Healthcare Global Enterprises Ltd
NSE:HCG
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Healthcare Global Enterprises Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of HealthCare Global Enterprises Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Ajaikumar, Chairman for HealthCare Global Enterprises Limited. Thank you, and over to you, sir.
Thank you very much, and good morning, and a warm welcome to all those present for the Q1 FY '24 Earnings Conference. I'm here joined today in our corporate office by Mr. Raj Gore, Chief Executive Officer; Srinivasa Raghavan, Chief Finance Officer; and also the senior management team. I will be sharing our operational financial highlights for the quarter ended March '23.
While we have always looked upon value as being a center of excellence for several years, similarly, we are now trying to establish center of excellences in Mumbai, Ahmedabad and in future in Kolkata. And in this regard, we are also looking at further growth of HCG centers across the country. And I'm very happy to report that we have made an acquisition in Indore, the SRJ CBCC Hospital Indore.
This is a comprehensive cancer center, 50-bed facilities, and it is scalable up to 100 beds in future with facilities offering medical, surgical and radiation oncology. It's the largest private player and leader in Indore in private section. And one of the things we have looked at in the future in M&A, is how do we enter Central India. We have a strong presence, as we know, in Maharashtra, Gujarat, Karnataka and in the Eastern India. This will give us a presence in Central India, and it will propel the growth for us in this part of the country, particularly with the hub-and-spoke model we use.
With this acquisitions and a few others we have done, and we are in the process of doing in the future, we will continue to dominate the oncology market in this country. Coming through the medical excellence, what we are focused on in the field of economic and research, as we all know, HCG has been a pioneer in excellence, data collection and outcome focused. In future, this will improve the outcome for our cancer patients and of course, improve the modalities of treatment.
We are also very proud to say that we have established multiple robotic surgery units across India, and this will once again provide the best of care to our cancer patients across the country. This will definitely bring about a change where our data in the future, particularly the work we are doing in the areas of genomics, circulating tumor cells. We continue to position ourselves as a cancer destination.
With these few words, I would like now to hand over to Mr. Raj Gore, CEO of HCG, for his comments on the strategies going forward and operational performance. Raj?
Thank you, Dr. Ajay. A very warm welcome to all the participants on the call. Allow me to initiate my comments by elaborating on the recent advancement in this quarter.
After consistently delivering organic growth over the series of many quarters, we have stated our clear intention to accelerate HCG's growth with inorganic prospects. We are delighted to share that we have initiated our journey of expansion through inorganic means, successfully completing the acquisition of two centers situated in Indore and Nagpur. These are strategically significant and attractive locations in central part of India, and both assets have an already established market leadership position. With our time-tested and highly replicable playbook of driving sustained post-acquisition growth across geographies, we are confident that these two hospitals will contribute to HCG's growth in the forthcoming years.
Speaking on Nagpur. You note that we have been operating comprehensive cancer care centers since 2018 in partnership with Dr. Ajay Mehta, who is a minority partner. However, there existed a complex structural arrangement between two entity, HCG and NCHRI LLP, which is our operating hospital; and NCHRI, which is 100% owned by Dr. Mehta.
Nagpur is a strategic market for us located in Central India. It promises significant growth in future supported by large capacity. We have a market leadership position that we have already worked hard towards, thereby creating a compelling case to simplify the structure by acquiring stakes from Dr. Mehta in both the entities. This is expected to result in enhanced operational efficiency and generate larger economic benefits.
With our already existing presence, strong presence in Maharashtra, Gujarat, East India, our pursuit of footprint in Central India would strategically position us across larger India. Discussing the performance during the first quarter of fiscal year 2024, we recorded higher ever revenue for the 10th consecutive quarter of INR 461 crores with a 13% year-on-year growth. This growth was propelled by 22% year-on-year growth in our emerging center, highest ever quarterly revenues in medical value travel and digital channels and overall improvement in operating metrics.
We recorded EBITDA, excluding ESOP, of INR 76.4 crores for Q1 FY '24 with 5% Y-o-Y growth. This lower-than-expected EBITDA growth was due to subdued incremental EBITDA on account of two factors, apart from the annual inflationary cost increase. First, investment in clinical talent. As indicated in previous quarters, we are aggressively pursuing to increase our market share in emerging markets primarily driven by clinical talent acquisition, which is visible in the growth of our [ revenues ] .
Second, delayed LINAC installation and upgradation, downtime and installation delays of LINAC machines at five locations resulted in loss of more than 300 operating days on radiotherapy in Q1. This impacted our revenues from radiation oncology, which is a high-margin segment affecting our overall margin profile. However, four out of these five LINACs have already become operational during quarter 2. We expect this to be normalized in second quarter.
In summary, we anticipate improved performance in the coming quarters with the operational LINACs and the operating leverage effect contributing positively to our revenue and margin dynamics.
With this, I hand over to CFO, Srini, for financial highlights.
Thank you, Raj, and very good morning to everyone. We have uploaded our Q1 FY '24 financial results and updated investor presentation on the stock exchange's and company's website, and I do hope everybody had an opportunity to go through the site. So let me take you through a few highlights regarding the sales.
On the revenue front, revenue split between HCG and Milann stood at 96.5% and 3.5%, respectively, for Q1 FY '24. Revenue growth for HCG stood at 14% Y-o-Y to INR 444 crores in Q1 FY '24. As mentioned in Slide 10, revenues on the matured centers stood at INR 331 crores, a growth of 11% on Y-o-Y basis for Q1 FY '24.
Revenue from emerging centers stood at INR 113 crores, a growth of 22% on Y-o-Y for Q1 FY '24. We are delighted to step at our emerging centers reaching towards maturity and are seeing good traction across geographies.
Moving to Slide 11. These are the key operational KPIs for our company. Our chemo sessions increased by 9% Y-o-Y taking the total chemo sessions to 35,000 in Q1 FY '24. LINAC capacity utilization stood at 69% for Q1 FY '24 versus 67% for Q1 FY '23. Onco-Bed occupancy stood at 66% for Q1 FY '24 compared to 65% for Q1 FY '23.
I now request your attention to Slide 12, where we have disclosed our operational parameters across our matured network and emerging centers for Q1 FY '24. Our company AOR stood at 66.9% and AOR for matured business emerging centers stood at 67.1% and 66.4%, respectively. Our ARPOB on company level stood at INR 39,686, and our ARPOB for mature center stood at INR 41,253 and for emerging centers stood at INR 35,766.
Across geographies, we have given our revenue breakup in Slide 13. Kolkata grew by 54%, Rajkot by 51% and Ranchi by 27% for Q1 FY '24. For our Milann business, revenues for Q1 FY '24 witnessed a degrowth of 5% in revenues. On the EBITDA front, our EBITDA excluding ESOP for Q1 FY '24 stood at INR 76.4 crores with EBITDA margin of 16.6%. We have also given bifurcation of our EBITDA across mature emerging centers. I request the participants to view Slide 10 for further details.
Other insights and EBITDA have already been shared by Raj, and let me move on to PAT. PAT for this quarter stood at INR 7.6 crores as compared to a profit at INR 6.1 crores in Q1 FY '23. Our PAT pre-IndAS adjustments for [ Q4 FY '23 ] stood at INR 11 crores as compared to INR 9.2 crores in FY '23 -- Q1 FY '23. RoCE in our matures networks stood at 20.2% annualized for Q1 FY '24, as compared to 19% in Q1 FY '23, an improvement of 120 bps.
RoCE before corporate allocations to a mature centers 24.5%. RoCE for Emerging centers stood at negative 5% for Q1 FY '24 as compared to negative 4.6% in Q1 FY '23. Our expansion of existing facilities of Ahmedabad Phase II and Whitefield expansion of Bangalore COE is on track. Total planned CapEx for Ahmedabad is INR 85 crores, expected date of operations being Q1 FY '25 and for Bangalore COE is INR 25 crores, expected date of operation being Q3 FY '25.
With this, I would now like to open the floor for Q&A.
We will now begin with the question-and-answer session. [Operator Instructions] We take the first question from the line of Kaustubh Pawaskar from Sharekhan.
My first question is on the EBITDA gain. So Raj, you just mentioned that there were two of the one-offs -- sorry, not one-off. One of the LINAC machines were not operational, five of the LINAC machines were not operational during quarter. So could you help us to understand how much was the impact because of this loss of operation? Because sequentially or year-on-year, if we look into the utilization of the LINAC machines, both were higher on quarter-on-quarter as well as Y-o-Y basis. So just want to understand why there is a loss in terms of margin or business?
We lost the connection from the management. Ladies and gentlemen.
Thank you for holding the line. We've got the management line reconnected.
This is Kaustubh here. Just want to continue the question on the EBITDA front. So Raj, you just mentioned that there was issues related to LINAC machines, five of the machines were not operational and that had an impact on the profitability because these are the high margin generating businesses for you. So I just want to understand what could be the impact because of this nonoperational five LINAC machines. And from quarter 2, whether LINAC [indiscernible] would normalize in terms of profitability? Or will it take some time?
Yes. Regarding the Linear Accelerator Machine, three of them were a replacement. So when you bring down the machine, there's a time lag, we are expected they will be done as operational in the first quarter itself. Now they're all operational in the second quarter.
So we are now not going to see any impact in the second quarter. And certainly, the numbers what we have seen in June are very promising. So we should be able to reach our expected level in the second quarter. Obviously, we will see the further growth of these new machines, which are coming in, in the impact in the second, third and fourth quarter, which will hopefully meet our -- we think we will meet our whatever expectation is at point. And also, as Raj mentioned, we are beginning to invest in areas like in Mumbai with high talent. So talent acquisition has also cost us in quarter 1, and that was part of the reason we had this margin issue. But we are now catching up, and we should be able to do well as we stated in the second and third quarters.
Right, sir. But talent acquisition, this is something which will continue because you want to expand to newer markets, and that is something which is part of your business strategy. So I guess that part will continue going ahead as well?
Talent acquisition is part of the strategy, but when we bring talent at a rather more cost I think it's cost versus talent. These talent people have come a little bit more expensive than what we normally do, particularly in a high area like Mumbai. And that is why our cost there has gone up. but that will get normalized as we move forward. And now as the revenue increase because of these talents, we see an increase in the revenue coming from this, and that will get it normalized. But whatever is our doctor to our overall revenue ratio.
Right. And sir, one last one on the debt part. So debt has gone up on the books, and you mentioned the reason that because of taxation, the debt has gone up. Should we expect any further increment in debt considering the ongoing CapEx, which is there on books? Or from here we should expect the debt levels gradually to come down or remain at same position what they are at the current level.
Yes. The thing is the debt level that you are talking about is planned for the acquisition that Raj and Dr. Rajesh spoke about. But internally, the way we have put our budgets together is most of our CapEx should be self-funded. So the debt number that you are seeing, I think we should be able to kind of sustain it.
We take the next question from the line of Jay Modi from EIML.
A couple of questions from my side. So first was around the chemo sessions. In previous quarters, we've seen the growth to be higher at around mid teens to high teens also this quarter, we've seen 9% growth. So any particular reason for this?
Can you please repeat your question?
Sure. Am I audible now?
Yes.
So my question was around chemo sessions growth. In earlier quarters, we've seen this growth to be higher at mid-teens to high teens. Whereas this quarter, we've seen only a 9% growth. So any particular reason for this?
These chemo numbers were also higher in the previous quarters because our -- some of the centers in their emerging markets were ramping up. Like for example, Jaipur and Nagpur those centers have led to the higher volume growth in our emerging centers, thereby, leading to overall volume growth in chemo therapy. So these centers are sort of normalizing. However, we expect these numbers to be further driven by Kolkata and Mumbai going forward.
Okay. And do these sessions have any element of price increase? Or what is the volume growth ideally translates to revenue growth for us?
So typically, what we are seeing is while price increase, we take an annual price, inflationary price increase to the extent of about 5%. However, we are -- what we have seen some change in adoption of molecules in medical oncology. Larger and larger adoption of immunotherapy in medical oncology is leading to higher average realization. I would like Dr. Ajai to further drill on.
Yes. On this matter, we are seeing a change in the approach how we manage our oncology patients. There are two things here. One is we all know cancer patients are now living longer. And cancer has become a chronic disease.
So as cancer patients, repeat cancer patients come back and when we do the first-time right treatment, there are a certain number of people who will return. And particularly for them and even for first time people, as technology advances and as more genomic studies and all come, when they become more patient-specific, we are beginning to see treatments like immunotherapy becoming very prominent apart from genomic testing. Because the base immunotherapy drugs are patented drugs, they are quite expensive. So you will see a definite ramp-up in our oncology section where our revenue is increasing.
Our percentage of oncology contribution in medical oncology is also increased. So this is what we are beginning to see, and it's maybe only the beginning because in the future, the therapies that -- like the immunotherapy will be increased significantly.
Got it. And in chemo sessions, we -- so in a therapy, do we have any element of scheme base patients or in the government [ foodstable ] or it is largely the private patients, which forms the majority of share?
Even in [ new ] Patients, it is gradually happening. Because now the states like Odisha, [ Pasamex ] In Gujarat, probably Maharashtra beginning to recognize the importance of this kind of targeted therapy. And even though they are expensive, they are beginning to approve.
I think, of course, it is all related to the budget of these people, what the states have in health care. So they will have a final say. It's a no. But in the long run, I think states will have to recognize. And at some point, of course, they will become generic, that will become far cheaper, for government to approve. But we are beginning to see the trend.
And if I can just add the question we also get whether chemo therapy scheme patients. So just to mention that our scheme patients distribution across the modality is more or less are similar. Our medium skewed on a positive side in chemotherapy, primarily led by our Tier 2 centers, where we see late-stages patients and late stages patients and undergo medical Oncology. So that actually leads to a little bit of [indiscernible]. And those poor patients who probably get diagnosed late are funded by [ destie ] patients, thereby leading to a little bit of [indiscernible] in chemotherapy from scheme patients.
Got it. And sir, what is the ideal mix between -- what is the share of scheme patients in an overall revenue in scheme based patients?
So you talk about only schemes, which is like a [indiscernible] and [indiscernible]. When we look at DPL and stage schemes, share of those schemes is about 20% of our total revenue.
Got it. That is understood. Sir, next question was around Milann. So we've seen a lot of competitive pressure building up. Lot of players coming in, a lot of deals happening. So could you speak a bit about the competitive intensity that you are seeing on ground? And also any particular reason why we've seen a steep decline this quarter?
Yes. Milann, as far as Milann is concerned, as we know, we are quite a dominant player in Bangalore, and we are sticking to that dominance in Bangalore. And they have put a lot of systems in place to go. Unfortunately, there was a slight drop in the Milann revenue because of the regulatory Surrogacy, which formed the -- which the government regulators have taken time.
Now that has been clear, all of our centers have a certificate, and we are beginning to see a healthy ramp-up happening. In fact, July, it has already happened. So we are focusing on Milann to make a center of excellence, good quality outcomes and approach in value. Our future growth primarily will be in Bangalore. And we will have -- we have a center in Delhi, which is not doing good. We are shutting down the center in Delhi-- we are also Chandigarh center is [indiscernible] we're putting some efforts to improve -- but apart from that, the greater Bangalore area where we are growing.
And we don't see that much competitive pressure. There are the [ others ] who are also [ bringing value ] . But because I guess long-term, we have adopted [indiscernible], I think in the future, we will be able to come back and grow and certainly, reach the leadership position.
Got it. And sir, typically, what is the cost of setting up One Milann center. Is it a very cost-intensive asset?
No, no, it is not cost intensive. It costs about roughly INR 3 crores to INR 5 crores is the cost, right? Do you want to say anything on that?
No.
Okay. And my last question was around the margin. So a couple of years, we've seen -- we've undergone the consolidation that we had in. We were trying to consolidate our centers and become far more profitable than what we've been in past. Now this year, we've seen two acquisitions and a couple of brownfield expansions taking place. So do you think expansions or acquisitions any way impact our margins in shorter term because it will actually take us some time to ramp these up to our optimal level.
See, the company has charted out all the expansionary plans unit by unit. And at some point of time, you will guide of all the comprehensive expansionary plans.
However, where we have already expanded and if it is a vertical expansion of our existing facility, we expect operating leverage to play out and margins should expand. Yes.
Now for example, in our acquisitions pursuit also, for example, Dr. Ajai just announced about Indore, we expect. We would be expanding right now the facility is around 50 [indiscernible] in the adjacent land, we expect to build one more building [indiscernible] building, which should be 100 bedded. And we expect this market [ comparison ] to happen with a better [ margin ] .
So This expand in this -- I mean, I don't know whether this question is related. However, the two acquisitions which we have announced should add to about INR 14 crores to INR 15 crores of incremental EBITDA during the financial year.
[Operator Instructions] We take the next question from the line of Karan from Monarch AIF.
So We have been guiding for margin improvement since Q2 FY '23 earnings call. And if I zoom out a little bit, it was mostly being derived from three aspects. So number one was our cost efficiency measures derived from consultant coming in and making us more efficient, leaner, better pricing in different emerging centers, et cetera.
Number two was obviously, our operating leverage playing out and making many emerging centers or going towards maturity and doing better EBITDA margins. And then third was obviously our consulting costs waving off, which were one-off. So the margin expansion, what we were hoping for or to the trajectory we were hoping for was around to the tune of 150 bps to 200 bps on an adjusted EBITDA basis.
However, we've only done around 16% reported and adjusted EBITDA margins for us for Q4 FY '23 was around 18.8%. So sir, I just wanted to know more contour, more color on what really went down this quarter? And why were we flattish in absolute EBITDA and perhaps lower to what maybe 18.8 to 200 bps in Q1 FY '24 from an adjusted EBITDA perspective because this is counterintuitive to the consultant costs that we took on and operating and efficiency benefits which should have flown in. And just a follow-up on that would be further cost line items. Can you just highlight some cost line items and other expenses, which are the most impacted? And what does that mean for us in terms of mean reversion to 19% and then expanding it to 20%, 21%. Does that look much harder to achieve in FY '24?
Yes. So Karan, I mean, I will take these two, three pieces. So you're right that our reported EBITDA was almost closed about 19%, adjusted EBITDA was about 19% in the quarter 4, now this is substantial what Raj and Ajai said on radiation business and the key themes which we have put out for us, our radiation business not being as per our expectation because of the downtime in the LINAC machine, that has caution.
And if you see our previous reports, radiation business used to constitute about 18% of our business, which has gone down to 17%, and that we believe is more of a quarter 1 phenomenon and should pick up going forward. Now that 1% of business is close to about -- close to about INR 4 crores and INR 4.5 crores. And we operate somewhere around like 80% margin on radiation business because costs were all based in. The consulting costs are there. There is no higher consumables on this. So costs are all based in. Now we expect a higher leverage coming operating level positive operating leverage coming out of this in the coming quarters.
Further, as we know that now in health care, we all take, all the hospital groups they take annual price increases inflationary costs come in and subsequent quarters, we start to see positive operating leverage on that. We have already started seeing positive operating leverage from June onwards because it was -- we take it in the month of April in the best that we should see that could play out.
Yes. Third is, again, speaking to what Raj said on the investment in doctors and primarily happening in our emerging markets, it is I would not say more or less done. It has been happening from quarter 4 and quarter 3. We have also announced that we are investing in these markets through our clinical talent acquisition we continue to do so, and that is reflected in our revenue growth. So at some point of time, if not quarter 2 alone, some quarter 3 onwards, we should start seeing operating leverage on doctors cost also being played out once the revenue starts ramping up further. So we are confident that -- I mean, this is one of the quarters where QC variable has gone against us. and we should be able to bounce back from the coming quarter -- in the coming quarters.
Yes. And one more thing you touched upon our consultant costs. Just to restate that our consulting cost has been taken out. From quarter 1, we have not had any consultant cost, which was there in -- 'til quarter 4 of last financial year. So -- and we had also stated that large part of those benefits, almost about 70%, 80% of those benefits were accrued in the biggest financial year only. Only 20% was remaining that we should see in the coming quarters.
Got it, sir. Got it. So sir, on the emerging center side, we are doing EBITDA margins of close to 9% to 10%, depending on which quarter we see, right? Can you just tell us what levers we have to take it towards the 15% kind of mid-teens or low teens kind of an EBITDA margins going forward?
See, I think one thing I would say is one acquisition which we just announced, Nagpur where we had a complex structure that itself should add to our EBITDA margin of the emerging buckets to an extent of about 40 basis points or 50 basis points.
Now the other levers are primarily operating leverage in nature. Because we do believe that 80% or 90% of our investment in clinical talent, as well as market [ making ] is done. As the revenue plays out, we should be able to see this operating leverage coming in. And somewhere from the number I just mentioned we should be closing it in quarter 4.
I mean isolate a few of the well performing centers, our Borivali center is already 20% plus margin. Jaipur center is also in close to 20% margin. It's primarily -- I mean, our whole focus is on two centers in the 22, 24 centers portfolio is Kolkata and South Mumbai. I mean these are the two newest centers, and we are not right now focusing on margins on those centers. We are focusing on revenue growth.
We are happy with the revenue growth which is coming in, and we do believe that EBITDA margins will play out in the future quarters.
And sir, we feel similarly for our Kolkata as well as South Mumbai center, because we've been investing in clinical talent and trying to get that up to EBITDA breakeven and obviously, a much better EBITDA on those centers. How are we on those centers currently?
So Kolkata and South Mumbai sort of put down almost 1% to 1.5% of overall EBITDA margin of the company. So when these centers breaks even, that itself will take our margin higher by 1.5%.
Understood. And sir, what would be the time line for that according to you? How do you feel that internally?
We should be able to achieve that in our fourth quarter of this year.
Understood. Understood. And sir, just one last question from my side. Can you just highlight what was the total acquisition cost for both Nagpur and Indore? I understand that we've levered our balance sheet around INR 100-plus crores for this acquisition. But I'm assuming that some bit of it will have been spent through internal accruals as well. So what was the total spend on both these acquisitions that we have done.
So if we see what we are saying is our net debt would go up by INR 107 crores, while the funding in the company is having enough sufficient cash, that it also has debt lines. So both sources of fundings are available to us.
However, because of that INR 107 crores of cash going out our net date should increase by INR 107 crores.
Okay. Understood. Understood. And sir, I was just going to the press release on Indore, and I couldn't see a reported EBITDA on the Indore center. Can you just call out, sir, what reported EBITDA is for the Indore center currently.
So if you said right now, the company is also in the middle of doing some more deals. So successfully, right now, we are not in a position to sort of disclose some of those parameters. That's why we have put together that both the centers put together, our EBITDA should be higher by higher by INR 14 crores to INR 15 crores per annum, and the resulting net debt is about INR 107 crores.
At an appropriate time, once we get into those situations, we'll disclose EBITDA as well. So I mean, we do not want to reflect on some of the things which can just sabotage our position on future deals which we are talking about.
The next question is from the line of Aditya Khemka from InCred BMS.
This has been a [indiscernible]. Elaborate a little of the clinical talent that [indiscernible] investing in? What are these people doing? Why weren't they hired? And how is it that they will help you to increase revenue? If you could just elaborate a little bit more on that.
Is that question about what type of clinical talent? Aditya, we have -- as we know, Mumbai, particularly, we have been really trying to acquire significant clinical talent in the field of medical oncology and particularly in surgery. And in this field, we are very happy to say that we have been able to recruit one of the star vertical oncologists from U.K. She was the Director of the [ breast] program in Nottingham, which is a big cancer center.
Dr. Sachin Trivedi has joined us. He has been full time since June. And so that is one of the things as we go forward, we will see that he is being positioned as a Director of Medical Oncology in the region. And his job is to really not only recruit talent for his department, apart from breast cancer, he'll be looking at entire solid tumor oncology. And also he'll be building a team.
In this regard, we are also happy to say [ Dr. Vini Kusamuti ] , who is a [ navy ] breast surgeon or renowned breast surgeon trained in stone capping in New York has also joined us for South Mumbai. And her role is to really work on the breast cancer in women and see how we can make it a center of excellence for breast cancer in South Mumbai.
Both of these talents apart from several of the associated talent we have recruited. So we are trying to create further [indiscernible] center which is doing well. And our South Mumbai center, which has got different talent and technology to really look at a center of excellence. That is where we are positioned and going forward. And also, we will cater to international market.
And apart from this, to make it a center of excellence in Mumbai, Borivali, we have just installed a robotic therapy, which will also improve talent acquisition has already done in terms of uro-oncologists. So with this, we will also see significant growth in the surgery as well as, of course, it will be truly a center of excellence with all the available technologies being present in under one roof.
Got it, sir. So these talents that you have acquired is basically doctors, majority of it is doctors or all of it is doctors?
Mainly, is that the question? The talent is what we have said on the main doctors.
The talent is mainly doctor, but actually know we are a big [ dealing ] Center. So all of this will propel people to come for the residency programs and improve. So with the center of excellence will have all the residency program associates. So it will go and we will be looking at data from it outcome from it. so many things will have when we have a talent like this. This will definitely improve.
And we are also, along the same lines to improve this kind of acquisition of talent and win, we are also putting the third -- we are putting our robot in also in Kolkata. So all of this will be a significant benefit for us for our cancer patients, of course, that is the most important thing, but we'll also add to our top line and also improve efficiency and [indiscernible]...
Got it. And sir, I think one of the concerns that investors have had for some time now is stories or streets say that your primary investor, which is CVC might look to exit in the near term. Can you throw any lights on that, anything that you would like to share with us? If there is a near-term exit of the private equity?
At this point, as we know CVC said that they are there for long term and they may exist whenever time they think is appropriate. It is best that you [indiscernible]. As far as I am concerned and Raj is concerned, that the entire management team, we are really working hard to expand our oncology and they have been very cooperative in it. I think they have been a very good partner financially and also strategically for us. So we are really enjoying this partnership we have for further growth of oncology.
The next question is from the line of Abdulkader Puranwala from ICICI Securities.
So my first question is on the Indore facility, what you have required. So if you could highlight what is the kind of surgical revenue on oncology front towards the center is doing coupled with that on some details on the operational part like the ARPOB and occupancy, if you could share, please?
Which center?
The indoor facility ?
What is the question? Indore facility has both sentry radiation and medical oncology. It is a comprehensive cancer center. And it is rated actually #2 on surgical oncology in that city. And there is also scope for further expansion.
And we are also in the process, as we know, we cover partner, we have an agreement to build a bigger center, cancer center with Dr. Rajesh. So once we complete this acquisition, which we have done, we will begin to grow here. And now the surgical number of centers here will increase once we go into the new set. And our goal is to become the premier center in Madhya Pradesh [indiscernible] and the future growth plan we have. Raj, you want to add?
Indore centers has the #1 market share in private cancer care in Indore. It's a very established center. In all modalities, it has a top 3 position. It has a very high percentage of good margin business. It doesn't do any scheme business. It has cash TPA business. It has -- in an existing facility, we can grow this revenue -- and we have a plan to add another center in coming two years so that we have a path to grow it sustainably in future and dominate that market as in a mobile marketplace.
Got it. Sir, secondly, on this impact of addition of the LINACs on your EBITDA margin, what you called up for. I think on the last call, you also indicated that you may be adding 7 to 8 more at a future date. So is that still on track? And will that happen in FY '24? Or you plan it to do as when there was some necessity coming up?
Yes. So apart from these five machines, we are also evaluating adding a machine in Kolkata in Nagpur, which will probably come and LINAC, three of our well-performing centers on radiation, which will probably come beginning of next year.
So we are on track. We are already preparing the bunkers, et cetera, ready. And we should be able to grow that radiation business in these three centers in the coming years, the next year.
We take the next question from the line of Ankit Agrawal from Yellowstone Equity.
My first question is on the Nagpur. We were already earning 76%, and now we have gone to 100%. Is that right?
So there are two developments in terms of macros. And Raj mentioned in his earlier speech, the structure was new complex, there was an infrastructure company, and there was an LLP. LLP was the operating company. There was a revenue share [indiscernible]. Now we are buying the stake in the interstate in the infrastructure by which we'll be able to consolidate the entire operations, which will give us better leverage on operational efficiencies, economic benefits.
We are 26% of our partners has been acquired fully by us, 10%. So both prices will become 100% [indiscernible]. That is the bottom line.
Okay. So that's why there is some EBITDA contribution because otherwise, the operational EBITDA would already be in there in the consolidated numbers.
Right.
I mean when you say 14% to 15%...
We take the next question from the line of Mahesh Atta from Atta and Associates.
Sir, my first question would be regarding your debt metrics. I mean what is the plan to deleverage the balance sheet going ahead? And where do you see the debt levels by end of this year, financial year '24 and financial year '25.
And coming to your ARPOB numbers from the existing centers, where -- when can we -- I mean, expect this to ease the level marginal levels? I mean, how exactly are we mean pushing it to come to the mature centers, levels and when do we see the numbers coming in? My two questions will be this.
Yes. Let me first take the debt part of the question and the second part will be taken by Raj. So you see the debt numbers as it stands to be if you see what your [indiscernible] in the investor presentation. I'm talking about where the bank debt is about INR 217 crores when we are trying to add about another INR 107 crores. Last need to fund these acquisitions. But don't look at debt in isolation. These acquisitions that previous management members said they're now coming with a positive EBITDA margin. And that is when we kind of support this debt.
And if you look at it on an overall basis, as I mentioned, we are looking on most of our CapEx from our internal approval [indiscernible] as well as this one would be when we got the acquisition remember at which will bring both revenue as well as EBITDA accretive. So we are largely looking at to keep a debt level in the range of about 2 to 2.5x both net debt-to-EBITDA. That's the kind of leverage we are looking at, and that is the way we are looking at it.
On your question -- go ahead, Mahish.
Yes, sir.
Go ahead, Mahish.
Yes. So just one question there. So when we pay back, we are going to -- look, I just wanted to know what would be our spend for debt when we are going for an expansion, let's say, we are charting a new hospital tomorrow? And then what would be the cost further? And what would be the payback period for that particular debt, what would be the payback basis at this ARPOB level?
At this point, we are not doing any greenfield. Like what Srini said, we are only acquiring hospitals, which already have a positive revenue and EBITDA. And so this will be based on, obviously, at a lower EBITDA times, that is what we are acquiring demand. So it will be definitely beneficial for us in terms of further expanding it and defining the dominant in those regions. So we are not doing any greenfields, to give you any details about what will be the cost of hospital expansion and all. We are not doing greenfield, okay, at this point. Except what we call it in Bangalore, [indiscernible] expansion we are doing in Whitefield, it is part of the Bangalore dominance expansion. So we are not calling with truly Greenfield. It is the expansion of our existing centers. That is how we are [indiscernible].
So a normal the part also, we have new center. Similarly, in Ahmedabad also building a new center because we run out of space. so that will have a huge positive potential as we go forward.
Yes. So sir, the metrics behind when you brownfield expansion is that are we looking at hospitals which have ARPOBs in line with our existing or existing centers or they are looking lower and they're trying to bring them up? How exactly are we looking at it from now from here on?
So on the investment CapEx is primarily what we have today. As Dr. Raj has said that we are not looking into Majority Greenfield. Any acquisition which we are taking. What we are seeing is it should be at least at par or accretive to our return capital [indiscernible] . Now when that happens, and typically, and you also touched upon payback period, we are expecting based on the headroom available and whichever targets we are taking, we should be able to have a payback budget in 6 and 7 years at the capital level. So once that happens, and you have enough headroom available to grow, that makes a viable business for us. So this is how broadly we are looking at any future investment or grant [indiscernible].
Right. Because sir, also one more thing that operating leverage in our business will come only when you're actually operationalizing the beds, right? I mean just wanted to understand that gaining where exactly the operating leverage in our business comes from.
Absolutely right. I mean, when you operationalize your bed, you bed opportunity goes up, our revenue goes up and then operating leverage kicks in. And we have been saying that we have an isolated focus on certain [indiscernible] which is pulling down the entire portfolio.
If you look at our existing centers, the margins are healthy the return on the [ capital ] are healthy. And if you just -- Kolkata and Mumbai Center, then we are [indiscernible] recent satisfaction position both in terms of profitability and return pursuant that's why we have been stressing up on these two centers all the time that a -- we are not looking at profitability.
We feel that it in terms of increasing our market share in those regions like doing the right things when it comes to market making and [indiscernible] opportunity will follow in days, as I said, as we said, we are already sort of seeing the improvement in EBITDA, and we should be able to do that in quarter 4 of current year. If you look at our Slide #10, we have been right on an increasing part coming on growing fast in EBITDA. So our EBITDA in quarter 4, from emerging center was INR 81 million, it has gone to about INR 99 million. And we expect this would keep going in future quarters.
The next question is from the line of Karan from Monarch AIF.
Sorry to ask this again, but I'm still confused on the total acquisition cost. I understand that you gave the breakup of the debt plus the cash bit. But if you can just call out the total acquisition cost to company that would be with debt, with internal accruals, et cetera, the total cost would be that would be really helpful, sir.
So just to say, our net debt is going to increase by 117. Of that INR 117 crore, INR 30 crores of debt is what we will be consolidating from NCHRI.
If you take out that debt of INR 30 crores, the next INR 67 crores would be primarily towards acquisition cost, not 64 crores. Because 77 crores will be catch up on the system, either in the form of debt or cash going down, that is a total consideration being paid for the two acquisitions.
Understood. So INR 77 crores is that actually playing because INR 30 crores that we're getting on our balance sheet from the actual center? Is my understanding correct, sir? And that's how we're coming to that next figure?
That's right.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Once again, thank you for your interest and support to HCG. We are happy to have further conversations if you want any more clarification, please feel free to reach out to our Investor Relations. Thank you for joining. All the best.
Thank you. On behalf of HealthCare Global Enterprises Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.