Narayana Hrudayalaya Ltd
NSE:NH
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Narayana Hrudayalaya Ltd
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Good day, and welcome to the Narayana Hrudayalaya Limited Q2 FY '19 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Debangshu Sarkar. Thank you, and over to you, sir.
Thank you, Raymond. Good morning, ladies and gentlemen. Myself, Debangshu Sarkar, and I run the Investor Relations and the business development function at Narayana Hrudayalaya. On behalf of the company, it's a pleasure to welcome you all to our Q2 FY '19 earnings call. To discuss our financial and business performance outlook and to address your queries today, we have with us Dr. Raghuvanshi, our Group CEO; Mr. Kesavan Venugopalan, our Group CFO; and Mr. Viren Shetty, who spearheads the strategy and planning practices at Narayana, alongside Ashish Sukhija from the team. I'm sure you have gone through the results release along with the investor presentation, which were uploaded on our website as well as on the stock exchanges.Before we proceed with this call, I'd like to remind everyone that the call is being recorded and a transcript of the same shall be made available on our website. I would also like to remind that everything 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 and subsequent annual reports on our website. After the end of this call, in case you have any further questions, please feel free to get in touch with us. Now I'd like to hand over the call to Dr. Raghuvanshi.
Good afternoon to all of you. On behalf of NH, I welcome all of you to our Q2 financial year '19 earnings call. We started the fiscal year 2019 with the first quarter's performance in accordance with our expectations, and we are pleased to report that building upon the same, the second quarter delivered an expected result on all fronts. Our EBIT growth and operating revenues at over 27% was achieved on the back of HCCI operations getting consolidated, coupled with our Indian operations growing at over 18% -- sorry, 11% year-on-year. On the profitability front, our Indian operations have picked up strongly vis-a-vis the last quarter, and this uptick in margins was largely contributed by our matured [ set-up ] facility, which registered an industry-leading EBITDAR margin of 23.5%, and was ably complemented by 3 to 5 years' bucket. We are quite delighted to share with you an investor highlight that the 3 acquisitions done by NH in the Eastern region, namely, the Westbank and the Barasat facility have started to reap benefits with these units growing at 20% year-on-year and registering an EBITDAR margin of 15%.On the international front, as expected, our Cayman facility is back on track with approximately 15% EBITDA margin.Our newest centers [ in -- at ] Mumbai and Delhi NCR have started to witness decent traction in terms of patient volumes and are moving up the operational trajectory in line with our expectation. Elaborating further, these facilities are making a mark in their respective regions with the strong clinical expertise. For example, NH SRCC Children's Hospital, within 2 months of commissioning its bone marrow transplant department, has successfully performed 3 cases. Now that we have entered into phase of consolidation of our Indian operation post an elaborate expansion exercise we undertook last year, the focus will be on strengthening our newly formed cluster by replicating the success we have achieved in east and south.Separately, as a part of our global ambition to look beyond Indian shores, NH has made a small strategic foray into Bangladesh by entering into partnerships for operating Cardiac Sciences department in the state-of-art soon-to-be-commissioned 350-bedded hospital in Chittagong, Bangladesh. Bangladesh being the key international market for us, now with it being in close proximity to our eastern cluster, coupled with NH entering the region through its flagship specialty that of Cardiac Sciences, will help us in leveraging the operational synergies emanating out of the Eastern region.On the clinical front, our focus is on creating regional Centers of Excellence by providing advanced tertiary and quarternary care. And thus, we continue to invest in state-of-art medical technology across speciality and clinical balance. We have emerged as one of the health care leaders in India in organ transplant, with strong expertise in renal transplant and successfully performed over 600 renal transplants last year.Coming to the clinical highlights for the period, we are pleased to witness significant progress in this direction as we continue to prioritize health and well-being of our patients. The Mazumdar Shaw Medical Centre performed 15 kidney transplants, 9 liver transplants in Q2, thus cementing its position as a Center of Excellence in organ transplants.NH SRCC Children's Hospital has started the Bone Marrow Transplant department during this quarter and successfully completed 3 cases.Narayana Superspeciality Hospital, Howrah performed the first extracorporeal radiotherapy in Eastern India. Rabindranath Tagore Institute of Cardiac Sciences is now the second facility in Eastern India to have successfully performed a heart transplant and the third center within the NH network to do a heart transplant program. I'm also pleased to announce that during the last quarter, our organization was recognized at various platforms. The key ones being the following: NH won an Express Health care Excellence Award by Indian Express Group in the Best CSR Initiative category in July 2018; NH won the Master of Modern Marketing award in Best Digital Campaign for Health care Enterprise category; NH won the CSR Health Impact award organized in association with ET Now for Swasth Bharat Initiative category in September 2018.To summarize, I would say that the latent demand for health care services remains intact and the team such as Ayushman Bharat, a plethora of opportunities could emerge in the health care space. But it remains to be seen that how determined the health care institution will work inclusively to deliver innovative low-cost health care solutions to [ masses ]. Overall, we do remain confident about our ability to focus on delivering quality value-based health care services across all the sections of society. Thank you.
Raymond, we can now open up the call for question and answers.
[Operator Instructions] We have the first question from the line from Rohan Dalal from B&K Securities.
So I had some operational queries. Basically, from what I can see from the results, what I'm getting is that overall occupancy or total occupied beds actually kind of reduced and realizations were huge growth driver. And is that due to a higher mix of outpatients? Because I mean other players have also been noting that, because of the flu season, there's been a higher amount of outpatients in this quarter. So that's my first thing, and that's basically on sales. My second point is on EBITDA. And I just wanted to understand what is the outlook going forward in the new buckets because the losses have improved relative to revenues, and I wanted to understand what kind of reinvestments we'll be doing for clinical talent or any equipment that we'll be adding in Dharamshila and SRCC facilities.
Yes. So I take the first part of the question about -- regarding the patient mix. Yes, patient mix has played a role in the kind of realization pattern, which you've seen this quarter. However, the flu onset this year was slightly delayed, and you're going to see the impact of the flu-related illnesses in the third quarter rather than in the second quarter this year, unlike what has been the trend in past. Having said that, one of the things, which is within our setup, you'll see the increase in the OPD revenues is a result of larger number of oncology centers in the network compared to what it was earlier, and they're showing a reasonably good growth. So that is on the clinical front. Also, we have to notice that due to several other interventions at various level units, et cetera, the average length of stay have come down and that also pushes up the realizations to some extent. Now the second part of the question, my colleague, Debangshu.
Yes. So Rohan, you rightly highlighted the fact that there has been an improvement in the profitability across maturity buckets, and that's really heartening and that's what we have been pushing or striving towards all this while. If you recollect, there has been continuous investment across the clinical as well as the nonclinical talent pool across our centers. And that's -- it is yet to play out completely as we would like to believe, but slowly, but definitely, we have seen some results of it, but we -- at the same time, I would like to put in a cautious word out there in terms of the price that we will continue to do so in terms of reinvestment across the clinical talent pool as well as the nonclinical talent that we bring up across the key specialities over the network. So there may not be very significant upside movement from these levels, but from the levels that it started and the improvement that you have been seeing across our groups at the maturity buckets, there has been a satisfactory uptick in terms of the profitability, and we want to continue that further.
And to add to that, you asked specifically about what are the clinical areas and speciality we are adding. In Dharamshila, for example, you asked we have started the cardiac services last month, so that includes the cath lab as well as the cardiac surgical program over there. We are in the process of installing the radiotherapy equipment in our Gurugram facility, which will be commissioned sometime in early January. Similarly, we are also adding some nuclear scanning facility, the PET scan and the SPECT scan in our Kolkata facility. So these are some few things we highlighted at the moment.
The next question is from the line of Anuj Jain from ValueQuest.
I have couple of questions. First, regarding the bucketed 3- to 5-year old hospitals. So we have seen like sequentially margins that improved from 2.5% to [ 11% ]. So any particular reason for that?
Again, Anuj, this is in line with the broader theme and that has been across all our hospitals, across most of our maturity buckets, the intervention that we have been doing. And we have specifically highlighted the sales that we have mentioned, let's say, across the facility like Guwahati. So Guwahati has been a drag in first quarter. And subsequent to that, as we mentioned over the last call as well, if you recollect, we had done some specific interventions around beefing up the clinical talent pool over there, which seems to have yielded some interim results out there and has resulted into that units turning into the green [ in this session ]. Having said that, in this bucket, there is another unit which is the Whitefield center that we have in Bangalore itself. Over there, despite the big growth in the revenues for the reasons that we again captured over the last call in terms of the construction coming up over there, which is likely to continue for at least 2 to 3 quarters more. But despite that, that we see there has been an uptick in the margin front on account of the higher realizations before the reasons that Dr. Raghuvanshi just mentioned as a response to the previous query. So across-the-board, we see that the margins have expanded on the back of the interventions as well as the highest uptick in the realizations and thereby the ARPOB for this particular topic as well.
What I understand is that all these 3 units in this bucket will move to a 5- to more-year bucket -- or like 5-year bucket in 1-year time. So how do you think are you lagging behind that original target in ramping up and as well as in terms of margin extension?
If you see in this bucket, we feel that both the value of hospitals, which is HSR and Whitefield, respectively, they have -- they are more or less as per expectation. Whitefield has had a little bit of lag simply because of the obstruction from the infrastructure construction, which is happening in the area. Guwahati has lagged as per our original expectations. However, we have seen a gradual turnaround there, and we hope that it will go into a -- be steady, good growth phase for the next 2 years. However, it is lagging by almost 2 years as far as the original assumptions are concerned.
So what could be like the sustainable margins for the next 2, 3 years for these 3 hospitals?
As a bucket, I think we are really confident that this should come within the expected range for any 5-year plus hospital.
Would you say from 11% to probably 20% in next 2, 3 years?
Yes. Like HSR, for example, is already at the EBIDTAR level at about 22%, and there is EBIDTA level at about 16.4%. So I think that is the trend, and that should go to as all other hospitals above 5 years [ book ].
Okay. And would you like to throw some light on the unit price of Raipur and Jaipur within the mature bucket. How are the margins for these 2 units?
Yes. So Raipur has been having a very good growth, and Raipur currently is -- yes, it's almost inching up to the 20% margin mark in terms of its overall profitability and Jaipur also has -- I mean [ though ] has not demonstrated very significant uptick, but it's still slowly and steadily getting into the double-digit figures in terms of the profitability. Anuj, just a word of caution on the previous answer in itself, one particular aspect of the 3 hospitals, particularly the 2 at Bangalore, notably Whitefield and HSR in light of what the sustainable EBITDA margins could be is the overall economies of scale that you can derive out of relatively smallest unit versus, let's say, a 500- or 600-bedded structure. So to that extent, the 3 flagship facilities building new margins, the kind that they are or they have been for the last -- [indiscernible] I mean, the last few years may not be possible out there because of the sheer facility consideration and thereby limiting the possible outside in terms of the economies of scale that you can derive out of those units. Having said that, we recognize that, but then are already able -- we are in the process of putting up expansion block at Whitefield. And we do believe we have expansion to develop further our Guwahati facility as well.
Understood, understood. And that is very useful. And the second question is, if you can shed some light on the Bangladesh venture, who is that partner? What is your plan? Some more -- if you can shed some more light on that venture
So this is -- as Dr. Raghuvanshi mentioned in his opening remarks, I mean this is a strategic foray that we have been eyeing for sometime given our overall global ambitions to scale up as a global player in the health care section. Historically, as you would be aware that we have seen a significant traction of patient flow from that region to India. And for different reasons, we could not set up a facility over there. So what we have done is now through this agreement, tied up with the leading or rather the pioneer in terms of ophthalmology practice over there in Bangladesh. The guy that -- was the owner of -- or rather the proprietor of the mother hospital is Dr. -- Professor Rabiul Husain, who is a pioneer in terms of eye surgery across that region, having run the facility at the eye surgery effective for over 50 years over there. They have started this venture whereby he has tied up along with a prominent local industrialist as well as financial investor to set up a multispeciality state-of-the-art facility. And they had got in touch with us to start up the Cardiac Sciences department. Over a period of time, we believe we would like to see how this venture pans out. And then slowly and steadily, critical other platforms to thereby develop further our overall Bangladesh, and thereby, the subcontinental-based international [ prolific ] platform of ours.
So what is the [ ending ] revenue share? How would it work for us?
It is typically a cardiac care or heart center arrangement whereby -- unlike in fact a typical cardiac care center engagement whereby we also invest in the medical equipment. They are not in the -- I mean we [ care ] and we are not investing anything into the CapEx out here. But as a lieu of their investment across the total infrastructure and the space that they are providing, we'll be sharing a percentage of our revenue with them.
[Operator Instructions] The next question is from the line of Amish Kanani from JM Financial.
Sir, my question is between the less than 3-year [ revenue ] we have challenges in breakeven versus 3- to 5-year. The occupancy rates are now tracking similar 48% versus 50%. But still the losses on below 3-year is reasonable. So the question is, sir, what does it takes to kind of breakeven? And whether we are on track to kind of breakeven, which we are guiding both 18 to 24 months between Mumbai and Gurguram, whether we are on track and whether any one of the region is showing a better sign than the other.
Amish, I remember there's a bit of optics in -- actually, what do you look at the occupancy is the reported occupancies. Occupancies is a function of the utilization of -- across, given the percentage of the beds that has been operationalized. As an example, let's say, in Gurguram, or for that matter, even Bombay, you see our reported occupancies of 40% or 50%, given the beds that we have operationalized. That does not taken to factors being underlying capacity that has still not been commissioned or operationalized and is a function of the ramp-up in terms of the occupied beds over a period of time that we...
Okay. [indiscernible] not occupied rates. Okay. Okay.
So like-to-like, if you -- actually, if you want to believe it, the 48% less than 3-year category is more like 25%, 30% kind of an occupancy. If you were to just calculate it on the basis of the overall capacity beds over there.
Okay, okay. And in that context, are you seeing -- between Gurguram and Mumbai, are you seeing signs of one doing better than other in your expectation?
So Gurguram, it has been -- I mean, it's just -- I mean less than 6 months now, and the traction has been really encouraging until now. The way we mentioned last year -- quarter also post our earnings call. We have seen growth in our revenues over there. And despite being in the fifth month of operation, it's already going around 25% to 30% occupied beds on a consistent basis. A good part of the business is being contributed by our international revenues or international patients segment over there, which is what we had anticipated from day 1 and which is contributing to the pretty high or rather attractive or healthy ARPOB for that center. Still early days, and we believe we are in good state in terms of following the expected ramp-up curve over there. There has been a traction in terms of our patient crew, and thereby, the revenues also for the Bombay center, which obviously there was a lag in terms of the performance at least for that initial 2 to 3 quarters and which we have elaborately captured over the period of the last 2 or 3 call. But we believe, overall, we are in good state in terms of the occupancy ramp-up of both these units across this particular bucket.
And sir, if I can ask one more question. Doctor's costs, sir, is showing slightly more uptick on Q-o-Q basis. Is it mainly because of HCCI thing integration? Or it's also the new centers in metro are also coming at a higher cost? Although the observation is that overhead expenses are now contained and hence overall expense looks, on a total basis, manageable. So are we seeing the doctors' inflation costs have been higher? Or is it just some mix issue?
Yes, a little bit of all of that. As you notice the hospital we've set up are in Gurguram and Bombay, specifically south Bombay. And we appreciate these are not actually low costs or low-salary destination. Yes, among that, the reimbursement is high.
But it also commensurate with the ARPOB were achievable in those regions.
So what you see right now is this temporary drag where the salary burden is sitting here right now and the patient portfolio will take the regular ramp-up then, in which case they will start to moderate. But given that these 2 greenfield hospitals of ours are in very high cost locations, the manpower costs will track slightly higher than is normal, but should normalize within the next few quarters.
The next question is from the line of Charulata Gaidhani from Dalal & Broacha.
My questions pertains to the lower ARPOB at Cayman Islands. They have come down 11% y-o-y. What is the reason for that?
I think, Charu, as we have explained earlier as well, I mean in the initial days of our hospital because of the higher proportion of the outpatient business as a percentage of total, the ARPOB tends a little bit higher and over a period of time as the occupancy, I mean, come down to a steady state or sustain at a steady state, we see that the ARPOB typically comes down at a steady-state kind of an ARPOB. To that extent, if you see our ARPOB for this quarter is around $1.7 million, which we believe will be more steady-state ARPOB for this particular hospital, [ if at all ], it can -- but it'd be -- there could be downward pressure to this as well as the occupancies ramp up even further in this particular unit.
Yes. My second question pertains to the [ word ] occupancy at the matured hospitals. Is it because of product mix? Or is it only because of the Bangalore obstruction?
We have nothing specific about the occupancy. I worry that it's the same. Or what's the question about that?
The lower occupancy adding that mature [ hospital ].
It's actually, in cardiac, our occupancy on the [indiscernible] is 65%, on Mazumdar Shaw around 60%, Kolkata at 75%. These are to be expected. Now obviously these are occupancy as measured at the end of the day at night. We are not like a hotel business where we can always plan for patients to check in exactly at 12:00 and check out by 2:00. So people are coming in and out. So generally, that's on a flux that you see. It represents the mismatch between patients who will take a long time to get discharged. But these hospitals are full, if you have visited for Bangalore and Kolkata, there is barely any room to move. That occupancy unfortunately because it's measured by people who are staying overnight and getting procedures done. It may obviously look like a small number. We actually are trying to evolve a better method for recognizing the full list of hospitals, which should account for ER and ICU beds and cath lab and all the utilization, but we’ve really not figured out a good way yet.
Okay, okay. And I wanted a little more depth on the India consolidation plan, like our -- all from your entire network, how many would be kind of nonperforming hospitals? And do you have plans to consolidate that?
We absolutely do. In past also where -- depending on the geography or the size of any sort of issue that came up in hospital, we took judicious calls about that. It's something we reserve the right to do, but you'll appreciate that these are not easy decisions to make. These are running hospitals that even if it is in an area that's very difficult to operate and badly performing, hospitals perform very valuable public service. If I don't just take a call overnight and say, the 300 people lose their jobs or the few thousand patients who are depending on us for providing dialysis, chemotherapy and life-saving procedure that we can just one day go up and leave. So these are things that we've taken more measures but you have to appreciate the badly performing units are not a significant part of the overall network and the amount of loss that we suffered because of it is getting lesser over time as the overall network increases. We will definitely take all above these units over the next few quarters.
Okay. Now during this quarter, there is a increase in medical consumables and addition of 375 beds.
Charu, what are you referring to?
On a y-o-y basis, there has been an increase of 375 beds for the India operations.
So these are factors that Gurugram unit getting commissioned, and we have commissioned some extra beds across Dharamshila and Bombay as the occupancies have ramped up over the last 3 to 4 quarters.
[Operator Instructions] The next question is from the line of Harith Mohammed from Spark Capital.
At Bombay, what is the occupancy for the quarter? Last time, you had indicated occupied beds of around 60. What was the same for Q2?
It's almost the same kind of a figure for this quarter as well.
Okay. And so when I calculate the ARPOB for the facility, it comes to around 20,000 per day, for a facility with high-end specialized capabilities, it seems to be on the lower side. So where do you see this number actually? Is there a potential to take the ARPOB higher at Mumbai?
Yes, absolutely. This is a newish hospital, and so the kind of procedures that we're doing there are definitely high end, but the realizations we get are low. One, because we're trying to build up a brand around the patients. We're not trying to -- we're trying to attract as many patients as possible, so we've been very competitive on our pricing. But as the confidence of the surgical team improves, as the confidence of the patients who come and get procedures improve, we will start adding more and more high-end procedures and that should definitely move up the ARPOB in line with some of the best-performing units in Tier 1 locations. But as of now, you’re right; it is suppressed because we are taking a lot of government patients. We're doing a lot of charity cases. And that's why you're looking at a relatively low ARPOB compared to other hospitals in [indiscernible].
Okay. And then you mentioned that you've increased the number of operational bed shares. So what is this currently?
Perhaps we can get back to you off-line on that, Harith.
Okay, okay. And the second question is on heart centers. As there has been a good improvement in margins this quarter, we're almost back to where we were before the price control on expense. So what is driving this improvement at the -- in the heart center segment? Have we revised the packaged prices for cardiac procedures? And are these margins sustainable?
As you know that majority of heart centers are in peripheral districts and lot of the volumes there are driven by [indiscernible] patients. So one of the reasons was that -- of the drop earlier was that we were not very keen on taking large number of scheme patients. Now the schemes are being re-crafted and we are yet to estimate what would be the impact of schemes on these heart centers. So it is difficult to estimate for us at the moment whether the growth in the heart centers will be sustainable or not. So again, to answer what Charu was asking, I think it is important for us to keep a close watch on how the -- it's afford and then decide whether the stability of these projects is good or not. At the moment, it looks like there's going to be a little bit of growth, but we still are in the early phase of the schemes we are getting relaunched, and we need to see how it exactly gets better results.
Next, we have a follow-up question from the line of Rohan Dalal from B&K Securities.
Just one last question. So I just wanted to understand, in Mumbai, we've operationalized more beds and the occupancy has remained static. So what is our outlook from that? And also, just also to tie in to that question, what is your outlook on the Jammu facility? We haven't really spoken much about that, and I just wanted to understand how we look at that facility going forward.
Well, I'll take the first one, the Mumbai increase in operational beds was as compared to y-o-y, I mean 30 September 2017. So we have not increased the -- or rather, commissioned any extra beds over the last quarter to this quarter over which the occupancies have actually remained almost at the same level. So that explains the fact that we have not commissioned any extra beds. It's the same kind of an occupancy out there. But the Jammu thing, I'll hand it over to Dr. Raghuvanshi for to answer.
Jammu, as you know, is a challenging location and it has run with a -- since we had the liability gap funding, it was not that great a concern. However, that is for a limited period of 5 years, which is 2 years from now. So during the half year, it's more. So for -- however, at the operating level, the center has been growing at an impressive phase and the challenges of operation in that terrain are huge. A lot of people in general population are covered by these areas, either that they are primarily government employees in large number. And the government has recently started a scheme for the government employees which we thought would have a good impact. However, after the change of the administration over there, suddenly, that scheme was withdrawn. Now due to all the political and other administrative changes which have been happening in the state, and this hospital being so -- contending with all those changes, we need to evaluate this further as to how this project can add value to us in future. And we continue to do that evaluation. So at the operated level right now, it is growing at a satisfactory pace. Revenues are close to about INR 5 crores a month. But we have a little bit of dissatisfaction by a lot of operational constraints which are there in that location. And hence, we are in the process of deeply evaluating it as to what would be the long-term kind of status of this project in our larger scheme on this.
So if I can just ask, what was the total outlay on Jammu, if you have that on hand? If not, then we can take it off-line, obviously.
See, it was a project where we did not have any capital from our side invested in that. This was clearly done by the [ Shrine ] board as both on the land, building as well as equipment, plus they also had a viability gap funding. So in a sense, it is a kind of a 0 CapEx thing for us.
And operationally? I mean, like capital outlay, I understand, there wasn't any, but...
Operationally as well because there is a viability gap funding. So for the first 5 years, it doesn't affect our operations. I mean we don't have to contribute for operational losses as well.
The next question is from the line of Nitin Agarwal from IDFC Securities.
On the mature bucket, there's been a very sharp improvement, as you mentioned, on the EBITDA margin over the last quarter in particular. Look, can you just help us understand, are there any specific measure that you have taken to improve the profitability in this cluster? And I mean are these kind of profitability levels sustainable as you go through now as a result of whatever measures you would have taken?
See, Nitin, I think we have been emphasizing in last few quarters that the external changes that started happening 2 years back, they had a lot of impact on many of the cost elements as well as the pricing elements in health care. And we had an impact of that. And we did some proactive measures to handle those things. However, we did those measures either way -- that they remain sustainable. And hence, the uptick of those initiatives or the results of those initiatives was to come slow. And that's what I have been emphasizing in last 3 or 4 quarters that those measures are going to be very, very sustainable. And what you see here specifically is the result of that. So we strongly believe that we are positioned to storm the -- any kind of changes happening to a large extent. However, if there is something totally unforeseen happens into a different situation, and then we have to do a reactionary step. However, most of the proactive measures we have taken, both in terms of pricing costing as well as our cost structures, those have started yielding a result now. So I'm pretty confident that this, well, performance will just continue.
And Dr. Raghuvanshi, on the Ayushman Bharat, with the way -- now with the rollout formally in place, any thoughts on how should -- how deeply you are looking to approach participating in the scheme?
We have expressed our desire to be a part of it. However, there is a complete lack of clarity in most of the states. And hence, we have been not able to estimate what will be the impact of these schemes. Even in our core state Karnataka, for example, there is still not enough clarity as to how the scheme is going to get implemented. And some loss in volumes are partly because of that as well, because the patients are also possibly not very clear there is a scheme benefit they will be able to get or not. So I think we need to wait at least another one quarter before we have clarity at the state level, at multiple states as to how these schemes are going to come about. And we would, of course, participate, but we will participate selectively in the units where the occupancy levels may be slightly lower and the units which are more peripheral. So that is the strategy we are adopting that major centers, we may be slightly selective about taking on.
Nitin, just to add, one state which has just converted the whole scheme into a nice one, but a scheme which anyway we are participating by way of a default arrangement.
[Operator Instructions] The next question is from the line of Sameer Baisiwala from Morgan Stanley.
I see that your ARPOB has improved sequentially across most of the buckets. Can you just give some color on that?
You mean quarter-on-quarter, right?
Yes, that's right. Across on maturity buckets and 3 of the 4 regional buckets.
There is no specific reason other than the fact that, historically, as well, we see Q2 as a seasonally strong quarter as compared to Q1. And this time around, like Dr. Raghuvanshi has mentioned in his opening and I think in response to one of the questions, this time around, the onset of the flu season embarking, the medical management cases have gotten delayed. To that extent, there has been an impact on the occupancy which has also meant that the ARPOB for most of those units across the buckets have actually been much higher than what we have historically seen for this bucket. So sequentially, also, that impacts [ what flows in ] and you'll see a higher ARPOB for this particular period in consideration as compared to both sequentially y-o-y, as well as y-o-y calculation if you have to look at that.
In addition to that, has there been any price action on the impact of any price action?
No, there is no potential impact of pricing this time around.
Sorry?
There is no impact of pricing as far as sequential -- we haven't made any pricing interlinks during this period.
Okay.
There has been few notable transplant cases, which Dr. Raghuvanshi again mentioned in his opening remarks. So we have increased [ feedback ] of quarternary care program that we have been emphasizing in terms of improvement of our case mix across our centers of excellence. That also has also played out its part in terms of the improvement in ARPOB across the maturity bucket that you just highlighted.
Okay. That's fine. Just on Bangladesh, I heard your comments but would there be any capital outlay from your side, one? Two, you mentioned the revenue shares. So is it like a typical operator, I mean, in terms of single-digit revenues come to you and the bulk of it to the asset owner? Is that the way it would be? And three, how do you think about the Bangladesh market in terms of ARPOBs and ramp-up as you go forward?
So fine, Sameer, first question, there is no capital outlay from our side to start out with. It's over the course of the engagement, if there are any maintenance requirement, that is what we will be responsible for. To start out with, there is no capital outlay from our side. Your second question was pertaining to how much of a revenue share. In fact, in other words, it's a function of the way our typical cardiac center engagement framework was structured where it's a very low-single-digit revenue share that we do with the partner in lieu of their investment across the entire infrastructure that they provide to us. So we retain the bulk of the revenue and then all the costs -- operational costs associated with running the facilities to our account and it's akin to a rental actually. So rather than a fixed rate there, it's just a proportion of revenue which is a single-digit revenue that we'll be sharing with them. And the ARPOBs are in the region, and likely to be similar as our eastern clusters, primarily our [indiscernible] facilities. So we expect the ARPOB in the cardiac range to be similar there as well.
Okay. And then -- so therefore, if there are operational losses, which I guess there will be, and I don't know if it takes 2 years or 3 years to break even, all of those operational losses will be to [ our line ]?
Yes, yes. Given that it's a heart center which is running the cardiac units, so cath lab and cardiac surgery, so it will not be huge amounts.
350 beds, so would you be operational...
We are running only the heart center. We will run only 2 departments which is the cardiac sciences departments which is the cardiac surgery and cardiology. So we are not responsible for the entire 350 beds. It's like a typical heart center what we've done in India, but we've got the option -- should the performance look positive, we have the option of to taking over the other departments as well. But starting we're just doing cardiac.
Okay, great. And then final question from my side. We come onto the Cayman hospital. And there, I think that for the last 3 quarters, it's been 28 to 31 beds, and I think what is very important for us is to ramp up the occupancies. So any course on effort that you are taking? You mentioned in earlier calls and what's the outlook going forward?
With Cayman, we have -- you are right absolutely it is low, because given that it's a small island and a lot of it is driven by medical tourism. The number of surgeries and the number of people staying overnight for the surgery is not the primary driver of the revenue there. Rather, it is the number of people that come for daycare procedures, for outpatients and then for continuing care, those people that we medically manage for chemotherapy or dialysis, those are the ones that are driving revenue, and that is really not leading to the long-stay patients that we're expecting. And further, going forward, we expect it to improve because we've done a couple of investments over there. One is we've recently signed up with a partner to add an extended-stay facility right on the campus. And so for a lot of patients, it was proving very expensive to stay and get procedures done for a long period of time. So now that we've secured a hotel right next door, it will be relatively more affordable for them to extend the stay. The other is that our doctor will start visiting the neighboring islands and start doing cases over there, both as a way to do more outreach but also as a way to drive more procedures towards the Cayman Island hospital itself. So both these activities in the near term should go a long way towards improving the number of patients who will be seen first for a long stay. The other that we announced recently that we'll be setting up the oncology, the radiotherapy specifically. So that again, it's like a 1-year project, but of course, that will allow us to do a much larger range of general surgeries than before because a lot of general surgery is onco-related.
[Operator Instructions] We have a follow-up question from the line of Sameer Baisiwala from Morgan Stanley.
Just thinking about your 2 new hospitals, SRCC Mumbai and Gurugram. Are the EBITDA level losses that you've reported in this quarter sort of the benchmark; from here on, we should see improvement going forward and have they stabilized, or do you think this can go up as well?
We would tend to believe that these are by and large stabilized now; if not, there would be improvement from these levels. And there has been improvement also if you'll notice over a period of -- in case for Dharamshila, as well as -- I mean, SRCC there has been there 18 months now, but we would like to believe these are the levels from which you can only expect an improvement going forward. We are trying and striving to ensure that the pace of improvement is as quick as we can possibly drive out of that.
Okay. And one more, last. Are the more regulatory risks that can come about, especially price caps, price control, given that we are -- just today it would be election mode? And also, any update on the in-house pharmacy price controls that also has been really talked about?
On the regulatory front, we don't expect any more price caps on the medical implants, because that's what's happened with the stem cell is what led to a WTO class action by the American manufacturers. But what we are indicating is something that's more on the lines of a margin capping. And so in anticipation of that, we have taken the steps that we had mentioned earlier which is move away from -- our margins will be more aligned towards procedures rather than the devices itself. To the other question that you asked, which is the price control, the outpatient pharmacy, more and more medicines are being added to the drug price control, including certain syringes and most likely capital. And what will happen in that instance is more of the same. Essentially, we'll just have to -- we, as an organization, believe that most our margins are coming from procedures and that was part of an entire price orientation program that we started doing a year ago. And so we are well prepared for that.
Okay. But you -- and is the outpatient, was it inpatient pharmacy, right?
Inpatient pharm -- I mean in it, that is -- it's not billed, the cash flow is part of the procedure.
Yes, exactly, so that is where the pressure point for us, that those numbers are very opaque and margin at 200%,300%, 400%. So I think that is what we're seeing talked about and about getting that and the price control and more transparency around it.
Sameer, I think what we did not explain, I think we are taking the same steps as far as the inpatient pharmacy is concerned with respect to the margins being rationalized. But as far as the price recognition is concerned, I think we see that as a composite price rather than any inpatient pharmacy price being readily disclosed. But however, when -- compared to possibly the industry, other industry players, we believe that we have a better structure which we have implemented in the last 8 to 12 months.
The next question is from the line of Amish Kanani from JM Financial.
Sir, if you can talk about the acquired units in Kolkata, and you did mention that they are doing well vis-à-vis expectation. But just to -- now if you can appraise us about the acquisition that we have made in Kolkata versus the Cayman Island. How has been our experience with that based on that inorganic acquisition and initiative versus organic in India, outside India? If you can just share some of your thoughts, and how old are these Kolkata units and how are we tracking and ramping up there?
The units that we took over in Kolkata were 2 sets. One is the hospital we call the West Bank, the other was a unit that we took over from Jubilant. Both of these were more or less defunct units. They were badly underperforming. And when we took over both hospitals, we essentially built the revenues up from scratch. So in a sense, we didn't -- until we had taken over Dharamshila in Delhi, we hadn't really taken over inorganic assets was already a running operation. So since then, I would say, it was good in the sense we were able to set up all the systems in the way we wanted, and that was -- we bid a very good price for both those acquisitions and it's something we constantly evaluate on a case to case basis. Cayman was different. Cayman was greenfield. It took a regular amount of time, 2 to 3 years for it to break even and it's definitely had a huge amount of investments that we made both in the infrastructure, as well as working capital. Going forward, we had mentioned earlier that we definitely would prefer the model of acquisition and brownfield projects over greenfield, and that is something we'll keep maintaining. But in the near term, at least for the next couple of quarters, given that we have significant capacity within the units and there is a lot that we need to do with our existing hospitals and beds, we will not be looking at any acquisitions in the near term; the acquisitions or adding any new greenfield capacity. If anything, it will more to augment the existing hospitals of ours. Because of the amount of time it takes to break even, it's pretty long, the regulatory uncertainty at this point is -- we still need a lot more clarity from how the payments from the Ayushman and these things are going to work out. There's been a tremendous amount of new hospitals coming up that are in a lot of trouble, lot of PE funded hospitals, a lot of doctors getting attracted to these [indiscernible]. So we would rather wait at this point for the field to cool down a bit before we commit to any more investments.
Next, you have a follow-up question from the line of Harith Mohammed from Spark Capital.
One question on the Jammu facilities. So as I understand, we are tracking around INR 70 crores of annualized revenues at this facility and this seems to be decent ramp up for a facility in its third year. So I'm trying to understand how close we are to a breakeven there. So should we expect a positive EBITDA from here in the next year or so?
I would say, right, that the operating environment is very difficult; the cost structures are extremely high. We have a kind of a residential campus kind of situation where majority of consultants, everybody is on the campus. So with all that in mind, the break-even point here is slightly higher than what would be the typical hospital of ours or for that matter other networks. So because of all those reasons we have a slightly guarded approach about the future of this unit. At the -- though the revenue growths are good as you mentioned, so the revenue growth are likely to remain good, but the break-even point also keeps on, that the growth book keeps changing and increasing. So because of that, there is a gap. So we have -- that's why critically although we're evaluating the functioning of this unit to see what is the role of such a unit in our long-term strategy.
And Dharamshila currently in the quarter?
Dharamshila growth, we have added a lot of the new departments and facilities. And because of that, we have acquired a lot of clinical talent, et cetera, which is based off of the cost side. And because of that, [indiscernible] has not been in the positive as far as this current quarter is concerned. The renal services have started like cardiac which I mentioned earlier. So all these will start showing the ramp up over the next 2 quarters.
And [indiscernible], what -- where will be in terms of occupancies now?
Yes. Gurugram currently we are occupying about -- approximately 30 beds on an average. But we are seeing good traction now, and hopefully, we would keep having that trend. Now it's about 6 months in the operations. There is a good trend and there is lot of international inpatient interest as well.
Next, we have a follow-up question from the line of Charu Gaidhani from Dalal & Broacha.
Yes. How much -- what would be the CapEx spend for '19 and '20?
So just to give a sales -- I mean as we have previously mentioned also, Charu, I mean, historically, we have seen a spend of around INR 100 crores to INR 110-odd scores annually towards our regular maintenance on key projects. But increasingly enough, with our increasing database, of course, we are also increasing, so that there will be an upward pressure towards that as well as the latest investment across the medical technologies that Dr. Raghuvanshi and Viren both mentioned over the course of this call. So we believe the number for this -- I mean, just to give you a sense on that, for the half year ended at 30 September, we have probably spent around INR 65 crores to INR 70-odd crores towards CapEx for this year.
Okay. And next half?
I mean we will not be able to give you a hard number guidance on that. But directionally, like we forward speak, I have given you enough hints around what the kind of numbers that we possibly will look for this year, as well as going forward for the next couple of years.
Next, you have a follow-up question from the line of Rohan Dalal from B&K Securities.
Last one, sorry. I wanted to understand what's our outlook on Ahmedabad. Firstly, it was, I think, bleeding by about INR 5 crores or something as such in the last year. So I was wondering how exactly do we see ramp up from your impact facility, especially with those significant outlay there? And -- yes, that's about it.
Yes. Ahmedabad's doing quite well now. The last year was more or less full, among all the beds that we've occupied it's just -- and we're nearly at a break-even point. It's not quite there, but it would be there in a quarter or so. The performance that we see was driven primarily by -- we lost a lot of the doctor teams because last year and the year before that, a lot of new hospitals had set up in Ahmedabad, and so that's -- this is one of the -- now it's a very mature and one of the older hospitals in Ahmedabad doing tertiary care. It's a very well respected brand, and we've been very competitive on our pricing for that market, and we have a very good doctor team who'll be able to take the work forward. So we actually are a lot more confident about the Ahmedabad unit, and it's something that we will look at investing judiciously as the time goes. We're just adding more beds over there to maintain the growth trajectory.
Perfect. And locationally, has there been any infrastructure improvements around the area?
Yes. So it is gentrifying. They're making the road in front of us into a double lane with a -- you know in Ahmedabad they do that dedicated bus lane. There are lot of new larger developments coming. See the thing with this, where Ahmedabad is, this is only placed so you get very large tracks of land, which are in decommissioned mode. And so we expect in the coming years, all the large projects in development will be coming on the part of town where we are located. Not to discount, of course, the communal sensitivities of being in that part of town, but I think we need to -- going by the growth of the city, we see it happening a lot more in the area we're located. So things are definitely improved from where we were before.
That was the last question in queue. I would now like to hand the conference back to Mr. Debangshu Sarkar for closing comments.
Thanks, Raymond. Thank you all for participating in our earnings call today. Please feel free to reach out to us should you have any further query or clarification from any of us. It was nice to have you interacting with us today. Thank you, all.
Thank you very much. On behalf of Narayana Hrudayalaya, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.