Fortis Healthcare Limited: A Deep Dive into Q2 FY26 Performance and Strategic Outlook

Fortis Healthcare Limited, a prominent integrated healthcare delivery provider in India, has unveiled its unaudited consolidated financial results for the quarter and half year ended September 30, 2025. The company reported a robust performance, with consolidated revenues reaching 2,331 crore, marking a significant 17.3% year-on-year (YoY) growth. This impressive top-line expansion was complemented by a substantial improvement in profitability, as operating EBITDA surged by 28.0% to 556 crore, pushing the operating EBITDA margin to 23.9% from 21.9% in the prior year's corresponding quarter. Profit after Tax (PAT) also saw a remarkable increase of 70.3% to 329 crore, demonstrating strong operational leverage and effective cost management.

Segmental Performance: Hospitals Lead the Charge, Diagnostics Show Resilience

The growth narrative at Fortis Healthcare is distinctly driven by its two core segments: hospitals and diagnostics. The hospital business, which accounts for the lion's share of the company's revenue, reported a 19.3% YoY growth, with revenues touching 1,974 crore. This segment's operating EBITDA margin improved to 22.9% from 21.4% in Q2 FY25, reflecting enhanced operational efficiencies. Key performance indicators for the hospital segment were strong, with occupied beds increasing by 13% compared to Q2 FY25, and Average Revenue Per Occupied Bed (ARPOB) growing by 5.8% to 2.51 crore per annum. International patient revenues were a notable contributor, growing 26% to 169 crore and representing 8.1% of overall hospital business revenues.

The diagnostics business, operating under Agilus, also demonstrated resilience and growth. It recorded a gross revenue of 400 crore in Q2 FY26, a 7.3% increase over Q2 FY25. The segment's operating EBITDA margin (on a gross revenue basis) expanded significantly to 26.1% from 21.5% in the previous year, or 24.0% excluding one-off expenses. Agilus conducted approximately 10.62 million tests, slightly up from 10.40 million tests in Q2 FY25, and expanded its network by adding over 200 new customer touchpoints.

Here's a snapshot of Fortis Healthcare's financial performance:

And a comparison of the key segments:

Strategic Initiatives and Future Outlook

Fortis Healthcare is actively pursuing a multi-pronged growth and expansion strategy. The company recently entered into a 15-year lease agreement for a ~200-bedded multi-specialty hospital in Greater Noida, a facility it previously managed under an Operations & Management (O&M) arrangement. This move is set to expand its presence in Delhi NCR to approximately 2,100 beds. Additionally, Fortis secured an O&M agreement for a 550-bedded greenfield super specialty hospital to be constructed in Lucknow by the Ekana Group, marking a strategic foray into a new geography.

Bed capacity expansion remains a key focus, with 550 operational beds added in H1 FY26 through brownfield expansions, the acquisition of Shrimann Hospital in Jalandhar, and the Greater Noida arrangement. The company is also augmenting its medical programs, launching a Biplane Neuro Cath Lab and an Institute of Genomic Medicine for precision cancer care in Mohali, and a 10-bedded Paediatrics Intensive Care Unit (PICU) in Greater Noida. These initiatives are aimed at enhancing specialized services and attracting a broader patient base.

Management expressed confidence in sustaining the healthy growth momentum, expecting diagnostic margins to remain around 23-24% for the full year. For the hospital business, there is an anticipation of higher margin improvement than initially guided, with a target of reaching a 25% EBITDA margin in the next couple of years. The company's disciplined capital allocation strategy involves reinvesting cash flows into capital expenditure and growth opportunities, demonstrating a commitment to long-term value creation.

Navigating Challenges: Legal Battles and Regulatory Landscape

Despite the strong operational performance, Fortis Healthcare continues to navigate a complex legal and regulatory landscape. The company is involved in ongoing legal proceedings and investigations by regulatory bodies such as SEBI, SFIO, and EOW. These matters primarily pertain to alleged improper transactions and diversion of funds by erstwhile promoters, a period preceding the current management's control. While legal expenses are expected to reduce, they will not cease entirely due to pending high court cases and recovery proceedings.

Another area of concern is the non-predictability of payments from government schemes like CGHS, characterized by potential delays, deductions, and evolving restrictions on drug use. The company also reported significant contingent liabilities totaling 2,740.8 crore as of March 31, 2025, which include income tax and medical negligence claims. Management, however, asserts that it is fully cooperating with regulators and believes that any further impact on financial results is not expected to be material, as provisions have been made for identified issues.

Conclusion: A Path of Growth Amidst Legacy Issues

Fortis Healthcare Limited's Q2 FY26 results underscore a period of sustained growth and strategic expansion, particularly within its hospital and diagnostics segments. The company's focus on enhancing bed capacity, launching specialized medical programs, and expanding its geographical footprint positions it well for future growth. While the ongoing legal and regulatory challenges present a notable headwind, management's transparent communication and proactive measures to address these legacy issues, coupled with a strong balance sheet and a clear growth strategy, instill confidence in its long-term trajectory. The company is actively shaping its future, balancing operational excellence with disciplined financial management, even as it continues to resolve historical complexities.