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Aster DM Healthcare Ltd
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My name is Saurabh Paliwal, and I welcome you to Aster DM Healthcare's earnings conference call for the first quarter of financial year '23. And the company declared the Q1 FY '23 results last evening. I hope you've got a chance to review them, along with other materials, which were posted on the stock exchanges and also uploaded on the company website.
Today, to discuss the quarterly business performance and future business outlook, we have the senior management at Aster DM Healthcare with us, includes Dr. Azad Moopen, Chairman and Managing Director; Ms. Alisha Moopen, Deputy Managing Director; Mr. T.J. Wilson, Non-Executive Director; Mr. Sreenath Reddy, Group Chief Financial Officer; Mr. Amitabh Johri, the Chief Financial Officer for the GCC; and Mr. Sunil Kumar, Head of Finance for India.
I would also like to remind everyone about how we will conduct this call. All external attendees will be in the listen-only mode for the duration of the entire call. We will start the call with the opening remarks by management, followed by an interactive Q&A session.
During the Q&A session, you will get a chance to ask the question by raising your hand by clicking on the raise hand icon in the Zoom application at the bottom of the window. You will call out your name. After which, your line be unmuted, and you'll be able to ask questions. We'll request to please limit your questions to 2, but not more than 3 per participant at a time. Post the completion of your query being answered, we will lower your hand.
Finally, before we get started, the safe harbor relate to the earnings conference call. Certain statements that will be discussed in this meeting that are not historical facts 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 relevant forward-looking statements. Aster DM Healthcare Limited 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 this, I will ask Dr. Moopen to start with his opening remarks. Over to you, sir.
His mic is on mute I think?
Dr. Azad, if you could unmute yourself, please?
Yes. Sorry about that. So am I audible now?
Yes, you are.
Sorry about that. There was some technical issue. So good morning, everyone. Thank you all for joining us for the earnings call for the first quarter of financial year '23. I hope and pray that all is well with you and your families. As summer vacations conclude in India and other parts of the world, I hope most of you were able to take your break this summer.
The world has now reached a stage where COVID cases continue to be there, but we now considered it to be part of -- and parcel of our lives, exercising necessary safety or precautions.
The Ukraine conflict continues and along with it, high energy prices and Taiwan's standoff between U.S. and China, all this together continue to battle hyperinflation with global central banks responding by increasing interest rates, thereby dampening growth prospects. However, we are happy that the scenario in our key markets in India and Dubai seem to be much better with strong growth prospects.
GCC from where we derive the majority of our revenue, has the benefit of spiraling oil cost, which will have an impact indirectly in all businesses there, whereas this is actually a ramp up for India.
Let me discuss the financial performance of Aster for quarter 1 financial year '23. At a consolidated level, we posted a revenue of INR 2,662 crores, which is an increase of 12% when compared with the same period last financial year. EBITDA grew only 4% to INR 292 crores when compared to INR 281 crores in financial year '22. EBITDA growth was impacted due to loss of INR 20 crores from commissioning of new hospitals in GCC and India.
Profit after tax post NCI stands at INR 69 crores when compared to INR 44 crores with quarter 1 financial year '22, a growth of 54%. Profit after tax post NCI, excluding impact of commissioning of new hospitals and onetime other income, is INR 77 crores, a healthy growth of 74%.
With respect to the GCC business, revenue grew 10% year-on-year to INR 2,011 crores with EBITDA of INR 208 crores as compared to INR 210 crores in the same period last financial year.
The Aster India business is growing well with revenues growing 18% to INR 651 crores and EBITDA increasing by 18% to INR 84 crores. Profit after tax post NCI stood at INR 19 crores as compared to a loss of INR 1 crore in quarter 1 financial year '22. This shows that we can spend the assets well in India, increasing revenue and profits.
I also want to mention that regarding the GCC, as we all know, this is relatively a weak quarter on half when you look at the first half of the year. So that is part of the reflection of that and, of course, along with the starting of the new hospitals, which are mainly happening in GCC.
Moving to the operational updates of the quarter. In India, during quarter 1, we started operations management of the 140-bed Aster Mother Hospital in Areekode in Kerala, kickstarting our planned brownfield low CapEx initiatives, which gives a much better ROE and improves our efficiencies. This addition takes our bed count in India to 4,033 capacity beds.
As stated earlier, we are looking at more of such opportunities in various parts of India, and we hope to announce some of this in the coming quarters. We have submitted revised plans for an integrated advanced health care facility in Trivandrum, capital of Kerala, named as Aster Capital. Where the hospital is planned to be built 550-bed facility ultimately, the first phase shall be a capacity of 350 beds and is expected to be operational by financial year '26.
We have brought 65 acres of land 5 years back, and the project was kept on hold due to COVID. We see a huge demand supply gap in Trivandrum and expect an early breakeven of this project in about a year after inauguration, like what we did at Kannur.
Aster Labs, which has its presence in both Karnataka and Kerala, has now also entered 4 other states: Maharashtra, Tamil Nadu, Andhra Pradesh, and Telangana. As of 30th June 22, there were 2 reference labs, 15 satellite labs, 109 patient experience centers -- and 109 patient experience centers.
The B2C business in Aster Labs is yet pick up to the levels we wanted due to many factors, including tough competition. However, we have started realizing the benefit of having the labs as an integral part of the ecosystem to create an omni channel. We have already -- we have recently launched Aster Labs on WhatsApp. This customer-centric approach should help us service our customers even better.
With respect to the Aster pharmacy-branded retail stores, operated by Alfaone Retail Pharmacies Private Limited or ARPPL, as of 30th June 2022, there are 176 pharmacies, 89 in Karnataka, 45 in Kerala and 42 in Telangana. As part of its service proposition, which provides facilities like prescription refill reminder, customer-centric promotions and free home delivery, Aster Pharmacy in India plans to launch its e-commerce operations in the second half of financial year '23.
In the GCC region, the 101-bed Aster Hospital Sharjah had a soft launch during the quarter. There has been some delay in launch of 145-bed Aster Hospital in Muscat, Oman due to adopt the approvals. We have now got the permissions, and we hope to inaugurate this soon. These 2 hospitals will increase our capacity bed count in GCC, 1,431.
I just want to touch upon the Saudi business. Over the past few quarters, the Saudi business has seen an improvement in performance. As a result of this turnaround, we are now looking at getting a minority investor on board instead of selling off the old business. The first quarter EBITDA of Saudi business, despite the challenges of Ramadan, et cetera, was in the single digits. We are looking at actively to enter the retail pharmacy business in Saudi, and discussions are going on.
The status of restructuring. The process is going on. The Board of Directors provided their approval for appointment of the bankers to explore potential restructuring options, which present an opportunity to unlock value for the company and its shareholders and provide further update to the Board in relation to further steps to be taken in this regard. Appropriate announcements and public disclosures in accordance with the listing regulations and other applicable laws will be made as and when required in this regard.
I now request the Deputy Managing Director, Alisha Moopen, to elaborate on the GCC business, the digital transformation and other strategic initiatives undertaken by Aster. Thank you very much.
Thank you, Chairman. Good morning, everyone. Just like Chairman mentioned, we are in a stage where COVID has now become a part and parcel of our lives with normal life and business moving in full swing and so is Aster. As Chairman mentioned again, we have 2 of our new hospitals, which we have put on hold during COVID. Now we have begun the commissioning. The Aster Sharjah, which is a 101-bed hospital, had opened up with a soft launch during Q1. And Aster Royal Hospital in Oman with 145 beds, it is expected to have the soft launch end of this month since we just got the regulatory approval. We are excited to get them operational in Q2 of this year as we expand the footprint in the GCC.
Revenues at GCC saw a return towards normalcy, this period of Q1 marked by both the Ramadan break as well as the Eid holidays. And there is also the sad demise of the ruler of UAE, which had some extended mourning period as well. So the combination of all of that, we've seen a little bit of a soft quarter, which anyway, despite typical of Q1 and Q2 in GCC. The hospital revenues yet quarter-on-quarter grew by 8%. The retail business saw a strong comeback with an increase in revenue of 30%, while the core revenue of clinic business, which is excluding the PCR revenue, saw an increase of 26%.
The GCC business would have seen a much better EBITDA, but with the operational losses of the new hospitals, which has been commissioned, which resulted in a loss of almost INR 15 crores in the GCC.
As Chairman briefed on the Saudi business, which really was a concern for a long time, it has witnessed a positive turnaround. We have seen a very sustained revenue and EBITDA numbers despite the summer as well as Ramadan. Some of this is emanating from certain systemic changes, which we have made in the business, and we believe they are likely to maintain as business trends.
We truly believe that Saudi has huge potentials. And for our GCC strategy, we cannot ignore this. We have recently signed a preliminary MOU with one of the largest retail and entertainment group to launch our pharmacies in Saudi. These will be low CapEx but will help us harness the health care ecosystem better.
On the digital initiatives, our expansion, we are continuing to trend along the plan line. We have done a successful launch of our digital app in Dubai. Currently, we are live with both the teleconsultations as well as the online pharmacy in the UAE, which we have seen a positive response to. With pretty much no marketing, we've had more than 100,000 users since the launch in June, and this was the numbers up till end of July. We actually aim to aim for marketing to be driven from the end of August and expect the numbers to scale quite significantly.
At this moment, we are running live load test and refining the system responses to ensure that the platform remains stable at higher loads, which we expect post marketing. For India, the teams are engaged in solving the specificities of the technology and the work force. And we expect the India business to be enabled on the digital platform soon, which will complement both our pharmacies as well as the labs, which are growing in scale.
For the Aster innovation and the research center, which is the innovation hub of Aster DM, we have collaborated with Intel Corporation and CARPL to announce a state-of-the-art secure Federated Learning platform. This collaboration, this will enable the development of AI-enabled health tech solution, where data can securely reside where it is generated. This collaboration will boost innovation in areas such as drug discovery, diagnosis, genomics, predictive health care. It will also help clinical trials to access the relevant data set in a very secure and distributed manner.
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 sales basis, our revenue from operations for the quarter has increased by 12% to INR 2,662 crores year-on-year. India revenues have increased to INR 651 crores, up 18% year-on-year, probably INR 550 crores. The revenue growth, excluding COVID vaccination in India, was 26%. Revenue from our GCC operations was INR 2,011 crores, an increase of 10% year-on-year, whereas the revenue growth, excluding COVID testing, was 18% year-on-year.
Consolidated EBITDA for the quarter was at INR 292 crores, an increase of 4% year-on-year. However, if you exclude the losses of new hospitals not present in FY '22 quarter 1, namely Aster Hospital Sharjah, Aster Hospital Sonapur and Aster Mother Hospital Areekode, the EBITDA growth will be 11%.
EBITDA from India operations were INR 84 crores, a growth of 18% year-on-year. EBITDA from GCC operations stands at INR 208 crores, a decrease of 1% year-on-year. Excluding losses of new hospitals in GCC amounting to INR 16 crores, the EBITDA growth will be 6.7%.
An important point to mention is that we are now going back to the peak COVID scenario, wherein the EBITDA for the past half of the year, as per the historical trends, will be in the range of 40% of the full year numbers.
Consolidated PAT post NCI is at INR 69 crores as compared to INR 44 crores in quarter 1 FY '22. Excluding losses of INR 32 crores from new hospitals and onetime other income, the PAT stands at INR 77 crores, a growth of 74% year-on-year.
Coming to the segmental performance for the quarter. GCC hospital revenue was at INR 913 crores, an increase of 8% year-on-year, and the EBITDA stands at INR 133 crores compared to INR 130 crores in FY '22 quarter 1.
Our hospital in Saudi has performed well during the quarter. The EBITDA from the business has nearly doubled with high single-digit margins. GCC clinics revenue stands at INR 538 crores, a decrease of 2% year-on-year. Excluding revenue from COVID testing, the business registered a growth of 26%, which is a sign of a [ poor business ], normally. EBITDA decreased by 9% year-on-year to INR 91 crores, and EBITDA margin stands at 17%.
GCC pharmacies revenue increased 30% Y-o-Y from INR [ 508 ] crores to INR [ 660 ] crores. EBITDA increased from INR 44 crores to INR 58 crores, an increase of 32%. EBITDA margin for this segment is at 8.8%. India hospitals and clinics segment has grown to INR 627 crores when compared to INR 549 crores, an increase of 14% year-on-year. EBITDA has increased from INR 84 crores to INR 99 crores, an increase of 18%.
Consolidated net debt as at 30 June 2022 stands at INR 1,847 crores compared to INR 1,806 crores as at 31 March 2022. India net debt stands at INR 359 crores compared to INR 319 crores as at 31st March 2022. And GCC net debt has reduced to USD 189 million from USD 197 million as at 31st March 2022. Capital expenditures during the quarter was INR 142 crores.
On that one, I conclude my remarks. We would be happy to answer any questions that you may have. I now request Saurabh to open the Q&A session.
Thank you, Sreenath. [Operator Instructions]
The first question is from Nikhil Chandak your line and ask a question.
My question was on the proposed restructuring. If you could share some more elaborate thoughts on what exactly is the plan of action? Because slightly every con call we hear that, yes, this is under consideration. But it's been a long time, and there's no visible progress at least to the investors on what really is happening. What is the thought process even on the Saudi hospital? As you mentioned, there's a change in plan where you're not exiting or you're getting an investor there. So what exactly is the plan? Do we eventually see 2 separate entities, 1 India and 1 non-India? Some plan and time line would help.
Yes. Thank you very much. Thanks a lot. So the first part I'll answer, then Alisha will answer about the Saudi. Regarding the restructuring, I assure you that it's going forward in the direction which we want, where we wanted the 2 businesses, 1 in the GCC, 1 in India.
So in the GCC, now it's very clear, really, there was a lot of -- I mean talk about that. But now we are looking at the GCC business and looking for somebody to come into the GCC business. So that is a vendor DD happening in GCC, which is in progress. And once the vented happens, and that is over. That's the time when we hope that we'll have more clarity on that.
So answering your question, there is more of clarity, and this is going in the direction where there will be a segregation between the 2 businesses. And once we have a clarity on what are [ titbits ] and after the event that really happens, then we will get back to you as well as to the requirements we will inform the stock exchange. So that's the first part.
Regarding Saudi, Alisha, if you can just enlighten him now.
Thanks, Nikhil. Thanks for the question. So earlier when we were looking at the potential exit from Saudi, it was because the Saudi market requires quite significant probably capital allocation for us to grow in a market like that. And we thought maybe if we are continuing as a global entity with the GCC business, we would rather allocate the capital into India rather than in some of the other GCC markets.
But now with this potential restructure, what we realized is a lot of the investors who have interest to come into the Aster GCC business, things of Saudi as a core business and a core geography that they would want to pursue. So at that point in time, we do not feel comfortable exiting from a market at this point in the restructuring process.
We felt it would be better for us to stay until we have clarity on the partner who's coming on board. And if they wanted to pursue the Saudi business, we thought it would be a bit premature for us to comment, especially as we mentioned earlier, the business seems to have been doing well. Most of the Saudi business are turning around, and there seems to be a very positive traction there.
So one, on its own effort, it's standing strong. And two, as part of the restructure also, we believe that Saudi is an important element to get the right investor attention and demand. I hope that clarifies.
Okay. And then the last question was on capital allocation in the interim until the restructuring doesn't take -- it doesn't come into effect. How do you see capital allocation between India and non-India. Even within India in the competitive diagnostics space, where do you think the focus would like?
Yes. So see, we have a clear plan now and we are following that in spite of the restructuring cost is happening. The only changes that we would like to hear from the investors regarding the GCC, what their requirement is. But as to a great extent, whatever we have announced regarding the India GCC, the split between the capital allocation will happen this year because we are almost halfway through.
So regarding the allocation of the capital, see the capital required for a very low CapEx business like the hospitals as well -- I mean, the lab as well as pharmacy is not very high when compared to a hospital. What we have allocated now is the last part is going towards the major projects like the hospital in Trivandrum as well as the 1 which we announced for Kasaragod.
So the hospital projects will be the one which will be attracting the just capital. The others will be there, but the numbers will be high when you look at the total number of establishments, but the capital requirement for these businesses are much lower when compared to the hospital business.
So answering your question, there is no change from what we discussed earlier between GCC and India for the capital. And second, in India, the focus will be on the hospital business. Even that, as we have mentioned, there is a change now. We want to make it low CapEx, and that's why this brownfield projects like the Mother Hospital. We are looking at many opportunities, and we hope that we'll be able to have a significant number of beds added to that where the CapEx allocation that is required is very minimal.
Thank you, Nikhil. The next question is from Ambrish.
Thanks for the opportunity and congratulations on a solid set of numbers despite the loss of COVID revenues. And thank you very much also for increased transparency in the clinics and pharmacy data in India.
The first question I had was on the operational performance in a -- is there something more you could shed on what's happening in Andhra and Telangana in terms of financial operational metrics? Everything seems much weaker than the rest of India.
Yes. Yes, yes. So I'll ask Sunil to add on to what I say, Sunil is our India CFO. So the business in Andhra and Telangana, when compared to our businesses in Kerala and Karnataka has been weaker. So part of it is because we had very high business last year because of COVID. The COVID revenue was very high.
But in spite of that, we have put some budgets, but they have not reached those budgets. So we are -- the reason for that is mainly because the hospitals in Andhra and Telangana have come out of the schemes, the [indiscernible] and such schemes, which are there. Because they wanted to cater to the more of a cash and insurance business. But this thing, that is something which we should be looking at because that is reducing the occupancy.
So we are now in a process of attracting -- I mean, going into -- that will ramp up the occupancy and which will help us to have better occupancy and also to sweat the assets better. So that's what -- more about the Andhra and Telangana. And we hope that with these [indiscernible] strategies that have been adopted, that should do better. And if not, to the speed of the other 2 clusters, should be doing better.
Sunil, do you want to add something on to that?
Sure, Chairman. Thank you. Thanks, Ambrish, for the question. So just to add to what Chairman said, is that as you know that distributor numbers to it, last year's symptom, we had the way of going one. And Andhra and Telangana is where we have the smaller format hospitals, which are really good, wherein the COVID revenue went up to 50% of the total revenue. So because of this, what happened is that the EBITDA margins are very high, upwards of 20%, 30% and all. Now you know that right it is H2 last year, the COVID number essentially have come down. And now we are trying to depend on more non-COVID numbers. So this is a scenario across the hospitals, across the clusters.
But you've seen that Karnataka and Kerala did very well to bring back the non-COVID revenue. They're even better than the pre-COVID numbers, what we see. But that is on the case in Andhra and Telangana. Similar other hospitals also facing that issue.
Our current occupancy is now sub 15 percentage. And as Chairman said, we are also looking at how to increase the numbers by bringing the schemes because considering scheme patients are quite high in Andhra and Telangana cluster. We cannot work without those schemes, but we will try to see how to get in to see that we don't dilute the ARPOB, neither the EBITDA margins. But whatever you see is just a onetime thing you're just trying to recover. So future quarters are going to look quite better on this aspect.
And then I suppose it's better to look at it from a longer term and assume the FY '22 numbers are a little bit of a blip as well. That's helpful. A couple of just strategic comment/question. On Slide 18 on Aster Labs, there is a mention of a Delhi being added as a potential location. Is this a planned activity? Or is this an error just because it's getting very competitive. And is this where we want to go?
Yes. So thank you for that question. So this is [indiscernible] our view. So in the overall plan, there was not -- was very minimal. But maybe -- because maybe even that our CEO for the hospital sector was earlier in the North. So he had huge hope and he wanted our presence in the state capital asset as in some other major metros.
But we have now thought that we will look at the next few quarters how the business is doing in this. Then only, we will go into the North. So whatever you have seen there is not going to happen immediately. So we have said that we will go into the North only after stabilizing the South.
That makes sense. Just a quick one on the restructuring as well. Through the process, assuming that we don't lose the benefit of the synergies that we have both with. I assume that's already been considered, but if you could just give some comfort on that because we benefit from, say, the digitalization activities in GCC, patients this way, and of course, from India, we can send doctors as well.
Yes. No, no, that's a very, very important thing, which we have deep in our mind. So one of the things which is going to remain as it is, is that we are going to be there on both sides. What our restructuring happens, as promoters will be there on both sides. So the synergies which are there, they are beneficial for the company. We will be continuing like, for example, the movement of employees, the movement of patients and things like what you mentioned about the digital, those things will continue, wherever there is a benefit to both sides and the arm's length we'll be doing that.
The next question will be from Spark Capital, Harith Ahamed.
My first question is on Sanad. So you mentioned that there's a fair bit of improvement there. So can you give an indication of the EBITDA margins there currently? Are we at a high single-digit of margin level there? Or have you touched double-digit portion there? Some sense would be helpful.
And one more follow-up. So it would be that you talked about bringing in a minority shareholder there. So can you elaborate a bit more on the rationale for this? What exactly will the fund be used for because the way I see it, the expansions that we've talked about so far at Sanad, we should be able to finance it through our own balance sheet.
Yes. So Alisha will come on the second part. So on the first part, in terms of the margins that Sanad hospital see, historically, if you look at quarter 1 and quarter 2 products in the GCC, these are lean period, mainly because of the summer quarters. And quarter 3 and quarter 4 are strong period.
Now if you look at Sanad Saudi, quarter 1 will be the weakest. But however, if you look in the current year, in spite of the holidays and the active customers, quarter 1, we are at 9% of EBITDA margin at Sanad Hospital. So these margins will get into double digits -- getting into quarter 3. So therefore, that is that the turnaround has happened, and this performance will lead to stronger margins in the coming quarters. Alisha, on the minority interest.
Sure. Thanks, Harith. So on the minority interest, there is expansion of the hospital. We have 60 beds, which, again, we have put on hold. Right now, we are running at almost 85% occupancy. Like you said, the internal accruals should take care of us expanding that capacity. But this was more looking at a more strategic partner for Saudi.
So we were thinking of using this funds from the potential minority partner coming in for the expansion of the pharmacies. We would use it for the pharmacies and also the base on the digital that we are setting up in UAE, we would like to quickly mobilize the same in Saudi. And that would, again, go towards some of that in Saudi. So that was the plan towards Saudi.
That's helpful. My next one is on GCC pharmacies. Actually, the revenues have increased on -- I know we generally don't look at the GCC business on a quarter-on-quarter basis. But -- so looking at the GCC pharmacy segment, the revenue increase quarter-on-quarter has been almost 10%, but the EBITDA has almost halved. So I'm struggling to understand why with revenues growing there's such a high impact on -- or such a high decline in EBITDA?
Amitabh, you would like how to answer the [indiscernible] on EBITDA.
Sure. So thank you for the question. So I think you're looking at a sequential number between quarter 4 of FY...
Yes.
So typically, this is impacted by 2 factors. One, of course, is a factor that quarter 4 is the highest quarter that we have in a year. It's a seasonality factor that is there, which is a reflection that if you look at the quarter 1 of the year, because of -- Alisha called out the Ramadan holidays and the summer period, there is a natural reduction in the volume that are sitting over there.
But it's also the factor on EBITDA that comes in, wherein the -- as we close the financial year, there are typically procurement benefits that come in, which we do not know for the whole year, but they only come towards the end of the year in our knowledge, which is why you would notice that the margins for quarter 4 for pharmacies are relatively higher than the other balance part of the year.
However, if you were to compare the year-on-year basis performance of pharmacies, I think that data is more representative. Because we've seen, between the quarter 1 of FY '22 and quarter 1 of FY '23, a 30% increase in the top line on pharmacy and a bottom line increase of 32%. I think that is a more relevant data to look at because it's representative of the business change that we observe.
All right. And Sreenath, these unallocated and elimination item that we have, both at revenue and EBITDA level, there's been a sharp increase. It's almost INR [ 120 ] crores at the revenue level and INR 80 crores at EBITDA level. This is an increase from INR 60 crores in the last couple of quarters. So what exactly is the nature of these items here? And can you explain the increase as well?
Yes. So this -- if you look at it, Harith, the pharmacy business has increased during the quarter, right? And the pharmacy business also provides the services to our other verticals. So that is a matter of there some other date will be the higher number.
The next question will be from Manoj Baraja. I guess he's -- next question will be from Manish Bandari.
Can you hear me clearly?
Yes, yes. Please go ahead.
I have two questions. One is regarding the medical tourism, which ideally the southern hospitals should have benefited. So are we seeing some recovery in the medical tourism, which should ideally lead to a potential improvement in the operating utilization of the hospital in South.
Yes. so definitely, there is an increase. This has gone down significantly in the COVID period. So this year, the...
[Technical Difficulty]
Dr. Azad, your line is muted by mistake.
Okay. Sorry about that. There is some issue, technical issue. So are you able to hear now?
I can hear you.
Yes. so I was telling that there is definitely increase in the MBT revenue, which is coming from mostly GCC as well as from other regions. But to give you some numbers, Sunil, can you give some numbers, indications in the first quarter...
Yes, Chairman. So Manish, thanks for the question. Now you could see pre-COVID, when we look at [ EBITDA ] revenue, we were clocking 5% of the total India revenue and 10% or -- 8% to 10% hospitals where we used to do [ EBITDA ] revenue. That had dropped to almost 1 percentage during the cold period. That is within FY '21 and FY '22.
Now what we see is that the percentage is now in the Q1, already back to around 78 percentage. So when I look at only the units which do the what we call the MBT revenue, but at the India level, against the 1%, which was down, now it has moved to almost 4 percentage. So there to put it in a very simple manner, yes, COVID revenue is almost back to record levels, almost 80% to 90%, you can say. And we are seeing a good numbers already coming in July itself. So we should be able to do very good in FY '23.
Sir, my second question is regarding the pricing pressure in GCC. Are we at the bottom of the cycle in terms of the pricing pressure? Or do you think so any more pricing pressure is left from where we are standing today?
Alisha, you would like to answer that, Alisha?
Yes. So I mean when you are working in an insured market, there is always some pricing pressure that comes in. But over the last couple of quarters, one, internally, our focus has also been on shifting a bit of our portfolio from insured business to noninsurance. So we have actually seen an upswing on medical tourism. We've had more than INR 200 crores of revenue in the last sort of 9 months just to our Medcare facilities. We've seen we increased our [ books ] in cosmetics, aesthetic business as well as the nonpharma piece, which is all cash. So we ourselves are trying to get more than close to 20% of our business coming in from the cash element.
Separately, there has been a lot of discussions with the regulators to add with the inflationary pressure to do a tariff revision upwards. So this is a constant dialogue that happens between the payers and the providers. We believe that will keep continuing to happen, but there seems to be a lot more upward increase as far as premiums are concerned, and we're just making sure that we get it passed on to the providers as well.
Would this strategy would be implemented in India also looking at the success what you are trying to find in Middle East.
Sorry, on what country?
So I mean to say the noninsured portion of the cash payment portion, would you just implement this strategy in India also?
Yes. So there is that fare -- I mean, in India anyways are -- it's largely cash for us. I think we're talking about 70%, 80% of our business in India is cash. But as the insurance penetration is increasing here, and as our focus on our flagship facilities, whether it is in Medcity, whether it's in CMI as well as estimates, there is a focus on MBT. In fact, we were just with the Medcity teams. There is a focus on a lot of the cash elements like we spoke about.
We're building the rehab center, 80 beds over there in Medcity, which would again be international patients, which will happen in the next 1 year. There is a focus on cosmetics and similar model. So we are trying to extend some of these strategies, which make sense for India, of course.
The next question is from Mehul Sheth from Axis Capital.
Yes, Yes, am I audible?
Yes, yes. We can hear you, Mehul.
Yes. Yes sir. So some questions related to your margin guidance, like -- what are your expectations towards segmented margins like in GCC as well as in the India hospitals, right. So we have seen that Q1 was a bit on the lower side for both hospital business in GCC in India as well as clinic was expected to be on a lower side, but even pharmacies differential So what is your overall outlook as for the segment in terms of margins?
So Sreenath, would you like to [indiscernible].
Yes. Thank you. So in terms of margins, hospital margins, if you look at it, especially in the GCC has been more or less the same, mainly because of the new hospitals, new facilities that are coming. But for the new facilities, the margins existing hospital margins have improved. So from a 15.4, they managed 2 16 point 3% on the existing hospital. So that will -- that improvement should continue in the coming quarters, and we expect somewhere around exiting hospitals almost close to 17% to 18% is what we expect our existing hospitals to do in the GCC.
Now on the clinic side, we have indicated earlier accelerated cost because with the RT-PCR testing going away. Definitely, that will have an impact on our margins from the previous year. And we expect to have around 150 to 200 basis points of impact, which was [indiscernible].
And in the coming quarters, we should do better even on the clinic side because the core business on the clinic has come back. And our dependence on the RT-PCR testing is now pretty minimal.
So pharmacies, the revenues have gone up. But however, the margins continue to remain the same. And on a full year basis, the margins will go up to around 11.5%. Because once we get the various touches the rebates, the volume rebates and other things, so these margins will be -- will go up the [indiscernible] quarters, mainly in quarter 3 and quarter 4.
And coming to the India hospitals. India hospitals, we are seeing an improvement in the existing hospitals. That has been a slight [ rate ] -- because of the new hospital [indiscernible] which is faster, which has made some losses. But in spite of that, the margins have improved to 15.7% from the earlier, 15.2% during the same period last year. But however, in India, we expect these margins in the current year in quarter 3 and quarter 4 to be somewhere around 18%.
So one more question on your pharmacy business itself in GCC. So what's your expectation in terms of sustaining this kind of momentum in sales for at least FY '23?
Alisha, you would like to answer the...
Yes. So Mehul, we are actually quite bullish about the growth on the pharmacy. We have been working quite a lot with aggregators. We have been seeing a real uptake on home delivery business. And once the -- our digital platform, the push happens, as I mentioned earlier, we do believe we will have a very sustained and very strong year coming forward for Aster retail.
In general, when you look at the buy, the retail business has been soaring. We have also been focusing on shifting from the pharma to the non-pharma, building up the cash component there. So the margins should look better, like what Sreenath was saying, and we believe the growth will be better as their digital platform pays off.
The next question is from Shyam Srinivasan from Goldman Sachs.
I joined a little late, so some of my questions are repeating, my bad. So first one is on the cluster-wise India hospital and clinics data that you're sharing. So just noticed that the Andhra, Telangana cluster has had a good growth fiscal '22 rate, I think 30%-plus growth. We have seen some like decline. So just trying to understand what's happening there. Even some of the metrics around occupancy, if I look at capacity beds is also down. So just your initial thoughts on this one.
Yes. Thank you, Shyam. In fact, what you mentioned, we had this question earlier, and that was answered. But for the benefit of you asked a lot, those who might not be there. So Sunil, if you can just give those details, the numbers which you mentioned about the Andhra, Telangana cluster.
Sure, Chairman. Shyam, well, thanks for the question. Now as I put across that H1, specifically Q1 in the Andhra, Telangana cluster, we have smaller format hospitals, 150 beds. So there, the revenue was almost doubled during the cold period, and the EBITDA margins were higher than 25 percentage.
And you know that right that weather out India it's H2. And considering we don't do any scheme side, only we depend on the cash and insurance patients. The recovery, what we have seen the recovery Kerala and Karnataka cluster, the recovery is not safe.
In Kerala and Karnataka, the recovery is better than record levels, but we are not able to recover the same in Andhra, Telangana cluster because we have limited occupancy also walk-in patients. And considering considerably in this particular region, there are more in-patients also. So that is 1 of the reason why you can see the revenue drop per se, and that is indirectly affecting my EBITDA margins also. But saying that this is just a one-off thing because we are seeing improvement in numbers happening into Q2.
And I think this should be taken just as a one-off, not for the full long term for the full year. And we see the trends, the way it improved in Karnataka and Kerala, it's going to improve going forward in the Q2 end or to the Q3, Q4 period.
Got it. Helpful. And just again, sorry if it's a repeat. But I just noticed Q1 over Q1, even occupancy in Kerala, Karnataka, Maharashtra is also down. More so Maharashtra, was that covered, sorry?
Shyam that occupancy, you are referring to Q -- where in the ability was 70% plus occupancy. Even in India, we did almost 70%. Now we are at 63 percentage. And you can see the [ ELOs ] also, right? [ ELOs ] is very high at 4.5 in the Q1 FY '22. Now we are at 3.5 or 2.6. So it's purely the COVID numbers, which is to watch. And if you look at the sequential Q4, we are at 60% occupancy margin. From there, it has improved to 63% in India. So on an occupancy level, Kerala is above 75%. Karnataka and Maharashtra between is between 55 to 60 and Andhra, as I said, because of the occupancy being lower, sub-50% is what it is.
Yes. So what's the outlook for the remainder of the year? How should we look at occupancies for the India hospitals.
Yes. Yes, Yes, please go ahead, Shyam, it will be better that because Q1 is the quarter which we start and Q2 is the best quarter in India, right? And Q3 is what we have festival on all. Usually, you can see a decline. So Q2, as I said, the indications already in July is 70%. So that shows that we will do better than occupancy in Q2 and Q4 better than what we have seen in the numbers.
Fair enough. Very helpful. Last question is on the ARPOB dynamics. I think some questions asked on GCC pricing pressure. But even in India this quarter, we have about 20% ARPOB growth. So maybe if you could get an overall sense of how we should look at ARPOB for the fiscal '23.
Yes. Shyam if you're referring to Q1 FY '22, as I said, because of the higher loss, ARPOB gets diluted. And also, you know that COVID revenue was the highest, 25 percentage during that time. And also because of the restrictions of what we had in Kerala, Karnataka very specifically, the ARPOBs are dragged down.
Now what do you see, 36,000, is because we have also taken certain price increases in majority of the locations, what we are or the clusters, what we have. And the consol number, what you've seen are the ARPOB, what you see in the cluster. These are bots are very stabilized because there is no one-off item in this quarter, right? So there is nothing as in -- with respect to the vaccination or the core revenue, specifically in Kerala and Karnataka. But in Andhra, yes, if I take skin patients more, which is not there today. You can expect certain dilution of [ 13% to 20% ].
What's the price increase? Like quantitatively, what have you taken? Is it like same...
It's between 5 to 10 or not across the board. It depends on certain services, we have taken certain services and not taken. But overall, it ranges between 5 to 10 percentage.
Got it. Sir, a reminder of the question was a bit GCC, what's happening to ARPOBs.
Yes. The GCC ARPOB, if Amitabh if you could give some color on that.
So thanks for the question, Shyam. Shyam, if you look at it in the GCC ARPOB, while our overall revenue from hospitals has increased, there's also an increase in the rebate capacity. With the Sharjah hospital coming in, we have added, the bed capacity has increased from a 1 month [indiscernible] to a 1,260, while the hospital is not fully operational.
The occupancy between a Q4 and a Q1 also declines, which is around 53% going to 51%, which has resulted in the reduction on the ARPOB from 205,000 to 194,000. Those are largely the reasons why the we've seen our ARPOB reduction between Q4 and Q1.
And outlook, Amitabh?
So the outlook is only going to get better from here because this is the lean quarter for us. The Q2 -- Q1 and Q2 are the lean quarters for us. If you look at the last year, you would observe the same trends. Despite COVID, we have better ARPOBs in the quarter 3, quarter 4. As we go towards the end of the year and between the quarter 3, quarter 4, we expect this ARPOB to rise.
Yes, that's right. So yes, [indiscernible] for Shyam.
Yes, sure.
So ARPOB definitely because in terms of the revenues, we will do better in quarter 3 and quarter 4. But in terms of ARPOB, because more beds are getting added and more to the Aster cluster, because this is a mix of Medcare and Aster, [indiscernible] the occupancy starting to go up. But however, more beds will come into this segment of Aster because we have got Oman, which is coming up, then we also got the Sharjah, which is more in the [indiscernible] -- so you could see some slight decrease 150 these beds get all spread. That would be a small decrease in terms of the ARPOB.
Thank you, Shyam. The next question is from Pureet Manshuri.
Sir, my question is already asked. So it's already answered.
Thank you. Next question is from Nikhil Mathur from HDFC [ Mutual Funds ].
I hope I'm audible?
Yes, yes, we can hear you.
Sure. Sir, my question is on the Saudi operations. You mentioned that the outlook for that particular country is looking good, at least in FY '23. So just wanted to understand what exactly is changing there? I believe that there's a lot of macro-driven tailwinds at the region is perhaps seen. COVID opening maybe in flux of blue color workers investments happening. But a lot of business is to do with macros, and we never know how the macros could trend, let's say, in '24, '25. If the oil price but, let's say, take a sudden downturn again, things might again go back to where they were.
So isn't this actually a good opportunity for you to continue on the path that you were envisioning 2, 3 quarters before when you were looking to exit this operations and now you are trying to bring in a minority of minority investors. I just want to understand, is it something can change such in that market because of which you're looking your stance on that particular facility.
Alisha, you would like to answer that?
Sure. Thanks, Nikhil. So there are some intrinsic inherent issues with our own assets, which we believe that we have rectified, I think I've mentioned in the last call that we had a lot of long-term onerous contracts with insurance companies, which had kind of affected our pricing significantly.
So those are things which we believe are -- have been be sustained. Because which we were getting a certain ARPOB, we have reduced our on percentages by more than 30% here. So which all pretty much goes to our bottom line. So that's the increasing margin.
On the macro level, of course, the government has taken a strong direction towards diversifying away from oil. You're seeing -- you have a high Saudization policy over there. We used to have a lot of Saudis working for us, but then they were working in other departments as well. And their contribution and productivity was always a challenge when what shifted over the last 1, 2 years is they're all expected to sort of be a lot more effective within the system. I think the contribution from the Saudi population who work in the environment is also different.
So all of those activities have also seen kind of a positive those we believe are -- will not change even if some of the other macro conditions that you're talking about will disappear or go adversely.
So for us, inherently, the business has become better. Our own team has also been restructured, and we're seeing a strongest team on the ground. And we've had to go through a couple of leadership in just before we have found a team that's actually working, and we have the confidence that the current team can take things forward. And it's been almost close to 9 months. Now we're seeing that consistent performance as well.
That's helpful. And then any particular investments that you're planning in Saudi region in '23 and '24. Any CapEx plans for that country?
So we haven't confirmed any plans yet. We do have -- we do -- or we would like to commission the facility, which was put on hold during COVID in Saudi. It was half constructed. We have 60-bed additional capacity that can be commissioned. So we would ideally -- and there's not a lot of capital that needs to go in to get that in order. We could probably make it go live in another 4 or 5 months. That's something which we would like to complete because we are sometimes at choking capacity and that this is in the summer months.
So we believe by October, November, but there are a lot of tenders from the government, which are out there, which we would like to bid for. So that's something which we would like to do for this financial year.
For the next financial year, it's more the pharmacy which is still under consideration, we'll probably have a little bit more information to share in the next quarter. But again, this would be ideally funded through the minority stake that comes in. And we believe anyway that lower CapEx, so it wouldn't be a significant capital outlay.
Got that. And 1 question on India. I understand that there CapEx stands for the India business from a 2- to 3-year perspective. Can you give some directional sense on the return on capital for that particular business? I think the investments are going to be there. So would it be safe to assume that the return on capital employed, whatever it was in FY '22, might remain flattish in the next 1 or 2 years and only 2, 3 years out, can we expect some bit of improvement on that front?
Yes. Sreenath, you would like to answer on the ROC in India, how it is trending and what we are looking at?
Yes. So see, the return on capital employed in India, even though the other business segments like the labs and pharmacy, the capital outlay was there very minimal. And we are not expanding across India, right? It's more of creating that ecosystem in the geographies where we are present. So that is our main strategy of getting improved in the pharmacy distribution and relapse. The focus is going to be mainly on the hospitals.
Now these hospitals, now most of the hospitals are reaching a state of maturity. And that's why the return on capital employment -- employed as well, you'll keep seeing an improvement every year by at least 200 basis points from hereon, in spite of some of the losses coming from the labs as well as the partnership distribution, because that will be minimal. So that's for the lab. The return on capital employed will continue to improve, and you see that increasing trend for the next few years.
Yes, I think that's quite helpful. So basically, is the understanding correct that there might be some margin dilution as the lab and the pharmacy distribution revenue share goes up, because pharmacy distribution itself is margin capped, right? I mean, at the distribution and retail end. But at the same time, that helps our overall ROC profile. So would that be fair assumption that you're -- at the expense of ROC, the margins might [indiscernible] a little bit.
Margins -- yes, on a consolidated basis, the margins -- the pharmacy is significant, yes, there would be a dilution because pharmacy business, you don't have that kind of margin what the other segments are, which we see in GCC as well. But the way we are looking at like what I say, the pharmacies as well as the labs, it is not that we have an aggressive sort of expansion. We based in the ecosystem.
So that's for this will be limited. We'll pass and take a pause once things settle in and once we feel that it is scalable and the margins are good. But for now, they put more clear the ecosystem. So considering the lower margins that we may get from the pharmacy segment because of the business is small. So we don't see that [ in India ] margins.
Thanks, Nikhil. The next question is from Alankar Garude from Kotak Securities.
Dr. Moopen, you mentioned about announcing some more CapEx plans, expansion plans in the coming quarters. Were you referring to the 500 to 700 beds to be added to the O&M model, in addition to the 1,300-odd beds which we have announced in India so far?
Yes, yes. So I was talking not about any new CapEx where we'll be going into new hospitals. I was talking about the -- I mean, low CapEx model, the brownfield model, which we started off. And we hope that to then be. See, our hope is that this financial year, we'll be able to reach around 750 to 1,000 beds in that category by end of this financial year.
It may not require too much of CapEx. It's just very minimal CapEx. For example, the 140 hospitals which we structure now report [indiscernible] the CapEx requirement was less than INR 15 crores or around that. So it's not going to attract too much of a CapEx.
Understood. So basically -- and that 700 to 1,000 beds number which you mentioned, it doesn't include Aster Mother as well as Whitefield operations, okay?
No, Whitefield is that's our own hospital where we are spending money, and that -- those are like even when I mentioned about at one Whitefield overall. The second part of Whitefield is happening. It will take another 4, 5 months for us to complete. Where we are investing in [indiscernible] Aster Mother Hospital go to 750 to 1,000 beds. There are many things in discussion, and we hope that we will be able to reach that number by end of the year.
Yes. Sorry, sir, I think I lost in between. So okay, can you just repeat the last 2 sentences, please?
Yes. So what -- there is some echo. People who are not speaking, if they can put the mic on off mode, please? Yes. So what I was saying is this -- so there are 2 things. One, there are hospitals of our own where we are investing CapEx. So Whitefield Hospital is such a project where we are investing CapEx. And in the next 4, 5 months, we'll be able to complete that, and we'll be investing more CapEx into that and whatever has been projected.
Now the project which I mentioned, like the brownfield and low CapEx is something like the Mother Hospital or [indiscernible] Hospital already for hospitals, 150-bed hospital, where there has been only very small amount which has been spent.
So such models, we are looking at a different basis. So for example, we are looking in Kerala again as a project which most probably we'll be able to announce in the next quarter. We are looking on in Andhra Pradesh, where, again, it is a very low CapEx, same model. So there are many hospitals which are being discussed. And we hope that we'll be able to reached about 750 to 1,000 beds in that category with very minimal CapEx in the next -- this financial year.
Sure. That's helpful, Dr. Moopen. See one clarification on the margins, the India margins. You mentioned about 18% margin expectation in the second half. So was that for the existing hospital only? Or you're talking about the overall India hospital business?
So I was talking about the hospital business in India. So that is something to see if you look at the presence of Aster business, it's 15.7%, right? So we expect Andhra and Telangana to deliver in the next couple of quarters. And we are also looking at the Kerala cluster. Some of our hospitals in Kerala cluster are doing extremely well and even with good EBITDA margins. But on a consolidated basis, because that's been a drag in some of the hospitals. We are looking at that improvement, and we expect that the hospitals will go up to 18%. It could even get better. There is a possibility that it could even get better. In fact, Andhra and Telangana vertical that we are able to bring into good margins.
Understood. So just to clarify the [indiscernible], we have the Whitefield hospital coming in the fourth quarter. And I'm sure there will be some start-up losses from this hospital considering it's our own hospital. So despite that, you are saying 18%-plus EBITDA margins in India in the second half -- India hospitals rather a possibility?
That's right. That's right. Because the Aster Hospital and Whitefield will come as of the end of the quarter 4. So despite that, we should be there in partakings.
Fair enough. And also, given that we are having this hospital expansion towards the end of this fiscal. Possible to comment on the trajectory in FY '24 as well?
Yes. So on the hospital margins?
Yes.
So we would like to say because what happens is that if you look at there are additions to the hospitals [indiscernible] that is coming up. So the Whitefield is coming up so far at least 1 year, that will be [indiscernible] from that.
Similarly, the 700 beds, what Chairman was talking, when we add that, even though it's existing hospitals, those margins could be slightly lower compared to our established hospitals. So that's for considering all this. We expect the next year '24, the hospital margins to improve from that 18% to 20%.
Understood. The other question was on -- yes, sorry?
No, no I was just adding. So we have now -- I mean, some of our hospitals are doing even at the level of 25% to 30% EBITDA margin. So that's a good thing, which we never had. So we have gone to that level. The efficiencies have improved. The occupancy has improved as well as the costs have come down. So we hope that there will be many hospitals, especially the larger hospitals, which will be in that level of 25% to 30%. We will be able to, I mean, absorb the losses or lower margins in other hospitals. So that's one thing.
At the same time, when you look at this, the low CapEx model, which I mentioned, where we are going to do it this year as well as in future years, you will find that there is a dilution of the margin because we have to give -- this is not owned by us. So this will be somewhere. We'll have to give you a percentage of the overall profit to the people who are coming in as partners with us.
So definitely, the margin will be lower when you look at the EBITDA margin of the hospitals. But this is -- when you look at the ROC, it will be significant improvement in our ROC. So that's the benefit that we are seeing. The ROC will go up significantly, whereas there may be some dilution of the EBITDA margin.
Understood. The other question was on the investments in labs and pharmacy. I think just now, you mentioned that it's more about creating ecosystem and you maintained that problem you would like to take a pause if required. So just wanted to understand what's the threshold which you are tracking here? Is it more in terms of time lines. Would you want to give the business, say, another year or so before looking at the progress? Or are you taking certain numbers or to take that call?
Yes. So regarding this now while we are creating an ecosystem, which will be complete only when the digital platform comes into India, that will tie up all this to the hospitals, the pharmacies, the labs and the online consultation. So which will take about a year for us to know that. How is the impact, even though that may be losses sustained in the pharmacy or in the lab, how is it overall? And also, it's a start up like.
You know that there is huge discounting happening in the pharmacies and all. So how are we going to sustain without that response being offered. We are not going for a discounting model. We are looking at a profit model. So how can we do that in the pharmacy as well as in the lab? How can we have such a number of patients coming in, in spite of the competition?
So I gave about 2 years for that. I'm not burning cash, but at the same time, not going into profit, but at the same time, helping the overall ecosystem, including refers to the hospitals and helping us.
Understood. And one final question from my side. Can you provide a firm time line on the GCC restructuring as well as the minority stake sale in sort?
Yes. So we won't be able to give a definite time line. One thing which I can tell you is that there are certain firm steps which have been done. One is the appointment of the investment bankers. Investment bankers have been appointed by the board?
And the second is regarding this DD, which is happening. So you know that anything, if we don't find a proper value or a proper price for the GCC, we may not even do that. So this all depends on what price we are going to get from whoever is bidding for the GCC business.
So that will -- we hope that there will be a good value, which will be discovered, and we will be able to sell. That's our hope and that's why we are doing this. But we won't be able to definitely give a time line on that.
Regarding the Saudi, like what Alisha said, we are now -- I mean, looking at maybe in the next 6 months, we'll be able to find a minority partner who can take a stake in the hospital. And that person probably will also be partner in the pharmacy business. We are looking at strategic partner rather than just this money coming in.
In Saudi, what we have understood by our failure in the last 7, 8 years is that there has to be a partner who is ready to support on ground and who will be standing in front and will be seen as somebody who is running that business by the Saudi [ copies ]. Only in such a situation, you can have a successful business in Saudi. With 30 million population in Saudi, which is almost the same, much more than the other GCC countries all together, that is the future if you have to have a good business in GCC.
So we hope that we have found a partner like that. There have been a lot of discussions. Now we have somebody who has been identified with that person who is coming into the hospital as well as into the pharmacy business. We think that we will have a partner who will stand in the front and will be able to ride forward.
The next question is from Harith Ahamed.
Alisha, on the GCC clinics business, you -- I think you mentioned that there's been a growth of 26% Y-o-Y, excluding the COVID testing revenues. So what I'm trying to understand is whether COVID testing is still a significant part of this segment.
And also trying to understand what is a sustainable number because this is a segment that we've had some pricing pressure exerted by insurance players. There's been a significant impact during COVID. We've also seen some impact from the economic situation in UAE in the past. So what exactly would be a sustainable number is what I'm trying to figure out here.
Sure. Thanks, Harith. I can't remember exactly. I will have to ask Amitabh about what was the exact ratio of COVID, but I do think it's -- Amitabh, what is it? Around 10%?
Alisha, at the same time last year from the clinic's revenue perspective, the PCR revenue was almost 33%. Now that has come to almost 9% in the clinics business. That has dropped down significantly. And which is why, Harith, when you are looking at the growth of the business year-on-year, year-on-year basis, it's a 26% growth if you take out the PCR revenue.
Yes. So that was on the COVID business. So it has come down quite significantly, Harith.
On the other part, we've made a kind of conscious strategic call that earlier Aster was also eligible for the lower segment of the population. We had a clinic network, which was exposed to all the networks.
Over the last 1 year, what we have said is we want to actively disengage from the lowest network. We want to make sure those people have only access to access brand of ours. And we want to make sure that Aster is able to command a higher pricing and the higher segment, the middle income segment core -- core mill income segment to be our customers.
So there has been a reshuffle and change in the portfolio, a much stronger focus on that, which we believe will enhance our margins to enhance the brand and keep it more intact as well. And we believe that this is working.
So again, it goes back to the whole point. It is with that segment that you can push more of that cash business. You can do more of the dental work. You can do more of the aesthetic work. So all of that is much more suitable and well suited for the middle income population over there. And that's a population which is increasing in the vibe.
So post this whole COVID, we are seeing that less of the blue collar workers, all that segment is getting more diminished and there is a much more increase in the higher segment and the middle income population.
So we said, let's restore Aster brand to be much more of the core middle-income brand and avoid the dilution, which had happened at some point when we had an overcapacity of clinics. And we said, let's try and increase the volume into the business.
So that's something which we believe is a much more strategic better the initiative for Aster and keep the lower blue bullet workers for our access brand and referral into our hospitals where we have capacity being built up in Aster.
That's helpful. And Dr. Moopen, last one from my side. On this new hospital in Kerala, which is in Areekode. So our strength historically has been in treasury care and time care. When I look at our other assets in Kerala, they're all in the larger cities in the state. So this appears to be a bit of a deviation from our strategy in Kerala. And I'm also trying to understand if there is a market for the same services in a smaller town like Areekode.
Yes. So thank you. So there are multiple things why we selected this hospital. One, this was having a next cell and infrastructure. This was built over the last 15 years, and that has not been successful. So we thought that, that has not even been run. We are the first people to operate that.
So excellent infrastructure. So there is a potential for us to even grow it further because there is land and other, I mean, foundations even late for your building. So from the point of view of the services that we are offering, as this is only 30 to 35 kilometers from the Aster [ Areekode ], the ability to provide tertiary care in that hospital is there, and that is something which we have already started doing.
So we are providing services like cath lab, neurosurgery and all these where the doctors from the Aster MIMS Calicut where they can reach in half an hour. So they are going there and providing this treatment.
And if at all, there is a patient who has to be transported, within half an hour, that patient can be brought to this hospital. So this is a real hub-and-spoke model where basic services like the gynecology, obstetrics, general medicine provider. And the higher services, the doctors are not employed there, but they are actually going from our main hospital.
So we also now see, because there is a huge issue on the capacity and the full capacity utilization at our Kannur and the delicate hospitals, there is an overflow. And with this, we are now able to center this hospital and take care of them in a hospital-like Areekode.
So answering your question, we have been having this strategy and which has worked out very well. And just to give you some numbers, we have started 2 months back, and we hope that we will go into a breakeven next year -- next month. In 3 months, we are going into a breakeven in the Areekode Hospital.
Just because the HR cost is very minimal because we have taken all the specialist doctors under MIMS Calicut. And they are providing the support. And so the breakeven is very, very low amount, even though it is a large hospital. So we hope that we will have good EBITDA coming out of it as we go forward. And it will also help to increase our footprint in the areas that we are operating.
I'll be approaching the close of our call. The last question is from Mehul Sheth from Axis Capital.
So just to confirm a couple of numbers, like your CapEx plan will remain like more of like a [indiscernible]? It's nearby INR 600 crores for this current year. And of that, around INR 300 crores will be towards India expansion.
That's right.
Okay. And so far, you have done something like INR [ 1.47 crores ] kind of CapEx in Q1.
That's right.
Yes. And also, there is one observation like earlier you had a guidance of having the Aster lab expansion strategy with 38 satellite labs and around 500 centers, collections in business, which is now you have reduced to like 35 less and 300 centers. So is there any major change in expansion plan?
Yes. So thank you. So we have found that there is a very tough competition like what we told earlier because of the competition. We thought that unlike the pharmacy, where we have found much more traction, we thought that according to the market, we should look at it and try to change like what has been told earlier, not to work in to not.
So we are trying to create this ecosystem. So around our hospitals, we are focusing. Beyond that, how much we should spend and I mean, spread and how much we should make it a stand-alone large label is something which we are looking at. So that's why there has been some balancing of the numbers which has been provided earlier.
Ladies and gentlemen, this concludes the earnings call for this quarter for Aster DM Healthcare. I thank you all and the management for joining us today. If you have any further questions or queries, please do get in touch with us. Have a good rest of the day, and have a great long weekend.
Thank you.
Thank you.
Thank you. Thank you.