Narayana Hrudayalaya Ltd
NSE:NH
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Narayana Hrudayalaya Ltd
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Good afternoon, everyone. As most of you would be aware, myself, Debangshu, and I run the Investor Relations and Mergers and Acquisition Practices at NH. On behalf of the company, I welcome you all to the Q2 FY '22, and thereby, H1 FY '22 earnings call of the company.To discuss our performance and address all your queries, as usual, today, we have with us Dr. Rupert, our CEO; Mr. Viren Shetty, our COO; Mr. Kesavan Venugopalan, our CFO; alongside Ashish Sukhija from the team.I'm sure you have gone through the investor collaterals, which have been uploaded on the stock exchanges as well as on our website a day before itself.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 as per our usual practice.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 strictly 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 disclosed in our prospectus filed with SEBI before our initial public offer in late 2015 and subsequent annual reports on our website.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. With the effects of the second wave of pandemic subsiding, our Indian operations staged a decent recovery during the quarter gone by, after the significant impact as observed in quarter 1 FY '22.For the period quarter 2 FY '22, we are pleased to report record profitability with consolidated EBITDA of INR 1.81 billion and PAT of almost INR 1 billion. This has been possible on the back of recovery in Indian operations, aided by our international ventures at Cayman Islands and the hospital project management at St. Lucia.Overall, our balance sheet and liquidity profile remained strong with INR 5.6 billion of gross borrowings and consolidated cash and liquid investments of INR 3.2 billion as on 30th September 2021.Our Indian business, adjusted for the vaccine revenues, while growing 63% year-on-year due to the base effect, translating to a 12% quarter-on-quarter growth, registered an EBITDA margin of 13.1% during the period against 8% registered in the previous quarter.There was an all-round revival in business across the network with new COVID cases waning across the country post the aftermath of the second wave, which had significantly affected the operations in the previous quarter.Our nonflagship hospitals continue to build upon its momentum of previous quarters with the group of hospitals, excluding the 3 new hospitals in Jammu registering an EBITDAR margin of 18.8% during the quarter, thereby continually improving upon its profitability over the quarters.We are also encouraged by the improving profitability trends at our 3 newer hospitals across NCR and Mumbai, where the losses having reduced significantly despite the pandemic-induced disruptions. It's indeed heartening to note that these hospitals across the network have not only held their ground during these uncertain times, and have been leading the business revival across the group since the onset of the pandemic.Recovery at our flagship hospitals has been slightly muted given the significant erosion in international patient mix as well as high-end cardiac sciences-based elective work, which was key footfall drivers at these centers of excellence. Thus, profitability of this category, especially our Health City Bangalore hospitals remained affected as compared to the pre-COVID times. We continue to work on improving upon this over a period of time with the sentiments improving all around, thus facilitating people's mobility across regions.Moving on to our overseas operations. Despite a couple of hurricanes, namely Grace and Ida impacting the region, our unit at Cayman Islands reported operating revenues of USD 19.7 million in quarter 2 FY '22, resulting in an EBITDA of USD 8.3 million. Thus, for the 6-month period ending 30th September 2021, the unit delivered a healthy USD 19.1 million of EBITDA with a PAT of USD 15.9 million. Separately, our hospital management project at St. Lucia contributed to INR 215 million to the group's EBITDA during the quarter. We remain confident in this regional business emerging as a strong pillar of our future growth.As regards to our continuing focus on various digital initiatives, we have now integrated doctor's mobile applications with ICU monitors for real-time remote monitoring assessment to enhance the clinical efficiencies across the network.We have recently also launched a pilot project called Enhanced Doctor's Bay Management System for outpatient queue management to ensure transparency and predictability in service delivery.On the clinical front, we continue to deliver advanced super specialty work as reflected in the work across our oncology, surgical oncology and medical oncology, as well as a very high-end advanced image-guided therapies and the cardiac program across the entire network.Some of the highlights has been a rare case of a selective dorsal rhizotomy for a child with severe spasticity. This was done to relieve the spasticity. And also, we have been doing very high-end complex neonatal congenital heart surgeries in our Howrah unit with a very complex procedure called selective brain perfusion or cerebral perfusion.And the Gurugram unit also has been doing minimal access surgeries for cardiac procedures for valve surgeries, and this has been a trend across the entire network as well.And Guwahati has been -- also been doing an image-guided therapies for abdominal bleedings for -- in general, they would have to undergo major surgeries by themselves. This has been dealt with by an image-guided therapy, similarly in the cath lab.Looking ahead, with the vaccination coverage expanding by the day, we are hopeful that business activity will resume its pre-COVID growth trajectory. At the same time, we remain vigilant over the developments taking place globally with regards to any fresh wave of infection -- COVID infection to prepare ourselves accordingly in case of any further disruptions.Notwithstanding the near-term COVID-19-related uncertainties, we remain confident about our business prospects by continuing to focus on delivering quality, affordable health care to all. Thank you.
Thanks, Dr. Rupert. With that, I think we can open the floor for Q&A. [Operator Instructions] Yes, I see a raised hand from [ Yash Khanna ].
Yes. My first question is related to the potential oversupply of beds situation in the Cayman Islands. So Cayman, I think they -- I mean they -- do they have -- already have enough beds to fulfill the current needs? And with our expansion coming up and we know that another listed peer is also setting up a project in Cayman. So would this lead to a potential oversupply of beds? And would it decrease the prices and margins of procedures in Cayman?
I'll answer this one. If you just look -- if you treat all beds the same on the raw number of beds that are available in Cayman, yes, you can call it as an oversupply, but that doesn't get to the truth. The fact is no two beds are the same. Essentially, what you're talking about is the bed used for treating different kinds of treatment modalities.So the expansion that we are looking into is not so much about adding beds as it is about adding clinical specialties that aren't being taken care of by our hospital and the other hospitals on the island. So this is high-end cancer care, emergency care, neonatal care, very advanced surgeries with robotics and so on.So when we add the new expansion and the facilities, there will not be a single specialty, barring from very advanced transplant and very advanced radiotherapy surgery like proton, which again, very few people actually require. Barring that, for 99% of everything that a person from Cayman is most likely to experience in their lives, we will be able to cover with our expansion.As for what it would be if another hospital were to come with a similar set of offerings and the related impact? Yes, I mean, obviously, there would be the huge impact. But you have to also understand the logistical challenges of doing itself -- in doing that in the first place. Because every -- so if you bring a cardiac surgeon on the island, for example, they're also going to understand that there is an existing cardiac surgery program. If you bring an oncologist or a radiotherapist, they're going to understand that the program is there. There simply won't be enough work to split for the third and fourth person to come on the island.So just logistically, it becomes very challenging. But yes, if you were to overcome all of that and somehow run a duplicated facility, if someone else were to set it up, there would be a problem. But given that we have a significant legacy in the island, the brand that we have is extremely strong and that patients have preferred our hospital over many, many years, it would definitely be margin erosive. But I would say much worse for someone else who's trying to start from scratch with the working capital losses they would face and the fact that they would be starting on a much lower margin base for them to justify their investment.
The second question is relating to our onco therapy. So since last 2, 3 quarters, our oncology mix has been around 13% of sales. And now that we are adding onco blocks in all our hospitals, like most of our hospitals. And -- so 2, 3 years down the line, where do we see oncology as a therapy mix, which is 13% currently? And I suppose onco is a higher margin and a higher ROCE than other therapies, so is that true? Can you give more light on that?
Dr. Rupert, do you want to take this one?
Yes. We've seen the biggest growth in the oncology services as a service -- clinical service line after the cardiac services. It's growing very rapidly into a very prominent one. And we feel that it will continue to grow like that because all we have to do is add the necessary comprehensiveness of the care that includes radiation in all our facilities.So once -- as we are doing that step by step, we will see this continuing to grow. And we've seen very good traction of not only medical oncology, but very high-end oncosurgical work and radiation oncology wherever we have put up those things.And we have -- for the comprehensiveness of that, we are adding the image-guided therapies as well because that is also one of the -- another modality, which is there. So that will be as -- it will work along with the cardiac program because that needs a cath lab as well. So we are well equipped, and we are equipping these centers for the sustained long-term growth of these specialties.
Sure. But do we have any targets in mind? Two, three years down the line, what number as a percentage of sales mix you want to reach? And is it more better on a unit economics level, onco, compared to other therapies?
Because all the other specialties also are growing, so I would see going closer to the eye -- closer towards another -- closer toward 20 -- 20% or something will be what we're seeing.
Shantanu can come next.
Yes. So I have a couple of questions. Firstly, I would like to -- I mean I would like to understand from your outlook on international patients. How is the situation evolving, particularly with respect to Bangladesh? So that is my first question.And the second question is with respect to your India P&L. So the consumable expenses as a percentage of sales is now 28.1% instead of the long-term average of around 25%. Now I would have thought that since COVID is waning, this percentage would be 25% in the current quarter, but it has not been the case.So what has been the issue? And going forward in the subsequent 2 quarters and in FY '23, what would this percentage be?
The outlook from Bangladesh, I'll take. I'll address the consumable part a little bit, and Dr. Rupert can address the core problem with that later.Yes. The flights continue to be restricted. The flights had opened up for a bit, then there were restrictions again. The Bangladesh traffic has been coming to Bangalore and Calcutta, not as much as it was before. There are many reasons for it. It's just generally now much, much more difficult for people to get the medical visas, for people to get the confidence that traveling is safe. And so the total international volume or rather revenue-wise, from 11% to 12%, it crashed down to 1%, 1.5%.The question you asked of when it will recover? It's quite -- it's very hard for us to predict. I think nothing -- I would not be able to have any kind of confidence that we'll get back to previous levels, unless there's no more COVID. But whether we reach some kind of accommodation, which is you'll always have an endemic levels of COVID and international travel will account for that and still come, I think what may end up happening is the same thing that you're seeing in business travel and all other kind of international travel. It's not going back to the same levels as was before, but those who are going, it's very important for them to do so.So within that, we're still taking this time to do a lot of outreach to work with clinics in Bangladesh, to do as much online consulting as we can to line up the patients, and so that when they come, it's not -- they're not fresh cases. We've done all the work beforehand, and so it's a much more smoother experience than it was before. But honestly, for when it will happen, it can only happen when there's almost no COVID in either India or Bangladesh. I'm not sure how long that will take.You raised a very good point on the consumable expenses. The 28% is an -- a very alarming figure for us as well as -- so the -- now it's caused by several things. One is the fact is a lot of material prices have gone up. That is one part of it, but it's not the entire part of it. Post COVID, we did get a lot of high-end procedures. We did get a lot of high-end therapies and treatments from doctors. And they were preferring the original molecule, they're preferring the more expensive drugs in that case, which generally in times when we're not as preoccupied with other things, we're able to convince them on the benefits of using the generic and a lot of other options.But because a lot of our supply chain team and operations team are so occupied with growing the volume, they were not paying as much attention to the supply chain aspects, which keep needing to be reinforced from time to time. But this is something that we have been analyzing and we are aware. And we'll be looking to address and reduce.Rupert, anything else to add on it?
Yes. See, I mean COVID has not gone away. So we still have COVID cases in all our units, though they may be in small numbers. So we cannot let our guard down. So COVID protocols, though that has been revised, still exists. So a lot of preexisting testing and a lot of protocols are still in place.And also, like Viren said, a lot of high-end procedures, so we've done almost close to 24, 25 percutaneous valve implantations and things like that. So we are -- we know where the issues are, and we are working on it, and hopefully, we'll get it under control in the next couple of quarters.
So I mean...
Shantanu -- just -- Shantanu, just to add on to what Dr. Rupert and Viren said, and just for everybody's information, the number of 28.4 is a consolidated number, which includes the vaccine revenues, and thereby, the consumption towards vaccine. Yes? So excluding that simply, and we have provided those numbers, the 28.1 actually becomes 26%, which is the lowest across the last 3, 4 quarters.So the other things -- the other point that Viren and Dr. Shetty -- sorry, Dr. Rupert highlighted remains very valid. But additionally, simply adjusting from the top line, the INR 23 crores of vaccine revenues, and from our consumption, INR 20.5 crores of the consumption towards this -- the vaccine consumption, the margin -- the consumption as a percentage of revenue actually becomes 26%, which is still a percentage higher than our long-term average, which point is well taken and that the reasons Viren and Dr. Rupert have already elaborated.
Right. And -- okay. That has been helpful. And on the international patients, any traction from other countries apart from Bangladesh? Or is it very low?
It's very low. We're getting patients coming from Africa and so on. But the travel between countries going -- usually, Dubai is a big transit point. The difficulties with getting transit visa and coming through and getting Indian visas as well is causing it not to be as convenient as it was before.
I think the next question could be from the line of Charulata.
Yes. Congrats on the good set of numbers. I have two questions. One about the Cayman EBITDA and PAT. And second, in terms of the Bangalore cluster, the profitability has sequentially increased very sharply. What are the reasons for that?
So I'll take the first one, Charu, that you've said. The profitability for Cayman unit for this quarter is -- the EBITDA is USD 8.3 million, which translates to an EBITDA for the 6 months ended 30th September of USD 19.1 million, which is close to 45% margin. And PAT for the H1 period is USD 15.9 million to be precise.
So there is another income component?
There is -- yes, there is a minimal other income of around $180,000 for each of these quarter periods. So for the half year ended 30th September, the other income is around $360,000, which roughly translates in INR terms to around INR 2.8 crores. And for this particular quarter, it's around $180,000, which is roughly INR 1.4 crores.
What was the other question?
About the Bangalore cluster, profitability improvement sequentially?
That is essentially driven by the slowing number of COVID and the return to the normal operations. It could have been faster. We're doing a lot of work in outreaching -- reaching out to patients to come and get their elective surgeries done. But essentially, this is more on the normalization trend.The big thing still missing is our international patients because our flagships in Bangalore and Calcutta get a huge percentage from international. But we've been able to bring a lot of the volume from the nearby regions and people from the corporates and so on to get treated. So that's essentially what is driving it.
Okay. Do you think the profitability like 18% EBITDA margin is sustainable?
For the cluster as a whole -- and we're only talking about Bangalore now, in the absence?
No. Yes. Okay. Bangalore and overall as a consolidated...
Viren, she is talking about the consol number.
Consol numbers. We're not seeing any large cost drivers that will take up a lot of the expansion and the business transformation work that we're doing is essentially done with the goal of enhancing the yield without necessarily adding a lot of manpower cost associated with that.So rather than add greenfield capacity, a lot of what we're doing is changing the bed mix, getting more private, semi-private rooms, getting more high-end equipment and doing high-end surgeries, which increase yields without that correspond increase in the cost. So it won't. There will be a seasonal effect, no doubt, because -- so just to give you an example, in this coming quarter, as of this month, Cayman has an outbreak of COVID. And so this was an island that has not had much COVID at all. Now the island is 80% vaccinated and not many people are requiring ventilation and so on, and people are just mildly sick. And there is a very large government hospital that is able to take care. So we're not very alarmed as of now.But this -- once you add this also to the fact that end of year, most people in the Western Hemisphere postpone their procedures till after New Year. So the time between Thanksgiving and end of Christmas, New Year is when most of the people are on holiday and they don't really get any elective procedures done. Q3 is always a weak quarter for Cayman.So that, combined with COVID, will have an outsized impact for this one quarter, but then it usually recovers by Q4. But if you tell me [Technical Difficulty] going forward, I think it's more or less the same. I won't venture that it will go drastically down or drastically higher. But I wouldn't say that there's anything causing alarm other than, of course, more COVID in India and this one seasonal impact, what will happen this month and next month.
Viren, you may want to highlight that this number of this quarter actually includes a onetime windfall profit of INR 21.5 crores from St. Lucia, which is probably not a recurring.
Yes. I mean that's essentially like it. I'm assuming you net off all the onetime things. So we're doing a consultancy contract with the government of St. Lucia and that contract is nearly over. There's one last payment due. Netting off that, if you just look on a like-to-like hospital performance basis, it is as I said earlier.
So Charu, I hope you've understood that from the consol number, you need to net that thing off to arrive at the recurring sustainable profitability margin. So that's a onetime windfall thing, which won't be a recurring thing.I think the next question is from Manish Poddar.
So just two questions. One is for -- in Cayman, could you probably highlight how many doctor clinics do we have now? And what is the plan there going ahead?
Sorry, Manish, how many doctor what?
Doctor clinics.
Outside of the main thing that we have, we have one clinic in the center of the city, but that clinic itself we are expanding. So we set up a separate chemotherapy area there, and there is more space that we're looking at. So we have one other.We will be opening up one more. This is in the Grand Cayman. We run another much smaller clinic in this place called Cayman Brac, but that is very small. It's in the government center. It's just more for -- it's -- the Indian equivalent would be a dispensary. But that -- it's just useful for doing follow-up for a lot of the patients.But we definitely have a much more aggressive clinic rollout program. As and when our existing clinics get to a very sustainable level and they max out, we will be adding more clinics and looking at opportunities in different parts of the island.
So let's say theoretically speaking, how many clinics can you have up there? So let's say if you have 3 right now, 2 big, 1 small?
Yes. To be honest, Manish, we're taking this more opportunistically. We haven't done a full study mapping of the whole island to figure out where is -- we have a good sense of which are the areas in which if you were to set up a clinic, where it would be because there are a few locations in the island where there are dense populations of people and it makes -- and the commercial area, it makes more sense to have a clinic located there.In terms of total number, it won't be a lot, like it's a very small island, and the mobility is pretty good over there. And this is more about deciding where you want to -- it depends a lot also on the convenience of the doctors who are going to go there and convenience of the patients who go.So we're taking it -- every year, we look at about 1 or 2 clinics like that until we get around 4 to 5, and then we'll take a call from there, whether any more start to make sense, because the other thing is also learning as we go on the configuration. So the clinic that we initially set up in this place called Camana Bay actually ended up 3x the size of what we originally planned because as we started building it and as the response became really good, we just started growing bigger and bigger.So just to give you an example, COVID testing, the RT-PCR testing, unlike in India, where you can get it done everywhere, in Cayman, there are very few places where you can get the PCR test done, and ours is one of the places. So we've taken up dedicated space in our clinic just for doing the PCR test.And over there, it's doing very well because a lot of people come in, but it means you -- this is a demand we did not foresee. And the initial plan for that space was to use it for doctor offices. Now we've had to rent more space just to do doctor office so that the PCR thing can be in that part. So we're taking it more opportunistically. It's not something we preemptively made a plan to quote 20 clinics all over for us.
Got it. And my second question is, I think for the last 2.5 years, you've been putting some or a lot of effort on the digital front. So is this largely to do with, let's say, productivity or improving the efficiency? Or if you could probably quantify, let's say, on a broad number, how much of savings does that really yield into versus the investment which you have done? Any broad sort of number, let's say, -- because now it's been 2.5 years. So just wanted to understand have you -- if you have done a 3-year project, what sort of CapEx did that entail? And what did you get in return from that?
Yes. Manish, you asked a very good question. Unfortunately, we don't have answers even internally, and even this is something -- it's the biggest bane (sic) [ bone ] of contention between us and the technology team, in that costs keep going up. We are extremely excited by all the opportunities that are presented by the digitization of all our processes, but it's impossible for us to calculate whether the gains that we were able to get were digital related or whether they would have come anyway.Just to give you an example, we changed and revamped our entire contact center operations. We harmonized -- there are multiple ways patients are able to reach out to us. Otherwise, before what was happening, some people would call our doctors directly, some people call the secretaries directly, some people call the front office, some people would call the call centers, some people would send e-mails or WhatsApp or make queries through the website. And there was absolutely no way for us to know and keep track of this.So we harmonized it and put it in a central contact center. And now we have much better detail as to where the patients are all coming from. Now because it is easier to track now and because we made it more convenient for the patients, we don't know if it led to a 10%, 20% or 30% increase in the number of inbound calls. We can tell you from now on going forward, and this is data we will start presenting as of this year.So from next financial year, we'll start giving you more data about how patients are actually reaching out to us. So this is part of the overall disclosure that we're making where we're breaking up into the average revenue per patient. We talked about their clinical stay, ICU bed stay and all of that rather than just getting stuck on occupancy numbers.So we'd start getting the data out to you later, but the thing is attribution becomes very hard because the truth also is that this is table stakes by this point. You cannot run any modern corporation, not just in health care, cannot run any modern corporation unless you have a robust digital strategy, unless you have a CRM, unless you have a very good lead management software, unless your doctors as in your workforce is able to access all their tools digitally.This is a bare minimum that anyone has to be doing. So we are really playing catch up, to be honest. Compare us not to the other hospitals, but to all the other firms and other industries that are digitally forward, I would say we are far, far behind. So there is tremendous scope. And it will start to show in the numbers.But if -- unless I do something what Apollo does, where I create a separate digital vertical, which we're not yet in the phase of doing, it will be difficult for us to get digitally attributed revenue. But the results have been good, the responses are there. With the OPD foot -- just to give you an example, our OPD footfalls today are still not at pre-COVID levels, which is the number of people coming and physically visiting us in the hospital.But by and large, nearly all the hospitals, except 2 that we have, have reached their pre-COVID revenue numbers on a monthly basis. So we can -- that at least I can attribute very clearly to the fact that patients now have different ways of reaching our doctors and getting the thing that they want from us without having to physically visit us.So that as decongested OPD, it has done a lot of good work. And I can see at least that much is a concrete proof that this whole thing is working.
Viren, just one small data point, if I can. So let's say, annually, what is that one number -- if you are spending on the tech side, what would be, let's say, as a percentage of sales, would it be INR 15 crores, INR 20 crores, just a rough number that would be helpful?
Yes. That's a good question. So if I include tech, including all of that, it will be more than INR 20 crores. Yes, it'll be around INR 15 crores to INR 20 crores if I include the contact center operations, the spend on the IT, the -- all the ERP licenses, everything else we're doing. But I'll -- we can come back. I mean Debangshu can come back to you on that.
I mean, Manish, just to get to -- give you a sense, I mean, till about -- till last fiscal year, cumulative, we had spent around INR 50 crores, and it was almost equally split between OpEx as well as the CapEx part of it, the network, software and everything part of it. Just to give you a ballpark sense of the investment that we have been able to make. The impact assessment, obviously, is going on, is a work in progress. And once we have robustness of data and confidence around the data, we'll surely come back to you and share with you the data, as Viren highlighted.
Sorry, I'm really sorry to harp on this. But you would have spent, let's say, INR 15 crores over 3 years, but you've spend INR 50 crores for this. So the incremental INR 35 crores is what you've said -- spent?
No, no. I said INR 50 crores was the cumulative number over the -- till the last fiscal, just a ballpark sense.I think Sameer Baisiwala has been raising his hand for some time.
A very good quarter. Just Viren, how are you thinking about the volume recovery going forward? I'm comparing your total discharges. Now I think you are roughly about 49,000-plus versus pre-COVID what used to be 70,000, 75,000, this is for India business.
Rupert, you want to start? And I can add anything. This is on the discharges and how we're looking at the volumes?
Yes. The -- I mean, if you look at the trends in the last month or so, the volumes are continuously going up. What discharges will -- what we are seeing is the routine, the elective work for straightforward work have started to come in wherever there is confidence in the system, where there is no COVID and other things have started to come into the system.So as we move forward, we will keep seeing this rise in this number of discharges as far as that is concerned. And also, you would have seen that our -- the day care procedures have also started going -- have gone up. So that only reflects the numbers that we are seeing in the medical oncology and the other day care kind of cases that is happening there.
I guess my question is that how far are we from the full-blown recovery in the domestic business? And if I can combine here not only the volumes but also, say, the mix -- cardiac used to be earlier 40%, we have improved, but we are still at 30%. If I look at your ALOS, pre-COVID used to be 3.5, you're now at 4.6. So sir, just how do you see the course of recovery? And what time frame do you think we're going to get back?
See, the ALOS will start settling down once certain COVID-specific protocols will be toned down significantly because we do want to make sure that the patients are not -- even though we test them prior to surgery -- prior to admission, prior to surgery, we don't want to -- for any major work, we don't want them to land up having COVID after we have done the procedure because that leads to a sure-short death.So we want to be -- so we keep them -- so the ALOS will start coming down once the confidence in the system and the COVID and all those things, factors are negated, then these things will start moving down. That is not an issue. I mean that will start settling down.
COVID being one. The other is also the -- we're seeing the nature of the work has changed as well. A lot more complex procedures that we're doing, which anyway, we were moving in the direction of. And so it could be that the number of discharges was very bog-standard procedures that in basic cardiology, angioplasty and so on, will take a longer time to recover, but will be made up from the fact that we're doing a lot more high-end procedures. But we still want to get back to the old discharge numbers because that's what our infrastructure is built for, but we'll have to do very different things to get to those numbers again.
Okay. Okay, Viren, very clear, but let me just try once more. The economy is normalizing, cases are much -- a lot lower. If you exclude Kerala, actually, we are having very low cases, vaccination is very high. But our volumes are still, I would say, also 30%, 35% below pre-COVID. So do you think it's realistic to expect that within the next couple of quarters, you're going back up there? That's the question.
I think we will be very different from what it was pre-COVID. And I think every sector, as the economy is normalizing, there are definitely more winners than losers, right? And there are certain behaviors that are irrevocably changed, certain behaviors people have learned during COVID, which is, let's say, ordering stuff online. I think it will never go back to a pre-COVID level of ordering things online. If it is more now, it will continue to be more.So from our business, it would be that a lot of the things that we became known for, which is the emergency response, the vaccination, the intensive care, the very high-end procedures, I think that will grow and continue to develop. Whereas a lot of the other hospitals may see their volumes increase in the most -- I mean other smaller hospitals, the nursing homes and so on, they may see a permanently higher number of their regular standard procedures, what they are good in doing.So we may -- I'm not saying it will happen. I'm very much -- we're working over time towards getting back to a pre-COVID demographics of the patient also. But there is an equal argument to be made about the situation, which we may have permanently lost the lower end of the market, which is the low-margin, low-yielding procedures and gained it in more complex procedures and people coming and staying longer and going with high-end treatment.Now that is a theory, of course. I mean this is just me planning for the absolute worst-case scenario in that. But it could very much be that things do revert back to a pre-COVID state, and we get back to doing the more standard procedures and the hospital OPDs get crowded once more and so on. In which case, yes, I think you can revert back to your models from 2019, but it may -- it still maybe that we need a year or so to get a good sense of what the future for us looks like.
Okay. Great. Very clear. My second question, Viren, is on the pricing environment. Now things have stabilized. Can you just share your thoughts, what's going on for the cash patients and for the insurance patients?
Pricing has always been tough. This being -- it's one of the most competitive markets in the world for health care because there's such a large private sector. From the cash, what we do is we take annual price increases to account for all the inflationary costs that we've had to bear.And since our salary costs, especially for nurses and frontline workers, have gone up as a response to the sheer amount of risk that we made them take over during the pandemic, a lot of those costs had to be passed on to the patients. And we're trying to do that while still remaining competitive. It's been difficult. But we'll make up the difference in volumes.With insurance companies, these are 2-year contracts, and those discussions are always filled with a lot of tension [Technical Difficulty].
Sorry, I missed your last line.
The -- so cash we pass on the -- we increase -- revise the rates every year in January. Insurance contracts are negotiated on 2-year contracts. But the insurance contract discussions are always very difficult and prolonged negotiations. So these things end up stretching beyond the 2 years. As and when they expire -- so we have 4 major insurance companies whose contracts have expired. We are in discussions with them. Hopefully, we'll close this in 2 to 3 years.If not, there are alternatives available in which case our customers pay the hospital, and they collect the reimbursement later from the insurance company. So that does give the pricing power in that instance. But the major things where we -- not just we, all hospitals lose out on in the government-insured patients: CGHS, ESI, Ayushman, all the state and government schemes, where rates just never get revised. And I don't know if it will ever happen any time soon, but that's one thing that continues to be absolute margin erosion and gets worse every year when the wage inflation -- price inflation goes up 7%, 8%, 9%, 10%, and this thing still stays basically the same.
Yes. Viren, so if I exclude the scheme patients, for the other two, which is cash and insurance, all the pluses and minuses and difficulties taken into account, I mean is it fair to put 4% to 5% annual inflation? And how much have you affected already for the cash patients?
We still haven't closed, still in November. We'll know only by January once the prices come in. The price increase, again, it's not a flat number. It's something that -- so certain procedures, we want to stay competitive on such as the cardiac procedures.So those -- the price increase will be very nominal, say, 4% to 5%, what you said. There are other things that have been accompanied by huge amounts of increase in the price of the input material. So a lot of onco treatments, the chemotherapy drugs and so on, the price have gone up a lot. So those have price increases more in the 10% to 12% range.So it's a mixed bag of sort. It's difficult for us to pin down what the total number would be. But yes, we are able to cover the -- at least the wage increase, cost increase, input price increase, we're able to cover that.
Okay. Great. With your permission, if I can ask one last question. And that is, Viren, that there's so much of funding, which is now available for health tech platforms and many things which are happening. Some of them are actually sticking, some may not, who knows. So the question here is for your hospital business, do you see any form of disruption that may happen to your inpatient and outpatient businesses and that makes you vulnerable to these health tech platforms?
Yes, 100%. I mean we're vulnerable to everything. We're vulnerable to other competitors, vulnerable to the start-ups. So a couple of the models that I find quite interesting, models that are getting funded now. So the previous generation was all telemedicine. There was a lot of that going on 5, 6 years ago. And that's -- so we adopted it, and it took up with some success in the pandemic, but it wasn't as game-changing as the VCs made you believe because a lot of patients and doctors still prefer to do things face-to-face.It's a good introductory call for us to do these things. Just like we're speaking now, you and I, but you very much like to meet me. And the only thing stopping us is you're having to wake up early to come to Bangalore or me flying to Bombay. So telemedicine is a good intro to what digital disruption this business will be.Things that are a lot more interesting now, companies that are getting wholeheartedly into actually doing the surgery. And so what they started doing is aggregating different doctors, working with different small, small hospitals, advertising very aggressively online and saying, we'll do your piles, we'll do your hydrocele, we'll do your gallbladder surgery at some price. And Hrithik Roshan will come and say it's super safe, it's super taken care of, it's a very good experience.And a lot of patients are choosing to get operations that way, which is very different. I have never imagined that you could consumerize these procedures in the way that they've proven it can be done. Now not that we would end up doing any of those things or getting Hrithik Roshan to advertise for our surgeries. But the lessons that we learned are essentially how they're reaching out to patients, how they keep those engagement models, how they deal with a lot of the inconveniences that we really have taken patients for granted.Like one thing, one of these companies does is, they send the car to pick up the patient. It's so convenient. It's just astonishing that [Technical Difficulty]. So to give you an example, doctor -- the heart hospital in Bangalore gets 50 calls per day only for Dr. Shetty. And this goes through his assistant, and he's not able to take all the calls. And so he's able to call back some of them, he's not able to call back some of them. So 40% of those calls get lost. And each of those is a potential revenue source. And multiply that by all the doctors in our network, and we're losing a huge amount of business just by virtue of the fact that we don't keep track of who wants to come to a hospital and get treated.And so it's driving us to put in a good -- something like sales force that will allow us to much more be able to follow through with patients who indicated that they would like to get treated in our hospital. So to the question you asked about health tech and all the things, like I don't think I -- we have the DNA to be a health tech startup-ish sort of company, but there are fundamental lessons that they do, and they have much better insights about what consumers want, that we can easily copy and adapt to our model and do it with much more success because we don't need to lose money doing that, whereas they have to spend a lot of money acquiring customers, building a brand, paying for Hrithik Roshan and those sorts of things, which we won't need to do.
I guess the next question could be from [ Mr. Shailesh Kumar ]. We can't hear you [ Shailesh ].
Can you hear me now?
Yes now -- yes, please go ahead.
Yes. So this is the first question, particularly to the North region. It is in line with the previous questions that are we on the pre-COVID level, particularly to 2 hospitals, one at Dharamshila and the Gurgaon. Can you please explain how these 2 hospitals are doing?
We've exceeded our pre-COVID numbers for both hospitals.
And what about the Gurgaon losses? Are we [Technical Difficulty] how do we see the outlook for that business?
Debangshu, do you want to take that? I didn't quite hear it.
No. So Viren, he is wanting to ask the Gurgaon losses and what's the outlook for that. I mean as Viren mentioned, [ Shailesh ], the losses for -- I mean, these 2 hospitals, particularly have far exceeded their pre-COVID revenues as well as the business traction in terms of both occupancies and discharges and all. And as far as the financials are concerned, while Gurgaon is on the brink of breaking even, but still short of that. While Dharamshila, for a few quarters now, as you guys aware, are -- is in the black.So put together, these 2 hospitals from the NCR region is actually in the black for a couple of quarters now, as you would have seen in our deck. Outlook-wise, we remain fairly positive given that these are newer hospitals and newer geographies, and we do see potential for further runway in terms of the growth potential of these 2 hospitals.
Yes. Just one last question, a little bit on the accounting side. When I look at your consol number, it's INR 100 crore higher than the -- on the EBITDA side, I'm talking, than the stand-alone. So I understand the INR 50 crore, INR 55 crore out of that is from the Cayman Island. And what is the remaining INR 40 crore, INR 45 crore out of that?
Okay. So our consol EBITDA number for this quarter is INR 181 crore, out of which India is INR 100 crore. And the balance INR 80 crore is accounted by INR 60-odd crores from Cayman and the INR 21-odd crores from St. Lucia as a onetime gain that we already referred to earlier in the call. And there is also a loss of around INR 1.7 crores or INR 1.9-odd crores from Chittagong separately, which is also accounted for in the INR 181 crore consol number.
So when you're saying India number is INR 100 crores, stand-alone is INR 70 crore EBITDA? I'm just excluding the other income.
Okay. Yes, because the stand-alone, there are other businesses which are not part of the stand-alone NHL entity, which also operates hospitals, namely Mysore, Dharamshila as well as our Westbank Hospitals in the Calcutta region, which are not part of the main NHL stand-alone entity, but are separate subsidiary -- wholly-owned subsidiaries of the stand-alone entity.I guess the next line is from -- next question is [ Parag Patank ].
This question is for Viren. So Viren, it's really good to see the progress that you've made on the automation and digital initiatives. Over the last few years, I've been listening to your quarterly calls as well as the AGM discussions. So question there is -- so and I had asked a similar question last quarter's call as well. We've done a lot of work in terms of internal automation and digitization for workflows.But on the patient-facing side, we haven't seen much progress. And you've would say that there are some initiatives underway which should help us get there. So could you share the progress on that? So the reason I ask is, so you on the right track saying that there is a certain amount of CRM that we need to make sure there's no leakage in terms of potential customers. But if you extend that thought and think of it as more of a patient life cycle management, a lot of our patients are essentially patients for life.So people who undergo cardiac or diabetes treatments, unfortunately, are going to have some kind of extended care for months or years. So how are we thinking of addressing those patients to, a, help improve the productivity from our end; and also reduce the friction in terms of their needing to come to hospital and so on.
Yes. [ Parag ], I mean all really good points. So our thinking on this is not finalized yet, okay? So while I'll say a couple of things, but this is not the final word on the matter on how we've evolved. I'd mentioned earlier about the DNA that certain companies have. And I said that we cannot be like a start-up because -- give me 1 second -- because we're built very differently, the kinds of people we have, the kinds of people we hire, the way we're oriented is very different.We had built an app, a patient-facing app called NH Care. And we worked very hard to get a lot of people to download it. We hired a lot of iOS and Android developers to build on that. But the sheer amount of effort and developer time, and as you, no doubt, would be reading, it's impossibly hard to hire good developers now. And the ones we have, we're holding on to for dear life. And every time someone starts hinting that they're getting an offer, we start panicking. So hiring a software developer, right now, is an extremely difficult job.The sheer amount of time involved in building, developing and maintaining these patient-facing apps for us is always a question of trade-offs. It's time that we could have spent improving something else in operation. It's time that could have been spent in improving the e-prescription module or a time that is desperately required to roll out the software developed in Cayman, which is such a huge component -- sorry. So we rolled out the NH Care. We tried to get people download it. There is a huge amount of reluctance from anyone to download the app. And the app that we made was a substandard experience because it's not on par with anything that you could download from 1MG or Practo because those guys have been at it for years. We've only been at it for a couple of months.So we decided that at this point, at least, we will strengthen our focus on the things that we're really good at and things that will lead to immediate yield. So rather than us putting more developer time into building a whole suite of apps that patients can use to book tests and so on, they can easily piggyback off things that other people have already built. Rather than building the e-commerce infrastructure for sending medicines around, we will partner with other companies who are doing it anyway and get on a revenue share arrangement with them rather than build a patient-facing app that they would have on their phone for us to remind them to take their medicines and in order to buy things, we can just do WhatsApp integration with that.So the core pieces of all of that, we're building out. So that means we may, from a patient side, at this point, have a very light presence. And there isn't much that you as a patient would be able to download from NH, whereas a lot of the focus we would have are on things that are used by a hospital, used by the doctors.It doesn't mean we're abandoning the space entirely. It just means that right now, given the shortage we have in resources -- by resource, I mean developer, there's no amount of money we wouldn't spend in doing this. But because it's very difficult for us to get developers, right now, we've decided to focus our efforts on finishing up all the products that we currently have, making sure it's used by the hospital, by the doctors, by all of them.And for all the patient-facing things, we'll rely a bit on third-party applications, either through other startups we can work with or by implementing Salesforce everywhere. So it will allow us to at least track where the patients are coming from and be able to improve our lead conversion, improve the throughput, address the queries much faster and be able to drive revenue in the more conventional way rather than go after digital revenue, which will take a lot of time.
Fair enough. So I think that's a great way to think about it. So I'm not asking sort of in terms of building a slick app that will compete with the best-in-class health tech apps out there. What I'm asking is sort of a more -- so I was thinking more in terms of -- I mean just the whole thought process of digitizing that whole patient life cycle management.Sir, right now, it's [indiscernible] essentially the patient [indiscernible] when patient turns up, so it's not a function of the app. It's essentially how we are thinking about tapping the entire set of contact points with the patient and being sort of proactive in guiding the patient towards what needs to be online and what can be off-line. Is there some kind of thought process around that?
Most of those are online, but they're given in a very disparate manner right now. At least with the CRM, we can integrate all of that into one place. So why we were interested in an app strategy was because we could combine all the different ways that patients are reaching out to us: through websites, through the phone, through WhatsApp, through e-mail, to directly contacting us into this one central place where all of these will happen. And then it will be relatively easy for them to reach us and for us to reach them. So that was the fundamental premise of the app.And the app is still there, and people are still downloading it. It's just that it's taking much longer than we thought, and it needs a lot more resources for us to popularize it and developers to build on that. So that's why our focus is decided at least we'll build out a lot of the smaller integrations.So for example, integrating online payment options. So it took us -- the developers rather than building more UI features to the app, they worked on integrating this Razorpay, so that you can use at different parts of the hospital, you can pay through the UPI, pay through Razorpay, pay online, and they can have a completely contactless experience in the hospital. So that is the convenience in the hospital.But we can't extend that right now to them being able to pay for services at home in advance for some like sending medicines at home. That part, we won't be able to attract right now. But the things that we are already good at doing and things that patients are experiencing, we made it much more convenient for them. But your larger point is true in that we definitely are aware that a lot more of these things have to be more patient-facing. And there's a whole realm of digital help that should be allowed. And for that, we're running a separate program with our clinics rather than with the hospitals because the clinics are a lot more smaller and focused, and we'll be able to spend a lot more time understanding the consumer behavior there.But from a hospital perspective, there's just so much more. So just I don't have any real facts to back this up, but I would pause it that there is an entire other NH worth of revenue, sitting already in our existing system that we're not able to tackle because of our relative inefficiencies: through the medicine fulfillment that we're not able to do because the pharmacies are crowded, through all the calls who come to our call center who are not able to get through, through every patient in our neighborhood who would like to come to our ER, but doesn't know the number of the ambulance or is not able to reach out to us, through every doctor who does 2 surgeries a day, but could do 1 additional surgery or 2 additional surgeries if only they were able to line up the patients on the same day.There are all these inefficiencies within our system that are much cheaper to do, much faster to do and easy to roll out, which would lead to tremendous gains without us going after new things. And not that we wouldn't do it. We absolutely are doing that. But these are things that are right there, it's in our grasp.
Charu, do you have any further questions? I'm not sure -- Charu, do you have any further questions? I see your hand raised. I guess that's by mistake, Viren.Anyways, I guess that concludes our session for the day. Thanks again, everyone, for your active participation, just like every time. We look forward to any further queries like I highlighted right at the outset, should you have any such queries, do reach out to us. We would be happy to address it to the best of our abilities. Thanks once again.