Max Healthcare Institute Ltd
NSE:MAXHEALTH

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Earnings Call Transcript

Earnings Call Transcript
2023-Q3

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Operator

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.

A
Anoop Poojari

Thank you. Good morning, everyone, and thank you for joining us on Max Healthcare Q3 and 9M FY '23 Earnings Conference Call. We have with us Mr. Abhay Soi, Chairman and Managing Director; and Mr. Yogesh Sareen, Senior Director and Chief Financial Officer of the company.

We will begin the call with opening remarks from the management, following which we 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 already. I would now like to invite Abhay to make his opening remarks.

A
Abhay Soi
executive

A very good morning to everyone. I am pleased to welcome you to Max Healthcare Q3 earnings call. Our performance for this quarter was on expected line and reflected continued focus on execution by the hospital team while maintaining high levels of medical quality and patient satisfaction.

Compared to quarter 3 last year, the occupancy, revenues, EBITDA and other operating and financial parameters have improved considerably. While compared to Q2, this quarterly quarter, expectedly witnessed a slight dip in the occupancy due to festive season and revenue was relatively flat. However, we yet again reported our highest-ever EBITDA, both in terms of absolute value and margins.

EBITDA per bed, ARPOB and ROCE for the third consecutive quarter this financial year. Our digital app, Max MyHealth, which was soft launched at the end of September 2022, has already witnessed approximately 90,000 downloads, the app is now ready for a formal launch in the fourth quarter of the current year.

Before I move on to the highlights of this quarter, please note that comparative numbers and percentages are being reported on a like-to-like basis excluding COVID-19 vaccinations and onetime tax gain in the previous quarter. Key highlights of our third quarter performance are occupancy for the quarter improved to 77% from 74% in Q3 last year. However, it was marginally lower than 78% for the previous quarter due to festival season.

Institutional bed share fell to 29% compared to 31% in Q3 last year. The bed share was 1% higher than the previous quarter due to relaxation owing to lower occupancy in festive season. Network gross revenue was INR 1,559 crore compared to INR 1,385 crores in Q3 last year and INR 1,567 crores in the previous quarter. This reflects a growth of 13% year-on-year, while remaining flat quarter-on-quarter due to seasonality.

Revenue from International Patients grew by 62% year-on-year and reflected 110% of pre-COVID average. This accounts for around 9% of the revenues now.

Digital revenue grew to INR 272 crores and accounted for 17% of overall revenue. ARPOB for the quarter rose to approximately INR 66,800 reflecting a growth of 10% year-on-year and 1% quarter-on-quarter. We reported our highest-ever network operating EBITDA of INR 419 crores compared to INR 364 crores in Q3 last year and INR 410 crores in the previous quarter reflecting a growth of 15% year-on-year and 2% quarter-on-quarter.

We are actively managing the cost, and there is a reduction in overheads quarter-on-quarter due to better collections and reduction in power costs. Operating EBITDA margin improved to 28.3% versus 27.8% in Q3 last year and 27.7% in the previous quarter.

Annualized EBITDA per bed, most importantly, rose to INR 66.9 lakhs, yet again, our highest ever, clocking a growth of 12% year-on-year and 4% quarter-on-quarter. Profit after tax was INR 269 crores versus INR 252 crores in Q3 last year and INR 267 crores in the previous quarter.

Net cash position stood at INR 372 crores at the end of December 2022 compared to net debt of INR 296 crores last year. This is after deployment of INR 102 crores towards the ongoing capacity expansion projects.

Continuing our efforts to give back to the community, we treated 38,344 OPD and 1,264 IPD patients from economically weaker section free of charge. In addition, we provided nutritional support to around 2,300 TB patients during the quarter. Both our SBUs continue to report robust numbers. Max@Home reported a top line of INR 36 crores, reflecting a growth of 30% year-on-year and 4% quarter-on-quarter. It started immunization at home services and now has 14 service line offerings.

MaxLab reported a gross revenue of INR 28 crores. This reflects a growth of 46% year-on-year while declining by 4% quarter-on-quarter due to seasonality. The active network partners stood at over 900 spread across 34 cities and supported by a dedicated team of more than 700 personnel.

Now coming to the overview of the company's financial performance for the 9 months ended December 31, 2022, Network gross revenue stood at INR 4,597 crores, reflecting a growth of 16% on a like-to-like basis. Network operating EBITDA stood at INR 1,199 crores, registering a growth of 20% on a like-to-like basis. ARPOB improved by 16% due to price, payer mix, case mix, et cetera, and led to margin expansion by 92 basis points. EBITDA per bed grew by 21% to INR 64.4 lakhs. COVID-19 bed occupancy was negligible again -- sorry, negligible throughout. On average, COVID-19 patients occupied nearly 5 beds in Q3 and 20 beds during the 9 months.

On expansion projects, the current status of capacity coming on stream by FY '25 is as follows: 100 beds at Shalimar Bagh have been more or less handed over to operations team, and we are on schedule for starting the operations in the current quarter. 300 beds at Dwarka, the structure is complete and interior work is underway. We plan to file for occupancy certificate by May and operational life in Q2 FY '24 as planned. 329 beds at Nanavati, the contract has been awarded to Larsen & Toubro on a turnkey basis in December for handing over the hospital on or before 24 months.

L&T is fully mobilized, and we expect to commission the facility by end of FY '25. 300 beds at Sector 56 Gurugram. Work has commenced, excavation at this 300 bed is the first phase. Work has commenced, excavation and D-wall work will be completed in the -- by first quarter FY '24 by which time the civil contractor will also be mobilized.

We would also like to point out that Sector 53 land cancellation has no impact on our bed addition plan until FY '28. It wasn't part of an expansion rollout but was a part -- will if it all impact bed potential post FY 2028 as we have put down in investor presentation.

So all in all, up to this stage, we are seeing no delays. We are focused on execution and it is going to be on spot as planned. 350 beds at Max Smart, the project is delayed by around 3 months for lack of final tree cutting permission, which has been received in January this year now. The work will start in the current quarter, and we hope to recoup the time lost as we progress on the project.

While we continue our focus on the growth we were articulated in the past, we have also been evaluating avenues for catering to demand for quality health care in the near term. We expect to add over 100 beds in the next 2 quarters as some of the hospitals through internal reconfigurations. Moreover, with our net cash surplus and deleveraged balance sheet, we're extremely well positioned and actively evaluating inorganic growth opportunities.

As of yesterday, our Board has given in-principle approval to raise finance of up to INR 4,200 crores of NCD for any future M&A. However, we intend not to breach 2 to 2.5x net debt to EBITDA, considering that any new acquisitions will also bring its own EBITDA in play.

With this, we open the floor for Q&A.

Operator

[Operator Instructions] The first question is from the line of Nikhil Mathur from HDFC Mutual Fund.

N
Nikhil Mathur
analyst

My first question was to be on net debt to EBITDA, I think you have kind of cleared it. But just at a slightly higher level, I wanted to understand that so much of organic bed expansion plan over the next 4 or 5 years. Is there a pressing need to do an M&A or whatever M&A that we are seeking is going to be very, I mean very valuation conscious and there has to be some clear rationale for you to be looking for M&A because I believe the best CapEx pans itself be kind of take care of the medium to long-term growth of the company.

A
Abhay Soi
executive

No, I think we're not putting a gap on the long-term growth. I think if you look at the opportunity set, which is out there, it is significantly higher than what we are looking to tap through our brownfields or whatever we expanding. One is that. I think secondly, also, given the fact that we have a completely unlevered balance sheet, we've got more than INR 1,000 crores of cash sitting. We've got a net debt position of INR 360 crores, INR 370 crores. Our entire expansion, which is at a cost of out INR 4,000 crores to INR 4,500 crores over the next 4 years, okay, is going to be conducted entirely through about 50% of our free cash flows. So we have a totally unlevered balance sheet, and we have the rest of our free cash flows to deploy. And given the opportunities set out there and again, if you've seen our history, it's been about buying assets at values which are intrinsically below what we believe we can [ kick out ] over there in EBITDA, okay? So these will all be massively value accretive.

We are very, very conscious of ROCE, we are already operating in very, very high ROCE, like I said before, also in my past calls. So I think anything that we will be acquiring is going to be accretive. We're not acquiring for the sake of it.

N
Nikhil Mathur
analyst

Understood. And sir, what are the priorities in terms of.

A
Abhay Soi
executive

I just want to add one more to this thing. It also gives us presence in newer geographies.

N
Nikhil Mathur
analyst

Understood. And in terms of region priorities, I think North looks pretty sorted for the company. There is obviously media article of new venturing out in Kolkata looking out for something there. But would it be safe to assume that, I mean, my understanding perhaps the Southern markets is a bit more competitive. So you might be looking more for West and East, would that be a fair assumption?

A
Abhay Soi
executive

Well, not really. I think if you look at -- I've gone in the past, they said, look, we will go to -- we won't go to uncharted territory. I will go to any territory where at least 2 or 3 of my competitors have proven viability, and we will do it better like we pretty much have done without exception, every micro market that we presented. There's a -- I mean, if you go by that list, I think the number of cities within the 20s, somewhere in 20s where number of people have proven viability. I mean we do operate our hospital in Mumbai, which is in Western India. It's only asset that we have been to operate pretty well. And if we look at what we are doing in even outside the cluster early NCR, in places in Tier 2 cities like Mohali or Dehradun, which are extremely high ROCE business for us.

So I think even entry into southern markets, when you look at what their profitability, et cetera, are, I think so long as we have conviction that we can milk out and we can make it accretive, it becomes a sensible entry point for us.

N
Nikhil Mathur
analyst

Got it. One more question I had on the operations for this particular year. Now I think your investor presentation gives a number of clinical update on liver transplants, kidney transplants and bone marrow transplants done till date. But can you give some sense as to what is the number for these 3 categories of transplants looking like in FY '23 and what growth are we amortizing in the number of transplants that we'll be doing in the coming 2, 3 years? Because I mean the clear question here is that -- these initiatives are ARPOB accretive. So that could be the ARPOB driver for you in the coming 2, 3 years.

A
Abhay Soi
executive

It doesn't really move the needle. I mean you have to look at it collectively. I think overall, this transplant business was 5%, 6% of our. Yes, so Nikhil basically, if you come to the liver transplant, we do around 40 to 45 of them every month, right? Kidney transplant would then a bit higher than that, it will be around 60, 65 every month. So that -- and that with BMD would be another 25 to 30, so these are the ranges that we have. Obviously, the endeavor of the hospital is to start the program in more and more hospitals. For example, that's what we did in liver transplant. We started a program in Vaishali, we started program in BLK, we are starting program in Mohali and in Dehradun now. And we are waiting for the license. So one of this, obviously, that's always the effort, right? So now to put a number -- projected number, and that's why it's tough for us, right? We can't really, there is no order book that we have, right?

But moreover, what I'm saying is this is going to be incremental. This is already a particular pace at which we add. So this is going to be incremental. You're not going to see an exponential move because there's -- even if I double this number, you're not going to see exponential change in EBITDA margins because of which...

Operator

The next question is from the line of the Damayanti Kerai from HSBC.

D
Damayanti Kerai
analyst

First, one clarification. Abhay, did you mention you would be able to add another 100 beds through internal reconfiguration, apart from the planned ongoing CapEx.

A
Abhay Soi
executive

I said over 100 beds. So it's a number which is higher than 100 beds, yes.

D
Damayanti Kerai
analyst

Okay. That's clear.

A
Abhay Soi
executive

Through internal reconfigurations, okay, we will be adding this and we'll be adding this over the next few months.

D
Damayanti Kerai
analyst

Next few months, okay. My second question is how do you see your operating costs inching up as your planned beds come online over the next 2, 3 years, both on a variable as well as fixed cost part?

A
Abhay Soi
executive

I think majority of the CapEx that we're doing or the rollout we are doing is towards brownfields, right? I mean 80%, 85% of the total rollout is towards brownfields. And brownfields by the very virtue have higher operating leverage, because it doesn't necessarily have a fixed cost associated to it because the fixed cost, be it in terms of management or senior clinicians, et cetera, is already incurred by the existing hospitals. So when you add another tower next to it, it has lower sort of -- or doesn't have that, you technically have a higher operating leverage, so your operating cost overall should come down.

D
Damayanti Kerai
analyst

Okay. Because you would be able to expand existing resources to a higher number of beds, right? So that's why...

A
Abhay Soi
executive

That's right. That's right. And what you are actually putting over there are nurses or resident doctors, et cetera, your senior clinicians already in play. And the reason you're doing these brownfields in the first place is because your capacity is out, right? And you've got unsatiated demand at your doorstep, your doctors have no -- they don't get OT time, they don't get beds for the patients and so on and so forth.

D
Damayanti Kerai
analyst

Okay. And in most of these brownfield expansion, should we assume the breakeven should be achievable within 12 to 15 months of the commencement of the unit?

A
Abhay Soi
executive

I've stated in the past, the brownfield should have a breakeven in the first quarter or 2, if not the first quarter itself.

D
Damayanti Kerai
analyst

Okay. So within 2 quarters, we can be reasonably assume that we...

A
Abhay Soi
executive

Absolutely. Absolutely.

Y
Yogesh Sareen
executive

In a brownfield, you will not open the beds [ till ] such time you are able to fill it, right? So there's no need us to -- need for us to open all the beds.

A
Abhay Soi
executive

I mean, not that we don't have the lease. We have the lease, I think the point which Yogesh is making we're holding the assets on your books, right? But there's no real fixed cost associated to it from operating standpoint.

D
Damayanti Kerai
analyst

My last question is, can you talk a bit about your ESOP programs? And right now, what percentage of mass employees are covered by your ESOPs? And what kind of annual expense you expect for the stock option programs?

A
Abhay Soi
executive

I think they're about 81 lakh shares, 271 employees, okay, are covered by the ESOP plan. I think the important thing is that the cliff for the ESOP plan, okay, is...

Y
Yogesh Sareen
executive

20%.

A
Abhay Soi
executive

Is 20% IRR, which comes to a price of, I think...

Y
Yogesh Sareen
executive

I think towards the 100% of the ESOP, the price is [ 1260 ] after 5 years. So is it clear? if it doesn't hit that price, the ESOPs don't sort of funded for CAGR, that's right.

D
Damayanti Kerai
analyst

Sorry, I just missed the price?

Y
Yogesh Sareen
executive

Damayanti, basically, the ESOP has a clause. So there are 2 portions to ESOP. So one is the, what is the individual performance, other is the company performance. So the company performance part, which is a large part, mainly for the leadership team, basically will vest after 5 years, provided there is a 25% CAGR at the share price when we issued the ESOPs. So at that point -- at that rate, the price required for 100% of these two, the rest is INR 12, INR 60 at the end of 5 years.

Operator

The next question is from the line of Amit Kadam from Canara Robeco Mutual Fund.

A
Amit Kadam
analyst

Am I audible,sir.

A
Abhay Soi
executive

Yes.

A
Amit Kadam
analyst

So my first question is that can you dwell a little bit more on how the international patient piece is moving? How the things look forward? For example, in one of the lines you mentioned that the sales are already at 10% higher than the...

A
Abhay Soi
executive

Amit, may I request you to use the handset please.

A
Amit Kadam
analyst

Okay. I'll do that. Okay. Is this fine now.

Operator

It is little low. Can you speak up a bit?

A
Amit Kadam
analyst

Is it okay.

A
Abhay Soi
executive

Yes, better.

A
Amit Kadam
analyst

So just like can you dwell little bit on the international patient, how that particular mix of segment is moving. -- in one of the presentation, in one of the slides, you mentioned that the sales are already at like 10% higher than the pre-COVID -- just wanted to know that on the footfall, how the things are looking, where certain traction is coming? How do I see the year going forward? Because last time when we spoke, you had mentioned about Afghanistan not present yet, but you are trying to cope up that particular thing with some other geographies. Just maybe 2, 3 minutes brief on that particular segment, please?

A
Abhay Soi
executive

We are not trying to cope up, we have coped up, right? So in spite of the Afghanistan which is 12% of our business down to 0, we are 110% of pre-COVID level. So what that basically implies is that not as we coped up with lack of Afghanistan, but we sort of overcompensated for it, right? That's one.

Secondly, I mean, to have a discussion on present footfall, you'll have to have a point of reference on past footfalls. I mean the fact that this number has been moving up. I mean, we're getting massive traction on this, it's over 60% compared to last year, it's over 110% compared to pre-COVID level in spite of 12% of Afghanistan business not being there. Hopefully, in the next quarter or 2 quarters, depending on the geopolitics as and when Afghanistan does open, this will give us further listing. But in the meantime, we'll be looking at other geographies as well. We've been opening offices in other places, and we are going to be looking at more direct to -- and I guess, with also the support of the Indian government through Heal in India and Heal by India, there is focus on global medical tourism. So I think we can have a step change over here.

I haven't given any guidances in terms of footfalls in future or revenue guidance in terms of -- in terms of international patient or any other sort of revenue guidance, I would avoid that even at this stage.

A
Amit Kadam
analyst

So when we say it like revenues had 10% higher than even the footfalls are -- I assume that if the realization was being same, then those even footfalls are higher than the pre-COVID.

A
Abhay Soi
executive

Yes, more or less, yes, but may not be 10%, maybe probably 4% to 5%.

A
Amit Kadam
analyst

Okay. Got it. Second is, Yogesh sir, you can help me with this thing. In the presentation footnote, you've mentioned that there was a recovery in terms of bad debts, which you have under that overheads. So can you just help me with that particular number, please?

Y
Yogesh Sareen
executive

So that number would be around INR 7 crores during the quarter, right? But this is a charge of this capital. So this is a charge during the quarter. So there is obviously, it's a running system that we have at the end of each quarter, whatever billings but this [indiscernible] 5 days, they will get provision for, right.

A
Abhay Soi
executive

We have a very stringent policy that anything which is over 365 days, okay, we provide for.

A
Amit Kadam
analyst

Right. Because you had mentioned that why the things that OpEx is sequentially down. One of the lined item you mentioned that one of this is reason.

Y
Yogesh Sareen
executive

Yes, we did mention -- that's right, yes. So there's impact. And there's always be impact. This obviously depends on when the flexion comes. So some we have around 60%, 70% of business, which is PSU revenue share and the payments from CGHS are tardy, they came in blocks.

A
Abhay Soi
executive

Sometimes they come over 365 days, then we write it off at the end of 365 days, will provide for it and then it comes back we have to write it back.

A
Amit Kadam
analyst

Okay. Yes. And just like I want to know further like because you have said that another 100 is you are expecting in the next few months through the internal reconfiguration. Is it across the various hospitals? Or is it from one particular thing? Second is that -- is it safe to build this particular increase in terms of like somewhere in quarter 1 or quarter 2 of FY '24.

A
Abhay Soi
executive

Yes. I mean it should come in through by quarter 1, quarter 2 FY '24, right, yes. These are -- these are in 3 or 4 separate -- 4 or 5 separate hospitals. There will be 20 beds somewhere, there were 30 beds somewhere and so on. So yes. So collectively, it's over 100 beds. And clearly, you [ look ] out this capacity in places where you're hitting thresholds. When you get to that stage, you find elasticity, you find the reconfiguration and so on to be able to get you. I mean you don't do it in a place where you already have even a little bit of leeway as far as idle capacity is concerned.

So you have to understand, as we are coming close to threshold capacities in place, what we earlier thought was threshold capacities, both in terms of operations and number of beds, we find there is elasticity at the end, right? Once you get -- it's like a manufacturing process, your rated capacity may be 75%. When you come to the 75%, you realize that you can operate 80%. When you get to 80%, you'll realize you can get to 80% to 83% and so on.

Operator

The next question is from the line of Naman Bhansali from Perpetuity Ventures.

N
Naman Bhansali
analyst

So my first question relates to the international patients. And I think it's around 8.5% contribution. But if you want to view it as a percentage of only Delhi hospitals -- so how much would that percentage be? And relating to the international patients, like what is the structure that we follow to attract these international patients, like do we pay some medical consultancy fees to any agencies? Or what sort of cost do we pay to attract these patients? And how is it versus the industry and MAX, so this is my first question.

And my second question relates to the margin structure of brownfield expansion, which we are doing. So with every incremental bed additions, how do we see the incremental margins which we get on the brownfield bed. And lastly, on the ARPOB difference, like what is the difference majorly in our business between the international and domestic ARPOB? And how would it boil down in terms of EBITDA per bed? So these are my questions.

A
Abhay Soi
executive

Let me start by margin on brownfield and then come to -- as far as margins on brownfields are concerned, our typical brownfield will cost about [ INR 130 lakhs, INR 140 lakhs ] per bed -- our present EBITDA per bed is about INR 66 lakhs last quarter. If you apply even a 75% occupancy rate to it. So that comes to about INR 66 lakhs. It will be about INR 45 lakh, INR 50 lakhs I believe. We're looking at INR 50 lakhs on top of INR 130 lakhs. This is if you were doing business as usual. But like I've mentioned, there is operating leverage in brownfields, so EBITDA per bed should be northwards of that. And more importantly, over the next couple of years, by the time all of this comes on stream, you'll have some real inflationary growth on top line as well.

So it is massively accretive. Look, the most attractive thing you'll ever do, okay, more than M&A, more than greenfield, et cetera, is brownfield. okay? Because a, you're building in a proven area where you were tapping into unsatiated demand, and then you have a huge amount of operating leverage coming out. So that is exactly what we are doing. So that's one. I hope that answers your question as far as margins are concerned. Now coming to your...

Y
Yogesh Sareen
executive

Yes, so on the ARPOB question that you asked on the international side, typically, the ARR [ the ticket ] size for the international patient is double of the domestic because of the fact that they are more acute patients. And -- but the ALOS is also higher, right? So the average length of stay of these patients is also 1.3x to the normal. So typically, that means that ARPOB will be [ 1.5x ] of the domestic patients -- one is that domestic patients will be cash domestic patients, right? So that's the on the ARPOB. Yes, the EBITDA per bed is higher because of the fact that these are higher ARPOB. So even if you maintain the same margin percentage, after payout to these [indiscernible], your EBITDA per bed would be again around 20% higher than the domestic patients.

A
Abhay Soi
executive

But having said that, we get -- our marketing is done through multiple channels. There are -- at the very least, there are walk-in patients, where there are no facilitators involved, then you have patients and all these people come through our digital platform, come through our office in overseas and so on and so forth. Then you have patients who come through international medical tourism companies. So in those situations, we make a payment of facilitation fees to those international medical tourism companies.

The third is we have tie-ups with various ministries of health in various countries. We have tie ups in hospitals at any given point of time, a number of our doctors are traveling overseas conducting OPD screening. So it's a fairly organic process. We also have doctors from these countries who come to our hospitals and work as observers, they go back, they jump in our testing but we conduct OPDs, we screen the patients, we do preconsult, post consult over there and so on, and that's how you -- that's the backbone of how you do medical tourism.

Y
Yogesh Sareen
executive

Yes. Also on your question about the share of international patients in the NCR hospitals or Delhi hospitals, so it ranges from 18% to 4%, right? So the maximum is in BLK Hospital -- BLK-Max Hospital and then followed with Saket and then you have other hospitals like Vaishali and Patparganj, et cetera. So on an average, it will be probably 11% to 12% in the NCR hospitals.

N
Naman Bhansali
analyst

Got it. And what is the maximum on a consolidated basis, like we are currently at 8.5% in international contribution, and this can go up towards 10%, 11%?

Y
Yogesh Sareen
executive

I mean it depends how much we are doing, right? Like I said, I'm going to avoid giving any sort of guidance in terms of how much of this business we are going to be shooting for over the next 4 to 5 years. And like I said, the potential is exponential not incrementing.

Operator

The next question is from the line of Ashish Thavkar from IIFL AMC.

A
Ashish Thavkar
analyst

Sir, if you could spell out, is there is certain seasonality in our business because if we try to have a look at the occupancy rate, quarter 4 seems to be much lower than the earlier quarters. If you could just help us understand the nature of the business?

A
Abhay Soi
executive

Absolutely. So there is a seasonality in the business. So even if you go back to our last quarter's investor call or the presentation, when we had the higher occupancy, we said in Q2 that the occupancy is higher because of seasonality, right?

In the rainy season, you have waterborne diseases, airborne diseases, et cetera. So in Q2, typically, all hospitals have higher occupancies, right?

I mean this is like I mentioned due to the seasonality and the flu season and so on and so forth. So you'll have a lot of internal medicine patients, you have a lot of pediatric patients, et cetera. These are -- they come to the hospital for medical reasons, not for surgical reasons.

Now -- so this quarter 2 is usually characterized by higher occupancy, but lower ARPOB. And if you look at Q3, Q3 is typically a weaker quarter, year-on-year, you will find it to be a weaker quarter, which is this present quarter, because it is characterized by the festive season. A lot of the New Year, Christmas holidays, et cetera, I think this year Diwali was also -- so you will see patients postponing their surgeries or doctors postponing the surgeries, et cetera during -- but you do it by a few days or a few weeks or whatever.

So typically, Q3 is a weaker quarter. So you have -- which is characterized by lower sort of occupancies, but you have higher ARPOBs in this season because whoever is coming for surgery is somebody who can't really put it off. So therefore, he is coming for more sort of acute and more cosmetic care surgeries, et cetera, but typically will have a higher amount of billing. Also because this will give you a lot of international patients don't sort of come in, they postponed as thing because look at Christmas, New Year's also, et cetera. So the way to compare health care existing quarter compared to the previous quarter -- previous year quarter rather than sequentially the previous quarter because of the seasonality. Q4 is typically a stronger season -- is the strongest sort of quarter in the year.

A
Ashish Thavkar
analyst

Okay. Yes, fair enough. That's good. So last one is ARPOB, we are already at 77%, 78%. Obviously, the concern remains as last time you had highlighted at peak, you can go to 80%, 82% and the bed additions like you're trying to reconfigure or internalize. So 100-plus beds over the next 2 quarters, where do you find comfort and do you feel that before we materially add a higher number of beds, can we still manage to do 10% to 12% top line growth with between 77% of the 80% kind of occupancy level?

A
Abhay Soi
executive

No. So look, I think there are 2 or 3 separate thing over here. Firstly, the number of beds we are coming out with over the next 6, 7 months, I presume is going to be 300 in Dwarka, 100 in Shalimar Bagh and 100 plus that we are doing. So that's over 500 beds. That's one.

Secondly, last quarter, we were -- which is quarter 2, we are in I think 81% -- 78% occupancy. We've done months of 81%, 82% also and we done quarters of 81%, 82% as well. Some of our spends are operating at the higher occupancies. And that's why when you start in those hospitals, you start getting occupancy thresholds. We also have the lever of payer mix, right? And you start accommodating your preferred channel at the cost of unpreferred channel. And that's why we had guided the unpreferred channel or the institutional business would come down reporting. So there's enough giveaway in the system to accommodate any sort of growth that we have, while the new capacity comes in. And I would be giving you 500 beds, which is estimated to come in over the next 6 to 7 months. And then 2025, we have more beds coming and so on.

A
Ashish Thavkar
analyst

Yes. Perfect. Sir, lastly, versus the volume growth. So typically, the industry does around 8% to 10% volume growth. Any color on how the pricing trends are currently in the industry?

A
Abhay Soi
executive

Year-on-year, you normally have a 2%, 2.5% impact on revenue as far as pricing is concerned. And that's pretty much across the industry right?.

Y
Yogesh Sareen
executive

Yes.

Operator

The next question is from the line of Lavanya Tottala from UBS.

L
Lavanya Tottala
analyst

So I just wanted to understand how you look for breakeven time line for the greenfield project? I understand for the brownfield, it's around 2 quarters, so for the greenfield project in Gurugram, how you look at the breakeven time lines?

A
Abhay Soi
executive

Yes. So look, I think historically, greenfield used to be about a 2-year sort of breakeven. My belief is now it will be a 12 to 15 months sort of a breakeven in greenfield.

L
Lavanya Tottala
analyst

Okay. Got it. Got it. So -- and the brownfield where the current occupancies are in the range of 75%, that should see somewhere like 3/4 high occupancy, something like 2 quarters and greenfield 2 years? Is it the right way of setting, sir?

A
Abhay Soi
executive

No. So we're not seeing that. So for example, we take the sample of Shalimar Bagh, now quarter 3, the occupancy was 85% in that hospital, right? So in 85% occupancy, that means, obviously, you are not admitting all the patients. So at that part of time when we open 100 beds, we think we should be able to -- there should be the accretion in the first quarter itself, right? So we are not going to wait for 3 quarters for us to get some EBITDA from those additional 100 beds. So that should be immediate. Now it depends on where the occupancy is, but I would say, probably not more than 3 to 4 months for EBITDA accretion in a brownfield situation.

L
Lavanya Tottala
analyst

I just got disconnected in the earlier commentary time. So if I understand right, like 100 beds of during -- with the existing capacity on the Shalimar side, these 250 -- 200, 250 beds should be available for the full year FY '24? And 300 beds from Dwarka should come in at what time line, sir?

A
Abhay Soi
executive

We said Q2 FY '24. Second quarter, on or before September, yes.

L
Lavanya Tottala
analyst

So around like for [ 2H ], it will be available, like the 300 beds of Dwarka.

A
Abhay Soi
executive

That's right.

L
Lavanya Tottala
analyst

Got it. And so on the like acquisitions, which you have highlighted, so what kind of efforts you will be looking at like the stand-alone hospitals or a chain, I just wanted to understand your view on what kind of assets would you be looking if you are trying to enter a new region or at least certain number of beds is the thing which you look at to -- I mean consider an asset for this opportunity. So how you will be looking at it?

A
Abhay Soi
executive

So the bigger the better, if you have a chain versus a single hospital, we prefer a larger sort of this thing. But it doesn't mean that we don't look at single hospitals. We look at that as well. What is important for us is that it has to be accretive to ROCE that we have -- we can build -- there is intrinsic value for us to unlock over there.

And like I said, ultimately over the medium term, it needs to be value accretive and needs to be ROCE accretive.

L
Lavanya Tottala
analyst

Okay. Got it.

A
Abhay Soi
executive

I mean if I have to go to south India, I won't go with one hospital, but if I have to do it in adjacent to a cluster that we are, then we may do one hospital over there, so I mean I just go and buy one hospital, random hospital, let's say, a 200 beds in Chennai or [indiscernible] Chennai has to be a larger sort of this thing. If I have to do, Bangalore, it has to be a larger format. This can't be a hospital for the sake of it because we are acquiring some EBITDA or something like that.

L
Lavanya Tottala
analyst

Yes. So this is helpful, sir. So that's what I wanted to check if you would be looking for a certain -- one certain Chennai or a place like where other things are present, so that's what I wanted to check.

Operator

The next question is from the line of Krishnendu Saha from Quantum Mutual Fund.

K
Krishnendu Saha
analyst

Sorry, this is the first time I'm on the company and I'm just taking everything on the slide. So maybe some of my data could be wrong. Just wondering, if we just to do the defined by revenues, the number of beds, is it coming to like revenue per bed is coming to around INR 6 million? The reason I ask...

Y
Yogesh Sareen
executive

Revenue per bed?

K
Krishnendu Saha
analyst

Yes.

A
Abhay Soi
executive

INR 66,800 per OPD, per occupied bed [ day ].

K
Krishnendu Saha
analyst

In the sense of what you call that just ARPOB you're talking about, right?

A
Abhay Soi
executive

Yes.

Y
Yogesh Sareen
executive

ARPOB is the revenue, yes.

K
Krishnendu Saha
analyst

But if I'm just -- the reason I'm asking is when I'm looking at you, you have a higher ARPOB compared to a lot of other players, but your revenue, just if I just do a basic -- I'm just trying to understand what is actually giving this higher ARPOB, that's the basic question.

Y
Yogesh Sareen
executive

What's the question? Is the question why we have a higher ARPOB, or you want the...

K
Krishnendu Saha
analyst

Yes, yes. Just trying to understand the business as to why we have a higher ARPOB because of a lot of foreign clients or because of the mix ratio that's just trying to get a feel of the business.

A
Abhay Soi
executive

We have a higher clinical mix. Firstly, I think if you look at the 2 things, which drive ARPOB, one is the payer mix, other is clinical mix, right? As far as payer mix is concerned, 7%, 7.5% of our beds are totally free for the poor compared to 1% or 2% for most of our competitors. If you look at 29% of our beds are catering to institutional business compared to maybe 20% and 13% for some of our competitors, right?

So the payer mix is clearly inferior, but our ARPOB is maybe 20%, 25% better than the next step there in the industry. But more importantly, our EBITDA per bed is 55% better than make that clear in the industry. Now EBITDA is better because each and every, I think, line item, we outperformed each of the hospitals where we compete in pretty much every micro market this way.

But as far as the revenue is concerned, we operate at a higher sort of more [indiscernible] care, higher end of clinical mix. So we -- it's also indicated in the fact that we have more beds, which are critical care beds, 35% of our beds are critical care beds. Most other people are between 25% and 30%. So it basically portrays that we are doing more high-end work as a proportion of the total work that we do with over compensates for the lack of peers.

K
Krishnendu Saha
analyst

And a bit of high occupancy also compared to the peers?

A
Abhay Soi
executive

Yes. So much there is no role in the ARPOB but the fact that we are presenting the NCR that also helps us, right? So NCR refer to...

Y
Yogesh Sareen
executive

And the stronger brand, the higher occupancy. The occupancy is not a function of ARPOB or this thing. Occupancy is a function of your brand strength.

K
Krishnendu Saha
analyst

So just the expansion which we will have, do you expect to maintain that 35% of the specialty types of the revenue stream, going ahead, is it like -- because we'll be expanding at a faster click in the next 2, 3 years? Just trying to get a feel that we will be able to maintain the 35% mix going ahead?

Y
Yogesh Sareen
executive

It would be higher.

A
Abhay Soi
executive

Yes, yes. There's no reason for it not to be. We're looking at the same mix of business going into the future as well.

K
Krishnendu Saha
analyst

All right. In the sense, more on the understanding. Yes, there's an available market which you can definitely address to so that...

A
Abhay Soi
executive

Available market is, it's where the crunch is, right? I mean if you look -- 35% of our beds are critical care beds yet where we don't have any beds available or the highest occupancy if we look at in our system is not in the ward bed, not in the rooms, et cetera. It is typically in the single room that more importantly in the ICU, the critical care. So as we are going forward, we are in fact intending to build more critical care beds because that's where the bottleneck is in our current system.

Operator

The next question is from the line of Sachin Kasera from Svan Investments.

S
Sachin Kasera
analyst

Congrats for a good set of numbers. I had just one question. As we bring this capacity to brownfield and some of these efficiencies, what is your thought in terms of being able to sustain or maybe improve the current payer mix and as well as sustain the current occupancy levels?

A
Abhay Soi
executive

Like I said, the majority of the expansion is coming in our brownfield, right? The reason we are doing it, we're not doing it in order to tap the market, we are doing it because we got unsatiated demand at our doorstep. So I mean, the payer mix that we've got waiting of 6 hours to 2 days in a ER for the sort of bed that you may want. If you want ICU bed, even a single room is not available. I mean, if you go to Nanavati Hospital, if you go to Max Saket, if you go to Mohali, if you go to any of our hospital that's where the challenge is. If you go to places like Gurugram and all, you don't have beds, right? So there's no reason for that payer mix not to be sort of to be any differentiation over there.

Of course, we've guided in the past that our payer mix should be improving to a certain extent and when it will be plateauing out. It will be plateauing out because this new capacity is coming in by that.

S
Sachin Kasera
analyst

So do you think with the current payer mix is only pressured out or you think there is still some improvement in the payer mix after which it will plateau out?

A
Abhay Soi
executive

So we have guided that it should be down to 15% in the next 4, 5 quarters.

S
Sachin Kasera
analyst

Okay. And you remain confident on that number, sir?

A
Abhay Soi
executive

That's right. You have to keep in mind, if you look at sequentially, in a weak quarter, you're going to be accommodative, right? I mean weak quarter in the sense that in a festive quarter where you have lower occupancy, okay. Why would you want to have idle bed, you're going to take more institutional or whatever else is at that point of time. And this was a weak quarter. I mean this is a seasonally weak quarter, not for us, but for -- from occupancy standpoint.

S
Sachin Kasera
analyst

Sure, sure. And sir, any thoughts in terms of the revenue per operating bed, how do you see that beds would...

A
Abhay Soi
executive

Sorry, I think what needs to be looked at, okay, is the fact that in spite of it being a seasonally weak quarter on an overall standpoint, right? We've navigated it to be the highest EBITDA quarter in margins, EBITDA per bed or absolute EBITDA in the history of the company.

S
Sachin Kasera
analyst

Sure.

A
Abhay Soi
executive

So what happens in the stronger quarter.

S
Sachin Kasera
analyst

Sure. So which would mean that even with this additional capacity coming in and with the leverage that we are talking about, actually, we could see improvement in ARPOB, EBITDA, per bed in EBITDA margins over the next few quarters.

A
Abhay Soi
executive

No doubt on that front. I mean I've repeatedly said that in the past that EBITDA per bed, it will be accretive.

Operator

The next question is from the line of Ranvir Singh from Nuvama.

R
Ranvir Singh
analyst

My question was more about the macro situation here in health care or hospital industry. I see in this budget, the government has allocated some, I think, INR 6,000 crores to INR 7,000 crores for setting up AIIMS in different locations. Just I wanted to mention going forward because the government first has been to improve infrastructure, mostly in public sector. So do you see that public sector is emerging strongly here and that could give private sector a bit of competition in the next 3, 4 years. So how is your view on it?

A
Abhay Soi
executive

I think anybody who's gone to, been to a public sector hospital should be able to answer that question. And even during COVID when health care was in focus, anybody is looking at it, you saw while there was no beds in private hospitals, okay? They were idle capacity, okay, in government hospitals across the board. So -- and I think if the public sector supercede, then you'll probably in my memory will be the first time and first country where the public sector sort of outperformed the private sector. I don't think it's ever happened anywhere else, so I really don't see that coming as a threat.

I think public sector hospitals are free hospitals. They are free to the poor and to the rich, and everybody else. There is -- when it is free, your idea is to provide health care coverage to more and more people not necessarily the [indiscernible] comforts them. It's not as -- your room has a TV over there, you have AC in the room and so on and so forth. And to be very basic sort of thing. And you may not be aware, but most governments -- no government hospital even has a stream, which is called critical care.

I mean what size -- the thing is nightingale wards and so on and so forth. I think the whole push of the government is very, very different from that standpoint. I mean after that the next stage will be hospitals, which are doing PMJAY, we are not even doing PMJAY. We don't even cater to that sort of subject.

Y
Yogesh Sareen
executive

The hospital like team is basically a source of mental talent, right? So typically, doctors working in AIIMS after 20 years, they take lengthy retirement and they try and work in the private sectors or in that [indiscernible] is a good thing, right?

A
Abhay Soi
executive

It's massive because the sort of range of skill set that they develop in public hospitals is immense simply because the volume and the complexities they see over there. So typically, you'll see a doctor having work space in any of the government hospital after a while leaves and joins the private sector.

R
Ranvir Singh
analyst

Understood, understood. And specific to companies, yes, I missed a number, that what was the contribution of international percent during this quarter in revenue?

Y
Yogesh Sareen
executive

9%.

R
Ranvir Singh
analyst

And that -- what was in Q2?

Y
Yogesh Sareen
executive

Same, same.

R
Ranvir Singh
analyst

Same. Okay. Okay. And ARPOB is normally much, much higher in international. So what would be the average ARPOB in international patients?

A
Abhay Soi
executive

I think Yogesh mentioned in the previous this thing is 15% higher ARPOB.

Operator

The next question is from the line of Prakash Agarwal from Axis Capital.

P
Prakash Agarwal
analyst

Just trying to understand the margin outlook better for the next 4 to 6 quarters. I understand the bed editions of Shalimar Bagh, Dwarka and others you mentioned, they would have a little lower EBITDA per bed and the ARPOBs than the average. Would that understanding be correct? And would it have any impact on the margins?

Y
Yogesh Sareen
executive

Not in the brownfield hospitals, but Dwarka, yes, it will take time for Dwarka to start generating EBITDA, so as I think Abhay mentioned, 12 to 15 months is when we see the breakeven in terms of EBITDA in Dwarka, that's the greenfield side. But other than that, it should be all better EBITDA per bed, et cetera and better margin because these are brownfield. And as I mentioned, Shalimar had 85% occupancy in quarter 3, right? So in that hospital we had 100 beds, you can understand how the optimacy -- the uptake in the occupancy and...

A
Abhay Soi
executive

And the 100-plus bed actually [indiscernible] out of the present capacity, right? I mean their EBITDA is again, we'll be swinging for the fences over there, literally with the EBITDA margin. So that 200-plus bed, [ 200 ] to 250 beds should give you a higher EBITDA day 1 sort of thing. And Dwarka will take 12 months to sort of get there and thereafter.

P
Prakash Agarwal
analyst

Yes. So -- but the 200 addition is higher than the average that the company is clocking like...

A
Abhay Soi
executive

Preety much. No doubt that.

P
Prakash Agarwal
analyst

So on a blended basis, you are okay with the margin trajectory or maybe see an improvement also?

A
Abhay Soi
executive

That's right.

P
Prakash Agarwal
analyst

Okay. And how about M&A? I mean, clearly, with the fundraise plans and the cash. But I mean we are sitting in Delhi NCR, which is the best micro market as such. But if we expand in the gaps maybe in Mumbai or even other Tier 1 metros, are these kind of ARPOBs are not off. So when we look into this M&A, would it be fair to see that we would be okay with the lower ARPOB to start with and with case mix, et cetera, we would be improving? Or how should we think about it in terms of M&A going into that particular micro market selection with respect to our margin stability and ARPOB stability.

Y
Yogesh Sareen
executive

So I think Prakash personally, our highest ROCE businesses is not Delhi. It's the Tier 2, Tier 3 cities.

Secondly, my ARPOB in Mumbai is comparable, if not, I mean, higher than any of the Delhi hospitals.

P
Prakash Agarwal
analyst

Yes. Barring Mumbai, Delhi, we would be looking at M&A outside also, right?

A
Abhay Soi
executive

So I'm saying outside Delhi and Mumbai, like I said, even if I look at Tier 2, Tier 3 cities, the ROCE over there is much higher than Delhi.

P
Prakash Agarwal
analyst

Yes, understand ROCE concept. But from the ARPOB and margin perspective, would we be open for lower ARPOB and lower margin business.

A
Abhay Soi
executive

Of course, I'll be very open to lower. Only thing I'm concerned about is ROCE, okay with lower ARPOB and okay with lower margins so long as whatever in absolute terms is EBITDA per bed vis-a-vis what I have -- what we put in over there is accretive to us on a return on capital basis.

P
Prakash Agarwal
analyst

Understood. Okay. And just one more clarification. So during COVID times, there was a higher cash patient mix. So has that normalized now post COVID? And how is the cash versus insurance? I mean insurance would have gone up, right?

Y
Yogesh Sareen
executive

Yes, for past [ 7 ] years, insurance has gone up after the -- once the COVID set in and there were more policy being sold and that trend is continuing. So it's not that the -- it was one-off and the share of the insurance business come down. It's been maintained at the same level now.

P
Prakash Agarwal
analyst

And cash would have gone down.

Y
Yogesh Sareen
executive

Yes, it did. Yes.

P
Prakash Agarwal
analyst

And the typical as per you would be about, what, 20% in pricing, 20%, 25%?

Y
Yogesh Sareen
executive

Prakash, what is your question, pricing?

P
Prakash Agarwal
analyst

So in terms of insurance are obviously contracted rates. So would -- I mean, that is about 20%, 25% lower as the cash patient billing or...

Y
Yogesh Sareen
executive

7% to 8%.

P
Prakash Agarwal
analyst

So that's it.

Y
Yogesh Sareen
executive

And it actually works out better because when you have insurance policy, we get -- and yes, there's been a step change in the frequency of people buying insurance -- health insurance will be more. So -- but the trend has been on for the last 10 odd years in some manner or the other. It works out well for the corporate hospitals because as and when you have insurance policy, you're paying the same amount of premium, whether you go to Max or you go to ABC Nursing Home. And what we see is people don't window shop at that stage. In your less price sensitive, you go to the better brand, better hospital because eventually you pay the same premium.

Operator

The next question is from the line of Kunal Dhamesha from Macquarie.

K
Kunal Dhamesha
analyst

So the first one on the 100 beds that we are adding in our existing capacity, would that be more kind of the deluxe beds or the private rooms, et cetera? Or would it be a mix of everything?

A
Abhay Soi
executive

No. So it will be more critical care beds than more single rooms, et cetera, et cetera, which is more of what we need.

K
Kunal Dhamesha
analyst

Okay. So probably more ARPOB basically if those gets filled, right, because of a single room or deluxe room, critical care beds, et cetera.

A
Abhay Soi
executive

We make more out of doing a liver transplant in a general ward, than we do from doing a delivery in the suite.

K
Kunal Dhamesha
analyst

But over a longer period of time, that's not in your hand, right, like over a longer period of time, the private room would be obviously better assuming that the mix over a long period across bed remains same.

A
Abhay Soi
executive

That's right. So I would actually take the current mix and projected. It won't be lower than that because it's a general ward or whatever else it is. Like I said, most of our hospitals are suffering from a bottleneck at the critical care.

K
Kunal Dhamesha
analyst

And as far, I believe that those critical care bed addition, et cetera, requires permission or something like. So all those are in place for us.

A
Abhay Soi
executive

Yes, yes. I mean these are no permission required within the existing baskets.

K
Kunal Dhamesha
analyst

Okay. Okay. Great. And second, more of a longer-term perspective, I believe that -- at one point, you were saying that government would face challenges in terms of operationalizing this AIIMS kind of facility because of the cost overruns, et cetera. So has there been any talks between after a year like Max...

A
Abhay Soi
executive

I didn't get that. What are you referring to?

K
Kunal Dhamesha
analyst

In terms of government being able to operationalize the AIIMS, et cetera, which they are kind of opening up now or investing in now because their operational cost or operational cost structure is very different from private players, right? Maybe around the nursing expenses or nursing salaries around maybe 2, 2.5x and what they get in the private hospitals. So at any point, is there any talks between government and player like you to hand over the operations and management of such apex institute to a company like Max, given we are also kind of providing similar kind of care.

A
Abhay Soi
executive

It's a different profile and a different thing. I think -- but what we are seeing is a lot of state governments, be it Hariyana, be it UP and so on and so forth, are inviting private players from and they've been some RFPs and SKUs to that account for public-private partnerships, okay, on creating newer facilities. The government has its own way of working. You would have seen even the total outlay has been increased by about 13% towards the health care sector. So I'm sure the government will be able to -- and whatever the economics of the government are the economics of the government facilities.

The viability, I'm not going to sit in question. The fact is they are trying to cater to perhaps an audience, which is an unaffordable audience, right, which can't even afford PMJAY sort of, et cetera. That's for free health care effectively. And irrespective of viability, I don't think a private player is going to be catering to anybody who can't afford to pay at all.

Operator

The next question is from the line of Sumit Gupta from Motilal Oswal.

S
Sumit Gupta
analyst

Just I have a few questions regarding international patients. So I just want to -- get just on the overall pricing. So I presume that international ARPOB is more than [ INR 1 lakh]. So it is gross or net? -- of discounts and every other thing that you pay to the overall medical tourism agents and all?

A
Abhay Soi
executive

Our ARPOB is obviously growth rate, right? It's based on the revenue that we put, right? There may be some expense linked to that revenue. So we don't net that. That's come in the expense side.

Y
Yogesh Sareen
executive

No matter how you look at it, EBITDA is 20% higher like what you just said, per bed.

S
Sumit Gupta
analyst

Okay. Okay. And one more thing regarding -- like sequentially, if I see that payer mix for international patient it is nearly like 9%, so consistently. But so going forward, do you see that 9% or like moving it to 10%, 11% also with like new geographies opening up?

A
Abhay Soi
executive

Our focus is always on the occupied bed days increasing, right? I mean if it remains 9% and other business is also increasing, so be it, right? So as long as the operating bed days are on an absolute or a stand-alone basis for medical is increasing. So we don't necessarily look at it as a percentage of the overall pie. We look at it as a separate segment altogether. So we look at -- look, is international number of bed days, occupancy increasing or not. Is the total revenue in absolute terms increasing or not. And then separately, we look at the same way for upcountry business. We look at the same way for cash business. We look at the same way for other business, right?

Not so much -- my focus or our focus is on this thing. The 9% being flat on 2 quarters also because, like I said, it's a seasonality. People don't travel during the festive season. Doctors themselves put off surgeries, et cetera, because they are on holidays. I mean the better way to look at it is at the same time last year. Unfortunately, last year being a little bit of COVID year, you have a kind of uneven comparison, but then you will -- and we all post look at pre-COVID levels. But sequentially, don't -- one should avoid. We will typically see the first quarter and third quarter are weak quarters. And for these very reasons, they'll be...

Operator

The next question is from the line of Amit Kadam from Canara Robeco Mutual Fund.

A
Amit Kadam
analyst

Just one small question. Maybe Yogesh, sir. Like can you help me with the tax rate for maybe how do we look at it going forward, may be FY '24?

Y
Yogesh Sareen
executive

I think for tax rate. I said this earlier also, it should be in the -- the ETR should be in the range of 18% to 20%, right? So this quarter was 18% plus. But I would say it will peak at 20%, on the net worth basis. But you will note that this quarter, the CTR has come down. The current tax rate has come down. It's by virtue of the fact that last quarter we did some voluntary liquidation and there are some inclusion benefit of that liquidation in terms of depreciation of intangible. So I would say 2 things. One, the rate will be 18%, 20%. Secondly, I would say watch out the CTR rate, that's better, that's where the cash outflows are linked to, right? And that's improved over the quarter 1 and quarter 2.

A
Amit Kadam
analyst

Okay. Yes. So 18% would be a fair assumption to consider somewhere between 18% to 20%.

Y
Yogesh Sareen
executive

I would say go towards the higher range of 18% to 20%.

Operator

The next question is a follow-up question from the line of Ashish Thavkar from IIFL AMC.

A
Ashish Thavkar
analyst

Sir, if given an opportunity, would you also like to consider stand-alone hospitals, which are very specialized in, say, oncology or child health care?

A
Abhay Soi
executive

Sorry, can you repeat the question?

A
Ashish Thavkar
analyst

Yes. So if you get an opportunity in future, would you also be willing to consider a stand-alone hospitals, which are specialized in oncology, pure play oncology or say something like pure play child care?

A
Abhay Soi
executive

We will evaluate everything, we have no issues evaluating any thing.

Y
Yogesh Sareen
executive

When the opportunity arises, we will evaluate.

A
Ashish Thavkar
analyst

Okay. Sir, lastly on this app-based model, if you could just give some color on the potential of this model. And would there also be a cash burn?

A
Abhay Soi
executive

Sorry on which model?

A
Ashish Thavkar
analyst

On the app-based model, how you are planning to position yourself through the app, the digital one?

A
Abhay Soi
executive

On the app, there is no cash burn. This is -- we are not doing agnostic this thing. It's not a platform -- this is -- it is a platform for our patients to interact with our doctors and our doctors to interact with the patients and for the hospital to provide services to the patients, right? Be it diagnostics at home or home care business or video consultants so on and so forth. I mean, I encourage you to actually look at the app, please download and look at it. So I think all your reports, everything is sort of stored over there. So it's effectively a platform between the hospital and the patients okay to interact. And for us to deliver those services to the patients.

A
Ashish Thavkar
analyst

Okay. Perfect. That was it, sir.

A
Abhay Soi
executive

We got a platform for third-party players, et cetera. So I mean it's very, very different. I mean it's not 24/7 or anything like that. I mean it is 24/7, but it's for us, so we're not marketing it as a third-party platform. I mean the cash burn [indiscernible] essentially what it is for technology and a little bit of marketing that we will be doing within the Delhi NCR or whatever reason through the hospitals, et cetera. I'm not looking at any significant cash burn or anything which will even move the needle over here.

A
Ashish Thavkar
analyst

Okay. And would your diagnostic offerings would also be clubbed with this app?

A
Abhay Soi
executive

Absolutely. So we will be providing diagnostics through the app as well.

A
Ashish Thavkar
analyst

Okay. Sounds good.

A
Abhay Soi
executive

So on our app at the top, okay, there's a red button, which can get you an ambulance in Delhi anywhere, anytime within 20 minutes. That's one, which will take you to a Max Hospital, then diagnostics, then nurses, then all your medical records, then any video consults that you want, any scheduling of appointment that you may want to do and so on. Physiotherapy at home, anything, so anything that of. So the entire suite of services that the hospital provides can be provided to you at your doorstep effectively or without you entering the hospital premeses. That's what the app does.

Y
Yogesh Sareen
executive

It will also review trends of your diagnostics, et cetera, reports. So in a way, it's there to improve the experience. It's there to improve the, I would say, the interaction of the patient with the hospital and vice versa. And these -- but check it out, it's out there. I think that's the most of [ download thing ].

A
Ashish Thavkar
analyst

Yes, sure. I will.

Operator

The next question is the follow-up question from Krishnendu Saha from Quantum Mutual Fund.

K
Krishnendu Saha
analyst

Just clarifying our average length of stay at 4.2 days, is there higher or it could not probably could go down a little bit more. Just trying to understand it is high because of the critical care being a larger portion is it? And can it go down further?

A
Abhay Soi
executive

In higher services. And eventually, we need to look at average revenue per occupied bed because your inventory in hand effectively is number of beds days that you have. So it's higher [indiscernible] loss but which leads to higher ARPOB growth for you, that's because you're doing more higher end. I mean -- so look, if a person has -- if a place has more medical patients, your this thing is lower but if you have more transplants patients will be longer. But transplant patients will pay you more. And with the more BMT transplant, lung transplant, heart transplant you do, people tend to stay longer. And billing is more, ARPOB is more, the length of stay is more. You can't really compare any particular chain with [indiscernible].

K
Krishnendu Saha
analyst

Yes. So some metrics if you look at [indiscernible] and all these days, their occupancy and all -- so just trying to figure out as to why because we are a little bit higher as of...

A
Abhay Soi
executive

You can't compare that's what I'm saying. Within my chain, I can't compare two hospitals because they may be leading two different medical programs. I have [indiscernible] compare program to programs or I have to compare with the same hospital to its absolute revenue in the previous year. It will actually be a procedure to procedure, right? So that cost [indiscernible]. And average revenue per occupied bed is the better metrics, but that will have kind of play into it already, right? if that metric is growing and it's better than others, that to my mind, that means a loss should not be even good at it.

Operator

Ladies and gentlemen, that would be our last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you.

A
Abhay Soi
executive

So thank you. I appreciate everybody coming online. And I just want to reiterate that we are the 2 pillars of the foundation that our organization rests on our execution. So we are very, very focused on execution, not only in operations but on projects as well to see that they are rolled out in time. And secondly is physical discipline, so you would see that any leverage if at all we use for inorganic growth, we would be within what our declared norms or prudent norm for leveraging the company, which are not more than 2, 2.5x EBIT to EBITDA. So thank you for the opportunity. Good bye.

Operator

Thank you very much. Ladies and gentlemen, on behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.

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