Narayana Hrudayalaya Ltd
NSE:NH
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Narayana Hrudayalaya Ltd
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[Audio Gap] FY '21 earnings call. [Operator Instructions] I now hand the conference over to Mr. Debangshu Sarkar. Thank you, and over to you, sir.
Thanks, Aman. Good afternoon all. Myself, Debangshu, and as most of you would be aware, I run the Investor Relations and mergers and acquisition practices at NH. On behalf of the company, I welcome you all to the Q3 FY '21 earnings call of the company. To discuss our performance and address all of your queries, 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. Before we proceed with this call, I would like to remind everyone that the call is being recorded, and the transcript of the same shall be made available on our website at a subsequent date. I would also like to remind you that everything that is being said on this call that reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the uncertainties and the risks that they face. These uncertainties and risks are included but not limited to what we have already mentioned in our prospectus filed with SEBI before our initial public offer in late 2015, and subsequent annual reports on our website. Post the call, in case you have any further queries, do feel free to get in touch with us. With that, I would now like to hand over the call to Dr. Rupert.
Good afternoon to all. With a steady decline in new COVID-19 cases across the country, we are encouraged by the business revival across the network, as reflected in the India business growing sequentially quarter-on-quarter by over 33%. While COVID-19 business contributed 14.2% of the Indian operations during quarter 3 as against 15.1% in quarter 2, for the month of December, it has come down to 10.3%. Recovery in Indian operations backed by the robust consistent performance of our overseas Cayman Islands facility, ensured that we return to reporting year-on-year EBITDA growth for the quarter gone by after the pandemic-induced aberrations over the previous 2 quarters. For the month of December, India business has almost fully recovered, having registered 79% of the pre-COVID revenues in the month of September. This has been possible due to the sustained momentum generated across units led by the NCR units and interland regions as underscored in our previous call as well. In a very heartening development, you may have noticed in our latest investor presentations, our 2 NCR units have generated a positive EBITDA for the last quarter as compared to minus 9.6% reported in the previous quarter despite the significant impact in international business. Going forward, this definitely augurs well for us as these newer units have significant growth runway and holds us in good stead by starting to contribute to the group profitability. As highlighted in our last earnings call, the 3 flagship centers do continue to lag the other units in terms of business revival, while still growing from 65% of pre-COVID revenues as reported in September to 89% for the month of December. As a result, the profitability of the India business remains impacted given the significant erosion in higher yield international patient mix, 11.2% of Indian business in Q3 FY '20 to 2.93% in Q3 FY '21; as well as our high-end cardiac sciences, 40% of Indian business in Q3 FY '20 to 30.3% in Q3 FY '21 and -- based on the elective work. With the operating leverage ingrained in the system, specifically the flagship centers, we remain hopeful about the profitability tracing back to normalcy over a period of time with the sentiments improving all around. Our overseas unit at Cayman Islands having fully recovered its pre-COVID revenues in the month of June [indiscernible] itself, continuing its strong growth trajectory delivered a 24.8% year-on-year growth in operating revenues at USD 19.1 million, resulting in more than doubling its EBITDA for the period to USD 8.1 million. [ Backed ] by the performance of our maiden international venture and with know-how gain through our experience on the ground, we remain keen to explore such value-accretive opportunities in the island as well as neighboring regions. Moving on with our focus on improving clinical outcomes through digital initiatives, we are pleased with the response to our in-house [ dot ] AADI application, which stands for Athma Application for Doctor Insights, that it has received from the doctors that are -- at all our units and especially our Health City Bangalore campus. And have rolled out further product updates on the same. This application allows doctors to access detailed patient records such as medical reports, real-time data from any location seamlessly, thus ensuring better patient care. On the clinical front, our focus on providing highest quality of quaternary care is reflected in some of the highlights of this quarter, which are amongst the first such cases in our part of the world. The Mazumdar Shaw Medical Centre and the Health City campus in Bangalore operated on a rare case of bifurcation aneurysms of the brain using an endovascular contour device. This is the first case in India and the third case in Asia. The Narayana Superspeciality Hospital in Howrah treated a very complex cardiac procedure for -- called the transposition of great arteries through a pulmonary root translocations. The Children's Hospital in Mumbai successfully performed a fetal surgery for an intrauterine PU valve fulguration, that is an anomaly in the urinary tract on a 20-week pregnant woman, on the fetus. The Narayana Multispeciality Jaipur unit also did a very rare cardiac procedure on a case called -- with dextrocardia with Tetralogy, which is the reverse positions of body organs. The Children's Hospital in Mumbai started the liver transplant program in December, and the Narayana Superspeciality Hospital in Raipur has done some very complex onco surgeries in the last quarter. On the policy front, starting 1st December 2020, West Bengal government has extended the state government-sponsored Swasthya Sathi health insurance scheme of INR 5 lakhs per annum cover per family for secondary and tertiary care-related in inpatient treatments to cover the entire population of the state. Given our meaningful share of business from that region, we continue to follow the developments and thus try to assess the impact of the same on the region's profitability with recalibration measures if needed. Separately, with the union budget being presented last week, we are pleased by the central government's emphasis on health and wellbeing, as reflected in the increased allocation towards the sector, with total proposed outlay of INR 2.23 lakh crores, an increase of 137% over the budget spending of last year. The enhanced allocation, along with the plan to look at health care holistically, including nutrition, sanitation, clean drinking water and pollution control, certainly augur well for the country. This initiative is aimed at developing capacities of the primary, secondary and tertiary care health systems, and we hope that the government will partner with private health care operators to drive efficiencies in the system and strengthen delivery of health care services across the country. Looking ahead, we believe that the health care sector is at an inflection point with the effective implementation of the vaccine rollout program, holding the key for expediting the business revival. At the same time, we remain vigilant of the developments taking place in other countries with respect to new strains of virus to prepare ourselves accordingly. Thank you.
Aman, we can now open up the question-answer floor.
[Operator Instructions] The first question is from the line of [ Divyansh Kalra ].
Sir, so can you repeat the EBITDA from [indiscernible]?
Sorry, [ Divyansh ], what's your question?
Yes. Sir, can you repeat the EBITDA from Cayman business and also [indiscernible] Dr. Rupert [indiscernible]?
The reported EBITDA was $8.1 million for the quarter, that is post Ind AS. And adjusting for $450,000 Ind AS impact, it's -- on a pre-Ind AS basis, it's $7.68 million.
Sir, just one more suggestion. So if you could add the EBITDA of Cayman's in the presentation next time that would be very helpful.
It was [indiscernible].
The next question is from the line of Charulata Gaidhani from Dalal & Broacha.
Yes. Am I audible?
Yes, ma'am. Your audible.
Yes, Charu, you are.
Okay. Yes. My question pertains to Cayman Islands. Cayman Islands you said has an EBITDA of 8.1% -- or $8.1 million, which translates to a 42% EBITDA margin. So even in the last quarter, it was above 40%. So is this a new profitability norm that will continue going forward?
Yes. Charu, this is Viren here. I think maybe you or someone else had asked pretty much the same question last quarter and the quarter before. Cayman right now is under lockdown, which means they aren't allowing international patients coming in nor are they allowing the local patients to go out. So what happened is that we had unprecedented inflow of very relatively high net worth Caymanian patients into our facilities who historically were going to Miami, Houston, New York for medical care. These are in a lot of the primary, secondary care and OPD specialties that we historically never focused on. When the pandemic lifts and when flight starts to resume, definitely we can expect some percentage, maybe not all, but some percentage of them will definitely go back to the U.S. because that's where their families are, that's where they have much more brand [ conscious ]. But a significant number will continue to get treated at ours. In recognition of that, we are making investments in the primary care and have started opening up clinics closer to the city, getting more into these departments that we've seen inflows from patients. So we will be able to retain some of that. We cannot promise that we can retain all once the borders reopen.
Right. Yes, I do recall of this response. So second query is on the Delhi NCR. Delhi NCR has seen a major improvement in the current quarter. What would be the factors that drive this? And do you think this will continue going forward?
So there's 2 different things. For Dharamshila, it is a very strong onco hospital. And oncology was one of the departments what we saw, even here in COVID, it was pretty unrestricted. And patients did come and they did not postpone their treatment. Gurugram is also a very strong oncology hospital. And I think during this time, a lot more awareness came for the hospital because of the COVID volume and patients started coming to us from other departments. So that led to quite a turnaround for the Gurugram hospital as well and was able to achieve the breakeven volumes much sooner than we had anticipated. Unfortunately, over the past couple of weeks, as you know, with all these border closures and the farmer agitations. Definitely, we've seen the volumes being affected for patients that are not from Delhi, because we get a lot of patients internationally as well as from the neighboring states. So it may dip again slightly, but we don't think it will dip so much that it will take it back to the old numbers that we were looking at. And so I would say maybe here or there, we can expect slightly negative to slightly positive for the remaining quarter. But I wouldn't say that it would go remarkably much better than where we are right now for this next Jan, Feb, March.
The next question is from the line of Shantanu Basu from SMIFS Limited. As there's no response, we will move to the next question that is from the line of Nitin Agarwal from DAM Capital.
There has been some development on the -- in West Bengal regarding compulsory health provision by the government or health insurance by the government. Can you just help us understand a little bit more on the development to -- into or what implications does it have on our business and plus our capacity expansion plans in the region now?
She has -- the Chief Minister has announced the schemes -- Swasthya Sathi scheme for -- irrespective of whether they are below the poverty line or above the poverty line for the entire population of the state. So this is in line with the run-up to the elections, and they are in the process of issuing cards and things like that. But we have not seen any dramatic increase in the number of patients with these kinds of cardholders seeking care across our facility. But this -- considering that this is an announcement by the government, we are keeping you informed and we are closely seeing how this is panning out.
The impact, I would say, if it gets executed exactly in the way they have described it, which is technically every person has access -- every person of West Bengal has access of this scheme, the short term will be quite painful because at least from an operations perspective, we simply don't have that many beds allocated to the scheme when everyone would want to occupy that. So I would say short-term challenges, definitely. But long term, what happens? It will be the same thing that we saw in other states, in Karnataka, for example, which did roll out an APL scheme. And we were initially very terrified, but then people started realizing that it doesn't pay enough, you don't get access to the best beds and timely treatment and there are long waiting list. And the government also realized they didn't have enough money to pay everyone, so they also started going slow. So I would say that this may be having a short-term impact, but long-term, it will get normalized.
And Viren, the attach point was Calcutta region, because of our capacity constraint, has been a target area of acquisition for us or inorganic growth for us. So I mean does this [ improve ] -- each development put us on a hold with respect to some of those plans until clarity emerges for -- I presume there will have impact on the asset valuation in the region, right? Or how does it work now in your assessment?
Well, I wish it would impact the asset assessment, it's not really translated on the ground. See, our commitment to West Bengal has been for the past 20 years and for the next 20 years as well and even longer than that. So it doesn't change our appetite for expansion over there. And we're looking at multiple opportunities, both greenfield and brownfield, as we've indicated earlier. Whatever we're able to conclude and as soon a manner as possible, we would. This decision does not impact our interest in the region.
Okay. Perfect. And secondly, you did mention in your opening comments about exploring other opportunities similar to the Cayman. So can you just elaborate a little bit on that?
We were looking at clinics. See, the thing is our facility is located in the east end of the island, which is around 40-, 45-minute drive from where normal people live. And a lot of them have expressed that for every little thing, they hate driving so far. And so we took up space in one of the most prominent shopping malls of the country, and we set up clinics over there. We'll be running one more clinic in a small island called Cayman Brac, which is a very small population, but they are also on a primary care side. So on those sorts of things, we will be exploring opening up on the retail health care side. As and when the demand presents itself to look at something more significant, we would also explore that.
And if I can squeeze in one last one. On your flagship hospitals, how has -- has there been improvement in the footfalls as we go through -- as we -- sorry, in January and Feb versus the previous quarter in Bangalore, in -- especially in Bangalore, the 2 main hospitals in Bangalore?
Yes. See OPD footfalls have gradually returned back to almost normal. And we've seen good growth in almost all the specialties, including the cardiac sciences and our flagships.
The next question is from the line of Kunal Mehta from Vallum India.
The first question I have...
Kunal, you are not audible clearly?
Yes. Is it better now? Can you hear me now?
Yes.
I'm audible? Yes. So I wanted to understand the status as it stands as on today with respect to medical tourism? Because I think we derive -- we probably should derive a good portion of our business from patients coming from Bangladesh to our units in Kolkata and international patients flying down to Delhi, which is -- flying down to Delhi and Mumbai. So just as on today, could you please [indiscernible] recovery?
The recovery has not been great. It's still -- even though some flights have opened, the frequency of the flying has not really increased. And international patients mostly come to India on elective cases. It's very rare that emergency cases get pushed to India. Bulk of our patients do come from Bangladesh. And there, again, the frequency of the flights hasn't resumed. But as the borders open and there are very few flights are coming, so we're seeing some traction buildup. But yes, it hasn't really happened yet. And we're hoping that if the government goes to some air bubble concept and starts increasing the frequency of flights that we should start to normalize that. In the meantime, we're trying more on-the-ground efforts. Obviously, a lot of that is hampered by the fact that our people also cannot get there easily either. So this is just one thing that continues to be challenging, that in the short term, we are compensating through enhanced domestic activities.
Understood. That's really helpful. The second thing I wanted to understand what was with respect to the onco block at Cayman. So we were in the process of setting up this onco block and we have pretty good expectations from this investment. So could you please give us the status on the onco block for Cayman?
Yes. There as they understand being a lot more regulated country, the things such as planning permission and so on does take a bit longer. The other one is, we definitely did take a pause. We were supposed to start this construction last year, but because the COVID pandemic and the travel shutdown, we had paused, not a wholly about around 6, 7 months. And then once we restarted, the whole thing has to start again from scratch with getting the permission and so on.So we're pretty confident that it should happen in the next 2 to 3 months. We've identified the contractor, we finalized the drawings and so on. And the pricing and negotiate with the equipment manufacturers. So again, it will come up sooner than we hope.
Sure. So sir, from now on, I think, are we looking for a time line of around, let's say, 18 months to commercialize this onco block?
It will be much sooner than that. It's just a cancer block, so it's not -- it's just a bunker and a few things. So it won't take 18 months. [ It will probably be ] about a year. But yes, once you include associated delays and, god forbid, any kind of issue happens with the shutdown tomorrow again, so I think it can give us a good buffer for 18 months. But yes, 12 to 18 months is a reasonable time line.
Got it. Just one last question from my end. I wanted to understand the status on the capacity expansion in your 3 flagship units at Kolkata. Because I think -- of course, presently, I think capacity [ would be fine. But I think with the unit ], we were anyway short of capacity and we were trying to use an adjacent building for adding a few operational beds. I just wanted to understand what is the status there? Because I think 8, 9 months down the line, I think that capacity would be valuable to us. I just wanted to understand the in strategy there.
Yes. This, again, is still very much in discussion. We've spoken with a lot of the building owners and chai shop owners around the place to allow us to buy the land, demolish it and turn it into capacity for us. It -- I mean, we have to admit, like in this part, we've -- it's been quite slow. And we're as frustrated that we're not able to get it done sooner. But as far as capacity addition in Kolkata proper, we have another hospital that has space and we will be expanding over there. But yes, it doesn't solve the capacity issue of our flagship. And even in that, we have been frustrated by how difficult it is to acquire land in that area.
The next question is from the line of Milind Karmarkar from Dalal & Broacha.
So can you hear me?
Yes.
Yes, we can.
Okay. Yes. So my question was basically if you could elaborate more on what we are doing on the digital side? Because after -- especially after COVID, a lot of things are moving to digital. There is a -- I wouldn't say competitor, but another hospital which basically focuses on oncology. And they are doing a lot -- they have a centralized sort of center where all the CT scans and other things are sent, which are then digitally where the experts sort of view them. So I just wanted to understand -- because we were doing something similar, I think, in MP or Chhattisgarh. So I just wanted to know what we are doing on the digital front. Because my belief is that going forward, especially for expansion, digital could be a big tool.
Thank you for asking me my favorite question of all. See, 100%, you're right. I think COVID time has really taught us that -- so for example, we built in 2 weeks an app that allows the patient to see the doctor virtually and for us to collect money. And that is simply because for the past 2 years, we have invested in a very strong team, who is able to very quickly iterate on the ground and be able to build tools that allow us to improve revenue, reduce our cost, improve the output. And yes, I mean, this is a huge investment that touches upon multiple, multiple aspects. So the thing what you're describing, we think about centrally looking at the radiology, is actually relatively old technology. It's not -- I mean, there's something called PACS, which are [indiscernible] and we've had that for years now. But it's not so much that you have the digital tools, it's what you're able to do with it. And by centralizing, we're able to run a very central radiology team. So you don't need in small towns to keep people. But that's just the first level of that. So we spoke in the earlier thing about creating an app called AADI. AADI is -- if I have to use a fancy term, it's like a Slack for doctors. So now because of COVID, doctors, one, they're very hesitant of getting into the ICUs. Now what is the doctor's job in the ICU? You go, you evaluate the patient, you look at a lot of the monitors and you make a decision, okay, increase some medicine or you make some changes or you prescribe a scan. Now what we did, we spent a large amount of money getting all their information digitized. So what that does is it can real-time push all the information to their home. So that means the doctor can be on the other side of the glass. He doesn't need to be in front of the patient. If he does need to be in front of the patient, he can be at home, he can be in a different town, he can be a different country also. And so now we have created these coordinated care teams for managing patients. And this, again, becomes very -- it's initially a little slow to roll out because doctors still have to get used to the way they work, but it will change the way how our patients are being managed and this is -- the potential that's available in the hospital. Now we don't have too many apps yet that patients can use and the things that a lot of the start-ups focus on, on wellness and weight loss and book appointments. We have all that, but it's not as grand-looking. Like for us, we're focusing on money on the table. And that is all the efficiencies that are there in the hospital that can be addressed with digitization. And those are the ones we're addressing because that we see as this final lever that we can have when we run out of capacity, when there's a lot of difficulty in growing the top line and getting more beds, so these are the efficiencies that we'll be using to -- addressing to drive further performance.
Okay. So basically, we are investing in technology. We are -- especially the digital technology, so that we are future-ready, let me put it that way. And it definitely would be extremely cost-effective over a longer period of time. Am I right in assuming that?
Yes, absolutely. So our IT spending right now is 3% of our top line. This is coming from at the time when we were spending only 1%, and we are very proud to spend only 1% of top line on IT. But IT is an enabler, as we say. And we expect this number will easily go up to 5% in the near future, the only activities that will deliver very tangible results.
The next question is from the line of [ Chirag Kacharia ] from -- as an individual investor.
Hello?
Yes, we can hear you.
Am I audible?
Yes, we can hear you.
Yes. Sir, I have a few question. The first is on the cost front. Like is there any room to reduce the cost on fixed or on a variable basis going forward from the lessons we learned in last 2 or 3 quarters post pandemic that going forward that this cost will not -- more required or [ such that ]?
Yes. No, that's a very good question. One of the first things that we did in the pandemic startup was a cost cutting, where we addressed on the salary front, but that was a very limited exercise we were able to do only because the patient flow simply was not there. Now that the patient volume has come back to normal, the corresponding spending on the salaries and the manpower has gone up. But one of the things we realize -- because of this work from home, we realize we can run shared services in a lot of the support functions like HR, finance, IT.
[indiscernible] support? Okay.
Yes. So what that means is we can run centralized teams. So every unit may not necessarily have to have a duplication team, we can start sharing resources. But that is something more long term. We will start moving towards the system of being able to do more activities with fewer and fewer people, and they'll all be able to work remotely. So that is something manpower side what savings we can get. Unfortunately, there are some activities on the cost side, which will permanently be high. And that is precisely on the supply chain side. Because of the supply chain disruptions, what we had, because of the rising import duties, because they changed duties and structures there, it will take a very long time for us to go back down in terms of the supply chain and the purchasing spend for the same amount of revenue than what we had earlier. Because there's too much ambiguity right now about supply chain disruption, we don't want to be too lean on inventory and tomorrow face any kind of stock-out situation. So until the overall macro situation normalizes, I would say, our cost base on medicines and consumables and all the supplies will be a little higher than normal. But essentially...
Sir, just one more clarification on the supply chain side. Is it due to the China -- we are restricting China import and we require to source from other sources, [indiscernible] we require more cost or it is something different you're talking?
Yes. I mean it's part of it. See, the fact is you have to realize China is integral to all the world supply chain, even Indian companies which provide the finished product depend on a lot of raw material and input from China. As these things become more difficult -- it doesn't mean it's impossible, it just means more friction into the system and the friction translates to a little higher cost for us. So a lot of the parts, a lot of the accessories, material, those prices start to go up. But even regardless of the China thing, because flights are so expensive now because domestic airlines are not traveling. So all kinds of air freight, price has gone up. Because the world economy is slowing down a little bit, there are not that much cargo containers going back and forth. So things like that, generally in a slowdown, you expect the supply chain cost to go up.
Okay. Sir, can you quantify, like, on the cost front, as you mentioned, several initiatives which you've taken will benefit us in the long run. Currently, what proportion of our cost structure are those costs?
Give me one second. The proportion -- yes.
Probably, we can come back to you on that. It's very difficult for us to come with the exact answer. So it's not -- I'm not talking -- we have not moved the needle 5%, 10%, 15% here or there. These are not big numbers. These are just -- there are many things that can be addressed. And so for that, I think we'll come with a more granular number, either we come back to you or in the next investor call, we can probably start reporting on the impact of our digital initiatives and cost-saving measures.
Okay, sir. Sir, my second question, like government allocation in budget for health care and pharma is continuously in increasing trend since last couple of years. So from next 3 to 5 years' point of view, post this pandemic inclusion to this topic, as an entrepreneur, what opportunity and threat would you feel that will come in our [ journey ]?
See, any allocation the government does for health care is always a good thing because you're increasing the overall demand for a service. If government builds more medical colleges, it is good because more doctors are there in the system. If the government builds more hospitals, that is also good because more people start accessing health care. If government starts spending money on providing treatment for the poor people, that is also good because some of that money can come directly to us. So I would say that there are -- any time the government increases spending, it is always a good thing for the sector that it is spending money on. That goes without question. But if you ask me, quantum-wise, if you say INR 1 lakh crore increase in spending, how much of that will come to NH? That, I don't know, because it will -- a lot will depend on what programs exactly they are targeting and which areas they're looking at. But it's definitely a positive thing. I will definitely say this is not something that just because government is spending more on government hospital that it crowds our private investments. No, that is a very short-term way of thinking about it. The most spending there is in health care, in India, the better it is for all of us because then it means you're growing the overall market. So the number of doctors in India increased, the number of companies that are supplying to Indian hospitals start to do more business and that improves our own cost of procurement and so on. So I'll say, yes, the long-term effects, either way, are good. Whether it goes to private sector or not is not that different.
The next question is a follow-up question from the line of [ Divyansh Kalra ] from Perpetuity Ventures.
Sir, I wanted to understand what proportion of our revenues from hospitals are outpatient revenue, that would include dedicated facilities or oncology, right?
[ Divyansh ], we don't have that figure readily available at this stage. So we can't...
Rough estimate. Rough estimate.
I mean, let me get back to you with the exact details rather than just giving you a number out of thin air. So while we might have some rough estimate, but I would want to be absolutely sure about it and come back to you when -- if you can touch base with us offline on this.
Okay. Okay. Okay. So last one thing -- one more thing. Sir, so when we calculate the ARPOB numbers, so the outpatient revenue would be included in that, right?
Yes, it's a total revenue divided by the inpatient occupied beds.
[Operator Instructions] The next question is from the line of Chinmaya Vadali from Singular Capital.
I mean in addition to the -- in addition to some of the behavioral changes that have been outlined in the previous questions, how do you see the whole hospital -- I mean, the whole hospital-patient relationship evolving in the post-COVID scenario? Where do you -- what are other fundamental changes that you anticipate? And how are you prepared for that?
[indiscernible]
And the one biggest difference what we noticed is that now patients are willing to pay for being served online. Previously, that really was not the case. We've been running telemedicine for nearly a decade before COVID happened. But we were doing it for free, and the uptick really was not there. But with COVID, the biggest behavioral shift we saw people willing to pay for health care online. The start-ups had been doing it in a very limited way. But most of the services they offered were free or of extremely low quality. But this was the first time patients were willing to pay and hospitals of all sizes embraced it in wholeheartedly. So I'd say, yes, the biggest shift for us is a lot of the outpatient-type services, a lot of the consultations were able to move online. And it has dipped. Definitely, I wouldn't say that we're at a similar trend what we were pre-pandemic, because someone who is thinking rather than drive to the hospital, I'll just do it online. Now he says, okay, now I can the drive and get everything down at one go. But we believe that this will continue to sustain and will grow from here because once you let the genie out of the bottle, it opens up the opportunity for us to start looking at many, many more services that can be delivered. Not just outpatient, not of the post-op follow-up, physiotherapy, wellness, chronic care management, even diabetes management, which right now operates mostly at the fringes, even in advanced countries, not just in India. See, in India, we always have a digital literacy gap. And so what will happen with digital literacy gap is that people will not be so comfortable dealing with these transactions online. But directionally, this is the way that our organization as well as most large health care organization are looking, that is moving a lot most services direct to the patient and going -- not going through intermediaries. And that's why our investment in a lot of digital infrastructure was done with the idea that we'll be able to start offering more and more of these ourselves rather than being reliant on third-party developers to give us solutions that we'll have to go through and they'll charge a tax on that. So yes, that, I would say, is one of the biggest behavioral shifts of this post-COVID situation.
Sir, corollary, would you expect more marketing costs to access this large -- to access -- or convert this larger footprint into new revenues?
On paper, you would be right, provided I was building up a separate digital health care vertical, which right now, we still have a bit of a ways to go to build up the robust platform that will able to aggressively go up to patients for only pushing digital business. Unfortunately, there are 2 problems with that. Problem number one, what I said earlier about the digital literacy, people are still not fully comfortable. And see, there are always the digitally native -- the people like you and me who are happy transacting online. But you and I don't represent more than 1% to 3% of the whole country. 97% of the people, people that are old up that just bought their first smartphone in the past couple of months, they will always be hesitant about transacting in that way. So we don't believe the market is right. Two is, and I'm sure this part you know on just the larger thing, a lot of the market on digital advertising has been spoiled by a lot of overfunded, highly valued startups that have really bid up the prices of the Facebook impressions and Google Clicks and so on. So the -- there's a classic thing, right, the CAT versus LTV of a patient, which talks about how much it cost to acquire this business versus how much value it provides. It is unfortunately, still extremely skewed towards acquisition costs. So if I want to make the managers at Google and Facebook very happy, I could launch a very big advertising campaign. But as a responsible company that's dealing with public funding, I'd very much wait until a scenario where either acquisition cost comes down or we build up organic impressions in such a way that it doesn't cost me too much, and I don't need to spend too much money acquiring every incremental patients. That is still, I'd say, a couple of months to a year away when that behavioral thing starts to tilt in our favor.
Do you also see more [indiscernible] that kind of payer profile changing going forward?
The audio is breaking.
Hello? Is it better now?
Yes. Can you just repeat that?
I was saying, do you also see change in payer profile with more patients going for insurance, really?
I mean we haven't seen it where we are. I mean, definitely, we have seen a lot more cash patients, but that's only because they're not that many international patients coming in. But as -- see, more insurance is always better. That definitely goes without saying more people with insurance cut means more people are ready to access. But I don't think it's changed in such large numbers that it is swinging the demographic profile of our hospital here, because our ratio is still pretty the same.
That's it.
But it will happen.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
A quick question on Cayman, Viren. What's our market share over there? And what's our current capacity utilization?
So Sameer, there's 2 ways to think about the, market share. One is, if you look at market share of -- you can hear us okay?
Yes, yes.
Okay. So market share of procedures done in Cayman, it will be massive. I mean depending on the kind of departments you're looking at, so for cardiac, oncology, a lot of advanced GI surgeons. So it would -- a procedure done in Cayman, it's easily 80%, 90%. Orthopedics, emergency, obstetrics are much less. I would say in a year from 30% to 40%. Given that we are 1 among 3 providers on the island, one of them being the government, 2 being private health care setups. But the overall market, if you say, if you have to compare the overall spend on the island of health care, and so that we did by taking how much money the government spends on health care and how much money is the private insurance company premium collected. If you go by that, we're not even 10% of the spend. So even though we're a huge share of money spent in Cayman by Caymanians, if you look at money spent by Caymanians on health, we're a small, small fraction. And that is something we're looking to much more aggressively go after in the coming years.
And the difference between the 2, Viren, is getting exported out is it?
Yes. Yes.
Okay. Okay. But this export was not happening last 3, 6 months, [ I would imagine. ] And it looks like within your capacity utilization on...
I'm sorry, sir, your audio is breaking. You are not audible clearly.
Is it better now?
It's still breaking, but I can understand you. Go ahead.
Okay. Sure. Yes. So Viren, the question was, it looks like your capacity utilization on the overall capacity [indiscernible] is still very low, maybe sub-50%. And for the last 6, 9 months, I would imagine that people were not obviously into traveling. So you're utilization has not gone up at all, no?
Yes. I'll give you an example, Sameer. See, in India, we are so pegged down to beds, bed utilization occupancy, and it could be because we're too stuck on a number that's easy to understand. And it is, I mean, for a hotel, occupancy is some of the best things that you can use to drive. But as we've been saying for many years now, our business is different. We shouldn't just purely be looking at occupancy. But unfortunately, we haven't found out what that perfect metric is. And that's why we try to do different combinations of things to tell you what utilization in hospitals looks like. I'll give you an example, Massachusetts General Hospital, okay, MGH, one of the biggest health providers in Boston, that is a 100-plus-year-old hospital, one of the best-known brands in the area. And this is a hospital with tremendous pedigree. And I've been there. If you walk past the side of the building, you'll be walking for 10 minutes and you still won't reach the other end of it. It is huge. It occupies a city block. And my brother was based in Boston, he asked how many beds does Mass Gen actually have? And it took a while for them to figure it out what the question was because they don't measure it on the number of beds. So they did some research, and they came back and said, yes, this hospital, which is the size of a city block, has 800 beds, which just completely blew our minds because they're not focused on the number of beds and inpatient. For them, it's just throughput, outpatient procedure rooms, linear accelerators, cath labs, just things that get patients in and out extremely quickly and huge number of clinics that can process those kind of procedures. So someone asked earlier, what percentage of your revenue comes from outpatient? And it's anywhere from 18% to 20% is what we sort of average out. And that's small. And that's true for all Indian hospitals. This is a number that we want to keep increasing because the one thing we noticed with Cayman was that our inpatient numbers may not grow that much, but outpatient, really did incredibly well over this time and people were not allowed to leave the country. So the capacity utilization, we want to start looking at more in terms of attracting more of the dollars that they spend on these daycare kind of procedures or on medicines or on these basic checkups that we've historically never really looked at because that also is a significant amount of spend in the western world and will soon be in India also.
Viren, this is very helpful. This is indeed a different view of how we should be thinking about your business. But coming back to the Cayman question that you are now looking at the top line, which has moved from $10 million to $15 million now to more like from $19 million to $20 million per quarter. So where does this number go over the next 4, 8, 12 quarters as we go forward?
It goes up. But how long it takes to go up? I would say, right now, with the business being as it is with no foreign patients coming in, we don't think the revenue number is going to grow appreciably for this next quarter that's there. It will go up a little bit because what happens over there during this Christmas, December time, people generally don't spend. So there's a bit of a lag, which they recover in Jan-Feb, so it'll go up a little bit. But until our oncology thing comes up, revenue will stagnate a bit. Once the oncology comes, it will grow again. We're doing a lot more stuff in clinics. So as the footfalls for that increase, the revenue will grow as well. But ultimately, it's waiting on us to make that next big jump in investment, which we hope to do at some point.
Okay. Fair enough. But Viren, if I were just to persist on just one last one. When do you think you can double this revenue, rough cut? Is it 4 years? 6 years? How do we see that?
I mean, Sameer, as much as I'd like to give you the answer right now and make your spreadsheets easier to do, we can't make your job that much -- that easy.
Okay. Fair enough. I'll let it be. So Viren, the second question here is, how do we think about the cash flows, both for Cayman and for India operations? And how -- consequently, how do we see the net debt as we go forward?
See, I think there has been, I would say, in the last couple of quarters, I think we had done not so good quarters with regard to the government as a payer. But with regard to insurance and other payers, I think we had quite a decent, I would say, collection profile, both in terms of the domestic operations and the overseas operations. In fact, in Cayman, our proportion of cash and insurance is quite high when compared to India. So from a -- I think this will hold good for the future, at least -- for at least another 12 to 18 months' time, I think this sort of a situation will continue. Beyond which, we need to see whether will there be any acceleration in the payouts from the government. Otherwise, from a cash flow perspective, I think we are able to manage free cash as a positive, maybe until such time we embark on any major inorganic initiatives. So the cash flow is quite healthy at this particular point of time.
So we expect net debt to remain more or less flat for next, whatever, 3, 4 quarters?
See, as -- see, like we -- in the last 6 to 9 months, I think our CapEx expenditures have been quite low, considering our normal run rate of CapEx. So considering the normal CapEx sort of, I think, what we used to have, I think we may be in a range, but it may not be a very significant increase in that even if it were to be.
Okay. Got it. And one final question with your permission. So for the flagship [ one Bangalore and one Calcutta ] facilities, how do we see the momentum build up here on? Is this a natural progression that over the next quarter or 2, they go back to pre-COVID levels? And what can help accelerate this?
A bit of both. One is a complete focus on the domestic business. And all of activities that are driving checkups, getting vaccinated, we're doing a lot of those awareness campaigns. Working with corporate types engagements. A lot of that will drive these daily footfalls. The other is that as the economy unlocks even more as people -- COVID cases keep coming down, people start to get the -- those sort of regular elective postponable procedures done now. And that requires a little bit of a mindset shift, and we've seen that happen a lot. But still, there are certain departments like orthopedics, for example, that really has not picked up in a big way for us, precisely because that is one thing that you can postpone indefinitely as long as you're willing not to travel anywhere, which most people are not doing anyway. So yes, I would say that will take the normal course of recovery. And a full recovery would take until the end of -- sometime in this coming quarter. Post that, a lot of the drivers of the growth will come from our planned CapEx expansion, capacity expansion, which we've been putting off. As Kesavan said, we've really restricted the amount of new medical equipment and upgrades that we're doing, which we will do. Plus, a lot of our hospitals are due for a bit of a refresh and we'll be changing the bed configuration, adding more private/semi-private rooms, doing up some executive suites, creating a more a nicer experience for patients that can pay a little bit. And those are kind of activities that will drive up the yield per bed for a lot of the flagship hospitals.
The next question is a follow-up question from the line of Charulata Gaidhani from Dalal & Broacha.
Yes. Okay. I had 2 questions. One on the doctor fees. Our doctor fees as a percentage to sales have come down over the last 3 quarters. Where do you see it bottoming up? And where do you see it, say, a year from now?
We had made a lot of structural changes in the -- as soon as the pandemic hit, wherever large minimum guarantees were given to doctors. But over a period of time, we've had multiple discussions and we have been constantly reworking on the professional fee structures. And wherever possible, we have made changes to that structures. So in line with that, we see some changes will have to be made, considering that a lot of units have started to do well. But overall, these structures will be changed to make it more appropriate for the given condition. So we'll see that it will be going up marginally, but we won't see a major hike in it.
Okay. So we could consider around 21% of sales as a norm for...
No, it'll [indiscernible] 24...
For your model, I think you can consider the pre-COVID levels, whatever percentage you had, I think that would be a much representative number to consider.
Okay. That is around 21% average.
No, no, no. If you look at it, the Q3 previous year number, this was like 24 percentage. So what Kesavan means by reverting back to that is not 21%, but more like 24 percentage.
Okay. Okay. Fine. And second, also the progress on Western India, especially the Mumbai hospital, how is it faring? And how do you see it going forward?[Technical Difficulty]
Charu, can you hear me?
Yes, we can hear you. [ Mr. Sarkar ] would like to add, yes.
Charu, your point on the doctor cost, as Kesavan was mentioning, for a normalized business plan perspective, you can assume reverting back to what it pre-COVID times, which was more at an aggregate level, like 24% for the India business. One of the reasons why it had come down was there was, as Viren mentioned previously, there has been some impact in terms of actions that we have taken on salary cuts and all. With the business now getting back to its original recovery and all, a lot of those are being phased out in terms of getting reverted back to what it used to be previously. So as much as we had taken some initiatives, as Dr. Rupert was mentioning, plus please as a base or premise -- base case premise, you should assume that there will be, if at all, an upwardly biased from the Q3 numbers as a steady-state run rate for the doctor cost as a percentage of revenue.
Okay. Right. And my question on the progress of the Mumbai hospital and where you see it going forward. I -- the oncology block in Mumbai?
We don't have any oncology plan in Mumbai. This is a children's hospital. And as such, we're doing BMT in a pretty big way.
Yes. These children don't -- are generally not subjected to radiation. So we will not have a comprehensive care in that context. But we will be doing the high-end hemato-oncology with the bone marrow transplant along with the major surgical oncology program as far as the oncology services there goes.While a lot of work has begun in the field of perinatology and higher-risk birthing, which we wanted to -- we have been planning to do because a lot of low birthweights and very high-risk pregnancies need a comprehensive group of pediatric specialists to take care of them, rather than being born somewhere else and then transport. So we've started the high-risk birthing as well in this hospital.
Okay. Great. And by when do you expect breakeven?
I think -- see, I think we have been consistently maintaining that it will take some time, being the child-only hospital. For this hospital to breakeven, I think we don't see this coming in the next few quarters at least.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Debangshu Sarkar for closing comments. Thank you, and over to you, sir.
Thank you, ladies and gentlemen, for your active participation. As mentioned previously, in case you have any further queries, please do follow-up with us and we will get in touch with you to try to address that to the best of our abilities. Thanks once again for your active participation on the call today, and look forward to such interactions in the future as well. Thank you.
Thank you very much. Ladies and gentlemen, on behalf of NH, we thank you for joining us. That concludes this session. You may now disconnect your lines. Thank you.