Narayana Hrudayalaya Ltd
NSE:NH
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Narayana Hrudayalaya Ltd
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Ladies and gentlemen, good day, and welcome to the Narayana Hrudayalaya Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Debangshu Sarkar. Thank you and over to you, sir.
Thanks, Janice. Good afternoon, ladies and gentlemen. Myself Debangshu, and I run the Investor Relations and mergers and acquisition practices at NH. On behalf of the company, I welcome you all to the Q1 FY '21 earnings call of the company. To discuss our performance and to address all your queries, today, we have with us Dr. Rupert, our CEO; Mr. Viren Shetty, our COO; Mr. Kesavan Venugopalan, our CFO; alongside Ashish from the team. I'm sure you have gone through the investor collaterals, which have been uploaded on the stock exchanges as well as on our website. Before we proceed with this call, I would like to remind everyone that the call is being recorded and the transcript of the same shall be made available on our website at a subsequent day. I would also like to remind you that everything that is being said on this call which reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the uncertainties and the risks that they face. These uncertainties and risks are included, but not limited to what we have already mentioned in our prospectus filed with SEBI during our IPO and subsequent annual reports on our website. Post the call, in case you have any further queries, do feel free to get in touch with us. With that, I would now like to hand over the call to Dr. Rupert.
Good afternoon to all. The fiscal year '21 started on an unpredictable note for us amidst the lockdown and travel restrictions with the first quarter capturing the full impact of COVID-19 on our business. And it played out broadly along the lines that we have outlined in our previous calls. While the month of April bore the brunt in terms of the operations, there has been a steady uptick in business at the consolidated level with June revenues at around 69% of the pre-COVID level and almost doubling from the April figures, around 35% of the pre-COVID level. This resulted in us almost breaking even at the consolidated EBITDA level in June at the revised cost structure. A key feature of the quarter gone by has been the relative outperformance of the hinterland units vis-à-vis the flagship centers, along with sharp bounce back in our overseas operations at Cayman Islands. Our flagship facilities at Bengaluru and Kolkata are witnessing a rather gradual uptick in the business with the cohort registering around 50% of pre-COVID revenue in the month of June. As you are aware, Health City, Bengaluru attracts a significant patient footfall from adjoining regions of Karnataka, Tamil Nadu and eastern region of the country and also from Bangladesh. Severe travel curbs amidst the lockdown restrictions at both intra and interstate levels have affected the recovery at Health City, Bengaluru. Revival at RN Tagore facility in Kolkata was limited as the city emerged as COVID-19 epicenter in the East, and the region got severely impacted from the cyclone with no clarity yet emerging on the resumption of civilian movement on the Indo-Bangladesh broader. However, our other hospitals in Tier 2 cities such as Shimoga, Raipur, Jamshedpur and Mysore remained relatively less impacted from the outbreak and have registered a strong recovery, registering around 90% of pre-COVID revenues for the month of June 2020. Growth trajectory at our newer set of operations at Delhi NCR and Mumbai got materially impacted as the nation went into lockdown, with these hospitals achieving 63% of the pre-COVID revenues in June 2020. As you are aware that our Children's Hospital at SRCC Mumbai generates a sizable chunk of business from hinterland areas of Maharashtra, along with states of Madhya Pradesh and Assam, and due to restricted mobility, it registered a substantial fall in revenues. Hospital at Gurugram gets 1/3 of its business from international patients, and with the halt of international flight operations, registered significantly lower revenues in April and May, but reported a slight recovery in June due to a decent traction in domestic business. Oncology being an essential healthcare service helped Dharamshila unit recoup the business lost in the first 2 months in the fag end of the quarter. Interestingly, this represents the maiden period where oncology as a service modality contributed over 15% of our inpatient service across the Indian operations, with Cardiac Sciences coming down to almost 30% given the severe lockdown-induced factor. We believe that these centers will take some time to trace their path back to growth as the normalcy returns and patients start feeling safe to travel. Our international operations at Cayman Islands bounced back strongly in the last 2 months of the first quarter after a temporary blip in April post the temporary shutdown of operations for a fortnight in March and reported healthy quarterly results. The facility registered USD 11.5 million in top line and USD 1.7 million in EBITDA in the first quarter of FY '21, translating into 14.7% margin. At an overall level, we are pleased to note that we have been able to tide over this difficult period without an increase in gross borrowings and have focused extensively on cash collections and creditor management process and remain very well placed within the industry in terms of the overall balance sheet position. Further, in order to ensure safety of our patients and staff, our in-house software development team has delved a customized telemedicine app for video consultation, which has already garnered a positive response from patient community, with around 15% of our present OP consultations being catered to through this mode. On the clinical front, even in these challenging times, our single-minded focus on providing highest degree of advanced medical care is reflected in some of the highlights captured. The Children's Hospital in Mumbai did an extremely rare, highly complex operation in a 45-year-old (sic) [45-day-old] baby. It was -- the operation is arterial switch intracardiac total anomalous venous -- pulmonary venous connection surgery for correction of that. It's a very -- second such case reported in the world. The unit in Mysore performed a rare interventional cardiology procedure on a 1-month-old baby called the balloon pulmonary valvotomy. The RN Tagore Hospital in Kolkata performed the renal transplant in which both the donor and the recipient had recovered from COVID-19 in few weeks prior to the main operation. The Health City, Bengaluru, Dharamshila Hospital in Delhi initiated the plasma therapy for patients who have been suffering from COVID treatment -- COVID patients. The diagnostic facilities for COVID testing in the form of RT-PCR laboratories were set up in most of our centers. And most of our centers have the ability to have 3 modalities of testing that is the conventional RT-PCR, TruNat and CBNAAT as well. This enables the clinician in having confidence in order to triaging and the ability to perform surgeries, non-COVID work in much more -- greater confidence. While we would like to believe that the worst is behind us, but we continue to be cautious about the turnaround as further disruptions in the form of fresh or stringent lockdown restrictions could hamper the progress we have made. Looking ahead, amidst all the uncertainty around us, we continue to tread with utmost caution, drive towards efficient deployment of resources in these testing times and embark on a fresh journey to adapt and thrive in the post-COVID world.
Janice, we can open the floor for the Q&A now.
[Operator Instructions] We take the first question from the line of Vivek Agrawal from Citigroup.
Sir, despite the losses in the first quarter, debt is down sequential basis. So, sir, can you please explain a bit what has led to the decline? And what is the outlook for the rest of the year given that you need to incur some expenses on the maintenance, CapEx, et cetera?
So Vivek, just to help you out with the cash flow for the first quarter, as we had guided over our previous call as well we have been able to manage the cash requirement for the last quarter despite the operational losses because of very strong robust collections from the cash part of the business as well as the institutional part of the business, which has also been complemented by the creditor management at an overall level. So at an aggregate level, if you see, there is INR 87 crores of -- roughly INR 86 crores, INR 87 crores of EBITDA loss, along with around INR 20-odd crores of financial expenses, which is roughly INR 106-odd crores. And additionally, I have repaid borrowings to the tune of around INR 26 crores, INR 27-odd crores. And this has essentially been funded by INR 30 crores of deduction in my current investments and the balance is entirely towards the net working capital management, wherein I have been aided by both deduction in absolute receivables as well as some bit of increase in our payables to manage the cash position for the company. As regards to the overall outlook for the year, obviously, it is a little bit premature for us at this stage to give you a firm, clear guidance on the same because there's a lot of uncertainty around the progress that we probably will see unravel over the period going forward. So as and when things progress, we will take decisions which are most judicial and optimize for the company and taking into consideration the overall gearing and the leverage that the company continues to enjoy and the best of relations with the entire lending institutions.
Okay. That is helpful. So one more question on the hinterland facilities that they have done better than the flagship facilities in the 1Q. Is it that they look relatively better against the flagship hospitals, which are down significantly? Or is there any new pattern that is emerging out in this environment?
The hinterland -- the prevalence in some of the cities where these -- our units are situated have a lower prevalence of COVID compared to the Bengaluru and Delhi, Bombay, Ahmedabad and the Kolkata units in the quarter April to June. So because of that -- that is one of the reasons why we were able to do well in the non-COVID patient admissions. The flow wasn't as restricted compared to the rest of the country.
Next question is from the line of Shantanu Basu from SMIFS.
So basically, my first question relates to discharges. So can you share the discharges number for the month of July '20 as compared to July '19? And the next question pertains to your cost structure. So do you foresee that your total manpower expenses and other expenses that you have reported in Q2 -- rather, sorry, in Q1, would be more or less the same in Q2 at least or Q2 and Q3 before the temporary reductions are taken out?
On the discharges, Shantanu, we would have to get back to you. I mean July has just ended, and we do not have the data readily available to give you a ready comparison between what was the number for this year versus last year. On the cost assumptions, I think Dr. Rupert or Viren can guide you on the same.
Okay.
On the expenses side, we did effect a large salary cut among the doctors by rejiggering the payouts, which a lot of the doctors are on high minimum guarantees, which have then been shifted to more towards a variable. For the other managerial cadre from the level 8 and above, which is managers and above, we've taken salary cut there as well. But this cannot prolong forever. At some point, as the business picks up, the doctor salaries will have to increase. So that will naturally go up. In terms of the overhead expenses, the power and electricity, as an absolute number, those are down because equipment utilization, all of that is a lot less. So that's a purely variable cost. It doesn't impact too much one way or the other. The medicine is kind of biggest thing on the consumption side. As a percentage of the revenue, consumption has gone up on 2 levels. One, because we are holding much higher inventory than we used to because of the shear variability of the business and that some of our units may be operating with a high number of COVID patients who need a lot of drugs and so on. The other is that a lot of the input costs are going up. Things such as the ban in items coming from China, a lot of the logistic difficulties that have been happening because of lockdowns and so on. A lot of the manufacturers have come back to us and said, all their raw material input prices have gone up. And so we should expect price increases to start happening over the next couple of months. So in this direction, I would say, a lot of the input costs are going up, expenses would start to rise. And that can only be offset through the volume increase, which, as and when the situation starts to stabilize, we should be able to get there.
Okay. That's helpful. And one more question, if I may? What has been your COVID discharges between April to June? And what has been the ARPC, your average revenue per person for COVID patients?
Dr. Rupert? COVID discharges.
COVID discharges...
COVID discharged between April and June?
Yes. Dr. Rupert here. COVID discharges, again, it depends upon the prevalence of the unit where the local prevalence is high. The COVID discharges are approximately anywhere between 18% to 20%. And where the prevalence is on the lower side, it's around 10%.
But it was pretty insignificant in April and it's the highest in June, and July will be even higher.
We take the next question from the line of Charulata Gaidhani from Dalal & Broacha.
The COVID discharges, can you give as a percentage of the total revenue?
It's a very insignificant number as a part of the quarter revenues. It's approximately around INR 10 crores out of the total revenue what you see in the financials.
The COVID rate, we've gone for fixed packages. And in a lot of instances, the government has capped the rate. So COVID is the -- COVID business itself is not a very attractive market.
Right. Right. Okay. So it could be overall around 5% to 8% of sales?
No, no. I said it is around totally an absolute amount of INR 10 crores out of the total consolidated revenue of around INR 398 crores.
Okay. Okay. Yes, fine. Yes. My second question pertains to how do you see the situation in July as of now? Are you seeing any improvements? Or is it worse than what it was earlier?
Dr. Rupert?
This is going along with the peaking of the COVID in respective states. So if you look at the northern and western units had a peak in the first quarter. So they all peaked at May and June and started plateauing in July and starting to come down. While the units in Kolkata and the South are in the midst of the peak there. So -- but we are seeing a slightly plateauing of the number of admissions in Bengaluru and in Kolkata in the last few weeks.
Okay. So the second quarter should be around first quarter levels or would it be a little better?
See if it where to go on the basis of July, I think the feedback would be like it will be status quo in terms of the quarter 1 numbers, meaning not -- sorry, June run rate numbers. But if the lockdowns do not happen and we are able to have a pickup much better than July, I think then you can see a much better result.
What is giving us optimism is that patients are getting less scared about visiting the hospital since we put up a lot more awareness about the precautions we're taking, about how we've created green zones and red zones. So there's a safe environment for patients who are not COVID positive. So all of that is paying off. So in places like Delhi and Bombay, it is definitely picking up and will get back to normal level, definitely, within Q2. Bengaluru and Kolkata, there will still be the hangover because they're in the middle of their peak right now. And this -- it generally takes between 4 to 6 weeks to run through the start and the end of a peak of corona infection. So optimistically, we believe it could be better. But then just to -- if we have to be realistic because knowing policymakers and -- they will want to give a lockdown if they feel the cases are too much. We wouldn't expect it to be something that different from Q1. But we are quite optimistic, it should be better. In terms -- the cases may be higher, but patients may not respond to it the way they did in Q1.
Okay. And how is the case in the south peripheral?
It's the same as in Bengaluru. So in Karnataka cases across board are going up. Given that those are smaller hospitals and the population centers are much more diffuse and that patients are coming from a much broader catchments, I would say it may not be as severely impacted for as long as in Bengaluru, but it will be -- it will also be quite bad. So for example, Shimoga was relatively unaffected up until now. And now, the cases are going up. Shimoga is, for the first time, starting to feel that operation suffering. But till now, it might as well have not been the case.
The next is from the line of Siddhant Bhandari from Highwest Capital Global.
I was wondering if you could talk a little bit about the performance in Cayman, where the recovery has been quite fast and sort of what drove that? And how do you see that facility panning out in the next few quarters?
Yes. Cayman was the first unit of ours that went into a lockdown as it was. We preactively -- proactively took the step of shutting it down, disinfecting the whole place. And the Island also sealed off its borders as a response to the coronavirus infection. But what it means also is that they were the fastest to recover. So the Island has 0 new cases of infection. Borders are still closed. So it's a bit of a good and a bad thing. It's bad, borders being closed because it chokes off our international business, which was around 10-odd percent over there, 10% to 15% of revenue there. But it's good in the sense that all the patients from Cayman and a lot of expats and locals, who historically have been going to the United States for treatment, are coming to us for the first time. And for the first time, we're trying to see departments that historically never performed well, like General Medicine and Family Medicine, so on, we're getting a lot of patients there. And so it has bolstered our conviction that we need to start expanding the number of specialties we offer in our Cayman Island facility. And so we did set up a city clinic that is catering to the entire primary medicine. So this, in addition to the oncology, gives us a lot more confidence that there will be a strong growth runway from Cayman's going forward. As for the domestic revenue, it is now more or less on the pre-COVID track. And if the trends continue, could even exceed. But the international thing still remains the sore point. We have been given to understand that September is when the government takes the call on opening up the borders along with strict checks and controls and so on. And every patient will be made to do the COVID test before they go, which also is another revenue stream for us. But again, these are highly things completely out of our control. So there's no telling what may happen.
[Operator Instructions] We take the next question from the line of Nitin Agarwal from IDFC Securities.
Viren, on the online consulting app that you mentioned, you mentioned 15% of the consultations are really happening on that. How important a role do you think this digital strategy is going to play going forward? And does it change your strategy -- how does it change your strategies for the post-COVID world?
Yes. Thanks, Nitin. See the -- it is -- it was God sent to us, honestly, at a time when the roads were completely blocked, where doctors were not able to even leave their house and come in for work. So in that time, it was an absolute God sent because it gave doctors the ability to at least see patients and at least keep that connect alive. Now as the lockdowns have eased out and patients are coming to the hospitals. Obviously, the growth in the physical outpatient has greatly outpaced digital thing. But we're starting to see definitely new use cases for it. Case in point, historically, a lot of the patients coming in to Health City in Bengaluru were -- that were outside Karnataka came from East India. But given the travel difficulties, we started to find once we opened up online consultation, Central India, the entire area of Chhattisgarh, Bihar, which traditionally used to go to Delhi, started to look at South India as an alternative. And so we started getting a lot of referrals coming from Raipur, Patna and Lucknow, which historically were not places that we either looked at to from a marketing effort nor we thought that they would naturally come to Bengaluru. But that channel has opened up. So what the online thing does, at a very low cost, it allows you to do market discovery, to figure out areas of interest, people which have a natural inclination or affinity for the brand and wanting to come there. So as a great marketing channel, it serves a valuable function. Two is, this is something we are rolling out in fits and starts right now, follow-up care. Patients who are diabetic, patients who have heart failure, people who have this thing that they need a regular follow-up from our side, right now is more driven from the patient initiative. What we're going to start pushing more proactively is selling them on long-term care packages. So if you've had heart surgery at NH for a very low cost, we can follow up with you on a 3-month, 6-month, 1-year basis, so that we're able to make sure that you stay healthy. And so that, again, opens up a continuous gain. But as a 1:1 direct substitute for patients coming in to the OPD, we have not seen that to be the case, to think that patients will convert from visiting the doctor to seeing them on the other computer is -- that's just simply wishful thinking. But it does open up many other new cases, which we're just at the beginning of exploring.
Okay. Secondly, you mentioned about the cost cuts and fact that some of those cost cuts will reverse back as the business picks up. But is there any sense on the amount of sustainable cost improvement initiatives that you would have probably put in place in system? Any ballpark amount of cost that you've been able to take -- identify and take out of the system, which you'll probably sustain going forward?
It's hard to pin an exact figure on that because the minute the business picks up, all those costs will come all the way back. So for example, marketing cost, it used to be 3% of revenue. Now we've cut it down to nearly 2.2%, really, really low number. But that's not sustainable, right? We're okay cutting that much on marketing and not running that many campaigns or buying that many ads because the volume is quite less. But the minute we start to see uptick, that number will go up. Similarly, we've moved to a system of having people work in half shifts or not showing up all the time because the volume is less. But again, not sustainable because as and when the patient volumes go up, that will ramp up subsequently. So I don't see a sort of permanent low plateau for cost. There are definitely a lot of synergies that we're driving. Work from home has definitely spurred us think about consolidating a lot of departments, specifically back-office functions that are not really patient-facing in finance, HR, discharge summaries, EMR and so on. But a lot of the growth, we really want to drive through productivity gains rather than just pure cost-cutting.
Okay. And secondly, on -- in this whole pandemic-related chaos, which has been there in the market, have you seen experience organized guys like yourself establish hospitals gaining at the expense -- probably gaining customers from the theoretically unorganized setups like nursing homes and all? And do you see the trend sort of sustain as we go through?
Yes, definitely. A lot of the smaller hospitals have shut down, and we've anecdotally heard experiences of, especially the hospitals in small towns, where the ones that are run by individual proprietors, who are slightly older or simply don't want to take that COVID risk, are shutting shops. And so for those, the patients are definitely coming to us. Now I don't -- okay, there's optimistic way in which once they experience the care that we offer, they do remain lifelong customers, that is for sure the case. But there will always be this cost and quality differential between the 2 sets of patients. Now it has not been meaningful right now because the overall volume of patients has gone down. And so the additional, let's say, overflow that we're getting from other hospitals that are shutdown may not be meaningful. But what definitely this pandemic has been driving is permanent closure, not just temporary closure. Permanent closure of several hospitals -- smaller nursing home hospitals in Tier 2 towns. Not so much in the Tier 1 town. That, I can only hazard a guess as to what the long-term effects of that will be. Whether they have the ability to reopen once this is over, whether they are permanently shutdown and more patients come to Tier 1 towns, that I don't know. But definitely, the one thing that will start happening once it is over is consolidation in the sector. There will be a lot of demand for hospitals to start merging and acquiring and all those other things.
And if I can squeeze in last one. At what level of occupancy do we see going back to the pre-COVID profitability levels, I mean, at the cost structure that we have?
Kesavan?
It will be approximately anywhere between 55% to 60% occupancy level.
Yes. But Kesavan, you mentioned that in June, you were about 69% -- 65% occupancy, right?
June?
June, about 69... Okay.
That was revenues of the pre-COVID levels, Nitin.
Okay. And so when those revenues come back to the COVID levels, we'll probably go back to the same revenue -- same profitability structure?
Yes.
And do we have any -- what's a good estimate in terms of why -- when do we start to get there? What's the best case that we should look at?
Million-dollar question. More than million dollars. See, going by the trend, if we don't see a second wave of infection, if these things sort of bleeds itself out and if I am to believe the seroprevalence survey that they did in Dharavi slum and Delhi, where they said 45%, 65% of the population is infected, then those 2 places are very close to herd immunity, which means that it is possible. Now I don't know if that survey is manipulated or not because they did a similar thing in Spain and over there, they found only 8% of the population got antibodies. So depending on whether that -- it's -- the Indian study is true or not, I would say maybe this thing burns itself out by this year -- in this calendar year, early next year. If it's not to be the case, this thing may be with us for a long, long time, possibly even into, let's say, March, April, May time frame. But that -- I think at some point, you'll reach this confluence where the number of cases become a sort of low-lying irritation and that is not enough to deter patients who have deferred it for too long. The patients who have cardiac conditions, who have cancer, children needing vaccinations and any checkups, they will -- their need to get it done will outweigh the sort of low-lying numbers, the low-lying irritation knowing that there is COVID out there. So when that point is reached, then we all sort of recover back to the normal levels even without COVID having gone away.
We take the next question from the line of Sameer Baisiwala from Morgan Stanley.
So quick one, what's driving up sequentially a loss in ARPOB?
Scheme patients coming down.
I see. So that would explain ARPOB, I guess, even ALOS?
Dr. Rupert?
Yes. Because COVID admissions, even though they are small in, I mean, number, but some of them are required to stay for up to 14 days. Some of them can't be fast-tracked and sent on the 7th or 10th day. And generally, most of the patients that come into a hospital kind of a setting are the moderately sick to very severely sick. So they stay for -- anywhere from 10 to 18 days inside the hospital.
Okay. And what's driving the lower mix of scheme patients? I mean they are scared to come because of COVID or something else?
Logistical issues. A lot of scheme patients come from hinterland, where the buses are not running, the government is not referring cases to us. That's just -- yes. At this point, the government schemes are just not able to send patients to us.
Okay. Great. And just to tie up with the previous participant. How long can the patients really hold out? If the volumes are down 50%, 60% for business, it's already been 4 months now, so all these patients, I mean, wouldn't elective then become emergency in the months ahead? So that's one. And second, would there not be a point in time when actually the volumes would surge way beyond what used to be pre-COVID volumes?
It might be a possibility and that's a good thing to have. But I think if it happens, we are prepared to handle a significant part of that load to increase that -- we have that capacity to -- and we can work out increased efficiencies to handle that kind of a load. What we are seeing now is the oncology is being -- steadily being doing well. So they are not deferring something like that. But we have a lot of patients who are approaching us for very high-end care, but some of them are like transplants and other things, they will obviously want to be -- situations to be COVID-free before they can come there because they want to be sure that they will not contract COVID in the postop because they have a very long convalescence period of almost 3 months at home and things like that. So we will see a very high-end work going up once the prevalence comes down very significantly. But we will be in a position to process them inside the hospital, we will have the capacity to do that.
Okay. Great. And you had mentioned earlier in the call that 18% to 20% of discharges were COVID discharges? Or if you can clarify on that?
No, that is -- depending upon the prevalence, which is happening, that is in some of these very high prevalence areas. But otherwise, it's around 8% to 12% in the low-to-moderate prevalence area. It's not the proportion of the total number, it's all unit by unit. So when it happens in the overall, this one, it won't come to that amount. It will be somewhere around 8% to 10%.
Okay. Got it. And what percentage of your capacity and the bed capacity is really now devoted for COVID patients, if there is any such thing?
Around 700 to 800 beds are committed for COVID in various units.
Okay. So that's about 15% of your total, yes?
But Sameer, we have also augmented the, let's say, this COVID beds by tying up with, let's say, external agencies for additional beds. So it may not be necessarily that hospital beds are occupied in this manner. But it is a combination of a hospital bed and externally tied up bed, which are adding up to the 700 or 800.
Just to give you a sense, in Bengaluru, we've set aside 150 beds. But in our hospital alone, it's only about 50 to 60. The rest are tied up with guest houses, our international accommodation hotels, those are the ones that we're using to house the asymptomatics.
I see. And of the 700 to 800, what's the sort of utilization you're running?
These units will have their own this one because it's all -- unit-by-unit will have separate utilization. Again, it all depends upon where the city is located, what's the local prevalence and things like that. So to give you an idea, in Bombay, hardly the occupancy is around 15%.
To give you a sense, Bombay is nearly empty. Ahmedabad, mostly empty. Delhi is about halfway occupied. Bengaluru is full.
I see. Okay. No, that's very helpful, but a little stray outcome because given that Bombay is actually very -- one of the worst impacted cities, why should it be empty?
No, that's a Children's Hospital, and we are exclusively dealing only with children, and children have a very low incidence of COVID, requiring admissions of any site -- any type.
We take the next question from the line of Siddhant Bhandari from Highwest Global.
Sorry, my question was just answered. Thank you.
We take the next question from the line of Ashi Anand from Allegro Capital.
I was just trying to reconcile the cash flows a bit better in terms of the reduction in net debt. So I understand receivables have actually -- receivables have come down. But I wanted to understand on the other working capital line items. How have those moved? Have you seen a substantial kind of increase in payables? And any other important line items that have helped like bridge the gap in cash flow?
It's -- there's a substantial increase in payables.
Okay. So in terms of payables, would you be able to share, how much of that has moved up by?
The gap, whatever you see in terms of the reconciliation is the movement in payables.
Okay. So the entire gap in terms of the cash flow movement is because payables?
Yes, yes, yes.
[Operator Instructions] Next question is from the line of Krishna Prasad from Franklin Templeton.
I have a question on the commentary on EBITDA margin. So you said that for June, we have already achieved breakeven for the month. Is that the right understanding?
Yes, almost, at a consolidated level.
Yes. And would that mean for the next quarter, you would be at -- starting from 2Q onwards, you'll be EBITDA positive, is that the right statement to make?
Krishna, like, I think we have commented on that. And depending on how the lockdown happens or not happen in various meaning in locations where we have these breakeven points, the revenue what we achieve, will move towards that. But if it were to continue on the basis of the June revenues, it is right that the breakeven point -- the quarter 2 will at least have a breakeven if it's on the basis of the June revenue.
Okay. And in the -- I think you spoke about Gurugram, for example, 1/3 being international cushion. Are there any kind of alternate measures there, like how do you get to breakeven now given that things have changed in the landscape?
Yes. Assuming the international flights don't reopen anytime soon, we're definitely targeting a lot more domestic patients. So entire marketing effort and our digital outreach is focused inward, and we're trying to do things to drastically increase the number of domestic refers we get. But that is not a short-term fix. The short-term fix is for the flights to reopen. This will take a lot more longer time.
And is there any kind of fresh thinking on when do you think the new hospital cohort would kind of get to breakeven? Any kind of time lines that you are thinking about?
I think earlier, pre COVID, we had indicated that Dharamshila was at the breakeven. Gurugram and Bombay would breakeven towards the end of this fiscal year or early next fiscal year. Now it's almost like the clock is reset a little bit. I think Dharamshila still could. It's almost there. Let's say, it could reach the breakeven much sooner. But with Gurugram and Mumbai with the businesses effectively resetting itself, it does get pushed out. So definitely, most likely not in this fiscal year.
[Operator Instructions] We take the next question from the line of Charulata Gaidhani from Dalal & Broacha.
Yes. My question pertains to Cayman. Cayman, because of lower occupancies, has reported a 14%, 15% EBITDA margin. You think the EBITDA margin will be around this level only? Or will it go back to 25% -- 20%, 25%?
The Cayman EBITDA margin will definitely increase. I'm not sure whether it will hit the numbers you indicated. From a combination of 2 things, one is definitely volume growth, which will happen once the borders reopen. The other is the change in the case mix when we start getting into oncology and when we pick up with the general medicine specialties. These will definitely have a significant increase in EBITDA given that they're very low consumables businesses. The last one is, we've engaged an external agency to help us with this process known as coding and billing. We historically used to go on these very large fixed packages with insurance companies, but going forward, we'll be going for billing and coding systems, which means that it's a little bit more work upfront, where we'll have to -- each bill individually, write very detailed clinical notes and be able to get the right ICD code assigned to that. It's a lot more work upfront. But the reward is that, if we are able to do it well, the realization per procedure definitely goes up much higher. So we've engaged a third-party to help us with that. And eventually, we're going to start doing it ourselves. So in that, I would say a lot -- even at the same volumes, we would see EBITDA growth.
Okay. And what is the proportion of international patients in Cayman?
Right now, it's 0.
No. As a pre -- at a pre-COVID levels?
Around 10% to 15% it would be before pre COVID.
Okay. So 80%, 85% is local.
Yes.
Yes.
Okay. And what is the occupancy for the current quarter?
Around 29 to 30 beds.
We take the next question from the line of Nitin Agarwal from IDFC Securities.
Viren, on Cayman you mentioned about the opportunity to increase in the kind of offerings there, seeing the demand there. But does the Cayman experience sort of strengthens your conviction to open up similar setups in other parts of the Cayman Islands?
Say that again, the last part?
I mean in terms of doing similar sort of setups and other earnings around the Caribbeans?
Yes, yes. No, definitely. In addition to this, we have signed an agreement with the Government of St. Lucia, where there is a hospital that was built by the EU. They will be giving it to us to set it up initially. So we have a 2-year contract to put in the systems and processes and hiring practices, all of that. And post that, at our option, we have the ability to run it. Similarly, we are looking at other opportunities in Bahamas, Barbados and so on. What's happened now because of the COVID, it's really put health care back, front and center for them. And they all realize they need to build robust health systems because historically, they used to rely on the U.S. for taking care of health. But in this instance, the U.S. borders are completely shut and even most Caribbean people are not happy going to the U.S. for treatment. And so we get a lot of inbound inquiries from these islands that historically went to Miami, who now want to choose our hospital in Cayman. So yes, the opportunity do exist, it's just that we're trying to do it in as capital-lighter fashion as possible given that the ticket sizes for these kinds of investments are also several orders of magnitude higher than in India.
Well ladies and gentlemen, there are no further questions. I would now like to hand the conference back to the management for their closing comments.
Thanks all for your active participation on the call today. Like we indicated in the earlier part of the call itself, should you have any further queries, please do feel free to get in touch with us. We'll be more than happy to address it to the best of our ability. Thanks, once again.
Thank you. On behalf of Narayana Hrudayalaya Limited, that concludes this conference. Thank you for joining. You may now disconnect your lines.