Aster DM Healthcare Ltd
BSE:540975
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Aster DM Healthcare Ltd
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Good morning, everyone. My name is Saurabh Paliwal, and I'd like to welcome you to Aster DM Healthcare's earnings conference call for the fourth quarter and full year of fiscal year '22. The company declared the Q4 results last night, I hope you had a chance to review them. They were uploaded on the stock exchange and on the company website. The results and the future business outlook, we have with us the senior management at Aster DM Healthcare. It includes Dr. Azad Moopen, Chairman and Managing Director; Ms. Alisha Moopen, Deputy Managing Director; Mr. T.J. Wilson, who is Executive Director and Group Head of Governance and Corporate Affairs; Mr. Sreenath Reddy, Group Chief Financial Officer; Mr. Amitabh Johri, Chief Financial Officer for GCC; and Mr. Sunil Kumar, Head of Finance for India.
I would like to take this opportunity to remind everyone on how we will conduct this call.
[Operator Instructions]
All external attendees will be in the listen-only mode for the duration of the call. We will start the call with opening remarks by management, followed by an interactive Q&A session. During the Q&A session, you will get a chance to ask a question by raising your hand by clicking on the raise hand icon in the Zoom application at the bottom of the window. We will call out your name, after which your line will be unmuted and you will be able to ask your questions. We request you to please limit your questions to 2 per participant at a time. Post the completion of your query being answered, we will lower your raised hand.
Finally, the safe harbor related to the earnings conference call. Certain statements that may be discussed on this call are not historical facts and might be forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties like government actions, local, political or economic developments, technological risks and many other factors that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Aster DM Healthcare will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.
With that, I will ask Dr. Azad Moopen to start with the opening remarks. Over to you, Doctor.
Thank you. Thank you, Saurabh. Good morning, everyone. Thank you all for joining our earnings call for quarter 4 of financial year '22. The world is slowly getting into a stage of normalcy with COVID being subdued and business libbing back to normal. In UAE, the number of COVID cases are almost nil. And in India also, the cases are low with very few being hospitalized and with minimal mortality. At this stage of nascent recovery across the world. Unfortunately, the war in Ukraine along has put spokes into the wheels of recovery of the global economy. The increase in interest rates across the world, fueled by the actions of the U.S. federal reserve is producing reverberations across the world. I sincerely hope that the negative clouds shall disappear, and we shall be on a stronger wicket regarding the growth in all sectors.
Before delving into the quarter 4 performance of Aster DM Healthcare, I would like to bring to your notice our major focus on ESG. All the pillars, including environment, sustainability and governance are being kept at the highest level with millions of lives being touched by Aster Volunteers every year. I am glad to inform you that in the CRISIL Sustainability Yearbook released in May '22, Aster is in the strong category with a score of 64, and is highest among the listed health care players in the overall score. I'm extremely happy about that. We also received many other awards, but CRISIL being the 1 based in India. I thought that I will highlight this.
I would also like to share with you a brief on the recently conducted first addition of Aster Guardians Global Nursing Award to honor and express our gratitude to the nursing community. The nurses are the backbone of any health care system, and they were at the front line in the war against COVID. We felt that they are under -- we felt that they are under-recognized and under compensated and had to be celebrated and noted. And esteemed international jury selected nurses, nurse Anna Kabale Duba from Kenya as the winner from among 24,000 applicants across the world. The winner was awarded a trophy and a price money of USD 25,000 -- USD 250,000 in a function held in Dubai on May 12 this year. 9 finalists from different continents were also honored in the function. We hope that this will help to increase awareness about the noble profession of nursing and attract many youngsters as the demand for nurses across the world is increasing, and it's estimated to be 6.5 million at present.
Now coming to the financial performance for the full year of 2022. It is a proud moment for us that Aster having crossed the landmark of INR 10,000 crores in revenue in a year, in consolidated revenue. The full year financial year '22 revenues were at INR 10,253 crores, reflecting a strong growth of 19% over '21. EBITDA at INR 1,483 crores increase INR 420 crores over the financial year 2021. This growth in top line and EBITDA, combined with the reduction in debt by INR 198 crores and low borrowing costs. So our patch post NCI increased from INR 148 crores in financial year '21 to INR 526 crores in financial year '22. The ROC post Ind AS 116 for the group and in India, which was low -- for the group and in India was low earlier and now has started growing well. And during the period reached 9.7% and to -- 9.7% and 7.2%, respectively, due to the better ramping up of and setting of the existing assets.
India contribution to revenue is now 23% of total business as compared to 19% last year with EBITDA contribution of INR 353 crores for the financial year '22. While the focus was on better utilization of existing facilities. We have also increased our bed capacity to 5,065 by adding 158 beds in financial year '22. Our staff count has increased from approximately 22,000 last year to almost 26,000 at the end of financial year '22. The major increase in strength is due to the hospitals and labs, and the labs which we started during this year.
I'm happy to inform you that the digital transformation of Aster is moving in the right direction, and we expect it to start making a huge impact in our operations and revenues from the financial year -- from this financial year onwards. Deputy Managing Director, Alisha Moopen, shall speak more about this soon. I shall now briefly touch upon the financial year and operational -- financial and operational highlights for the quarter 4 of financial year '22. At a consolidated level, we posted revenue of INR 2,728 crores, which is an increase of 14% when compared with the same period last financial year. EBITDA is at INR 463 crores, an increase of 44%. The profit after tax post NCI is INR 226 crores in an increase of 115% when compared with quarter 4 of financial year '21. With respect to GCC business, quarter 4 was a good quarter overall delivering growth over last year as well as over quarter 3.
Revenue has grown 11% year-on-year to INR 2,121 crores EBITDA increased to INR 384 crores as compared to INR 289 crores in the same period last financial year. The Aster India business has grown significantly in quarter 4, with revenue growth of 26% year-on-year to INR 607 crores and EBITDA increasing by 147% to INR 79 crores as compared to the same period last financial year. EBITDA margins improved from 7% in quarter 4 of financial year '21 to 13% in quarter 4 of financial year '22.
Let me now move on to some of the operational updates. In India, we have started operations of the 140-bed Aster Mother Hospital in Areekode, in Kerala, fulfilling our promise to kickstart brownfield low CapEx initiatives. This takes the total bed count in India to 4045 capacity beds. We are looking at such opportunities in various parts of India, which gives a much better return on investment and improve our efficiencies. Aster Labs, which was -- which has its presence in both Karnataka and Kerala has now entered into 4 other states, Maharashtra, Tamil Nadu, Andhra Pradesh and Telangana, as of 31st March 2022, there are 2 reference labs, 12 satellite labs and 100 patient experience centers. By the end of financial year '23, we are planning to have 38 labs and over 400 patient experience centers overall.
With respect to the Aster Pharmacy-branded retail stores operated by Alfaone Retail Pharmacies Private Limited under the license from Aster, we celebrated the milestone of 100 store launch in Kochi, Kerala on 31st March 2022. There are 131 pharmacies, 82 in Karnataka, 27 in Kerala, 22 in Telangana. The plan is to reach around 300 pharmacies by the end of the financial year '23, and it is on track. We signed a memorandum of understanding with the government of Tamil Nadu of proposing an investment of INR 500 crores in hospitals, pharmacies and laboratories in the state over a period of 3 years.
We are looking at an asset-light model with someone doing the hospital building for us. We have started rolling out the low-cost labs and pharmacies in Tamil Nadu, which is something which will be there even before we start the hospital. Aster CMI Hospital in Bangalore in association with the Indian Institute of Science launched an artificial intelligence lab, the lab aims to build cutting-edge health care products and bridge the gap between clinical medicine and technology by training, health care professionals in artificial intelligence.
In the GCC, the 101-bed Aster Hospital Sharjah commenced operations during the month of April. We also expect to commission Aster Hospital in Muscat, Oman in the next 1 to 2 months. These 2 hospitals will increase our total capacity bed in GCC to 1,406. GCC, especially UAE, is an insurance-driven market. We are focusing on efficiency improvement measures, especially strengthening the revenue cycle management function. For this, we are making investments in talent for the RCM function and expanding the role of shared service center based out of India to bring down the cost. We continue to be recognized for the quality work we do and external recognitions we received is testament to the Aster's all-round excellence. Aster Hospital Mankhool achieved prestigious HIMSS Stage 6 certification. This multi-specialty hospital is the first private hospital in Dubai to win this recognition.
The achievement reaffirms our Aster Hospital's commitment to integrate technology into its services to ensure advanced patient safety and ever free treatment. LinkedIn ranked Aster among the top 5 preferred employers in UAE. The ranking was based on our ability to attract and retain talent, including the career advancement opportunities we provide to the employees in the backgrounds. I would like to give an update on the disinvestment of noncore assets.
The Saudi asset disinvestor is moving forward, though at a slow pace. What we are -- while we are at an advanced stage of conversation with one of the prospects, the recent improvement in performance of the hospital has led to interest by a few others, too. As you may be aware, Saudi has most potential in GCC with a population of over 30 million with huge demand-supply gap in health care. We are exploring the opportunity for getting a Saudi partner to roll out lower-cost pharmacies and clinics and labs with maybe -- with a partial sell-off from the hospital asset to fund this. We shall keep you informed of the developments in the coming quarters. Status of the corporate restructuring. The subcommittee of independent directors formed to look into the corporate restructuring is actively exploring the various options. We hope to give an update on the status during the next quarter earnings call.
I now request the Deputy Managing Director, Alisha Moopen to elaborate on the GCC business, their digital transformation and other strategic initiatives undertaken by Aster. Thank you very much.
Thank you, Chairman. Good morning, everyone. As Chairman mentioned, definitely, the world has started opening up and easing all their travel restrictions. This has a significant impact in the GCC for us because a large part of the population here is the expat population other than in Saudi. When you look at the country, the UAE has managed the pandemic very well, and Dubai in particular, has pushed ahead with major reforms to attract more people to establish a base there and live here. Part of the expat population, which had left during the COVID has also started coming back. We are seeing a rise in tourism, which is a big driver of commercial activity in this area.
Our result to get on with our lives in a normal fashion, like it was before COVID is strong. And our own experience dealing with a pandemic like situation, plus the continuous scientific innovation and research, should keep us in good stead. Going a little bit more detail on the GCC trends, we have seen a good year-on-year growth of approximately 13% growth in revenue over FY '21 and I'm pleased to state that this is actually also a growth of 12% over the FY '20 revenues since we wanted to compare it with a pre-COVID era. The EBITDA at INR 1,130 crores witnessed an increase of 23% over FY '21.
For the Q4, the revenues for GCC saw an increase of 11% over last year and grew 4% over quarter 3 of FY '22. This has primarily been led by growth in our hospital business. The clinic revenue, it grew by 13% and EBITDA increased by 6% over quarter 4 of last year. The pharmacy segment is showing signs of improvement with a marginal increase in revenue sequentially, but EBITDA has moved from INR 76 crores in Q3 to INR 112 crores in Q4 of this year. We do continue to face some pressures from the insurance companies, and we are seeing some margin pressure both on our OP and IP business.
Recently, we have had the DRG 2 implementation and the tariffs that's been finalized. We expect the IPO-related projections to stabilize. Like in any evolved market, there is stiff competition in this market as well. The positive news is that we believe that the next financial year shall see a near normal fee being returned across GCC, especially in our largest market, Dubai.
Just going on to some of the new business initiatives. We know that we need to innovate and explore new business models, which include begin malls sharing risk and rewards that will help make our business more sustainable and more resilient. We are working on a few such models with our insurance payers in the GCC. We recently launched a joint product with Insurance Company for the lower income group. While these are still at nascent stage, they would be critical for us to remain relevant in the coming years. We have also increased our focus on medical tourism as part of the GCC growth strategy. This is in line with the UAE vision to increase tourism for health care as well.
In the last quarter, we have been able to attract and treat multiple cases from close by countries for gene therapy, especially from Turkey, we've been able to provide also vaccination and cure to children suffering from SMA, which is quite a nation advanced therapy. In order to further our growth in the pharmacy business in GCC, we are exploring the franchise model for the pharmacies as well as looking at expansion feasibility in Jordan and Bahrain.
We are working actively towards going to adjacent geographies, which has been able to see a turnaround post COVID. We have also reset our cost base during COVID and the business is doing much better in terms of revenue and EBITDA. Specifically to UAE, we are actively investing into widening our range of offerings. We are setting up clinics, which are focused on wellness, where we shall provide a wide range of services, including functional medicine, cosmetics, aesthetics, IV drip therapy. This is also going to be increased focus on growing other cash-related business like dental and mental health. Further, as Chairman mentioned, the market in GCC, especially Dubai remains competitive. We at Aster, we are exploring innovative business model in partnership with payers and leverage our scale in the region. This will -- with this, we believe, will help us compete more effectively and service certain demographic segments in the coming times.
Of course, our major focus for the last year has been building the whole digital muscle for Aster. As stated a few quarters ago, we continue to -- on our pursuit to make Aster more future-ready and increase -- and create a better experience for our patient care. We do recognize the fact that digital is really the way to further our mission of health care as well as wellness. We have been making some very strategic investments and building on some strategic partnerships on bolstering our digital backbone.
I would like to summarize some of the progress that has been made during FY '22 and what's planned for FY '23. We have been building our core digital team with the CEO that was hired last year. And as Chairman mentioned, we continue to make investments in talent in this area and continue to strengthen our engineering as well as the product team. Our app, which is One Aster shall be the primary omnichannel mode of engagement and which will allow us to have a unique integrated view of patient care across all health care touch points. This will house as appointment booking, teleconsult, e-pharmacy, home health, e-diagnostics, chronic disease management and creating various streams to support patient wellness.
The app is on the App Store and Google store. We did a very controlled launch of the latest version in April '22 to a select few, and we saw more than 10,000 users and 2,000-plus registration. This is only a virtual consult being launched at this point, and we are yet to launch the e-pharmacy, which will be launched in a few days from now. Post the successful launch in the UAE, we plan to replicate this omnichannel care model in our top core markets in India in a phased approach. It is expected to start piloting within our Kerala cluster in the second half of FY '23.
There's also a big focus on personalized and guided care to patients through the digital CRM, which we have launched in obs and gyne as well as ortho across all our brands of hospital, and we have seen success with these pilots. We will be now making this a mainstream revenue initiatives. We have also launched a data lake digital initiative across Aster. This cross verticals data lake is to leverage native data across our verticals and shall help in unlocking cross-vertical opportunities as well as engagement for our patients and customers.
We shall have use cases across marketing, finance, clinical and operations. We are working with some technology partners, and we have started work on this already this year. We have a total planned cash outflow of INR 175 crores towards digital investment, out of which we have spent over INR 56 crores as of March 31, 2022. Cash flow for the business is expected -- cash outflow for the business is expected over the next 2 years. Riding on the back of digitization, we've also set up our Aster Global Delivery Center in India mark to our centers of excellence in UAE. This center is now 1 year old. Numerous process improvements, plans have been implemented. Thereby making processes more agile across all functions like F&A, procurement, HR, IT, RCM, to name a few. We have over 350 people operating out of 3 locations in India, in Bengaluru, Calicut and Gurgaon. The Aster Global Center is poised to become the center of innovation in the coming years, piloting some of the most critical and important processes and products.
I will now request our Group CFO, Sreenath Reddy, to take you through the details of the financial and segmental performance of the quarter. Thank you.
Thank you, Alisha. Good morning, everyone. On a consolidated basis, our revenue from operations for the quarter has increased by 14% to INR 2,728 crores year-on-year. India revenues have increased to INR 607 crores, up 26% year-on-year from INR 481 crores. Revenue from our GCC operations is INR 2,121 crores, an increase of 11% year-on-year. Consolidated EBITDA for the quarter is INR 463 crores, an increase of 44% year-on-year. EBITDA from India operations has more than doubled year-on-year to INR 79 crores and EBITDA from GCC operations is INR 384 crores, an increase of 33% compared with the same period in the previous financial year. EBITDA margin at 17% as against 13.4% in the same quarter of the previous year, an increase of 360 basis points. PAT post NCI increased by around 115% from INR 105 crores in Q4 FY '21 to INR 226 crores in the current quarter.
In terms of performance for the year, consolidated revenue from operations increased by 19% year-on-year from INR 8,608 crores to INR 10,253 crores. The EBITDA for the year has increased from INR 1,063 crores to INR 1,483 crores up 40%. India revenue for FY '22 is INR 2,384 crores, up from INR 1,654 crore in the previous year. And EBITDA now is INR 353 crores up from INR 144 crores in the previous year with a margin of 15%. India's contribution to the group EBITDA has increased to 24% compared to 15% in the previous year. PAT for the group post NCI is INR 596 crores compared to INR 148 crores for the previous year.
Coming to the segmental performance for the quarter. GCC's Hospital revenue is INR 944 crores an increase of 14% year-on-year, primarily driven by better performance of our hospitals, including Saudi. GCC Clinics revenue was INR 661 crores, an increase of 13% year-on-year and 4% sequentially. EBITDA increased by 6% year-on-year to INR 122 crore, and EBITDA margin is 18.5%. With COVID cases seemingly under control, drop in RT-PCR revenues and uptick in normal business has resulted in lower EBITDA margins in comparison to the previous year. GCC Pharmacies revenue increased 9% year-on-year from INR 559 crores to INR 609 crores. EBITDA increased from INR 67 crores to INR 112 crores, an increase of 68%. EBITDA margin for this segment also increased to 18.5% as compared to 11.9% for the same period last year.
The increase in margins for the quarter is primarily on account of purchase benefits earned due to ramp-up of sales post COVID. Consolidated net debt as at 31st March 2022 stands at INR 1,806 crores compared to INR 2,004 crores as at 31st March 2021, a reduction of INR 198 crores. India net debt stands at INR 319 crores compared to INR 306 crores as at 31st March 2021. And GCC net debt has reduced to USD 197 million from USD 231 million as at 31st March 2021. The reduction in the consolidated net debt combined with an improvement in our EBITDA reflects in better net debt-to-EBITDA ratio of 1.6% for FY '22 as compared to 2.7% for FY '21. Capital expenditure during the year was INR 544 crores. In addition, another INR 43 crores was incurred to its acquisition of wholesale pharmacy business and our additional stake acquisition from minority shareholders, both in India.
On that note, I conclude my remarks we would be happy to answer any questions that you may have. I now request Saurabh to open the question-and-answer session. Thank you.
[Operator Instructions] The first question is from Karan Vora from Goldman Sachs.
Saurabh, can you hear me? This is Shyam.
Yes, Shyam, please go ahead.
Yes, yes, sorry. So I think congratulations on the good set of numbers. So the question is more on when I look at how are we thinking about fiscal '23 at this point of time in terms of either outlook for revenue or how you're looking at margins? That's first question. And point number 2 is on the hospitals business. It's done well. Specifically, a combination of both volume growth and price in terms of ARPOB increase. So if you can help us understand how the hospital business will likely grow. What are some of the drivers of growth? I'm more keen on how the ARPOB dynamics are. So these are my 2 questions.
Sreenath, you would like to answer?
Yes. Shyam, yes, in terms of going forward, it's a little bit early to give any kind of a guidance. Maybe another 1 quarter is something we would like to observe, and by second quarter, we'll have a bit of clarity. But at least, what we are seeing is that the current year, it looks more normalized in terms of -- if you look at in the previous years, in the GCC region, quarter 1 and quarter 2 used to always be low, and quarter 3 and quarter 4 performance will always be better.
So that is what we are likely to see in the current year. Definitely, the RT-PCR tests have gone down. And therefore, the margins in the clinics, we will see a drop for quarter 1 and as well as quarter 2. And in terms of the hospital business, asking the question, we are coming on -- in fact, 1 hospital has already launched in Sharjah and the Oman hospital sometime during this quarter, we are likely to launch. So in terms of the existing hospitals, we will continue to see the same margins. We don't see -- maybe in quarter 1, quarter 2, we could see some small drop, maybe 50 basis points. But we feel that in terms of hospitals, we should continue the margins what we have got at this point of time.
We could see a drop in the clinics, mainly because of the RT-PCR, pharmacies is something which the volumes we are seeing an uptick. And in fact, during the last quarter, even the phases of the pharmacies, the footfalls have started going up. And therefore, we are positive and with all the e-commerce initiatives and other initiatives being taken -- so pharmacies, which was flat for some time, we feel that, that should be an uptick in terms of debt.
So just to add to that, Shyam, I just wanted to tell that 1 of the initiatives which we started and which we mentioned earlier, was about this -- the brownfield opportunities, operations management of hospitals with very minimal investment CapEx, almost nil capital. And we hope that we'll be able to have significant number of hospitals in India in the geographies that we operate and this can add to our number of beds to a great extent without CapEx being brought in. So that is something where we are focusing. And if that model works, that will be a way in which we can increase our number of beds as well as with the -- we see that there is an opportunity for good margins without investment, where the ROC goes up significantly.
And Shyam -- in terms of the hospitals, we continue to see the growth. It could be something similar to what we had in quarter 4 at least for the quarter 1. So that is something hospitals in India continue to do.
Yes. My question is specific. The second part of my question was on the -- you talked about growth, but how are we seeing the ARPOB dynamics, either in terms of in an inflationary environment, are you able to take medical inflation linked price increases? How should we look at the mix change from a hospital perspective, medical tourism, I think you touched upon in the opening remarks. So just those dynamics around how we should think about the growth coming from price and volume.
Yes. So one of the things which I -- yes, one thing which I just wanted to mention is that we -- definitely, we know that there's a requirement for price increase and to see the inflation, how it is being covered. So in India, some of the hospitals, we already have, I mean, taken the price increase. And Sunil, if you can just give what is being done already, in India.
Thank you, Chairman. Yes, in India, already majority of our hospitals, specifically in the Kerala and the Karnataka cluster, we've already taken the price increase both in the quarter 1 itself and some of them took in the last quarter, quarter 4, in the end of the quarter 4. So these price increases range somewhere between 5 to 10 percentage, and it's not across the board. So we have gone through some of the services wherever we feel it under priced and looking at the competition also, we have done the price increases. But I think this will be enough to ensure that whatever the ARPOB increase we have seen from FY '21 to FY '22, the similar uptick can be looked at least in the -- going forward also.
Shyam, that is in India, what Sunil gave. I think for GCC, we expect similar ARPOBs to continue. We don't see significant increase because like what in our opening statement, what we said, there has been some pressure from the insurance companies. So therefore, the ARPOB levels will continue to be almost similar. There may not be a price increase as such, but we are looking at bringing in efficiencies and increasing the wallets.
Just to add to that, Shyam, I think you will remember the point on the MET. That's 1 area that we're focusing on for increasing the occupancy levels. But another 1 is, we are fully shifting the mix of cases within our hospitals as well. So when you look at Aster Hospitals, for example, we have added neurosurgery. We've added oncology. So there is an increase, a slight increase in ARPOB that you're seeing in the GCC hospital on account of this case mix. So we believe that while inflationary linked tariff increases is a little bit more of a challenge in insurance-led businesses. What we have in our control is how do we have an occupancy that we still need to work on, which between MET and service level changes where we are moving much more into a tertiary care services and procedures here. I think that's where we will see the uplift on ARPOBs coming in.
The next question is from Amrish Kacker.
Congratulations on a fantastic quarter and a fantastic year to everyone in your team. So the 2 questions I had was -- were all the new initiatives. First, in the digital and then hospitals and clinics, the clinics and labs in India. So for the Indian operation, is there some color you can provide? We've now got some very good numbers in terms of pharmacies, in terms of labs and PCs. Is there something qualitatively you could share on good and bad and how this fits into our strategy and thinking of having these reasonable proximity to our hospitals and having some sort of an ecosystem around this. Is there any visibility you can share on a qualitative basis at the moment?
Right. From the qualitative side, see, as has been mentioned by Alisha, she will mention more about what is happening in the digital and Amitabh also will mention about that. See, we would like to create an ecosystem where the hospitals are connected with the clinics, with the pharmacies, with the home care and all this are tied up through the One Aster where virtual consultation also will be available. So we have been talking about this omnichannel where we want to provide this to our patients. And this is going to be a reality within the next 6 months once the app is rolled out in different parts of the GCC as well as in India.
So that we think that will be a force multiplayer, which will have a significant impact on our revenues as well as our patient comfort. So that is what we are looking forward. The digital driving that along with the physical, which is getting ready in India, especially so that we are now closer to the people. We always say that we have to take health care closer to people. That's what is happening through the physical ways. Just by online, we don't think that we'll be able to do that. Even if it is a pharmacy, if a medicine has to be supplied, we think that if we are closer to a location, it will be easy for us to provide even an online order coming in for fulfillment, it will be easier for us rather than many others, we will have to bring it from faraway places. So in all these ways, this saturating the market with our pharmacies, our clinics as well as with our hospitals as the backbone. I think we'll be able to provide a bouquet of services, which are connected with each other. Alisha, you wanted to say about the digital part.
Yes. So Amrish, I think just echoing what Chairman said, right? For us, in India, as the clusters are there with the hospitals, we do really think that still the funnel comes from the primary care. And primary care, whilst digital is a major unlock, you still would need the physical presence as well. So we've got 4,000 doctors. How do we really give them access to a wider population?
Definitely, digital will enable that. But when you're looking at combining that with the pharmacy and the medicine delivery having these units, it really fits in to making sure it's a tight ecosystem where people do think about Aster not just for tertiary and quaternary care because that's what we have built over the last 15 years in India, but we also want to make sure that anything which is for primary care as well as post-op care, we are able to have that connect across from the primary care, all the way to quaternary care and the post-op care, which requires both this digital as well as the physical infrastructure and network to be created.
So I think qualitatively, from a patient's journey and experience, it gives them multiple options and that's really what we wanted to kind of enable, right, the convenience, whether if you want it at home, you have that option to have it at home, whether you want to go to the store that's next to you, that's also available. So we do think the whole idea is how do you empower the patients to have more choices and more access and more convenience. So we really believe that these needs to go hand in hand. It cannot be only a physical plan. It cannot be only a digital plan, which is where these have been for us, we've been trying to run these in parallel to give that dual choice for our customers and patients.
Just to add to Amrish, what Alisha was saying, if you look back at the last year, where we haven't launched our e-pharmacy as an app, just by WhatsApp orders that have been received by us, we've been able to generate almost INR 50 crores of revenue. These are the places where we see that there's a great opportunity because the moment these are orders that are coming on WhatsApp. But the moment we launch an app where your captive patient base is automatically given the option of getting the medicine delivered to home, we're also launching a lab business in UAE. So the phlebotomist can reach your home to do the tests. All this ecosystem of patient care integrated at 1 app is expected to give us significant revenue potential in the UAE.
Thank you all. I mean we look forward to this over the next 12 months, I suppose, as we start rolling it out, it looks very, very interesting. Just as a follow-on and the second question, effectively to this. So on the app itself, we've earmarked INR 175 crores. We've spent a little less than 1/3 of that and we'll spend the remaining next 2 years. I think just hoping you talked also about monetization. I'm just trying to understand beyond, of course, the customer experience and the stickiness that, that will create. And I guess we already have a use case in e-pharmacy kind of sales. Are there any other monetization pillars that we can see? And sort of what metrics should we be thinking about for this digital business?
Sure. So I'll ask Alisha or Amitabh to give the details. So we have launched programs, chronic disease management as well as the ways in which we can award dropout of patients as well as fulfillment of patients who come to us and go back and then don't come back for medicines or for treatment. So if you can give some details on that, Alisha or Amitabh.
Amitabh, you want to give the numbers.
Sure, Thank you, Alisha. Thank you, Chairman. So if you look at, Amrish, last year, we also launched 2 more initiatives. One was what we internally call it as revenue augmentation, it's an initiative which allows us to ensure that a visit to a GP is referenced to a hospital. There's no handoff and it's more towards the patient care where a patient clinical walk between a clinic and a hospital is managed. And we've seen that there's a significant acceptance to that. If you look back last financial year, even in last 2.5 quarters, we generated almost INR 18 crores of revenue.
And again, we -- as Alisha mentioned in our speech, it is very limited. We just launched it at a few clinics for ortho and obs and gyne. Similarly, when we call it as a DCRM, we've been able to create a platform which pulls the information from our HR system and for chronic cases, where there is a need for a medicine or a regular checkup, a reach out is made to the patient to further the patient care.
And we've seen that it has helped us get the patient back into clinical consultation, like e-pharmacy, things of multivitamins and other places we have seen that this has led to in the last 1.5 quarter gave us revenue of almost INR 10 crores. Amrish the reason I'm bringing on the numbers is because on a limited pilot launch, we've been able to see significant growth potential on this. And that's why we believe that for this geography, this can be a strong growth pillar for us.
I think that's very helpful. And hopefully, as we go forward, we'll find a metric also some way to measure this because I suppose the sales will get captured how the revenue will get captured in 1 or the other division, but it would be really interesting to track this. Thank you very much.
Yes. We are hoping for is -- over time, as the app is launched, like you said, we would be able to say about our unique number of customers, which are there on the app. And how much is the sort of realization per patient, right? We have kind of the data on how much that is right now. We -- are the pharmacy orders changing, are the visits changing? So I think those are the kind of metrics we are working towards developing.
The next question is from Ramveer Singh.
My question was related to -- on balance sheet side, the current net debt of INR 1,800 crores. So can you give year-wise repayment plan, how we are going to plan? And if you could give it CapEx also year-wise on expansion related to expense an update?
Yes. So I can just cover the summary, but anything in detail Saurabh can always provide. So this net, the repayment -- most of this debt is in the GCC, and this debt is going to be repaid in the next 6 years. It's a step-up, which gets repaid in the next 6 years. In India, the debt whatever we have got that is the long-term debt in terms of close to around 12 to 13 years. That is on the repayment schedule. Your second question was -- sorry I didn't get the second question.
CapEx. CapEx.
Yes, on the CapEx. Yes, CapEx is something which we had guided earlier itself that every year for the next 3 years, including the year -- in the current year, we have said that we'll be around INR 580 crores. And that is the number of CapEx, which we look also going forward for the next 2 to 3 years. So every year, we'll have a spend of around INR 580 crores. We need to create newer facilities for the growth. And a major part of this almost INR 300 crores where we are earmarking it to India.
So that INR 580 crores would be related to that expansion planned in GCC and India that some 300 bps (sic) [ INR 300 crores ] we are going to add in '23.
Yes. So this CapEx is for everything that is hospitals, clinics, pharmacies, and also we have got those digital activities happening. So it's a combination of all that. Out of which, out of the INR 580 crores, INR 300 crores is for India, mainly for the -- in India and just for the hospitals and also we are investing a certain amount in the rollout of the labs. So that is planned, we have got labs and pharmacies. So lab is 1 area, which we would like to scale it up further.
But mainly our focus is going to be on hospitals, but like what it was said, we would like to create the ecosystem in the places wherever we are present. And that is the reason we are creating this labs because we want to go to the doorstep of our customer labs and pharmacies. So that ecosystem is being created in the places where we are present. No, now that's a pilot basis, we may get into other geographies where we are not present, but those numbers will be minimal at this stage.
Just adding to that, I just wanted to add on. One, the -- wherever possible, what we are doing now in India also earlier, we used to do this in GCC only. We make it asset-light, even hospitals that we have to construct, which is greenfield. We have people who are ready to construct it for us and give it on a long-term lease. While it may come on to our balance sheet with the new standards, we will have the cash flow advantage. And so we are looking at that with the very attractive rates at which people are ready to construct it for us. So the equipments we bring in, but half of the cost, which is the land and the building that we don't take on our balance sheet as much as possible. And the second thing, apart from these expenses, which INR 500 crores, INR 550 crores, some amount of replacement as well as maintenance CapEx also, which comes into that because we have 5,000 beds. So naturally, there will be some replacement also which is required.
Yes. Understood. Understood. So just wanted to understand where that debt because we have high intensity CapEx going forward for the next 3 years. And so debt repayment may be calibrated. But still, I've seen that on balance sheet side, do you think by debt equity ratio would significantly improve in the next 2 years or maybe by FY '25.
Sreenath, do you want to take that.
Yes, sure. Definitely, definitely. If you look at it because of performance year-on-year, we'll keep improving, right? So naturally, in fact, we'll have free cash flows, if we look at in the current year as well. We do have free cash flows. So going forward, because when the debt is restricted -- sorry, the CapEx is restricted. And we don't have any significant borrowings to make because internal cash, what we are generating is sufficient mostly for our CapEx. And therefore, the repayment of the debt will happen at a faster pace. In fact, last year, during the COVID times, in fact, even based on the collections that we made, we preclosed all the loan as well. So there is every possibility that in the next 2, 3 years, we should have sufficient cash to reduce the debt from the present levels.
Okay. And just on Q4 performance, do you feel part of performance is related to pent up demand because we came out with COVID scenario. And so obviously, there would be some out-patient -- from out-patient side also any in-patient side also, and that 66% occupancy may have some related to a bunch of demand. So is -- do you feel any element is there in Q4.
In fact, not because what we have seen during this quarter also is that there is that business continuing as well as see during COVID, you had all the revenues coming through COVID testing, PCR and dollar, which is going to be -- in spite of that, we were able to have a fairly good quarter. Now when we look into this quarter also, the performance appears to be -- it's showing that there is that traction which has happened even in the post-COVID period, even without that pent-up demand.
So going forward, occupancy because now bed capacity is also being increased. So occupancy, can we assume that 60% plus occupancy will continue in FY '23 and FY '24?
We hope so, see it's unpredictable, but we hope, though, we have been having better occupancies since some of our hospitals, especially the new hospitals, which started ramped up quite fast. So we hope that we will be -- we want to go up, and we are seeing that trend and where we will have better occupancy as we go forward. Like what has been told earlier, see, this whole idea of this ecosystem being created, where there is a primary care, where there is this labs, the pharmacies, everything becomes a funnel, which brings patients into the hospital. So that is the whole idea of increasing the occupancy. It is Aster being seen everywhere and having points of contact in all the areas where we are. We hope that more and more doctors as well as patients directly will come into our system and our occupancy can go up.
The next question is from Shiv Shankar.
Yes. I took 3 quick questions. Just wanted to know what is the breakup of your capital employed between GCC and India?
Sreenath. You're on mute.
Yes. I'm just taking those numbers. So can we move to the next question, I will get back on that quickly.
Okay. The next 1 is the CapEx between GCC and India. Over the next 3 years, you mentioned INR 580 crores. I heard you say that it is INR 300 crores for India over the next 3 years or so? And the third 1 is receivable lease levels. What is also the receivable difference between GCC and India?
Yes. In terms of the -- this is your second question, in terms of the CapEx, INR 300 crores is what we are looking every year in India for the next 3 years. Have I answered that.
Yes, that I got it. You answered that to an earlier question. Yes.
Yes. And your third question was?
What's the receivables difference between the 2 geographies?
Yes. So receivables, see, if you look at the geography in India and there is a big difference between how business happens in India and GCC. GCC mainly, it's an insured market. And India is a cash market, no doubt, insurance during the last few years has been steadily increasing, more so in the bigger cities. So normally speaking, in the GCC, the credit period is anywhere around 90 days. So you'll always -- you will almost have 90 days receivables showing in the books of sales, what was that. So that is on the GCC side.
India side because in terms of the total credit business, what we do is around 20% because some of the geographies have got 15% insurance, some cities, bigger cities like Bangalore as well 40% insurance. So the credit business, what we do is around 20% of the total sales. And even that or that will have 90 days of receivables on the credit sales. And in terms of your fast question capital employed, in GCC it's INR 6,500 crores and in India is INR 2,500 crores.
Okay. So in receivables in absolute numbers, can you give me in GCC and India?
Yes, I can give you that. We can give you that. Just give me a minute. I'll come back with that. Biju will take that. We have given the -- yes.
The blended rate, Shiv Shankar is the blended receivable is 72 as we have reported in our consolidated financials.
Right, I got it.
Yes. Shiv Shankar, just give us a couple of minutes. We can give you the exact numbers in terms of receivables in the GCC and India. So we will come back to it, post the next question.
Shiv Shankar, before you go up, the GCC is 88 days and the blended is 72, if that helps.
You want to be absolute number. So I can give the absolute number. So the absolute number in terms of GCC is INR 1,880 crores, and the India is INR 140 crores.
The next question is from Deepak Poddar.
Sir, I just wanted to understand, firstly, the sustainability of the better margins that we have seen in this quarter at 17%. And my second query is, I think we currently are at about 5,000 plus kind of operational bed capacity at 5,065. So what was the capacity we are looking at by FY '23 end? Yes. Those are my questions.
Yes. So regarding the sustainability from GCC, you want to take it up, Amitabh. And from India, I think Sunil can take that.
See, so Deepak on the sustainability of margin, we do believe that given the fact, on the hospital side, we are seeing better utilization and the loss has been coming down. We do believe that the margins are sustainable. However, in the immediate future, when we talk of Q1 of FY '23, we do believe that GCC will have some impact of the Eid and Ramadan holidays that pretty much impacted most of April and when -- and part of May also. However, on the overall year, if you look at it from the perspective of clinics, as well as pharmacies. We do believe that there will be some impact of PCR and clinics. And on pharmacies, we have been seeing the footfall increasing. And with all the new initiatives we are launching, the margins over on a blended basis would be sustainable.
Blended margin in GCC, right?
Sunil, you want to talk about India.
Yes. On India, Deepak, as you know, current year, we are at 15% consolidation rate at the India level for the full year. Next year, we're looking at the higher rate -- talking about upwards of 19% at least near the hospitals bit of it. But maybe that is, again, I'm talking about excluding the new hospitals, which is coming up. In terms of bed capacity, you know that we are already 3,900, and by FY '23 ending, I think we'll be adding another 400 beds. So with that, we should be around 4,300 to 4,400 beds for the FY '23 ending. And again, this is something which we already send off, this is excluding the -- what Chairman called out about the brownfield projects with the less CapEx. If that also come to a picture, the number of beds will be more then.
The 3,900 going up to 4,400 right? And this is on an overall basis, right.
I'm talking about only India.
Okay. And then on overall basis?
So that is 1,400 from GCC.
Okay. Okay. Understood. And regarding your comment on margins. So basically, India segment can see improvement in margins when the GCC segment, we expect the margin to be sustainable. So overall, on an annual basis, you are expecting margin to improve, right, or on the consol basis?
Yes. So I'd like to comment on that. So the GCC, like what we said, the clinic margins will unlikely to go down because mainly because of the RT-PCR tests, which we will not have. So that is something which will bring down the clinics margins. So on a consolidated basis, India, definitely, the margins have continued to improve. Hospital segment and pharmacy segment, we'll maintain our margins. So we should continue to improve our margins from the present levels.
From present level, we are talking on an annual basis -- or that we taking basis...
Annual.
Not the fourth quarter base, right?
No, annual basis.
The next question is from Mehru Sheikh.
Sir, first question on, again, on the India business side, really. When we say we are seeing improvement in the margins, but considering that you will be adding new beds as well as they will be spending towards your digital initiative, combined with your expansion planning lab as well as in the pharmacy side. So do you feel that this will have some breakdown impact at least in near term. Can I have your view on this?
Are you talking about the return on capital or on the...
EBITDA margins, operating margins, which is.
Yes. So the margins in the hospital is likely to go up because of the improved efficiency. See the labs, pharmacies and all, which are being rolled out and new being added. Those areas, the margins will be less definitely, but that's only a minor part of the overall business. So overall, that impact by way of impact of the margin will -- I mean, overall revenue will be much less. Sunil, you wanted to add?
Yes, Chairman, thank you. So Mehru, the thing is that as -- even though we are adding the number of beds, you can see that the major projects are going to come in FY '25 and FY '26. At least next year, there is the FY '23, we're only looking at whitefield coming through. And the majority of other assets, whether it's in Karnataka an Kerala cluster are above 3 years. So they can sustain the new losses, which is going to come up from the new units and the drag will be very less at the consol level or the India margins would not be more than 100 basis points. So that is the why we said that we should be able to have a higher teens EBITDA margin and consistent growth, which we can achieve.
Okay. And sir, 1 question on your 1,000 bed addition through your O&M model, basically asset-light model. So can you provide some time line of this addition as well as your focus region of this for your O&M led model?
Yes. So we already have added 140 beds in Kerala, which is the Aster Areekode Mother Hospital. So we hope that we'll be able to add between 500 to 1,000 beds in this financial year. Our target is 1,000, but we could be anywhere between 500 to 1,000, and the larger part of this is likely to be in Kerala, but we also will have in Karnataka as well as in Andhra Pradesh and Telangana. So we are perfecting that model, but it's also already become operational, and we hope that we'll be able to have at least 500 beds, if not 1,000 beds during this financial year.
Okay, sir. And so moving to your GCC pharmacy business, when we said there is some benefit of purchasing and all in, which has led to EBITDA improvement. So can you break it down like, as I see the sales growth is something like 9%, but against with the EBITDA has grown more than 65%. So can you quantify some -- or can you break it down this -- or can you basically bridge the margin expansion?
Amitabh?
So Mehru, what typically happens is when we have a full year of a purchase, there are certain purchase benefits that get passed on by the OEMs in terms of -- against a volume commitment. In this particular quarter that has gone by, we have won almost INR 40-odd crores of sales benefit which has come in, which is -- purchase benefit, which has come in, which is mainly towards the purchases that we have made during the year because of post-COVID, if you look at the last financial year of the same period, it was not INR 40 crores, it was a little less at that point of time. But as you look at a year-on-year comparison, this benefit will come to us in the year FY '23 also because it's a part of an annual benefit and thus a part of a sustainable margin on the year-on-year basis.
Adding to that...
Mehru, just to add 1 more point is like what Amitabh, there's obviously been a registration of sales. But again, as far as the breakup is concerned that we have. I think we had mentioned before also that we were trying to increase the ratio of nonpharma business in pharmacy. So we used to do 75% of medicines and 25% nonpharma. What is that by the year end, has shifted to 70% of medicines and 30% of nonpharma. So the margins that you get in the nonpharma is also higher. It's our own products, white label products. So that's also 1 part, which is where we are thinking about sustainably increasing our margins and helping us have that margin expansion coming in.
Yes, I would like to add on to what Alisha said, I would request you not to go just with quarter 4 margin numbers that is better to look at the full year margin numbers because in the coming years, this couldn't get spread out and as much as possible, we are trying to get those benefits as and when it accrues. So we don't want it to go into the quarter 4. But generally, what happens because the volume numbers do come up in the target numbers to come up somewhere in quarter 4. So quarter 4, the benefits, what we get will be significantly higher compared to the other quarters. But on the segmental I would request you to look at the full year margin numbers for the pharmacies.
Sure, sir. That explains. And sir, last question on your clinics side. It has grown around 21% in FY '22. But can you give us a growth number with what will be the growth?
So what I didn't hear that question on what?
Yes, GCC clinic business is up around 21% in FY '22. But can you quantify the number, excluding your RT-PCR related during, what could be the GCC clinic growth will be?
Okay. So the thing is that I'll answer it slightly different. So the RT-PCR revenues in the clinics in the GCC for the FY '22 is around 33%. So that is the RT-PCR revenues that we had in the clinics. So if you exclude that, so clinics, we are not looking at a significant growth. So the growth is likely to come is in hospitals, clinics, we don't see much out for growth.
Yes. Just to add to what Sreenath has said. When we look at the revenues of clinics, at least the PCR revenue, we don't expect that to be there in FY '23. But we also believe that the secular traffic, what used to -- footfalls used to come in clinic, which were not happening in FY '22 and partly for FY '21 because of COVID, is expected to resume and we expect this business to go back to the levels of FY '20.
So considering the new -- our core business will be coming back. So at least on the clinic side, we will see something less lower-digit growth or maybe a flattish kind of a growth in the clinics.
So Mehru, one of the things, which I just wanted to tell you that we all -- we found that during the COVID time, many of the respiratory infections, pediatric cases, ENT, all these were very low, which now has gone back to that level of a normal period. And these are 2 impacts. One, this had an impact on the clinics because the numbers were less in all these areas.
Second, this also had an impact on the pharmacy revenue because the pharmacy usually gets a lot of its volumes and profits from acute care medications like antibiotics and all. This was also very low during this period. While there was income coming from RT-PCR and all, we were losing this on both sides in pharmacy as well as on the clinic side. It's becoming normal, and they like a normalized year like '20 now.
Sure, sir. And sir, 1 last, 1 small data point. In start, you mentioned your budget for our digital spending for next 2, 3 years, what was that number? So already you have spent around INR 56 crores and what is overall spending budget for you on a digital side?
Amitabh, would you take that?
Yes.
Yes. Go ahead, please.
So Mehru, we are looking at a total estimated spend across India and GCC of close to INR 175 crores, of which INR 56 crores has been spent. And this also includes a bit of a marketing and on other expenses that we will be incurring because at the end of the revenue, launching a certain product, it's not only the development it's the marketing, the other development and everything else that is there. So it spreads across both development as well as marketing and the organizational setup. Overall, for this initiative, we expect around INR 176 crores to be spent.
The next question is from Alankar Garude from Kotak Securities.
Firstly, can you help us understand what is causing this delay in monetization of Saudi hospital? Because if I remember correctly, we had mentioned about completing this deal in a couple of months in our Feb con call. So can you just help us understand what exactly is causing the delay?
Yes. So Alisha, you would like to or Amitabh.
Yes. So Alankar, 2 parts of it, right? One, March was Ramadan -- April was Ramadan. So it ended up being pretty much a very, very quiet month and then Eid holidays came in. So there's definitely been in Saudi pretty much a lot of things closed around Eid and Ramadan. So things like Chairman mentioned, was going a little bit slow. Secondly, there has been quite a big turnaround in the Saudi business over the last 6 months. We had new business tenders that we have won as well as complete renegotiation with most of the insurance companies on 5-year contracts, which has happened, which restored the business, and now we have more than double-digit margins, which has been consistently seen for the last 5 months. So we do have some more interest from other parties as well to associate.
Like Chairman mentioned, we had been anyways exploring options of extending the pharmacy in Saudi. There has been a lot of people who have approached us over the last 1 year to set up pharmacies, and we've been looking at the right model between franchise or setting up our own. We have had discussions with various parties. So we have been just sort of looking at what is the best option for us to conclude.
Like Chairman said, there has been -- the deal, the due diligence has pretty much almost concluded. But since there is a turnaround of the business, do we try and revisit the value or do we try and do a part monetization and go on with a new partner to also expand the pharmacy. So we do want to look at it quite strategically because Saudi is a big market for us. We have been there for a while, and we've been seeing that there is a very big difference post-COVID in that way the reforms have happened within health care, the kind of laws that have come in very attractive towards health care investments, and we do not want to take a very rough step when we see a turnaround on the business as well. So we're trying to kind of keep it more measured. We will have a stronger update for you by the next quarter.
Understood. My second question is on the GCC restructuring. I think we mentioned about giving an update in the next con call, but just wanted to check whether the internal Board committee have they set up -- set any time lines for finalizing on this trend?
Yes. So this is a priority item for the Board. And so it's being taken up with the right earnest with the frequent meetings of the committee along with the people who are in the north things. But they haven't given any time lines, and we hope that this will be done at the earliest because -- this is a top priority for us to, I mean, decide how to go forward. The members are aware about it. And -- but we don't want to comment on that. We just want to tell that within -- by next Board meeting. I think by next investor call, I think we'll have much more clarity on that.
Fair enough. So basically to summarize this in terms of time lines between sale of Saudi Hospital or maybe not a sale, maybe not an entire sale, maybe a partial sale then excluding a partner for pharmacies and labs in Saudi and then the GCC restructuring, in your mind as of now, what would be the pecking order?
No, I think, first, it should be the Saudi, which happens. But maybe both are simultaneous even both are there. But we see -- like there is also this question of when we are doing a restructuring, then we have to decide suppose the restructuring happens first and then the Saudi sales comes. So then this has to be in separate verticals or because if GCC is separate and India separate this happens in the GCC ADR, and so it has to be done by them. So we -- even that is in our mind. And so we are having this overall thing, the Board Committee, which is formed once that happens, this will become a little more clearer. Of course, we know that there is a value ascribed to that asset and that anyway has to be taken into consideration. So overall, without much delay, we hope that both this process will have more clarity.
If there are any more questions, I request the forum to raise their hand by pressing the raise hand icon on Zoom application. Since there seem to be no further questions, I would like to thank everyone for joining us for the call today. If you have any further queries or questions, do feel free to reach to me. Thank you very much, and have a great day ahead.
Thank you. Thank you very much. Thanks a lot, everyone. Thank you.
Thank you.
Thank you.