margins to 10.2% by FY2026E
from 1.2% in FY2022, while we expect Max@Home to operate at EBITDA margins of 14-15%
over FY2024-26E.

Exhibit 67: We forecast 14.9%EBITDA CAGR over FY2022-26E Exhibit 68: We forecast 17.2% PAT CAGR over FY2022-26E
Network EBITDA, March fiscal year-ends, 2019-26E (Rs bn, %) Network adjusted PAT, March fiscal year-ends, 2019-26E (Rs bn, %)
EBITDA (Rs bn, LHS) % EBITDA margin RHS) Adjusted PAT (Rs bn, LHS) % PAT margin (RHS)
30 30 20 18 .5 20
27.1 17.7 18 .0 17.9
17.0
26.0 26.5 26.1 26.0 17
24
23 25 15 13.8 15
19 13
18 17 11
14 10
13 20 10 9 10
17.2 16.9 7.5
12
7 4.1 5
6 15 5 5
6 5 3
13.4 1
0 10 0 0
2019
2020
2021
2022
2026E
2023E
2024E
2025E
2019
2020
2021
2022
2023E
2024E
2025E
2026E
Return ratios to remain better than peers
Among the hospitals, We expect healthy free cash generation despite the ongoing expansion. We note Max has a
goodwill on account of consolidation of Rs37.7 bn on its books post Radiant’s acquisition of
Mohali and Dehradun
Max, which is tested for impairment annually. Adjusted for cash and current investments on
operate at the best books, driven by its less capital intensive expansion strategy, we expect Max to report
RoCEs in Max’s healthy 15.3% RoIC in FY2026E. Among the hospitals, Mohali and Dehradun operate at the
network best RoCEs in Max’s network. We expect gross cash conversion cycle to remain steady at 45-
50 days of sales post rationalization of scheme patients. Max remains highly focused on
executing RoIC accretive deals, be it acquisitions or asset-light expansions.
Exhibit 69: We forecast 13-15% RoAE over FY2023-26E Exhibit 70: We forecast 13-15% RoIC over FY2023-26E
RoAE, March fiscal year-ends, 2019-26E (%) RoIC, March fiscal year-ends, 2019-26E (%)
RoAE (%) RoIC (%)

16 15 20
13 13 13 14 18
16 15
12
9 15 14
13 13 13
8
5 10
8
4
5
0
(2)
(4) 0
2019
2020
2021
2022
2023E
2024E
2025E
2026E
2019
2020
2021
2022
2023E
2024E
2025E
2026E

FCF generation to remain strong despite planned doubling of bed capacity

Given the planned We expect Max to generate cumulative OCF of Rs56.2 bn over FY2023-26E. In our view,
doubling of bed EBITDA to OCF conversion will remain strong in the 70-80% range over FY2022-26E. Given
capacities, Max is the planned doubling of bed capacities, Max is guiding for a total capex (including annual
guiding for a total maintenance capex of Rs1.5 bn) of Rs37.6 bn over FY2023-26E. Despite this significant
capex (including annual capex phase, we expect Max to generate strong cumulative free cash flows of Rs18.3 bn
over FY2022-26E. We build in impressive PAT to FCF conversion of 48% in FY2026E.
maintenance capex of
Rs1.5 bn) of Rs37.6 bn
over FY2023-26E
Exhibit 71: We forecast 70%+ OCF conversion over FY2023-26E Exhibit 72: We forecast 47%+ FCF conversion in FY2026E
OCF, March fiscal year-ends, 2019-26E (Rs bn, %) FCF, March fiscal year-ends, 2019-26E (Rs bn, %)
Operating cash flow (Rs bn, LHS) Free cash flow to equity (Rs bn, LHS)
30 %EBITDA-OCF conversion (RHS) 110 %PAT-FCF conversion (RHS) 47.8
12 36.3 50
100.9
24 14.5 17.1
100 8
8 (5.5)
93.6 0
17 (23.6)
18
4
13 14 90 4
12 2 2
8 4.0 10 (70.3) (50)
12
0
6 6 80 (1) (0)
76.1 (1)
6 8 1.6 (122.8 ) (100)
4 (4)
77.6 78 .8 72.0
0 70 (8) (6) (150)

2019
2020
2021
2022
2023E
2024E
2025E
2026E
2019
2020
2021
2022
2023E
2024E
2025E
2026E

Exhibit 73: We forecast 14.8% network sales CAGR over FY2022-26E

Network income statement, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Profit and loss
Net revenues 35,722 39,908 36,007 51,709 54,671 61,145 72,912 89,798
Medical consumables (10,402) (11,364) (9,734) (13,503) (13,996) (15,470) (18,738) (23,078)
Gross profit 25,320 28,544 26,273 38,206 40,675 45,675 54,174 66,720
Staff costs (9,421) (9,969) (9,498) (11,024) (11,740) (13,267) (15,787) (19,260)
Professional fees to doctors (5,247) (5,783) (5,329) (7,814) (8,127) (9,265) (10,932) (13,228)
SG&A expenses (5,876) (5,928) (5,361) (5,937) (6,326) (6,553) (8,451) (10,852)
EBITDA 4,776 6,863 6,085 13,431 14,482 16,591 19,003 23,380
Pre-Ind AS-116 EBITDA 4,776 6,372 5,345 12,939 14,114 16,231 18,642 22,995
Depreciation & amortisation (1,856) (2,077) (2,161) (2,484) (2,887) (3,330) (3,800) (4,052)
EBIT 2,920 4,786 3,924 10,947 11,595 13,261 15,203 19,328
Other income 271 324 277 472 980 1,220 1,600 2,100
Interest expense (1,553) (2,147) (1,875) (1,118) (1,061) (1,085) (894) (698)
Share in associates — — — — — — — —
Exceptional items — — (2,768) (502) — — — —
Profit before tax 1,638 2,963 (441) 9,799 11,514 13,396 15,910 20,730
Tax & deferred tax (183) 33 (499) (1,432) (1,842) (2,411) (2,864) (4,146)
Less: minority interest/associates — — — — — — — —
Net income (reported) 1,454 2,996 (940) 8,367 9,672 10,985 13,046 16,584
Net income (adjusted) 1,454 2,996 4,955 8,796 9,672 10,985 13,046 16,584
FD no. of shares (mn) 537 537 966 970 970 970 970 970
EPS (reported) (Rs) 2.7 5.6 (1.0) 8.6 10.0 11.3 13.5 17.1
EPS (adjusted) (Rs) 2.7 5.6 5.1 9.1 10.0 11.3 13.5 17.1
Growth (%)
Revenue 11.7 (9.8) 43.6 5.7 11.8 19.2 23.2
EBITDA 43.7 (11.3) 120.7 7.8 14.6 14.5 23.0
Adjusted PAT 106.0 65.4 77.5 10.0 13.6 18.8 27.1
Margins (%)
Gross margin 70.9 71.5 73.0 73.9 74.4 74.7 74.3 74.3
EBITDA margin 13.4 17.2 16.9 26.0 26.5 27.1 26.1 26.0
Pre-Ind AS-116 EBITDA margin 13.4 16.0 14.8 25.0 25.8 26.5 25.6 25.6
PAT margin (reported) 4.1 7.5 (2.6) 16.2 17.7 18.0 17.9 18.5
PAT margin (adjusted) 4.1 7.5 13.8 17.0 17.7 18.0 17.9 18.5
Staff costs (26.4) (25.0) (26.4) (21.3) (21.5) (21.7) (21.7) (21.4)
Professional fees to doctors (14.7) (14.5) (14.8) (15.1) (14.9) (15.2) (15.0) (14.7)
SG&A expenses (16.4) (14.9) (14.9) (11.5) (11.6) (10.7) (11.6) (12.1)
Tax rate (11.2) 1.1 113.0 (14.6) (16.0) (18.0) (18.0) (20.0)

Exhibit 74: We expect Max to maintain healthy balance sheet over FY2022-26E
Network balance sheet, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Assets
Net block PP&E (incl. CWIP) 18,930 20,140 25,320 32,270 36,590 43,620 51,080 55,080
Net intangibles 7,150 6,990 6,580 6,880 6,730 6,580 6,430 6,280
Net block right of use assets — 1,580 2,420 2,350 2,500 2,650 2,800 2,950
Goodwill 7,680 7,680 37,730 37,730 37,730 37,730 37,730 37,730
Cash & equivalents 3,240 4,110 6,660 6,150 5,451 8,949 11,072 20,000
Investments 15,750 21,380 20 20 1,000 1,200 1,500 2,000
Receivables 3,358 3,752 3,401 4,884 5,315 5,945 7,089 8,730
Inventories 860 940 740 830 1,215 1,698 2,228 2,993
Deferred tax asset 20 20 — — — — — —
O ther assets 720 — — — — — — —
Total assets 57,708 66,592 82,871 91,114 96,531 1,08,372 1,19,929 1,35,763
Liabilities and equity
Borrowings 20,680 19,260 11,280 9,180 10,680 11,180 9,180 7,180
Lease liabilities — 2,440 1,980 2,020 1,805 1,580 1,332 1,035
Put option liability — 5,860 820 1,390 940 490 — —
Contingent consideration payable 2,560 2,470 4,280 4,250 4,404 5,435 6,684 8,232
Deferred tax liability — — 1,580 1,850 1,850 1,850 1,850 1,850
O ther liabilities 4,041 2,702 5,551 5,244 — — — —
Total liabilities 27,281 32,732 25,491 23,934 19,679 20,535 19,046 18,296
Share capital 5,372 5,372 9,660 9,596 9,596 9,596 9,596 9,596
O ther equity and reserves 25,054 28,488 47,721 57,584 67,256 78,241 91,287 1,07,871
Minority interest — — — — — — — —
Equity 30,427 33,860 57,380 67,180 76,852 87,837 1,00,883 1,17,467
Total equity and liabilities 57,708 66,592 82,871 91,114 96,531 1,08,372 1,19,929 1,35,763
Solvency metrics
Gross debt 20,680 19,260 11,280 9,180 10,680 11,180 9,180 7,180
Gross debt (incl. put option liabilities) 20,680 25,120 12,100 10,570 11,620 11,670 9,180 7,180
Net debt 17,440 15,150 4,620 3,030 5,229 2,231 (1,892) (12,820)
Net debt (incl. put option liabilities) 17,440 21,010 5,440 4,420 6,169 2,721 (1,892) (12,820)
Gross debt / equity (X) 0.7 0.6 0.2 0.1 0.1 0.1 0.1 0.1
Net debt / equity (X) 0.6 0.4 0.1 0.0 0.1 0.0 (0.0) (0.1)
Net debt / EBITDA (X) 3.7 2.2 0.8 0.2 0.4 0.1 (0.1) (0.5)
Interest coverage (X) 1.9 2.2 2.1 9.8 10.9 12.2 17.0 27.7
Efficiency ratios
Fixed assets (inc CWIP) (Rs mn) 26,080 28,710 34,320 41,500 45,820 52,850 60,310 64,310
Capex 3,656 4,707 7,771 9,664 7,207 10,360 11,260 8,052
Net fixed asset turnover (X) 1.4 1.5 1.1 1.4 1.3 1.2 1.3 1.4
Return ratios
RoAE (%) 4.8 9.3 (2.1) 13.4 13.4 13.3 13.8 15.2
RoCE (%) 5.1 9.1 13.2 12.5 11.6 11.5 11.8 13.0
RoIC (%) 8.1 15.6 17.8 13.7 12.6 12.5 13.2 15.3
Working capital
Receivables 3,358 3,752 3,401 4,884 5,315 5,945 7,089 8,730
Inventories 860 940 740 830 1,215 1,698 2,228 2,993
Gross working capital 4,218 4,692 4,141 5,714 6,530 7,643 9,317 11,724
Working capital days of sales
Receivables 34 34 34 34 35 35 35 35
Inventories 9 9 8 6 8 10 11 12
Working capital cycle 43 43 42 40 44 46 47 48

Exhibit 75: We forecast cumulative Rs56.2 bn operating cash flows over FY2022-26E
Network cash flow, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Cash flow from operating activities
PBT 1,638 2,963 (441) 9,799 11,514 13,396 15,910 20,730
Depreciation & amortisation 1,8 56 2,077 2,161 2,48 4 2,8 8 7 3,330 3,8 00 4,052
Working capital (48 1) (474) 551 (1,573) (8 16) (1,113) (1,673) (2,407)
Tax (28 1) 33 (499) (1,432) (1,8 42) (2,411) (2,8 64) (4,146)
Finance costs 1,553 2,147 1,8 75 1,118 1,061 1,08 5 8 94 698
Other income (271) (324) (277) (472) (98 0) (1,220) (1,600) (2,100)
Others — — 2,768 502 — — — —
Net cash generated from / (used in) operating activities 4,013 6,422 6,137 10,426 11,824 13,066 14,466 16,827
Cash flow from investing activities
Capex (3,656) (4,707) (7,771) (9,664) (7,207) (10,360) (11,260) (8 ,052)
Acquisitions — — (30,050) — — — — —
Others (2,632) (4,58 6) 18 ,8 8 9 (30) — 1,020 1,300 1,600
Net cash generated from / (used in) investing activities (6,288) (9,294) (18,932) (9,694) (7,207) (9,340) (9,960) (6,452)
Cash flow from financing activities
Dividend — — — — — — — —
Interest paid (962) (2,147) (1,8 75) (1,118 ) (1,061) (1,08 5) (8 94) (698 )
Issuance of equity — — 4,28 7 (63) — — — —
Change in net debt (1,260) (1,420) (7,990) (2,100) 1,500 500 (2,000) (2,000)
Principal payment of lease liabilities — (250) (460) (290) (215) (225) (248 ) (297)
Others (650) 4,431 1,199 503 (5,540) 58 1 758 1,548
Net cash generated from / (used in) financing activities (2,872) 614 (4,839) (3,069) (5,316) (229) (2,383) (1,448)
Change in cash and equivalents (5,147) (2,258) (17,633) (2,337) (699) 3,498 2,123 8,927
Beginning cash 8 ,38 7 3,240 4,110 6,660 6,150 5,451 8 ,949 11,072
Adjustments — 3,128 20,18 3 1,8 27 — — — —
Ending cash 3,240 4,110 6,660 6,150 5,451 8,949 11,072 20,000
Key cash flows

Operating cash flow (ex-interest costs) 3,052 4,275 4,263 9,308 10,762 11,98 2 13,572 16,129
Free cash flow to firm 357 1,464 (2,094) 472 4,402 2,481 2,958 8,478
Free cash flow to equity (2,28 2) (2,126) (14,076) (2,58 3) 5,011 2,092 226 5,919
Free cash flow to equity (adjusted for net debt) (1,022) (706) (6,086) (483) 3,511 1,592 2,226 7,919
Cash conversion
OCF as % of EBITDA 8 4.0 93.6 100.9 77.6 8 1.6 78 .8 76.1 72.0
FCFE as % of PAT (70.3) (23.6) (122.8 ) (5.5) 36.3 14.5 17.1 47.8
Capex as % of sales 10.2 11.8 21.6 18 .7 13.2 16.9 15.4 9.0
CRoCI (%) 7.9 11.6 8 .7 13.3 13.2 13.0 13.0 13.4

Exhibit 76: Max posted Rs39 bn sales in FY2022 on a consolidated basis

Consolidated income statement, March fiscal year-ends, 2019-22 (Rs mn)
2019 2020 2021 2022

Profit and loss
Net revenues 16,910 18,845 25,047 39,315
Medical consumables (3,655) (3,918) (5,944) (9,229)
Gross profit 13,256 14,927 19,103 30,086
Staff costs (4,406) (4,492) (5,888) (7,599)
Professional fees to doctors (3,869) (4,264) (5,329) (8,095)
SG&A expenses (3,429) (3,280) (3,847) (4,999)
EBITDA 1,552 2,891 4,039 9,393
Pre-Ind AS-116 EBITDA 1,552 2,572 3,623 9,065
Depreciation & amortisation (1,026) (1,197) (1,741) (2,211)
EBIT 525 1,694 2,298 7,182
O ther income 571 724 1,147 1,306
Interest expense (1,013) (1,527) (1,795) (1,009)
Share in associates — — — —
Exceptional items — — (2,337) (90)
Profit before tax 83 891 (687) 7,389
Tax & deferred tax (85) 63 (459) (1,339)
Less: minority interest/associates — — — (1)
Net income (reported) (2) 953 (1,145) 6,049
Net income (adjusted) (2) 953 2,753 6,115
FD no. of shares (mn) 537 537 966 970
EPS (reported) (Rs) (0.0) 1.8 (1.2) 6.2
EPS (adjusted) (Rs) (0.0) 1.8 2.8 6.3
Growth (%)
Revenue 11.4 32.9 57.0
EBITDA 86.3 39.7 132.6
Adjusted PAT NM 188.7 122.1
Margins (%)
Gross margin 78.4 79.2 76.3 76.5
EBITDA margin 9.2 15.3 16.1 23.9
Pre-Ind AS-116 EBITDA margin 9.2 13.6 14.5 23.1
PAT margin (reported) (0.0) 5.1 (4.6) 15.4
PAT margin (adjusted) (0.0) 5.1 11.0 15.6
Staff costs (26.1) (23.8) (23.5) (19.3)
Professional fees to doctors (22.9) (22.6) (21.3) (20.6)
SG&A expenses (20.3) (17.4) (15.4) (12.7)
Tax rate (102.3) 7.0 66.8 (18.1)

Exhibit 77: Consolidated net debt stood at Rs4.2 bn in FY2022

Consolidated balance sheet, March fiscal year-ends, 2019-22 (Rs mn)
2019 2020 2021 2022

Assets
PPE 9,385 10,097 15,227 17,326
CWIP 857 55 267 1,047
Intangibles 9,698 9,517 23,337 26,557
Right of use assets — 1,331 2,255 2,210
Goodwll 2,854 2,854 24,547 24,547
O ther non-current financial assets 2,386 3,364 4,794 5,575
O ther non-current assets 2,635 2,514 3,773 4,627
Non-current assets 27,816 29,732 74,200 81,888
Cash & equivalents 76 2,748 6,266 3,091
Current investments 40 60 263 1,902
Debtors 4,994 4,940 3,659 3,854
Inventories 260 434 538 614
O ther current financial assets 267 94 273 327
O ther current assets 203 237 245 216
Current assets 5,841 8,512 11,245 10,003
Total assets 33,656 38,244 85,444 91,891
Liabilities and equity
Long-term borrowings 8,901 7,899 8,428 6,294
Lease liabilities — 2,152 1,811 1,867
O ther non-current liabilities 3,723 3,694 11,160 13,498
Non-current liabilities 12,624 13,745 21,399 21,660
Creditors 2,916 2,935 4,357 4,521
Short-term borrowings 737 5,045 775 972
O ther current liabilities 7,748 6,644 2,526 1,914
Current liabilities 11,400 14,625 7,659 7,407
Total liabilities 24,024 28,370 29,058 29,067
Share capital 5,372 5,372 9,660 9,696
O ther equity 4,260 4,502 46,727 53,129
Minority interest — — — —
Total equity 9,632 9,874 56,387 62,825
Total liabilities and equity 33,656 38,244 85,444 91,891

Exhibit 78: Max generated Rs7.5 bn OCF in FY2022 on a consolidated basis

Consolidated cash flow, March fiscal year-ends, 2019-22 (Rs mn)
2019 2020 2021 2022

Cash flow from operating activities
PBT 83 891 (687) 7,389
Depreciation & amortisation 1,026 1,197 1,741 2,211
Bad debts and provisions 19 46 65 (413)
Working capital (48 1) (469) (3,763) (1,320)
Tax (28 1) (127) (58 0) (1,091)
Finance costs 1,013 1,527 1,795 1,009
Other income (571) (724) (1,147) (1,306)
Others 81 158 3,755 1,005
Net cash generated from / (used in) operating activities 890 2,498 1,179 7,485
Cash flow from investing activities
Capex (1,157) (8 8 7) (1,18 4) (5,613)
Acquisitions — — — (1,072)
Others 992 (379) 454 (1,033)
Net cash generated from / (used in) investing activities (165) (1,267) (730) (7,718)
Cash flow from financing activities
Dividend — — — —
Interest paid (962) (1,471) (1,710) (910)
Issuance of equity — — 11,792 37
Change in net debt 222 3,010 (7,911) (1,928 )
Principal payment of lease liabilities — (98 ) (257) (141)
Others — — — —
Net cash generated from / (used in) financing activities (740) 1,441 1,913 (2,942)
Inc./ Dec. in cash & equivalents (15) 2,672 2,362 (3,175)
Beginning cash 91 76 1,110 6,266
Adjustments — — 2,794 —
Ending cash 76 2,748 6,266 3,091
Key cash flows

Operating cash flow (ex-interest costs) (72) 1,027 (531) 6,575
Free cash flow to firm (268) 1,512 (263) 1,731
Free cash flow to equity (22) 2,8 8 9 (11,167) (1,023)
Free cash flow to equity (adjusted for net debt) (245) (121) (3,256) 905

COMPANY PROFILE: METRO CENTRIC PLAYER WITH SOLID EXECUTION RECORD

Max is one of the leading healthcare providers in India with a network of 12 hospitals, 5 medical centers and
2 SBUs across India with close to 3,300 operational beds. The company has established itself as a leading
player in the healthcare segment and is a well-recognized brand in Delhi NCR and adjacent regions. We
expect Max to leverage its position in the premium care segment to enhance presence in its core geography
and continue its growth trajectory.
Max is a well-known healthcare services brand in Delhi NCR

Max is the second largest private hospital chain operator in India in terms of revenues
Max operates an
generated from healthcare services and other ancillary businesses. It operates an extensive
extensive hospital hospital network comprising 17 facilities (12 hospitals and five medical centers). Max has a
network comprising census bed capacity of 3,412 as of FY2022 with 84% of hospital sales in FY2022 coming
17 facilities (12 from the metros. This gives Max an edge in attracting and retaining the best medical talent.
hospitals and five Max employs 25,000 healthcare workers, with 18,000 of these living in Delhi NCR. Out of
medical centers) these, ~3,800 are senior clinicians. Max has been at the forefront of medical tourism, aided
by its considerable presence in the metro cities, along with well-connected travel facilities
and allied services.
Besides the core hospital business (96% of total revenues), it also operates two strategic
business units (SBUs) – Max Lab (non-captive pathology diagnostic services) and Max@Home
(health and wellness services at home). Through Max Lab, the company provides diagnostic,
pathology, radiology, radiation oncology and clinical services, through fee and/or revenue-
sharing agreements, in select specialties and departments to its Partner Healthcare Facilities
and Managed Healthcare Facilities. Presently, Max Lab also has operations in the NCR region,
Chandigarh, Panchkula, Mohali and key cities in Punjab and Uttarakhand. Max Lab plans to
expand its presence in Uttar Pradesh in FY2023. Max@Home is a platform that provides
health and wellness services in 10 cities across 12 service lines, including pathology,
pharmacy delivery, physiotherapy and critical care nursing to patients.
Exhibit 79: Max has the highest percentage of metro focused beds among peers
Operational beds in metro cities, March fiscal year-end, 2022 (%)
100
84
80 75
66
61
60
54 49
40
22
20
0
Max Fortis Narayana Apollo Manipal KIMS Aster (India)
(India)
Max Healthcare was formed through a reverse merger with Radiant

Founded by erstwhile promoter, Analjit Singh, Max Healthcare was originally part of Max
India. Since the commencement of operations (2000) at the Panchsheel Park multi-specialty
hospital (medical center as on FY2022), Max has consolidated its foothold in Delhi NCR
(National Capital Region), Mumbai, and north Indian cities of Mohali, Bhatinda and
Dehradun.

Max has consolidated Exhibit 80: The 201-bed hospital in Dehradun, which generates leading RoCE in Max’s network
Dehradun facility, March fiscal year-end, 2022
its foothold in Delhi
NCR (National Capital
Region), Mumbai,
and north Indian
cities of Mohali,
Bhatinda and
Dehradun
Max Healthcare was formed by a business merger between the company, Radiant Life Care
Private Limited (Radiant), erstwhile Max India Limited, and its subsidiary company Advaita
Allied Healthcare Services Limited (now known as Max India Limited), effective from June 1,
2020. The business combination has been treated as a reverse acquisition for financial
reporting purposes, with Radiant as the accounting acquirer and Max Healthcare Institute
(MHIL) as the accounting acquiree/legal acquirer. Max was formed as the resultant entity,
and got listed on Indian stock exchanges in August, 2020.
Previously, in Jun-2019, Radiant purchased a 49.7% stake in Max from Life Healthcare for
Rs21.4 bn at Rs80 per share. Radiant’s shareholders were granted 635 million shares by
MHIL (merged business) based on an agreed exchange ratio (9,074 shares of MHIL for 10
shares held in Radiant) upon merging of Radiant's healthcare undertaking with MHIL, and its
pre-acquisition ownership of 49.7 percent was cancelled. Radiant’s promoters (Mr Abhay Soi)
now control the merged MHIL as a result of the transaction.
Post completion of the merger, Mr Abhay Soi and KKR became the controlling shareholders
of the company, and the earlier promoters were deemed as public shareholders. During
Mar-2021, the company did a QIP deal of Rs12 bn, wherein it issued 61.41 mn equity shares
(face value of Rs10 each) at a price of Rs195.4 per equity share.

Exhibit 81: Goodwill calculation post Max’s merger with Radiant Life
Fair value of identifiable assets and liabilities recognized as a result of the merger, March fiscal year-end, 2021
(Rs mn)
2021
A. Consideration transferred as a result of business combination (Rs mn)
Fair value of the Radiant Life care's previously held equity interest in the company 19,631
Fair value of shares deemed to be issued on reverse acquisition 20,237
Total consideration (A) 39,868
B. Fair value of identifiable assets and liabilities recognised as a result of the reverse acquisition (Rs mn)
Property, plant and equipment 12,613
Right-of-use assets 2,38 8
Capital work-in-progress 84
Intangible assets 22,342
Intangible assets under development 1
Non-current investments 5
Trade receivables (non-current) 1,18 9
Loans (non-current) 3,350
Other bank balances (non-current) 8
Non-current tax assets (net) 1,441
Deferred tax assets (net) 662
Other non-current assets 1,169
Inventories 443
Trade receivables (current) 3,502
Cash and cash equivalents 2,794
Other bank balances 35
Loans (current) 89
Other financial assets (current) 72
Current tax assets 19
Other current assets 145
Total assets acquired (a) 52,351
Long term borrowings 7,8 92
Lease liabilities (non-current) 1,752
Other financial liabilities (non-current) 9
Long term provisions 236
Deferred tax liabilities (net) 6,043
Other non-current liabilities 2,319
Short term borrowings 4,750
Trade payables 3,031
Lease liabilities (current) 103
Other financial liabilities (current) 6,357
Other current liabilities 173
Short term provisions 18 9
Total liabilities acquired (b) 32,854
Net assets of MHIL and its subsidiaries recognised pursuant to the scheme (a-b) 19,497
C. Goodwill (A-B) 20,371

Exhibit 82: Goodwill allocation across different facilities of Max

Goodwill allocation to cash generating units as per annual reports, March fiscal year-ends, 2019-21 (Rs mn)
Goodwill allocation to cash generating units (Rs mn)

Annual report 2020 Annual report 2021
2019 2020 2020 2021
Cash generating units
Radiation Oncology services at Dr. B L Kapur Memorial Hospital — — 55 55
Operation & Management contracts of the accounting acquirer
Dr. B.L. Kapur Memorial Hospital (Silo) — — 3,467 3,467
Dr. Balabhai Nanavati Hospital (Silo) — — 654 654
Hospital operations acquired upon business combination effective June 01, 2020
Max Super Speciality Hospital, Saket (including related day care and other wings) — — — 4,8 32
Max Super Speciality Hospital, Shalimar Bagh — — — 2,073
Max Super Speciality Hospital, Dehradun — — — 1,8 73
Max Labs — — — 653
Max Super Speciality Hospital - Mohali — — — 4,362
Max Super Speciality Hospital - Bathinda — — — 252
Crosslay Remedies (Max Vaishali) 2,050 2,050 — 2,08 4
Saket City Hospitals 659 659 — 3,719
Alps Hospital 145 145 — 522
Total 2,854 2,854 4,176 24,547
Exhibit 83: Impact of scheme and QIP on share capital and securities premium
Share capital and security premium, March fiscal year-ends, 2019-21 (Rs mn)
2019 2020 2021

Share capital (Rs mn)
Beginning balance 5,372 5,372 5,372
Cancellation of shares upon merger scheme — — (5,340)
Share issuance pursuant to merger scheme — — 9,013
Share issuance pursuant to QIP — — 614
Ending balance 5,372 5,372 9,659
Securities premium (Rs mn)
Beginning balance 3,520 3,520 23,405
Fresh equity share issuance premium — 19,905 —
Share issuance premium pursuant to merger scheme — — 16,466
Share issuance premium pursuant to QIP — — 11,38 6
Share issue expenses — (20) (208 )
Ending balance 3,520 23,405 51,049

Exhibit 84: Max and Radiant’s journey since inception

Timeline, March fiscal year-ends, 2000-22
Dr. B L Kapur • Radiant-Max Healthcare merger

Memorial Hospital, Dr. Balabhai Nanavati • Discontinuation of Max Multi
Rajendra Place Hospital, Mumbai Speciality
2000 2009 2014 2020
2018
• Max Multi Speciality 2016
Centre, Pitampura Discontinuation of
2012 Max Multi
• Max Multi Speciality Max Hospital,
Centre, Noida Gurugram 2014 Speciality Hospital,
Max Super Max Institute of Greater Noida
Speciality Hospital, Cancer Care,
Patparganj 2008 Max Super Speciality Lajpat Nagar
2010 Hospital Dehradun
2006 Max Medcentre, Lajpat

Max Multi • Max Super Speciality Nagar (Immigration
Speciality Centre, Hospital, Bathinda Max Multi
Speciality Hospital, Department)
Panchsheel park • Max Super Speciality
2004 Hospital, Mohali Greater Noida
2002 • Max Super Speciality
Max Super Hospital, Shalimar Bagh
Speciality Hospital, • Max Super Speciality Hospital,
2000 (East Block) Saket Vaishali (Crosslay)
Max Super • Max Smart Super Speciality Hospital,
Speciality Hospital, Saket (Saket City)
(East Block) Saket

Exhibit 85: Max has a hybrid network structure of owned, managed and partner facilities
Network structure, March fiscal year-end, 2022
Balaji Society
(Max
Patpagranj)
Valid till 2065
Max Shalimar Bagh

Max Dehradun
Medical Service Agreement with Society
Max Panchsheel Max (listed
Immigration centre (Lajpat Nagar) entity) Devki Devi
Society (Max
Max Saket (West)
Saket East,
SBUs (MaxLab, Max@Home) O nco day care
centre) Valid till
Immigration centre (Mohali)
2064
Shareholding: 26%
O ption rights: 74%
100% 100% 100% 99.99% 100% 100% 100% 100%
Max
HBPL (Max ALPS Hospital CRL (Max MHC Global Max Hospitals Eqova
Max Lab Saket City Healthcare
Bathinda) Ltd (Max Vaishali) Max Heathcare and Allied Healthcare
Limited Hospital Ltd. FZ-LLC
(Max Mohali) Gurugram) Noida) Nigeria Ltd. Services Ltd Pvt. Ltd.
(Dubai)
100%
O &M / O &M /
Medical O &M / Medical Medical
ET Planners Pvt. Medical Medical
Medical Services Service service service
Ltd. service service
contain specific Agreement agreement agreement
specialities & agreement agreement
Pathology /
Radiology services,
as may be the case
Nirogi
Medical Gujarmal Modi Muthoot
Service BLK-Max Nanavati Max Charitable
Society (Max Hospital
Agreement Hospital Valid Hospital Valid till and Medical
Smart) services
till 2054 2112 Research Trust
Valid till 2105 agreement
Valid till 2112
Vikrant
Children's
foundation &
research
Centre Valid till
2111
Owned healthcare facilities
Partner healthcare facilities
Managed healthcare facilities
Notes:
(a) MHIL – Max Healthcare Institute Limited; CRL – Crosslay Remedies Limited; HBPL – Hometrail Buildtech Private Limited

Exhibit 86: Max has an able management team led by Mr Abhay Soi
Key management personnel, March fiscal year-end, 2022
Position Description
Key management personnel
He is the Chairman and Managing Director of the company. He was appointed on the Board of the company as a
Non-Executive Chairman on June 21, 2019, and as Chairman and Managing Director on June 19, 2020. He holds a
Chairman, Managing BA from the University of Delhi and a MBA from the European University. He was associated as a senior associate
Abhay Soi
Director with Arthur Andersen India Private Limited and serves on the board of companies such as Radiant Life Care Private
Limited (erstwhile Halcyon Finance & Capital Advisors Private Limited) and Radiant Life Care Lucknow Private
Limited. He successfully restructured BLK Hospital and led the turnaround of BNH Hospital.
He joined the company on January 15, 2012. He holds a B Com degree from Panjab University and is a member of
Yogesh Kumar Senior Director & Chief the Institute of Chartered Accountants of India. He started his career with Ranbaxy Laboratories Limited and has
Sareen Financial Officer around 32 years of experience across various facets of finance. Before joining the Company, he was the chief
financial officer at Fortis Healthcare Limited (Corporate Office – Gurgaon).
He joined the Company in Jul'19. He holds a bachelor’s degree in medicine and a bachelor’s degree in surgery
from University of Gorakhpur and MBA in health care administration from the University of Delhi. He was
Senior Director –
Dr. Mradul Kaushik previously the director (operations and planning) at Radiant Life, responsible for BLK Hospital and BNH Hospital.
Operations & Planning
Before this, he was the medical superintendent at the Fortis Hospital, Shalimar Bagh. He has worked, amongst
others, with Global Health Private Limited, New Delhi and Indraprastha Apollo Hospitals.
He joined the Company in Jul'19. He has completed post graduate studies from Defence Services Staff College,
Wellington and holds a bachelor's degree in science from Jawaharlal Nehru University, New Delhi and a master’s
Senior Director & Chief
Col. Harinder Singh degree in science in defence and strategic studies from University of Madras. He has completed a certificate course
Operating Officer-
Chehal in business management from the IIM, Ahmedabad. With diverse experience of over 37 years in various domains,
Cluster Two
he has over 12 years of experience in the healthcare sector and was previously associated with Radiant Life as the
COO and Fortis Hospitals Limited.
He joined the company on October 1, 2014. He holds a MBA from the Aligarh Muslim University, Aligarh, and a
Senior Director & Chief
degree in bachelor of engineering from the Ravishankar University, Raipur. He has several years of experience in
Anas Abdul Wajid Sales and Marketing
diverse fields such as advertising, retail, healthcare, and media. He has previously worked in HT Media Limited,
Officer
Apollo Health and Lifestyle Limited, Artemis Medicare Services Limited and Fortis Healthcare Limited.
He joined the company on July 1, 2019. He has passed the examination for master’s degree in hospital
Senior Director & HR management from Osmania University and holds a bachelor's degree in science from Kurukshetra University. With
Umesh Gupta
and Chief People Officer over 20 years of experience in healthcare industry, he was previously the chief human resource officer at Radiant
Life and was associated with Fortis Healthcare Limited as associate vice president – human resources.
He is presently also the chairman for Internal Medicine at the Company. He joined the Company as a consultant
Dr. Sandeep (internal medicine) in Jan'01. Holds a degree in bachelor of medicine and bachelor of surgery and degree of
Group Medical Director
Buddhiraja doctor of medicine from University of Delhi. He has earlier worked as a senior registrar in department of medicine
at Mumbarak Al-Kabeer Hospital, Ministry of Health, Kuwait and has over 29 years of experience.
She joined the company on July 1, 2019. She holds a B Com from University of Mumbai. She is a qualified CA and
a Sloan Fellow from London Business School. She had worked as vice president – finance and accounts at Dodsal
Senior Director & Head
Vandana Pakle Corporation Private Limited and as financial controller at PJL Clothing (India) Private Limited. She has been
of Corporate Affairs
associated with the healthcare industry for a period of around 10 years, including her association with BLK
Hospital as a member of their board of management since 2010.

Exhibit 87: Max’s board of directors has two representatives from KKR
Board of directors, March fiscal year-end, 2022
Position Description
Board of directors
He is the Chairman and Managing Director of the company. He was appointed on the Board of the company as a
Non-Executive Chairman on June 21, 2019, and as Chairman and Managing Director on June 19, 2020. He holds a
Chairman, Managing BA from the University of Delhi and a MBA from the European University. He was associated as a senior associate
Abhay Soi
Director with Arthur Andersen India Private Limited and serves on the board of companies such as Radiant Life Care Private
Limited (erstwhile Halcyon Finance & Capital Advisors Private Limited) and Radiant Life Care Lucknow Private
Limited. He successfully restructured BLK Hospital and led the turnaround of BNH Hospital.
He was appointed as an Independent Director from September 26, 2014. He is a qualified CA and a cost and works
accountant. He has, amongst others, been a member of the committee constituted by the Ministry of Information &
Kummamuri Non-Executive
Broadcasting, Government of India for suggesting a viable capital and financial structure for Prasar Bharti to
Narasimha Murthy Independent Director
strengthen its functions and has been nominated as a member of the committee constituted by the Ministry Of
Finance to review the guidelines on internal and concurrent audit in public sector banks.
He was appointed on the Board of the company on June 21, 2019 and as an Independent Director from July 15,
2019. He holds a bachelor’s degree in business administration from Baylor University and is certified to practice as a
Michael Thomas Non-Executive public accountant by State Board of Public Accountancy, the State of Texas. He has worked with HCA Healthcare UK
Neeb Independent Director for 12 years as CEO and during his association with HCA Healthcare UK, HCA Healthcare UK won the Queen`s
Award for Enterprise – International Trade three times. Further, he has served as chairman of Healthtrust Europe and
also serves on the board of Telemetrics RPM.
He was appointed on the Board of the company on February 13, 2022. He is a representative of Kayak Investments
Holding Pte. Ltd. Further, he is a Managing Director in KKR’s private equity team. Prior to joining KKR, Mr. Kumar
Non-Executive Non- was a Director and member of the investment committee at ChrysCapital, a leading India focused private equity
Prashant Kumar
Independent Director fund. Previously, he was with Warburg Pincus where led investments in various sectors. Prior to that, Mr. Kumar
worked at Karsch Capital Management, a New York-based hedge fund, and SUN Capital, an emerging markets
focused private equity firm. He began his career as a consultant with McKinsey & Company.
He was appointed on the Board of the company on June 21, 2019 and as a Non-Executive Independent Director from
July 15, 2019. He is a qualified CA and a law graduate. He has over 39 years of experience in investment banking,
Mahendra Non-Executive
corporate restructuring and corporate and project finance. He is on the board of directors of companies such as
Gumanmalji Lodha Independent Director
Radiant Life Care Private Limited and Nitrex Chemicals India Limited, and was earlier on the board of Arvind Products
Limited and Shyam Cotsyn India Limited.
She is the Chief Digital and Innovation Officer at BT Group Plc. Ms. Mehta was previously the Global CIO and Head
Non-Executive of cloud and Security businesses at Bharti Airtel based in India. She has significant experience of leading digital,
Harmeen Mehta
Independent Director Engineering, IT and innovation transformation at Bharti Airtel. Before Bharti Airtel, she held CIO positions at BBVA,
HSBC and Bank of America Merrill Lynch.
He was appointed on the Board of the company on March 15, 2022. He is a representative of Kayak Investments
Holding Pte. Ltd. He has joined KKR in 2020 and is a Partner and Chief Executive Officer for KKR India. Prior to
Non-Executive Non- joining KKR, he spent more than fifteen years with TPG Capital Asia. He has led and executed private equity
Gaurav Trehan
Independent Director transactions across a diverse range of sectors in India from financial services to retail and healthcare. Prior to joining
TPG, he worked in the mergers, acquisitions, and restructuring team of Morgan Stanley with a focus on the
technology sector. Mr. Trehan holds a BS in mathematics/applied science and economics from UCLA.

INDUSTRY OVERVIEW: INDIAN HEALTHCARE INDUSTRY – GOING STRONG

As per CRISIL, Indian healthcare delivery market stood at Rs4.3 tn in CY2021 and is expected to grow annually
at a pace of 15-16% over the next four years to reach Rs7.7 tn by CY2025 led by a change in disease profile,
increasing health awareness, higher health insurance coverage and medical tourism. ~68% of the treatments
in value are carried out by private hospitals/clinics in the country which is likely to increase to 72% by CY2024
led by demand from PM-JAY along with expansion plans of private players.
Healthcare delivery industry to report a 15-16% CAGR over CY2021-25E

India’s healthcare
delivery market is India’s healthcare delivery market is heavily underpenetrated with availability of beds and
heavily doctors well below the global average. The market currently stands at Rs4.3 tn and is
expected to report a CAGR of 15-16% over CY2021-25E driven by (1) change in age
underpenetrated with
demographics as well as increasing life expectancy to require greater health coverage,
availability of beds and
(2) rising income levels along with increase is health awareness, (3) an increased demand for
doctors well below the lifestyle disease-related healthcare services over the next five years, (4) an increase in health
global average insurance coverage, and (5) growth in medical tourism to aid demand growth of healthcare
in the delivery market.
Exhibit 88: Healthcare market is set to grow at 15-16% yoy Exhibit 89: Hospitals comprise 61% of Indian healthcare market
Healthcare market, December calendar year-ends, 2015-25 (Rs tn, %) Indian healthcare industry, December calendar year-ends, 2021 (%)
IPD (%, LHS) OPD (%, LHS) Medical

Market Size (Rs tn, RHS) devices, 9
100 10
31 31 30 27
80 36 8 Domestic
pharmaceut
7.7
60 6 icals, 20
5.0
4.3 4.3
40 4
69 69 70 73
64
20 2 Hospitals,
2.2 61
Diagnostic
0 0
centres, 10
2015
2020
2021E
2022P
2025P
Source: Yatharth DRHP, Kotak Institutional Equities Source: Yatharth DRHP, Kotak Institutional Equities

Exhibit 90: Indian current healthcare expenditure had been largely steady before the pandemic
Current healthcare expenditure (CHE) as % of GDP in India, December calendar year-ends, 2010-18 (%)
4.0
3.8 3.75
3.62 3.60
3.6 3.54 3.54
3.51
3.4 3.33
3.27 3.25
3.2
3.0
2010
2012
2013
2015
2016
2018
2011
2014
2017
Exhibit 91: Bed densities in India are lower than global average levels
Beds per 10,000 population, December calendar year-end, 2021 (#)
100
80 71
60
43
40
26 29
25
19 21 21
20 15
8
0
China
USA
UK
Bangladesh
Vietnam
Thailand
Malaysia
Brazil
India
Federation
Russian

Exhibit 92: Availability of medical personnel in India is lower than the global average
Physicians and nurses per 10,000 population, December calendar year-end, 2021 (#)
200 Physicians (per 10,000 population) Nurses (per 10,000 population)
157
160
120 103
74
80
58
44 45 39 38
35 32 33
40 26 23 27 24
20 18 15 9 9 8 5
0
China
USA
UK
Indonesia
Russia
Thailand
Nepal
Malaysia
average
Brazil
India
World
Contribution of private players set to increase

As of FY2020, ~68%
As of FY2020, ~68% of the treatments in value terms were carried out by private
of the treatments in
hospitals/clinics in the country. The share of IPD for private hospitals is expected to grow
value terms were from 69% in FY2021 to ~74% in FY2024 with additional demand to be created by the
carried out by private Pradhan Mantri Jan Arogya Yojana (PM-JAY) which can be met only by private participation
hospitals/clinics in the as government facilities are already over-burdened.
country
Delhi NCR - underpenetrated market with multiple growth drivers
While the Delhi NCR region is densely populated, it has a large demand-supply gap with
respect to availability of beds and medical professionals. Max is primarily based out of Delhi
NCR, which has a bed density of 2.7 beds per 1,000 people. In addition to patients from
within Delhi NCR, there are upcountry patients who travel to Delhi NCR in order to access
healthcare services at hospital facilities.
Exhibit 93: Share of medical expenses in aggregate expenditure is high in Delhi NCR
Medical expenditure as % of aggregate expenditure, December calendar year-end, 2021 (%)
12 10.9
6.1
5.6 5.5 5.3
6 5.0 5.0 5.0 4.8 4.7 4.7 4.6
4.3 4.3 4.1 4.0
3.6
3.1
3
0
Kerala
Delhi NCR
Uttar Pradesh
Bihar
Maharashtra
Telangana
Odisha
Rajasthan
Madhya Pradesh
Jharkhand
Karnataka
Andhra Pradesh
Tamil Nadu
West Bengal
Haryana
Chhattisgarh
Gujarat
Punjab


Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
70%
Equities, within the specified category.
60%
Percentage of companies within each category for
which Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the
previous 12 months.
40% * The above categories are defined as follows: Buy = We
33.0% expect this stock to deliver more than 15% returns over
30% 27.2% the next 12 months; Add = We expect this stock to
deliver 5-15% returns over the next 12 months; Reduce
19.6% 20.1% = We expect this stock to deliver -5-+5% returns over
20% the next 12 months; Sell = We expect this stock to deliver
less than -5% returns over the next 12 months. Our
10% target prices are also on a 12-month horizon basis.
4.9%
1.8% 1.3% 1.8% These ratings are used illustratively to comply with
applicable regulations. As of 31/03/2022 Kotak
0%
Institutional Equities Investment Research had
BUY ADD REDUCE SELL
investment ratings on 224 equity securities.
Source: Kotak Institutional Equities As of March 31, 2022
Max Healthcare (MAXHEALT IN)

Kotak Institutional Equities rating and stock price target history
500 70,000
450
60,000
400
350 50,000
300
40,000
250
30,000
200
150 20,000
100
10,000
50
Stock Price
- 0
Feb-22
Feb-20
Feb-21
Jun-19
Sep-19
Dec-19
Jun-20
Sep-20
Dec-20
Jun-21
Dec-21
Jun-22
Aug-19
Jan-20
Mar-20
Apr-20
Aug-20
Jan-21
Mar-21
Apr-21
Aug-21
Sep-21
Jan-22
Mar-22
Apr-22
Jul-19
Oct-19
Oct-20
Nov-19
May-20
Jul-20
Nov-20
May-21
Jul-21
Oct-21
Nov-21
May-22
Index
Price
Source: Kotak Institutional Equities Research for ratings and price targets, Bloomberg for daily closing prices.
BSE-30 Index (RHS) Covered by Alankar Garude

Price target Not covered by current analyst
The price targets shown should be considered in the context of all prior published Kotak Institutional Equities research, which may or may not
have included price targets, as well as developments relating to the company, its industry and financial markets

Analyst coverage
Companies that the analyst mentioned in this document follow
Covering Analyst: Alankar Garude

Company name Ticker
Apollo Hospitals APHS IN
Aster DM Healthcare ASTERDM IN
Aurobindo Pharma ARBP IN
Biocon BIOS IN
Cipla CIPLA IN
Divi's Laboratories DIVI IN
Dr Lal Pathlabs DLPL IN
Dr Reddy's Laboratories DRRD IN
Gland Pharma GLAND IN
Laurus Labs LAURUS IN
Lupin LPC IN
Max Healthcare MAXHEALT IN
Metropolis Healthcare METROHL IN
Narayana Hrudayalaya NARH IN
Sun Pharmaceuticals SUNP IN
Torrent Pharmaceuticals TRP IN
Source: Kotak Institutional Equities research

Disclosures
Ratings and other definitions/identifiers

Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.
Our Fair Value estimates are also on a 12-month horizon basis.
Our Ratings System does not take into account short-term volatility in stock prices related to movements in the market. Hence, a particular Rating may not strictly be in
accordance with the Rating System at all times.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following designations:
Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak
Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in
certain other circumstances.
CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.
NC = Not Covered. Kotak Securities does not cover this company.
RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a sufficient fundamental
basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in effect for this stock and should not be relied
upon.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.

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Company Report

Max Healthcare (MAXHEALT) ADD

Robust execution to elicit sustained strength across metrics

Growth drivers: improved mix, doubling of capacities to drive growth

Strong FCF generation supports organic and inorganic growth aspirations

Ahead of the curve; initiate with ADD rating with FV of Rs410

Company data Stock data High Low Price Performance 1M 3M 12M

Valuation: Initiate with ADD, with an FV of Rs410/share ........................ 5

Growth strategy: Improved mix, doubling capacities to drive growth .... 12

Razor-sharp focus on operating and capital efficiency .......................... 32

Key risks: Sales concentration, stagnant mix, fallout in agreements ...... 39

Financials: We expect robust 14.9% EBITDA CAGR over FY2022-26E .. 42

Industry overview: Indian healthcare industry – going strong ................ 60

2 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 1: Max Healthcare financial snapshot

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Max Healthcare KPIs

Units 2019 2020 2021 2022 2023E 2024E 2025E 2026E

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

2019 2020 2021 2022 2023E 2024E 2025E 2026E

Source: Company, Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

VALUATION: INITIATE WITH ADD, WITH AN FV OF RS410/SHARE

We expect Max to offer 12% upside from CMP

Network financials are a better indicator of Max’s financial health

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Exhibit 4: We value Max at Rs410 /share

Jun-2024E Multiple Value

Source: Kotak Institutional Equities estimates

Exhibit 5: Max’s 1-year forward EV/EBITDA chart

1 Year fwd EV/EBITDA Mean Mean + 1SD Mean - 1SD

Source: Bloomberg, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Max surpasses peers in most key operating metrics

Source: Bloomberg, Kotak Institutional Equities estimates

Max’s EBITDA per EBITDA per occupied bed

5.9 2020 2021 2022

Source: Companies, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

Average revenue per occupied bed (ARPOB)

Exhibit 8: Max’s ARPOBs are highest among listed Indian peers

80 2020 2021 2022

Source: Companies, Kotak Institutional Equities

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

100 2020 2021 2022

Source: Companies, Kotak Institutional Equities

Average length of stay (ALOS)

2020 2021 2022

Source: Companies, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

As of FY2022, Max Bed capacity and operational beds

12,000 2020 2021 2022

Source: Companies, Kotak Institutional Equities

2020 2021 2022

Source: Companies, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

We expect Max to trade at a premium to listed Asian peers

Exhibit 13: Max trades at a premium to other listed Asian peers