Max Healthcare Institute Ltd
NSE:MAXHEALTH
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Max Healthcare Institute Ltd
Earnings Call Analysis
Q1-2025 Analysis
Max Healthcare Institute Ltd
Max Healthcare's first quarter of fiscal year 2025 started strong, with new initiatives and expansions. The opening of Max Super Specialty Hospital in Dwarka has added a significant capacity of 303 beds. This facility is equipped with high-end technology and is already showing promising traction.
The company continues with its asset-light strategy by partnering for a build-to-suit 250-bed hospital in Mohali, scheduled to open by FY '28. This strategy helps insulate Max Healthcare from development risks. The recently acquired Luna and Nabo hospitals have shown impressive growth within the first three months, contributing significantly to the revenue and EBITDA.
For the 15th consecutive quarter, Max Healthcare achieved year-on-year growth. The network's gross revenue for Q1 stood at INR 2,028 crores, an 18% increase year-on-year and 7% quarter-on-quarter. The operating EBITDA was INR 499 crores, with a margin of 26.5%. The profit after tax was INR 295 crores, reflecting stability over the past year.
The average revenue per occupied bed (ARPOB) grew by 7% year-on-year to INR 80,100. This was driven by growth in high-margin segments like oncology and orthopedics. Occupancy rates also improved slightly to 77% from 74% in the same quarter last year.
Despite robust performance, the operating EBITDA was slightly impacted by a drop in immigration health checks due to visa regulation changes in countries like Canada and the UK. The company expects these effects to be temporary. Additionally, margins were affected by annual merit increases and GST on variable management fees.
International patient revenue was slightly impacted, contributing INR 158 crores to the gross revenue. Max Healthcare also reported strong growth in its Max@Home and non-captive pathology verticals, reflecting 23% and 21% year-on-year growth, respectively. The organization remains committed to community services, treating more than 1,150 patients free of charge.
Max Healthcare plans to ramp up its oncology business within the year and expects robust growth from its newly added beds and facilities. The company anticipates a positive trajectory with ongoing projects, such as the development of additional beds and new towers in various locations. This expansion is expected to drive higher revenues and profitability in the coming quarters.
Analysts inquired about the future growth of ARPOB, which the management expects to stabilize above 7%, driven by new and existing units. The leadership also emphasized the importance of increasing high-value clinical programs to drive future growth. The asset-light strategy is expected to provide higher returns on capital.
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Ladies and gentlemen, good day, and welcome to Max Healthcare Institute Limited Earnings Conference Call. [Operator Instructions] Please note that this conference has been recorded.
I now hand the conference over to Mr. Suraj Digawalekar from CDR India.
Thank you, Mira. Good morning, everyone, and thank you for joining us on Max Healthcare's Q1 FY '25 Earnings Conference Call. We have with us Mr. Abhay Soi, Chairman and Managing Director; Mr. Yogesh Sareen, Senior Director and Chief Financial Officer; and Keshav Gupta, Senior Director Growth, M&A and Business Planning. We will begin the call with opening remarks from the management, following which, we will have the forum open for an interactive Q&A session.
Before we start, I would like to point out that some statements made in today's call may be forward look into and [indiscernible] of today's effect has been included in the presentation shared with you earlier.
I would now like to invite Abhay to make the opening remarks.
A very good morning to all, and a warm welcome to Max Healthcare's earnings call for the first quarter of fiscal year 2025. It's been a very promising start to this financial year. I'm pleased to share that we have operationalized Max Super Specialty Hospital, Dwarka on July 2. Located in the heart of South Delhi, it is a 303-bed hospital equipped with the latest high-end technology and currently has 125 doctors and 418 nurses, paramedics and support staff. The hospital is seeing good traction since the launch. Presently, the hospital teams are engaged on various fronts, including patient outreach and panalment with insurance companies, clinical accreditation, et cetera.
Yesterday, we announced a build-to-suit transaction for setting up a 250-bed hospital in Mohali. This 2.75 lakh building with attendant parking will be constructed by the developer as per our requirement and specifications. This is a long-term lease extendable to 50 years at our option, and we expect to commission the facility before FY '28 -- sorry, in FY '28. The hospital will cater to surrounding areas of Himachal Pradesh, Punjab and Haryana. This is in line with our asset-light strategy, which allows us to expand while insulating against development risks.
Further, in strong demonstration of our turnaround capabilities, both Luna and Nabo hospitals that we acquired at end Q4 last year are ramping up well. With an average occupancy hovering around 60%, for Q1, these hospitals contributed INR 99 crores of revenue and INR 18 crores to the operating EBITDA, reflecting a year-on-year growth of 21% and 64%, respectively. And more importantly, this was done with the first 3 months of us acquiring these facilities.
Collectively, their ARPOB stood at 45,300, an annualized EBITDA per bed of about -- close to INR 30 lakhs. A large part of the post-merger integration activities has been completed now, the results of which will be more visible in the quarters to come and further augmented as new clinical teams joined and infrastructure is upgraded them.
Now coming to the Q1 performance. This is our 15th consecutive quarter of year-on-year growth. Overall, network gross revenues stood at INR 2,028 crores registering a growth of 18% year-on-year and 7% quarter-on-quarter. Network operating EBITDA was INR 499 crores, net of onetime charge of INR 6 crores towards prelaunch costs at Max Dwarka. This reflects a growth of 14% year-on-year and a marginal decline of 1% quarter-on-quarter.
Profit after tax stood at INR 295 crores compared to INR 291 crores in Q1 last year, and INR 311 crores in the previous quarter. While we expect substantial improvements during the course of this year [indiscernible] increase equity in the [indiscernible] subsidiary bring down the finance costs. All numbers from here on are going to be now shared on for a like-for-like basis, including new hospitals. One average occupancy for the network increased to 77% from 74% in Q1 last year, and 75% in the trailing quarter, while occupied days grew by around 5% year-on-year and 2% quarter-on-quarter.
Average revenue occupied bed ARPOB for the quarter improved to INR 80,100 growing by 7% year-on-year and 3% quarter-on-quarter. Year-on-year improvement in ARPOB was largely due to growth in oncology, orthopedics and renal sciences, as well as increased number of robotic procedures. This was coupled with tariff revisions for self-pay insurance and institutional segments.
Network gross revenue was INR 1,929 crores compared to INR 1,719 crores in Q1 last year and INR 1,847 crores in the previous quarter. This reflects an increase of 12% year-on-year to 4% growth versus the trailing quarter. The international patient revenue stood at INR 158 crores. There was a temporary impact on patient flows from some countries due to political situations and [indiscernible] management-related actions taken by us, which accounted for the muted growth in this segment.
Network operating EBITDA stood at INR 87 cores, which reflect growth of [ 1% ] and declining by 2% quarter-on-quarter. Operating EBITDA margin stood at 26.5% for the quarter. Operating EBITDA was impacted due to annual merit increase, GST on variable management fee and drop in footfall for immigration health checks owing to change in visa regulations by some countries, particularly Canada and U.K. Annualized EBITDA per bed stood at [ 7.7 lakhs ], a growth of's 6% year-on-year. Profit after tax was INR 316 crores versus INR 291 crores in Q1 last year and INR 322 crores in the previous quarter.
Free cash flow from operations was INR 258 crores. Of this, INR 213 crores was deployed towards the ongoing capacity expansion projects and upgradation of facilities at new hospitals. Consequently, net cash position stood at INR 66 crores at the end of June 2024.
Continuing our efforts to support the local communities, we treated approximately 36,800 patients in OPD and 1,150 patients have been entirely free of cost or free of charge. Both [indiscernible] significant growth in the revenue and profitability. Max@Home reported a top line of INR 49 crores, reflecting a strong growth of 23% year-on-year and 6% quarter-on-quarter. [indiscernible] offers 14 service lines over 10 cities and currently [indiscernible] a very high CLP transaction.
The non-captive pathology vertical now offers its services in nearly 50 cities and has a network of over 1,100 collection centers and active partners. This strategic business unit reported a gross revenue of INR 41 crores, reflecting a strong growth of 21% year-on-year and 6% quarter-on-quarter.
Now coming to the status of expansion projects. For the 590 beds at [indiscernible] hospital, the work on refurbishing the existing facility is underway, finishing work, rationalizing additional 104-bed has started. We have also received the environment clearance approval for setting up a new 450-bed tower on the site, and we expect to complete the development of the new tower within 48 months -- sorry, within 24 months. The 440-bed at Nagpur Hospital work has been initiated to [indiscernible] bed internal reconfiguration by Q3 FY '25 and environmentally cleared [indiscernible] additional flows has been filed. We expect approval over the next 2, 3 months, and the project completion by -- in the next 24 months as well.
For 241 beds in Nanavaty, Phase 1, the hospital structure will be up in this month, and the project completion is expected by end of fiscal year, as communicated earlier. The project continues to be on schedule. 375 beds at Max Smart at Saket complex. The project was fast track in Q4, and we expect its completion by Q1 FY '26. This is a steel structure building and the installation of columns have already started. The site is fully mobilized, and we don't expect any further delays.
For 155 beds at Mohali, work on the second floor slab is underway. While the work on ramp area is reaching ground level, all high-side equipment has been ordered and the project is on schedule. We expected completion by Q1 FY '26. For 300 beds at Sector 56 Guda, basement slabs are nearing completion. The project is progressing as per plan. Orders for all high-side -- high lead items have been tested. We expect completion for the first phase of Q2 FY '26.
For 250 beds at [indiscernible] Phase 1, post issuance of the no-objection certificate by the fire water departments, we have submitted the growing for approval and the tendering process for the project is on. For 415 beds at Max Miramar, the environment clearance and consent to established has been received. The barricading and D wall, et cetera, has started. We have applied for forest approval and are still awaiting the same. We expect some related to ongoing litigation involving DDA and Delhi government regarding cutting of trees in the eco-sensitive zone near Solab and the risk areas without approval.
With this, we open the floor for Q&A.
[Operator Instructions] First question is from the line of Amey Chalke from JM Financial.
The first question I have is on [indiscernible]. Is it -- I understand that we have planned to expand to 550 beds, and then there is another power which could come up. But what is the near-term action plan for the existing [indiscernible] unit? And so the specialty addition, et cetera, that ARPOB, I believe, was substantially. So what is the driver going [indiscernible] for this unit will include [indiscernible]?
The clinical program is clearly one, I think doctors is the other, and that's how you sort of achieve clinical programs, improvement in infrastructure. So we're expecting to refurbish the entire -- I mean, the present infrastructure as well as at the 140 beds by end of this calendar year. I think as far as clinical programs are concerned, on quality represents less than 2% of the total revenue in [indiscernible]. So that's a major driver for us. It is the high sort of ARPOB business as well as contributes more than 24%, 25% of overall revenues.
So if you look at sort of implying that over there, we'll see a major flip in ARPOB. I think like I mentioned, we've had -- in the first 3 months, literally, I mean, we get what [indiscernible], we acquired at the end of March and April, May, June compared to April, May, June last year. There's been a 60%, 60-odd percent increase in EBITDA. And this has largely come through all the sort of low hanging fruit, et cetera, which is there. The real changes that we may have made are you want to have all of those sort of pay dividends in the quarters to come.
Also, typically, we have a higher proportion of surgical business that we do in our hospitals and a lower proportion of medical business, whereas in both Natur as well as Batam, the situation is the other way down. I mean it's a higher sort of -- when your surgical mix moves up with respect to the medical mix, you see higher ARPOB in any case. So there are plenty of levers. I'm not sort of concerned about that. And frankly, I think the kind of traction that we are getting, the kind of early wins that we've been able to demonstrate over there, really gives me a lot of confidence that we should be able to ramp up both our ARPOB as well as profitability there.
So this oncology addition, et cetera, should we expect it in the current existing units? Or it will happen when the expansion for the [indiscernible] happens?
I mean existing unit, we already have bunkers for radiation, et cetera, which are nonoperational. We will just operationalize this. The 140 beds that we are adding, as well as the things that we're doing, is going to happen by the end of the year. Actually, even the new towers that we're building are going to be done over the next 24 months. Because it's 27 acres of land, we don't have permits and so on and so forth. Similar to what we've done at Max Mark and some of the other listings that we're looking at.
But yes, the oncology business should ramp up in the current year itself. I mean it will not ramp up to 25%, but you'll see ramp-ups in the quarters to come immediately. And there is a surgical business, right? And even after we sort of take over these, when we start adding doctors, when we give doctors letter of intents and they sign up with us to join us, they have a 2-, 3-month notice period. So it takes them kind of time to join us. And as the infrastructure sort of -- the equipment has been ordered, the new equipment and so on and so forth, as that comes through, you see more and more teams coming up, right? Now all the technology, all the equipment is being replaced and so on and so forth, right?
Sure. The second question I have is on the [indiscernible] unit, which has been recently commissioned. If you can provide some time line over there, how the ramp-up will happen? And in terms of the speciality, is it at par at present with the other units? Or do you think the improvements will happen over a period of time?
In terms of the infrastructure is concerned, it is at par. I think the bunker is not ready yet. That is going to be ready in due course. But other than that, I think as far as infrastructure and technology is concerned, not only is it at par, but it's the new generation. So I would say it's perhaps 1 or 2 steps ahead of existing infrastructure. We have again seen very, very good traction over there. It is a massive facility. It's the best infrastructure of its kind in the region of Dwarka. The region [indiscernible], again, fantastic traction is what we've seen in the first month itself, and I think they should continue. You should have a breakeven or more within 6 to 8 months.
Next question is from the line of [indiscernible] from Land Global Investors.
[indiscernible]
Sorry, we are not -- I mean, you're not audible. Can you speak through the handset?
[indiscernible]
You audio is not clear.
[indiscernible] to us. Why don't you take the next?
Next question is from the line of Rishi Mori from Marsalis Investment Managers.
Can you hear me?
Yes.
Yes. So just on the Mohali hospital that you're planning to add 4 years out, right? Are we going to be -- is this going to be, firstly, an agreement the way we have with the [indiscernible] and those kind of hospitals? Or is it an outright rental sort of a model that we see in retail where we don't incur CapEx, we have -- just put a security deposit and we start operating on it?
It is the latter. It is we are leasing it. It's outright rental stroke lease model, where somebody else is putting the infrastructure and has invested in the land, making a build-to-suit. It's a 50-year lease agreement. The only difference is normally, you have commercial leases for 9 or 15 years or whatever. But here, there's pretty much a 50-year blocking. So yes, it's a 50-year lease agreement that we will have.
Okay. And so just from a broader conceptual point of view, right, are we seeing incremental interest from, say, the builder or real estate community towards these sort of models? Or like if you could share your observations from across North India or [indiscernible] country?
See, it depends on the tenant. Today, if you tell a builder that it is made of build-to-suit, and I will give you 8%, 8.5% yield and I'll give you, whatever, 3%, 4% increment every year, I mean, that is what the market is, right, as far as commercial real estate is concerned. So as far as the builders are concerned, developers are concerned, they are happy to do it for commercial real estate or retail real estate or for hospitals. The question is how many hospital chains can offer this? Your own ROCEs have to be significantly higher than what you're paying out over there.
So I think in our situation, we are able to take up these hospitals because our ROCEs are significantly higher. And so this build-to-suit kind of model works for us. It may not be the case -- and it certainly works with the developers. They are taking a [indiscernible] balance sheet effectively. And that is where they're getting the distinct look will be around 50 years, and they'll be able to -- after even making that particular hospital or that they're seeing and dedicating it to us for 50 years. Because do remember this is build-to-suit, so it's not as per our design.
If somebody is building something under certain specs and leasing it out to you for 50 years, you have to sort of be very confident that you will be around for 50 years and your balance sheet will be able to hold it. But I think that's a point [indiscernible] needs to take, because eventually, your tenants -- but you hear your tenant for 50 years, it's not as if you can move this hospital and you start using it for a mall or give it for the other, purpose or a hotel or whatever else it is.
Right. All right. Secondly, just -- I think you went through the capacity addition plans and updates pretty quickly. But just on an overall basis versus Q4, any delays or any preponement, just if you could highlight that piece?
Not really. So we're not expecting any delays or preponements. I think you want to have -- except for Vikrant, I think which is the last one, which in any case was a 2028 generation hospital, which you're expecting maybe a couple of quarters of delay on that one. Other than that, we're not expecting any delays. So you should have Mumbai, Mohali as well as Saket up by Q4, Q1.
Okay. Got it. Yogesh, I had a question for you on the tax rate piece. So I'm seeing your tax state for this quarter has come up 26%. Just wanted to understand, because I'm under the impression that we have a tax benefit in the BLK and the Nanavati, and now with the Dwarka unit. So is my understanding correct? And is this used a factor of the profitability for these 2 charitable hospitals? If you could just help me understand the tax piece.
This is Yogesh. Yes. So overall rate is 22.8%, right? This quarter, the rate has gone up because we have losses in the new countries, mainly the Sara hospital entity. This Sara hospital tranche was [ INR 990 crores ]. We funded this by INR 840 crores of loan into the entry. And as Abhay mentioned, alluded in his speech, that we are changing the total structure in the company. So since we have losses in this company, we don't do the DTA as per our policy until it sustain -- the company is profitable. right? So that means you have these losses, but you have the tax stop on the other hand. So that's the reason why the rate has gone up. But otherwise, the rate was the same as in quarter 4. Quarter 4 was [ 21 ] rate. And we do think that, going forward, we will be around 32% rate.
Okay. But -- so just if I take a calculation, right...
Also on the BLK, the overall -- whatever is the net profit, 98% profit comes to us, right? So the moment we will draw the money from there, there are 2 taxes on that. One is there is GST and also there is that the money comes on this side, and we pay on it, right? So to that extent, BLK doesn't allow me any tax sheet.
We don't trap money in trust. We sort of take it, we pay full tax on it.
Okay. For example, now BLK there is no capacity expansion plan. So you're taking the money, refactoring it and went to the holding company. But Nanavati, we have a plan of expansion, hence, we are not repatriating. But once that expansion is done, it will also become like BLK. Is my understanding correct?
That's right. But also this formula on committee basis, right? So what happened is that the BLK write-down their losses on it, too many basis last year quarter 2. So the drawn has happened from quarter 3 onwards, right? So similar things will happen for now. [indiscernible] probably will happen, but that will happen mostly [indiscernible] property [indiscernible] in the trust.
Okay. So maybe 1, 2 years down the line, it will start kind of [indiscernible].
Yes, yes.
Next question is from the line of Damayanti Kerai from HSBC.
My first question is on the margin contraction, which we have seen in first quarter. Most of that for the new facility cost are between 4Q and June quarter. Have you seen like any major change in the business mix, say, in terms of medical and surgical volumes which are coming to your facilities?
We've clearly seen change in the clinical mix has moved to a higher-end clinical mix. And like I've mentioned in the past, when you -- when you do higher-end surgeries, you do more robotics and more oncology and so on. We typically have low margins, lower margins in percentage terms, but higher margins in value terms. So whilst you see a flattening of EBITDA margins, you don't -- you see an increase in EBITDA per bed on the existing hospitals as well. So I think the takeaway should be that what is the increase in EBITDA per bed. Because eventually, we have 2 things, we've got inventory and we've got a number of days in a year. And it's really -- you'd rather do to a 50% -- you'd rather do a 20% margin or a INR 10 lakh surgery than do a 50% margin or a INR 2 lakh surgery, right?
So I think this percentage is relevant. I think we should look at sort of -- the other thing is that we had a reduction in OPDs, like I mentioned in the current year, and these OPDs were largely from the immigration. Because of disruption in visa from Canada and from U.K. and a little bit in Australia, we've had reduction in OPDs. And this is the immigration income that we had. So that has had a couple of percentage point sort of impact.
Okay. That's clear. And my second question is a couple of your hospitals are scheduled to start in another, say, 6 to 12 months, if I may say, Nanavati Smart, yes, Mohali.
6 to 8 months, that's right.
Yes. So just want to understand, when you are about to start a new facility, when do you start your prelaunch activities? And what kind of cost you're anticipating for these upcoming units?
So look, unlike Waka, which was a -- it's a new facility. So what you have to do is you have to actually have a minimum amount of doctors and staff, et cetera, which is pretty much you need to start the entire hospital, okay? In that case, before you apply for even a nursing home license, right, so you're still sitting fully staffed, okay, then you make the application for the nursing home license, okay, and then you need to sort of promote the facility by advertising it and so on and so forth, by onboarding doctors and getting new -- getting all the insurance companies and TPAs onboarded, by getting institutional sort of distinct, by public corporate tie-ups and so on and so forth. So you're really starting ground zero.
All of the facilities that you sort of alluded to right now, be it Nanavati, Mohali as well as the Max Smart, they're all existing facilities. So I don't need to promote the existing facility. They are not people waiting in my ER over there waiting for beds, right? And it's going to be very similar to what happened in Shalimar Bagh. In Shalimar Bagh, we didn't have to have any pre-op expenses or any, or promote those facilities or even way to get these. So all these contracts, everything is already pretty much signed up. So you won't see any pressure on margins over there. I think almost day 1, you're sort of good to go.
Okay. Understood. And my last question is on clarity on your Mohali planned hospital. So you said it's a 50-year long lease and it's a build-to-suit to premise which you will be getting, so there will be no CapEx. Once you get the facility leased, just say equipment and then people's cost, which will be going towards this [indiscernible]?
That's right. That's right. So we will be providing the medical equipment and -- other than the deposit, again, which is interest-bearing, and move furniture. The entire project cost is incurred [indiscernible]. Importantly, any delays, any cost time, overruns, everything is onto their account. I mean this is very similar to what we've done in Dwarka,right?
Okay. So the way like Dwarka [ O&M ] facility, which you got into a network, but...
It's not an O&M, this is a lease. But the same listing as Dwarka in the sense that developers develops it and he incurs the project cost , everything, and the equipment and so on, okay? And I mean whether you look at O&M or a lease, the commercials are pretty much the same, right, it's asset light.
Next question is from the line of Kunal Randeria from Axis Capital.
I think in the last few quarters, the number of institutions there is standing is around 29%. Do you see headroom for some improvement over here?
We do see headroom improvement here, but first quarter and usually the third quarter are weaker quarters. So compared to a fourth quarter, what -- you take your foot off the accelerator. That's not the time for this sort of this thing because your occupancy levels will subdue at that point in time. So if you want to kind of [indiscernible] and what, you churn new patients. Specifically, you will see churn happening in the second quarter and the fourth quarter.
Okay. Sure. Because even I think in last quarter, it was somewhere at 29%, right? So I thought just, in the last 5 or 6 quarters, somewhere in this range.
That's in Q4, right? The fourth quarter is a strong quarter. So if you see Q3 versus Q4, there may have been some change. But if you look at Q4 versus Q1, you won't have a change. So typically, now again from Q1 to -- sorry, Q1 to Q2, you'll see a change. But Q2 to Q3, you won't see a change. I would also say there's a change that we don't see that changes in the ARPOB of the business, right? So we do the PSU business, but as you may see, the same beds. But the throughput of those beds have gone up. If I see the improvement in the ARPOB, it's Y-o-Y, it's a 10% improvement in the ARPOB of the TSU. So which means that we are -- within that batch, we are trying to do high-end work, right?
Sure. Got it. Just second question...
Yes, yes. [indiscernible].
Sure. Second question on ARPOB. This quarter saw around 7% growth on your existing units. So is this the new normal that we should expect going forward?
No, I think we've had -- because of the immigration and visas, okay, that's had maybe a couple of -- 2, 3 percentage point impact on ARPOB. That is something we had last year. This year, there's been some disruption because of Canada not issuing visa. U.K. immigration visas have been sort of listing. And you've seen the same with Australia as well. We believe it's a temporary phenomenon, and the business is sort of this thing. But if it doesn't, then we kind of repurpose that space to put more dialysis beds and so on and so forth. We catch that up. But yes, so I think 7% would be a little muted compared to perhaps what we had in the past.
Sure. Got it. And sorry, when you say this and assuming also in the new units that are coming in or it's only with the existing units?
Sorry which is...
So when you mentioned that your growth should be higher than 7%, so does it include all the beds or just the new units? Is that the same?
So new units will be a significantly higher ARPOB growth, right? I mean new units are starting at a low base. So if you combine the 2, then your growth should be more.
Okay. Okay. For example, I mean...
I mean you have a revenue growth of 21% in the new units, right?
Okay. Okay. Because -- so you are saying that maybe now and last 4, who are core lower [indiscernible] faster pace than the existing hospitals?
And Dwark?
And Dwarka. Okay. Sure.
[indiscernible], right? I mean [indiscernible]. They are still lower. They are starting on a lower ARPOB.
Sure, sure. So in terms of...
21% and 64% growth in [indiscernible] and ARPOB from [indiscernible]. So you can imagine actually want to growth come from that side.
Sure. And just one [indiscernible] seems to be a go-to spot for long [indiscernible]? [indiscernible] we are so talent question?
[indiscernible], which has been there for a while, and [indiscernible] versus Mohali smaller facility, and again, have been there for 5, 6 years. This was for the existing facilities. And [indiscernible] don't really coming up there.
Nevertheless, we don't -- see we an abundant supply of beds there, [indiscernible] maybe sort of them are from [indiscernible].
Historically, [indiscernible] has been the place where we got most often, 25%, 50% of our debt from [indiscernible]. So historically, [indiscernible] had medical colleges and government medical hospitals, et cetera, and it's a big, big sort of base of doctors there.
Next question is from the line of Dheeresh from WhiteOak Capital Management.
Sir, which quarter do we take the annual increments, is it this quarter or...
1st of April.
1st of April. Okay. For the Mohali asset that you mentioned, it will be possible for you to share how much the partner -- listed partnering in the land and building for the 250 bed?.
I can't share that. We've already -- we own the land, so we would have...
So we have a fixed entry?
The specification and BOQs, then they don't sort of share what they are spending. But it will mean land and building will cost -- well, the building alone will cost about 80% of the total project cost if we were to do it.
Next question is from the line of Adit Chatuwerri from Nomura.
So I have a question specifically regarding the [indiscernible] business. So you reported this quarter around INR 1,600 crores of...
Sorry to interrupt you, your voice is coming muffled. Can you speak with the handset, please?
Am I audible now?
Yes.
Yes, yes.
Sir, my question is specifically regarding the inpatient business. So you've reported around INR 1,600 crores of IP revenue. So that's around 21% Y-o-Y growth. And also the volumes have grown by roughly 17%. So that translates to about like 3.5% growth in realization. Now this 3.5% is sort of one of the lowest in the preceding quarters. But at the same time, the volumes are like highest in the preceding quarters. So is this the sort of business profiling that we should come to expect as you grow and you expand? That your realization per patient on the IP business is going to be around 3%, 4%, that you're going to focus more on volumes?
I think you are looking at the overall number, which includes the new facilities, right? So you should compare the number on Y-on-Y basis for the existing hospital separately. Because the new hospitals ARPOB is obviously lower, right? And also -- so to that extent, you find a volume increase, but not the increase in the revenues because of the ARPOB issue.
As we have mentioned, that as we have -- we changed the mix of the business in those new hospitals, we're also putting oncology there and have more talent there, slowly the ARPOB will change, right? So there's a difference of 80,000 to 45,000. The new hospitals have an ARPOB 45,000. And our existing hospital having an INR 80,000, right? So we think that 45,000 will surely come up fast. So it should be anything been 60,000, 65,000, let's say, in a year's time. And that's how this will get catch up, right? Then you'll find that the number increase and the overall increase will come up -- will start to have lesser differences.
So the backdrop also on the levers for these realizations, right, so like if you look at the sum of shares of oncology, cardiac sciences, orthopedics, neuroscience and [indiscernible], like the sum -- the share has come down this quarter on a Y-o-Y basis. And that's a first in a while. And even the...
It's because you are including [indiscernible] in this. Because you included the new hospitals, which have less than 2% oncology share, right? So it will, right?
So what's this...
The new hospital's share is very different from what we have in the existing hospitals.
Right. So when do you suspect like, as the expansion ramps up, that we would have a sort of a resting rate where, as you said, ARPOB grows at roughly 9%, 10%. So I guess the realizations grow at 8%?
No, no, no. It doesn't work like that. You have to understand, okay? What are we -- what is it that we focus on? We focus on acquiring facilities, okay, turning them around. See that this thing get higher ROCEs over a period of time, but you look at it on an incremental basis, right? Now all of -- if we bought something, okay, with a lower EBITDA, lower ARPOB, okay, and we are demonstrating an increase in that ARPOB, it may or may not get to -- not all hospital will not have the same ARPOB, okay? Eventually, that is very hospitals [indiscernible].
Okay. So...
Nor we have the same EBITDA per bed. What you have to see is, okay, vis-a-vis what you paid for it, okay, what is the sort of return you're going to get and so on and so forth. Yes, the levers for doing all of that -- and what we are seeing is that levers for doing all of that is going to be better critical mix, doing more surgical work, less sort of testing, et cetera, higher oncology business and so on and so forth. That makes 25% or 24% oncology, okay? But you may not get to the ARPOB, because the ratio there are cheaper. I'm not even facing the daily ARPOB with it, right?
Yes. No, I understand. So just lastly, so a lot of your peers have mentioned that that's sort of translating a lot of the lower ALOS businesses to like daycare. And right now, your IP business is roughly 80% of overall. So you don't give any separate numbers there. So do you have like any kind of qualitative color regarding what's the OPD margin profiling versus daycare, and how it helps your margins if you sort of translate a lot of those lower loss to daycare and census beds, in terms of beds?
So look, I think if you -- the lower ALOS business to -- this thing has its own sort of tenants with it, okay? Because currently, insurance companies don't cover businesses which are where you don't spend the night in the hospital, right? So you need to spend a night for insurance companies to -- so daycare business may not be covered by the insurance companies. That itself is kind of distinct. So by squeezing a lower ALOS business and doing it daycare, I mean, of course, you can -- daycare procedure, okay, the longer you stay in hospital, the hospital loses money us money, right? I mean the surgical part is what [indiscernible].
So if you can translate anything into a daycare, the person in the morning, do the procedure and have them out by the evening, okay, your yield is significantly higher. The question is why is it that you can't do it? Because for a lot of the procedures or for most of the procedures, you need to stay the night in the hospital to get -- to claim insurance.
Okay. So on the cash patients, like the cash patients, is there a targeted strategy there to like move a lot of these lower ALOS to daycare? Or is it something that's not the focus right now in terms of your non-IP business?
We do that as [indiscernible], right? And I don't know exactly what you are seeking. If you're able to articulate a little better, then perhaps I can answer you for the sake of...
For us, the ARPOB is the one that we go for, right? We will obviously -- and this data procedure will be all run-off new procedures, right? Our focus is to go up the value chain, right? So we'll be pursuing liver transplant, oncologies, neuro, cardiology, [indiscernible] surgeries. I think those are the cases that we pursue, right? So while we'll obviously -- there'll be shift of some data procedures on 1 day stay and you do it in daycare, yes, we can, we do. But that's not the [indiscernible] of the hospital administration to really after, right?
They really depend what your proportion is, right? I mean everybody's is sort of different because the clinical programs are different. If you do a liver transplant, okay, your EBITDA per bed or your ARPOB is higher, meaning upwards. It's higher, right? But the fact of the matter is the patient stays much longer. Would I replace that with the dengue patient which has maybe a lower ALOS, but a higher percentage margins but lower [indiscernible].
Next question is from the line of Prashant Nair from AMBIT Capital.
Just one question on your -- so as your new projects now start coming on stream over the next few years, so if you take some of the larger projects, [indiscernible] Nanavati, when the beds come online, would they have similar case mix, payer mix, ARPOB [indiscernible] for all the beds? Or would they start at slightly different levels and then match up to how the existing hospital beds are?
So you want to have a different sort of base to start with because, first and foremost, what you do is you try to ramp up occupancy over there in the new beds. And when you do that, then you're not kind of very strict on the payer mix as well as the clinical mix, okay? You are going to take -- and people may not be getting priority today because that's a lower-end payer mix or a lower-end clinical mix, right? You kind of open your doors to it. So ARPOB from the incremental bed is lower.
Having said that, the EBITDA per bed is higher. So your profitability -- because you get amount of operating leverage over there as well. right? Because your main costs and, et cetera, associated costs, everything is already being incurred by existing hospitals.
Sure. And second question in these projects, would the investment in the beds follow a similar pattern? So say a new greenfield project, you frontloaded everything, right? So in the brownfield, there's -- is there a period maybe after the first year, I think, where you have to step up either investment in [indiscernible] or equipment, [indiscernible]? Or are they all done at the beginning?
They're all done in the beginning, so you don't have a step up anything. I think brownfield, I understand you pretty much -- yes, you're operating with the same set of people, the same majority of the equipment is already there. So yes.
Next question is from the line of Tushar Manudhane from Motilal Oswal.
Sir, just on the international patient ARPOB, if you could just help understand like how much drop the ARPOB or decline in the ARPOB that has happened because of these issues related to immigration in the year-over-year or quarter-on-quarter basis.
So international business has got nothing to do with immigration business. These are 2 separate streams altogether. The immigration businesses where people come for visas, they have to get themselves tested and so on and so forth, they're not immigration departments, right? The international business is the incoming business that you have. I mean immigration business is the people who have to -- if you have to relocate to Canada, then you have to get your medical sort of tests and all that.
It's OP business.
It's OP business. The international medical tourism is people who are coming to India. They are 2 separate business streams.
Understand. So as far as international business, just to understand what kind of ARPOB growth which this has in the last 2, 3 quarters.
No. So Tushar, typically, the ARPOB in the interest of the [indiscernible] the overall ARPOB. So international business growth on ARPOB would be 7% to 10%, right, if you see the last year. So -- and also it changes, right, part of it depends on what the proficiencies that you're in. But that would be the -- so it will be overall growth. Because these tariffs are linked to the [indiscernible].
So largely similar to that of the domestic patient in terms of growth, not in terms of value. But in terms of growth, we are largest in both international as well as domestic patients. Is that the right way position?
The change, yes. So the pricing change is -- yes, price is linked to the self-pay, right? So we charge a premium on that, but then it's linked to self-pay.
Understood. Understood. How much of the OpEx at Dwarka? Like operation cost, when you say breakeven, it's [ 6 to 8 million ]. So if you could share how much OpEx and how much of that is already into the given period? You said that we need to get the licenses and all, so you need to have doctors and nurses already on board. So does it mean that OpEx is already on June?
No, Tushar. Basically, in this quarter, we have 6 crores of prelaunch costs, the cost of the doctors and the staff that we had hired. Before you get the [indiscernible] hospital, you need to have people on your roles, right? So you have to demonstrate to the department, to the health department, to say that we have so many people available for treating patients. So that is the cost. We haven't had any revenue from the hospital in quarter 1, right? These costs will obviously that build, right?
This is a cost which is for the quarter. But obviously, if you take June month, June comp will be higher than the average rate. 6 crores is not for the full quarter, not for the -- so let's say, June -- if I say July, you will have further increase in the cost, because you're adding more people. So we opened 94 beds this quarter time, and I can't give you a P&L statement in terms of what the cost would be. But we do think that by 8 to 9 months, we should be on a breakeven state, which means that this would be in the quarter 4, that we start to see breakeven numbers at EBITDA level for [indiscernible].
So primary, you're still trying to understand [indiscernible] drag is there on the existing EBITDA, say, INR 500 crores. So [indiscernible].
Tushar, we said quarter 4, we'll breakeven, right? So that was -- that will happen until quarter 4. So in quarter 4, you'll see that loss come [indiscernible] for Dwarka.
Sure, sir. And how much further investment would be required in Lucknow for this 450 beds once the approval is there.
So I think this will be around INR 700 crores plus.
Next question is from the line of Amit Kadam from Sandra Robeco Mutual Fund.
Yes, sir. Am I audible?
Yes, yes.
Sir, my question is like I'm just reading the Slide #10, and I'm trying to refer the outpatient growth what we have seen, the fourth chart, where it shows that 4.5% has been the growth for the like-to-like of the existing hospitals. Whereas, when I compare it for the quarter 1 FY '24, a year back, this run rate was like almost 13%, 14% growth rate. What -- how do I read this particular thing for 14% versus [ 14.5% ] right now?
So the OP consultants have come down. I think we alluded to that to speech also that we had [indiscernible] emulation business, which is down by around 48%, right? There's a large immunization. So we have 3 centers for immunization, right, 2 in Punjab and 1 in Delhi. Now the footprint has come down by 48% here, right? So obviously, that has impact in these numbers because that's all OPD business. So we do think that this impact will go until quarter 3 and from -- because quarter 4 was a normal quarter because we have this change in the visa option from 1st of January this year. So there will be some impact of that, that you will have.
But the good part is this is not the OPD business which needs to admissions or IBD, right? I mean this is purely always -- immunization business, OPD people come to the consult, the same go out. So they don't get translated. Normally, reduction in OPD business or outpatient footfalls, okay, would be concerning. What that means is that they're going to have a lower in-patients going forward. But this is not the category of [indiscernible] which converts in patients.
Which is what, 3% of costs? 3% [indiscernible] investing.
Yes. Also last year, I think we opened Shalimar Bagh. And so 3% of that was because of the capacity expansion like Yogesh pointed out. That is last year. So there's new capacity which opened in this month last year, in that quarter.
So like the kind of capacities what we are going to see in next 1 or year, what is the metric -- or what number you would like to see? Because for run rate in what we see and part [indiscernible] partly driven by volume, the number should be high single digit. That's what could be a number for maybe a steady-state growth.
Are you talking about the existing hospitals or new hospitals or combined?
Existing, sir. Because combined, you have -- it may not be correct reference. But like when I just see that inpatient and outpatient growth, and you say that partly would be the international, but I'm just like little confused that international patients coming off may not have so much impact.
So the material part is the inpatient.
Yes. So inpatient is 5.5%. That's what I -- the second part of the question is then what is the run rate I need to see in this particular number to maintain a steady-state growth rate of this, as a tracking point?
So I'll just give an example of what happened Shalimar Bagh, right? This is a hospital where we added 43% of speciality. And the moment you have the speciality available, the [indiscernible] that, the IPD volume and the occupancies went up by 34%, 35%. The OPDs and the IPD footfall went up by 34%, 35%, right? So that the same way [indiscernible] and we see adding [indiscernible] a month ago, and 2% will finance spend and [indiscernible] should be [indiscernible].
Last year, same time. This year, you're not. [indiscernible] the overall growth basis, right? If you [indiscernible] hospital exists without the Shalimar Bagh expansion.
But sir, this is a volume count, right? So it is irrespective of what hospitals I'm trying to count. Because even I give that benefit of Shalimar also now part, you're like existing product and if it is 5.5...
[indiscernible] a little differently, right? So let's say, last year, okay, so you had 3,400 beds and then you add, let's say, 200 beds to it, because you've done a brownfield, or you move to 3,600 beds, right? You're not comparing the 3,400 to the existing beds today. You're comparing the 3,600 to the existing today, because you have the jump of 200 beds last year. Likewise, if you take a jump of 900 beds this year, okay, then you need to look at overall footfall.
So I don't let me sort it the other around, just explain this. So basically, we have the highest occupancy among our peer group, right, which means that we don't have more IPD patients, right? So what comes first, you have to have capacity to have more IPD patients. So what -- so that means to be -- to that extent, we are lifted by the number of beds that we have. And the example that [indiscernible] was that the moment we added the beds, the volume went up. So as we -- as people get added, we do think this volume will materially change. The growth in the volume would materially change, because we've got a better, right? [indiscernible].
If we don't come up with brownfields, we don't come up with capacity addition, we're already operating at 77% occupancy. I don't have room for my occupancy to go up. Partially only, right?
Yes, this explains that particular thing. Because maybe on the flip side, I was maybe trying to see is there a shortfall in terms of whatever the demand expected...
No, no, no. I mean there is a shortfall of supply. There is supply shortfall and that's why we're doing all these brownfield, right? And that's where we [indiscernible], right?
Right. And you mentioned that pension and outpatient doesn't have like high correlation with that particular thing.
No, no, no. We had a very high correlation, okay. But the outpatient business, which is reduced, is the immigration -- visa immigration business. If you're going to Canada, you had to come to get your blood tests done, so you get your certificate on the thing, that you are medically fit, right? So let me show -- when you're into Canada, you would come to a hospital and get tested in, because we were accredited with the Canadian embassy. Now that person is not going into an inpatient, even through getting admitted for a procedure. So the visa policy right now, Canadian government is not giving visas. So people are not coming for the medical certificate.
So if you would have added that missing part, it would have -- what run rate this number 4.5% would have been, it would be in the...
The same. It will be same. Inpatient would be the same.
Not inpatient, outpatient then, sir. That 4.5% would have jumped up.
Yes, then that would have gone up.
Next question is from Lana Samin Gupta from Centrum Broking.
I am audible?
Yes. Yes.
I just want to understand on the bed share mix. So basically, from the existing bed share has remained majorly between 29% to 30% for the institution segment. So -- and our overall institutional bed share mix has come down to 27%. So how do you see it going forward over the next 2 to 3 years once all the facilities get integrated and where you are in full swing?
So I think there are 2 aspects. So far, like we said, that quarter 1 is a weaker quarter, okay, you have less demand. So you don't put your foot on the accelerator and start driving out institutional business. You accept and accommodate, because you want to be leader there. Normally, you see this happening in Q3 and Q4 where you have a reduction in institutional business.
Having said that, like I mentioned, when you come up with new capacity, new brownfield, then you take in occupancy is the criteria, not the caliber of clinical mix as well as the sort of payer mix. So we will be at that stage, taking more institutional. But having said that, even on the institutional business, the EBITDA per bed, which you're able to ink out, is significantly higher than what it is for existing beds. And that has been experience with Shalimar Bagh also, right?
So when we opened the new beds, you saw the ARPOB, the incremental ARPOB of the new beds come down, because you were taking institutional as well as sort of lower payer mix, et cetera. But the EBITDA per bed pertaining to those incremental beds were higher than the EBITDA per bed of the previous hospital, on existing hospital.
Okay. Okay. Understood, sir. And for the international business also, you see like there's bed share mix going upwards or remaining at the same level? And like, how do you see this international business going forward?
We see it -- I mean, the growth in that business has been outstepping growth in other businesses. Percentage incrementally going up [indiscernible].
So I think Q1 is an aberration there. But we do [indiscernible] growth, which will come back it, have come back, I mean, at speed. And I think there was some temporary blip because of Bangladesh vacation and situation in Yemen, Somali, et cetera.
But nevertheless, your growth in international business is more than growth in your other business. You have to [indiscernible] go up.
Next question is from the line of Alankar Garude from Kotak Institutional Equities.
Sir, we have added 2 new cities to our network in the past 6 months. Other than these 2 are focused teams each way and growing in the existing market, at least over the next 4 to 5 years. So the question is beyond what we have already announced so far on the expansion front, is it fair to expect a relatively higher expansion announcement coming through towards the newer markets?
Look, I think growth in our existing hospitals is not a focus both in our existing hospital is a necessity because we run out of capacity, we're already operating at 77%. I need to increase bed strength in my existing hospitals. And that's why you're seeing this incremental kind of listing. And this is something we embarked on 2, 3 years ago. And so they've been in construction and so on and so forth. And over the next -- maybe between the next 8 to the next 15 months, you would see -- or 20 months, you're going to see a lot of that capacity come through.
Now having said that, we still have a balance sheet. You know all the expansion is being incurred through internal accruals. So we are intending to go to other markets. They are high ROCE markets, high opportunity markets. And frankly, I mean, you can imagine whatever multiple dates for these 2 hospitals has already come down by 60-odd percent, simply because we moved the EBITDA by this much in the first 3 months. So we see opportunities in other markets as well, and we are focusing on that. That's where the focus is going to be. It doesn't mean that you don't look at metros. The point is that in metros it's going to be that much more difficult to be able to acquire hospitals or to acquire land because it's not available.
Fair enough. So maybe like to that one, how are you looking at this expansion from an operational standpoint? I mean any need to beef up the senior management team? Can senior management bandwidth be increasingly an issue going forward?
On the contrary, I think we see the number of locations that we've added in the last 5 years or 6 years, right, is essentially 3. One is Dwarka, which is open, one is Lucknow and Nagpur. So from maybe 17 locations, we wanted 20 locations. Now everybody wants career progression, right? And we got 30,000 people work for us. And if it's 1 unit head, he also wants over 5 or 6 years, his area of influence will increase. Maybe he's running one hospital he was handed to, the person is handling 2 and 3 or 4 or whatever.
So I think providing that growth, providing the segue for people's career path, it's a necessity today. Even 5 years to have 3 more locations. And essentially, if you make a brownfield, I mean, a lot of our expansion is a brownfield. Now if I increase 800 beds by another 400 beds in Saket, nobody is -- I mean it's the same location, it's just you're doing a little more of the same thing maybe operating another facility. So from 200 beds in Mohali, even go to 355 beds, you don't require management bandwidth for it. I mean this is doing more of the same effectively. And 85% of our growth is coming through going forward. 90% is coming through brownfield. So if your existing capacity increasing.
So look, I think from a leadership standpoint or down the -- I mean, the 3 locations on top of 17 which have been added, I don't think it's -- on the project side, of course, we've augmented the team because when we embark upon all of these kind of expansion, you need to sort of fortify those teams. So that will be focused on. Other than that, not really. I mean, of course, we've strengthened the team, et cetera, but -- and that happens through due course. I don't see bandwidth issues. Because frankly, the expansion hasn't been that much in terms of locations.
Fair enough. Sir, maybe that question becomes more relevant as we go beyond these 20 [indiscernible]. Okay. So the second one, then we have been increasingly hearing about resistance from insurance companies on rising health care tariffs. Over a period of time, do you have any change in the balance of part when it comes to negotiations between corporate hospital chains like us and the insurance company?
Look, I think the insurance companies, by the end of the day, okay, piggyback on what your schedule of charges are, right? What your rate list is for cash patients. And frankly, I think you have the most democratic system over here because no hospital has a monopoly. Patients are choosing to go where they want, based on the value proposition they're able to get okay? It's not as if people are not kind of reducing the prices to get more patients and so on and so forth. Everybody does that.
None of the big chains, none of the big guys, okay, are price-makers. We're all price-takers. Eventually, 90% of all health care is provided by smaller nursing homes and so on and so forth. Every year, they know what the inflation is, they come up with a particular price. And when we seek price data, okay, that is the basis on which we increase our [indiscernible]. So I think from our standpoint, you keep in mind, I mean, our EBITDA per bed is still 55% better than the second best player in the industry. Our ARPOBs are maybe 20% better than the second best player in the industry, okay? So if they're price negotiation that sort of comes down, then I frankly think even insurance companies a lot more price sensitive.
Next question is from the line of Shubham from Purnata Investments.
Sir, I want to know how many nurses seats you have across hospitals?
How many what?
Nursing seats.
Nursing seats?
Yes.
You mean nursing colleges?
Yes. I mean you have some nursing seats in Lucknow, I think.
We have one nursing college in Lucknow, and that's about it.
Yes. That's around 100 seats.
100 seats.
Okay. And do you want to increase that or something like planning it?
So we have tied up with many nursing hospitals, nursing colleges.
Okay. And how many beds is operational in Dwarka?
94 beds, that is combined. So it's a 300-bed hospital, so far 94 beds as we speak.
Ladies and gentlemen, I now hand the conference over to the management for closing comments.
So thank you, everyone, for joining us for the first quarter FY '25 earnings call. We look forward to taking you up again next quarter. Thank you.
Thank you very much. On behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your end. Thank you.