Shalby Ltd
NSE:SHALBY
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Ladies and gentlemen, good day, and welcome to Shalby Limited Q2 Financial Year '25 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kashish from Elara Securities Private Limited. Thank you and over to you, sir.
Thank you, Nivedita. Good evening, everyone. We welcome all the participants to the Shalby Limited Q2 FY '25 Earnings Call hosted by Elara Securities. Today, we have senior management representing Shalby. Among the senior management, the participants, we have Dr. Vikram Shah, Chairman and Managing Director; Mr. Shanay Shah, President; Ms. Nishita Shukla, Chief Operating Officer; Mr. Amit Pathak, Chief Financial Officer; Mr. Deepak Anand, Global Chief Business Officer; and Mr. Babu Thomas, Chief Human Research Officer.
We will start with the performance highlights from Mr. Amit Pathak, CFO; and Mr. Deepak Anand, Global Chief Business Officer. After that, we will open the floor for question and answer for all the participants.
I now hand over the call to Mr. Jigar Todi for important disclaimers regarding any forward-looking statements that may be made in today's call. Over to you, Jigar.
Thanks, Kashish. Good afternoon, everyone. Our earnings presentation is uploaded on the stock exchange website and our company website, shalby.org. We do hope you have already had the opportunity to go through the presentation.
Please note that some of the statements made in today's call may be forward looking in nature and may involve risks and uncertainties. Kindly refer to Slide #40 of the investor presentation for a detailed disclaimer.
Now I would like to hand over the call to CFO, Mr. Amit Pathak, for his opening remarks. Thank you, and over to you, sir.
Yes. Thanks, Jigar. Good evening, everyone. I'm pleased to welcome you all to Shalby's Quarter 2 FY '25 Earnings Call. Now I will walk you through the financial performance of the company for the second quarter of FY '25.
The consolidated revenue of the company is around INR 275 crores in the current quarter versus INR 243 crores in the quarter 2 of the last year. And we have been grew by 12.9% on Y-o-Y basis.
EBITDA of INR 39.8 crores in the current quarter versus INR 58.1 crore in the last -- in the quarter 2 of last year with a margin of 14.4% in the current quarter and 23.9% in the second quarter of the last year, and our EBITDA has been down by around 31.5% on Y-o-Y basis.
PBT is INR 13.7 crores in the current quarter versus INR 42.6 crores in the quarter 2 of FY '24 with a margin of 4.9% in the current quarter versus 17.5% in the quarter 2 of FY '24.
The revenue for the current year H1 -- the half year is INR 563 crores versus INR 483 crores in H1 of FY '24, and we have been grew by 16.5% in terms of revenue on the Y-o-Y basis.
We are maintaining the healthy balance sheet with a low gearing ratio of 0.2x on the debt gearing ratio. Now I will be running you through the stand-alone performance of the hospital business.
Our stand-alone revenue is INR 218 crores in the current quarter, is INR 223 crores in the quarter 2 of FY '24, and it is down by 2.4% on a Y-o-Y basis. The EBITDA is INR 14.8 crores in the current quarter versus INR 57.5 crores in the last year quarter 2 with a margin of 18.7% in the current quarter versus 25.8% in the quarter 2 of FY '24, and it has been down by 29.1% on a Y-o-Y basis.
The PBT has been clocked at around INR 28.3 crores in the current quarter versus INR 47.3 crores in the quarter 2 of last year with a margin of 12.9% in the current quarter versus 21.2% in the quarter 2 of FY '24.
On the stand-alone performance, our revenue has been degrowth by 2.4% on a Y-o-Y basis due to reduction of surgeries by 7% on Y-o-Y basis. Rajasthan and Gujarat had witnessed a major rainfall in the current quarter, where most of the district in Gujarat and Rajasthan has experienced heavy flooding, which has resulted in patients postponing elective surgeries.
This result the major dip in the surgeries in arthroplasty business as well as in the other specialties. Our EBITDA on the stand-alone performance has degrown due to the above reasons, which has resulted the higher expenses in proportion to the revenue.
On the stand-alone basis, we continue to maintain a strong balance sheet with a positive net cash balance of INR 74 crores. With this operating leverage kicking in and growing with asset-light approach, our stand-alone ROCE is resulted to 15% in quarter 2 at an annualized business.
Our ARPOB and ALOS has shown improvement at INR 38,779 crores and 3.6, respectively, compared to INR 36,136 crores and 3.92 in the same period of the previous year. ARPOB on Y-o-Y basis has been grew by around 7.3%. The number of occupied beds increased by over 2% on Y-o-Y basis as the occupancy ratio of 49% in the current quarter due to acquisition of Sanar.
The payer mix of the current quarter is 36% from the self patient, 41% from insurance and 23% from the government business.
Now from the investment point of view, the further CapEx will be incurred for the capacity expansion from 130 beds to 200 beds in the coming years for Sanar International Hospitals.
The revenue of Shalby finance is INR 25.74 crores in the current quarter versus INR 23.7 crores in the Q1 of FY '25 with a growth of 8.3% on a quarter-on-quarter basis. The ARPOB and ALOS of Shalby Sanar for the current quarter is around INR 85,722 crores and 3.64, respectively in the current quarter.
Shalby Sanar is presently operating at 25% occupancy level and it will increase gradually in the coming quarters. In the current quarter, 54% of the revenue contribution of Sanar has been generated from the international patient.
Revenue from international patients on the overall group basis is INR 15.3 crores, which includes Sanar as well as Shalby Limited. At Shalby, our undivided focus has been demonstrating our clinical excellence through successful expansion of many diverse critical surgeries in several of our hospital units.
We also take a pride to share that we have successfully completed 28 transplants, 12 in kidney, 11 in liver and 5 in BMTs during the current quarter. In the current -- in September 2024, Shalby Krishna Hospitals has got a license of bone bank and has successfully operationalized in the ongoing quarter 3 of FY '25.
Now our SOCE franchisee business has delivered adequate performance in the current quarter. The total revenue from the FOSO business is INR 2.3 crores, which has been grew by around 14% on Y-o-Y basis and the total revenue from FOSM business is around INR 1 crores, which is flat on the Y-o-Y basis.
Our new SOCE unit at Rajkot has become operationalized from July 2025 onwards. We have been incredibly selective in our choice of potential partners from many inquiries we received so far to maintain the reputation of our strong brands to follow clearly defined process and a strict criteria when making these selections.
Looking forward, we have a strong sense of optimize about seeing positive development in the upcoming quarter of this fiscal year. Our primary focus remains on utilizing our expertise and excellence in orthopedics with the goal of establishing more than 40 franchisee hospital across India within the next 4 to 5 years.
For our Home Care business, we served 9,000-plus patients in the current quarter versus around 7,800-plus patients in the quarter 2 of the last year, with a growth of 15.3% patient count in the similar period of the last year.
Revenue from the Home Care business is INR 3.9 crores in the current quarter versus INR 3.6 crores in the same quarter of the last year, which is 7% growth on the Y-o-Y basis.
As part of our social commitment, we continue to spread awareness about the importance of health and well-being through various social media platform and created 130-plus health care video. We also conducted more than 410-plus health care camps and 160-plus health care talks across all our units during the last quarter as a part of various community outreach program.
Shalby also takes the pride in nurturing young talent through our Shalby Academy vertical with 1,135-plus students registered in various health care program during the last quarter.
We also like to inform you that Shalby Advanced Academy has successfully completed enrollment process of MBAHHM Program of Ganpat University with 34 enrollments for the academic year 2024 to '26 batch.
Shalby Academy has successfully launched first batch of Kaushalya The University's Diploma & MSC courses at our premises. Our SAT Implant Business has delivered minimal EBITDA loss of INR 72 lakhs in the quarter 2 of FY '25 due to marketing, sales promotion and other aligned expenses incurred during the quarter for our upcoming products. Our operational efficiency is improving quarter-on-quarter basis with the optimization of the procurement cost.
Shalby Advanced Technology U.S. has delivered the revenue of INR 27.8 crores in the current quarter versus INR 14.7 crores in the quarter 2 of FY '24, with a growth of 90% on Y-o-Y basis.
Now I will hand over the call to Deepak to share insight about our implant business. Over to you, Deepak.
Thank you, Amit, and good evening, everyone. During the second quarter of this financial year, our implant business made significant progress, generating revenues of INR 27.8 crores, which is a growth of 90% on a year-on-year basis with contribution from the U.S. and OUS at 30% and 70%, respectively.
The total constructs sold has grown by 46% from 2,174 units to 3,184 units in quarter 2 financial year '25. It's grown by 85% from 3,585 to 6,644 in H1 of financial year '25.
The average cost of goods manufactured per component has decreased by 30% quarter-on-quarter basis and 35% year-on-year basis. We are actively focused on bolstering our team with skilled professionals, transitioning our sales mix to retail customers from wholesale, enhancing operational capacity and efficiency expanding our product pipeline through extensive research and development efforts and significantly reducing procurement costs.
The reception of our Shalby Advance Technology implants and hospitals across all markets that we have launched has been highly positive and we've received additional orders from the Indonesian market.
With our key strategies firmly in place, our team is fully dedicated to executing these plans flawlessly. Shalby is well positioned to achieve double-digit growth with sustainable profitability while also expanding and deepening our presence by opening up new geographies.
These efforts will ultimately drive the creation of sustainable value for all stakeholders at Shalby. The 4 different pillars that we've been focusing, let me speak about each 1 of the -- each pillars quickly.
The first pillar being sales. The growth of sales has been 90% over the last quarter and 8% over the previous quarter. In Indonesia, we have surpassed $0.5 million of business already in the first half of the year. Response has been extremely great and we'll be adding more surgeons in time to come.
India business has had a growth of 115% over the last quarter and 91% growth over the previous quarter. We've added more than 18 people in the team in India and about 5 distributors in this quarter.
In the U.S. business, we have added 5 new customers as well as onboard at 7 distributors in this quarter. We are looking at Latin America, 5 countries in Latin America, Russia, Iran, Malaysia actively as our next growth phase along with expansion in Japan.
When it comes to COGS reduction, our cost of goods manufactured has gone down by 30% over the previous quarter, and we're currently at $77 against $109 of last quarter, which has been done by change in vendors for raw materials and increasing our capacity in our plant.
From a capacity increase standpoint, which is our Pillar 3, our plant has significantly grown its manufacturing capabilities where we are manufacturing approximately 2,700 components in April, we have been able to manufacture 7,500-plus components in September. This has allowed us to produce more to take care of the demand in the market as well as drive the cost of goods down.
Looking at more new vendors for raw materials coming on board in quarter 3 and quarter 4, we will have a good capacity soon to expand for global business. And the last pillar being our new products. This team is working not only for the current day, but also for the year and 2 years down the lane. So we have established SAT India, and we have started hiring engineers.
We have more than 15 engineers who have been hired across the globe in the last -- in this quarter. And we have also looked at strategic partnership for some products for India and Southeast Asia, which will drive growth for some of our new products like G21 bone cements in partnership with Italian company.
So that's it from my end. Thank you, Amit. Over to you back.
Thanks, Deepak. So I can -- now I request the moderator to open the forum for the Q&A.
[Operator Instructions] The first question is from the line of [ Rajesh ] is an individual investor.
Wish you a very, very happy Diwali, sir.
Thank you.
Sir, my question is, is there any plan for raising equity capital to fasten our growth of our company, specifically -- for aggressive growth, specifically in Mumbai and NCR region? Or any plan in future to hive off this implant business and focus more on our more lucrative business which is hospital business, which have more secular growth and have higher margins?
So thank you. Just to answer your question. In terms of the hospital, we are not looking for any kind of equity infusion right now because our cash position on the stand-alone basis is suffice to take care for our expansion for Delhi as well as Mumbai location.
Apart from that, our balance sheet is so strong that we can raise the further fund from the banks, we don't have that cash liquidity issue. So that is suffice if we required to invest somewhere apart from Mumbai and Delhi. So our balance sheet is sufficient to take care of that.
Now in terms of the implant, you can see the implant, we have already started the story that implant will do in the coming years. In the current quarter, you can see there is a 90% growth in terms of the top line.
And as we will progress in the coming quarters, implant will start delivering the profit. And in the coming years, it will deliver the higher double-digit profit. So it is a profitable venture for us, and there is no possibility that we will look forward for any kind hive off for that.
Okay. And sir, like if we have any plan for any aggressive inorganic growth in Delhi NCR region because it is a very big area and very lucrative as far as hospital business is there because if you see the average revenue per bed in NCR region is very lucrative and very high-margin business is there in the Delhi NCR and there is lot of opportunity here, sir, also like in Delhi, Noida, Gaziabad, and Faridabad and they have very ample opportunity for our company.
If we have any plan -- aggressive plan in Delhi NCR and especially in the Delhi NCR and Mumbai region because they are very lucrative as far as this business is concerned.
We've already started putting up our footprint into the NCR and Bombay is already in plan, and we are always evaluating the right proposition what we have. So whenever the good opportunity will be there, we will evaluate. But right now, whatever we have in our hands, we have briefed to the market where we are moving out.
The next question is from the line of Rohan from Envision Capital.
Sir, my first question was on the surgeries that got postponed because of monsoon in Gujarat and Rajasthan. So are we seeing spillover in the month of October? How has been the response? And do we see the growth coming back in this quarter based on the spillover from the last quarter?
So in terms of the growth, you can see except this quarter, if you can see, Y-o-Y basis all the quarter we have delivered the good reasonable amount of growth, okay? So this quarter, we expect the growth will be in the similar range, but we cannot comment right now because quarter 3 just started. We have to see how the things are going on.
Just to add to that, in the month of October, from what we have seen, definitely see growth and that spillover effect coming in this quarter despite 3 or 4 days of the month be impacted due to the festive season of Diwali. So we definitely see that. In fact, even in the month of November, there are a lot of surgeries lined up in 2 of our flagship units if you compare it to the previous quarter or if you compare it to the same quarter last year. So the quarter 3 is expected to be kind of -- quarter 3 and quarter 4, we'll see the spillover effects of quarter 2.
Got it. Got it. And sir, my second question was on Sanar. So while we've started operations with 130 beds and currently at 25% occupancy. So what could be the idea behind scaling up it right away? And what is the kind of time line that we are looking at Sanar scaling up to our occupancy level at hospital level of 50%?
Sure. So Mr Nanda -- Naresh Kapoor is also part of the call. He takes care of the north cluster with -- for Shalby on the hospital side, so I request him to take that question.
Good evening, everyone. On your question regarding the expansion. So typically, right now, the expansion plan is on the drawing board. And once we have finalized that, then it will go for the permissions and everything. And in my opinion, it would take roughly about 12 months to 18 months to complete once we apply for permission and we get the permission, et cetera. So on your question that since we are operating at 25%, so we see in coming quarters, the occupancy will grow. And as the occupancy grow, we do feel that within next 12 to 18 months, we will be needing enhanced capacity.
Got it. Got it. And sir, if I can just 1 more question here. So basically, at the hospital level, we've been in this range of 49% -- 48%, 49% kind of occupancy. And we see our peers now doing occupancy in the range of 60% to 70%. So what are the drivers that we are looking at? What are the steps that we've taken to scale up occupancy at hospital level -- at the company level?
So I think the steps -- I think, first of all, I think we have to look at the numbers slightly differently. So what happens is that as Delhi Sanar got added. And as Amit also said -- alluded earlier that the occupancy level is at 25% at the moment. So at the aggregate level, what happens is that your overall occupancy comes down because of that. So that's the reason the occupancy numbers in percentage have come down.
But if you look at the absolute numbers, the absolute numbers, we've seen a growth on a year-on-year basis. So it's a 12% growth, so -- and which we expected to continue, we'll see occupancy growth in terms of absolute occupancy as we -- as well as an ARPOB growth of between 4% to 6% that we've seen historically.
The next question is from the line of Kashish.
Two questions from my end. First question will be on ARPOB. We have seen a growth of 7 percentage Y-o-Y this time around. So how are you looking at ARPOB for at least FY '25? And what will be its growth drivers?
So as we have mentioned, the ARPOB will keep growing on the quarter-on-quarter basis. And Sanar occupancy will grow, that will also contribute into the ARPOB because the international patients, we have the higher ARPOB. So the way we have seen historically, it is growing every quarter 5% to 7% or every year around 10% to 12% on a basis that will continue to grow.
So adding to him, I'd just like to tell that we will be -- we are focusing on all transplant surgeries, the high-end surgeries, liver transplant, kidney transplants and all, which all are going to give us a good ARPOB.
My second question is regarding our payer mix. So if you see our insurance has gone down to 41% from 44.2% last year. So any specific reason for this, as insurance penetration has been increasing? So our competitors insurance -- generation from insurance revenue is quite higher. So can you just throw some light why it is so?
Okay. So just to say regarding this, as we mentioned, in the current quarter, there is a lot of surgeries have come down into the Gujarat region also and in our flagship unit and a couple of units, we have the higher TPA business.
And in the couple of states like MP, we have a more of a government business. So this time, the mix has changed because in terms of this mix the Gujarat have the lower surgeries and all these things, so that is the reason the payer mix has been changed.
And we have to look at it hospital wise specific because if you look at Jabalpur, for example, if you look at most of the hospitals in the region, about 60% of the number of patients who walk into the hospital out of 100 are CGHS patients, right?
So now what happens is that the numbers look skewed because of such kind of hospitals. And then on the other side, you have our flagship hospital, where we don't take government patients at all. So you have only self-paying and TPA patients in our flagship hospital. So hospital-wise, it is different and region-specific as well, it will be different. I don't think it will be fair to compare us with any of our peers, the reason being that most of our peers have most -- like for example, if you're comparing us to, say, a hospital, which has most of hospital group, which has most of the hospitals in Delhi, the payer mix is expected to be different. And I hope that answers your question.
Yes, sir, it does.
The next question is from the line of [ Raj Kumar ] is an individual investor.
Yes. Sir, just a few questions. So the first one is on the tax rate. I just want to know what is the guidance? Because tax rate seems to be even on stand-alone basis, almost 33%. So is it due to that we are still in the MAT regime?
Yes. We are not able to hear you clearly.
Yes. Sir, I just want to know what is the -- any reason why our tax rate is almost 35%, given that the domestic companies pay only 25%? So is it due to that we are still in the MAT regime?
So we are still under the MAT regimen. So the MAT will only get utilized by the end of this year. So thereafter, we will see the impact. So till current year or maybe the quarter 1 of the next year, the MAT will continue.
Okay. Okay. Yes. So then the next question is -- this new insurance scheme introduced by PM Ayushman Bharat for senior citizen, I just wanted to know what is the -- will we get any uptick out of this because it's targeted towards the senior citizens and given that a lot of senior citizens have bone related issues. So will Shalby get any uptick because more people will be covered and more people will opt for surgeries? Is that a fair assessment?
So at the moment -- so if I've understood your question, right, because your voice was a little blurred, but basically, it is fairly early to comment on this right now. I think we have to let a few -- a few weeks, a few months past. And then I think at that point of time, we'll be able to better comment on the impact of this change.
Okay. But at a ballpark level, is that a fair assessment from an investor standpoint that can we expect there will be some uptick in business?
So far -- refer to only 2 hospitals.
See, out of the hospitals that we operate, only 2 of the hospitals are Ayushman Bharat empanelled for us, right? So for us, any which way the impact will be very minimal. For the rest of the hospitals, I mean we are unable to kind of give you an assessment of the overall impact. But I can tell you for us, it won't be a significant impact.
Okay. Got it, sir. And lastly, one housekeeping question. So these other expenses on a consolidated basis, I see almost INR 34 crores reported current quarter which is almost 50% jump year-over-year. So is there any one-off in this line item?
So there is one -- not one-off. If you compare to the last year quarter 2, we have not consolidated Sanar. So Sanar expenses are coming into the place. Apart from that, as our implant business is going up, so you can see there will be some expenses around that. On the stand-alone level, we don't have much of the increase, except INR 1.5 crores, the rest of the impact is the addition of Sanar and implant business. There is no one-off.
Okay. Because even compared to June quarter, it has gone up by almost INR 7 crores, INR 8 crores, so...
So compared to June quarter, if you will see that I have mentioned, in the implant, there is a growth in terms of the top line also. In terms of stand-alone, there will be some increase in the cost, okay? And the other entities also there is increase. So that is impacting there.
Okay. And sir, any guidance on the written on equity that you are targeting for FY '25-'26 onwards? Because I know that a lot of acquisition that has happened this time in implant business is getting stabilized, so I just want to know from '25-'26 onwards, what kind of return on equity we are kind of expecting?
So you can see in this quarter, we have shown around 15% and prior quarters, you have seen the 18%. This quarter was slightly exceptional, you can understand. And we have contributed always higher on the return on equity every quarter it is growing. So we can see somewhere by the end of the year, it will be around 20% kind of thing.
So this is on a consol basis because you are reporting only on stand-alone basis, the return on equity. So I'm asking on the consol basis what is the return on equity?
So consol basis, we will come back to you. We don't have the data handy with us.
Okay. Yes, because I've asked this question last call also, sir, I didn't get a response. So that is the reason I'm -- and I would appreciate if you could e-mail...
Have you reach out to Jigar Todi, our Investor Relations?
No. So okay, yes, I'll take it off-line, sir.
Yes, so please drop a e-mail. We will share the data with you.
The next question is from the line of Bino from Elara Capital.
Just a follow-up on Sanar. What is the level of profitability there? And what is our expectation over the next couple of quarters?
Yes, Mr. Kapoor, if you could take that, please?
Yes. In terms of occupancy, right now, as earlier mentioned by Amit, we are around 25%, and it's growing now. And we expect next couple of quarters, it will grow further as we have got a couple of new doctors on board in high-end specialties like liver transplant, bone marrow transplant and medical oncology.
And also, we have got recently accreditation by AACI, which is an American accreditation company. Now this accreditation will help us in getting some institutional business from different countries. So we expect the opportunity to go up.
My question is around profitability. What is the EBITDA margin? And how do you expect it to move over the next 3, 4 quarters?
Okay. Sorry, I heard it wrong, maybe Amit can answer this.
So you can see Sanar, we are at around EBITDA neutral. And as Mr. Kapoor said, there a lot of potentials are into the Sanar with this accreditations and the business will grow and it's growing on quarter-on-quarter basis. In the current year, we are seeing -- it will be the EBITDA positive in the single-digit kind of thing. Next year, it will be on the -- moving to the double-digit kind of profitability with the growth in occupancy and the...
Understood. And just to recap, what is the sort of bed addition we are planning there? Currently 180 I believe?
We'll add around 60 to 70 beds, so taking the capacity to around 200 beds.
Okay. And will that be for adding any new specialities or would it be in the existing speciality?
So specialties booking more or less we are complete, but definitely, we'll be taking up some more additional high-end work like CAR-T cell, which is along with bone marrow transplant, which is not being done by many of the hospitals. So we have a couple of patients lined up, and we have recently tied up with the company, which is manufacturing the CAR-T cells and that business will give a substantial revenue. The ticket price just in case I can mention that, ticket size is roughly around INR 70 lakhs to INR 1 crore per patient.
Got it. Coming back to the monsoon impact on surgeries. Can you specify which exactly months or weeks it was in...
Can you just repeat the question?
Yes. The impact of monsoon on reduced number of surgeries in Gujarat, Rajasthan, could you tell us which [indiscernible] weeks or months there during the quarter?
It was majorly in the month of July and some part in the August also.
Okay. So if you look at the numbers, they are comparable in September Y-o-Y compared to last year? Or in other words, has September -- in September, with the number of surgeries pick back up to the normal rate?
Yes. So if you're comparing month-on-month basis, September last year versus September this year, the surgeries has been grown. The impact which has been there in the month of August as -- sorry for July and slightly in the month of August that has not been covered totally in the month of September, and we are going to catch up in the current quarter.
The next question is from the line of Pinaki Banerjee from AUM Capital Private Limited.
Sir, we have consolidated PL profit and loss account, sir, the gross operating expenses have gone up by almost 25% from INR 252 crores to INR 316 crores. So what is the reason to that?
So you are asking for Y-o-Y basis?
Yes, half yearly Y-o-Y basis.
So as I mentioned last year, first half, we don't have the Sanar into the consolidation. Sanar has been consolidated into the current quarter. This is the one reason. And another impact is due to the growth into this implant business, which has been growing compared to last year, which has impacted into the expenses.
Okay. And sir, your debt levels have also gone up by from INR 313 crores to INR 405 crores. So sir, what is the reason for that?
The reason if you can see, this is majorly as you can see, the growth is coming into the implant business. We are investing to the implant. The new product is going to be launched into the upcoming quarter. So that is a working capital utilization, mainly into the implant business and some part into the Sanar business, the Sanar is minimal majorly into the implant business only.
Okay, sir. And sir, one last question. Sir, your tax rate is almost 83% for this quarter and which was -- last quarter, it was almost 52%. So actually, what is the reason just now because the MAT adjustment is 1 of the factors. Is it the only reason?
No. The reason you can see in the consolidation, we stopped creating the deferred tax on our implant business as well as into the Sanar. So that is the reason you can see the impact, whatever the tax -- actual tax is coming into the stand-alone, almost including the other non-potential subsidiaries, the tax rate -- tax amount is similar to -- it is coming into the consolidated, and we are not creating any deferred tax for this implant as well as our Sanar business.
The next question is from the line of Priyank from Abakkus Asset Managers LLP.
Sir, my first question is on occupancy. What is the sort of peak occupancy our business can have?
So basically, what we have generally noticed is that around 70% is the level at which we can grow on a sustainable basis with most of the large institutions that we run.
Okay. So where will we see assuming that kind of...
As I said, we are expecting a good anywhere between 12% to 15% volume growth on a consistent basis. And as Amit eluded earlier, again, the ARPOB growth will be -- I mean, ARPOB growth will be over and above that. So based on that 12% to 15%, I think you can [indiscernible] get to the 70% level.
Okay, sir. Understood. Sir, I wanted to understand the economics of our FOSO and FOSM business. So compared to the own hospital, where -- how much CapEx we have to do in the FOSM business, that I wanted to understand?
Yes, I'll just add to the previous question that you said. So basically, some of the newer hospitals, like, for example, say, a Delhi Sanar hospital or, say, Mohali. So within the group, there are many hospitals where the growth will be higher because the occupancy level today is low. I'm talking about a 12% to 15% volume growth in some of the mature units is what I was referring to.
No, sir, from the perspective of the CapEx and the overall economics of the hospitals for FOSO and FOSM business that I'm deferring to.
Yes. So from the CapEx point of view, for the FOSM business, as the entire franchise business, you have to understand is the asset-light model. So FOSM don't have to do any kind of CapEx. FOSO sometimes, maybe we have to move the CapEx in the range of INR 3 crores to INR 5 crores, but that depends upon the situation. But this entire franchise model is an asset-light model.
So INR 3 crores to INR 5 crores for how much beds we have to do for FOSO?
So it's ranging between 25 bed to 50, 60 bed kind of thing.
Understood. Understood, sir.
This is also not mandatory, okay? So that is dependent upon the what kind of terms we're entering, but max to max it's a INR 3 crores to INR 5 crore kind of thing.
Understood. So I wanted to understand in terms of the accounting part all the revenues that we earn in FOSO business would be consolidated along with the expenses. Therefore, FOSM business all the revenue will be having revenue sharing model. Is that the right way to understand it?
Yes. So FOSO you have to understand is a line-to-line consolidation, okay? So that is getting added into our stand-alone performance. The revenue is getting added into revenue expenses are getting added into the expenses. But for the FOSM, whatever the revenue share we have, that is just coming into the revenue from operations as a management fee that is -- in fact, that is getting included into the top line and is directly contributing to the bottom line also.
Sir, the next question is from the line of [ Raunak Kapoor ] from Elara Capital.
So I have 2 questions. So firstly, I want to know like what's your overall guidance like for FY '25 regarding revenue and EBITDA and your CapEx guidance? And second question is regarding the implant business. How do you see it in the next FY '25 and over the next 3 years, let's say?
So the guidance that you are seeing on the overall basis, I'm just aggregating into the 2 parts. One is the hospital business and other is the implant business. Implant has already picked up their speed. We are going to see the half-year growth into the coming quarters compared to the last year, quarter 3 and quarter 4 will be the good quarter compared to the current quarter also. We will grow fast for our implant business. For the hospital business, we are always delivering the high double-digit growth kind of thing, and we are going with the same kind of direction right now.
And I think you should also consider the fact that Delhi Sanar Hospital in terms of the top line was not -- I mean, we acquired it early this year. So the impact of that was not part of the financials last year. So that will add to the top line in this -- in this particular year.
Yes. So this year, you will see the 12 months of impact of Delhi Sanar. Last year, it was just 2 months. So the 10 months of addition from the Sanar Hospital will contribute into the top line.
Okay. And so implant business, like any give an absolute number like where do you see it in the next 3 years?
Deepak, would you like to comment?
Yes. So on the implant business, we still stick to part of trying to get to the $100 million business by 5 years' time from now. So 2028-'29 is when we see $100 business coming into picture.
Okay. And so hospital, you say any absolute number for this year?
So we've just given the guidance on the percentage. So absolute will come accordingly. So that's what contribute to [indiscernible] and direction.
The next question is from the line of [ Rajesh ] is an individual investor.
Actually, I would like to ask 1 question. Sir, if you can give some guidance on occupancy level in the near future because now onwards, every -- little bit increase in occupancy levels will add to the operating leverage and the bottom line will be increased very far if we can have occupancy level increased to 60%, 70%. Would you like to give any guidance on occupancy level, it can reach up to 70% on an overall basis, sir, not on mature hospital, but on an overall basis, sir?
So you can see our occupancy on quarter-on-quarter in absolute terms, it is growing. We should not see it on the percentage terms because once we are adding the operating beds the percentage due to the denominator is getting changed, okay? So from 680 what we have right now the occupancy, we are going to see the very shortly in the upcoming quarter, it will be ranging between 710 to [ 736 ]...
Okay. Okay. Right, sir. Because actually, just wanted to understand because in case of increase in -- because I have like something like the -- quantum of that we have operational beds we have and the valuation we get from the market is quite different from the industry standard. So if we can increase the occupancy level aggressively, then the valuation can be very attractive for our....
Kapoor?
Yes. Feedback noted. But we are working continuously on the occupancy level. So hiring the right clinical talent across different specialties -- and so basically, what happens is we have to be very selective on that front also because at times, there are doctors that can bring in a lot of top line, but if you are not able to control the expenses because often what happens is that a huge chunk is taken away by them as doctor fees, we might not have control over the consumables and materials.
So we have to take a right judgment call at any given time. But organically, if you see, I think the past trend gives a good sense of what it will look like 5 years from now. So about 5 years ago, we were ranging at 300, 330 occupancy in terms of beds which has now consistently grown and we are at about anywhere between 650 to 700 today, and this is my new nighttime occupancy because in the daytime, you see 15% higher occupancy than these numbers also, but these patients are often discharged by the end of the day.
So this is how we can expect the numbers to again double over the next 4 to 5 years from here. And at that point of time, you will see that essentially, we will be at that 70%, 75% level. However, at the same time, you will continuously be adding beds in terms of organic and inorganic capacity. So again, from that perspective, you will see that the average will again come below 70%. So this is a continuous process.
Okay. Because I see there is much value in our company as compared to other peers in our industry. So I like our company, just trying to compare that.
Thank you for the feedback.
The next question is from the line of Rohan from Envision Capital.
So sir, amongst the hospitals that you mentioned the likes of Mohali, Jabalpur. So which of these do you consider mature and non-mature, what is the classification as far as the occupancy goes?
So I think based on the potential to grow in a given unit, based on the existing occupancy level is how we determine that this is a significant growth area compared to, say, a hospital which is already at a 50%, 55%, 60% occupancy. We then consider it to be not a very high-growth area, but maybe a consistent compounder from there.
Right. So which one of those are once there's a focus of growth where you see more space to grow?
Well, we see a potential in different places of different things. But if you ask me, Delhi, Mohali, Jabalpur, Naroda are these 4 hospitals where there is significant possibilities of growth from here on.
Understood. And sir, the second question was over a longer term, say, when the Sanar Hospital scales up, what is the kind of EBIT margin that we are looking to do on the hospital business?
Talking about EBIT margin or EBITDA margin?
Yes, yes. EBIT margin. There was a segmental margin that you report. So what is the kind of margin that we are looking -- we are looking at the hospital business?
For hospital business, you can see we are ranging between 23% to 25%. Sanar is on the breakeven. If you will include the Sanar, we are ranging between close to around 21% to 22%. And as the things will progress, you can see that we don't have any debt into this -- our existing hospital and we are not seeing any kind of major CapEx or major debt will come into the stand-alone, but with the induction of Sanar, we are sitting at the debt of around INR 60 crores. So we are seeing that trend will continue of around 21% to 23% for the next financial year.
The next question is from the line of Dhruv Shah from Ambika Fincap.
Deepak, I have a question -- 3 questions on SAT. Does the $8 million incremental revenue still stand, the guidance?
For the year?
Yes, because that's your guidance, right, $8 million incremental revenue on Shalby Advanced Technologies.
So $8 million incremental revenue for this year, right?
Yes, yes, yes. That's what I'm saying.
Yes, we're gunning for that.
Sorry, I couldn't hear you.
Yes. It still stands. We're gunning for it.
Okay. And Deepak, the second question is the CKS Gold launch in Q4, which we are expecting, are we due because we delayed 2 quarters?
It's gone for the U.S. FDA approval. So we're waiting for the U.S. FDA approval to come through. So expecting the approval to come anywhere between December and January. So -- but it's nothing -- it's not in our hands, it's been in the U.S. FDA and it takes us time from a standpoint of approval and what they need in terms of tests and stuff. But from our side, we're waiting for the approval.
Okay. And Shanay, we are already on INR 200 crores of debt now. And with Ashapura's CapEx, which will start because now we have got the approval, what kind of peak debt are we looking at?
Look, prior to the PK Healthcare acquisition, which is the Delhi NCR Hospital, we were sitting on about INR 80 crores of net cash. So the position of that company was different. So we are at a debt of this level right now, primarily because of the acquisition that we made. So that was -- so that's the reason. From the perspective of the peak debt, very honestly, we would be comfortable at about -- I mean, internally speaking, debt equity ratio, 1:1 or maybe 3x EBITDA.
But very honestly, we don't see ourselves going there. The reason being that we are already generating anywhere between INR 200 crores to INR 250 crores of annual EBITDA. So we feel that -- and that number is also growing on an annual basis. So I believe that our internal accruals should take care of a large part of these expansion plans. And if at all, we will have to take on minimal debt going forward.
What was the CapEx for Ashapura?
So Asha Parekh Hospital in Bombay, we are looking at around INR 250 crores kind of a number from the investment. That will again be kind of spread across 36 months from the day that we filed the lease agreement with the Charity Commissioner. So from that day onwards, it will take 36 months in a stage-wise manner.
Right, right, right. And when is that expected by because -- we had done a press release, right? We had got a Charity Commissioner's approval?
Yes. So the Charity Commissioner has approved it. And now basically, the Trust authorities are working on submission of the lease agreement. So with the Charity Commissioner in their order of approval told the Trust to submit the lease deed to the Charity Commissioner's office within 6 months of the date of the order. So the Trust at the moment is working on completing the lease document. And soon they should be able to submit it to the Charity Commissioner's office, after which we will be getting the handover of the premises.
Okay. Fair enough. Deepak, one last question from my end. Congratulations, first of all, for reducing 30% of your cost from $109 to $77. That's really appreciated. Do we have any further room to reduce this from $77?
Yes, we have, and we're working towards it. So it's a multiple function of raw material coming from vendors and also improving some more efficiency in our plant with an ongoing path, right, like how sales is an ongoing task -- even COGS is an ongoing...
As there are no further questions, I would now like to hand the conference over to Mr. Jigar for closing comments.
Thank you, everybody, for joining the call. We will connect again into the next quarter. Apart from that, if you have any questions, you can reach out to our investor e-mail ID. Thank you. Happy Diwali.
Thank you on behalf of Elara Securities Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.