Narayana Hrudayalaya Ltd
NSE:NH
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 148.1
1 416.95
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Narayana Hrudayalaya Ltd
You don't have any saved screeners yet
Hello, everyone. Good afternoon to all of you. Myself, Debangshu, and as most of you are aware, I run the Investor Relations and Mergers and Acquisition Practices at Narayana Hrudayalaya. On behalf of the company, I welcome you all to the First Quarter Fiscal Year 2023 Earnings Call of our company.
To discuss our performance and address all your queries today, we have with us Mr. Viren Shetty, our Vice Chairman; Dr. Emmanuel Rupert, our CEO and MD; Ms. Sandhya, our CFO; Dr. Anesh Shetty, MD of our overseas subsidiary, HCCI; and Durga Prasad from that 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 date. I would also like to remind you that everything that is being said on this call that 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 before our initial public offer in late 2015 and subsequent annual reports on our website. On that account, I'm sure you guys probably would have also gone through our annual report that has also been very recently updated for the last fiscal. Post the call, in case you have any further queries, please 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. We are pleased to report the highest profitability for our Indian operations during the quarter gone by, which surpassed the previous highs witnessed in quarter 3 of FY '22. Aided by steady operations that came in, we managed to achieve a consolidated EBITDA of INR 2 billion at a margin of 19.4% and a PAT of INR 1.1 billion at a margin of 10.7% for the period quarter 1 FY '23.
Since our planned capital outlay for India and Cayman is still running behind schedule due to external factors, we incurred a cash CapEx of over INR 1.1 billion during the period. Our overall balance sheet and liquidity profile remains strong with INR 5.2 billion of gross borrowings against the consolidated cash and liquid investments of over INR 4.4 billion as on 30th June 2022. Separately, we have reorganized our operation's regions to ensure greater alignment among our hospitals. From this financial year onwards, Jaipur Hospital will be part of the Northern Group and Raipur Hospital will be part of the Eastern Peripheral grouping.
With negligible contribution of COVID-19 and vaccine volumes combined with recovery in elective volumes, we registered the highest-ever EBITDA margin of 16.2% for quarter 1 FY '23 for our Indian operations. Compared to our previous highs in quarter 3 FY '22, the domestic operations EBITDA grew 27.5% while registering an absolute increase of around INR 300 million and registered 46.8% growth compared to quarter 4 FY '22, which was impacted by the Omicron wave. The Indian operations also registered the highest percentage contributions from the international patient business since the onset of the pandemic at 6.5%.
While we are working on new marketing channels to grow this further, we don't believe we will reach our pre-pandemic figures of around 10% to 11% until international travel reverts to pre-pandemic behavior. It is heartening to note that the strong India performance has been achieved through all-around performance across the network, while continuing to be led by our flagship centers with registered an EBITDA margin of 30% in quarter 1 FY '23 as against 28.9% in quarter 3 FY '22.
Our 3 new hospitals across NCR and Mumbai, registered a revenue of over INR 1.05 billion and delivered a positive EBITDA margin of 6.5%. The non-flagship hospitals, excluding Jammu, achieved a healthy EBITDA margin of 18.8% in quarter 1 FY '23. We remain encouraged with the resilience of our business during these uncertain times, and we shall continue to invest in brownfield expansion across these units over a period of time.
Moving on to Cayman. Our hospital was affected by COVID restrictions and strict quarantine rules placed by the authorities for most of the quarter and managed to register an EBITDA of USD 8 million in quarter 1 FY '23. As our expansion slowly continues, we plan to onboard key clinical talent ahead of the anticipated patient volumes, since there is a long lead time for getting visas and work permits. With COVID disruptions minimizing from quarter 2 and with our Camana Bay clinic making us more accessible, we are confident of sustaining solid performance of this unit going forward. We continue to focus on various technology initiatives to drive performance.
During the quarter gone by, we implemented a cost estimation model in ATHMA HIS to provide accurate estimations for planned admissions, and we also implemented a checklist tool for clinical staff to improve patient safety. Our software team also developed a new user interface for AADI mobile app to improve user adoption and drive productivity of our doctors across the network. Our efforts in revamping the marketing team has paid off and digital marketing channels now contribute almost 1/4 of the overall India business.
On the ESG front, for the period quarter 1 FY '23, we achieved a net carbon reduction equivalent of 3,705 tonnes, along with savings worth INR 9.1 million through energy optimization and switching to green energy and another INR 3.6 million to buy upgrading to a high-efficiency equipment across the network. To improve our focus, we have also initiated the Business Responsibility and Sustainability Report/ESG framework across the group.
On the clinical front, we have continued to differentiate our services by focusing on advanced quaternary work in cardiac sciences, oncology services and GI sciences and the transplantation across the network.
Some of the key highlights for the quarter gone by. We added 3 additional operating rooms to the Narayana Institute of Cardiac Sciences at Bangalore in the Health City campus, thereby increasing the surgical throughput in this unit. This unit did 2,027 cardiac surgeries during the quarter, and performed 1,700 cathlab procedures in May 2022, which is an all-time highest monthly volume at this center.
The Rabindranath Tagore Hospital in Kolkata successfully bridged the patient with end-stage heart failure to transplant with an assist device, and this was the first successful such procedure in the Eastern India. And our focus on transplants also generated a strong momentum, which resulted in 75 successful bone marrow transport, 20 liver transplants, 8 heart transplants and 192 renal transplants across the group in quarter 1 FY '23.
Across the network, percutaneous valve implantation that is TAVI procedure was also 30 procedures was done as well as more than 125 robotic surgeries was done across the entire network for high-end oncosurgical procedures. While continuing to consolidate our operations, we would pursue growth opportunities, both in India and overseas to drive synergies from our robust existing operations and maximize value for our stakeholders. We are confident about the prospects of the health care landscape across the world and are taking to transform our business to become more patient oriented, digitally native and operationally efficient.
We see our overall business being well poised to continue Dr. Shetty's mission of delivering affordable and high-quality health care to all sections of our society. Thank you.
Thanks, Dr. Rupert. With that, we will now open the floor for Q&A. [Operator Instructions]. Yes. I see a question from the line of Prithviraj. Prithviraj, you can go ahead. You can unmute yourself and go ahead.
Mr. Viren, I just have a couple of questions. First, on your domestic business, new hospitals. You mentioned they have done 6% EBITDA margin this quarter. So how do we see this margin trajectory over the next couple of years? And when can we expect them to touch that 18 or 20 percentage, which you're -- currently your nonflagship hospitals are delivering?
These hospitals, 2 in Delhi, 1 in Kolkata are of different sizes and configurations. The Delhi ones, we feel pretty confident that ultimately they will reach the normal trajectory that the rest of the hospitals have, given that these are multispecialty [indiscernible] hospitals. So as for timeline, it's hard for us to give guidance. I would say, normally for our hospitals, they take anywhere from 3 to 4 years to breakeven. Post that, another 3 to 4 years to reach a sort of maturity.
And then depending on how we expand them, it will take its time. So both the hospitals will be due for expansion, not immediately but at some point over the next 2 years. In Gurugram, we will want to add 2 more floors. We have the capacity to do so. And Dharamshila also, we're looking to talk to the hospital owner, the trustees, to expand another wing over there. So what happens with the expansion is that, again, you incur a lot of manpower [indiscernible] are done. But it does reach a very steady state EBITDA level. When you don't do any more expansion, you're just going up the volume growth.
So long answer to your question, I would say to get to that 18%, 20%, it would take the normal trajectory that all the other hospitals did, which is usually from 5 to 8 years, barring certain exceptions that come about. The exception would be our Bombay Children's Hospital, given that it is highly specialized around children's care, and this has a very different earnings profile, which is quite high in cost. And as it's trying to differentiate itself, it's taking much longer to breakeven. So there, it's not easy for us to say whether it will match the performance of the other hospitals.
And just one more question from my side. Again, on your Cayman business. You mentioned that -- business is now going back to normal. So can we expect, again, the margin and the volume trend to move to historical levels even here?
For this question, I'll pass it on to Anesh, who is based over there, and we'll be better able to flesh this out. Anesh?
So to your question, yes, during the first quarter of the financial year, we were severely impacted by COVID. A lot of patients were not sick, but the government rules are very, very strict around quarantining and testing and even a single family member being tested positive results in the whole family needing to isolate. So a lot of our doctors were -- and nurses were, unfortunately out of action. Fortunately, that is behind us. And even in the first month, that's July of the new quarter, we have seen both revenue and margins revert to normal.
Thanks Prithvi. Nitin, you can go ahead with your question.
Thanks. I can probably take it forward from the Cayman Island question. Cayman Island essentially has been a big success story for us -- turnaround story for NH over the last 2.5, 3 years, especially post COVID. Since you're close to the -- more closer to the ground, can you just help us understand on 2 things. One is, a, what change in Cayman Islands all of a sudden that our business performance really took off? And two, I mean, there's always concerns that some of this may not sustain. So how -- what would your thoughts to go on that count?
Sure. Thanks, Nitin. So there are 2 questions there. So to the first one about what suddenly changed. I actually -- we don't think it's sudden. Of course, we've been operating the hospital for about 8 years. For the first, I would say, 2.5 years or so, we had a lot of problems finding our fit in the market. We were actually chasing a very aspirational target in terms of an expectation of medical tourists coming from overseas, which we realize is a game that will play out over years, if not decades, and we are getting there.
But I think the initial insight we had was that we had to be built on the foundation of a very, very strong local and Caribbean presence. And markets in the U.S. and Canada and North America would play out over a longer timeframe. So I would say from year 3 onwards, that's when we really made that switch and focus in our efforts. And things have -- like you said, have been working out well for us so far. We don't see any sudden swing or we don't see any need for any sudden deterioration that would happen because of any external event in most situations.
To your second question about how sustainable is it. We did have COVID restrictions like everybody else in the early half of 2020 that did mandate for a lot of people to be -- to remain on Island and people here were happy to be on Island because this was something like a paradise where there was negligible COVID and people couldn't come in, most people couldn't go out. So a lot of patients, especially the privately insured and mobile patients who traditionally would go to the U.S. Centers of Excellence for their care, had to try us out. These people would come to us for certain procedures, but in most cases, would go overseas.
So for a good 1.5 to 2-year period, we had, in a sense, a group of privately insured local people who had to experience our services. And travel restrictions have been rapidly going away. In fact, right now, if you are fully vaccinated, there are almost no restrictions, including testing requirements as long as they're fully vaccinated, which most of the population is. It's hard to say whether those people who used to go out will continue to stay with us. But so far, the trends look very, very encouraging and very positive. It appears that they've liked what they've seen. They enjoyed the experience and they are sticking with us. But we'll know in the next 2 or 3 quarters or so if that is a permanent shift to us or there may be some rebalancing. But so far, we are very, very encouraged by what we're seeing.
Thanks, Anesh. If we recovered just probably take that a little forward again. Now we have oncology setup coming through in the Camana Bay units. I mean 2 things, one is, a, how does it change the proposition for NH's business in Cayman? And two, does it do anything more for you from our overall Cayman Island -- beyond Cayman Islands in the broader Caribbean? I mean, does it do anything to enhance our proposition in the product payables per se?
Yes, Nitin, absolutely. Now you are right on the mark over there. See, when we've been working with other Islands, other governments, other payers, to get them to move their patients towards us or -- the value proposition is very clear. We are a joint commission accredited hospital. We offer tertiary care at an unbeatable price. The challenge that a lot of the clients face or a lot of payers face is that they have existing relationships. So it's difficult for them to move some business to us and maintain their relationships elsewhere. One of the biggest gaps we always had was radiotherapy and oncology in general.
This is a very big spend area, if not in volume, but big in spend for everyone. So what we're seeing now is we're on track to have our Radiotherapy Center commissioned by Q4. That was what we had committed to and things look to be on track. With that, not only do we fill in perhaps the last reason for local people to go overseas, at least one of the last reasons which was oncology and radiotherapy. But we've become that much more attractive as a full service, a truly full-service option for other governments and payers in other jurisdictions where they can now say that, all right, I don't have to maintain relationships elsewhere. This is a one-stop solution for me. So that really is a very, very positive sign for us. And that's why we've been pursuing this radiotherapy project for quite some time now.
Thanks, Anesh. And again associated point is -- for us, from our overseas expansion perspective, Cayman, obviously is -- it's turned out to be a significant success. So does now Cayman become an anchor for us to build a business around or just remain essentially one hospital story or one market study for us in your perspective?
Sure, sure. No, definitely not. I mean I think for as long as I can remember, at least 5, 6 years onwards, we've been wooed by every head of state, every payer in most Caribbean Islands. I mean, I travel to all of them, all the English speaking Caribbean Islands. There's not a single market where people don't want us to replicate what we have done in Cayman. Naturally, that's not possible. There are some very favorable dynamics in the market that allow us to do what we did.
Having said that, Cayman will very much and is already on track very much to becoming a hub for what we're doing in the region. For the past 1.5 years, we've been engaged with the government of St. Lucia to help them operationalize their national hospital. The intention of that project always was to learn more about the market and take that to the next level if we wanted to. We have similar early-stage discussions going on in several other islands. But these are mostly arrangements where we would be a consultant, we would be an operator. We would not be coming into the table with capital initially. But we always have that option to do that.
And we still have a lot of unused capacity in our Cayman hospital. It still is very much in our favor to use this as a hub and establish relationships to better utilize our infrastructure, especially with the new hospital and the oncology project coming in. But we are a very, very well-known brand in the region, and we have proven that this model of having a tertiary joint commission accredited hospital in a small island can work. So I think that there is opportunity to do something along the same lines elsewhere, but not with so much of an investment or not with such a big presence.
Anyone else? Any questions? Yes, Harith, you can go ahead with your question.
Will you be able to share the EBITDA number for the new hospital's cohort? I think I missed that, in case you said in your opening remarks.
Yes. So Harith, Dr. Rupert had mentioned that the cohort has delivered a positive EBITDA margin of 6.5%.
And if I take a step back, I think maybe last couple of years of pre-COVID, we had embarked on efforts to improve the case mix and ARPOBs in our India hospitals network. And then we've seen some of that reflecting in a much improved ARPOB when I look at the numbers today. So where are we in that journey? And then if you could give some color on whether we should expect the trajectory in terms of ARPOB improvement to continue?
If you see the clinical work that is happening, most of the work is happening on the high -- in addition to the higher routine work, the high-end tertiary and quaternary work, what is actually driving the ARPOBs and margins as well. We would have seen the number of transplant numbers which we have done across and also the kind of the quaternary work that is routinely going. And we are constantly working with clinical teams and the throughputs and the efficiencies, and gradually trying to get ALOS also done. Currently, it is around 4.6, but we are in the journey where we will start reducing it closer to 4.2, 4.3. And then once we stabilize, we will be further coming closer to the 4 kind of a region.
And in spite of the quaternary work, we are able to maintain a very steady ALOS numbers. But it's a combination. We are working a lot on the oncology front, where the daycare work on the chemos and the radiations and all that is working. And we are upgrading some of our machines. Machines in Bangalore have just got upgraded. We were down to only one machine similar as the story in Howrah. We will get that up by October. And also, we will be commissioning by the end of this -- closer to the end of this financial year, the unit in Jaipur as well. So all this will contribute to reductions of the ALOS as well while contributing significantly to the high-end treasury and the quaternary work, which will continue to happen in these sectors.
That's what we are working on. And then a lot of other efficiencies and a lot of digital initiatives are also bringing in the efficiencies and the throughput, which we have started to work on and which will start bearing fruit in the coming quarters.
That's helpful. And last one from my side on the M&A front. I think last time you had mentioned that we are evaluating a couple of assets. So where are we in that process? And in terms of geographic priorities, which are the key markets that we should expect an M&A front?
Priorities are our key markets, which is Bangalore and Kolkata. There, we are evaluating opportunities, but those take a long time to come, and it's not always that economics favor us. So we'll be taking up brownfield expansion for our Health City in Bangalore and in Kolkata, we're not able to get land nearby. We bought a few small parcels, but that's adjacent to our property, but that's a very crowded space. So we have to buy a land little bit further away, around 20, 25-minute driving distance and build a new campus over there. It won't operate traditionally like a greenfield given that there's so much patient volume that will be shifted in certain clinical departments we will move there. So it will function more or less like a brownfield.
So that is our highest priority for expansion. Adding flows to the existing building, adding onco units to all our hospitals, changing the bed configuration and this brownfield expansion of Bangalore and Kolkata. And eventually, for Delhi, Bombay, Mysore, Raipur, all these other places.
M&A-wise, there are a few things we're looking at, at our 2 hospitals under liquidation, a few things that come up on an asset-light basis with some trust, some people that we are talking to for management contracts at the hospital, but those are still a very slow burn, long lead project that as and when it will come, it will come. But our growth numbers are not dependent on that. Those will be coming over and above everything we have planned.
The next question is from the line of [ Ahmed ].
So my question was related to the last participant question's. Is it fair to assume that there is nothing M&A coming up in this financial year?
No. I mean there are a lot of things we're pursuing. It's just that our ability to close them and coming to an agreement on the right price means that it's hard for us to tell you exactly that exactly one is coming up next quarter, one after that, two beyond that. So that's the kind of guidance we're not able to give. We are evaluating 3 to 4 opportunities. We don't know exactly when they come up. But when they do, they are all part of the plan. What we said earlier, which is to strengthen our existing hospitals, have huge focus on Bangalore and Kolkata and look at the current geographies as areas for expansion and asset-light things in other places.
Got it. Makes sense. And one more question related to ALOS where we have -- I mean, there's commentary that it will reduce from 4.6 to 4. Now we understand that it is a day-in-day-out process and you need to improve therapies gradually. But can you give broadly a guideline or how long does it take to improve this year-to-year or longer than that?
Yes, closer to 8 quarters to come to that 4.1 figure. But we are constantly working on that. It's a gradual process, which we will see on a quarter-on-quarter basis, a step-by-step reduction.
The next question, Sameer, you can go ahead with your question.
Yes. Thank you, everyone, and a very good afternoon. So just on the previous question, you had a CapEx target of INR 10 billion for the current year, have done INR 1 billion. So are we on track for that? And is it possible to break it up, especially for the Kolkata and the Bangalore expansions?
Sameer, this is Sandhya here. We have guided that we're looking at INR 700 crores, INR 1,000 crores over 3 to 5 years. So we -- so there are couple of aspects on CapEx. One is that it's a mix of greenfield and brownfield, some of which could be inorganic. So on the inorganic, Viren has already given a commentary that is depending on the timing, it will materialize. As far as the greenfield opportunities are concerned, like we had indicated, the big sanctions will happen in Kolkata and in Bangalore. In addition, we are looking at, for example, oncology expansion in Ahmedabad and Mysore. So there would be specialties and capabilities that we will be building across different units based on the demand and traction that we are seeing in those specialties.
So those are on track. The greenfields are subject to land acquisition, et cetera, the Viren explained. Those will be timed accordingly. And the inorganic, based on the timing, the CapEx will be done. So I'm not able to guide a particular number, but this is the trajectory in which we are on.
So did you say INR 7 billion to INR 10 billion, INR 700 to INR 1,000 crores over the next 5-year period? Is that what you say?
Yes, 3 to 5 years. Yes.
I see. Okay. And can you quantify how much would be Bangalore and Kolkata, if you have something in -- I mean, something in mind?
Other than the Cayman one, which we've already spoken about, which is a big investment, a significant chunk of this is currently the intent is to be investing in Bangalore and Kolkata. And in other high-performing regions based on return that we will be able to generate. So there will be a significant investment out of this in Bangalore and Kolkata. I'm not able to quantify that number because, like I said, some of these are inorganic opportunities, and they will have to materialize. So therefore, it is not fair to put a number to it at this time.
The bulk of that amount will be for these 2 geographies.
Sandhya, just to, I mean, probably get this right, what Sameer was wanting to understand, because the INR 7 billion to INR 10 billion is actually INR 700 crores to INR 1,000 crores. That's not over this 5-year period. That's what Sameer's question was. Since we had guided a figure of north of INR 1,000 crores for the current fiscal and itself including all the activities that we are pursuing across organic, inorganic, greenfield and everything. So that remains on track, albeit that we are running a little behind the schedules, Sameer, in terms of what you have seen us incur in the first quarter.
But if all things were to go through in terms of what we have planned, for the current fiscal, we are -- we should be looking at the kind of number that we have previously guided upon.
Yes, exactly Debangshu. That's what my understanding was.
Yes. She got confused with the numbers, yes.
No. Sorry, we got confused because we forgot to add Cayman into that.
Okay. Okay. Got it. So it is INR 1,000 crores for the current fiscal. And okay, got it.
There will be an upward bias to the INR 1,000 crores. So don't hold us on that number, if at all.
Okay. Okay. Got it. And the other question was on the Mumbai hospitals. Can you talk a bit more about how is the asset utilization, in whichever way you want to quantify and talk about? And is it really taking longer than what you had initially planned? And what really needs to be done to make it a very optimal usage?
Yes, the -- I mean, for a pediatric hospital, the occupancy has been [indiscernible] the beds, given our census beds being around 135 to 140. And we've seen a lot of growth in Cardiac Sciences program and the Oncology program in addition to the very sustained and very steady runoff of pediatric surgical program as well. Pediatric orthopedics and the other specialties, which has been going on.
So we are focusing a lot on the high-risk pregnancies because that is a need which not many wanting to focus on a Level 3 NICUs and the high-risk pregnancies all in under one roof. That is something which we are running on -- I mean we're trying to focus on that and move that in that direction. In addition to focusing significantly on the very high end NICU and the cardiac sciences program and various other things.
So for all these expansions with good traction in the bone marrow as well as the liver transplant programs going, we do need additional capacity for which we have mentioned about that in the opening remarks, and that is something which we are working on. But this is something which we are utilizing the capacity, and we will, over a period of time, if we do not expand over a period of time, then we will see an upper limit for running the services because pediatric is something which we can't be, unlike other adult program, a lot of efficiency and ALOS can be reduced significantly.
We may not be in a position to do that when we are doing very high-end tertiary and quaternary care. So we do need a little bit more of the capacity there.
But the costing will be funded through fundraising from our trustees for that hospital. [indiscernible] that will be our expense.
Sir, what's the utilization over there at the moment?
The bed utilization is almost close to 67% this quarter. That is as per the mid-night occupancy. But if you look at the daytime occupancies, it will be a little higher. But when we are looking at the uniformity of the number, it is around 65% to 67%.
Okay. So sir, sorry to belabor on this. But with such high occupancy, I would say, it should be many profitable hospital or operations that you're running over there, which is not. So is there something that's holding you back?
Rich people don't have sick kids. This hospital was built with the idea that it would be a center of excellence for pediatric cases, model on the lines of Children's Hospital of Philadelphia, Boston Children's and so on. But in a country like India, given that most of the patients who come with the worst symptoms tend to be from poorer backgrounds. We rely on a lot of government funding, charitable funding to support the hospital operations.
So in time, it will -- once it becomes known as this #1 center of excellence and people from all over the country come the -- let's say, the patient demographics of the hospital will change a lot, which will improve the finances. But until that time comes, it will -- it's going to take some time. That's one way to put it.
Thanks a lot Viren, that's very, very helpful. And let me ask one more question, and this is for the Cayman Island. So not worrying about the quarter-to-quarter fluctuations. If I say that you were doing roughly INR 25 million on the topline and $10 million roughly about on the EBITDA line, how should now this territory be going forward, excluding the new onco block until it comes, sir? How much potential does it have on top about that?
Anesh, do you want to take this? This is potential in the eastern campus.
Sure. Thanks, Sameer. So the numbers you referenced were, like you said, they have already been achieved in, say, Q3 of previous year, and they're very much our current expectations. So excluding the oncology block, which will be starting soon, we have a lot of room to grow, both in Cayman Islands as well as in the immediately vicinity that is for us the Caribbean and certain Latin American countries. There are a few service lines which we have yet to commission.
We don't do the bulk of primary and secondary care. We restrict ourselves to tertiary care in most instances. There are certain very high-value niche areas such as neonatology and pediatric intensive care, which we are planning on commissioning soon, hopefully in the next year or so. But those are currently not offered. These are services for which patients go overseas and locally they are frequently dubbed the million dollar babies, because neonatal care in the U.S. is extremely expensive.
So there are a small -- a fair number of specialties, which we have yet to commence. And we have a clear path to -- we have the infrastructure. It's just putting the teams in place, getting the right approvals and getting started. Having said that, our entry into the retail high street location with our clinic has given us a good, good, strong foothold into the privately insured market. In fact, in the past few quarters since that clinic has been active, we've seen a good improvement in our market share in the private insurance space as well.
So I think while I don't have an exact figure to share at this time, I think we are comfortably seeing a good pathway to easily increasing revenues from the existing facility we have and with adding new service lines to the existing infrastructure. And this is not to mention that a lot of our recent growth over the last 2 years was achieved with, I would say, negative performance of our international business because of COVID restrictions. So as the restrictions abate, those are all channels that we will slowly restart.
We had to defer a lot of those relationships because of the COVID restrictions. We will be restarting a lot of those. And that's -- that is a much larger pool, of course, more challenges to that. But that's a much larger pool that we have to tap into.
Okay. No, this is useful. And for the fully vaccinated, are there any travel restrictions now in Cayman, inbound or it's still pretty much locked up?
No, no, no. You are right. So I think I mentioned this as well earlier, that if you're fully vaccinated, you can freely enter and -- enter and exit. But there's just an online portal, you have to fill up some information in it. It's something like our Air Suvidha. So that's the only requirement and that was as of a few weeks ago. So if you're fully vaccinated, you're good to go.
Got it.
You can plan your travel there, Sameer.
Anyone else have any questions? Yes, Damayanthi, you can go ahead with your question.
I'm looking at your presentation slide where you have given operational review for India. So your ARPOB for the quarter was INR 12.2 million, which is around 9% higher than the previous year. So how should we look at growth on the ARPOB side and what will be a key driver? And my other question will be, have you taken price hike for your health care services for the fiscal and by how much?
So, Damayanthi, as far as the ARPOB is concerned, some of it is coming, like Dr. Rupert was earlier saying in the mix change or the type of procedures that we have been performing. And some of it is coming because of the faster turnaround of patients. And while overall, the ALOS has remained the same, but we have been able to turn around a lot of the segments of patients faster. As far as the price hike is concerned, we -- as you are aware, price hike is not our first lever from a -- we normally look at costs.
However, to counterbalance the heavy inflationary pressures, we do take price hikes, depends from a unit to unit, and that happens in January. So our last price hike happened in January of this year. And the next price hike will be scheduled in next January. It is a very, very low single digits. It is the broad average of price hike, which we have taken this year. Next year, as we go through the cycle and we roll up our costs and we see how the work backs up and the efficiencies that are coming in through the significant investments we have made in technology, we will then see what we'll have to do from a price point of view.
Sure. Also, key driver, as you said, is mainly the mix improvement from the current level and scale up of some new units, not much reliance on the pricing part?
Correct.
Mix change, volumes, throughput.
Thanks, Damayanthi. Anyone else? Sameer, I still see your hand raised out there. I believe you are not there in the queue to ask the follow-up question. Anyone else, any questions? Yes, Gagan, you can go ahead. You can unmute yourself and go ahead.
You did give a detailed sort of response to what's the headroom for growth at Cayman. Likewise, if you could give some idea on what's the headroom for growth in India. And if you could sort of segregate your northern and western markets and eastern and southern markets and give your comments specifically to both the markets. What I'm trying to assess is till your CapEx sort of comes in or is effective, how much potential is there for the existing capacities to take you further ahead?
So a lot of the CapEx, what we are doing. So Onco, for example, is done to add a new service line. So that is revenue that is additive, which is not always already happening. Another kind of CapEx, what we're doing is the room upgrades, the infrastructure refresh, a lot of the equipment upgradation. That is for increasing the yield per room, creating the throughput, new service lines like adding new diagnostics therapies and faster scans. That's one dynamic.
But even without that, on a like-to-like basis, on the same infrastructure, simple things we're doing on the process side, on the service excellence side or on the digital side are done, too. So I'll give you an example. A big problem all our hospitals have is whenever we deal with insurance companies or with government schemes, it takes a very long time to get a patient discharged. Whereas everyone promptly shows up for admission at 9:00 in the morning. So there's a big mismatch where most of the admissions happen in the morning, but the discharge happen in the evening. So that's leading to a squeeze in beds.
Now a lot of the process change what we were doing and on the coordination between doctors, lab and test results and so on, so that we can discharge patients faster, early in the morning. And the same number of beds [indiscernible] people in and increase the occupancy. Otherwise, when my crunch is happening in the daytime and occupancy measuring in the night, you may see that as 65%, 68%. But functionally, it acts more like a 75% to 80%, which is full occupancy. That is one aspect of that.
The other is the clinical team that we bring in. Now a lot of our clinicians are traveling across. We've done a large number of these procedures called TAVI, which is a very advanced cardiac procedure for valve defects. A lot of them are traveling for doing liver transplant and training our people also then there are robotic surgeries where patients are coming from different cities to get it done. So that is happening on the same infrastructure. That, the levers for that are just, again, lining up patients, a lot of communication, some marketing effort and having doctors talk to one another and manage the patients well.
The third one is, as Dr. Rupert mentioned, which is the clinical team is working to reduce the ALOS, which increases the throughput, which in the same infrastructure will allow us to see more patients. So on a like-to-like basis, these levers will always be there. That is something that's pursued independent of everything else we will do. But over and above that, in Bangalore, in Kolkata, in Raipur, in a lot of places, even in our Delhi hospitals, we are really still choked for space. So our bone marrow transplant is usually always full because a lot of patients require that. And so they need more rooms for that.
Also MRIs and CT scans are always choked in the morning time. Or in the OT, you cannot get a slot in the daytime. Our ICU is always full. So for that, you would have to also do a little capacity addition to address these minor things as well. Then, of course, over and above that, we are looking at brownfield expansion, adding lots of beds to Bangalore and Kolkata because there's just a natural flow.
At this stage of our company's life, a lot of patients come because their family members got treated here. So it's not that this is the first time they've ever heard of NH as they come. Some family member, maybe even their parents have come here and got treated, had a good experience, and so these are repeat patients for us. And so that thing just keeps growing, the more mature you become as a hospital. And so we have to have enough capacity to take care of them.
While I appreciate that very detailed answer. The issue is all of these steps, as you see, to start with, in a way, help you increase throughput and efficiency. I'm simply trying to -- because I'm struggling or grappling with what effective sort of a number even a ballpark number in terms of additive capacity it can create or increase throughput by -- if you could help us somewhat there because otherwise, it's very qualitative and very difficult for us to assess our model. And secondly, as you increase throughput, I'm sure it also implies some sort of an efficiency and therefore, improvement in margins. So would it be a right assessment that as and when this moves up, there's also margin benefits to be had, both if you could give us some idea on the maybe enumerate the outcomes of these efforts. And second, the consequences of these and the margins?
Yes. So I mean, Gagan, I'm sure you know we don't give guidance on that, and it would be -- and it's not something that we would be able to give any kind of certainty either in terms of guidance on how all these digitization activities, how much it's going to do. I think the best just to help you what I've seen other people do in the model is take where we are and take what is best in class. So for hospitals in certain regions, best-in-class occupancy is 70%, 75%. Our best-in-class ALOS is that, whereas we are at 50%, and the ALOS is where it is. And so in the gap between the 2, you'll have to just make a reasonable assumption that this will happen organically over the next 2, 3 years for you to reach that and then assign some kind of confidence interval on that.
But in this part release, it's not -- I don't think we'd be able to give you any guidance on -- just by putting -- put a number.
Thanks. I get what you're saying. Just one final one. The brownfield, if you could help us understand both the timeline over which it materializes and to what extent does it add to the existing bed capacity?
These are still in the planning stage. We're still doing -- talking with the contractors and architects and designers doing all of that. These will be a little long lead time projects. So this construction alone takes 2, 2.5 years. Getting the planning permission and so on will take another 6 months. Capacity that it would add -- it will be added in phases. So ultimately, we want to double the capacity of both hospitals. But that will happen in phases. So you may start, let's say, with the number of beds and then keep adding that every couple of years as and when the occupancy reaches a certain level.
So it would be reasonable to assume that the significant CapEx budgeted for this year ex of Cayman will -- a large part of the balance will actually bear fruit only 2, 2.5 or 3 years out or am I completely wrong there?
No, no, no. The significant CapEx that's budgeted for this year that will actually come online, won't let any bed increase. This is mostly medical equipment and bed refurbishment. That's what we're able to spend. For bed capacity addition, those are long-lead projects, which will take 2, 3 years. So it won't show up in changing the overall bed mix. These things, what we are spending now apart from Cayman, are mostly quick wins like little remotely, adding MRI, adding some robots, adding onco, which it doesn't really change the bed mix much, but increases your realization is a very high-margin departments.
Alankar, you can go ahead with the question.
Two, three questions. So one is a follow-up to Sameer's question on the hospital in Mumbai. So if you see Viren there's another pediatric hospital in Mumbai, which is operating at more than 20% EBITDA margins. We also have the largest Mother and Child Hospital chain in India, which is operating at 25%, 28% EBITDA margin. So it doesn't seem to be a city problem or maybe an acceptance issue for pediatric hospitals in general in India. So can you help elaborate on what are the issues which you are facing? Is payer mix a larger issue for us compared to some of our other peers or any other issue which you can highlight?
Yes. I'll start and Dr. Rupert will elaborate. The key issue, what you identified and you're mentioning the hospital which are going in for listing soon. Those are mother and child hospitals. They don't do really high-end pediatric work. Most of it is birthing and a lot of birthing related. Since our birthing program has just started, we're yet to get those sorts of numbers, whereas we started from day 1 with a focus on high-end work on newborns, neonates, young children with serious continental disease. So that is leading to the difference. Like the patient profile of our 2 businesses are very, very different.
Yes. I think Viren has covered it all, but that is one more area where we are focusing on the routine general pediatric work, putting a lot of focus on that as well where there is reasonably larger margins compared to the -- some of the higher quaternary work where there's a different payer mix, which we are catering to as of now.
Understood. But just curious on that. I mean, if you look at, say, the largest chain in India, I mean, 70% of their business comes in from pediatrics, 30% only comes in from maternity. And when I meant about the hospital in Bombay, I didn't mean about -- again, I mentioned the one which is filed. I mean, there's another hospital which I was referring to, which I guess has a higher pediatric mix. So can you help me understand if you just compare it to the largest chain in India, because the mix is broadly similar, 70% coming in from pediatrics, is it just because of the mix issue or is there something else?
The patient -- the clinical mix, because they have just started doing some super specialty work. Apart from doing the NICU work, which they are very well known for, they do a lot of retrievals and things like that. But they've just started to go towards the tertiary and the quaternary work. And which we are already well established as a provider of those services in Mumbai, but we need to have the right mix, and that is what we are working on. The right mix of proper birthing, and the right mix of the routine pediatric work and that is what we are focusing on and trying to get that thing, the daycare surgeries and things like that.
Okay. So say in a steady state kind of timeline, would these high-end procedures, which we are currently doing, would these be profitable procedures for us?
Yes. These high-end procedures works well, but it just occupies too much of your manpower as well because the more tertiary and the more quaternary work you do then lot of support services also proportionately rises. While the basic secondary level care and the primary kind of a care don't need that kind of manpower support. And that is where we are and we need to get the right balance here, and that is what we are working towards.
Okay. The second question is on Delhi and the Eastern peripheral. I guess there's been some change in how we have reported our clusters in this quarter. So can you provide some numbers on the margins of Delhi as well as the eastern cluster, ex of Jaipur and Raipur?
Let's see, actually, if you look at the Delhi cluster, we have reported margins of about 9.5%, including Jaipur. If you take -- if you look at the Delhi cluster, we would be around the range of 9%, 10% only in terms of margin because one of the hospitals has already at 17%, 18% margin and the other hospital is on track. So therefore, because Jaipur has got added to Delhi cluster, we have not had a positive bias to our margin numbers. In fact, Delhi performance has been -- the North cluster had recorded on of the highest ever revenue as well as higher ever margins this quarter.
So the performance has been positive, even excluding Jaipur. As far as eastern -- and again, our commentary is similar. Raipur margin profile and the core profile was in fact similar to -- Raipur comes at a slightly higher margin profile, but there isn't a significant positive bias because of Raipur in the Eastern peripheral as well.
Understood. So basically, from almost 1% of EBITDA margin for the Delhi cluster in FY '22, we are now, as of this quarter, around 19%, even excluding Jaipur.
Not Delhi cluster. One of the hospitals in Delhi has almost has 18% EBITDA. And the other hospital is recovering. As a cluster, we will be around 10%. And that there is no positive bias that is coming because Jaipur getting added too.
Fair enough. Okay. And one final question. Can you comment on CapEx plans beyond FY '23? I mean, very broadly, given that we have not firmed up our exact plans. And also, is it possible to split the broad CapEx plan beyond FY '23 between India, Cayman and U.S.?
So Cayman, the CapEx is pretty much done. We will finish the existing CapEx in Cayman and we will have adequate capacity that will run us for the next short to medium term. As far as India is concerned, just like we said, there are various initiatives which are work in progress, and they have to materialize. Like we guided, maybe we would invest INR 700 crores to INR 1,000 crores over the next 3 to 5 years in India. But it is not possible to give a more detailed split of this profile right now because there are various moving parts.
And some of it will convert and it's not fair to put a number on that right now. We are intending to invest among all the options that we think about so far in the call. And as we go through further calls, we can give you more commentary when things rectify and we have greater clarity.
Sure, ma'am. So basically, even though the exact numbers are not finalized as yet, but very broadly, the CapEx intensity is going to be higher over the next few years compared to what we have seen in the past. That would be a fair assumption, right?
That is. But that's also because we didn't invest anything during the COVID time. So catch-up investments that have to happen. Group CapEx is driven primarily by [indiscernible], but have happened regardless.
Understood. Well, that's all from my side. All the best.
Anyone else?
Can I go ahead? Just one follow-up. On the CapEx, how would you be funding it? Would it -- what proportion do you intend to fund from 10 accruals? And how much cost to debt would you require here?
So we are -- it depends -- certain types of CapEx. For example, if we are acquiring land, we will be funding them from internal accruals. But say, if you're thinking of buying machinery or putting up a building, et cetera. So that would have a more skewness towards it. While we don't have an exact number of how much will be internal accruals versus debt. But we do not intend to breach the debt equity of one at the outer limit. So we would stay in that range. As the propositions come up and we start building our plan, I think we'll be in a position to give better visibility for that number.
Okay. Would it be a reasonable to summarize that towards the end of FY '23, our debt-to-equity would have changed significantly? Or we would have levered up significantly from where we are?
I don't think we'd have levered up significantly. We are like your -- we're not very aggressive in terms of the equity. We will lever up in the short term, yes. But I don't know if I will call it significantly. We will try to keep our debt equity under one. That's the aspiration.
So, I think there are some issues with my microphone out here. So I was trying to say that, with that, we will wrap up our session today. Thanks once again, everyone, for your active participation just like previous calls. Like we mentioned at the outset, do feel free to reach out to us in case of any further queries or clarifications that you would might need to address. Thanks once again for participating and being here with us on this forum.