Narayana Hrudayalaya Ltd investors must be in the pink of health. The stock has advanced 57% so far in calendar 2025. In fact, it surged 14% in the past three trading sessions, reacting to its solid September quarter results announced on 14 November.
The rally was accompanied by a sharp surge in trading volumes. The company, responding to an 18 November query from the BSE, said there is no pending information or announcement that may have a bearing on the price/volume behavior of its shares. It added that it does not have any comments on the volume movement of its securities, which are market driven.
Narayana Hrudayalaya is now the fourth-largest hospital stock by market capitalization. Its overseas presence sets it apart from the three larger peers – Max Healthcare Institute Ltd, Apollo Hospitals Enterprise Ltd and Fortis Healthcare Ltd. Narayana’s facilities in the Cayman Islands in the Western Caribbean accounted for over 25% of total revenue in Q2 of FY26.
Narayana expanded its global footprint by completing the acquisition of the Practice Plus Group Hospitals in the UK on 6 November at an enterprise value of GBP 183 million. It will be funded with GBP 40 million of equity from the Cayman operations and the remaining with debt. Raising debt should not be an issue as consolidated net debt was ₹247 crore at the end of Q2.
Practice Plus had revenue of an estimated GBP 250 million in the year ended September, with adjusted Ebitda (pre-IFRS) of GBP 20 million. Based on this, the acquisition price seems reasonable at an EV/EBITDA of about 12x. But the Street was hardly enthused by the acquisition as captured in the stock’s muted reaction to that development.
Lower valuation
So, what led to the sudden spurt in Narayan’s stock price? A likely answer is valuation. Even after the rally, the Narayana stock trades at a P/E of 35x based on FY27, according to Bloomberg data, a discount to larger peers that quote in the 45-50x range.
A possible explanation for the relatively lower valuation could be its Cayman Island operations, which are complex to decipher. Also, its losses are still a drag, albeit negligible at $0.3 million in Q2. The Ebitda margin of Cayman Hospitals was at 44% in Q2, about 20 percentage points higher than that of its hospital business in India, the management said.
Despite that, the overall Cayman operations are struggling to achieve a positive Ebitda because of losses in the health insurance business. The company has an "integrated care" model, which combines hospital services with local health insurance to provide comprehensive healthcare packages to the island’s residents.
On top of the complexity of the Cayman business model, investors may also be worried about how the UK acquisition will pan out.
In its Indian operations as well, some key performance indicators are pain points, such as the Ebitda per ipatient. Narayana had an Ebitda margin of 24% in Q2, which is similar to that of Apollo’s hospital segment.
But Narayana’s average revenue per in-patient was ₹1.49 lakh versus Apollo’s ₹1.73 lakh. This made Narayana’s Ebitda per patient of ₹35,760 lower than ₹41,520 for Apollo. Max Healthcare and Fortis Healthcare report average revenue per occupied bed, so they are not comparable.
For now, Narayana has outperformed peers with superlative returns. However, further meaningful gains depend on health insurance success in the Cayman Islands and optimization of the UK acquisition, using the learnings from the Cayman operations. Also, it needs to maintain the growth momentum in India.