Medi Assist Healthcare Services Limited (MEDIASSIST) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Medi Assist Healthcare Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Niraj from Medi Assist Healthcare Service Limited, Vice President. Thank you, and over to you, sir.

Thank you. Good evening, and a very warm welcome to each of you to Medi Assist Healthcare Services Limited's Q1 FY '26 Earnings Conference Call. The results of the company, the press release and the investor presentations have been uploaded to the stock exchanges on our website and also distributed through our mailing list. Please note, any forward-looking statements are to be relied upon based on your own judgment and all financials and operating numbers discussed on the call are unaudited and management estimates, and hence, investors should refer to only the uploaded financial statements of the company. Without further ado, I would now like to hand over the call to Satish Gidugu, CEO and Whole-Time Director of Medi Assist Healthcare Services Limited.

Thank you, Niraj. Good evening, esteemed investors, analysts and all participants joining us from India and around the world. Thank you for taking the time to join us today as we review Medi Assist performance and strategic direction amid the dynamic evolution of India's health insurance landscape. I'm pleased to be joined by our CFO, Mr. Sandeep Daga; and Mr. Niraj Didwania, our Senior Vice President, Strategy, who also leads our Investor Relations function. I would quickly share some key operational highlights for our company performance for the quarter 1 and then take you back to the investor presentation we had uploaded some time ago. The total premium under management was INR 7,076 crores as of 30th of June 2025, which is a growth of 18.5% year-on-year. And this growth came in both group and retail. Group clocked a growth of 20.4% year-on-year growth, and retail, while there's been a significant mix change in the way we operate retail, clocked a growth of 0.2%. All in all, between group and retail in terms of health insurance premium administered, our total market share went up to 23.1% as of 30th of June 2025 as against 21.3% as on 30th of June 2024. The group segment market share moved up to 33.2% from 30.2% in the same period last year. And retail segment market share is 5% against the 5.5% last year. Thank you for your continued support and confidence in Medi Assist. I will now switch to the presentation that we have uploaded. And I will read out the slide numbers as we flip through the deck to sort of recap some of the important points. I'm on Page 3. I think we briefly spoke about some of these aspects in our previous call from what are our focus areas for Medi Assist, they continue to be strengthening our proposition as a holistic health benefits administrator, continuing to grow across all key segments, which is group, retail, government and international private medical insurance, which is the IPMI market. And continuing investments in technology to drive scale and leadership. Innovative offerings, delivering incremental stakeholder value and consistently improving financial performance. Along these focus areas, as I switch to Page 4, we've started talking about what we do as a TPA within the Medi Assist Group and also how we are expanding the scope of our services to be a well-rounded health benefits administrator, predominantly working towards offerings beyond the traditional TPA offerings, including but not limited to technology platforms, fraud detections, network, personalization and also supporting insurers with in-house operations with our technology offerings. And we've started reporting some of the key metrics around our HBA proposition. So today, there are three insurers operating on Medi Assist technology platform on a stand-alone basis. The number of insurers using our network exclusively has moved up to 19 from 17 the last time we reported. There are three now full-scale AI/ML products that are available -- generally available for our partners to use. These include our adjudication capabilities, fraud prevention and the entire prediction of out-of-pocket experience, leading to a very quick or almost no wait discharge. And our self-help tools that we are developing continue to improve. Over 41% of all inbound queries of customers today are getting answered by our self-help tools. Page 5 has a quick snapshot of growth across our key segments, group, retail, government and IPMI. Group, we continue to maintain our market leadership with a 33.2% market share in Q1. We've clocked on a much larger base, a 93.4% retention including some of the calls that we've taken for quality of revenues. And all in all, over 10,000 corporate accounts are managed by us. And within the group business, the premiums that we service for private and SAHI insurers, that portion has actually grown by over 20%. And all of these numbers that we are seeing today in terms of premiums and market share for Medi Assist stand-alone without any of the Paramount numbers included for the first quarter. We've signed Paramount on 1st of July. So all of the Paramount consolidation will start from Q2. And similarly, in retail, our tech-led customer-first approach and focus on technology allowed us to significantly change the mix of how we operate in retail. While the overall premium base growth is at 0.2% on a quarter-on-quarter basis, the premiums that we service for private and SAHI insurers grew by nearly 89% quarter from same period last year. And if you were to include the technology offerings, the portion of retail that we touch for the whole industry is much larger and does not necessarily reflect in the premium-based reporting that we currently share with you. In the global business, Mayfair arm of ours has had phenomenal growth. The revenues grew 35.6% from the same period last year. And with our continued access to over 0.5 million providers across 185-plus countries, and increasingly working with Indian insurers who are providing global add-ons and beginning to integrate with many of the Indian retail insurers. Lastly, on the government side, government saw a healthy growth, especially as the government schemes are becoming much larger in scale and with a renewed emphasis on how the administrator's choice is actually made in some of these government schemes, Medi Assist has been able to differentiate itself as a provider of choice in many of these government schemes. And we've seen a pretty healthy growth even on the government segment. And I will skip on Page 6. Just a couple of points that I want to bring to your attention. We processed over 22 lakh claims just within the group in the retail business in Q1. That's the scale that our technology platform today is sort of able to give us. And one of the questions that we get frequently asked is what are you spending on technology. Our quarterly spend towards technology as a percentage of revenue are between 5% and 7% now as we continue to double down on our investments. Moving on to Page 7. We have improved on some of our innovative offerings to the overall market. The Navigator, which allows people to estimate out-of-pocket even before going into a hospital and then make prudent financial decisions. We have seen behavioral changes where members using this facility are actually changing their room type choices at the time of claim and thereby reducing their out-of-pocket incidents. And next to it is how we use similar technology for enabling quick discharges or express checkouts, the program that we call as Raksha Prime. We've allowed over 67,000 patients to walk out of the hospitals even before the bills got generated in the quarter that just ended. Of course, our global platform, our analytics and. Insights continue to improve on a regular basis. And we briefly spoke about some of the aspects of a consent feature the last time. We now send the consent some kind of a provisional approval for the members to sort of give us feedback, ask questions, get clarifications before a claim outcome is finalized and shared with the member. We're seeing nearly 60% of our members acting on the consent or the provisional approval request that we sent with less than 5% of that number asking for a clarification or a change. As we move to the next page, Page 8, we continue to improve our AI/ML framework. We made fraud-based and abuse. This is our flagship product in our AI/ML stack. We have -- the total fraud, waste and abuse savings for the quarter are at INR 160 crores in Q1. This was close to INR 50 crores in Q1 last year. So there's been like a 3x improvement in the savings that we are able to deliver to our insurance partners. And system and AI-led fraud detection has now crossed 80% of all frauds that we detect and this number continues to improve. And as we move forward to Page 9, as we've completed the integration of most of the acquisitions that we've concluded earlier with Medvantage and Raksha specifically, our EBITDA margins, which at the lowest point in H1 FY '24 were at a 20.7% on a consolidated basis, have been steadily improving quarter-on-quarter. We reported a 22% margin in Q1 FY '26. I'm happy to sort of note that the performance is continuously improving quarter-on-quarter. And also some of our other metrics that we've historically tracked like the annualized revenue per average headcount has now moved up to INR 14.9 lakhs. And the PAT margin as reported, despite the impact of the acquisitions, which is, of course, of noncash nature, is still at 11.4% at a very healthy rate. As we move to Page 11 to quickly spend some time on the operational highlights. And we spoke about the growth in the overall premiums and the group and the retail premiums. We continue to improve our market share on the whole and expand our leadership in the group segment. And when we go to Page 12, probably we will skip some of these details and take this as part of the Q&A. And the only thing of importance here for me to share with you is Medi Assist Insurance TPA Limited, a wholly owned subsidiary of your company, has successfully closed the acquisition of Paramount Health Services and Insurance TPA on 1st July for a final purchase consideration of INR 412.4 crores being the equity value of the purchase. And we've continued to win some awards for the work that we do using AI/ML in this space. We have won best AIOps Implementation Teams, data-driven insights. And in one of what is probably one of the most defining quarters for our growth, not just the growth in the TPA business with the acquisition of Paramount, we've also entered a strategic partnership with Star Health and Allied Insurance Company, India's largest retail health insurer to deploy MAtrix, our proprietary AI-driven automation-first claims platform. So these are some of the quick highlights from our performance. I will now hand over to Sandeep, our CFO, to give you a quick set of financial highlights for the quarter before we open the floor for questions.

Thank you, Satish, and a warm welcome to all the participants. The financial highlights for Q1 FY '26 are as follows: Total income was INR 198 crores, which was equivalent to a growth of 14.5% over the corresponding period of the previous year. Revenue from contracts with customers, excluding other income, we call it as operating revenue was INR 190.6 crores, which was a growth of 13.6 percentage over the corresponding period last year. Revenue from contracts included 11.1 percentage from the government business, 5.6 percentage from the international benefits business, and 2.5 percentage from the technology services, which Satish spoke about. Moving on to the margin profile. EBITDA excluding other income, which we call it as operating EBITDA was INR 42 crores, which was a growth of 19.3% year-on-year over the corresponding period last year. This is equivalent to a 22.0% of operating revenue. The profit for the year was INR 22.6 crores, which is equivalent to a growth of 18.7% on the reported PAT year-on-year and equivalent to a margin of 11.4 percentage on the total income. A few of the key numbers from the balance sheet are as follows: the net cash balance in the books was INR 312.6 crores. The net worth was INR 577.4 crores. The return on the net worth was a healthy 15.7 percentage annualized, which is equivalent to 3.9 percentage for the first quarter. Return on capital employed was 21 percentage annualized equivalent to 5.3 percentage for the first quarter. Revenue per average headcount, which again Satish spoke about on the nongovernment contracts was INR 14.9 lakhs annualized equivalent to INR 3.7 lakhs for the quarter. I now hand over the call back to Niraj.

Thank you, Satish. Thank you, Sandeep. We can now open the call for questions from the participants. If you have any questions, please direct them to Satish, who will in turn ask the team member to respond.

[Operator Instructions] The first question is from the line of Chintan Sheth from Girik Capital.

Congratulations for the good set of numbers and onboarding Star. Great validation of your platform and the offering you have. A couple of questions...

Chintan, we are not able to hear you very clearly. Just if you can speak a little louder and slower. We are not able to hear clearly.

Is it audible now?

Much better.

Thanks. Yes, I was just congratulating team on onboarding Star as one of your SaaS model and gives us a great validation on the platform and the product we have created. A couple of questions. One was on the premium growth despite -- we have overall growth has been 19% Y-o-Y, largely driven by group. Retail is still flagging -- chugging along sub 1% growth. If you can elaborate on what's happening there on the retail side, that would be one. And if I look at your revenue growth ex of revenue, government and IBP, and technology services business, the core TPA revenue has grown slower than -- materially slower than the premium growth. Typically, it lags premium growth, but this time around, the growth has been slightly higher -- slower than -- materially slower than the premium growth, if you can elaborate on that. And lastly, on the Star Health engagement, if you can provide some color, how should one look at -- because it's not linked to premium, I believe. How should one look at business coming in going forward? How should one look at the 2.5% technology revenue as a percentage of revenue scaling up with the Star engagement?

Thank you, Chintan. Satish here. Maybe we just go in the reverse order. I think right now, like we said, we've historically not reported at a client or a customer level from a revenue perspective. But if you noticed, we have added our large technology-led services as a percentage of revenue this time, which is the 2.45%. And I think -- and of course, deals or transformations of this magnitude will take a few months of lead time for 100% of the volumes to sort of kick in. But I would only sort of request that you watch the percentage of the technology services revenue, and we'll obviously continue to report the growth on it separately, right? So from the tech perspective. And on the group side, and of course, I think you've got that exceptionally well. We've had a phenomenal quarter, while our retention was at 93.4% on the same-store side. We've also added INR 1,000 crores of new corporate premiums in quarter 1, which has been one of our largest and biggest quarters ever from a new corporate wins. And all of the new corporate wins as a premium is being reported. But as you are aware, much of the revenue sort of gets pushed back into the subsequent quarters given the 12-month defer. So that's pretty much the reason for the incremental lag between premium to accounting revenue translation. And on retail, of course, so retail historically, we've done it in multiple ways, one with private, SAHI, different constructs and the PSU insurers, which are also largely allocation based. And any time the allocations change, typically, there is a dip and then there is a time to bring it back up. So part of the slow growth is partly the seasonality and the reallocation of the underlying portfolios. But if you noticed today, the private and SAHI premiums in our retail premiums are already at 42% and that's an area where we have made significant gains since the same period last year, almost an 89% growth. But one of the things that I will also sort of directionally share with you is that it is likely that not all the retail work that we do will be reflected in a premium-based model going forward. It is also likely that some of the solutions that we're deploying on the technology side will sort of also address the in-house and the retail opportunity. So I think going forward, it will be a good way to look at both retail and the technology services revenue.

Right. Put together. Okay. Got it. And on the fundraise, the cash is still on the books. I think the deployment happened post the quarter once the deal concluded with Paramount, right? That will be the right way to look at, right? The presentation still says net cash, we still hold. So I was just confirming that. Okay. Okay.

The next question is from the line of Niharika Karnani from CapGrow Capital.

So my question was on the acquisition. So if we see the top line has largely grown by acquiring Medvantage, Raksha and now Paramount. So is there any other acquisition in plan right now? And if not, what would be the top line drivers?

This is Satish here. I think the Q1 numbers are Medi Assist stand-alone. The growth that we have reported does not have any of the Paramount numbers. The Paramount closing is which effect from 1st of July. So we will be able to talk about it in Q2. Even historically, if you track our growth from, say, March '22 to March '25, we've doubled our premiums and of which only about 20% of those premiums came in from the acquisitions, a little over 20%, but much of that has been same-store growth, retention, benefits expansion and our organic sort of new corporate wins. That absolutely continues to be a focus area. And you've seen that in the group market share increase this year. And from a top line, I just answered the previous question to Chintan saying retail will potentially address retail in two models, which is the standard TPA services for many of the insurers of in retail and plus also the technology and other services for what traditionally has run as in-house in retail. You've also seen us grow fairly well on the government business side. The government business contribution of the business, in fact, has gone up. And you also noticed that at the same time, our margins have also improved. So the quality of the government business, the scale of the government business and the opportunity is something that is very exciting, and we'll continue to stay invested and stay focused on the government. And lastly, the other last growth driver we spoke about is our international business, Mayfair, which has also clocked over 30% growth in revenue for the same period as more and more Indians are traveling abroad, be it for travel, be it for elective surgeries or for short- and medium-term reputations from their employers. Today, as Mayfair, we have fairly integrated solutions that allow our Indian corporate clients and the insurer partners to seamlessly access global networks for hospitalization. That sort of -- that thesis is beginning to play off. So I would say we continue to be equally focused on all the four as growth levers. And acquisitions, of course, are strategic in nature, not just only for the top line. And as and when such a right opportunity comes up, we will certainly evaluate.

Understood. And one more question is on the HBA part. So right now, we know that it's a minimal percentage of revenue, but how do we foresee it in future? Like right now, TPA is 90% of revenue. So do we see kind of 50%-50%, 60%-40%? Or how do we plan to grow this HBA service?

Maybe it's a little early for us because if you looked at our transition, of course, we became the partner of choice for over 23% of the industry today by premiums. We've -- I think the phase where we are is all of the technology that we build is at an industry scale. We are able to componentize our offerings now, whether it is fraud detection or is an AI capability or navigation or discharges or the entire network as a service. And I think we have a reasonable number of conversations in place. But I would, at this point, not go into guiding anything else. But from a non-TPA perspective, we should look at both the international plus the tech as a diversification, and that's fairly recent, right, over the last two, three years, and that will continue to expand.

Understood. So do we see any margin expansion from here onwards from 22%? We have grown from 21% similar period last year to 22%. Or do we kind of be in the same range?

So I think we've always said this consistently in our conversations since the pre-IPO roadshows. We believe our steady-state margin in the TPA business should be at 23%, 24%. That's what -- that's where we were prior to the whole slew of acquisitions, and we have consolidated we're at 22%. And of course, we'll continue to improve our efficiencies using technology. But of course, with sort of Paramount consolidation coming in for about five to six quarters, we'll probably see about 200, 250 basis points kind of an impact on the consolidated margins. Of course, part of that will be offset by our productivity and efficiency improvements, but that's something that we should keep in mind. And then the consolidated base, getting it back to the 23% will be our focus.

[Operator Instructions] The next question is from the line of Madhukar Ladha from Nuvama Wealth Management.

Congratulations on a good set of numbers. So a few questions from me. First, you see the retail premium under management has not grown as much. I think in the opening remarks, you did mention some change in the industry. Can you elaborate on that? Second, can you give me what the contract liability number for -- at the end of Q1 is? And third, on the tech SaaS business, how are we billing customers? What is the thought process? Will it be as a percentage of premium that they manage? Will it be sort of a lump sum number? And I wanted to also understand what sort of costs can be associated to that cost of servicing that SaaS part of the revenue. So theoretically, two, three years down the line, what sort of margins should we be thinking about in that business? And lastly, on Paramount, I know that typically, when you announce an acquisition, after that, a lot of the customers, they directly renew with Medi Assist. So given that now I think we announced the acquisition last year in August, and we'll be integrating only from July this year onwards. Can you give us a sense of how much of that INR 150-odd crores has already been renewed at Medi Assist and how much will sort of has been and how much of that is still lying with Paramount? Yes. So those would be my sort of four questions.

Thanks, Madhukar. I'll do my best to answer them in the right sequence. So on contract liability number is INR 288 crores as of Q1, INR 288 crores is the number. This was INR 238 crores as of March. So that's the increment in the number, right, over the quarter. Now on the tech -- on retail, it's not necessarily a change in the industry. It is basically two things, right? One, we work with multiple insurers and multiple templates. We work as a TPA with the insurance companies in the retail portfolio. We work for private, SAHI and public sector insurers. Some of the portfolios, especially the public sector insurers are more an allocation-based portfolio. So there are occasionally changes in the allocation and then one has to sort of work back to realizing all of the portfolio that's been sort of allocated. So there's a bit of that change that is currently in the current year numbers. Whereas in private and SAHI, and I think we did report in Q3, Q4 last year that we've added some more insurers on the private, SAHI segment for retail. And now sort of we are operational in those relationships. And that's where you see that on a stand-alone basis, the component of private and SAHI retail has grown by 89%, while the overall growth because of the mix impact or the reallocation is looking like 0.2%. So this is an area that we've spent a lot of time on, and we continue to work very closely to bring all of the innovation and the tech to the retail side of the business. So that -- and like I have also answered in one of the earlier questions, it is also possible that some of the retail or retail-like products that are typically in-house. And we believe we now have solutions that can offer -- that we can offer to those portfolios, be it whether claims technology or analytics or fraud, waste and abuse prevention or even entire cashless network as a service or the whole Raksha Prime Tech as a service. So these are some of the offerings that we are now in a position to make available to stand-alone portfolios even where we don't have a TPA relationship. So -- and hence, it is likely that some of the work that we do in retail in future would potentially also show up as a technology revenue, not only as a premium-based revenue. That brings us to the tech and the SaaS questions that you've had. And of course, I think the good thing about the platforms is that we've always built platforms of industry scale. including the platforms that we've previously carved out, which are now the largest in their respective industries. Today, MAtrix for Medi Assist stand-alone itself allows us to process over 22 lakhs a quarter. And with some of the other insurers, potentially even if on a pro forma basis, over 30 lakhs of claims a quarter. That's the scale at which we operate. So we believe that we've created a platform that some insurers are beginning to like evaluating as an option, especially as they rethink the scale and the product innovation and the speed that is required to automate. And MAtrix is a platform sort of also has de facto integrations with much of the industry. Our fraud detection engine already is -- I'd like to believe that many -- multiple times more efficient even compared to our own numbers of last year Q1, where we saved INR 50 crores in terms of fraud. We've saved around INR 160 crores in this Q1. So these are capabilities that are continuously improving. And hence, I think the pricing models, Madhukar, will evolve. But the base pricing model for the claims technology on a per claim basis is a SaaS fee. We typically have multiyear contracts with a fixed fee for the entire duration of the contract, fixed in the sense, the fee is fixed at a per claim level, sometimes even with some amount of inflation in the base technology platforms. We expect that in some of the other AI-led models, the industry will sort of move towards outcome-based pricing because this is pure value and pure outcome. But these are slightly early days, Madhukar, and I think we will have a lot more color on this in the next few quarters as we figure these models out. And lastly, on Paramount, of course, until 30th of June, all wins were pure competition because we were competitors competing in the open marketplace until we signed on 1st of July. We expect -- so right now, irrespective of whether the customer already signs with Medi Assist or not, Paramount is a 100% wholly owned subsidiary of Medi Assist Insurance TPA. So from a customer and service and experience perspective, it is absolutely one. And of course, there's a bit of an operational alignment and system alignment that will happen over the next four, five quarters. And from a revenue perspective, while Paramount was an IGAAP and then after Ind AS recast and after adjusting the revenue recognition models to be aligned to our models, we expect a little over INR 140 crores a year in the Ind AS format to sort of accrue from what we have as numbers. So that's the kind of run rate. There's a little bit of that, that we had already won in the open marketplace earlier, but that's sort of the size at which Paramount will come in.

So okay, just I'll just -- first on the last bit. So of the 140-odd, there is some bit that you have already won in the open market. What would that number be? And then...

I'm sorry for interrupting. The 140 is the pro forma Ind AS converted number as of closing. This does not include any win from the [indiscernible]

Understood. Understood. So the 140 will get added -- 140 run rate will get added from basically July onwards effectively. Got that. And then on the SaaS platform, you mentioned it's on a number of claim basis.

Yes.

So is that the right way to build something like this I mean or shouldn't you try and price it on the premium because I'm wondering if we miss out on claims inflation, then.

No, I think -- thanks for looking out for us. This is our transaction processing system. I think after multiple rounds of understanding, we found this to be the most transparent way to work with our customers. And I think it's about arriving at the right kind of a transaction pricing to be fair and in line with to grow.

And I think you missed on margin, what can be -- like what's the cost of -- for doing -- for providing this SaaS service? What sort of do we have dedicated people? Obviously, we'll probably incur some costs on this side. So how should we think about that?

So, Madhukar, historically, we've not broken down our business lines by margin. I think what I can tell you is that there's obviously a significant amount of BUs that's available from an engineering and infrastructure possibility. Of course, we expect these margins to be better than the core margins, absolutely. Right now, I think the scale is too small for us to give you any kind of numbers. But at the right time, we will.

Yes. I'm guessing that at slightly better scale, the margins would be much better than the 22%, 23% EBITDA margin that we're talking about if this piece scales up.

It's a very fair and logical assumption.

Yes. I'll probably speak to you offline more on this.