Narayana Hrudayalaya Ltd
NSE:NH
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Narayana Hrudayalaya Ltd
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Ladies and gentlemen, good day, and welcome to the Narayana Hurdayalaya Limited Q3 FY '18 Analyst 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, Ali. Good afternoon, ladies and gentlemen. Myself, Debangshu, and I run the Investor Relations and Mergers and Acquisitions functions at Narayana Hurdayalaya. On behalf of the company, I welcome you all to our earnings conference call for the third quarter fiscal 2018 of the company. To discuss our financial and business performance outlook and to address your queries today, we have with us Dr. Ashutosh Raghuvanshi, our group CEO; Mr.Kesavan Venugopalan, our group CFO; Mr. Viren Shetty, who spearheads the strategy and planning practices at NH alongside Ashish Sukhija and Ishaan Mohan from the team. I'm sure you have gone through our results release, along with the quarterly presentation, which have been uploaded on our website as well as on the stock exchanges.Before we proceed with the call, I would like to remind everyone that this call is being recorded, and the transcript of the same shall be made available on our website. I'd also like to take this opportunity to remind everyone 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, necessarily, in conjunction with the uncertainties and the risks that they face. These uncertainties and risks are included, but not limited to, what we have mentioned in our prospectus filed with SEBI, and subsequent annual reports uploaded on our website. Post the call, in case you have any further questions, please feel free to get in touch with us. With that, I would like -- now like to hand over the call to Dr. Raghuvanshi.
Thank you, Debangshu. Good afternoon to all of you. On behalf of the company, I welcome all of you to our earnings conference call. Let me start out with the summary highlights for the quarter. We are delighted to let you know that we have been able to deliver industry-leading growth of about 22% in terms of revenue. That we have been able to achieve this in a seasonally moderate third quarter, which sees the onset of festival season leading to a drop in patient footfall is remarkable. Just to highlight that, this is, despite, the very really unpredictable and challenging external environment at the moment, which has definitely had an impact on overall healthcare ecosystem over the last 12 months. Effect of which, we do foresee to continue to some extent in near future as well.On the overseas front, we believe, a very important milestone in the lifecycle of our institution has been achieved through acquisition of the entire stake of our partner in Cayman Islands Hospital, making it a wholly-owned subsidiary of NH. Registering an attractive 43% year-on-year growth, the hospital achieved USD 32.65 million in revenue for the 9 months period ending December 31, 2017. And this resulted in a healthy EBITDA of USD 4.29 million, which has grown over 3.5x or registering over 250% year-on-year growth for the same period.Moving on, you will be pleased to learn that our upcoming facility at Gurugram is close to commissioning, and we are looking forward to a really vibrant northern region of operations. This unit will be complementary to our Dharamshila facility in East Delhi, which is already gaining traction in terms of its upgradation from a cancer-only center to a full-fledged multi-super speciality facility. We remain hopeful about the prospects of both these units to contribute in a real significant manner to the overall group. With this backdrop, let me know, elaborate upon the performance during the last quarter.In spite of this seasonality, the third quarter, we registered a robust growth of 21.7% year-on-year in total operating income from INR 4,553 million to INR 5,538 million. It's really heartening to note that the bulk of this growth is on the foundation of solid and constant uptick in our volumes across the network. This showcases that the business is back on the high growth trajectory after registering an average growth amidst the temporary strutters in the form of demonetization and cap on cardiac stent prices in the last 4 quarters. The impressive growth in the business has ensured that our operating profitability adjusted for the newer units like SRCC Mumbai and Dharamshila Delhi and the preoperative non-capitalized expenses in our forthcoming facility in Gurugram is maintained at 12.4% EBITDA margin on the lines of the margin observed in Q3 of financial year '17. Thereby, emphasizing the resilience of our business model. This is very satisfying for us. Especially, when the healthcare industry is facing turbulent times due to regulatory and other external challenges. The margins were well supported by the sustained impressive performance from our matured hospitals with over 5 years vintage which have been consistently recording industry-leading EBITDA margins of around 24%.Hospitals in this bucket of greater than 5 years, continue to outperform by delivering best-in-class revenue growth of 18% year-on-year for this quarter, and utilizing the available headroom in these flagship centers. These centers registered an uptick of 12% in occupied beds year-on-year for the quarter. Within this bucket, the Health City Bangalore housing our flagship cardiac unit and multi-speciality MSMC unit continue to occupy the pole position by registering maturity define close to 20% revenue growth. On the back of a robust ramp-up in occupied beds in this seasonally moderate quarter, our other centers also displayed a strong traction in patient footfall and reported a healthy revenue growth of 25%. Given this growth impetus from the newer units centered around our conscious strategy to develop other centers as preferred healthcare destination is giving us the desired dividends as the contribution of the 3 flagship facilities have come down to just over 50% of the total revenue from over 70% few years back.Not only focused on India, but as far as our international Cayman Island hospital operations are concerned, this less than 4-year-old, 105-bed capacity facility is a medically advanced tertiary care hospital providing high-end services such as cardiac sciences, orthopedic surgery, neurosurgery et cetera. With the prestigious gold seal of approval from the Joint Commission International HCCI is the largest hospital in the Caribbean to have such eminent accreditation, and attracts patients from the Cayman Island, the Caribbeans and Central America. With a handsome annualized ARPOB of USD 1.85 million, the unit reported revenues of USD 11.38 million in the last quarter, with EBITDA of USD 1.74 million. Thereby achieving an EBITDA margin of 15.3%. These figures highlight a healthy sustained trend in the operations of this center. Looking ahead, we remain positive that this transaction has the potential to contribute meaningfully to the overall operations, particularly in terms of augmenting our profitability and thus, cash accruals.On the operational front, we have tied up with all major insurance companies in that region, and have also entered into understanding with airline operators to improve connectivity in the region. On the clinical front, our outcomes are at par with major hospitals in advanced region like the U.S., these endeavors have strengthened HCCI's brand recognition in the region. Going ahead, we are planning certain operational streamlining in the facility, which is expected to give a further boost to its profitability. We expect this hospital to evolve as a major healthcare destination in the entire Caribbean region in times to come. We are optimistic that this experience will act as a steppingstone for us to further explore the untapped international market as well.The success we achieved at this facility in terms of the unit breaking even at monthly EBITDA level within 24 months of the operations and becoming profitable at net profit level by 11th quarter has bolstered our conviction to operate in such territory.Our transformation from a cardiac-focused center to a multi-specialty healthcare provider through enhanced focus on providing advanced diverse spectrum of services is bearing us fruits today. Our endeavor towards high-end specialities with the highest degree of clinical physicians and focus on minimal invasion has led to NH brand soaring new heights. NH felicitation at various clinical forums speaks volumes about the pioneering and cutting-edge work we have been doing. Recently, the SRCC NH Children's Hospital won the best super-speciality hospital of the year award in pediatrics at International Healthcare Summit & Awards. Linked with derisking the business model from a single speciality, which was cardiac sciences, whose contribution to the overall revenue has come down below 42%. High-yielding specialities like gastroenterology and oncology, now contribute around 16% and 10%, respectively. Renal sciences and neurosciences are not far behind by about 8% to 9% of contribution in revenues at the moment. The recognition like the 1 highlighted above have cemented NH's position not just in India, but also abroad, with international patients choosing NH as a preferred healthcare destination. Our international patient base now appears to be firmly entrenched, and we receive about 10% of our total revenues from international business.Coming to the clinical development, we are pleased to witness significant progress in this direction, as we continue to prioritize health and well-being of our patients. MSMC in Bangalore, successfully separated conjoined twins. This medical problem is a rare event occurring 1 in 100,000 births. And the survival rate for such surgeries is very low. Our hospital in Jammu performed the first case of endovascular aortic repair. This is the first case of its kind in that region. And this establishes our preeminence in performing cutting-edge cardiovascular work in this center. MSMC in Bangalore treated a rare cancer of the pelvic bone, where the affected part of the bone was removed and replanted after sterilizing it with radiation in a technique called extracorporeal radiotherapy. We are also pleased to announce that during the last quarter, our organization was recognized at various platforms, the key ones being the following: NH won The Health Brand of the year in Healthcare at India Health & Wellness Awards in December 2017. NH was recognized in various fields at International Healthcare Summit and Awards. One of them was SRCC Children's Hospital award in The Best Superspeciality Hospital of the Year in category of Pediatrics. RTIICS in Kolkata got the award for The Best Cardiac Sciences Institute of the Year. And NSH, Howrah won the Best Superspeciality Hospital of the Year Award in Oncology. Narayana Institute of Cardiac Sciences Bangalore won The Medical Value Travel Specialist Hospital Award in Interventional Cardiology at the Advantage Healthcare India Summit in October 2017.We remain confident that despite the continuing regulatory headwinds, the Indian healthcare ecosystem, which is undergoing a sweeping overhaul, there are lots of opportunities lying untapped in the market. And we see this apt for an institution like NH focused on providing affordable, quality healthcare to masses to benefit the most from rapidly evolving healthcare environment. Thank you, so much. Now we'll be open for questions and answers.
[Operator Instructions] We'll take the first question from the line of Charulata Gaidhani from Dalal & Broacha.
My question pertains to the breakup of expenses. The expenses have gone up significantly in this quarter. Can you give a breakup in terms of its -- or an idea in terms of expenses for the new hospitals and for existing?
Well, it seems -- actually, if you see, Charulata, the expenses that have -- are not gone up that significantly, overall. But for the doctor payout that has happened across a few of our new units. I can explain the top few units across the pay. So out of our bulk increase of around INR 4-odd crores of doctor payout, this is in comparison to the last quarter that mind you, I'm mentioning. We have incurred additionally, around INR 1.5 crores towards our Dharamshila facility that has effectively gone towards transforming it to from the cancer-only facility to being a multi-speciality, superspeciality unit that we are transforming, upgrading it to, rather. As always, there has been onset of few new programs like the pediatric cardiac surgery program that we have kickstarted in Guwahati. Similarly, we have also started the cardiac surgery program in Barasat as well as the cardiology program at HSR. Additionally, we have also beefed up our existing clinical talent across few of the specialities like nephrology and orthopedics at Mysore as well as medical oncology and nephrology at Jammu. So totaling -- I mean a sum total of this has resulted in around INR 4 crores increase in our medical doctor payout vis-à-vis the last quarter. As regards to all our expenses, all the expenses have actually come down in absolute terms also, in line with the reduction in revenue, which is like INR 5 to INR 6-odd crores as compared to the last quarter.
Okay. The other expenses have gone up significantly, on a Y-o-Y basis?
That is in line with rather, it is still as a percentage of revenue that's much lower than what it was last year. So there has been a growth of 22% in our revenues, Y-o-Y, if you see.
Okay. Okay. Then my second question pertains to acquisition of Cayman Islands. What is the cost of the acquisition?
So as we have highlighted in our notification previously, as well, so this has been consummated at an enterprise value of around $70-odd million. And we have acquired the balance 71.6 percentage from our partners -- 71.4% to be precise from our partner.
Okay. So you have acquired 71.4%, additional?
Correct, right.
Right. Now this will come into as a wholly owned subsidiary of Narayana?
Yes, yes. Going forward, from the 3rd of January -- from the 10th (sic) [ 12th ] of January, this will be construed as a wholly owned subsidiary of NH.
Okay. Now how much was the occupancy at Cayman Islands?
25% odd.
Okay. And the number of beds stand at 105?
Yes, ma'am.
Okay. Yes. If I could squeeze in one more. At SRCC, how much was the occupancy?
It's around 30 -- 30 to 35-odd occupied beds out of the 60 census beds that we have commissioned till date over there. So it's roughly around 50% of the beds that we have commissioned till now.
Okay. Okay. So then, that should take you close to breakeven?
Not really, madam. As we have specified in the presentation SRCC's loss in absolute terms albeit has come down, but it's still as high as INR 6.9 crores for the quarter as against INR 7.9 crores in the previous quarter.
Okay. Okay. And there is a decrease...
Charulata, we would suggest for you to probably give chance to others to also ask. If you have any further questions please get back to us on this call or separately.
Sure, sure.
Thank you.
Ali, just ensure that people do ask or limit themselves to 1 question or possibly a 1 follow-on question at this time.
Sure, sir. We'll take the next question from the line of Trilok Agarwal from Birla Sunlife.
Actually, I was more keen to understand that in a 3 to 5-year category majority hospitals, our occupancy levels and your margins have come off, any particular reason for that?
3 to 5-year occupancies as compared to Q2 might appear that it has come down. But Q3, last year, it has actually improved from 51% to 55%. So this is a seasonal effect that we see on a quarterly basis. Despite that, as Dr. Raghuvanshi mentioned in his opening remarks, we have had a fabulous third quarter. At least in terms of the volume ramp-up, which has translated into record or rather industry-leading revenue ramp up as well. Now coming onto your question as regards to the margin drop. This is, again, I am presuming that you are comparing it against the last quarter. This is...
Comparing to base quarter, which is Q3 FY '17?
Q3 FY '17, the hospitals in itself in those brackets have moved into different brackets. So like-to-like, you probably would not be able to compare. I can get down to the different details around those units around the thing. But that's what I am anyway is going to tell you about. So if you see even on the quarter-to-quarter basis, I agree, that it has possibly come down from 11-odd percentage to 6 percentage that you see in this quarter. That has primarily got to do with the reduction in revenue of around INR 4 to INR 5 crores and that has translated to the same in terms of EBITDA flow as well. That aside, like I previously mentioned, there has been few one-off investments kind of an expense that we have incurred towards the clinical talent across the units like Mysore, Guwahati, HSR, and so on and so forth, which explains this kind of an unusual, a little bit of one-off expenses that we believe are here to hold us in good state going further as regard to these units are concerned. But broadly this is in line with the drop in revenues of these units quarter-on-quarter.
And -- is this -- are these expenses primarily into any -- apart from talent, which you highlighted above, anything...
Yes, yes, yes.
Is there any devices -- or additional medical devices that were invested in this quarter?
That would not get captured in P&L. That will get captured in CapEx basket.
Other expenses, nothing?
No, no that gets captured typically in -- we capitalize those kind of an expense. So it doesn't get captured in the P&L at all. So the P&L expense is primarily towards manpower, and in this case, this particular quarter that we are talking about, it's primarily towards doctor payout. But for doctor payout, all my expenses in absolute terms have actually come down. So doctor payout, like I have mentioned, unit-by-unit, but for those are also in line with the observed revenues that you see.
We will take the next question from the line of [ Rohan Dalal ] from [ BNK Securities ].
I wanted to know what was the CapEx incurred in this quarter for the Gurugram facility, for Dharamshila facility, and the Cayman Islands facility, if any CapEx was incurred?
We hardly spent any significant CapEx in either Dharamshila or Cayman in the last quarter.
Okay. For Gurugram?
Gurugram is still under commissioning. Once we commission it, we will probably able to give you the complete figure around what the total CapEx that we incurred subsequent to our acquisition.
We'll take the next question from the line of Nitin Agarwal from IDFC Securities.
Dr. Raghuvanshi, I just had a question around the new hospitals. So our Mumbai hospital, I think the loss continues to be at a range -- run rate of INR 7 crores to INR 8 crores a quarter. And we're probably investing -- beginning to invest now in Dharamshila to transition to multi-speciality hospital. And I presume, because of the starting the Gurugram hospital any time shortly and it will entail another round of start up losses. So overall, when you look at this block of 3 new hospitals, while our existing hospitals continue to do extremely well, I mean, how should we look at the EBITDA contribution from these hospitals from say, over the next say, 4 to 6 quarters? And at what stage you see this cluster actually becoming EBITDA positive for us?
I'll take the northern 2 units, separately, and then I'll come to Mumbai, separately. The 2 units in north in NCR region, the Dharamshila unit that was an operational cancer hospital. So there was significant level of clinical activity as well as at the EBITDA level, it was almost like neutral. However, as we are converting that hospital into a multi-super speciality hospital, lot of acquisition of clinical talent et cetera has happened in the last 2 quarters. Now, in order to have this expense getting translated into revenue in terms of patients and new specialities takes a period of about 2 to 3 quarters. But since it is an established hospital, the cycle -- revenue generation cycle over there would be slightly faster than a traditional hospital, which is totally greenfield. So the trajectory of Dharamshila and Gurugram is going to be slightly different. What we expect is that Dharamshila would sort of start going towards the kind of a majority in terms of a positive sustainable EBITDA in the next 3 to 4 quarters, within the next say, 1 to 2 quarters. However, Gurugram is completely a greenfield facility, and would have its normal cycle of growth, which means that, it should take about 24 months or so, before we get into a positive territory. So overall, as a cluster or as a region, if we look at it, since Jammu is an EBITDA-neutral hospital as well and Dharamshila being EBITDA neutral as well, the impact of the northern regional cluster will not be very significant. On the other hand, as far as Mumbai hospital's operations are concerned, as Debangshu pointed out, from the previous quarter to this quarter, the losses have come down, though not to the extent, which is extremely significant, but from about 7.2, it has come down to about 6.8. So we expect that to -- trend to keep on continuing. But as I said in the previous call also, that the typical cycle of about 12 to 18 months is what is required. So another 4 to 6 quarters, Mumbai is likely to remain into a negative EBITDA range. However, the quantum of that negative EBITDA is going to gradually keep come down. At the moment, the hospital is showing trends of occupancy of about 50 beds on some of the days, which means, almost the occupancy in the occupied beds of about 60% to 70% already. So we are getting into that phase, where we would be commissioning more beds over there. So that may also partly increase the expenses. So as the revenue catches up with the expenses and a positive EBITDA territory comes, I think that journey would take us about 3 to 4 quarters minimum or maybe up to 6 quarters.
If you can probably help me with the Gurugram expectations also, when do you see it breaking even for you?
Gurugram being a completely greenfield project, we expect at least 24 months for it to go towards the positive territory.
[Operator Instructions] We will take the next question from the line of Amit Hiremath from Mahindra Mutual Fund.
Would it be possible to provide the breakup of our beds capacity across the maturity cadence like over 5 years, 3 to 5 years?
Yes. We can get that. Yes, if you look in the percentage terms of over 5 years, 53% of our beds are in over 5 years category; 18% of our beds in between 3 to 5 years; and 15% of our beds are in less than 3 years. The acquired operations, which is 4 of them is 13% of the beds.
This is for the operational beds you are saying? Or the capacity?
Capacity.
Capacity.
Operational. This is operational.
Operational.
Can you just give that data for capacity for the [indiscernible] beds.
I can give it to you right away or if it's possible, you can take it off-line.
Perfect. And my second question would be for the heart centers that we are now well past the price embargo. What is stopping you from increasing the profitability of these heart centers, which is lingering at around 8% to 9% EBITDA?
The heart center, there are several dynamics, which operate. Heart centers, exclusively, are within the Karnataka region. Being in secondary towns et cetera, most of the patients over there are the scheme patients where the prices are fixed by the scheme. So the cash paying patient competent in the heart center is relatively smaller compared to our larger hospitals, though in the larger hospitals, only 20% or even less is scheme patients, but in the heart centers about 70% to 80% are scheme patients. However, the scheme patients -- the heart centers also are referral centers to the -- these hospitals as well. So those are the limitations you have in the heart centers. But they are part of the larger ecosystem. So it is better to look at them in a more comprehensive manner and as to what value they add to the operations in the bigger hospital. As I earlier pointed out, if you look at the revenue growth in our cardiac hospital, which is more than 17 years old hospital, was 20% in terms of revenue growth from the previous year's same quarter, if you compare. So not many, very matured hospitals will see that kind of growth. So we have to look at these heart centers as a part of the ecosystem, which provides that kind of growth to our mothership hospital.
Okay. But do you see this EBITDA margin coming back to around 18% in the near future? Or will take some more time?
I think the heart centers will be under stress as I said because of the scheme. We need to really see how the newer initiatives, which have been announced are going to shape up the scheme. And a lot would depend on that. So I would not like to random guess on that. What we would be doing internally and we always do is that we are continuously in the process of evaluating the relevance and the importance of a particular unit to our overall operations. So if a particular heart center does not fulfill the criteria of being self-sustainable, and at the same time, being good referral channel, then we would review it from time-to-time. And as you might be aware in past also, we have shut 1 or 2 heart centers in the past.
[Operator Instructions] The next question is from the line of Sameer Baisiwala from Morgan Stanley.
I think Dr. Raghuvanshi would just touch upon that and that's my question, that's on National Health Protection Scheme that the government announced, yesterday. What is your first take on it? Is it going to be a big opportunity for hospital sector in general? And would there be margins to be made over here? And would the business come to private operators or government hospitals? Your thoughts, please.
Yes. I think the first reaction is one of, I would say jubilation. Because, if you have to look at it at our ARPOB levels, you would realize that majority of patients, we will be able to cover, except for some very catastrophic illnesses or conditions like bone marrow transplant and liver transplant, almost everything gets covered in 2 or below INR 5 lakh, kind of, category. So that way, it sounds very good. But the devil is in the detail, and we are yet to see, how this is going to be implemented. I think, we will all have to wait for the fine print to emerge, and how exactly the scheme is going to be implemented and administered. That would be the key. However, even if it gets implemented in a limited manner and not the 50 crore people, but lesser number is covered, I think there is definitely a good thing for the healthcare industry in general. Certainly for a provider, which is in the value segment, such as us and many other networks as well. The idea of government coming up with this scheme is that this is essentially focusing on secondary tertiary care and not on primary care, for which they have created a separate vehicle, as I understand. So if that is the case, then this business primarily is likely to go to the private sector and not to the public sector hospitals. That is our initial impression. But as I said in the beginning, it would all depend on how exactly it is implemented and managed.
And my second question is about the stent price control. So what's the current update on that? When I compare September quarter to December, I can't see a discernible change, but I thought that you had taken a fair bit of price increases in September?
Yes. In end of September, we have taken some price increase, which could cover our -- what the losses which we would have because of the price control on stent. It's covered to a large extent, but not completely. We would still have a deficiency of about 3% to 4% on that count. However, the latest update on that is that the government has constituted a review of that pricing mechanism and the National Pharmaceutical Pricing Control Authority has called for next consultative meeting as early as next week. So there is likely to be some change in that, whether that change would be significant or not is yet to be known.
We will take the next question from the line of Harith Mohammed from Spark Capital.
You talked about some of the measures that's being done at Cayman Islands to improve the occupancy there. Given that you have full ownership and management control now. How do you see these numbers, the occupancy numbers moving over the next 12, 24 months? Can we see a significant ramp-up from the current less than 30% levels?
The occupancy levels, I expect it to grow rather slowly. Because the -- lot of treatments over there are daycare, kind of treatments. And as you've seen the ARPOB over there is remarkably higher than what one sees in the Indian context. So we are not so concerned about the occupancy. What we are concerned about the realization and how many and what kind of ARPOB levels at which we are operating. So as far as the operating expenses are concerned, those, we have full control on the management, will be rationalized to some extent, and that could add to the profitability. We have been seeing a continuous growth in the numbers over there, both in terms of the number of cases, which are being done, as well as the complexity of the work which is being done. So that would continue to evolve at the rates. Last year to this year the growth was 40%. However, that growth may not be 40% this year, but we still expect a high growth.
Okay. And then secondly, on the Bombay facility. The reduction in losses has been slightly more gradual than what we had expected. So what is actually -- is there any unexpected challenges that you are facing in Mumbai? And what are you doing to address these challenges?
There are no unexpected challenges, but some of the things which we had anticipated are there. One of them was the cost of clinical talent is relatively higher, and the cost of overall staffing is also slightly higher. Similarly, many other ancillary costs like accommodation cost for the nurses, et cetera also is relatively higher because of the general living index being higher in Mumbai. Other than that the only other reason why the ramp-up has been slightly delayed and slow is because, we were planning a large kind of launch of the facility which we did not -- we were not able to do because of not getting the appointment from the VIP, who had earlier consented to it. So we will -- that -- it appears that the ramp-up is slow. The second thing is that, this being a specialized children's hospital, we would expect that, the outpatient business will be more significant than the inpatient and that has taken some time. The third factor which was there is to get all the arrangements in place in terms of the referrals because majority of children surgeries are usually supported by various individuals, trusts and other organizations and governments. So now this hospital has a tie up with the Assam government to treat 1,000 children for heart operations, and they've already started sending the patients over there. 100 heart surgeries have already been done. The second agreement they have reached is with the Tata Trust and the Maharashtra government's scheme, where the Chief Minister Scheme, which is supporting surgery for 500 children for heart operations. So with all these kind of measures getting in place, we expect to see a faster ramp. But having said that, being a children's only hospital, this hospital will see a slightly muted ramp up.
We will take the next question from the line of Ashi Anand from Allegro Capital Advisors.
The first question is a followup for the previous question. You have mentioned that the government is going to review stent prices, could you just speak a little more on what...
Sorry to interrupt, your voice is echoing. If you're on speaker, you need to turn that off. I'm afraid, it seems he has mistakenly placed the call on hold. We'll move to the next question in the meanwhile. From Mr. Sameer Baisiwala from Morgan Stanley.
A quick one on the employee count, if I'm not wrong, it has gone up 1,000 on a quarter-on-quarter to 15,900, what's driving that?
Yes, that is because, our new facility in Gurugram is getting commissioned. So they already have -- the appointments have been made and people have started joining. It's pre-commissioning numbers. Over there, about 200-plus employees are already in place. Similarly, there have been some additions in Dharamshila as well as in our Mysore facility and Guwahati facility. So this selectively put together has increased the number to some extent. Other than that, since the occupancies have gone up in some of the hospitals so the number of nurses have also gone up marginally over there. So all these put collectively together has resulted in this increase.
Okay. And for Gurugram, when exactly are you planning to open the hospital? And what -- can you just ballpark some range, like year 1 EBITDA loss?
As far as the commissioning of the hospital is concerned, we have all the licenses and everything in place. As of Monday, we are doing a soft launch, which is just registering patients, we will start seeing. The outpatient services, we would start by 15th of February and the in-patient services by 1st of March. So that's the time frame on which we're working, and we are well ready to start on that. It is difficult to hazard exactly how much of EBITDA negative losses might be there in the first year. But as I said, earlier, this is being a greenfield project, it will have the normal trajectory, which means that, at least for the first 24 months, you should expect a negative EBITDA. The other thing, I must point out is, that Gurugram, again, being a kind of a grade A location, in terms of cost of living, it would have a slightly higher cost structure than many of our other hospitals. But at the same time, we have been able to acquire very good clinical talent. So we are very hopeful that the ramp-up might be faster than what we had originally anticipated. But that time will tell.
We have the next question from Ashi Anand from Allegro Capital Advisors.
My apologies, there is some technical issue. My question is a follow-up on the previous question, on one of the previous questions. You mentioned that there is a review on stent prices the government is undertaking. Is this on the product pricing? Are they looking at capping the procedure pricing? Could you just give us some indication of what exactly they're looking at?
I am not sure what kind of review they are actually going to undertake. But their concern is that the new stents, new generation stents are not being introduced by the companies from multinational companies in India. And that is a big concern for the government as well as for the medical fraternity. And I think it should be a very big concern for the patients as well. So I think they are trying to address that issue and in order to address that issue, I'm sure they will have to consider the price capping issue as a primary driver of this whole problem. So we do not know at this moment what kind of decisions they will take. But they have called for a formal review. They've also called for industry experts to come and give their opinions. So which, we will duly be giving.
Okay. Excellent. Just a follow-up question. In a mature facility with respect to NICS, MSMC, and RTIICS, I just want to understand any sort of scope for brownfield expansion? Is there a difference between capacity beds increase and rampings up for the quarter?
As far the RTIICS is concerned, there, the capacities are exhausted at the moment. So we are trying to sort of reconfigure the facilities as much as possible to see how we can add up more growth there. So the driver of growth for that hospital will be changing the patient mix. Whereas, in case of MSMC and the cardiac hospital, the capacities are still available. And we still have enough headroom for growth in both these facilities. As far as MSMC is concerned, we have added new service lines like adult liver transplant program, which we did not have earlier. So we expect those also to ramp-up as we go further.
[Operator Instructions] The next question is from the line of Nitin Agarwal from IDFC Securities.
Dr. Raghuvanshi on the hospitals which are more than 5 years old, you've done a very good -- phenomenal job over the last few quarters in terms of growth and profitability in these hospitals. I mean, how much scope do you further see in terms of -- how much scope you see in terms of further maintaining this kind of momentum in these -- growth momentum in these hospitals going forward? Given the fact that the occupancy is pretty high, and so is the ARPOB recovery of these hospitals?
Yes, within those 3 flagship hospitals, the older ones have done extremely well. But within this bucket also there are 2 hospitals, where we have significant work to do. As you are aware that we have -- had struggles with our Ahmedabad facility, which has also now come to this bucket. And...
Jaipur as well.
And Jaipur as well. Jaipur, we expect, a lot of headroom is available for growth, and performance can be improved significantly. Not only that, as I pointed out earlier also, if you see in the cardiac hospital also we saw good revenue growth. So with the kind of patient mix, which was there earlier from that kind of change and also a little bit of capacity, our occupancy increased, we can expect still more growth from these centers as well. The only center which is saturated is RTIICS.
Okay. And in terms of your future growth plans, given the fact that you already have got 3 large hospitals -- 3 hospitals -- recent hospitals are still not making EBITDA -- still not EBITDA profit -- profitable EBITDA level. What is our appetite or view towards adding more hospitals in the network?
See, we have a very clear strategy as to where our growth should be. The growth should be in markets where operationally you can make viable operation faster. And it also is -- we can utilize our existing brand value. At the same time, we can use our existing resources. We can use the strengths of our supply chain. So with that, in mind, we would continue to remain focused on the eastern cluster, southern cluster and with the renewed focus on the northern cluster, where these 3 units are already going to be operational very soon. And if there are certain opportunities in the Western cluster, around Mumbai, we would definitely explore those. However, our appetite for a greenfield hospital is not very high. We would prefer to go for brownfield kind of expansion in these markets as well.
[Operator Instructions] Your follow-up question from the line of Charulata Gaidhani from Dalal & Broacha.
My question pertains to the Gurugram facility. How much is the total CapEx that has been spent?
So Charulata, as previously highlighted to one of the previous questioners also, I mean, we would be able to confirm that once we complete our commissioning work on this. So since it is still under CWIP out here. So let us get this onboard in terms of commissioning and possibly over the next quarter, I will be able to get you that detail.
Okay. Fine.
But roughly like previously estimated it will be in the range of around INR 50-odd crores.
Okay. And Mumbai that will also get capitalized in advance...
Mumbai, there is no CapEx at this point of time. It's a newly constructed unit, which you recall is in an O&M asset-like format, where the partner has invested in the land and the building. And we have just equipped it fresh with all the medical equipment and we have spent around INR 50 crores towards that.
Okay. So around INR 100 crores will get capitalized in...
Mumbai is already capitalized as of April 2017.
Okay, okay, fine.
The CWIP that you see, the capital work in progress that you see in my balance sheet today is essentially towards Gurugram, which also will get capitalized over the next month or so.
Right. For FY '18 you expect any additional other than this INR 53 crores coming in?
In terms of what?
For capitalizing?
There will be a -- I mean, aside from this our routine normal upgradation and maintenance CapEx, which we have previously given guidance upon or rather quoted the actual numbers. So till our last quarter or H1 it was around INR 50 crores. If I'm not mistaken till Q3, it is around INR 72-odd crores. So year till date 9 months, we have spent around INR 70-odd crores towards normal routine maintenance and upgradation CapEx.
We have the next question from the line of [ Rohan Dalal ] from [ BNK Securities ]
I have a follow-up. What is the contribution of RTIICS right now for this quarter for revenues?
Rohan, we typically don't spell out individual hospital-wise revenues out here. But one thing to say that unlike last quarter RTIICS has grown significantly. In fact, the entire Eastern region has clocked very impressive 21% year-on-year growth, unlike the previous quarter, where it was in mid single-digit kind of a number. And that has been led, while that has been contributed wholeheartedly across by all the units in that region but that has been led ably by RTIICS in itself.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Debangshu Sarkar for closing comments.
Thanks, Ali. Thanks, everyone, for participating in our conference call and coming up with your questions. Should you have any further queries or questions, please feel free to get in touch with us. Apologies, if we've not been able to answer some of you -- some of your questions directly, today, on this platform. But we'll be more than happy to get in touch with you and address your queries, separately, if you would take it off-line. Thanks, again.
Thank you very much. Ladies and gentlemen, on behalf of Narayana Hurdayalaya Limited that concludes this conference call for today. Thank you for joining us. And you may now disconnect your lines.