Max Healthcare Institute Ltd
NSE:MAXHEALTH
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
601.65
1 079.9
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Max Healthcare Institute Ltd
Earnings Call Analysis
Q2-2025 Analysis
Max Healthcare Institute Ltd
Max Healthcare reported robust growth in its latest earnings call, marking the 16th consecutive quarter of year-on-year revenue increase. Total network revenue was INR 2,228 crores for Q2 FY '25, reflecting a 22% year-on-year growth and a 10% sequential increase. The network's operating EBITDA came in at INR 591 crores, up 19% year-on-year, and the profit after tax rose to INR 383 crores, a 13% increase from the previous year. This indicates that the company is not only maintaining but enhancing its profitability.
Key operational metrics also showed a positive trend. Average occupancy increased to 81%, up from 77% a year ago, while average revenue per occupied bed (ARPOB) reached INR 76,100, growing by 2% year-on-year. The international patient revenue grew to INR 178 crores, up 12% year-on-year, despite challenges in patient footfall from regions affected by political unrest. These factors contribute to a solid operational foundation for future growth.
Max Healthcare is aggressively expanding its capacity. The recent acquisition of Jaypee Hospital in Noida for INR 1,660 crores is expected to enhance the company's footprint in the national capital region. The current operational bed capacity will rise from 376 beds to 430 by March 2025, with potential to increase upwards of 480 beds by December 2025. Additionally, expansion projects across various locations indicate commitment to growth, and the new Max Dwarka hospital aims to breakeven before the end of this financial year, potentially becoming the fastest breakeven in the company's history.
The company continues to uphold its commitment to community health, having treated nearly 40,000 outpatients free of charge within economically weaker sections. Both strategic business units are performing exceptionally well: Max@Home achieved INR 53 crores in revenue, growing by 24%, while Max Lab reported INR 47 crores, an increase of 21%. These diversifications add resilience to the business model.
Max Healthcare generated a significant operating cash flow of INR 464 crores, with INR 217 crores redirected toward capacity expansion and facility upgrades. The net cash position improved dramatically from INR 66 crores to INR 313 crores, providing a stronger balance sheet to support ongoing and future initiatives.
Despite the positive growth trajectory, management indicated a cautious outlook on profit margins tied to recent investments in high-end surgical capabilities, which can often yield lower percentage margins but enhance overall revenue. Management also refrained from providing specific forward-looking revenue guidance yet expressed confidence that occupancy levels and operational efficiencies will improve margins over time.
Max Healthcare's strategy appears balanced and well-structured, focusing on increasing operational capacity while maintaining a quality patient care standard. With strong financials, a commitment to expansion, and a focus on community health, the company is well-positioned for continued success in the healthcare sector.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Max Healthcare Institute Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Good afternoon, everyone, and thank you for joining us on Max Healthcare's Q2 and H1 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 Mr. Keshav Gupta, Senior Director, Growth, M&A and Business Planning of the company. We will begin the call with opening remarks from the management, following which we'll have the forum open for an interactive question-and-answer session.
Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.
I would now like to invite Abhay to make his opening remarks.
A very good afternoon to everyone, and a warm welcome to Max Healthcare Earnings Call for second quarter and first half of financial year 2025. The financial year was projected to be one of limited growth.
Our brownfield capacity expansions with scheduled for completion at year-end, and a greenfield hospital in Dwarka, will still be in its early stages of operation. However, the first half of the year has seen stellar growth fuel by recent acquisitions and the successful integration into our network.
By expanding into new or proven geographies, we have supplemented our growth momentum. Max Lucknow and Max@Home have been fully integrated into the network and have significantly improved their performance. Combined revenue reached INR 130 crores for these 2 hospitals in Q2, representing a growth of 40% year-on-year and 32% quarter-on-quarter. Compared to the previous year, the combined EBITDA nearly doubled to INR 33 crores in Q2 with a margin of 26%.
The newly operational Max Dwarka Hospital reported a revenue of INR 33 crores, an EBITDA loss of INR 18 crores, with occupancy of 41% and ARPOB, average revenue per occupied bed of INR 80,000. This hospital has been doing -- performing very well, and we believe we'll breakeven before -- much before the end of the year, and perhaps we will be the fastest breakeven in our history.
We are excited about the recent acquisition of Jaypee Hospital Noida. It is a marquee asset and will strengthen our presence in the national capital region. The enterprise value for this acquisition was INR 1,660 crores and we expect to integrate the hospital into the network quicker than others.
In the near term, our plan is to increase the operational bed capacity from 376 beds currently to 430 beds by March and upwards of 480 beds by December 2025. We're simultaneously strengthening the medical program in urology, medical oncology, gastroenterology and neurosciences through a combination of external hires infrastructure enhancement and technology updates.
Now coming to Q2 performance highlights. This is our 16th consecutive quarter of year-on-year growth. Overall network revenue stood at INR 2,228 crores, registering a growth of 22% year-on-year and 10% quarter-on-quarter. Network operating EBITDA was INR 566 crores. And more importantly, excluding the extraordinary items comprising of INR 18 crores of start-up losses at Max Dwarka and INR 7 crores of transaction costs for the Jaypee deal, so operating EBITDA stood at INR 591 crores, reflecting a growth of 19% year-on-year and 17% on quarter.
Profit after tax stood at INR 349 crores compared to INR 338 crores in Q2 last year and INR 295 crores in previous quarter. Yet again, excluding the extraordinary items as mentioned above, PAT stood at INR 383 crores, reflecting a growth of 13% year-on-year.
From here on, I will mention all numbers and percentage, excluding the extraordinary items. Our average occupancy for the network is to 81% from 77% in Q2 last year and 75% in the trailing quarter. While the occupied bed grew by 18% year-on-year and 8% quarter-on-quarter.
Average revenue per occupied bed for the quarter stood at 76,100 growing by 2% year-on-year and remaining flat quarter-on-quarter. Like-for-like, ARPOB grew by 7% for the existing beds -- for the existing hospitals.
Network gross revenue was INR 2,194 crores compared to INR 1,827 crores in Q2 last year and INR 2,028 crores in previous quarter. This reflects an increase of 20% year-on-year and 8% versus the trailing quarter. The international patient revenue stood at INR 178 crores, which reflected a growth of 12% both year-on-year and quarter-on-quarter despite contraction in patient footfall from Bangladesh and Yemen due to political unrest.
Network operating EBITDA stood at INR 591 crores, reflecting a growth of 19% year-on-year and 17% quarter-on-quarter. Operating EBITDA margin stood at 28.2% for the quarter. Annualized EBITDA per bed stood at INR 75.5 lakhs, remaining flat year-on-year and increasing by 6% versus the trailing quarter. Like-for-like EBITDA per bed grew by 4% for the existing hospitals.
Profit after tax was INR 383 crores versus INR 338 crores in Q2 last year and INR 295 crores in the previous quarter. Overall free cash flow from operations was INR 464 crores. Of this INR 217 crores was deployed towards ongoing capacity expansion projects and upgradation of facilities and acquired hospitals. Consequently, net cash position for the network stood at INR 313 crores at the end of September 2024 compared to INR 66 crores at the end of March 2024.
Continuing our efforts to support the local communities, we treated approximately 39,600 outpatients and 1,300 inpatients from economically weaker section a society in value free of charge. Both our strategic business units continued to report significant growth in the revenue and profitability.
Max@Home reported a top line of INR 53 crores, reflecting a robust growth of 24% year-on-year. It offers 14 specialized service lanes across 12 cities with over 50% repeat transactions. Max Lab reported a gross revenue of INR 47 crores, reflecting a strong growth of 21% year-on-year. It provides services in 50 cities through its network of more than 1,100 collection centers and active partners.
Now coming to the status of our expansion projects. So capacity augmentation and Max Lucknow, finishing work for additional 140 beds is in progress by December 2024, as communicated earlier. Further, environmental clearance and consent to established and fire been received for additional 450 bed tower at Max Lucknow. We are completing the growing for the same and we'll be appointing the contractor shortly. 450 beds at Nagpur, 12 beds have been added in October 2024 for the balance back on additional floor applications to environment payers, et cetera, are in progress.
268 beds at Nanavati in Phase 1. We have completed most of the structural work. The project continues to be on June, and we expect completion by end of the financial year, as communicated previously. For 400 beds in Max Smart, this project is on track. We expect its completion within Q1 FY '26.
455 beds at Mohali, again, most of the structural work is complete, and we expect its completion again by Q1 FY '26. For 500 beds at 56 Gurugram. Again, the structural work is completed up in the print and above. We expect completion of the first phase of 300 beds by end of Q3 FY '26. All of these are on schedule, and we see over the next 12 to 15 months, significant ramp-up in our capacity, most of which via Nanavati, Mohali as well as Max Saket should be coming through in the months of April, May, June.
For 367 beds at Patparganj, post issuance of a no objection certificate by fire departments and water departments, et cetera, we've already submitted our plan. We got environmental clearance. We are doing the tendering and all of that, and they should be pretty much inside as well.
For 550 additional beds at Maxicam in the Saket complex. The environment clearance and consent to established, et cetera, has been already received. -- battery work is on. The forest approval over here is delayed due to Supreme Court proceedings in relation to 3 selling involved in BBA and the tenant Governor Billy. So right now, for the past 6 months, they haven't committed anybody to remove any trees, but I think this should get resolved very soon.
And finally, moving on to overview of the company performance in the first half of financial year 2025. Network gross revenue stood at INR 4,222 crores, reflecting a growth of 19% year-on-year. Overall network operating EBITDA grew by 17% year-on-year to INR 1,089 crores, reflecting a margin of 27.2%, while EBITDA for beds stood at INR 72.8 crores per lakh per bed. In the first half, we generated INR 722 crores of free cash flow from operations after interest tax, working capital changes and routine CapEx, of which INR 450 crores was deployed towards ongoing expansion projects.
With this, we open the floor for any Q&A.
[Operator Instructions] First question is from the line of Ameya from JM Financial.
Congrats with the management on good set of numbers. The first question I have on furnace units, both have done value during the quarter. I understand the ARPOB might be going through the seasonality of the occupancy. And both the units are now believing 20%-plus margins. Is it possible for us to give some color of what would be the potential margins for optimally utilizing both at the Macon and the Lucknow unit specifically Lakota it match the profitability of your existing pineti market, et cetera?
I think, firstly, we don't give forward-looking statements. But intrinsically, margins and percentage margins in one part, we're still operating at lower ARPOB compared to the rest of the network and also compared to the potential in the market over there. And in the coming quarters, you should see an improvement in that. When you have an improvement towards better quality programs that mean higher end surgical mix and so on. More robotics, more complicated surgeries.
As the new teams that we hired come in, kick in, some of them are very recent tires, et cetera. So you see all the benefit coming through. Also keep in mind that Lucknow so far, we have a bunker over there, but oncology has not been a big play in Sara, I think it's only a couple -- 1 or 2 percentage, 2 percentage points?
The volume to...
7 to 8 percentage points of revenue as against 26%, 27%, which is across the network, and that's a high sort of test. And as we get the bunker ready, the new machine, the linac machine is coming in place. So we see this number move up. So you automatically see an increase in ARPOB. Our preoccupation, as you're aware, is never with margins in percentage terms, it's EBITDA per bed. And I think there is a significant amount of dues over there with respect to EBITDA per day.
Sure. The second question I have is on the Saket complex expansion which is close to cover...
You want to sort of add -- as you're going to get 10 more beds over there, it's almost 50% more capacity, right? So your operating leverage because on the incremental basis much more EBITDA for debt for incremental beds is significantly. So you'll see margins expand because of that as well.
Sure. So you see the 7 large bed kind of EBITDA to be achieved in the plan?
I may not give you a forward-looking sort of statement.
Sure. No problem. The second question is on the Saket complex. So here you're adding almost 1,000 base maybe 800 to 900 beds in next 2 to 3 years. So should we consider this as a brownfield expansion because considering this much amount of beds are getting added, I believe that everything like utility doctors, everything it should be added as well, right? So it's sort of the well time the margins will not be significant, right?
Is my understanding correct? Or do you think that this is like a green brownfield expansion, which is happening in a?
No, it works like a plain brownfield expansion. I think when you look at utilities, stare you looking at a capital cost. As far as the operating cost is concerned, there is a significant increase in operating costs. If you look at the P&L, about 15% of your costs are related to doctors and out of the 33% of indirect cost, 23% nonmedical personnel. Most of it is management. So you are about 25%, 26% of the operating cost, so the operating cost may increase on an incremental basis, but you still have significant amounts of growth. In each one of the brownfields that we do, it's the same. You have to increase your utilities, both in terms of whether in terms of chillers, venting or STP and so on and so forth.
So -- but it's in the same complex, yet you have the benefits of a brownfield. Also keep in mind that it's not 800, 900 beds over the next 4 to 5 years. You have to look at it 3 to 4 years, you would look at it slightly differently. You're going to have 400 beds, let's say, in the month of April, May coming up, which is now, right? We expect a very quick sort of ramp-up of those 400 beds like we witnessed in our other brownfield expansion.
The next set of 500 beds, okay, is going to come up after 3.5 years. Basically, you had a run on these 400 beds, you'll have for the next 3.5 years, 4 years. My belief is that these beds are going to get occupied in a very, very quick time. And you're going to run out of capacity way before, okay, your new beds, which is another 500 beds in Viana going to come out.
And the third question, if I can squeeze in on our profitability for the core business is still healthy at 20% plus margin but it has dropped slightly year-on-year. If you have to call out anything there?
Again, point I'd like to call out is you need to change your view of the margins. When you start doing high-end surgeries or high-end payer mix, your margins in percentage term comes down. In absolute terms, it goes up. I mean, you'd rather do -- I keep saying the other INR 10 lakh surgery with the 20% margin, then INR 2 lakh surgery with a 50% margin.
So if you look at medical patients, medical patients give you less -- more margin in percentage terms, but less in value terms whereas a surgical patient with liver transplant patient, hard transplantation will give you a less in percentage terms and more in value terms. I mean, but that's the patient you want, right? What you need to see it is in the context of -- so 3 aspects. You need to look at EBITDA per bed. That's one.
Secondly, you have to compare it to the same time last year rather than on a quarter-on-quarter basis, Q2 is always a medical quarter. The ARPUs are lower in Q2, but it's always -- also characterized the higher occupancy, which you see.
And the third aspect is that if you are going to look at EBITDA per bed, we want to take out at least the newer acquisitions that have been done, okay, because be it Barka, which is being started right now or Lucknow, which is unified or not, but they're still in the building stage, right? So they enjoy lesser EBITDA per day.
That if you look at it all...
So Aman, the EBITDA are better down by 6% Y-on-Y, right? And this is despite the fact that we had an indivisible last quarter also, which has dropped by 34%, right? And it is very high margin, a bit high-abusiness, EBITDA margin business. But I would say that has some impact, but I think that will be normal from quarter 4 onwards because we had a drop from quarter 1 quarter last year. So I think that normally, you see that even EBITDA order growth will be much better than what we see today, which is 6% and.
Got it. So going ahead for the existing but EBITDA for that improvement would be largely inflationary? Or you think there would be improvement in terms of the productivity as well?
So you know that the ARPOB has grown by 7%, right? And that's really adjusted for all the in the supplier to growth in ARPOB. And in the 8% to 9%, 2% is because of price. That all is FMC in terms of such inspection fee or, I would say, part and also the case mix, right? So that is one called , and that's what will continue. And I don't think we will see any big change in these numbers in terms of growth in ARPOB or not moving forward.
Next question is from the line of Neha Manpuria from Bank of America.
On the Jaypee asset acquisition. I just wanted to get a sense on do you think -- if I look at the numbers, EBITDA that obviously can be better. But in terms of occupancy ARPOB, it seems pretty decent. Obviously, it can be higher. But what do you think is required there from an either do we think we need more medical equipment, more doctor team, does it need a gradation? How are you thinking about ramping up that the Noida asset?
I think all of the above. It's been a company which has been in liquidation for a significant amount of time. As you -- I mean, as you would sort of appreciate, it's not the best management, the best kind of equipment would be end of life because it is administrated would be employing that equipment.
So equipment is end of life, new equipment, handheld instrument, et cetera. I mean all of that is very basic over there. As far as the clinical programs are concerned, again, it's -- I think it's been operating gravity. There's a new amount of upside over there.
I think separately, it's been operating as 380-odd bed hospital. We believe very quickly, it can move to a 500-bed hospital within the current structure without making any significant sort of changes. And this can be done in a matter of -- in a few quarters itself.
So if you ramp up the capacity, you move up the clinical programs, you move up on the ARPOB, with the payer mix, et cetera, I think we'll be able to get there. To me, given the location, given the access and given the quality of infrastructure, it's a marquee asset.
So when you have that kind of distill, it becomes the easy sort of -- I have no doubt that this will play out the same way as Lucknow, or more or better.
And are there any litigation, et cetera, that we need to be worried about, which needs resolving? Or which could be a liability in the future that we need to be mindful of?
None whatsoever. None. I mean there are no pending litigation, see, that's the wonder of buying through an NCLT process. If there are any creditors, if there are any claimants, et cetera, there is a time bound manner in which they have to sort of raise their hand and put it. We mean any department. We even as government-regulated department. Any plant process allows you, okay, to basically step up and say, "Look, this is what my claim is." And after that time, okay, those claims are not sort of entertained.
In this case, it's not as if all the claims that were entertained at the inlet proceedings, all of them have been satisfied. And more importantly, even post the proceedings, there are no further claims which have been raised. When you get something through a high court order, Pasiones something via high court order? I mean how do you question that?
Yes, yes. So it's a fairly clean from a litigation perspective, there's no big overhang that we need to be worried about then?
You can't have a cleaner sort of title than that, right? I mean once getting it through the high court.
Fair enough.
And there are no credit with dialers. So it's all have been fulfilled. So I don't think there's any.
Understood. Understood. What about the 2 -- the balance here and the Balancer, I think is commercial would that be meaningful enough? Should we be considering that when we are looking at the math?
No, they're not meaningful enough. And I think we do not even attribute any value to it. Really, the question is that whether we should focus and spend CSR time and money on this or just sort of -- we'll figure it. Management is meaningless in the overall.
And last one on Jaypee, we've acquired part stake, right? The rest of it, what is the process for that by when do we see that for that position?
I think in the next few days, we should have that wrapped up.
The options they have estate book. So hopefully, next week, we should be kind of recoup.
Next question is from the line of Damayanti Kerai from HSBC.
My question is Dwarka. So are we in your opening remarks, you mentioned Dwarka will still be in Rampur for most of this FY '25. So I just want to understand like on CPA and insurance parent, I believe discs underway. So when do you expect this 18% revenue share will likely move up to the network level, 50% when you panel the required number of funding?
Anti perfectly, the EPA empowerment is underway, right? So we're also waiting for the Nation, you know that some of the PPAs have requirements to have the analyst. And so we do think that by the end of December, we should have all of them in place. And that's the time then onwards we can -- we should be more than 30% recon.
Okay. So by December, most of the contracts will be signed and then build up from there?
Yes.
And the ARPOB, which you mentioned is 0. That is because we understand most of the patients so far were the cash channel patients, right? And maybe ARPOB will settle down more at your network level for this hospital also?
Yes. So together 2 things. One is that we have very high APDs, right? And we were not able to -- since we do not have impairment, et cetera. So some of the equity will happen, but it will happen in some of the hospitals, right? So the doctors had -- did have some we were talking a lot of hospitals they are taking patients in the other office example. Euroscan takings in patients.
Something that's what is happening. So I think hopefully, when we have something in place, then the ARPOB will moderate a bit. But it won't be a very big change because it will be more near to the national average than the.
Yes, but give us a play between occupancy and ARPOB. Our belief is -- like I said, this will probably be the fastest greenfield breakeven that we have witnessed. And very good traction is a matter of time, you have the PPAs, et cetera, signed up. When we started end of July, so pretty much August, it does take 3 to 6 months to sort of sign all the contracts, et cetera, et cetera.
And I mean a lot of it is in play, I think like Yogesh mentioned by January, we expect all of that to be done.
Sure. My next question is on your network level revenue contribution from TPA and corporate. So it's around, I guess, 38% in the first half. So looking ahead, I guess, when we are adding a lot of capacities into the network where I guess this fare will take some time to build up. So say, in next 2 to 3 years, what kind of contribution we can assume from this particular channel. So you got can comfortably go up to say 25% or so? Or how do you see this fine moving up?
So I'm not going to give you again any forward-looking statement, but I can tell you what our experience all mean that when you open new brownfield capacity, you essentially start taking also a larger amount of lower-end payer mix as well as lower end clinical mix, which typically you -- so one of the characteristics is a brownfield is that you pretty much finished with distilling your payer mix. You're doing very little or none of institutional business, right?
Like in Saket, in the main cluster, the main hospitals, we stopped doing it. And none of the we stopped doing it. The minute you put up additional brownfield. One of the things you're going to do is we're going to switch on the TAP 4 institutional over that, which is lower impaired mix, right?
But because of the operating leverage, even with the lower end payer mix, that means lower ARPOB, the EBITDA per bed is high. That's what we witnessed in Shalimar Bagh when we opened the brownfield. If you actually see what is worth for us in ARPOB it was operating at maybe 55% or 60% occupancy. And on first order of business after taking of operations was to sign up the institutional business, which is again lower ARPOB, but provides higher occupancy.
Now the result is ARPOB's is going to occupancy went up to 90-plus percent, but EBITDA moved up by more than twice, right? So I think that's what we see when you have occupied incremental beds, okay, which are the cost of which is only incremental cost, okay? And even with the lower sort of payer mix, that brings it down to the bottom line. So margin improved.
What extent? That I will not get.
Sure. And my last question is in some of your near-term upcoming capacities, so Lucknow and then I guess Manatee, those are coming in near term. So for these species, when do you start putting up a new set of doctors, medical team, et cetera? Or it's like very -- it happens very near to the commencement update?
No. So there are 3 things. I mean we have new capacities coming up in, firstly, in Nanavati, in Max Saket and Mohali as well as Lucknow coming through by December, but these 3 are coming up in the same time, new month of March, April, May, sort of thing, right? These are brownfields. In brownfields, unlike Dwarka, which is a greenfield, okay, where you're going to staff, you're going to get doctors, you're going to get nurses, et cetera, they'll be on your books for about 2 months before you commence operations.
Even when you commence operations, it takes you time to sign up PPA, sign up this thing, et cetera, there's a ramp up. So there are some limitations in ramping up, which are not limitations at the operational level, but the limitations of enabling that occupancy over there. In a brownfield, you don't have that. It is the same existing contracts, the same licenses in the same state.
And all your doctors, pretty much all your doctors are the same because we have the more expensive ones as the Chairman of the program and the head of the program, et cetera. It's not the units that the unit consulting below. I mean the revenue doctor, the revenue doctors are not -- which is extremely sort of this thing. So it doesn't really show up in the first month itself, we kind of you get them and absorb it and so on. So I don't see a major impact because of this.
Yes. So any hiring in this bonus said, maybe the department head or the really senior position, but -- most of the team is already in place that there won't be any meaningful delta cost.
That's right. Even on the management side, if you see, I mean, the same facility is the same as been the same nursing head, it's the same engineering, medical superintendent and so on and so forth. It's not significant amount and particularly in smart, wise expanding beds. So the team is there already in place.
Next question is from the line of Sumit Gupta from Centrum Broking.
2 questions. First is on the -- can you tell what is the international patient spread share? And what kind of trend we can expect?
Interest in reshare is only 5.5%, right? And it constitutes around 9% on the revenue side. but 5.5% is you know the ARPOB is higher than the net leverage when it comes through presentations.
Right. Sir, second is on Jaypee posit also can you explain the cases of the payments of this hospital in order?
Sorry?
The recent agent in Bodo.
I can't hear you. Distracting noise.
So give you a patient case mix. About 25% of leg comes from institutional business and about 10% to 14% of the business, month-to-month consumer international business.
Okay. And sir, I just want to understand on the broader set. Like how the competitive marine just like so there are the hospitals which are also going to expand in this trap. So how do you see that in on Will there be an impact that you see on the volume side?
I think this hospital is there. Other hospitals that will come up are going to come up in some time. But this is a A+ location. When you can't get better than this in just anybody sort of familiar with that area. It's the 18-acre complex, it's 9.5 lakh square feet. I mean honestly, I think none of us would ever build a hospital like that. We wouldn't want to. I mean the size and scale of it is something, which is overspecced.
So from that standpoint, the benefit is that we will get something with that size, that scale, that location, that kind of infrastructure, which nobody is going to operate. It's like we can make a in the, you can make a new hotel, but there's 1 ambulance. This is the number also. So it's an easy sell, easy access, easy everything from that standpoint.
I already as a start, side, it's already even in -- with a lot of limitation that is operated with, okay, under liquidation for over 10 years, very little medical equipment and so on and so forth, yet you've seen decent sort of halfway decent results coming out of this hospital.
And the reason for that is this fundamental structural. I mean it is -- I mean getting 7 start treatment at maybe 4 tau prices or quality service of bed.
Okay. Okay. And sir, lastly, on the plate. So just making the presentation you have mentioned that the hospital is expected to open 200 beds by end of FY '25. Just want to understand on basis. So like going at like 200 of 10 to 14 that are going to be operational capacity to get to 200 beds.
No, it's a 300-bed hospital, right? So you know that in a dental situation, we don't open all the bets because when you open more beds, that means there's a cost case, right? So we opened back as we have felt -- so I think what we said is we have 141 that opened as of now, and we think we'll be -- by March, will be open quarter.
You see -- yes, what happens is that you have to get a license, right? And if I get in order to get a license, if I go and get a license or a 300 beds, then I need to staffed all the 300 beds. And you have to prove it through the licensing authority but you've staffed all the 300 beds. But if you have occupancy over 150 beds, then you'll just say, okay, give me a license for 150 beds because you staff accordingly then.
There's no point in carrying staff of 300 beds of nurses and revenue doctors for 300 beds when your occupancy you only 100, 150 because you're waiting for all the TPAs and all of that to happen.
Next question is from the line of Prashant Nair from AMBIT Capital.
Again, follow-up on the Jaypee asset. When you acquired it, you had mentioned that there is quote to raise capacity in media that capacity meaningfully here. I think you also mentioned a little to that now. Can -- do you have -- I mean, have you worked out over what period of time you will be looking to expand the capacity here?
And also a second part, for the current hospital, how much do you think you would need to invest in order to upgrade medical equipment, clinical capability, et cetera, over the next couple of years?
I think on the first part of the question, I think we will look at expanding the capacity at the earliest. We will be limited by actual time details to be structured. So we're looking at right now moving up to 480-odd beds from the current capacity. And thereafter, it should take us 2, 2.5 years to build another 450 beds, 500 beds, which we will embark on that right away because we see the current capacity being filled out in the macro months.
And way before the new capacity that we are looking at because it takes time to construct. By then, we're looking to set it up. As far as the BME medical equipment right now and upgrade is concerned, is what is the.
Yes. So I think we already have some plans on that. There will be a 150 or spend that we're planning to expand the p40 bets. And then as Abhay mentioned, then -- and after that, we'll start...
But this includes the medical equipment over INR 150 crores.
Yes, yes.
That includes -- because you have to appreciate that all -- almost all of the medical equipment and end of life. So the is replacement.
Next question is from the line of Nitin Agarwal from DAM Capital.
We've had a pretty busy last few quarters in terms of the actions that we've done. So -- and with a bunch of new assets coming on stream next year, as you mentioned, I mean, are we looking to take a pause on the inorganic growth part of plants? Or there is still -- we still continue with the inorganic growth activities for the next few quarters?
I mean if we get -- we have a pipeline, we can keep getting opportunity to add marquee assets. We'll continue to do that. We certainly have the balance sheet and we certainly have the bandwidth.
Okay. That's good. Secondly, on Jaypee. So you mentioned INR 1,600 crores, we remember as the EV for the business acquisition, this includes the entire payout for the entire equity and whatever debt we've taken on for the asset?
That's right. That's the enterprise value.
And beyond this, you mentioned there's going to be some registration and transfer charges. So how much of that do you account to?
Only be for, I think there were 6 on the , which is over and above. It's either malware the changing shareholding, they were on. So it's a that we get.
That's already paid out. No further transfer charges.
So I mean, how should we bet think about the assets? So you paid about about 1,700-plus including the update in about INR 800-odd crores for buying out in assets for about refined by asset. So about -- is that the way we should think about it apart, obviously, the running assets gives us EBITDA versus a greenfield investment that would have to have done. But in your mind, how do you evaluate this versus as you were to make the same rental investment, there's an opportunity like this in Noida versus acquiring these assets for the with you paid?
You look at it from an ROC standpoint, like everything, essentially, what you're doing is you're looking at 500 beds asset, which is renovated with new equipment, et cetera, and capacity to add another 1,500 to 1,700 beds over there on the land there is, right? So I mean, very clearly, and we look at over -- if you want to look at it over a 4- to 5-year plan, you look at 500 beds plus another 450 beds that you would be able to add. You already got the land for it.
And you look at what is the EBITDA and what sort of ROC you were able to get, if you're able to generate more than 25%, 20%, 25% return on capital employed over that period of time, it's a good acquisition. That's how we look at it. It so happens that this one is easier to sell perhaps because a marquee asset with that location, with that missing and so on. No matter how you cut it, no matter how you look at it, even if you look at its sands and expansion, 500-bed hospital, okay, in this location should give you about INR 250-odd crores -- sorry, should give you about -- sorry? INR 300-odd crores of EBITDA.
So let me just tell you how we look at it, right? So basically, also, if you take, we have a hospital in Visalia, that 360 bed hospital, 360. And this is one, 480 beds, right? Now quality 480 beds with all the money that we're going to spend, et cetera, is going to be roughly on 900 cos. And this hospital in Vishali does roughly on INR 380 crores of EBITDA every year, right? And that's a 350 million hospital a -- this is a hot...
So this is actually a better location -- better access, but bigger, better infrastructure in shale.
Yes, more beds, 8 meters. I mean that would have happened a piece of that. So see the kind of numbers that we are set from Jaypee given that we have a benchmark in same market already giving back a little bit of margin than...
Our normal bed size, average about 1,100 square feet per bed. This is close to 2,000 square feet per bed already constructed.
And when you are looking at -- obviously, looking at a customer evaluating a pipeline of various sort of assets, so the kind of transaction that you've gotten on the Jaypee hospital, is it more of a one-off transaction? Are you there similar such transactions, which are there for the taking in the market?
Well, if Jaypee is a one-off, then I guess Ara was a two-off and three-off, right. So I think we keep doing the one-offs, which we like every once in a while. And I think Sara now is very similar. So was not full.
No, again I appreciate that. And lastly, on Dwarka, you talked is going to be our fastest probably begin for a greenfield. So what is the time horizon looking at for the breakeven here?
I mean on the outside, we look at it before end of financial year.
Next question is from the line of Andrey Purushottam from Cogito Advisors.
Also for in an exceptional performance, not just for the last quarter, but this quarter and the long-term investor want to express the appreciation of the performance? My question is really a follow-up from one of the earlier questions in terms of the levers that you have to review EBITDA per bed. If you could just expand a little bit on that and also answer specific questions.
One is, has your the portion of your low margin kind of business actually demised over the last year or 2? And how do you retain scaling up the internet business per se and also perhaps to compensate for the possible reduction in volumes from places led by Maison. How important is Bangladesh your total share of patients of the international business?
Us of questions. I'll take the last one first. Bangladesh to be less than 1% to 2% of our total business. So it really hasn't impacted us that much. And we've been able to sort of compensate that through to other markets and all the initiatives very well. So Bangladesh is not affecting us. What did affect us in the past through the Pakistan, which is 12% of our international business. But we haven't had that for many, many quarters now. So you don't see the impact of that.
Hopefully, as and when it comes through, there will be a positive impact because of it. Having said that, levers for EBITDA per bed really start from the top. We got revenue levers to start with. And perhaps most of it are revenue levers, okay, got to do with adding clinical team, adding occupancy, increasing occupancy, increasing more beds. I mean every revenue levers that you can sort of imagine will play into the bottom line and increase your EBITDA per bed. Because I think as far as costs are concerned, we are pretty much in queue of where we want any benefits over there will be only incremental.
Institutional business has been missed marginally over the last few quarters, but the ARPOB of the institutional business has almost doubled. So you'll actually see that within that category, the ARPOB has doubled. So the rates are becoming closer to our cash rates.
More importantly, we're not doing in a lot of our metro locations where we already have very high capacity, we've distilled away from that. So if you look at an Mumbai, we don't do any institutional business. But once we start the, we'll start that we occupy the beds with it until such time that we have idle capacity. One that's kind of runs out, we start distilling it, go back to cash business.
Saket, same thing in the main , et cetera, we don't do institutional business. At some stage, once we come up with new capacity as smart as we start taking on more patients. But again, over a period of time, we'll distill it. But then this was 3, 4 years later when Vikram comes again, we start doing that. So we keep playing that game.
But more importantly, as you start running out of capacity, you start distilling payers. And within the payer groups also, we start distilling -- we kind of start distilling the clinical mix.
Going back at the interactional business, do you think that you have a 5.5% bit share and the 9% revenue share. Now if you are looking to increase the share, what is the approach that you're pulling? Is it largely bottling business? Or are you making a fair amount of proactive efforts in other geographies to attract talent here?
To affect is we've set up offices in the last 2, 3 years in about 22 geographies, right? So we've got our own offices or partner offices, et cetera. And that is the reason that you've seen that, look, we have an outside sort of growth in our international business. Maybe 9% or 10% of our revenue, but our revenue has also been growing significantly over the last 4 or 5 years. Business has been a 20% CAGR for us.
I mean we're growing at about 20% plus per year. So that it kind of out steps. And the reason is that some of the investment initiatives that we've taken in terms of setting up these offices and like to fly, et cetera, overseas.
One here is about lots of problems that people face with the NHS and Indian then similarly in place like Canada, et cetera. So given the fact that we can provide outstanding medical care at a fraction of the cost, do you see more traction coming from developed countries like U.K. and Canada, et cetera, where a lot of geographic problems about getting service in their own countries?
Yes. It's a question of whether you want bad health care free or you want to pay for good health care and upfront health care, and you want to come to India for it. So we are setting up some beachhead operations in the U.K. as we speak because of the same reason that we mentioned. But I'm not expecting some pluggages. So I think it's more a long-term kind of this thing that we need to have some sort of presence over there to at least get people of Indian-based product to India will be able to pose. I don't see people coming in droves because there's a waiting time in NHS. There's a waiting time, but it's right.
Next question is from the line of Madhav Marda from FIL.
I just had 1 question. On the Barauni, it's quite encouraging that greenfield assets can take even in a very short period of time. Could you just give some color in terms of word guidance because I guess a general understanding for everyone has been that greenfield assets take, let's say, 2 years, 2.5 years to reach that breakeven. But since we can do it at a very good pace, just what are interiors, just for my understanding.
No, I think it's not 2, 2.5 years. It takes about 18 months to break typically, it should take about 18 months. So that's par for the course. But having said that, I think this is, again, excellent, excellent locations. The first this thing is all of the locations. Second is infrastructure. The third is the -- how much underserved that market is. And fourthly, I tend to believe that our brands are -- that is NCR centric. We already have 14 old facilities over there makes a big difference. There is a very strong brand we call what.
My belief is that we have already broken even if we had all the institutional tie-ups, the NAB, et cetera, et cetera, which typically you need 6 months of data to get an NBH. Once you get NBH, you get higher rates from institutions. So a lot of it is process related, but otherwise, I mean, for us, again, once the location is good, once the infrastructure is good, access is good, then it shouldn't take time to ramp up.
Also a team of doctors, we've been able to access to get very, very good team of doctors. But that's the max advantage, particularly in NCR, we are able to attract quality talent.
Next question is from the line of Amit Tiwan, an individual investor.
I particularly enjoyed the response to the question whether Jaypee was a one-off. But Yogesh, I just was -- I also enjoyed how we've broken up the business into existing and new units. So can you -- so at 81% kind of capacity utilization, we are a little bit maybe constrained for volume growth in the existing units. So can you -- a little bit of a forward-looking statement, what would the growth that you estimate in the existing units in volume and ARPOB going forward?
And just a ballpark, even a range is fine. And even I'm looking for more of a longer-term number rather than a short-term number.
Firstly, 81% is a seasonal number, right? That is because the seasonal flu, et cetera. Normally, the second quarter has a higher occupancy. So you see actually in Q3, perhaps the occupancy is to get renamed on that. And that's traditionally been the case. Whatever is in Q2, Q3 is lower, Q1 is lower. And then Q4, again, you ramp up.
So yes, the other characteristic of having a capacity constraint is that you have a higher move up in your ARPOB. Simply because revenue has to be constrained, the lower-end clinical mix and lower end payer mix is perhaps not given the priority. And when you haven't given them the priority, you post those surgeries and procedures at the later date, they're likely to elaborate.
When you have capacity, all of that lower-end payer and clinical mix comes through. But like I said, it's also characterized by higher EBITDA per bed. So it works out better to have higher occupancy than a ramp-up in ARPOB.
I mean, we -- the fact of the matter is that we've been operating at these kind of capacity levels for the last couple of years with the 1, 2 percentage point here and there as far as occupancy is concerned, and that is always that the margin will be some elasticity, but it's diminishing returns.
And we need to be cognizant of the fact that we have capacity constraints. We are cognizant of the fact that we have capacity constraints. And therefore, we embarked on this massive journey. Some people will ask me the question, like you are asking me that, "Look, you are at full capacity, where do you go from here." So the answer to that is that's what the brownfields are for. And some other people tend to ask them, look, there's so much capacity coming in the country, while you're putting up more capacity. Well, this is the reason we are putting it up. We've run out of capacity.
Got it. Got it. But any quantitative guidance would you want to venture in that?
No, I don't normally sort of stay away from forward-looking guidance.
Next question is from the line of Alankar Garude from Kotak Institutional Equities.
Just 1 question for Yogesh, sir, with Dwarka coming online, what will be the annual lease payment at the network level?
I think the overall number for the year would be around INR 95 crores, right? I'm talking all the business this -- so specifically, this number is around INR 28 9.
And the number for Dwarka, when you say INR 95 crores would be for 9 months, right?
No, I crore-INR 28 crores is a INR 495 crores for the overall network.
28 for the year.
Yes, for the year.
I'm turning all end numbers, right? Understood. Understood. So basically, I mean, for FY '25, the number would be INR 70, 80 crores lower to your point. That's it from my side.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for the closing comments.
Thank you, everyone, for joining us on the second quarter results. We look forward to interacting with you again next quarter. We appreciate it. Thank you.
Thank you.
On behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.