Narayana Hrudayalaya Ltd
NSE:NH
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 148.1
1 416.95
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Narayana Hrudayalaya Ltd
Earnings Call Analysis
Q3-2024 Analysis
Narayana Hrudayalaya Ltd
The company showcased a year-on-year revenue growth of 6.7%, with consolidated revenue reaching INR 2,036 million. However, this growth is juxtaposed with a quarter-on-quarter decline of 7.8%, which can be primarily attributed to seasonal fluctuations particularly due to festivities. A little dip was also seen in the EBITDA margin, narrowing down slightly from 25% to 24.7%. Despite these minor setbacks, the performance was bolstered by the Caribbean operations, specifically the units in Cayman with revenue up by 8.5% year-on-year, reaching USD 30.6 million. There is a cautious optimism being emitted by the firm, based upon the strong financial position articulated by a net cash situation of INR 0.25 billion and a negligible net debt-to-equity ratio - a promising sign for potential investors sighting the company's ability to fund expansions without heavily relying on borrowings.
The company's commitment to digitization and process enhancement is clear through tangible improvements in operational metrics - an 8% increase in lab throughput and a 3.3% reduction in laboratory turnaround time, thanks to the Athma platform. Clinical benchmarks boast significant status as well, as the Health City campus exhibited profound medical results, including numerous successful transplants and advanced robotic procedures. Mumbai's Children's Hospital marked a significant milestone in treating a complex pediatric case with a positive outcome. These achievements not only reflect the company's clinical prowess but also the potential for high patient satisfaction and retention.
The horizon seems bright with the anticipated commissioning of a new hospital in Cayman in the upcoming year. The imminent capital expenditures for the Bangalore and Kolkata projects are poised for a trajectory that will, over the next 2 to 3 years, signal the buildup of physical infrastructure. Furthermore, the company expressed intentions to expand capacity options, aligning with growth opportunities in these regions. With land already acquired in Kolkata and plans for Bangalore progressing, investors can look forward to the unfolding of a new chapter in the company's expansion tales.
The earning call discussed the recent procurement of an insurance license and the company's subsequent steps towards materializing the insurance business. Operational elements such as product finalization and technological infrastructure are currently being worked on, with the target to go live sometime next year. Initially focusing on Karnataka in Mysore, the plan is to gradually expand this service to other regions. Investors could find this venture appealing as it denotes both vertical expansion in healthcare services and potential new revenue streams.
The discussion shed light on a strategic shift towards daycare-oriented procedures, which is a growing trend in healthcare delivery. With recent acquisitions facilitating this shift, the company has managed to maintain a high level of bed utilization without needing to forego patient treatment due to inpatient bed constraints. This shift is also seen in the incline of the Average Revenue Per Occupied Bed (ARPOB), which rose despite a decline in discharge numbers - a testament to improved payer mix and operational efficiencies. As the company leverages digital initiatives and operational efficiencies to de-bottleneck capacities, investors should consider how this may bolster patient service capabilities.
The leadership team conveyed hopes of a strong recovery in the forthcoming quarter, aiming to get closer to the business targets. They pointed out that the previous quarter's numbers were influenced by seasonality, with no structural issues impeding the Cayman Island unit's performance. By analyzing the Cayman unit's revenue per patient and other operational metrics over a longer period, like the last eight quarters, it's evident that the company is gradually taking on more complicated and revenue-dense procedures, thereby creating potential for increased profitability in the future.
You don't have any saved screeners yet
Good afternoon, everyone. My name is Nishant Singh. I head the Investor Relations function at Narayana Hrudayalaya. I welcome you all to the quarter 3 FY '24 earnings call of the company. To discuss our performance and address all your queries case today, we also have with us Mr. Viren Shetty, our Vice Chairman; Dr. Emmanuel Rupert, our CEO and MD; Ms. Sandhya Jayaraman, our Group CFO; Mr. Venkatesh, our Group COO; Dr. Anesh Shetty, MD of our overseas subsidiary HCCI; Mr. Ravi Vishwanath, who is the CEO of NHIC; and [ Vivek Agrawal, ] Senior Manager in the IR function.
We hope you have gone through the investor collaterals, which have been uploaded on the stock exchanges as well as on our website. As usual, before we proceed with this call, we would like to remind everyone that the call is being recorded and the transcript of the same will shortly be made available on our website as well as on the stock exchange at a later 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. Post the call, should you have any further queries, please do not hesitate to get in touch with us. We would like to address them to the best of our ability.
With that now, I would like to hand over the call to Dr. Rupert.
Good evening, everyone. I warmly welcome you all to the Quarter 3 FY '21 Earnings Call Conference of Narayana Hrudayalaya Limited. After a robust Q3, the third quarter of fiscal year delivered steady performance across our units. Consolidated revenue for the current quarter stood at INR 2,036 million, reflecting a growth of 6.7% year-on-year and minus 7.8% quarter-on-quarter. NHS generated consolidated EBITDA of INR 2,968 million in quarter 3 FY '24 at a margin of 24.7% against 25% in quarter 2 FY '24. The quarter-on-quarter growth was impacted on account of seasonal factors related to festivities in the current quarter.
Our Cayman units the HCCI as well as the EICL continued to deliver strong business performance with a quarterly revenue of USD 30.6 million, a year-on-year growth of 8.5%. We are confident that our Caribbean business will continue to grow through strategic initiatives and investments.
The balance sheet and liquidity profile at the group level remained strong with group cash and liquidity investments of over INR 10.39 billion against a gross borrowing of INR 10.14 billion, resulting in a net cash position of INR 0.25 billion as of 31st December 2023. Our net debt-to-equity ratio now stands at minus 0.01 giving us sufficient room to fund our expansion through a mix of borrowing and internal accruals. We have incurred capital outlay of close to INR 5 billion until the December quarter and are on track to spend the balance amount in the remaining quarter of the fiscal year.
On the clinical front, the Health City campus successfully performed 27 organ transplants, 44 bone marrow transplants, 90-plus robotic procedures, 60-plus robotic ortho procedures and 2 very rare renal transplants in patients with nephrocalcinosis, which is a genetic disorder. The Children's Hospital in Mumbai successfully treated a child with super-refractory status epilepticus that is convulsions continuously happening on this child, which had an expected disability of 80% or a mortality of 50%. The patient recovered through a combination of medical management and a procedure, which resulted in a recovery without any disability.
Our focus on digitization and business transformation continues to lead to significant benefits throughout the NH system. We have seen an 8% quarter-on-quarter increase in throughput and a 3.3% reduction in turnaround time across NH labs because of the initiatives taken in our Athma platform. Our doctor app called AADI has helped save 2,500 surgeon hours annually with digital OT nodes. Our new app for nurses called Namah has saved 83 nursing hours due to digital handover process in the first month at the HCCI campus. Its India launch will be in February. We just launched that in the Health City campus. And in our other tech initiatives, our OPD paper reduction has reduced by 22% in this quarter, and there has been 75% EMR adoption in OPD across the group.
Our recent venture, the Narayana Health Integrated Care continues to perform well despite a seasonally weak quarter. Revenue for the quarter has crossed INR 53 million with more than 42,000 patient transactions. We will continue to grow this business and serve our customers with a clear focus for improving their health outcomes. We continue to upgrade our clinical and nonclinical operations across the group, transform the patient service levels, increase our throughput with more capacity, invest in more digital patient outreach channels and improve our operational efficiency.
We are reasonably on track on our ESG commitments and continue to focus on creating meaningful social impact in addition to pursuing our environmental goals and upholding the highest standards of governance. We are simultaneously pursuing organic and inorganic growth opportunities both in India and overseas that will derive synergies from our existing operations, maximize value for all our stakeholders while keeping a close watch on the return on capital.
Thank you, and I hand over to Nishant.
[Operator Instructions] [ Prithvi, ] please go ahead.
Sir, my first question is on the domestic business. Compared to the previous quarters, the growth in revenue for domestic has been quite low. So just wanted to understand what expense this low growth in this quarter?
Yes. See, this quarter, like the routine Q3s are always affected by seasonality impact. But our north and west regions had, had a higher seasonality impact than expected. There is some underperformance in Gurugram, which we are working on. But the major impact has come from Jaipur due to change in the structure of reimbursement for medical management of the RGHS which is the state scheme. It has become unviable for us to service that business. But the association of hospitals are approaching the government for renegotiation to be started in 3 months.
We've also taken a conscious effort to improve our payer mix, which is a cash and insurance, which has gone higher by 2%. Schemes have come down by 2%. It will take some more time for the same capacity to get filled up by higher paying customers. The improvement will show over a period of time. But the positive thing is, this is reflecting in our improved margin profile despite a difficult quarter. Also, this payer mix rationalization is an effort to not carry large corpus of unpaid bills and to have a better handling of our cash flows as we get into this election year plus we have exited M. S. Ramaiah and Bellary contracts to improve our focus on our strategic focus. The impact of MSR also has some bearing on this, but not a major thing, which we are confident of overcoming in the coming quarters.
Could you quantify the impact from the Jaipur Hospital?
We are not specifically sharing information relating to individual hospitals. You can see the overall north number. north has 3 units, Gurugram, Jaipur and Dharamshila, which are predominant. Now if you see that Dharamshila has been reasonably okay in terms of performance. So the underperformance in north has largely come from Gurugram and from Jaipur, most from Jaipur, less from Gurugram. So that should give you a broad idea on the impact of the Jaipur unit.
And just one question on the CapEx. Can you give a time line for the new hospital in Cayman and then also the greenfield and brownfield projects in Bangalore and Kolkata?
The CapEx for the unit in Cayman is almost complete. By first half of next year, we will be able to commission the hospital. Bangalore and Kolkata units will take 2 to 3 years cycle. We have to managed to acquire the land in Kolkata. We already have land in Bangalore. So we have now applied for permissions to build in Bangalore. So all of it put together, I think in another 2 to 3 years, you will see a CapEx buildup on all of these units. We are also looking at additional capacity options in Bangalore and Kolkata and more growth options. So therefore, as and when we have those opportunities materializing, we will be able to share more details with you.
Just a bookkeeping question. What is the revenue and EBITDA number for the new hospitals in this quarter?
Yes, our new hospitals, as I said, have also suffered due to seasonality impact more than our flagship. On a combined level, their EBITDA is around 4% against 7% in Q2, with Dharamshila performing the best. We're hoping that the last quarter will see a strong recovery, and we'll be able to close the business to -- we'll be able to get closer to our target for the next 2 quarters.
Sir. Hello?
Yes, Arvind. Please go ahead.
What about your insurance business?
Ravi, do you want to answer about the insurance?
Yes. You got the right...
This is Ravi Vishwanath. We received the license in early January...
Hello?
I would request others just to be on mute.
Yes. We received the license in early January and we are now in the process of putting together, finalizing the product, finalizing technology, the regulatory policies, et cetera. And as soon as those are in place, we would go live.
Okay. When you are going to start it? [Foreign Language] tentatively, when you are going to start it?
We expect to go live sometime next year. And as soon as these -- as you would imagine, there are many things that need to be put in place. And as soon as those are in place, the base will go live sometime next year.
Okay. I meant to say you're going to start Pan-India or at Bangalore only?
We will initially start in Karnataka in Mysore to start with. And over time, as we build our experience and our knowledge, we will expand into other geographies.
Yes, thanks, Arvind. Yes, Rishi. Can you go ahead with your question, please?
Yes. So I had a few questions. So the first one, when I look at your Cayman IPD ARPU, which is basically I'm just dividing Cayman ARPP by the average loss that you all have of around 9 days out there. I see that it's kind of dropped versus last year. So could you explain what's happening there? Why is your Cayman ARPOB for IPD business going down?
Hi, Rishi. Thank you for the question. If you actually look at the investor presentation, we give you the exact numbers split up into OP and IP in Slide 10, operational review, Cayman Islands. So I think the last quarter was an unseasonably high quarter. In Cayman, our recommendation always is to look at 3 or 4 quarters for any metric to get a better sense of the direction these things are heading in because of the low base effect in terms of volumes. A few large discharges a few complicated cases can skew things either which way. So we recommend looking at more of 3 or 4 quarters for any metric. And if you go by that, there isn't really any significant change if you think about it.
Okay. So basically, what I'm looking at is Q1, Q2, Q3, right? So Q1, you all were better off versus Q1 FY '23. Q2, Q3, you'll have been -- you all have seen a 10% decline. So is it probably seasonality and nothing structural change there?
No, definitely nothing structural. In fact, even if you -- a 10% decline or increase for that matter in this metric really wouldn't concern us too much quarter-on-quarter. More or less, if you look at the, say, the last 8 quarters or so, that gives you a trend of a gradual uptake as and when we are taking on more complicated patients. And this is -- it's nothing something -- it's not something unusual for us to see these minor variations up and down.
Great. And just a bookkeeping question on Cayman. What's the ALOS for this quarter? I think you all have forgotten to report it for Cayman this quarter.
Well, no, that was a conscious call. I think in Cayman, we've decided that, that's not a relevant metric to talk about. I mean one gets a sense of the direction we're heading in because of the number of discharges, revenue per patient, OP and IP as well as our total revenues and any other information that can be there. We have sufficient capacity in the hospital. That isn't a constraint for us to grow, especially with the new hospital being commissioned in a few months as well. So we felt that, that was not needed. But we're happy to answer any question you have for which you need that information.
Yes. So basically, we used to see how much bed utilization you all are at despite your daycare procedures not being counted in that. The bed is not free if the IPD patient is staying there for 9 days. So just to get a hold of that understanding. That's why I was asking for ALOS.
Sure. Yes, I can answer that. So I think we have moved more towards daycare-oriented procedures, especially with an acquisition we did recently and a certain change in the approach of the way we're performing certain procedures. So we've not had any constraint on bed. There will always be certain busy times and certain busy days or weeks with certain things like ICU capacity, et cetera. But at no point in time are we foregoing treating any patients because of IP patient -- I mean the availability of inpatient beds. At the same time, we're happy with the utilization. We're heading in a good direction. And it's a good buildup towards commissioning the new hospital in a few months. So we're pretty comfortable with the availability of capacity.
Got it. Got it. On the India business, right. This year, what I'm seeing is that your discharges have come down to single-digit growth. Even if I remove Western and northern piece, just not this quarter, but for the full year. So just wanted to get an understanding, is it because are we hitting peak capacity utilization out here? Or what's happening or was last year an exceptionally good year, and hence, the base is normalizing this year?
No. If you see, one is the discharge. And the other thing is the ARPOB, which is the ARPOBs have grown from INR 13.4 million to INR 14.1 million, even though the discharge numbers have gone down. This Is on account of our conscious efforts in terms of working on improvement in payer mix, which you've already said. See, there is a 2% increase in the cash TPA volume as compared to previous quarters. See, our growth drivers, as we've always said, will be on higher throughput numbers, through efficiency improvement, digital initiatives, leveraging on operational efficiencies. Even at most of the hospitals, we are trying to convert general wards into semiprivate to meet the demand for insurance and cash payers.
So while we are working aggressively on throughputs, daycare procedures, a lot of robotic procedures, which are a morning evening discharge, a lot of cardiac surgeries, which are morning evening discharges, which won't reflect much on the discharge numbers. But we -- it will reflect more on the ARPOBs. And with this system and capacity debottlenecking, we are in a position to do more -- we are in a position to service more patients within the same capacity. So that's the answer for this.
Okay. Got it. Fine. The third question I had at my end was the other expenses for this quarter. It has come down on an absolute basis on a 1% year-on-year. So what -- where is the cost savings coming from? Is there a one-off in the base year or this year, which you want to call out?
There is -- there are some onetimers that come. Especially in Q2, we had a higher -- we took actually a higher impact of R&M given that it was a good quarter, and we did use it up to work on our R&M expenses. And Q3 being a little bit of a leaner quarter, we went a little more slow on some of those discretionary spends. That's the call that we keep taking periodically. There is no underlying exception to read there. It is in line with what we were expecting to spend.
Okay. So basically, the INR 20 crores that you all haven't spent -- or INR 14 crores that you haven't spent in Q3 FY '24, it will basically bunch up and there will be a INR 30 crore expense in Q4, is what you are seeing, right, for enterprise cadence?
May not be because we've kind of accelerated a lot of the work that we wanted to do in Q2 itself. So we will -- depending on how our needs of each of the units arise, we will moderate the spends. But we've -- I don't think you will need to assume that every money that we have saved is a postponement. Some of it got accelerated in Q2. Some of it will get spent in Q4. So some of it is postponement, some of it is already spent.
Okay. Got it. In your notes to accounts in other income, right, you all have called out that around INR 159 million out of that INR 179 million is on account of lease modification. Could you just share more color on that what exactly is happening there?
So we have certain lease arrangements, which we have with our third-party partners. And sometimes we do periodically renegotiate these lease arrangements, depending on either party requirements, convenience, et cetera. So some of those renegotiations have reflected because of the way Ind AS is, it has reflected in some accounting increase coming because of that.
So these rental renegotiations have happened on land building rentals or it's on equipment rentals? Where is it coming from? Like which hospitals? How is it happening? And its nonrecurring in nature, right, if I have to...
It is nonrecurring in nature, yes. This will come in our nonowned hospitals. This will come in terms of the share of compensation we paid to the partners. And in some places, some equipments are also rented. So largely, this comes because of the compensation that we paid to them.
Okay. Got it. Got it. My final question that I wanted to understand is that your manpower costs, right, year-on-year have been increasing at high double-digit growth. Now in a situation where ARPOBs are growing, yes, you can offset these, but what are we doing to control these costs if you can give some qualitative understanding on that front.
So there are 2 aspects to manpower cost. One is that because a lot of the manpower cost comes in from people who are either minimum wage earning or linked to minimum wage, and therefore, government actions in terms of minimum wages, et cetera, have a direct bearing and that results in a higher manpower cost burden.
And that is not going to go away. We are going more -- we have to understand that the underlying inflation in the economy is high, which means the cost-of-living adjustment that's happening in the minimum wages across states is also higher. So therefore, that part of the wage inflation coming on the baseline will not moderate.
How we are trying to tackle this is through efficiency in operations. Venkatesh had spoken about earlier about how we are -- how we are looking at more digitized delivery, how we -- we had also spoken about our Namah app, which we have just gone live in HCCI, and now we are starting to go live in Health City, which is going to help us be able to organize our manpower better.
We are also looking at many other digital initiatives across our organization, which helps us deploy the right people in the right place. And therefore, we are able to handle our manpower costs effectively. It will be a journey. I'm sure you would be seeing this across all hospitals, but you will see it more for us because our price actions are minimal, and therefore, our growth in ARPP comes mainly due to efficiency actions. So that comes a little slowly. And therefore, you see the impact more profound for us. But this is the reality of the situation. We have to work this through, and we will be able to get to a -- we will be able to improve this over a period of time.
Okay. Okay. And what has been this wage inflation across, say, the last 10 years on average? How much wage inflation do you all see on the employee, the non-doctor employee manpower cost and the doctor and nurses manpower cost, if you can give?
In FY -- for the current year FY '24, we have seen anywhere between 10% to 12% wage inflation. We are expecting a similar number in FY '25 also.
Okay. And historically, it's also been double-digit inflation for you guys on this front?
During COVID time, I think the inflation rates were fairly moderated. After COVID, this has got picked up quite a bit, but it's been -- it's peaking now in the last year and going into the next year.
But these won't get revised downwards even if inflation comes down, right? So I'm just trying to understand like the business model is exposed to this. So I was just getting a feel of how this line item will move for you also?
Yes. Business model is exposed to this. Like I said, you have to factor some amount of increase that comes because manpower costs will keep going up, but you'll also have to factor that there is a lot of work and effort being done on the digital side, and that will help us optimize. It is similar to any other manufacturing industry or any other labor-intensive industry, where you would have a wage inflation coming through and the recovery partially happens through efficiency and partially happens through price. So that's really how our industry will also progress.
Thanks, Rishi, for the questions. Can we have the next set of questions, please? Any other questions anyone? Yes, Gagan. You're on mute, we can't hear you.
Yes, can you hear me now?
Yes, yes, we can hear you now.
So sorry, if the question is repetitive, I got disconnected from the call. What was the reason for the India revenue being -- growth being relatively muted this quarter specifically north and West. Overall, also, I think it was a bit muted in volume terms?
Yes, it was. As we said, this quarter always has a seasonality impact as compared to other quarters. But again, we feel north and west regions had a higher impact than before. There was some underperformance in Gurugram, which we are sorting out. There are a little bit of an issue in terms of medical management bills in Jaipur and the structure of reimbursement from the government there, which is practically unviable for us to service that business for the time. There are discussions going on with the government through the association of hospitals. We would be in a position to get positive results maybe in a quarter's time.
Also, we've taken efforts to rationalize our payer mix. The result is very clearly showing in terms of the cash TPA going up by 2% this quarter. But of course, it would take some time for these capacity to be filled in by the paying customers. The improvement will show over a time -- over a period of time. That is the reason why there is a little bit of a -- I mean there is a bigger dip in top line as compared to the quarter 2.
But the positive thing here is as a result of our conscious effort in terms of rationalizing payer mix, improving process improvement -- working on process improvement, adopting technology, it has reflected in terms of our improved margin profile despite a low and difficult quarter. Also, we don't want to expose too much of payables and have a better cash flow coming into an election year.
Yes. So given the fact that a part of the growth is seasonal, I understand that, but part of it -- that growth, crimp in the growth is also coming from you trying to deliberately alter your payer mix. Are we in a transition phase where perhaps we take some time before growth normalizes back to a level which would be optimal?
That's how we are looking at it. However, like we have always said, we will -- we are very cautious on how we take these steps and how we move. The desire is that we want to make a healthy transition so that our capacity is reallocated to better ARPP and cash flows. But we will be measured and careful about how we go about it. So you can assume that it will take some time, but we will also balance it off to the needs on the ground.
Yes, I get that. But is it possible for you to delineate, let's say, what part of the impact is coming from these deliberate steps and what part -- seasonality year-on-year should even out. I can understand quarter-on-quarter seasonality impacts you. But compared to the same quarter last year, seasonality shouldn't impact you. Given that, what would be the -- how would you attribute the growth weakness to these various factors that you've been talking about?
Our healthy payer mix has moved by about 2%. So that gives you some idea of how the payer mix has contributed to the little bit of stagnation in the revenue growth. But it does no takeaway the fact that west -- we did have underperformance in north especially and a little bit in west. And the other aspect is that we did a rationalization during this year with the M.S. Ramaiah, which was a key contributor in terms of our south cluster revenue, which was -- which also contributed a little bit to the overall impact. Maybe a couple of percent impact came from the rationalization, maybe -- I mean, I don't have these numbers exactly calculated because we have not analyzed it in that fashion, but you can attribute 2%, 3% to our maybe poor performance in north sector, maybe 2%, 3%, you can attribute to the payer mix calls we have taken. So it's -- some -- you can assume that kind of mix in terms of our performance.
So these changes won't play out as a one-off effort. And then let's say it's just a one-off effort and then you are completed with the exercise. It's actually a constant effort to apply methodical changes to the way our hospitals operate. It will keep showing up improved earnings, improved volumes, higher average revenue per patient year after year. You'll not see immediate results, but it will be over a period of time.
You're saying that the trade-off is that you want better average ARPOB perhaps our average revenue per patient, better gross margins, and therefore, these steps will -- while they might impact the top line for some time, they will result in better margins. Is that how we should think about it?
Yes. One is definitely there's an aspiration for better margins, but right now, we are more focusing on better cash flows. And we don't want to deal with significant cash flow uncertainty at this stage. So a lot of the moderation is also happening from that perspective.
So how does that impact your cash flow or working capital, so to speak, receivables, so to speak, because these are aimed at better receivables, I presume?
Yes. That reflect in our June quarter and September quarter receivables because the payment cycle for many of these schemes is 6 months to 9 months. So at the moment, we -- like every other hospital, in the December quarter, collections are normally very poor from government customers because they have budget freezes. The budget release happens in the last week of March, early April. And that's when the cash flows start coming in. So all we're trying to do is not create a significant load on the cash flow going into the first half of next year. Having said that, it's a very small rationalization. We still have nearly 1/5 of our revenue still coming from these payers. So that impact will not go away. But to some extent, whatever we can do, we are trying to do in terms of improving our cash flow mix.
Great. And while for the full year, your CapEx is budgeted at north of INR 1,000 crores, I think year-to-date, what you've incurred is around INR 450 crores. Is it going to be a case where some amount of that CapEx, the actual cash outflows get incurred in the next financial year? Or are you going to be...
Yes, a little bit flow over will be there in the next financial year. But actually, cash flows may largely happen. Capitalization may happen in the next financial year once the commissioning happens. A significant chunk of this CapEx is being spent in Cayman. And that is -- most of the funds are committed and there is a payment schedule to the vendors based on which it's being paid out. So most of the cash flows are being spent. I think you may have a 1-quarter flow over maybe to some extent because of the timing of the payable days.
Also, since we are in the last quarter, and a lot of these CapEx are also attributable to the greenfield expansions like acquisition of land in Kolkata, plans for greenfield in Bangalore. So we are pretty confident of spending major part of the CapEx by the end of this March. And of course, there will be a small spillover, as Sandhya said, in terms of the routine replacement and upgradation CapEx, which may have a little bit of a spillover to the next year, but most of it will be utilized in the next 45 to 50 days.
Right. And coming on to Cayman. I mean, in the quarter, as far as I can understand, Cayman ARPOB looks Y-o-Y down by about 4.5% to 5%. And OPD volumes are also down and down, I think, by a reasonable number if I got it correct -- if I recall it correctly from your presentation. So any thoughts there?
Can I just get some clarity on the question. So if we look at Slide 10 of the presentation, the box on the bottom right talks about the OP numbers. So Q3 FY '23, which I think you are referring to is at 7,647 and Q3 FY '24 is 9,558.
Okay. I might be wrong there. But...
Yes. Let me know if there's any question.
On ARPOB in Cayman, is there a drop, if I...
Yes. Similarly, if you look at the box on the top left on the same slide, Slide 10, we answered this question to the previous gentlemen as well. So if we look at Q3 FY '23, the inpatient revenue per patient is closer to INR 4 million, whereas in the current quarter, it's INR 3 million, although that seems like a drastic drop, what we suggest is always in Cayman to look at 3, 4 quarters or perhaps longer to look at a trend. And when you do that, you will see that it's pretty in line with more or less a number we've traditionally been at.
The reason was Q3 in FY '23 was an unseasonally high quarter for this particular metric because of a few discharges that are very high in value. Because the underlying volumes are low, it's a low base effect of a few big discharges skewing this particular metric. But if you look at a longer time series, you will see that this is not something that concerns us.
And from an occupancy standpoint, how does Cayman -- how has been Cayman doing year-on-year?
Sure. So we prefer to disclose discharges outpatients and those kind of productivity metrics. Occupancy will change and can be skewed basis on the percentage of patients we focus on daycare versus nondaycare. So in terms of the activity metrics like outpatient numbers, discharges, et cetera, number of surgeries. We have seen a good growth that you can see even in the series of presentations, the similar presentations every quarter. A lot of that has been driven by more of a high throughput procedures, especially in the outpatient services that we are focusing on these days.
And when does the new facility come on board? I presume it will be next year, but is it possible to understand exactly when next year are you scheduled to bring it on board?
Sure. The answer would be a range, but we are aspiring to do it closer towards the end of Q1 of next year. We have more certainty around when the facility will be ready in terms of its infrastructure, but then there is a series of regulatory requirements as well that does have a broad range, and we have less control over. But our intent is to start towards the end of Q1. More specifically, definitely, it will be around June-ish, I would say. Yes.
In the oncology unit that you commissioned this year, year-to-date, any possibility to understand the contribution to the Cayman revenue and profits from that specific unit?
Sure. So nothing that I can share in specifics, but more qualitatively, the unit has done -- is doing very, very well, better than what we expected. We're pleasantly surprised with it. Radiotherapy in any geography, whether India, Cayman or whatever is always going to be a high-margin service from a P&L perspective because our operating costs are quite low in radiotherapy. And that oncology facility as of now is only radiotherapy. So in that sense, it's definitely margin accretive, and we are happy with the volumes and revenue we're seeing so far.
Final one from my side. On the India piece, as we head into the next year, is there a reasonable case for an early double-digit sort of growth? I mean, would you be in any way constrained to achieve that? I'm not talking from a demand perspective, more from, one: your ability to service that kind of demand; and two, from the fact that you are looking to do something about changing payer mix. So is that a reasonable possibility given these constraints? Or are we looking at a different sort of aspiration there?
I'll answer this one.
Yes, Viren. Go ahead.
Nothing constrains us other than our ability to not disclose what next year's numbers are going to look like. Yes, Sandhya, go ahead.
Yes. Thanks, Viren. So it's a -- there are a few aspects we have to keep in mind. One, of course, like you rightly highlighted, there is a payer mix work, which is ongoing. And we will take it as the year progresses. It's an election year. So we are taking some actions towards that, but we may take some different actions after we get more confidence on cash flows. So that's one aspect.
The other aspect is that we are working continuously on our throughput, and that's been our journey, if you see for the first several years, we've not added a single bed. In fact, we have rationalized beds. We have repurposed beds. We have converted some of our general ward capacity into ICU, private ward capacity. So we've been rationalizing our business and improving our throughput on an ongoing basis.
So that should help us service the demand as well. Having said that, we can't make any forward-looking statements on where we are headed. Our journey is a little more long-term journey because we are not taking very immediate occupancy -- any immediate bed addition decisions. We are not doing any significant acquisitions. We are buying land and building, so which means our next point of inflection will come when all the capacities go online. And until then, we have to keep doing more of what we have been doing for the past several years to be able to deliver results. So I don't know if I answered your question, but I think that's really how we're looking at it.
We have seen the pickup happening to some extent after the Q3. But it is a task cut out for us. And we are pretty confident. Along with our efficiency drive, as Sandhya mentioned, we would also be able to build up on our volumes.
Gagan, any more questions from your side?
Just one follow-up, which is that on the throughput since a lot of emphasis is laid on improving the throughput and operational metrics. Is it possible to understand what are your aspirations there? For example, if with the same bed capacity next year with all that you have invested in increasing throughput, how much can you improve the throughput?
Yes. We are constantly working on this, whether it is a procedure-driven or whether it is any of our processes of diagnostics, while increasing the workstations in the diagnostic space for ultrasound, ecos and seeing more throughput in the CTs, MRs and all these things so that we'll be able to service more because we are able to see the need from our OP EMR, which we have an adoption, which is very high, touching 80% plus. And we know that there is an opportunity for us to see the throughput increase in these areas. And that is one area where we are working on. And while the procedure areas, whether it is infusion centers with our onco program or the program with the dialysis or of various other daycare procedures.
We are trying to see how much we can do within the very shortest possible time. So we're trying to do most of our angiograms as like a short stay within a 4 to 6 hours kind of a period so that we'll be able to do 2 in some cases, even 3 shifts in the same bed which we'll be able to utilize. So these are all some of the things which we are working on. It's a constant work with the clinical teams and hopefully, we'll master it in 2, 3 quarters down the line.
So the way you track it is to check on the ALOS and the footfalls that we're achieving per quarter.
Thanks, Gagan. Robert, Can you please ask your question?
Could you just talk a little about your longer-term capital allocation. So when you're looking at your key markets, how you're seeing supply demand the way you see the opportunities? And so looking beyond the kind of the next 12 months, how you're weighing up the different opportunity set?
Sure, I'll answer this one. Our key priorities are winning greater market share in Bangalore and Kolkata. So for the next decade, at least, the bulk of our investment will focus on these 2 geographies. The remaining will just be strengthening the existing hospital set that we currently have. So that means adding more beds or adding adjacent capacity to the existing network. So most of this will be in some combination of brownfield and greenfield investment in hospitals, clinics, pharmacies in the network of cities that we're currently operating on. And this will be the case for the next easily 10 years.
And just with that in mind, so when you're assessing the kind of supply side of the equation, what are you seeing in terms of your peers' actions and so on? And do you think that gives you kind of a clear enough runway in that regard as what you do?
Sorry, by peer action, do you mean -- could you just clarify that?
In terms of general hospital and clinics supply across those markets. So if you presume you can see what your peers are up to, to a reasonable degree.
Yes. It's fair to say that most of the mature cities in India have an adequate supply of hospital beds but they are short of very high-quality beds. And so there is a shift in the preference for patients to move from the very large, unorganized sector, which constitutes essentially 90% of all the private bed capacity in the country and for them moving away from unorganized hospitals and unlicensed nursing homes to larger, more accredited hospitals. So in that sense, while there is a crowding effect of most large corporate health care groups being focused in the large cities, it does not represent the true demand that exists among the patients in those cities. And the demographics are in our favor. With rising incomes, rising old age, we do believe that the opportunity set is tremendous. .
And do you mind if I just ask one follow-on on to that? Just in terms of how you're anticipating, for example, the insured mix versus out-of-pocket, et cetera, how you're expecting that to hold over the next 5 years?
For us or for the sector?
Well, for you, in particular.
Sure. As of now, it's about 20% to 22% that it hovers between that range for organized players. Whereas for our peer group, it's sometimes close to 40% to 50%. So our aspiration is to reach those numbers. I'm not sure that we could achieve it in 5 years. It may take us a bit longer just because of our patient mix and our legacy of being a provider of very low-cost subsidized services to a large number of people, but the aspiration is to get to what the peer group is able to achieve.
Thanks, Robert. Abhishek, please go ahead.
Hello, am I audible?
Yes, we can hear you.
So my question is, I think there is a decline in the Q3 versus Q2. I know we might have already spoken about the seasonal effect. Is the seasonal effect more pronounced in the northern and the western region where we're seeing decline? Or is the seasonal phenomenon across the country? That's my question number one. Yes. Then I'll ask another question.
Yes. Of course, the seasonality is a little bit more -- the impact of seasonal fluctuation is a bit more in northern and western side of the country. Of course, seasonality has affected the other parts also. But it has affected us more in north and west. Typically, it's -- most of these hospitals have higher volume of scheme patients and mix in such hospital. Added to the fact that we're consciously trying to take the effort to improve our mix -- payer mix and the replacement is going to take time for these paying customers, this benefit will also take some period of time. And that's the reason why there was a little bit of a further dip in this.
But if you look at the way in which these units in these regions are performing, Dharamshila generally generates reasonably double-digit margins quarter-on-quarter. Gurugram also except few aberrations this quarter is always in a single-digit margin, and it's also shown good improvement. And Mumbai also is expected to be positive in the late Q4 and then maintain stable margins from then on. So though there has been a bigger fluctuation because of this reason, but I guess they are giving meaningful contribution to the overall scheme of things and should be able to maintain this.
Sure. And I guess you also talked about that bulk of your focus over the next 10 years is going to be the Bangalore and Kolkata region, right, the greater Bangalore and Kolkata region that if I may say. So -- and is that because -- and do we have, let's say, a huge untapped market in these 2 regions that we have a pretty long runway? Or is it because in the north and west, we have -- we don't have a strong brand presence? Like what's the reason of like focusing on the southern region and the eastern region?
So 2 reasons for that. One is that the Bangalore and Kolkata hospitals that we run are all full. And so you naturally build capacity where you're sure you're going to get all the patients to fill it up. There is huge demand in north, huge demand in west, even more demand in other parts of Eastern and Central India. It's just that it will take us longer to fill up those beds while the investment will -- it's essentially the same. The construction cost in any part of India is roughly the same. So the confidence that we have in filling our beds and generating quicker returns is much higher in Bangalore and Kolkata. That's one of the, let's say, the most nonemotional spreadsheet-driven reason why we would invest in these markets.
The other one is that these are the places where we have the highest brand recognition, highest market share, but we're constrained in being in very few locations around the city. There was a time when a lot of patients would travel for days to come see us or they'd be willing to wait a very long time to get an appointment with some of our doctors. That's not the case anymore. So we are not able to hire more doctors, we're not able to accommodate more people in the same current setup. So we have to add more capacity to accommodate all the patients who want to see us, but are not willing to wait 4, 5 days in order to do so.
Understood. Understood. And then from the capacity expansion standpoint, I guess, we have a very good debt-to-equity ratio and that should allow us to -- could we not have expanded or not done more CapEx? Just a question on that because I see that we do have the requisite sort of comfort there.
We absolutely want -- I mean, I'm the biggest proponent of pushing from CapEx, but then Sandhya's job is to hold us back. So we do what Sandhya says.
Please go ahead with your question.
Can you hear me?
Yes, we can hear you.
Yes. Just quickly in terms of going forward on the areas of business like your oncology and the heart part, which other areas are you seeing expanding into? Or would you like to focus on only these 2 major ones? I mean bulk of your business.
Yes. So though these constitute a major portion of our clinical work orthopedics, spine, neurosciences is one area where we are constantly looking at opportunities for growth. And that is also more or less a community-based growth because usually patients because of mobility reasons will come from a 50-kilometer radius for all these kinds of work. While GI Sciences and acute care, which constitute emergency care and the critical care forms a major portion of our work. So these are the areas where we are constantly looking at growth in this.
My second question was when you -- you had mentioned that you would like to be a lowest cost -- not lowest but comparatively lower cost service provider. You would want to match that with some specialty kind of procedures, which would gain you more revenue with less time spent at the hospital. So is there any kind of trade-off between these 2? Because I understand your service culture does prompt you to go for more value-added services.
Yes. If you look at it, neurosciences has got a combination of more of OPD practice and most of the procedures now are becoming minimal access and endoscopic and different kind of procedures. It's not necessary when you say that all those days of neurosurgery being very large, ghastly surgeries are no longer there. Lot of things work on an interventional neurology platforms and things like that, which has got a very minimal stay. So we do look into all these aspects.
But when you give a service, you can't give a patchy kind of a service because patients come for a variety of -- spectrum of requirements across a specialty. And we need to be there and we have the ability and have the clinical bandwidth to service them. But these are not something that will be large volumes, but will give a lift to the department so that even the routine work comes in large numbers for us. So whether it is GI sciences or neurosciences, it's all the same. These are all very short-stay, minimal access work that keeps happening. We will focus on that.
Critical care is a very crucial element because if you are going to look at emergency care and acute care, critical care becomes a crucial element, and it's not necessary that with all these advances in sciences, that they will spend. There is a portion, maybe 10%, 12% of the 20% of the patients will spend time, but a lot of them recover very quickly nowadays.
And one last question. Is there any geriatric care planned given the demographics moving?
We do have in our flagships people who specialize in geriatrics so that they don't land up with 5, 6 cross consultations across multiple departments, but they will take into account specialists as and when required. But by nature of the way the spectrum of work happens, geriatrics is a reasonable volumes that we deal with in all our centers.
Anymore questions. Rishi, you have any question, Abhishek, any more questions? You've raised your hands.
Yes. So I'll just go ahead with my question. So Viren, you just mentioned that the demand scenario has changed over the last few years for you guys, where earlier patients used to come from far off, they used to wait for days or weeks for your doctor's appointments. Now that's not the case anymore and doctor talent retention is becoming tougher. So could you give more of an understanding here what's happening because from what I understand, your value proposition is very high. So a patient who can't afford, does he have more options now and -- closer to his city or what's happening here? If you could just give your understanding.
Here in a big city, the options for most normal kinds of surgery. So gallbladder, cesarean section, any sort of compound fracture. Those are almost universally available within walking distance of your house if you're in a big Indian city, meaning the top 10 cities of India. But that's not necessarily the area that most corporate hospitals play in. For them, it is about being there for the heart surgery, cancer surgery, very advanced procedures. But it doesn't mean that those procedures don't happen. They absolutely do happen in large numbers, but then that tends to be driven by convenience.
So a lot of the investments we're making in increasing our footprint in looking at these greenfield expansion is to be able to cater to a large segment of diseases. We are building also a large number of clinics, which we historically never did. So that their first point of entry for whether it is even a cough or a cold has to be within our network. So since we build an integrated plan around that, then they see there is a lot more value in sticking to one network provider for all your issues. And we'll have all information, we'll be able to treat you much better and we'll have a much better idea of the longitudinal care that -- the longitudinal view of what happened to you over your life. So in terms of the demand, yes, it is currently being fulfilled in quite a large range of hospitals of different kinds of quality standards. The preference always is that people get it done at more accredited places, and we want to be able to cater to that.
All right. So basically, you're going closer to the customer, but how does this play out in terms of ROCE? Do you -- is it dilutive for you guys or accretive?
Short term, very dilutive. But the thing is I can't -- no patient came here and ask for my ROCE, and I can't pay the doctor salaries and ROCE. So it is -- yes, it is something that has been definitely a point of concern for us, which is why we don't do very large acquisitions and we take things in much more moderated way. But it isn't the only determinant for how we decide to spend our money. In a perfect world, we would just stick with the network we have and just keep on flogging it until the day the building falls down.
But that means that you're forgoing a lot of long-term opportunities, which we don't want to either. And so in terms of establishing a footprint, building out significant CapEx for the next couple of years, since we have the borrowing ability to do so, and it won't -- we have the cash serviceability as well. We will do that. Still we're no longer able to expand anymore in which case we operationalize all the things that we have built and wait for things to improve again.
I mean, if you even categorize the way we service at the national level, one at the national level, one at the local level, one at the hyperlocal level. We need to also have solutions across all the 3 categories. So when it comes to quaternary care, which we have in the flagships, we look at catering international level, even at international level. And when it comes to tertiary care like neurosurgeries, orthopedics, we have solutions at local levels. And also when it comes to hyperlocal level, the obstetrics, gynecology, pediatrics, we have hospitals, which cater to this level. So you need to be available to provide solution to each of this category, and that is where we are working towards.
We have a lot of questions on the -- which have been typed because there was some issues with the speaker with the participants. So I think we should take them down. There are questions from Utkarsh and Riddhi basically on the CapEx spending for this -- yes, basically on the CapEx spending for this year and next year. So I'll take that question and maybe Sandhya can probably add. See, for CapEx for FY '24, we had a position of around INR 1,100 crores. And we've already spent close to INR 500 crores. And we have the POs also lined up. Added to that, we have this Rajarahat expansion for Kolkata where we have CapEx of roughly INR 180 crores lined up for this quarter. And we also are in the advanced stages of procuring a land in Bangalore. So if you add it up all, I think we should be there at around INR 1,000 crores and slightly above for FY '24.
For FY '25, we don't have a finalized plan, but given that we'll be growing by adding hospitals and clinics at a lot of places, especially our flagships, we have taken a rough estimate of around INR 1,200 cores even for FY '25. And as Viren has already mentioned very clearly that we'll be spending mostly in our flagship, which is Bangalore in India. So a lot of our CapEx especially for the brownfield and greenfield will be towards these 2 cities, bulk of it, and Raipur as well.
For Cayman, as Anesh also mentioned, we'll be done with this new hospital construction by, say, first quarter of FY '25. Beyond that, we are -- we don't have any greenfield plans for Cayman, but we keep exploring other organic expansion in the near balance and other international locations. Anything else maybe...
I will take the rest of the questions.
Yes, sure, Sandhya.
Yes. Thanks, Nishant. So the question on payer mix. Like we said, we do want to optimize payer mix in the long term. But what we're doing right now is rationalizing for cash flow as well as trying to see if we are having the ability to correct the payer mix. We don't want to guide a target on this because there is a segment we want to serve as well, but we want to find the right balance. So we are not guiding on the payer mix.
In terms of our patients' response to our services, I think one measure we could look at is say Google reviews. We have -- on an average, the industry top tier players would be at an average of about 4.6 kind of number. Ours in most of our hospitals flagships -- flagship and large hospitals is about 4.8 and across a large number of review counts. So we are believing that whatever actions we are taking in terms of improving the patient service outcomes, it is being appreciated by our patients, but it's a constant journey and we'll have to keep working on it. In terms of comparing our procedure costs versus our peers, I think a good way to compare this rather than we trying to put out some number out there, a good way is for your to be able to derive this. The costs are almost exactly the same for every player, any large player. I'm not sure if we can say that we will be buying something cheaper than another large listed player.
But if you look out realization profile, it is relatively lower to many of the top 5 players. And at the same time, our cost profile is at par with the top players. So that's a reflection of the efficiency and scale at which we play. So that should give you a broad comparison on how we are operating. In terms of how much it costs for building a hospital with land prices being a premium and depending on where we choose to build, it will cost anywhere between INR 1.5 crores to INR 2 crores. If the land cost is very, very high, then it can even go up beyond that. But approximately, including everything, it is costing or going to cost INR 1.5 crores to INR 2 crores per bed.
Our initial capital investment for health insurance, we have invested INR 100 crores in the health insurance business. And we're going to start with that and this will run us into the next year and a little bit after. And after that, we will see how the investment will build on. As far as the question on tech, maybe I'll request Viren to take the question. The question, Viren, is that you've developed a lot of tech internally -- yes.
We do have a patient-facing app called NH Care. We're in the process of rebranding it. Essentially, we this to be the one-stop shop for accessing all of your hospital-based services. Its capabilities currently include being able to book appointments, pay for the -- any test that you order, see the results of your test, get any bio of all the doctors that we have and be able to check on the status of any of your people who -- loved ones who are already into the hospital.
The road map for this is eventually to roll this into our NH integrated care plan, which would then allow you to buy a care plan, be able to coordinate with your care coordinator on the app so that they will remind you about any upcoming, whether it's a checkup or appointments or any tests or medicines you want to order that can be done on the app as well.
And you can use it to keep track of ultimately when the insurance rolls out, be able to keep track of your insurance, the sum insured and all those sorts of things. So the patient-facing app is still -- it's got a lot of good reviews. It still worked out. But like all things, a lot of work still needs to be done. We're also trying to roll in QR codes into the apps. So then when you're in the hospital, this becomes sort of the fast track for you to go to the different parts of the hospital, pay for things, identify yourself at the entrance and act as a sort of passport for you within the hospital. That also is a work in progress. We do have a medical research wing. I'll ask Dr. Rupert to talk about it.
We got a fairly robust medical research wing headed by a very good clinician who is a cardiac surgeon, but he has worked in the Bristol University, and he's got a major interest in research. He works as our Chief Scientific Officer. And recently, one of the professors from Vellor having major interest in immunology and research has joined us. So they form part of the leadership team and working on interdisciplinary research. And last calendar year, we had in excess of 200 plus publications. These publications are having an impact factor of more than 1 and which have been published in the PubMed accredited journals. And these are not some journals, which are having a lower impact journey.
And we have various incentivizing plan for people who take time out for research and publications and presentations across the network. But we have a very good ecosystem in the Health City campus for basic science research in addition to clinical research. But as we are doing more and more electronic medical records, and almost 100% of our OP EMRs or OP consultations are getting captured. The ecosystem for various kinds of trials, outcome analysis and survival scores up to 2 years, 5 years after multiple kind of therapies is all going to be available in a couple of years' time because we have a very good data capturing.
The more data that gets refined, the better the outcomes and since we have distribution of patients coming from a vast segment of across the country, it is almost like doing a multicenter trial within our own organization. We don't have to go outside the organization to do any kind of a research. So the ecosystem is for basic science research in addition to the clinical database, which is -- and we also have a tie-up with what is called the REDCap database for doing this clinical trials.
And all our units have access to good journals from the Alzheimer's, ClinicalKeys and UpToDate and clinical decision support systems, which we have online and which is available to all of them from -- even from their homes. So they have an ecosystem for this, and we have demonstrated for the last 3 years consistently, we have very good publications in journals, which have an impact factor of more than 1, more than 200 plus this one. And that is something which we have been constantly been working on. As of now, industry-funded research is in excess of 80 across the entire network. And main areas of research are all in new cardiac -- apart from cardiac sciences has been in oncology, neurosciences and critical care.
So I think we have been able to answer all the questions, even the typed ones now. If anything is pending from the typed questions, can the participant again request? Yes, I think we're done with the questions. Gagan, do you have a question? Yes, Gagan, keep going.
Just 2 questions. One on the tax rate. As we get into the next year, we've had a low tax rate this year? How does it work out for the next year? And second, is the CapEx for the next year also budgeted at INR 1,000 crores, if I heard it correctly?
Yes, Gagan. Yes, go ahead. Nishant, go ahead.
Yes. As we mentioned earlier, CapEx for next year is not finalized, but it should be roughly in the same number of around INR 1,000 crores to INR 1,200 crores.
Tax rate for next year will be similar, Gagan, except that this year, we had some benefit -- accounting benefit in Q1 given that we shifted to the new rate in some of the deferred tax liabilities reversed. Adjusting for that, we should have a similar rate. So essentially, most of our units are now on the new tax regime, except the NSHH PL, which is we still have some brought forward losses to set off. So only after that, it can move to the new regime. And depending on the mix between India and Cayman, our effective tax rate will get moderated.
Right. So as far as the funding for next year's CapEx is concerned, so far, we've managed to retain a net cash position with another INR 1,200 crores for next year. How do you propose to fund it?
So we will do a mix of bank borrowing as well as we are planning to do an NCD raise and some internal accruals also we will use. We don't expect to be in this very low debt-to-EBITDA at least for the next 2 to 3 years because we will -- we have stepped up the pedal on our CapEx. Over the past 2 years, we have spent close to INR 1,000 crores, and we want to continue to do that. So which means that these will not come from organic cash accruals. So you will see a more higher ratios on debt-to-EBITDA in the medium term until all the investments that we are making start returning money. And given that we are prioritizing buy land and build or more greenfield, so therefore, the cycle is also going to be longer in terms of from the time we made the investment to the time the cash flows start coming in. So you have to expect that a significant amount of the CapEx is going to be funded through debt.
So what's the debt-to-EBITDA levels you're sort of looking at as a ceiling or a peak, which you don't want to breach?
So we've historically wanted to stay at a ratio of 2. But then we also are aware that if there are meaningful opportunities, which we have to go after and if there is a -- in the short term, we need to breach the ratio. We -- it may not -- we may not go after the opportunity because of the ratio. So we will be balanced about it, but we have to breach it in the short term. We may take those calls depending on what opportunities come our way.
Okay. Any further idea you can give as to where exactly is that INR 1,200 crores being targeted? You've given the split for this and last year's INR 1,000 crore each. Any further details that can be offered on next year's INR 1,200 crores?
Can you repeat the question because I didn't have better connectivity.
So what I was asking is the composition of that CapEx for this year and for the last year, you've given a breakdown of the CapEx in Cayman, in India, and what exactly are you sort of doing with it? Is it possible to understand for next year, the INR 1,200 crores of CapEx that you proposed, where exactly are you putting it?
Sure. While we are still working with details, maybe I'll request Nishant to take this question.
Yes. Sure, Sandhya. See, Gagan, we have this normal CapEx of biomedical civil for all the hospitals, which is around, say, INR 400 crores to INR 425 crores, INR 450 crores. So we can take a 10% jump on that. So around INR 450 crores for that general CapEx. And anything apart from that, within that gap of INR 1,200 crores will be for the expansion, which could be a mix of expansion in Bangalore, Kolkata, a bit of that in Raipur as well. So that is a broad split. For Cayman also, we'll have some CapEx -- regular CapEx. And the last portion, the last-mile portion of the new hospital CapEx, which will be around, say, INR 150 crores. So that is a broad split of the INR 1,200 crores planned CapEx for next year.
And final one from my side. On the Sparsh acquisition that you did last year, what has been the ramp-up like? And if I recall correctly, one of the reasons, I mean, also was that it will help you create additional or sort of transition some capacity in the Bangalore facility to Sparsh and create some additional capacity at the Bangalore hospital. So just wanted to understand how is that working out? And second one, what's the status on your clinics and insurance programs if you could update us there?
Yes, the first one, I'll take, which is the Sparsh. The Sparsh completed 5 quarters post acquisition and has been moving the way we had projected it and doing very well in terms of margins. It's working similar to the margins which we have in Health City. We have had a lot of benefits by acquiring Sparsh in terms of cost rationalizations because since it is located within the same complex, we have been able to leverage the manpower of the existing campus into Sparsh to work on savings and manpower costs. We've been able to leverage on our economies of scale and efficiency in consumption to have savings in consumption costs. And also in terms of the overheads.
And as a part of capacity debottlenecking, Sparsh has also helped us create additional capacity in our main centers as an add-on to the already executed program on improving operational efficiencies, throughputs and all. And that has actually created -- basically added more virtual beds because of -- since the inception of Sparsh over the last 5 quarters. So this quarter, Sparsh has also been as per plan and as per the budget. The second one? Yes.
Yes. The second question was on clinics and insurance. So there is still early days. We continue to focus right now on kind of a beta or a pilot in Bangalore. We made progress over the course of the quarter. We added a new clinic. We'll be adding more in the current quarter as well. And we're focused on building our products, services and adding clinics. in terms of insurance, I have updated earlier, we expect to start operations sometime next year.
And a final one, if I am allowed to and this would be on Cayman. You will start the new hospital in June. How are you looking at the scale-up of that one and the implications that has for the existing one, specifically for '25 and '26, if you could give a broad brush idea.
Yes, Gagan. So our intention is to hopefully start by June. I mean, these things can get delayed a couple of weeks up or down basis on factors beyond our control. But that's the aim. In terms of how it will impact. So as we discussed during the previous call as well. This is going -- we are going to be front-loading a lot of costs because we are commissioning a new hospital. So there will be some front-loading of cost that hopefully will be mitigated fairly soon because it's not a new geography. So although it's a new building, it's a new campus, it's a new location, it's still within the same island. The market knows us very, very well. It's a relatively small market. We've been around for close to a decade.
We don't see -- we don't foresee it taking very long to get people flowing through the facility in reasonable numbers. Having said that, we do, unfortunately, have to front-load all our fixed costs. Cayman as a market in general there is a very high degree of operating leverage, which explains the profitability. But at the same time, when we're ramping up, it also explains the high fixed costs in the beginning. So we hope to climb on those very soon.
Yes, I think we have one last question after that, this call automatically terminates. Rishabh?
This is building on the previous response. You mentioned around INR 400 crores to INR 450-odd crores of routine CapEx that NH has. So is this only for India business or this includes the Cayman business as well?
This is largely towards the Cayman business -- for India business, sorry. Cayman business, we don't have too much of general running expenses. Most of the CapEx for Cayman is towards the new hospital construction. So when we say INR 400 crores majority of that is towards India business.
And this is the work that's already in progress across the different hospitals as part of their overall transformation and expansion activities.
Okay. Understood. And one last question. What would be the overall impact of Ind AS adjustment that we do for rent in India business as well as Cayman business?
I think that is disclosed as part of our investor deck. I think we do give a footnote of Ind AS adjustments.
So INR 18 crores is -- I think is what overall impact. Can we -- is there some way to bifurcate it into India? What would be the India aspect of it?
We can assume all of it for India actually. There is no -- nothing material from Ind AS point of view in Cayman.
So I think with this, we would like to conclude our session. Thanks, everyone, for your active participation, as always. Please do feel free to reach out to us for any further questions which you may have. Thank you.