Aster DM Healthcare Ltd
NSE:ASTERDM
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Aster DM Healthcare Ltd
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Good morning, everyone. I welcome you to Aster DM Healthcare earnings conference call for the second quarter of FY '25. The company declared the Q2 results for FY '25. With us, we have the senior management of Aster DM Healthcare, namely Ms. Alisha Moopen, Deputy Managing Director; Mr. T.J. Wilson, Non-Executive Director; Mr. Anoop Moopen, Non-Executive Director; Mr. Ramesh Kumar, Chief Operating Officer; Mr. Sunil Kumar, Chief Financial Officer; and Mr. Hitesh Dhaddha, Chief of Investor Relations and Mergers and Acquisitions. [Operator Instructions]
Certain forward-looking statements may be discussed in this meeting and such 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. 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 now request Ms. Alisha Moopen to start with opening remarks. Over to you, Ms. Alisha.
Thank you, Puneet. Good morning, everyone, and thank you for joining our Q2 FY '25 earnings call. To begin, the Indian healthcare sector is experiencing robust growth driven by several macroeconomic factors. Rising healthcare demand fueled by a growing middle class, the increasing prevalence of chronic diseases and enhanced government focus on expanding healthcare infrastructure and insurance coverage continues to create significant opportunities. Additionally, India's emergence as a major hub for medical tourism further amplifies the attractiveness of the hospital industry.
Amid this favorable backdrop, we are very pleased to report that we are outpacing the industry growth. Our superior quality of care, state-of-the-art infrastructure and leadership position in key micro markets have allowed us to consistently deliver results that exceed broader industry benchmarks. In Q2 FY '25, we sustained our strong momentum from the first quarter with steady growth across all key operational and financial metrics. The strategic realignment we executed earlier this year, combined with our deep understanding of India's diverse healthcare needs has been crucial in driving this performance.
Our focus on expanding capacity, streamlining operations and enhancing service delivery has further strengthened our ability to meet the growing needs of the healthcare sector. This focus has also solidified our leadership in the regions we serve, where our reputation for quality care continues to differentiate us even in highly competitive landscape.
Now coming to the financial performance. Looking at overall India's long-term performance. Over the last 5 years, our India operations has achieved robust growth with a CAGR of 23% in revenue and 38% in operating EBITDA up to FY '24. This success has been driven by a strategic focus on expanding capacity, boosting the ARPOB and increasing the international patient revenue. At the same time, we have delivered stronger margin improvement through disciplined cost management, operational efficiencies and optimizing our service mix, allowing us to scale profitability while maintaining high-quality care.
Now coming to the H1 FY '25 performance. Our overall India business recorded revenue growth of 18%, reaching INR 2,088 crores in the first half of FY '25. This growth was driven by 7% increase in occupied beds and a 12% year-on-year increase in average revenue per occupied bed, the ARPOB. Aster's operating EBITDA also grew by 44%, totaling INR 410 crores, with EBITDA margins expanding to 19.6% in H1 FY '25, up from 16.1% a year ago. This substantial improvement has been fueled by operational efficiencies, evidenced by a reduction in average length of stay, cost optimization initiatives and enhanced EBITDA performance from our Labs business.
Notably, our material costs, excluding Wholesale Pharmacy decreased to 20.7% in H1 '25 from 22.8% in the same period last year. Our net profit post NCI doubled to INR 171 crores in H1 FY '25 compared to INR 91 crores in H1 FY '24, which showcases our strong operational performance and increased other income from interest earned on the investment of remaining sale proceeds from the segregation of our GCC business. Furthermore, we have seen a positive shift in our payer mix with the contribution from insurance business increasing by over 300 basis points to 30%. This growth was partially offset by a corresponding reduction in the scheme business.
Now coming to our core business, hospitals and the clinics. Our core hospital business is demonstrating continued growth, achieving an operating EBITDA margins of 22.4% for H1 '25, up from 19.1% in the prior year. Specifically, our mature hospitals, which by definition for us, has been in operation for over 6 years, has showed a very impressive expansion in operating margins, reaching 25% in H1 of FY '25 compared to 22% just over a year ago with a return of capital employed of 32%. Our deliberate focus on building a sustainable business model is reflected in our well-diversified specialty mix, where no single specialty accounts for more than 15% of total hospital revenue. This strategic diversification, enhances our resilience and positions us well for future growth in the healthcare sector.
We are actually making significant progress in enhancing our oncology services with Aster Whitefield Hospital becoming the first hospital in India to introduce the groundbreaking intraoperative electron radiation therapy for cancer care at the Aster International Institute of Oncology. This represents a significant leap forward in the hospital's commitment to providing the highest quality treatment options for our cancer patients.
Coming to some of the newer businesses as pharmacy and labs. As of September 30, 2024, we have established 232 patient experience centers and 212 Aster Pharmacy branded retail stores. Additionally, our Lab business performed well, achieving a revenue growth of 17% year-on-year in Q2 FY '25, while maintaining a positive EBITDA margin of 11%, up from 3.4% in Q1 FY '25.
Coming to our CapEx plan, we remain committed to our robust expansion plans. This quarter, we successfully operationalized 100 beds at MIMS Kannur and added 25 beds at Aster Aadhar, bringing our total capacity to nearly 5,000 beds as of September 30, 2024. Additionally, we are excited about the Greenfield expansion of Aster Women & Children Hospital in Hyderabad, which will feature 300 beds and is anticipated to be completed by FY '26. This project further to add approximately 1,800 beds to our overall capacity, elevating our total bed count to nearly 6,800 by FY '27. Our expansion pipeline also includes significant Brownfield projects at renowned hospitals such as Aster Medcity, at Aster CMI and Aster Whitefield, which are on track to become large capacity facilities with approximately 950 beds, 850 beds and 500 beds, respectively.
Coming to some of the changes in our Board of Directors and leadership team. We are very excited to announce recent changes to our Board of Directors, welcoming Mr. Madhavan Nambiar, Sunil Theckath, Anoop Moopen, Zeba Moopen as our new members. Their diverse expertise and fresh perspectives will enhance our leadership team, strengthen our governance and support our strategic growth initiatives. We look forward to their valuable contribution as we continue to drive our mission forward.
I'm delighted to announce the promotion of Mr. Ramesh Kumar to Chief Operating Officer of Aster DM Healthcare India, previously serving as the Regional CEO for Karnataka and Maharashtra. Mr. Kumar brings a wealth of experience and leadership to his new role. We are confident that his strategic vision will play a crucial role in advancing our operations and enhancing the quality of healthcare services that we provide.
Just to share some of the recent recognitions that we have had. We're thrilled to announce that following Aster CMI Hospital in Bengaluru achieving platinum level NABH digital accreditation last quarter, both MIMS Calicut and Aster Medcity, Kochi have now become the first hospital in Kerala to achieve this prestigious status. With a total of 9 hospitals currently holding NABH digital accreditation, we are proud to demonstrate our leadership in the digital transformation of healthcare.
Looking ahead, Aster DM Healthcare is very well positioned for substantial growth with a focused strategy on expanding capacity, enhancing operational efficiencies and improving patient care. These strategic priorities not only help us maintain our momentum, but also deliver long-term value for our stakeholders. We are confident that this concentrated approach will further reinforce our leadership in the Indian healthcare sector and enable us to meet the rising demand for high-quality medical services.
I will now request our Group COO, Mr. Ramesh, to further elaborate on our cluster performance. Over to you, Ramesh.
Thank you. Thank you, Mr. Alisha. Very good morning to everyone. I'm really excited to provide you an overview of our cluster performance for quarter 2 FY '25. In fact, we have witnessed a continuous growth and improved operational efficiency across all our regions, and I would like to provide a few highlights around the same.
Starting with Kerala cluster, the region remains the cornerstone of our operations with a total bed capacity of 2,501, we have 1,898 operational census beds with a solid 77% occupancy rate. This utilization demonstrates the trust our patients place in the quality of care at our facilities. In terms of our financial performance, Kerala has shown a significant strength. Total revenue from the cluster has increased from INR 1,087 crores in H1 FY '25 compared to INR 965 crores, which was in H1 FY '24, making a growth of 13%. The operating EBITDA for the Kerala cluster has grown by 30% year-on-year to INR 259 crores in H1 FY '25. The margins have improved to 23.9% in H1 FY '25 from 20.7% in H1 FY '24, reflecting both our top line growth and our efficiency in managing operational costs.
Next turning to Karnataka and Maharashtra cluster. This cluster has also shown a significant progress with a total bed capacity of 1,446 beds and 1,010 operational census beds we have seen the occupancy improved by almost around 600 basis points year-on-year from 59% to 65% in H1 FY '25. Revenue of Karnataka and Maharashtra cluster has grown by 35% year-on-year, reaching INR 696 crores in H1 FY '25, up to around INR 516 crores in H1 FY '24. The operating EBITDA for the cluster also shows a robust growth of 62%, increasing from INR 101 crores in H1 FY '24 to INR 164 crores in H1 FY '25. Our operating EBITDA margins have also improved to 23.5% in H1 FY '25, up from 19.6% in the previous year. This demonstrates our ability to enhance the profitability while continuing to expand services, especially through our high-end treatment in hospitals like our Aster CMI and Aster Whitefield in Bengaluru.
Finally, both our Andhra and Telangana cluster has also demonstrated a strong performance with a total bed capacity of 1,047 beds and 781 operational census beds. The occupancy rate improved by around 700 basis points from 49% in H1 FY '24 to 56% in H1 FY '25. Revenue for Andhra cluster grew by around 17%, reaching INR 236 crores in H1 FY '25 compared to INR 202 crores in H1 FY '24. Operating EBITDA grew by around 44% from INR 21 crores in H1 FY '24 to INR 30 crores in H1 FY '25, with a margin improving from 12.8% compared to that of 10.4% in the previous year.
Now we see across all our regions, our performance continues to drive both the revenue growth and enhance profitability. In total, our bed capacity stands at 4,994 beds with 3,689 operational census beds. Outpatient visits have grown by almost 13% and inpatient visits by 14%, which clearly highlights the increasing demand for our services. Looking ahead, we remain confident in our ability to sustain the growth trajectory by maintaining a focus on the operational excellence and expanding our reach and delivering the highest quality of care, we are well positioned to continue with this positive momentum.
I now request our CFO, Mr. Sunil, to elaborate more on our financial performance. Thank you.
Thank you, Mr. Ramesh. Good morning, everyone. For the quarter ended 30th September 2024, India revenues have increased to INR 1,086 crores, up by 16% from INR 934 crores in quarter 2 FY '24. And operating EBITDA has increased to INR 233 crores with a margin of 21.4% compared to INR 157 crores in quarter 2 FY '24 with a growth of 48 percentage. PAT post-NCI for quarter 2 FY '25 is at INR 97 crores compared to INR 50 crores in quarter 2 FY '24 with a growth of 95% year-on-year. For the half year ended 30th September '24, India revenues have increased to INR 2,088 crores, up by 18% from INR 1,772 crores in H1 FY '24. And operating EBITDA has increased to INR 410 crores with a margin of 19.6% compared to INR 285 crores in H1 FY '24 with a growth of 44 percentage.
PAT post-NCI for H1 FY '25 is at INR 171 crores compared to INR 91 crores in H1 FY '24 with a growth of 88% year-on-year. For the quarter ending 30th September 2024, our EBITDA margins have grown by more than 450 bps, increasing from 16.8% to 21.4% year-on-year. This growth is driven by several factors like the Hospital and Clinics segment has achieved over 19% revenue growth with margins expanding by more than 400 bps from 19.8% to 24%. Our mature hospitals, which contribute 72% of our Hospital and Clinics segment are now operating at an operating EBITDA margin of 25.9%. Revenue growth in this segment stems from a combination of increased volumes across our hospitals and 11% rise in ARPOB and 6% improvement in ALOS alongside revenue assurance measures which we have taken.
The growth in operating EBITDA is a result of various optimization initiatives across our hospitals. Our material cost percentage, excluding Wholesale Pharmacy has steadily decreased from 25.3% in FY '22 to 22% in FY '24 and further to 20.3% during quarter 2 FY '25, marking 500 bps efficiency improvement over 3 years period. Additionally, manpower costs and overheads have contributed through operating leverage to the EBITDA growth.
Aster Labs reached breakeven in quarter 4 FY '24 with margins increasing to 3.4% in quarter 1 FY '25, further to 11 percentage in quarter 2 FY '25. This impressive turnaround has been fueled by a strong 41% year-on-year growth in external business, improved operating leverage and material cost efficiencies. For the half year ended 30th September 2024, our capital expenditure totaled INR 161 crores with approximately 65% spent towards expanding our capacity. We operationalized 100 beds in MIMS Kannur during the quarter. Over the next 3 years, we aim to further add nearly 1,900 beds with the majority of these being Brownfield expansion to ensure that there is no much dilution in our margins.
Optimized capital allocation, coupled with margin improvement, our ROCE has experienced a significant growth. ROCE surged by 390 bps year-on-year, reaching 18 percentage at consolidated level. On Hospital and Clinics segment, ROCE rose to 23.8% from 20.1% in H1 FY '24. Mature hospitals saw an impressive increase in ROCE by over 530 bps, reaching 32.4% in H1 FY '25. As of now, Aster India net cash stands at INR 988 crores as on 30 September 2024.
On that note, I conclude my remarks. We would be happy to answer any questions that you may have. I now request Puneet to open the question-and-answer session.
[Operator Instructions] The first question is from Mr. Sanjay Shah.
Congratulations for a decent set of numbers and very nice presentation, too. Sir, my question was regarding growth trajectory, what we are highlighting, that is we are adding 1,800 beds. Can you highlight upon what will be the CapEx required for it? And which are the geographies where we plan to increase our bed capacity?
Sunil, why don't you go ahead?
Yes, as we put across, we are adding something around 1,800 to 1,900 beds in Aster India. Out of which 100 beds which were supposed to add in Kannur that's got operational in the quarter 2. In addition to that, in the -- coming down from the north, in the Calicut, we are adding 75 beds, which is again an existing hospital with 500 or 600 beds there. In addition to that Aster Medcity Kochi, where we are at 750 beds, there, we are adding 100 beds. As of now, it's almost ready. And we have also got occupancy certificate also, and we expect it to operationalize sometime this month end.
Coming down further south, Aster Capital is another hospital which we are adding in -- it's a greenfield hospital. It's overall a 600-bed hospital, but Phase 1, we are adding 450 beds. Coming to Karnataka and Maharashtra cluster. In Karnataka, you know already that 350 beds of Whitefield Hospital, which is operational. We're adding another 150 beds there as a Brownfield expansion, which is expected to get operationalized sometime this year or later part of it. Then also in the Aster CMI Hospital, which is again a 500-bed hospital with a 65% to 66% occupancy, we are adding another 350 beds there.
So this is the broad expansion, which is happening. In addition to that, Medcity, considering I told that we're already adding the 100 beds in the current month. We also started working on adding another 100 beds specifically for a physical medicine rehabilitation. That is expected to come in next 2 years' time. In terms of CapEx for the current 1,800 and 1,900 beds we're talking about, that's going to cost us something like INR 1,450 crores, right, overall CapEx. Out of INR 1,450 crores, almost INR 215 crores to INR 220 crores has already been spent. So balance INR 1,200 crores to INR 1,250 crores is going to be spent in the year FY '25, '26, '27.
My second question was regarding, we have seen some good uptick on our ARPU (sic) [ ARPOB ], especially on Kerala side and Karnataka side. So can you highlight upon how is the trajectory ahead of this? And this [ ARPOB ] is more coming from our specialty businesses where we offer to the patient or there is addition of some international patient or there's a price rise? How do you --
So Sanjay, ARPOB growth, if you look at history, sometime in [indiscernible]. Yes. So if you look at our historical growth, right, we have been last 5 years CAGR, we've been growing at a 9% average. And here, you can see 12% we have grown in H1 and around 11% ARPOB growth, which has happened in the quarter 2 FY '25. Even if you look at the, what you call, Karnataka cluster or Kerala cluster, there also you get a double-digit ARPOB growth. Now with respect to ARPOB growth, there is multiple factors to it. First one should be the price increase because that is something which we take every year. At the same time, it's not -- we spread it across the units, right? Based on the geography to geography, we take the decision. So somewhere between 3 to 3.5 percentage will be your price increase.
In addition to that, we also initiated a lot of revenue assurance measures. See, considering we have 19 hospitals today. Last 2 years, we have done a lot of work from the IT part of it to consolidate our HIS, consolidate our ERP, consolidate our service and item master. With this, we are trying to leverage on the volumes what we have and trying to do a revenue augmentation, right? By looking at what are the billings services, which is missed, what about the service laddering. All these things we have brought into the picture, which has helped us to drive at least 1% of our ARPOB through that.
In addition to that, I would say major other part also is basically ALOS. ALOS has decreased year-on-year almost by 6 percentage. That is also one of the very important factor, which is driving the ARPOB growth. In addition to that, scheme patients, if you recall, Calicut almost a year back, right, we used to do a scheme of something like 8% to 9%. Now it has gone down at least by 300 to 400 bps. Even in Medcity, we have reduced the scheme patients by almost 400 bps. So considering all these things have really impacted the ARPOB growth.
Now looking at the future, even if you look at our payer base mix also, right, in H1, we are growing even walk-in patients or cash patients have grown by 20 percentage. Your TPA patients have grown by 30 percentage. At the same time, your scheme patients have reduced by around 11 to 12 percentage. So all these factors have helped us the ARPOB growth. And considering still our majority of our business comes from non-metros, we still see a good scope for our ARPOB growth, at least 7 to 8 percentage in the medium term. I'm talking about 3 to 4-year span period. I think in average, we should be able to still grow at 7 to 8 percentage.
Sir, my last question was regarding our Andhra and Telangana, where we see still a growth and where we can bring in. So how we see that sector panning out for us on occupancy side also and ARPOB side?
So I can start with the first part, maybe Ramesh can come in to that. See if you've seen historically, Sanjay, Andhra/Telangana has been -- during the COVID, they did really well. But post-COVID, they were not able to scale up the non -- basically the occupancy bit of it. And that's also specifically because they are perceived as more like a cardiology hospital. Even today, 35% to 40% of their business comes from the cardiac census per se. Now that last year, we rebranded that into Aster Ramesh Hospital. And also, we are driving to add more specialties like multi-specialty then the -- trying to bring the pediatric women's health. All these things are really driving the growth.
And if you see for a long time, at least last 2 years, we have stuck at occupancy of 50%. But now you can see an uptick in both our Ramesh Hospitals also and the Telangana cluster also where the -- what you can see, occupancy has really gone up to almost 56 percentage for the H1 FY '25, but we still see a good scope to grow here. And one important thing which has happened is that last 2 years, the EBITDA has been stuck at 10 to 11 percentage. But you can see a very good turnaround, which has happened in the quarter 2. Quarter 1, we were at something like 10.9% specifically. The cluster has moved to almost 15%, 16% in the quarter 2 with the average EBITDA margin of something like 12.9% in H1.
So we see that this has got a very good scope. Even today, ARPOB is very low at INR 30,000. It's got -- again, a year also, we have got a very good scope to increase the ARPOB further. Keeping this in mind, this particular specifically Andhra and Telangana cluster, which is today at a 15% EBITDA, it should go to above 20s. So that is something which is achievable and sustainable.
Ramesh, do you want to add to that?
Yes. So moreover, if you look at the split between Andhra, Andhra that is in Vijayawada, primarily it is the cardiology center. So we are trying to enhance all of the multi-specialty verticals also into the cardiology center. So we are expecting good growth in Vijaywada. Guntur is a 500-bedded facility. Guntur is a larger facility. It is pitched in as a bigger multi-specialty hospital. So we are expecting a good traction in Guntur and also focus on oncology business. So ARPOB increases, and we are looking at a good footfall coming in.
The other 2 centers, especially coming down further, Tirupati. Tirupati is another center where Narayanadri have taken over. And in fact, there is a significant growth which has happened from hardly around INR 2.5 crores, INR 3 crores within a year's time, it is -- we have doubled the revenue of Tirupati. A good amount of traction happening there. And of course, we have a -- since Prime is a smaller facility of 150 bed, we are trying to scale up that also with the case mix. So there is a good potential. We are looking at the case mix. We are looking at the ARPOB to increase the ARPOB also and also being mature hospitals, a few of them, and we are trying to increase the EBITDA margins as well.
I just wanted to add to that point, Mr. Sanjay, what you asked. Even for the future, when you look at it, we have announced our new 300-bed hospital in Hyderabad, which is a specialized women and children. So we are very bullish about the market. We believe that there is scope and having sort of a specialized center for women and children will further enhance sort of the portfolio we have in Andhra and Telangana as well.
I congratulate new members joining the Board.
The next question who's asking is from Damayanti from HSBC.
This is Damayanti from HSBC Securities and Capital Markets. So my first question is continuing the discussion on margin pickup, which we have seen during the quarter or in first half. So you mentioned in AP and Telangana cluster, margins can go upward of, say, 20% or so. And in the existing Kerala and Maharashtra, Karnataka cluster, it's already at mid-20s. So if you can talk a bit about how we should see margins moving up in the more mature clusters from here on, say, from 25% level or so? What is the -- potentially margins can go up to? And very broadly, if you can also talk about some of the initiatives which you believe can really push margins from current levels also? And how should we see margins in, say, next 2 or 3 years?
Sure. Damayanti, yes, with respect to margin, we can see that, right, specifically, at least on the H1, we have closed at a consol level at 19.6% operating EBITDA and the hospital segment at 22.8%. There is at least 300 to 400 basis points improvement, which has happened year-on-year. And it's specifically driven by 2, 3 levers. Majorly, it's our material cost. Material cost has gone more than 200 bps efficiency we have brought in there. And if you look at, okay, quarter 2 itself is at 20.3%. But if you ask me, do you think there's still scope to reduce? Yes, there is at least another 100 bps can -- further material cost can be done, which is in the coming years.
Next another efficiency which brought us in the -- specifically in the manpower cost. So manpower cost also, we see at least 90 to 100 bps has reduced. And again, as I've been calling out previously also saying that with the increase in occupancy going on and with the Brownfield expansion, which we are doing, you don't really need to add across the employees across the board, right? You need to only add the bedside staff. Other than that, you don't have expert in the leadership team or the admin staff. To that extent, we keep on going to increase the efficiency. And you'll see that because, as I said, material cost already has leveraged more than 400 bps in the last 3 years, we see the further growth will come from the efficiency increase in the manpower cost.
In addition to that, another 100 basis points, we are able to expand in the also because overheads is more semi-variable cost, right? So it doesn't go very linear with our revenue growth. To that extent, we are able to get that benefit also. And also one of the reasons why we're also getting is that if you look at our maturity profile, right? Today, 70% of our beds are above 6 years and 72% revenue or 73% revenue is coming from the above 6 years hospitals. And there already margins are at more than 24 percentage. So considering more assets are getting into mature stage, we expect the margin expansion to continue.
From an overall perspective, today where we are at 19.6%, we can say, at least I'm giving -- saying broadly next 2, 3 years, we can go to 21% plus. and also on a yearly basis. And also with respect to Hospital and Clinic segment, which is a core segment where 94% of the revenue comes in. There, we see that which we are today at 22.8% for the half year. On a full year basis, we should go around 24% plus. Even this is all numbers, I'm putting it across, including the addition which we are doing. So if you're not just adding it, then it could go faster. But at the same time, there is no dilution happening because they are all EBITDA accretive, and that's where we see the ARPOB -- sorry, EBITDA margins to expand in the next 2 to 3 years' time line.
And I understand you had some restructuring done at the Wholesale Pharmacy segment also. So if you can talk about it and how do you see that business from your overall service or offering perspective?
Yes. See, Wholesale Pharmacy, it has got 2 segments. We call that as a Business Unit 1 and Business Unit 2. Business Unit 1 is something which we acquired almost 3 years back, right? So that has got more of a B2B business and the B2C basically, you're talking about a trade business also. So that continues to grow at 10% year-on-year. Another business, another vertical which we added after purchasing or acquiring that is the BU2. Basically, this segment used to drive the back-end purchases for the -- our retail business. But we have seen that handling the back-end pharmacy from our end, it is -- logistically, it is not really creating more benefit or creating operating leverage in terms of expanding our EBITDA margin. That's where we thought that why don't we outsource it, and that's why 6 months back, we did the outsourcing of that.
To that extent, you are seeing there is a dip in revenue. But at the same time, it's benefiting us by reducing the EBITDA losses in the Wholesale Pharmacy and also giving us the overall EBITDA margin expansion across the India Aster India level. And we expect from the Wholesale future point of view, as I said, the BU2 is completely outsourced. So we can only look at whatever revenue you're seeing is 95% is coming from the Business Unit 1, and that's expected to grow at 10% to 12% year-on-year.
And my last question is for Ms. Alisha. So Alisha, I think you mentioned like you have several Board members and management team also. So do you have plan to hire a new CEO for India operation? Or do you think the current team is good enough to sustain the current operations?
So a really good point, a really good question. So definitely, we've had these new Board members, including some of the promoter members like Zeba, Anoop have joined. And they've been involved now in business review, strategic oversight. They're supporting the unit heads, Ramesh, the CEOs and the COOs and function heads. The business seems to be doing quite well for us. We have said that it's very important for us to have the right team in place.
We do have very strong unit leadership and functional leaders at play right now. We would look at maybe a CEO in the future. Right now, we seem to be scaling up quite well. Ramesh is doing a great job along with the rest of the team. We didn't want to rush into this because this is a very key role for the organization. We believe that the team at hand is more than capable of delivering what we have committed to for this year, and we will relook at this maybe over the next few quarters.
The next question is from Mr. Krishnendu Saha.
Yes. This is Krishnendu from Quantum. Most of the questions have been answered. But so quickly, but on the Slide 35, I was looking at the Karnataka and the Maharashtra cluster, the inpatient volume is like 24% growth. So just trying to understand because I'm new to the business, just trying to understand what -- this is on a H1-to-H1 basis Y-o-Y, there's a 24% Y-o-Y growth in inpatient volume. What explains that? And what you call and on #3 slide, we have 545 -- 4,900 and some beds, but just a minute --
Yes. If I understood the first question with respect to the Slide 35, where you're talking about the growth in inpatient, right? So more than 20%. What it's very important to note that majorly the growth is coming from the Aster Whitefield Hospital. If you recall, we were only operational 2 or 3 years back, only the women children block, which is 50 beds and balance 3 beds came into operational only in the October 2023, right? That's where growth which has come in the current year, which is not there in the H1 FY '24, right? That the major addition. Otherwise, we are still growing at 11% to 12% in the other than Whitefield Hospital.
Yes. And on the revenue per bed side, if the insurance penetration increases, say, from 30% to 50%, do you see that revenue per bed being flattish or you will still be able to take a price increase because the rack rates for insurance will be a little bit lower? So what is that also?
See, if you look at our IP ARPOB, right, not overall ARPOB and we break into cash and TPA, we don't see much of a difference at all. Even our negotiations, right? We give a hardly single-digit discount to that, right? So even that in mind, ARPOB doesn't really showcase basically because your insurance patients come for a high-end case mix and also they usually opt for a twin sharing or single room. So that's where your ARPOB is going to be always -- almost equal to your cash ARPOB. That is first thing.
But even if you look at the year-on-year growth, right, we as [indiscernible] said very rightly called out, 27% contribution has moved to 30%. And also from the growth point of view, added growth of almost 34% year-on-year for H1. But we don't expect the ARPOB to be flattish because these insurance companies, yes, we don't do every year renewal, but every 2-year renewal, we do it. And whenever we do a 2-year renewal, we always get an inflation which is more than double digits, right? It's always set of 10%. So as long as that is happening and case mix is improving and the bed mix is improving, specifically with the TPA patients, we don't expect any degrowth in the ARPOB. It is going to be quite strong even at least in the next 3 to 4 years' time line, which I could say.
And you don't see -- face any competition from, say, Telangana and all these regions where there is a lot of hospitals, do you see any pricing pressure out there? Or it is comfortable for you to take a normal 3%, 4%, 5% price increase?
Yes. We don't see any -- see, if you look that way, every metro, you can see 4,000 to 5,000 beds getting added in the next 3 to 5 years, right? So even with that, always the price increase because you're not taking a 10% or 12%, right? You're talking about a 5% to 6% price increase where ARPOB impact is only 3%, 3.5%. So that will never be a real burden to the patient. And considering that, we don't see any pressure in not doing the price increase. And it's -- as I said, we are not doing something where double-digit price increase. It's around 3% to 3.5%. It's a very decent price increase, which we can do, and we continue to do that.
And last 2 questions. Your capacity is 4,994 beds, but occupancy is 2,491. So I was just wondering, but the average occupancy on slides are something else. What -- am I getting something wrong out here?
No, no, no. Okay. Let me explain that, right? See, 4,994 beds is a capacity beds. This has got a combination of census and non-census, okay? The census beds would be something like 3,800 to 3,900 beds. Balance 1,100, 1,200 are the non-operational -- sorry, non-census. Non-census means we're talking about emergency beds, daycare beds, right? These are all revenue generating beds, but we don't take midnight census. So that is anyway [indiscernible].
In addition to the 3,800 beds, which I talked about the census beds, out of that, only 3,689 is operational, right? Balance another 150, which is there basically, we have got another 50, 60 beds in J. Madhav Hospital, another 50, 70 beds in our Whitefield Hospital, another 50 beds in our Guntur Hospital. So these are the census beds we get to operationalize, which we always do. But what you're seeing is very right. I hope that answers your question. So occupancy is always calculated on the operational census beds.
I see the 2,000, whatever the number is, it's on census beds and and some of them are still not operational also.
Yes. Around 100 to 200 beds --
Last question from my side. So your average loss is like 3.2, right? And Kerala is 3.1. So we can -- how low can we go? Do we go for 3.1 is the max or it like 2.9 is what we can? Is there a thought in the head that we can go to 2.9, 2.8? So that's stretching it a lot, but is it possible because we're already at 3.1% at Kerala? So is that benchmarked? What are the number out there?
Yes. If you ask me, I think we are literally quite efficient in that ALOS, right? So 3.0 is -- see, if you're doing only tertiary care or secondary care, you can go up to 2.5, 2.6, but we are doing more coronary care procedures, including the transplants, robotic surgery, high-end surgery, 3, 3.1 is a really good number to stay on.
That's why your ARPOB also has a higher number.
The next question is from Mr. Sumit from Centrum.
Congrats on good set of numbers. So I just want to understand about the margin aspect from cluster point of view. So margins in Karnataka are better than like for the Kerala cluster. So what is driving this? And like how should we see it going forward over the short term to medium term?
See, now if you look at the margins, I think Karnataka is very similar to Kerala, right? From the -- if you look at H1, yes, there is 100 bps difference. But if you look at only quarter performance, I think both clusters are at 25 percentage margins, right? Now one very important thing we all have to understand is that EBITDA margins are very much leveraged to your ARPOB. If your ARPOB is higher, the margins always go up. For example, Kerala, which is ARPOB of average of INR 40,000 where you have a range from North Kerala to INR 30,000 to INR 50,000 plus in Aster Medcity, Kochi, the 25% is a very good margin to be at a consolidated level at the cluster level.
Now when you look at Karnataka and Maharashtra, where ARPOBs are as high as INR 5,000 to INR 60,000, where some of the hospitals do 70,000 ARPOB. I think this has got a very good potential to further grow. If you ask me 25%, which is there today, it has got potential to go even near to around 29-30 percentage. But because that's a leverage on the ARPOB. In addition to that, one of the limitation I see in Kerala, in addition to the ARPOB is the higher minimum wages. For example, nurses in Kerala cluster, we pay approximately INR 30,000 to INR 32,000 staff nurse, where in Karnataka you pay some between INR 18,000 to INR 20,000. So it has got a dual issue in Kerala, where you've got ARPOB lower than Karnataka. At the same time, minimum wage is higher. So that limits the margin expansion to the extent potential which Karnataka cluster can do.
Okay. So like going forward, let's say -- so Karnataka would be the major cluster, which will be driving the margins. And how should we see AP cluster also faring in terms of margin expansion?
Yes. Karnataka, as I said, it will always have a 300 to 400 basis points higher margin than Kerala. At the same time, I'm not going to say that margins already peaked in Kerala. Our margin expansion is still going to happen because we see still efficiencies in some of the cost lines, which we can do it. Andhra, coming to Andhra/Telangana because you know the performance has been subdued for the last couple of years. And now things are really picking up in the quarter 2. We can see here also the margins can settle somewhere in the mid-20s.
The next question is from Mr. Kunal Randeria from Axis Securities.
My first question is on the Kerala cluster. The occupancy is hovering around 78% to 80%. And I think around 340 beds are coming next year. So do you run the risk of a slowdown -- potential slowdown in the coming quarters?
Yes. Thank you, Kunal. Maybe, Ramesh, you want to take the question?
Yes, yes. So it is pretty much as you see that it is -- we are clocking around 77% occupancy. And I'm sure in the days to come, I don't think so there is a slowdown, I would say. It has got to do with the seasonal fluctuation. If you can see, especially the quarter 2 had a little bit of slight because of the seasonalization and also the festive season across Kerala. So we have seen that slightly the occupancy has gone up. But in the days to come, I'm sure there will be -- definitely, there is a surge is what we are expecting. And the season is back, and we would expect the occupancy to go up.
No, no. Sorry, my question was occupancy is already pretty high, and it's actually very difficult to breach the 80% mark and new beds would be only coming next year. So you run the risk of not meeting the demand because you don't have the beds.
So right now, there are 2 large facilities. If you look at [indiscernible] in Aster Medcity. So Aster Medcity, we are -- in 10 days' time, we are opening another additional 100 beds. So there, I think it will ease out. And Kannur, we have -- which is already around 100 beds, we are nearing 100 beds we have opened now. So that is easing out. So I don't think so we should have except in Calicut, there also, we are trying to shift a few other facilities and understand trying to bring in some more additional beds in MIMS Calicut as well. So these are the 3 large hospitals, and we are already taking action on that, and we are opening up these beds.
Sumit, if I can also -- or Kunal, if I can just come in here as well. See, we've -- while the sweet spot is 75% to 80%, we've also been able to manage in Kerala because of the demand, like exactly like you said, closer to 90% as well. So we don't think in the next couple of quarters, there would be a slowdown because operational efficiency that the team manages is quite good. So we should be able to kind of continue with the higher occupancy in Kerala. Anoop, I don't know if you want to add anything maybe to this as well.
I think basically, the question was whether we would have sufficient beds to meet the demand. I think correct me, Kunal, if that's what you're trying to ask.
Yes. That was my question because 340 beds are only coming next year, right? And you're already at close to 80.
See, basically, when we are running at this capacity, so when there is a gap, we open up for the scheme patients and try to fill up the gap. And when we are running at full levels, we try to focus more on other areas where we would reduce on the scheme and more on cash patients and things. So that's how we balance the occupancy levels and our performance.
Second question, again, actually to Alisha. Alisha now several family members are on the Board. So I'm just wondering if you could share what the roles and responsibilities, how are they divided?
Yes, sure. So Kunal, as -- once the segregation actually happened, we were talking about how there needs to be a double-down efforts on scaling up our India business, of course. So the way we have kind of divided from a promoter family perspective, at least the involvement is much more on a strategic level. So I work a lot with the function heads, whereas Anoop is more focused on the Kerala cluster and Zeba is more focused on the Karnataka cluster along with Ramesh.
So the idea was how can we make sure that we are deciding the best strategy for each of these regions. Anoop has spent a lot of time in Kerala, understands that market very closely. Zeba is someone who studied in Karnataka, has worked there, understands that market and again, is a doctor. So looking at the medical strategy is something which is her forte. Anoop is someone who is an engineer. Again, when we're looking at projects and looking at the expansion of the new project, that's something where he is definitely able to add his expertise.
So we come in more as supportive roles. The performers are all the team that's on the ground full-time dedicated to this. But we felt that with the segregation, it was important for us to kind of enhance the -- or sort of make the strategy a bit more laser sharp and which is where both Anoop and Zeba have come in. And of course, the IDs also who have -- some of them who used to be with us who have come back to sort of talk about what should be Aster's strategy to be sort of top 3 in the country, right? And we felt that we needed more inputs and more support to get to that full position, which has been Chairman's goal.
Sure. And so Alisha, if I can ask you on this. As far as your bandwidth goes, is it more on the India business or are you are still heavily involved in the GCC business?
No, I'm very involved in the GCC business because I am the Managing Director for the GCC business. So yes, it's -- like I said, the business is run with the local team in place between Ramesh, the cluster heads, the CEOs, the function heads. We feel India is running on a very good trajectory with the teams that are there. We come in more from a strategic support perspective, how do we look at allocation between the different regions, which departments to focus on. So I think definitely having Zeba and Anoop joined has been a great support system as well.
Last question for Sunil. See in the balance sheet, I've seen the sharp increase in ROU assets and lease liabilities. So what has led to this?
Yes. Kunal, so with respect to ROU and even the lease liabilities, right? It's both are interrelated. We were at something like INR 700-odd crores, I think, as on 31st March 2024. And after that, if you recall, we added signed off 2 agreements, right, lease projects. One is the Aster CMI. It's already a lease project, if you recall, which is 500 beds. We added -- we are adding another 350 beds, right? So that is a liability which will create because you're going to pay additional rent to the 350 beds. And again, it's a 20-year lease, right?
So to that extent, you have to create ROU, the itself, I think it came to around INR 350 crores to INR 400 crores and balance another INR 250 crores to INR 300 crores is coming from our Women and Children Hospital. That is, I think, we signed off sometime in September, September 22nd, if I'm right, and that has kicked in, in the quarter closure of 30th September. That's again, 300-bed hospital, again, with a 30 to 31-year lease. So that lease payments present value has been created as an ROU and lease liability. So these are the 2 major assets which we added in the H1, which has increased the lease liabilities and the ROU by almost INR 600 crores to INR 700 crores.
And if I can squeeze one more, sorry. The tax rate has gone up in the last couple of quarters, the P&L tax. So what has led to it? And what should we model going forward?
See, we had this [350] benefit for quite long, like Medcity is where we had a huge carryforward losses, and we have been utilizing for the last almost 10 years now. And I think in the last year also, we moved from the tax regime from old to new. So considering most of the carryforward loss has been utilized in the last year, now we are got back to the usual tax rate of between -- based on the legal entity, right? Either 25 percentage or 22 percentage. And that's where you can see an effective tax rate of near to 30% now, right?
So I think that's expected to continue unless -- and also, we are not adding new assets in the listed entity. We're adding the new assets in the separate subsidiaries to ensure that cash flow management is quite efficient. Keeping that in mind, I think current tax rate should continue.
[Operator Instructions] The next question is from Mr. Prateek Poddar.
This is Prateek from Bandhan AMC. A couple of questions. One is on the Women and Children Hospital, which is starting in Hyderabad. How should we think about this? Is it this new practice area which you want to develop and scale this up from a medium-term perspective? And from a payback period perspective, would this practice area be a faster payback period versus, let's say, a multi-specialty? That's question number 1.
Second is, when I read the press release, you talk about 9 hospitals getting this digital standard published by NABH. Maybe you could just spend a bit of time and explain what is this? Does it result in better operational efficiency or better customer satisfaction?
And lastly, on Labs and Pharmacies business, I think you called that out. Just from a 2, 3-year perspective, how should we think about this business? These are the 3 questions.
Ramesh, do you want to comment on the Women and Children as a specialty for Aster?
Yes. This Women and Children Hospital at Hyderabad, we are looking at as a state-of-art the first -- we wanted to have the largest hospital of that center to make up presence felt. And we thought we should have all the specialty subspecialty of pediatric in the center and ensure that it becomes the point -- I mean, where people can address to all kinds of patients coming into the system, the pediatric patient. And also women as far as the guiding part is concerned, we wanted to have one of the best experience as well as have the state-of-the-art good rooms and facilities to ensure that they have a good experience in the center. So that's a thought process. So we want to make it as the best center in Hyderabad.
Payback periods and from a, let's say, medium-term perspective, would you want to scale this up? In the sense, would you want to add more of this practice or these hospitals and other clusters?
We would like to -- we'll be adding -- as such, we have done this women and children Aster in Bangalore Whitefield. So that itself is a big success for us and it is almost running at 80% occupancy. From there now, I think we are looking at Hyderabad and other centers also we'll be looking at this model.
And the payback periods are faster, right?
We think payback period, it all depends on the ramp-up, but should be in the range of 9 to 11 years.
Sure. The second question was on the 9 hospitals, which were accredited with the digital standards published by NABH. Maybe what does it lead to? Does it lead to operational efficiency or customer satisfaction?
See it leads mainly to operational efficiency. It gives us the kind of -- it's a standardization what we have achieved. So earlier, we didn't have any kind of -- this kind of audit happening. So with the support of NABH, I think we are able to come up with this kind of standardization across all the units.
And could you quantify the operational efficiency? I mean --
It can be as good as anything to do with a discharge somebody visit, are we able to monitor the discharge timing where it leads to patient satisfaction. So we are able to -- we are able to integrate all these factors together and see that we are able to deliver kind of better patient satisfaction and operational efficiency.
I think there is one question --
Prateek on something like this discharge that Ramesh was talking about, right? I think we've realized that's one of the biggest pain points...
Yes, I agree with you.
-- after everyone is done with the surgery and all the post-op discussions, right? So it's a bit hard to quantify exactly. We believe that we look at it from a customer experience point of view. So that's one part of it. But like what Ramesh said, in terms of standardizing care, standardizing protocols, there are big intangible benefits of that, right? From a quality, maintenance and consistency perspective.
The last question was on Labs and Pharmacies business. A part of it was called out in terms of Unit 1. But just from a 3, 4 years perspective, medium term, how should I think about this business unit? I know it's very small for you today.
Yes, yes. See, even when we envisioned Lab and Pharmacy, Prateek, the idea was never to create a chain out of it, right? But our core business is going to remain the hospitals, but we are always looking from the continuity of care point of view. That's where you will see that in the current quarter, the quarter 3, we'll be launching the app also. wherein we are going to consolidate the OP consultations, OP to IP conversions, the IP patient journey and the labs, post-discharge labs sample collections, reporting, then the acute and chronic care patient pharma delivery. That is a whole concept why we even got into Labs and Pharmacy. And you'll see that Labs and Pharmacy both are in the states where majorly we are present, right, as a hospital.
Now Labs, you know inherently, it's a high-margin business. And that's one of the reasons why we were able to quickly breakeven in the last year and margins scale to double digit in the quarter 2. And again, this margin can go beyond 20% provided the non-Aster business because this Aster Labs provides services to our own hospitals by creating more efficiency. At the same time, does the third-party business also, right? So today, last year, it was 23% of our component of the Lab business was from the non-Aster business.
Now this year, already in H1, we've gone to 28 percentage. So the idea is that next 2 to 3 years' time, we want to move this 28% to near 50%. If we can achieve that, we are looking at a margin above 20 percentage. And again, it doesn't require too much of capital infusion because already we have 14 satellite labs. We don't expect to add any more processing labs at all. It's only the collection centers, which we will be worried on. And once the app kicks in, we should be concentrated more on the homecare business.
Now moving on to the Pharmacy. Pharmacy, it's inherently what you can say, low-margin business, right? So we don't expect to do a double-digit margin anyway. We're talking about somewhere in the mid-single digit, right? So keeping that in mind, we are trying to breakeven there. That's what we've done. That's why you'll see we are not expanding the pharmacies and everything. We kept at around 200 or so. And now the way we did the Lab breakeven, expecting to breakeven to happen in the -- sometime in near FY '26.
The next question is from Mr. Nikhil.
Most of my questions have been answered. Sir, I would just like to ask you an update on acquisition, like what are the acquisitions are we looking at? Are we still planning to expand in the UP side? And that's pretty much it.
Hitesh, do you want to come in here?
Yes. Sure, Alisha. So regarding acquisition, we keep evaluating opportunities. I think the objective is to take the leadership position in the South India market where we are already second largest. And there are certain states where we can expand more presence while we have strong presence in Karnataka, Tamil Nadu, Andhra, Telangana, there are states like Maharashtra and Tamil Nadu where we can expand ourselves further. So I think these are geographies that we would like to kind of look at M&A opportunities, and we continue to explore those. But I think as of now, there's nothing that we can really talk about from the kind of commitment perspective.
And I would just like to ask you about the MVT business. Like how are we planning to grow the MVT business? Are we looking to increase our proportion in the revenue?
Yes. So that's definitely something which we keep working on, right? Because MVT business for us, especially for Medcity and CMI has been quite significant. So Ramesh, do you want to just comment on how we are looking at enhancing some of the existing markets as well as new markets we are opening to?
Yes, true. So as far as MVT business, Kerala is concerned, we have 90% of our business coming from Oman and Maldives. So that is continuing and it will continue to grow and a little bit of African markets. So we are also looking at -- right now, Bangladesh is to also trade down into our Calicut and a little bit into our Midcity as well. So that has slowed down a bit as we know that there are some issues, which is prevailing in Bangladesh.
As far as Bangalore is concerned or Karnataka, I would say, more or less, we have almost the GCC markets patients coming in and mainly from a few of the African markets also, we have a lot of patients coming in. Kurdistan and Iraq is another place where a few patients are flowing in for oncology and mainly for onco business and for our Europe business as well.
Sir, I would just like to ask like in our last call, like we said that we are in talks with our promoters in Andhra Pradesh and Telangana. So those talks did materialize in this quarter, I guess. So are we still looking to like increase the efficiency there? And how -- can you just throw some light on that area? And can you provide a summarized outlook for each of the clusters, if it is possible?
So Ramesh, you want to answer the first one? I can come on second.
Can I -- I didn't hear clearly the very first point.
I think he's referring to the Ramesh Hospital. So let me add to that. So Nikhil, you're looking at how are we doing a turnaround, right? So yes, today, the Chair very clearly talks about day-to-day operations run by the Ramesh Hospital, and our investment is more strategic, and we control the Board. And also, as we've been talking about strategically to discuss with them that how to improve the top line and how to improve more efficiencies. And if you can see -- I would agree with the point that that's exactly working for us. That's why you can see the quarter 2 business, which has ramped up.
And again, when you look at the growth also, you can see across the board, you can see multi-specialty growing up because that is not the strong suit considering cardiac was capturing more than 35% to 40% of the business. And also, we're seeing the pediatric business increasing quite well there. So keeping all this growth expanding, yes, that's where with even the small increase in the top line, we are able to see a big movement in the EBITDA margin. And with the continues to have the top line growth in the further quarters, Ramesh Hospital have got the capacity to reach somewhere upwards of 20s as an EBITDA margin in next 2 to 3 years' time line.
And can you please provide a revised outlook on each of the clusters, if it's possible?
On the margin bit of it?
Yes, like on the margin bit of it.
Yes. So I think, yes, I tried to cover in the previous one. So look at the Kerala market, I told you that ARPOB is lower than the Karnataka cluster market. And also the manpower cost is again comparatively higher to the K&M cluster. Keeping that in mind, quarter 2 already, they have achieved a 25% margin. And H1, it's almost near to 23% plus EBITDA margin. And we see that going forward, it can go upwards of 25% also because we're adding capacity across the board. As we said, we operationalized 100 beds in Kannur. We are going to operationalize 100 beds in Medcity this quarter and Trivandrum is going to kick in, and there's a Calicut expansion, which we have planned. So keeping that -- we keep adding the beds, we are expanding -- we expect that EBITDA margins to be expanding there. It may not reach to the Karnataka level, but at least it should go beyond 25 percentage.
Now coming to Karnataka and Maharashtra cluster, considering it has got a higher ARPOB as compared to the Kerala cluster and also the lower minimum which is keeping in mind. We should currently -- which is again at a quarter 2 at 25 percentage, specifically driven by a very good performance by Aster Whitefield Hospital, where their EBITDA margins have reached near 20s there. So with that, we expect at least to go at least 300 to 400 points higher than the Kerala cluster. And Andhra I told you that today, which is at quarter 2 at something like 15% to 16% EBITDA margin, it should go above 20% in a couple of quarters or at least 2 years' time line.
The next question is from Mr. Alankar from Kotak.
First question is more of a follow-up to one of Prateek's questions. What is the current split between pediatrics and maternity at the Bangalore Hospital? And do you expect a similar split at the upcoming Hyderabad one as well?
So you're talking about the current occupancy and the trend in Bangalore?
No, no, the revenue split between pediatrics and maternity at the Bangalore Hospital.
Yes. So presently, it is around -- we can see around -- we are doing clocking around INR 5 crores of -- which is out of that INR 25 crores -- INR 30 crores in Whitefield. So you can approximately say around 3% to 4% -- 5% of our business is women. And yes, children put together, it should be around 8% to 9% of the total revenue at both the hospitals. I mean what has happened at Whitefield and of course, multi-specialty centers. This Whitefield Hospital since a concept we have built on women and children, that is slightly -- the concept is very well accepted, attached to that next to a multi-specialty center. So we have a better traction there than compared to a complete multi-specialty center having women and child inbuilt into the system. So with this successful concept is what we are looking at Hyderabad, which is a standalone center, which can give us a good revenue on standalone for mother and child.
So Alankar, I mean, I'll also just come in here. So in Kottakkal, we had a multi-specialty hospital and then we opened up a women and children wing. In Whitefield, what we have done is we started with the women and children because that was the availability of space. And then we've added other departments like what Ramesh has said, you've got now INR 25 crores coming from the entire unit, which is oncology and all the other specialties. Hyderabad is slightly different in the sense that it is an independent women and children hospital. There is -- it is going to be the biggest in Hyderabad, even bigger than the rainbow one, which is there. And the focus is on maternity, on pediatrics, all the subspecialties, aesthetics, infertility. So it is -- in that sense, as being a fully independent unit, it would be our first. We started with that in Whitefield. But then, of course, Whitefield does have the full expansion that has come on board with all the other specialties.
So I'm not sure if you were directly comparing that would make sense. But Sunil, just to talk about the split between pediatrics and women in both of these existing facilities, would you be able to give that? Or do we need to go back to Alankar?
Yes. No, Alisha, yes, we can give that number. So if you look at the CMI hospital, we do around 7% of women's health and around 3% to 4% on the children care. And I was saying the reverse. Children care is around 6% to 7% and women's health around 3 to 4 percentage. When you go to RV, 5% is the pediatric care, what we do and another 4% is the women care. And when you look at the Whitefield, the children and adults and the pediatric specialty does around 8.5% and women's health, it does almost 7 percentage. So that is a number.
But as you rightly called out, at India level, when you look at, we do at 6% the women's health and 6% the pediatric bit of it. But Hyderabad very clearly called it an independent facility where it's independent Women and Children Hospital where 70% of the revenue is expected to be driven by pediatric and only 30% from the women care. And we are going to have a super specialty and subspecialty mix in all the pediatric, whether it's a cardiac surgery or it's a gastro or ortho and also state-of-the-art NICU and PSU also. So that's what we are expecting for in the Hyderabad.
And just -- so this is through the build-to-suit model because the construction is -- I mean, the hospital is opening pretty quickly. and it's leased so --
[indiscernible] Alankar. So this is a [indiscernible] it was a building of almost 3 lakh square feet. It is existing building. It was ready to be converted into an office space or alternative commercial. So considering that this is really suited for our needs, we were able to convert that into a women and children hospital. Now what we have to do, why it's going to be early is that because already the whole structure of [indiscernible] and the high side is completely ready. So it's only going to take 1 year or even less than that just to put interiors and equip with the medical equipment.
The second question, Alisha, for you, in the first call -- in the last call, rather, you had spoken about looking to merge with a platform to accelerate growth. Does this still remain a priority for us? And should we look at the CEO hiring, which you said could happen in the next few quarters, if required, in conjunction with any potential M&A?
So Alankar, we have been looking at various opportunities over the last 6 months. Still early for me to come back to you yet. Hopefully, in the next couple of quarters, we will have -- we'll be more crystallized and we'll have better clarity on that. So the point on the structure and looking at the CEO hiring will also depend on some of the transactions, which we are exploring at this stage.
And are you still evaluating a potential entry in UP?
Specifically, not right now. No, we're not.
And maybe one last question from my side. I mean, while our performance in this quarter has been very strong, and congratulations for that. We have seen some senior level attrition in Kerala and Karnataka. So just wanted to understand the attrition is in which functions? Anything to be worried about? Any impact you see in the future?
No, Alankar. I think -- I mean, as the system is growing and as people have been performing, of course, we expect some level of churn to happen. As I mentioned earlier also, we do have a very strong local team in most of the units. It's not specific to any function or any specific unit as such, even the attrition. We had a few attrition in Kerala, but they're split between some in MIMS, some in Medcity. We have been also hiring. So there are some senior level resources coming on board to Kerala soon. So you will hear about that also, hopefully, in the next call. But nothing that we are worried about. Performance seems very strong, solid. The team has been team, the brand, everything seems to be kind of moving in the right direction as far as we are concerned.
The next question is from Mr. Harith.
The first question is on the Labs and Pharmacies segment where you've disclosed around INR 70 crores revenue for the quarter. So can you provide a breakup between the 2 verticals, the Lab business and the Wholesale Pharmacy business for the revenues?
So Pharmacy business, you're referring to the quarter 2 or H1, Harith?
H1 is fine.
H1, whatever the number is there from that, INR 66 crores is related to the Labs with a INR 5 crore EBITDA that is amounts to 7.5% margin and balance is related to the Wholesale Pharmacy.
And the operating margins that you reported this quarter for the hospitals business of around 24%. Can you comment a bit about the sustainability of this number, especially given that we are adding almost 300 beds in the second half. So what I'm trying to understand is whether there is a benefit of seasonality in this 24% number, and we should expect some normalization in the second half?
See, Harit, you always follow the healthcare, right? So quarter 2 is always going to be the strongest, right? So again, quarter 1 is the weakest because at least in our case, we have got Ramadan and what you call the school holidays and everything. Quarter 1 is always subdued in quarter 2 with the rains and everything coming in. multi-specialty does really well. But if you look at our growth from the -- across the specialties, right, multi-specialty grew at 24%. Cardiac census has grown by 20 percentage, then the neuro census has grown by 23 percentage. Our oncology has grown by almost 27 percentage. And even our pediatric care across the board has grown by 20 percentage. So you can see it's a mix of multi-specialty and the super specialty, which has grown.
And now whether that 24% is sustainable, yes, it is sustainable. Because you are talking about only 24%, not like and not achieved stay at 30%. But 24%, again, as I called out in the initial stage, a majority of it has come from the material cost. Our material cost is one of the lowest today because we're able to drive a good compliance across the board, very good support from the business units, and that is able to leverage to the restricted bands, and that has really further helped us to getting negotiated on good procurement mode. So keeping all these benefits, I think we got still the expansion happen to in the further efficiency in material cost of another 100 bps.
Manpower is a major thing because you saw the CapEx slide wherein the bed addition almost more than 50% is coming from the Brownfield addition. So this Brownfield addition helps us in leveraging the manpower cost. That's a very big way because today, we have ramped up in Kerala very specifically very quick. And you can't rationalize the -- or bring efficiency when you're ramping up in a very quick manner. But with Brownfield expansion, as I called out, you don't have to hire a leadership team. You don't have to hire admin people. You only need to ensure that the current existing capacity, which utilize and wherever required to add the bedside staff. That's it.
So with that happening, margin expansion is going to happen because I can see still another 200 or 300 basis points coming from the manpower cost. And as I said, indirect overhead already, we have done 100 basis points. And again, further, there is another, I would say, 50 to 100 basis points coming across. But yes, all these things will take time. right? That's how you can see in the last few quarters how the efficiency slowly is kicking in. But yes, quarter 2 was a revenue jump was very quick. But quarter 3, quarter 4 also, you don't expect anything major downfall or upside because festivals are there. But we've got a very strong occupancy running even in October. We expect the performance of quarter 2 to continue.
And last one, Alisha, just a follow-up from Alankar's question. The discussions you alluded to with private equity investors and various platforms, can you clarify if those discussions are still ongoing? Or have you decided to focus on our organic growth plans for now?
Harit, so discussions are still ongoing. I think I just don't have anything to disclose per se. So we are continuing to explore the various options. So the goal is to kind of scale up. So we're trying to see what's the best way for us to do that.
The next question is from Mr. Amrish.
Hi, I'm Amrish Kacker, an individual investor. First question is on Telangana again, on Hyderabad. So is it reasonable to assume that this hospital's margins and ARPOBs will be closer to Karnataka than it is to the Telangana, Hyderabad cluster. So effectively over a longer 3, 4-year period, we might even see the margins further enhance compared to what Sunil mentioned?
So Amrish, if you are referring to our Aster Prime Hospital in Telangana?
No. So the new children [indiscernible] new hospital in –
Again, see that's again, inherently a very high-margin business, right? You've seen the peer groups do more than 30% margin, right? So it's very clearly a 30% margin business with, again, profile mix is very good. You've got 50% cash, 50% TPA. And if you have a very good state-of-the-art NSU, PSU, IVF and a birthing center, we expect to have a very good margin, very similar to Bangalore.
And the -- you had mentioned that we're heading to 20% plus in the cluster. This will probably enhance that as and when the hospital matures, right?
Yes. Because if you look at individually, yes, it should achieve it. But I was giving a guidance of 2 to 3 years wherein hospitals need to start sometime next year, right? And with the Andhra cluster put together, I was giving that guidance.
Second one is just a minor comment on the O&M. I think we've taken out O&M -- the asset-light O&M revenues and margins. I understand it's a very small part of our business. Is that sort of an indication we should take that this is probably not the big thing we want to swing for in the next few years. We've got bigger opportunities?
Let me put across on the numbers, then I can ask Ramesh or someone to come in. See, with respect to O&M business, we -- for the quarter 2, we achieved a business of around INR 40 crores and EBITDA margin of around 7.7%. So still, our Tirupati Hospital and PMF column is a strong suit. They're really doing well. And our Madegowda Hospital in Mandya and Aster Mother Hospital in Areekode almost near to breakeven, right? So they're not bleeding, but overall, we are at a 7.7% margin. And with respect to expansion, we don't -- as we also previously called out, considering the ARPOBs are lower and EBITDA margins will be lower, ROCEs are better, right? Double-digit ROCE. We continue to want to stabilize this one before we look at expanding further.
Ramesh, you want to add anything on the O&M asset-light?
Yes. Yes, rightly said, there are -- the good thing is it's an asset-light model. As Sunil has mentioned, if you really look at -- I mean, assets are yet to go into the full throttle and the ARPOB is slightly lower. A few challenges are there being a Tier 2 or Tier 3 city. Usually, the challenges are retaining the clinicians and then making them perform. So high-end work, clinical work would not happen there. So it will take its time to really stabilize and then show a very good growth. So we are just looking at the model now slowly. A few of them have started performing and some of them are -- it depends on the geography. So we are yet to decide on how the model would be taken off. But still, we would be exploring because that's a lot of opportunity happening in Tier 2 and Tier 3 cities.
So we have next person in line, Mr. Krishnendu again, who has joined back in the queue.
Just a clarification to the numbers. So we are adding another 630 beds of spot beds next year, 639 beds. They're all on lease. So FY '26, what would be the increase in lease amount ROU which will be added? And post that, do you think that the addition to the ROU will go down? That's the first question. And if you could --
Continue please.
The second question was, could you give a sense of what would the revenue per bed for government hospitals in the South zone, what kind of -- this is just for my knowledge.
Yes. So with respect to your first question on the FY '26, right? Yes, 630 beds we are adding, that's specifically coming from the Kasargod, which is leased. But in MIMS Kasargod, we have not leased the [indiscernible]. We leased the land. So the land is leased for almost 60 years from, right? So you don't expect any major rental cost at all because we are doing the complete building there. So it's only the rental what you're paying for the land. So you can expect a very least hit from the rent point of view.
Calicut, again, it's a small capacity of 75 beds you're adding. Again, we don't expect any major amount coming in. But yes, women and children care, see, when we stabilize usually at a stabilized level, when you reach a very good optimum capacity utilization and a good revenue, you can expect a revenue share or revenue share is not there, but lease amount -- or rental amount should be somewhere between 4 to 5 percentage, right? But if you want a number directly, you're talking about -- you can take approximately INR 50 per square feet for 3 lakh square feet rental and take an inflation for every 3 years at 12% to 15%. That will give you the number.
So that's the cash flow. But how much could I add to the ROU, say in FY '26?
ROU, almost INR 250 crores to INR 275 crores is what we added.
That what we could add --
That's what we added, Krishnendu. If you look at 31st March to 30th September, our lease level ROU has increased by double, right? From INR 700 to INR 1,300-odd crores. So it has got 2 numbers. One is the INR 200 crores to INR 300 crores coming from the, what we call the Women and Children Hospital, in Hyderabad. And second one is from the Aster CMI expansion from Bangalore.
So -- and on top of that, we add another INR 250 crores next year.
No, there will be no again addition because whatever signed off, you're talking about 1,800, 1,900 beds we are giving a pipeline. Whatever is already agreement signed off, that's already kicks in into the balance sheet immediately. So there is no addition coming in unless we sign off a new agreement.
So from FY '26 or '27 onwards, the ROU just depreciates, that's it, and interest comes out from that. And last question about that ARPOB on the government hospitals in South and all, how is the numbers looking like?
We do very less, right? We do only --
No, no not about us, I'm talking about the government, which is such a large portion of the healthcare, the hospital -- government hospitals, what is the ARPOB? Just for my knowledge, there's nothing. So I just want to know. Any idea on --
You're referring --
Not for us.
Maybe I don't know, 20,000 maybe, nothing more than that.
[Operator Instructions] So we have one more Mr. Naman.
This is Naman from [indiscernible] Capital. Just 2 small questions. First, which we had alluded to the last quarter and it will be gone by the end of the year. So any update on that? And second, on the tax rate, on a quarterly basis, the tax rate seems abnormally high. So what is the normalized tax rate we can expect for the full year or the next few years?
Naman, I didn't get the first question, but the second question with respect to effective tax rate, I called out for another question which we got during the call. Till last year, we were able to get the benefit of the old regime on the carryforward losses. So that has been exhausted. So during that time, we used to pay an effective rate of somewhere between 12% to 14%. Considering this year that the whole carryforward loss has been completely exhausted, we need to end up paying the tax. That's where you can see it jumped to almost 29% to 30%. But future, you can look at somewhere between 25% to 30% will be our effective rate.
And first question was on the pledge which we have on our shareholding. So it seems around 90% of our shareholding [indiscernible] voters. So on the last call, we had alluded that it could be gone by the end of the year. So is there any update on that?
Yes. So Naman, I think we mentioned last time also, it was just a high pledge because of our technical reasons where the company -- I mean, where the promoter shareholding is based out of. It's sort of reduced significantly now. It was a bridge loan during the time of the transaction. We are refinancing it right now. So by the end of the year, like I said, we should -- this should be restructured.
Dear all, due to the time constraints, I would like to mention that we will conclude our earnings call for this quarter for Aster DM Healthcare now. I thank the management and all the attendees for joining us today. If you have any further questions or queries, please get in touch with us. Thank you.
Thank you.
Thank you.
Bye-bye.