Max Healthcare Institute Ltd
NSE:MAXHEALTH
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Max Healthcare Institute Ltd
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Ladies and gentlemen, good day, and welcome to the Max Healthcare's Q1 FY '23 unity Earnings Conference Call. [Operator Instructions].
Please note that this conference is being recorded.
I now hand the conference over to Mr. Suraj Digawalekar from CDR India. Thank you, and over to you, sir.
Thank you. Good morning, everyone, and thank you for joining us on Max Healthcare Q1 FY '23 Earnings Conference Call. We have with us today Mr. Abhay Soi, Chairman and Managing Director; and Mr. Yogesh Sareen, Senior Director and Chief Financial Officer of the company.
We will begin the call with the opening remarks from the management, following which we will have the forum open for an interactive question-and-answer session. Before we begin, I would like to point out that some statements made in today's discuss may be forward-looking in nature and a disclaimer to this fact has been included in the earnings presentation shared with you earlier. I would now like to invite Abhay to make his opening remarks. Thank you, and over to you.
Good morning, everyone. It gives me immense pleasure to welcome you to Max Healthcare's earnings call for the first quarter of the ensuing financial year. Let me provide you with the key highlights of the quarter's performance before opening up the forum for question and answers. In continuance of a trend towards the end of the previous quarter, quarter 1 FY '23 was largely a normalized quarter with average occupancies hovering around 74% while less than 1% of beds were used for COVID patients. It was the highest ever revenue and EBITDA quarter and marks our movement in the direction already articulated earlier.
We witnessed consistent performance throughout the quarter and almost all the operating and financial parameters touched a new height. Consequently, we registered highest revenue ARPOB, EBITDA, EBITDA per bed, et cetera. This was driven by improvement in payer mix, surgical medical mix, annual price revision and normalization of patient footfalls as we continue to focus on the growth levers set out by us post Omicron wave.
I would like to remind you all, in quarter 1 last year, we had separately reported a revenue of INR 136 crores and an EBITDA of INR 59 crores from COVID-19 vaccination. To that extent, the year-on-year growth numbers are being reported on a like-to-like basis, excluding this nonrecurring item. The key highlights for the quarter 1 performance were the average occupancy for the quarter recovered to 74% from 68% in quarter 4 FY '22, which was largely impacted due to Omicron COVID wave in the first half of Q4 FY '22.
The bed share of institutional patients relatively a lower ARPOB channel has been brought down to 30% from 33% in Q4. This has added to growth in ARPOB as well as EBITDA per bed. This is in line with our guidance and objectives. The ARPOB for this quarter rose to INR 66,000, implying a growth of 28% year-on-year and 4% quarter-on-quarter. Network gross revenue stood at INR 1,433 crores, of which INR 2 crores is contributed by revenue from vaccinations.
Gross revenue, excluding COVID-19 vaccination, grew by 18% year-on-year and 14% quarter-on-quarter. The digital channel's share of revenue was the highest ever at 16% in quarter 1 FY '23 as compared to 13% in quarter 1 FY '22, with website traffic growing by 14% quarter-on-quarter to reach 33 lakhs sessions. In absolute terms, the digital revenue stood at INR 232 crores in quarter 1 FY '23, which is 40% of the digital revenue of INR 585 crores clocked in the last financial year. That's the whole year. Also at international medical tourism revenue reached pre-COVID levels in this quarter despite negligible revenue from Afghanistan, which was one of our key territories till FY '20.
We continue to expand our graphical presence and expect to have 20-plus offices operating from various countries by the end of this financial year. This, coupled with the new heel in India initiative should all go well for medical tourism to Max Healthcare as well. We continue to do our bit to provide care to under privilege. During this quarter, we served 38,500 indigent patients in IPD and OPDs free of charge. The noticeable value of this treatment was INR 49 crores. Network operating EBITDA, excluding COVID-19 vaccination for quarter 1 FY '23 was INR 370 crores compared to INR 301 crores in Q1 FY '22, and INR 304 crores in the fourth quarter of FY '22, reflecting a growth of more than 23% year-on-year and more than 22% quarter-on-quarter, respectively.
EBITDA margin was 26.6% as compared to 24.8% in the fourth quarter FY '22, leading to a PAT of INR 229 crores. EBITDA per bed, most importantly, for the quarter was INR 62 lakhs, showing an improvement of 10% quarter-on-quarter. Cash generated from operations after interest, tax and replacement CapEx was INR 237 crores versus INR 179 crores in the fourth quarter FY '22.
Further, net debt reduced to a low of INR 217 crores at the end of June '22 from INR 441 crores at the end of the previous quarter. However, the present net debt includes a put option liability of INR 141 crores. So the actual net debt after that is less INR 100 crores. Coming to the strategic business units, Max Lab, which is a non-captive pathology vertical reported gross revenue of INR 26 crores. It added 90 channel partners during the first quarter of FY '23, taking the overall active clients to 850-plus spread across 32 cities. On a like-to-like basis, the revenue, excluding COVID-19-related tests grew by 50% year-on-year and 24% quarter-on-quarter.
We continue to invest in this business and have expanded the team to more than 700 people working across functions. Max@Home, our home health care vertical reported gross revenue of INR 32 crores, a growth of 10% over fourth quarter levels -- fourth quarter last year and representing a growth of 18% year-on-year. The 650-plus strong team and Max@Home also manages a network of 62 medical outposts across corporates of which 13 medical rooms were added in the first quarter of FY '23. Going forward, we continue to employ the following growth levers: one, international medical tourism growth from both existing and new geographies. Two; improvement in payer mix, three; fast-tracking brownfield expansion, 100 additional beds will be optional in this year at Max Shalimar Bagh, while additional 300 beds in Dwarka would be in early first half FY '24.
With large capacity addition in FY '25, we are poised for growth in the foreseeable future. And finally, inorganic expansion in both hospitals and perhaps if we get some good opportunities in the diagnostics space as well. We also made considerable progress on the digital front and are in the final stage of rolling out our proprietary app, which will not only help us engage with more patients and widen our reach but also serve our customers better and provide improved experience.
On this note, I would like to open up the forum for question and answers. Thank you.
Thank you very much. [Operator Instructions] The first question is from the line of Damayanti Kerai from HSBC.
Abhay, my question is how much price hike you have taken for the hospital services? And also if you can elaborate how price hike flow across different payer groups in terms of change?
So essentially, we have normally a price impact of about 2% to 2.5% at best year-on-year at the end of this thing, okay? What it impacts is essentially the international patients, by that extent, it will impact your cash paying patients. Insurance are typically 2- or 3-year contracts. So every couple of years, it's sort of retriggers. And then you come to the institutional business, which doesn't get impacted by it.
Okay. So just 2% to 2.5% kind of increments, which you have taken for the current year, it's already visible for the cash and international patients and insurance as you said, when contracts are renewed and the institutional business, it takes longer.
No -- Yes. So what we retriggering right now is that when the new contracts come, it'll be renewed. So we got the for contracts and all of them don't start at the same time. So if they've 2-year contracts, you can pretty much evenly sort of spread them over 2 years or 3 years. So it'll have some impact of that, whichever contracts are coming off are coming on stream or coming up for renewal, they will renew at new prices.
Okay. So does it mean the patient who are paying cash, they have to bear the cost, like higher cost compared to someone who is covered by insurance on an immediate basis?
That's right.
Okay. And in general, like what kind of impact we have seen on health care demand due to inflation. So if price hikes have gone up. So any impact on the demand?
I mean you see occupancy, right, from 68%, you move up to 74% quarter-on-quarter.
So will say it's immune to price changes because it's essential services?
I think it's a very marginal price changes and it's not a very large price change.
No, in general, say, like 2 -- 2 to 2.5 year price hike for this year, but say like inflation goes up meaningfully across the industry. Then should we assume any tapering on the demand part?
Look, when inflation comes -- on second, okay. And inflation in the industry doesn't impact the consumer. Does it? The price hike as a result of the inflation impacts the consumer. That's right? Now if the price hike is 2%, 2.5%, that is what is impacting the consumer. Now if tomorrow inflation is significantly, whatever the inflation has been, you've seen have gotten absorbed and you've seen the margin sort of expand in spite of the 2%, 2.5% increase in price. So you're better off in terms of margins. That's one. Secondly and more importantly, tomorrow, there is a further, let's say, there is a push because of inflation, and you have to reprice it then perhaps in October, you can relook at pricing and say, look, if I have to pass on the inflation, I have to improve the price or increase the price. Question -- your question will become relevant at that stage.
Okay. And this kind of price revision you do once in a year or if...
Once in a year typically, but we always have the option of relooking at it on October 1. I mean you can even do it every quarter, you can do it midyear, anytime you want, but fact is it will be disruptive. So I mean, if we have to look at it, we'll look at it at that stage, after 6 months. Maybe 2 months, 3 months, you can't sort of keep changing after [indiscernible] charges.
Okay. And on the international part, you mentioned it brought it back to the pre-COVID level and when you are stepping up or present in the target market to get more footwall, so which key market you're looking to -- sorry?
That's not what I said. I said we are back to pre-COVID levels, okay, in spite of one of our key markets, which is Afghanistan, okay? Giving us negligible business. That was a key market because of travel restrictions from Afghanistan. So when Afghanistan normalizes, that would improve it even further. We're already back to pre-COVID levels because we made efforts in other markets as well, right?
Okay. And finally, in terms of contribution from international business, how much that can go up in next 2 to 3 years?
Sky is the limit. I think the government is now really focused on this, you'll probably hear on the Independence Day as a part of the Independence Day speech, at least what I'm reading in the press is the heel in India is going to get a big push, which is India becoming a destination for health care tourism, and that is what the government of India and the Prime Minister of India himself is -- that's [ going to ] included in his speech. So that should all auger very well. Sky is the limit. If you're asking me for precise this thing, we don't give forward-looking guidances in terms of specific numbers like that. But look, I think you have a huge comparative advantage in India with the right push and the right encouragement from the government. Literally sky is the limit as far as this is concerned.
The next question is from the line of Nikhil Mathur from HDFC Mutual Fund.
My question is on the new debt and the associated costs that will have to be incurred for new debt expansion that the company is undertaking. In FY '22, the company had indirect overhead of INR 1,700-odd crores which was associated to 3,200 capacities that roughly INR 54 lakhs or INR 53 lakhs cost per bed is the indirect overhead that I'm able to pass with calculate on the [ aloft ] of this FY '22, but 100 [indiscernible], 1,200 beds likely to be added next 3 years. We're looking at a bed buildup of 1,570. So when I look at the cost buildup for the new bed, should I multiply the 1,570 beds with the embedded overhead you have on the existing capacity beds? Or it would be lower? If you can give some sense, what kind of cost build up should be associated with the new beds that are coming on stream?
Nikhil largely, the brownfield -- if you see out of the 3,000 beds 80% of the new capacity is brownfields, right? In a brownfield, you already have your management costs as well as our senior clinician cost being incurred by the persisting hospitals. So I mean, I would look at it a little differently. Rather than looking at the cost and start dividing it, I'll say, okay, look, my EBITDA per bed is INR 62 lakhs today, right? Now this INR 62 lakhs, what is it going to be 3 years down the line? And more -- I mean, with the payer mix distillation, any inflation and increase in price and so on and so forth. But that is what is going to be attributable to the old capacity.
The new capacity which comes up, okay, we'll have some operating leverage in it simply because like I said, we not going to have -- a lot of the costs are already being incurred within the INR 62 lakhs per bed. So that number for the additional beds should be higher theoretically. So you would take that EBITDA per bed and multiply it by the occupancy in those installed beds, that's how we would look at it. I don't see any major fixed costs coming or [indiscernible].
Okay. So before these beds came on stream, whatever EBITDA for the company kind of stabilizes at in next 2 or 3 quarters. While the new beds will come on stream, there should not be any major dilution on EBITDA project. Would that be a fair assessment? Or...
That's correct, which we've guided to also and brownfields typically or breakeven in the first quarter or whatever. And we've seen that in the Vaishali Hospital, we came up with 100-odd beds, I mean there was no sort of -- and these are required, these hospitals are operating at 80% occupancy. To put another 100 beds that gets taken up very quickly. So we don't see any abatement in EBITDA in absolute terms.
Okay. And 2 near-term bed additions in Shalimar Bagh and Dwarka in the last 2 investor presentations, the timelines have remained same. So can you highlight some milestones which would have been achieved in both these facilities just to get some comfort that these beds additions are on track?
Nikhil, Dwarka is at finishing stage. And as far as Shalimar Bagh is concerned, it's late in finishing state. I mean if you're going to open up on capacity in the current year, you've already got a -- look, current year mean there's obviously, you're looking at the next 6 to 9 months, okay? And then the new capacity in perhaps 3 to 4 months after that, you have to be pretty close to finishing. And that's what on the ground reality is. I'm not giving you visibility on something 3 years later. I mean if you're seeing something is coming up in 6 months or 9 months, right? I mean, then obviously, the structure of this thing, everything is ready, you're being fit outs and stuff like that.
And third question is on the international patients. Can you give me the number of beds which were occupied by international patients in this quarter? And then what this -- number of it can look like lets say in 12 months?
First question I think about 6%. But Yogesh, sort of leaning on this. But secondly, like I said, I'm not giving any guidance on where it can be. Sky is the limit, like I said. So that number can keep moving up.
Yeah, it's 4.5% to 5% of the beds were occupied by international patients this quarter.
4.5% to 5%.
Okay. So the revenue mix and the bed count mix is the same. So I mean my understanding might be wrong, but I thought that international patients come in at a much higher ARPOB, right?
That's right. The reason, you see that the overall revenue share is 8% and the bed share is 4.5%, 5%, right? That's signifies that.
The next question is from the line of Praveen Sahay from Edelweiss Wealth Management.
Many congratulations on a very good set of numbers. The first question is, just I'm repeating the earlier question that related to the EBITDA per bed. As you said that down the line 3 years with the new capacity coming in the place, you're trying to --we'll manage this EBITDA per bed from there? Or is there some detrition we can see?
Like I said, look, 80% of the capacity is coming in the form of brownfields, right? What is the brownfield. You have existing hospital, which is operating, let's say at 80%, 85% occupancy. You were waiting in your ER for a couple of days for beds, okay, the hospitals are out of space. Okay, where do you go from there? You put up another building addition or right next to it. Now -- okay. So you incurred the CapEx of the building, okay? Now your CEO, your management, your clinicians, et cetera, already all your sort of fixed -- the fixed indirect cost is already being incurred by the existing hospital. So let's say, in the new building, I'm going to open -- which is 100 beds, but I only have demand for 20 beds. I'll only open 20 beds over there. I'll put nurses, et cetera of 20 beds. Also my building is ready. Okay. My fixed cost, this thing is already there. So also the higher operating leverage. So I don't see your EBITDA margins or your EBITDA per bed going down because it should be accretive theoretically.
And as you are in the -- this year and the coming year, coming capacity in the Shalimar Bagh and the Dwarka, so with this any change in the clinical mix also, we can say because...
No. This has nothing to do with the clinical mix.
Okay. Because they have a certain different clinical mix and they are on the lower side of a bed. So that's why I'm asking this question, whether this...
Sorry, I didn't get that.
So like Shalimar Bagh and Dwarka has some different -- on the company level, it's a different clinical mix. So is there any impact you are expected to see in the next 2 years in your clinical mix on the overall company level.
If where do you see from a company level, it's a different clinical mix, Dwarka and Shalimar Bagh.
It's similar, you are saying?
No, I'm asking, is there -- I don't think specific hospital clinical mix is something that we have ever guided to.
Okay. So now the next question is related to the payer mix and which you had guided earlier for an institutional business to go down to 15%. So what's the time line for that where you -- when you wanted...
Over the next 1.5 years. I mean, do keep in mind, this was 37% previous quarter, it was brought down to 34%, 33%. Now it's down to sub-30%. And hopefully -- that's been the trajectory, right? So in the next 1.5 years, it should be down to 15% or below.
Okay. And last question on the occupancy side. The current occupancy level, you are seeing this as a normal 75%, 76% is a normal rate which you will run on.
I mean pre-COVID level, we used to be 71%, 72%, okay? I mean, obviously, disease disburden goes up. We've also operated as you've seen 81 -- 80%, 81%, 82%. On a sustainable basis, I've said in the past, we can go up to 77% -- 76%, 77%, okay, across the network -- at the network level. And these are midnight occupancies. Yes. So I mean, the could be a couple of percentage points sort of over a period of time, but that's about it. So it's marginal. So the real value will come from the distilling the payer mix.
Okay. Okay. And in the inorganic, are you also looking in the hospital business, any opportunity?
Well, we are mostly looking only in the hospital business opportunities, to be honest.
Not in diagnostics?
Not actively at present.
The next question is from the line of Sangeeta Purushottam from Cogito.
This is Andrey Purushottam, Sangeeta's partner. Abhay, just a little bit more light on your margin drivers specifically, if you were to look at the 2 or 3 year term horizon, how do you see your international tourism shaping up in terms of percentage of revenue from 7.3% or so? And also in terms of -- I believe your CTH is proportion to revenue is already low as compared to other hospitals. Would you be seeing this coming down to 0 in the near future and seeing its substrate by higher-margin peers? And what other elements of the mix can you add further color to which could give us an idea as to how your margins would expand in a 2- or 3-year horizon.
So first, I think your presumption is incorrect. Compared to our peer group, our institutional business, CTH business sector is the highest, or more than twice, so follow and maybe more than 50%, 70% of this. Secondly, we are not giving any guidance on margins like we have devised from doing that in the past. Again, like Yogesh also said, international business, I'm not going to give you -- I can tell you what the opportunity set is, which is a great [indiscernible]. I have been a big proponent of international medical tourism. And really, I think the big [ finish ] we want to get now is because the government of India is putting -- is the reason behind it. And we are reading about heel in India initiative, okay, again, which the Prime Minister may take up on his Independence Day speech, which is a big, big thing. When the Prime Minister takes it up, the rest of the ministries and organizations do follow. So I see a huge opportunity amenity from that. I've always been a proponent that we have a big competitive advantage. I think it's being recognized at present. A little difficult for me to answer what percentage of the business is because, like I said, even if I have an internal assessment, it's something that we've resisted from giving forward-looking guidance on margins as well as -- what we have said is that the levers, and you can perhaps make that out okay, for our margin improvement going forward besides medical tourism is going to be a key -- is distilling the payer mix that means reducing the institutional business, which we are from 30-odd percent looking to bring down below 15% over the next 1.5 years.
This business gives us -- yields us 45% to 50% lower revenues, okay? And once this business is replaced by -- as we are seeing is trending also by our noninstitutional business, it will generate 45% to 50% more revenues, and 85% of that comes straight to our EBITDA. So that can have a -- has a major impact on both our ARPOB as well as EBITDA per bed.
So this reduction in the share of the institutional business, what impact did it have on occupancy rates? And would you be able to keep the same occupancy rates that you are right now? From what you said earlier in the call, you operate, let's say, on an average of maybe 77%, 78% as kind of sustainable occupancy rates, right? So how do you see the trade-off between that...
There is no trade-off. I think you're looking at the wrong equation. Today, we do this business not because we want to because -- not because we have to because we want to. Rather than keeping a bed idle, we'd rather do institutional business, right? It's not as if you stop the institutional business, makes a bed idle, okay, and then hope we are going to get business. Because if that was the case, then we would never start doing this business. The way to do it is, okay, that today, we have noninstitutional business, which are preferred channels, right? Which has a certain rate of growth. Now I won't even go down to all the aspirational things on international business, et cetera, et cetera, that we are doing, forget all of that. And that business has been growing at a particular rate. Now we've already hit our overall ceiling almost as far as the occupancy is concerned, like you rightly alluded that you're already at 74%, 75%, right? So where do you go from here? Maybe a couple of percentage points
The preferred channel is growing, okay, it requires more beds, 200 or more beds per year. Where do you get them from? I have to displace my institutional business. So each hospital has about 200 contracts with various public sector undertaking so on and so forth. And these are hospital level contracts, which are for a period of 6 to 9 months, and then you have a notice period of 1 month on both side if you want to discontinue. So you keep switching off one after the other on a particular hospital wherever you have no beds or your preferred channels effectively. Case in point was our Gurugram facility. We could do 20% business from the institutions. Okay, now it's down to 0. But our EBITDA per bed over there is INR 9 lakh plus compared to INR 60 lakhs for the rest of other things because of that. I hope I've been able to sort of answer your question in some manner.
So it's not either or. I mean, we only -- once we have the demand, we move away. So you don't ever see a reduction in occupancy because we're moving from institutional.
Okay. And one last clarification. A lower ALS is good for you commercially?
Sorry.
A lot of -- lower the average length of stay, the better this is commercially for you?
That's right. That's the key indicator of all hospitals, any hospital. Okay. You make money in the surgeries or the procedure. Most profitable things are daycare, okay? The longer a patient stays in a hospital, it's loss mix. Every day a patient stays in hospital is actually loss-making. Most people believe that hospitals are holding them back and make money et cetera, there is the other way around, hospital want you out.
Because all the expenditure really becomes upfronted, right, on the first day itself?
That's right. That's right. So your returns on daycare, et cetera. The room et cetera is INR 4,000, INR 5,000 a room with a nurses, with this, with that, et cetera, et cetera, you can imagine.
The next question is from the line of [ Divesh Patak ] from Vito.
This slide, which says that CapEx for the quarter was INR 13 crores only. And there was another slide which says that total CapEx for the year is supposed to be some INR 600 plus crores. So why was this quarter low?
Yes. I think we haven't really made the payment to the contractors. So there was already advances issue till last quarter. I think we'll be making some payments in this quarter now. It's only that soft of stuff, right? It doesn't have any to do with the work which has haven't yet decided, right?
Okay. So work at the Saket site and the Nanavati site, how are they progressing?
So Nanavati site, the piling work is on more or less, more than 70% of the piling has been done. The [ dewalt ] has been done. We will start -- demolition has been done. Construction is going to start once the -- sorry, the digging is going to start now. Most of all -- almost all the approvals are in place. As far as Saket is concerned, I think retaining wall has been done. Recently, we have to transplant trees. There was an order that you can't transplant trees in Delhi. Now the order has come and you can transplant tress and we transplant those trees. So we are doing that. And I think work should start. I think the work has already started, I think construction should start. I think the process is that you have to make a retaining wall, you have to make a [ dewalt ], you have to do the piling, you have to do foundations et cetera.
Which will be et cetera. Yes.
More than that, I wanted that all the approvals that were like the tree issue and all those government approvals are in place, right?
Right, right.
So in our control. Okay. The second question was on the Max Labs. So I'm just trying to understand that there's a gross revenue of 40% and then there is a net of 25%. The balance is payment to the collection center as well as to the Max hospital lab, or that only represents payment to the collection center and payment to the lab gets charged later in the cost line item?
No. So we recognize the revenue on a net basis in our financials. This is GMV, right? So don't compare with GMV, GMV is basically, for example, what is the [indiscernible] charging or the center charges to the patient. And also, we have some HLMs, right? Where they charge if we manage third-party hospital labs also. Obviously, we get [ almost ] 60% of the revenue and 40% that is a marked up when the hospital starting to get in. So 40% is not come in within the line. We consider only for 25% on [ year-on-year end ].
Understood. So my question was that of the 40% and the 25%, the difference is 15%, this 15% includes both, right, the payment to the collection center, which is third party and payment to our hospital labs.
No, no, no.
15% is only payment to collection enter payment 40% of the net revenue, which is payment to the lab that will be as an expense line item?
So when you send the sample to the hospital lab, hospital lab will charge you [indiscernible], right? That's coming up [indiscernible], right? For example, if you put INR 100 worth of sample from the market, which is [indiscernible], you probably deliver 25% discount to be franchisee 75% will be charged from patient. So that's your [indiscernible] line 100 GMV and then you send the sample to the hospital, the hospital charge you for testing the sample, that come your [indiscernible].
So based on what we are showing, it seems the customer is paying INR 100, we are getting only 1/3, right? 40% is going to the collection center and 25% or so is going to the lab.
No, I think you are confused. So what I tell you is 40% is getting charged to the patient, 25% is coming revenue in our books, right? We are collecting 25%. And off the collection, then we are really -- then the sample tested in the hospital lab, there they [indiscernible]. So then they pay part of that money into hospital for testing labs, right -- for testing samples. So 25% is what we get collected. So 40% to 25% is what the money which is payed to the third-party hospital as well as the third-party franchise.
The next question is from the line of Harith Ahamed from Spark Capital.
My first question is on one of your closest peers who've announced [indiscernible], which is COVID hospital, and they've acquired a 650-bed hospital there. And we also have a significant presence in the region and then announced COVID bed expansion as well. So firstly, any thoughts on the incremental completing intensity in this important macro market. And secondly, if you could give an update on the status of the 2 projects that we've announced.
So I think first and foremost, this particular this particular target or what they've acquired has been available in the market for 6 years, okay? And it's been available, and there's a reason that there were the only bidders right now, or the only people through a bilateral listing. We have passed it on numerous times in the past and we passed it on -- off again. So I mean, that's the extent I'd like to sort of go through or not doing that. And yes, so I mean I don't see any threat or challenge coming from that.
Significant thing in Delhi. I mean you have to keep in mind today, Max hospital is equal to the size of perhaps Apolo and Medanta protest than maybe somebody has put together.
Understood. Max Labs was -- currently, the net revenues are tracking at a quarterly run rate of around INR 25 crores. So -- and is there an aspirational revenue target that we've set for this business over the next 3 years from the current INR 100 crore annualized level. And do we plan to explore any other adjacencies such as pharmacy retail or primary care clinics to further leverage the brand?
No, we're not looking at doing anything to leverage the brand, which is unviable. Primary clinics, et cetera, are not the most viable listing. We've been in that and we rolled it back. I think we've seen it with some of the other competitors also. They've done that either they pause on it or whatever else it is. As far as Max Lab is concerned, it's a business we have aspirations. We've had a 3-year, 5-year plan and so on. Of course, tactically keep changing and the outlook will keep changing depending on what others are doing and what the market is -- right now, market is disruptive in terms of discounts, et cetera. We don't participate in that because our sort of client base is very different. So yes, we continue to build this business out, and we've seen, although on a small base, good growth, both quarter-on-quarter, year-on-year. So 50% year-on-year growth and a 24% quarter-on-quarter growth in the non-COVID business and Max Lab is very, very healthy.
And yes, so we continue to invest and grow this business. It has multiple benefits for us, a: brand reach, b; it sort of -- it's important part of our offering to be able to do home pickups for our patients, et cetera, and to reach out to more and more people. So yes, I think we will continue to build this business in a slightly challenging time right now because of more of what is happening in the marketplace. But these things are known to settle. At some point in time, the discounting and there will be some shakedown in the industry. And hopefully, we will get back to building this business to what our previous aspirations were.
As in before, I don't -- we avoid or resist from giving any forward-looking statements. So I don't want to make a statement. This is what I wish to be in 3 years. Regarding to Max@Home, I think that's a very, very interesting business. Okay. It's again, something which is about INR 30-odd crores in this quarter, but it's been a healthy 10% growth over the last quarter and 18% growth year-on-year. It's a business of the future in my belief. It's -- we've got -- we've been doing it for many years. We've got more than -- it's a profitable business, most importantly, but as the only profitable home care business in the country.
We've got more than 650 people doing this business. So we're seeing great opportunities here as well. But again, I want to resist from giving you 2 or 3 years...
Yes. So is there a standalone profitability for this business that you can share, like you said for Max Lab or...
Yes. That will be in sort of EBITDA margins.
The next question is from the line of Ashwin Agarwal from Akash Ganga Investments Private Ltd.
Congratulations to the Max team. And Abhay, in the last 3 years, you have built a fantastic franchise. I think Max stacks well in all the operational parameters compared to the peer group. I had one question for you. One of the copromoters, KKR as we know for their own internal reasons is selling their stake. If there is a potential stake sale of the entire, would you be looking out for financial investors or what is the strategy on that front?
I think it's a private equity fund. Private equity funds are known to churn their portfolios and sell because they have a particular holding period in mind. Their holding period for this investment for 7 years. They've only done 3 years, but it doesn't mean -- but yes, they've seen great returns because of the performance of the company. So -- and they have sold about 20-odd percent in the last 6, 8 months. The flip -- so it's a large amount of stock which is coming to the market, yet you do have to keep in mind that the trading in our stock is not very large. It's basically because whatever is being sold also has gone into a lot of the long hands. And these long hands don't sort of trade in the stock, so your trading volumes at 2 lakhs, 3 lakhs shares or whatever. So I'm not that sort of worried about further stock coming into the market in the future. As a private equity fund, it's a matter of time rather than -- it's not a question of if, it's a question of when.
But yet, they've been very clear in stating and we put it out in the news item as well as part of our release to the stock exchanges that they are not in any conversations with any strategic buyers or conglomerates, et cetera. So what that basically leaves, it is sale in the marketplace only.
Okay. But in future, whenever that term or their holding period maybe next 1, 2, 3 years, would you, in consultation with them, look at placing this large stock among 2, 3 long-term investors rather than it coming to the market?
Even right now, the 20% which has sold has been gone to long-term investors only now. I mean if you actually see -- I mean, right now, if you look at the stock between KKR and we have 50% of the company. So the balance 50%, which is about INR 1,800-odd crores of stock is out there in the market which is about 45 -- 48 crores shares. Yet, the trading in shares is about 2 lakh or 3 lakh a day.
Okay. Okay. So you are not disturbed with having 23% stake and the other core promoter selling of whenever they need to.
No, I don't have any concerns on that. I think there are immense examples of companies where the motors have shareholding in this range. I mean, be as a player like Cipla, players like UPL, be it players like -- a lot of the Tata Group companies and other companies as well. So I think -- yes, so I mean, I'm not concerned about shareholding and balance shareholding going out in the marketplace.
The next question is from the line of Prakash Agarwal from Axis Capital.
Just one question on the growth. So you had a fantastic ARPOB growth, occupancy itself has increased substantially. And business seems to be normalizing now. Now the question is the growth and the margin EBITDA growth, both are mid-single digits. So you mentioned in your opening remarks, what are the levers, but when do we see these levers playing out? Is it from next year onwards and this year would be still this mid-single digit? Or how do we see the business shaping out over the [indiscernible] period given that there are a lot of initiatives which are at play.
I think where is going to shape out and what the margin is going to be something for you to work out. I can essentially tell you what the levers are. And you can see what the -- the main levers would be international, will be the peer mix, there will be other smaller sort of this thing. Do keep in mind 2 things. Quarter 1 typically is not the strongest quarter because you have price increases, et cetera, in the first quarter. Okay. Yet we don't have a bad quarter in the first quarter this year. That's one. Second is the payer mix, like I said, from 33% year in 1 quarter, it came down to 30% over the next 6 quarters, you're expecting it to below 15%. That means 15% of your beds will be able to generate about 45% or 50% more revenue and 85% of that will go down to your EBITDA. This is on top of what your regular growth should be. So if you do the math, you come to some sort of a -- but that's for you to annualize. I'm not -- I'm going to resist from giving you any forward-looking -- and we haven't given in the past also guidance as far as the numbers.
I understand. I'm not asking for the percentage or I'm saying when do you see this happening? I mean this because we are sitting on a decent base given the strong execution we have done over the last 2 years. I'm just trying to understand when does this start playing out double-digit growth? Or with the addition of new beds, then only we start seeing that? Or it can happen...
Aren't you've already seen -- Sorry, you're talking about double-digit growth?
That's right, yes.
So double-digit growth as far as?
Top line and EBITDA is concerned?
I have not guided double-digit growth at top line or this thing. It's something that we're working out. That's one, okay? You're already seeing some sort of growth, which is, I think, quarter-on-quarter, at least has been this double digits. You've already seen the 33% come down to 30%. So your growth right now is embedded with some payer mix churn as well, okay? And when we are guiding it down to 15%, and your only question can be, is it going to get bunched up in the last quarter of -- on the sixth quarter? Or is it going to happen sequentially? Or how is it going to sort of play out? that's why we can't do it on a quarter-on-quarter, month-on-month basis, and I don't -- I refuse to give that sort of guidance. So if you want to draw a linear line you're welcome to between where we are today to -- from 30% beds going towards institutional payer mix to 15% in the sixth quarter. 70% on a like-to-like basis, and the EBITDA growth is 23% on like-to-like, right? So if we take the [ relaxation ] out from the quarter 1, which we knew is nonworking and we've put in the numbers separately also in quarter 1 last year. If you take that out, and then if you compare the numbers, it give you 70% plus growth, right? And the EBITDA is also growing by 23% plus. So I don't know when you say that double-digit growth because I don't know what do you mean by that.
I'm talking about reported basis. So there was COVID and then non-COVID was down. Now non-COVID is fully up whereas COVID is down. So I'm just saying on a...
We just taken the COVID vaccination out, Prakash, we haven't taken the COVID out. What we have taken out is only the vaccination. We know that vaccination was non [indiscernible]. And that's the reason why you reported the numbers definitely for these vaccinations. So I'm not taking the COVID out. I'm taking only the vaccination out, right, which is a OPD business and was not in [indiscernible], right?
I understand that. And secondly, I just wanted to understand the Shalimar which is getting added by end of this calendar or by fiscal end. How do you see the ramp up? I mean, given that your turnarounds are pretty fast. So what is the plan here? And similarly, if you can guide on the work also?
Like I mentioned, ramp-up should be very quick, right? I mean -- and this will not have any -- at least by Shalimar Bagh is brownfield should be very quickly as far as Dwarka is concerned, it's not brownfield, it would be a little longer. We expect breakeven within the year. But it's on a large base of 3,500 beds that you can look at and another 300 beds coming up. So it should not disturb your numbers too much.
Okay. Okay. And lastly, if I look at base, particularly, sales have been soft, but margin has improved significantly. Anything happening there you want to call out?
Not particularly, Yogesh?
Just want to understand, what is your question?
We are seeing margin improvement maybe I didn't quite hear that.
Yes. So don't read too much into it, but there will be some payments which the people made, which is on a -- basically has to create donate money, et cetera to another trust that payment comes when they come...
I think he is talking about are the margins improving? Can you repeat your question, Prakash?
Yes. So if I see the slides that you have provided...
[indiscernible] slide, you are taking about, right?
Yes, the slide where you have that revenue and EBITDA breakout.
Yes. So Prakash, [indiscernible] to go into the visual [indiscernible] slide. And those movements happen from quarter-on-quarter because sometime they have to make some donation et cetera which they [indiscernible]. I would say, yes, there is improvement overall in all the hospitals as you compare to quarter 4. You know that EBITDA has gone from INR 304 crores INR 370 crores. So obviously, you will see that in the entire [indiscernible] and so that's a better step. The point down here is that don't read too much into it. Apparently, the gross number is what is more important than the individual especially at EHF level, right? Because here the agreement that provides and when the agreement get provided then maybe they'll have more charges to the P&L and then that will come to the [ MHF ] side, right? So that's -- the reason this will happen in the close of this year. I think it will be a temporary phenomenon before the agreement revision takes place.
Okay. Perfect. And lastly, on the further growth initiatives. So the next 5, 6 years, we all stack with the stated plan of bed addition. But you also talked about REIT kind of structure, asset-light development tire-based developers or ready to move in hospitals kind of setups, is there anything on -- we're still looking at it or our hands are very tied up with the existing expansion plan?
Dwarka is just that, isn't it? Dwarka is a tire-based developers because that....
That is what I was asking, is there anything that isn't a...
Yes. So there's plenty on this thing. I think, yes, there are quite a few conversations around that. This is a big focus area for us.
The next question is from the line of Ashay Shah from Investec India.
I just got one question. [indiscernible] international patients are falling back to pre-COVID level and Afghanistan is not completely back, so which country have you exactly seen certain improvement and what I wanted to understand is the [ estimate ] in your opinion?
Sorry. I can't...
Sorry to interact Mr. Shah, but your voice is not clear. There is a lot of background noise.
Is this audible? That is just -- is it fine?
Better now.
is it better?
Yes.
Okay. Sir, what my question was is given that our revenue or our footfalls from international patients, it is back to pre-COVID levels, right? And Afghanistan is not completely back as compared to FY '20, right? So I just wanted to understand which country have you seen certain inflow like in footfalls. And do you think it is sustainable? Or will you be able to sustain from the other footfalls from the same countries?
Yes. So it is sustainable. It is -- we've been making efforts entry into new markets and increasing also our patient flow from interesting markets, which is sort of what augmented and absorb the Afghanistan, lack of business from Afghanistan. I'm going to again resist from giving you specific names of new markets because I don't want to [ get into a trouble for it ]. Yes. But we do see stickiness about this business, in fact, more stickiness with this business because this is a result of a lot of direct to fly offices that we are setting up overseas.
Got it, sir. And just one small clarification. When we say international footfall is this back to pre-COVID levels. We mean the revenue, right? 11%, which was [indiscernible] FY '22.
Yes. [indiscernible] in absolute terms.
Absolute term. That's right.
The next question is from the line of [ Amit Thawani ] an Individual Investor.
Can you please discuss what levers -- are there any low hanging fruit still there in ARPOB. And I mean, if we look at ARPOB as something where we can guide for certain Q-o-Q growth or do you think that we will see seasonality in the ARPOB. How -- or are there any low-hanging fruits to take this higher? I wanted to just know you hold there or...
First and the most -- primarily the low-hanging fruit is going to be the payer mix and [indiscernible] noninstitutional, which we've been speaking about on this call. And second is international business. As far as seasonality is concerned, there is a slight seasonality. Typically, the fourth quarter is the best, your first quarter and your third quarter are typically not the strongest quarters, et cetera. But yes, so that's where we are.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
So thank you so much for being on the call. The results are robust, as you can see, but don't come as a surprise for us in some manner and you've been a part of the call in the past. You've seen us guide towards normalization and these sort of results. And we are quite certain that this part will continue going forward as well. Thank you.
Thank you very much. Yeah.
Thank you very much. On behalf of Max Healthcare, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.