Shalby Ltd
NSE:SHALBY
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Hi, everybody good morning to all of you. This is Dr. Bino Pathiparampil from Elara Securities, welcoming all of you to the Shalby Limited Q4 and Full Year FY 2023 Earnings Call hosted by Elara Securities. Today, we have with us our senior management representatives from Shalby. We will start with opening remarks from Mr. Sushobhan Dasgupta, Vice Chairman and Global President; and Mr. Parag Agarawal, Chief Business Officer, followed by a discussion on financial performance by Mr. Amit Pathak, Chief Financial Officer.
After that, we will open the floor for Q&A for all the participants. Should you need any assistance, please message on chatbox. I will now hand over to Mr. Puneet Maheshwari for important disclaimers regarding any forward-looking statements that may be made during the call. Over to you, Puneet.
Thanks, Bino. Good morning, 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. That may involve risks and uncertainties. Kindly refer to Slide #39 of the investor presentation for a detailed disclaimer. And now I'd like to hand over the call to Mr. Sushobhan Dasgupta, Vice Chairman and Global President, for his opening remarks. Thank you, and over to you, sir.
Thank you, Puneet, and good morning, everyone, and a warm welcome to all our Shalby Limited's fourth quarter and full year 2023 earnings call. All of us at Shalby sincerely hope that you, your families and your friends stay happy and healthy as always. Before I start on our quarterly and annual achievements, let me take a moment to introduce Mr. Amit Pathak who has joined our Shalby as Chief Financial Officer.
Amit is a chartered accountant and the company's secretary with 20 years of rich experience with companies of refuting accounts and finance management, financial planning and budgeting, treasury management, investor relations, due diligence and cost optimization initiatives, having strategic experience across industries and functions. Proudly joining our organization, Amit was heading the finance and accounts function at Bharat Serums and Vaccines Limited as Vice President Finance.
And previous to that, Amit worked as the CFO of Vimta Labs Limited and various senior positions with Gati Limited and Birla Group. So please join me in welcoming Amit to our Shalby family.
Now to our quarterly achievements. Our hospital business continued to show consistent performance in all key operational and financial parameters in the last quarter. On a year-on-year basis, delivering high double-digit growth in the key metrics of inpatient counts, which include day care and surgery counts growing by 24% and 18%, respectively.
Our hospital revenue and EBITDA grew by 21% and 13%, respectively, in quarter 4 of the full year 2023 year-on-year basis. Such excellent performances are a result of the continuous all-round efforts taken by our Shalby group through various business development initiatives. From a strategic perspective, we undertook various initiatives to improve occupancy levels and brand recognition by leveraging several of the digital media and marketing campaigns, including advertisement kiosk at the airport besides placing digital LED holdings.
We conducted more than 935 health care camps and 388 health care talks across all units, thereby improving our occupied beds to 579 beds in this quarter from 499 beds in the same quarter of last year. These initiatives will continue to benefit ramping up our occupancy levels in the coming quarters too.
At Shalby, we remain focused in demonstrating clinical excellence by performing critical surgeries across many of our units. Some of them I can cite here on the successful first case of TAVI. TAVI means transcatheter aortic valve implantation, performed in Shalby Jaipur, a challenging marginal kidney transplant done successfully at Shalby Indore for a 19-year old girl would be the other example that I could cite here.
Those smaller numbers, we are proud to inform that we have performed more than 220 kidney and liver transplant at our SG and Indore unit. In continuation, we have also applied for hand and heart transplant licenses at SG unit and kidney transplant licenses at our Naroda unit.
I'm very excited about our growing home care business, which grew by 38% year-on-year with revenues of INR 9.8 crores and patient count of 27,000, which is a growth of 34% in full year '23 from 2022. Additionally, our international revenue grew by more than 100% year-on-year with revenues of INR 10.4 crores in the full year 2023.
Shalby also takes immense pride in nurturing young talent who shall be academy with more than 2,000 students registered in the various health care programs during the full year of '23. We feel proud providing various job offers to these students across all our hospitals. We, being a health care service provider, understand our responsibility towards our nation and its citizens to make them more and more aware about their health. And in this regard, we have created more than 250 videos on various health conditions as a part of health care education and awareness program and also created 28 long and short health care video contents in partnership with Google to its arm, YouTube.
Our knee and hip implant manufacturing business under Shalby Advanced Technologies, Inc. in California, U.S.A. has made steady progress during the full year '23, wherein revenue grew 3x multiple to INR 94 crores, of which sales in the U.S. and India contributed 60% and 40%, respectively. Our U.S. customer sales mix from retail and wholesale remained at 58% and 42%, respectively, in quarter 4, which helped in better profitability mix.
EBITDA became positive in full year '23 after a significant cost reduction activities in raw material and freight cost and this within a span of 22 months from our takeover of the business. With all the efforts to improve in plant production, we are now able to produce on an average 4,000 to 4,500 components per month in the full year of '23 versus the 2,000-plus components per month that we produced during full year 2022. We successfully navigated through our ISO 13485 audit or Shalby Advanced Technologies in January 2023 and have received the certification, a proud testament to the high standards of quality we hold ourselves accountable to -- in our implant business.
We are receiving very positive responses from the consumption of a Shalby consensus implant from our in-house diligence as well as from outside surgeons. We are also very delighted to inform that we have received the license approval to sell our implants in Indonesia. We will soon be receiving registration approval to launch our Shalby implant product in Latin American countries like Argentina and Colombia in the coming quarters.
Further, we remain focused on building a strong team with the right attitude, maintaining healthy customer sales mix, continuously increasing operational capacity and thereby efficiencies, adding new products in the pipeline supported with extensive research and development activities and substantially bringing down our procurement costs. With all key strategies in place, our team is extremely committed on flawless execution of such strategies with the right people and leadership in place.
All this, in turn, will help create sustainable value for all stakeholders at Shalby Limited. Now I will hand it over to Mr. Parag Agarawal, our Chief Business Officer at Shalby Limited to discuss our SOCE quarterly performance. Over to Parag.
Thank you so much, Sushobhan, for sharing quarterly developments on hospital and implant business. A very warm good morning, everyone. Let me discuss the full year FY '23 performance for SOCE vertical. During full year FY '23, we have added 2 new SOCE franchise units at Lucknow and Gwalior under Shalby operated and Shalby managed business model. These franchise units are fully operationalized now. With this, now we have 4 SOCE units at Ahmedabad, Udaipur, Lucknow, and Gwalior, with a total bed capacity of more than 130 plus under the SOCE vertical.
These SOCE units have performed more than 425 joint placement surgeries in the full year FY '23. We have an MoU signed at Rajkot location under Shalby operated model, which is expected to commence its operations this financial year. As you know, our asset-light franchise model continues to witness encouraging responses and is investing a lot of interest across various stakeholders.
While we are getting a lot of inquiries, we have a standard protocol and strict guidelines in place to select the right partner, so as not to dilute our strong brand in any way. We are in a continuous process of taking over all our operations in our brand name with whom we have signed MoUs so far, and we are optimistic to see the good developments in coming quarters of this financial year.
Moreover, our focus remains on capitalizing our expertise and excellence in orthopedics to have over 50 Shalby franchise hospitals across India. Now I'd like to hand over to Mr. Amit Pathak, CFO of Shalby Limited to discuss Shalby's quarterly performance in more detail. Over to you, Amit. Thank you so much, everyone's.
Good morning, everyone. First of all, I would like to thank Board of Directors, Shalby management, investors, all the shareholders and other stakeholders of the company to giving me the opportunity to work with Shalby Limited. Now in terms of -- first, I will walk you through the financial performance of the company for the fourth quarter and full year FY 2023. First, I will -- running you through the consolidated performance of the group.
In Q4 FY '23, the total revenue grew by 25% to INR 208 crores. EBITDA grew by 23% to INR 35 crores and PAT grew by 37% to INR 14 crores from Q4 FY 2022. EBITDA margin remained stable at 17% in quarter 4 FY '23 versus quarter 4 FY '22. For financial year 2023, we have recorded revenue of INR 827 crores, grew by 16%, EBITDA at INR 159 crores grew by 20% and PAT of INR 68 crores, grew by 25% from full year FY '22.
The group continued to maintain a very strong balance sheet with low gearing ratio of 0.15 and close the year at a net cash balance of INR 71 crores at group level. Now I will be running you through stand-alone performance of the hospital business. On the operational side, the total strategic count grew by 35% to INR 27,352 with inpatient and outpatient improved by 17% and 42% in full year FY '23 from FY '22. ARPOB and ALOS also shown an excellent improvement at INR 34,854 and 3.92, respectively, in full year FY '23 versus INR 31,347 and 4.55 in the previous year FY '22.
The payer mix has shifted slightly in favor of the insurance, which has been compensated by reduction in government business. On financial performance side on quarter-on-quarter basis, the revenue for Shalby grew by 21% in quarter 4 FY '23 to INR 183 crores. EBITDA grew by 13% to INR 36 crores and PAT grew by 17% to INR 18 crores as compared to same quarter in last year. For the financial year '23, hospital revenue grew by 10% to INR 728 crores, EBITDA grew by 13% to INR 161 crores, and EBITDA margin improved to 22.2% as compared to 21.6% in FY '22.
PAT margin for the financial year '23 stood at 11%. At stand-alone level, again, a very strong balance sheet with low gearing ratio of 0.03 and close that year with a net cash balance of INR 170 crores. We continue to maintain the ROCE at 16% from our hospital business. With significant ramping up of the operations, new talent addition and product launch, our U.S. implant business had grown more than threefold to USD 11.7 million versus USD 4.3 million with EBITDA positive in FY '23.
Now I would like to request all of you, please raise hand for any questions. The floor is open for the question now.
We'll take the first question from [ Sameer ].
Yes. Good morning, everyone, and congrats to the elite team of Shalby for posting a good result, sir. I have 2 questions. Am I audible?
Yes, you're audible.
Yes. See, I have 2 questions. First, now the operation at the U.S. has ramped up and now we are reaching almost INR 200 crore level yearly or maybe INR 25 crores per quarter revenue. But still, we are not breaking even at PAT level. So what is your target when we should be breaking in the PAT level? That is the number one question.
And number two, what are the growth drivers going forward for next 2 years, whether we would be banking on franchisee or we will be doing a capital investment to set up a new hospitals in the next 2, 3 years? So just wanted to understand your next 3 years plan with respect to growth.
Yes. This is Sushobhan. I would answer your question, especially on the first part because I have a lot of involvement in the business for the implant. Now if you look at the implant business, when you see there's a lot of capital or working capital, infusion happens in an implant business at the start because you need to get a lot of raw materials in, and when we took over this company, as you may aware, there was a lot of situations that we had to turn it around, including people, including customer satisfaction, including lost customers and so on.
So with that putting in mind, we actually had targeted that we would be getting into EBITDA neutral or slightly positive this year. And we have been able to achieve that at INR 94 crores of growth. Having said this, when you look at -- your question was the year next year, we plan to increase our EBITDA to a pretty healthy margin. And our aim is to look at this company to be getting a $100 million business in 5 years' time. So whenever we are getting into a $100 million business in 5 years' time, we are looking at an EBITDA of 20% plus in that 5-year time frame.
So that would be our objective in order to do that. A lot of things are happening. We have built in our strategic plan. We are developing a very solid team of leadership and the first-line managers. The business that we have in Vizag will -- 60% of the business will come from the U.S., 40% of the business will come outside of the U.S. But as you know, the U.S. average selling price is much higher than the rest of the world. So the volume will be varied to where to almost 65% of volumes will be consumed outside of the U.S. and 40% will be coming out of this.
So coming to your second question, which is where we are looking at our growth engines. Definitely, the hospital business would continue to be in the double-digit growth mindset, where I think I would get the other members of my panel to be talking a bit more on that. But I can tell you, we are really looking at hospital to be our driving force as always, continuing to be a double-digit growth, we are expanding our hospital in terms of getting our occupancy level better every passing day. We are focusing a lot on surgeries that would be bringing in more better revenue mix and profitable mix.
We are looking at expanding into other areas like, as I think you have heard from us earlier, we are looking at -- in towns and cities where we are not present in from a Shalby group perspective, that will continue to be our growth driver. The second growth driver, which Parag will talk about even more is our SOCE business, which is our franchisee business, which we plan to be getting into 50-plus over the coming years, and Parag will talk more about it. Third area and this is not in order, but the third area would be the implant business or the medical device business or the implant business that we are looking at, that would be another key growth engine.
And the other area that we feel very good about it is our home care business, which is within the hospital business that is growing very, very fast, and we believe the home care business, along with the international business would be our growth driver. So if you ask me, we have the 3 big verticals of the hospital business, the SOCE and the implant business. And within the hospital business, we also have the home care and the international business, which would be our growth drivers going forward.
Maybe I'll leave the other members of the panel to add anything that I missed out.
So I'll add in while the SOCE remains one of the growth drivers of the organization as we move forward, the asset-light model is something which we will look forward to in expanding on the hospital side as well. A good opportunity comes in, yes, we will be looking forward to those. Plus, we also have our hospital business, our businesses in Mumbai and Nashik, which we'll be looking forward to capitalizing in the next couple of years so that we are able to add to the business.
In the existing hospital business, we have good headroom to grow, as Sushobhan talked about double-digit growth is something which we look forward to with the aid coming in from the transplants from home care and international business.
I had 1 more question, if you allow me. With the kind of guidance you have given at $100 million for the implant business, so how much Shalby would be further compelled to invest in the U.S. business going forward. Already, I believe that INR 100 crores is invested in this year, the cash flow shows that. So how much capital it will need more from the Shalby?
So if you look at the capital investments, there are 2 areas that the capital invest happens. One is definitely the running day-to-day business. We expect this business to be operationally self-sufficient within this fiscal year. So what would then happen, that is something that we always believe that we'll be doing it. But the second thing, what happens is the CapEx investments. So if you look at the orthopedic business, there's -- a lot of capital is required, especially at the CapEx level to buy instrumentation. We do not manufacture instrumentation in a large scale.
So every knee or a hip implant requires almost close to 250 instruments that are needed to put in 1 single hip or 1 single knee, and that comes in 5 or 6 or 8 trays, and without those instruments, you cannot operate. And that is a very investment, though we depreciate it over 10 years, but that investment needs to happen. So the way we are looking at, and I'll just give you an example and you can do the math, is an instrument gets around a turnaround of around 50 to 75 depending upon the country, every instrument. Now if I'm looking at a $100 million business, a $100 million business is close to what we would anticipate would be over 100,000 plus implants that we will be selling in the coming years.
If I have to sell 100,000 implants and you look at the number of instruments is required, this would be a continuous investment from a CapEx standpoint because instruments cannot be for life, right, because it's a metal and it gets worn out over time. So that CapEx investment will be the main investment going forward. But the working capital, as I said, we are trying and doing all our efforts to ensure that we become self-sufficient from an operational standpoint in the U.S. business. Does it answer your question?
Yes, great. And thanks for the opportunity for asking the question and all the best.
We'll take the next question from Divya.
Congratulations for the great numbers. And my first question is EBITDA for implant segment is $11 million as per your presentation, whereas PBT is a negative $166 million for FY '23. What are the deductions in amounts we are deducting?
I think I will refer this to the -- my finance person. He would be able to give you a rundown on areas. Maybe Amit, would you be able to handle this?
Yes. So, post-EBITDA we have the 2 parts on the implant business. One is the depreciation that is close to around $1.2 million. And another is the interest cost that is around $1 million. And the rest is the deferred tax that is close to around $0.5 million.
Okay. And my next question is, what is the implant production in quarter 4?
The implant production in quarter 4 was around 10,000 something. So if you look at it, we calculate on the basis of implants and instruments. We predominantly manufacture our implants in our factory. But sometimes what happens is there are certain instruments that are customized and require or something that our vendors have not been able to manufacture, and we cannot stop surgeries. So we do instrument manufacturing as well. So it will be around, I would think, 10,000-plus implants that were manufactured in quarter 4.
So overall, if you see our total implants that were manufactured were over 45,000 implants in the full year, which was, I would say, double the production that we had in the previous year -- fiscal year.
Okay. That's it. I have just one more question. A few remarks medical device submitted, does the company have an external debt?
Amit, can you answer the question?
Yes. The company has to -- they have 1 term loan and a working capital loan. These are the 2 external borrowings, which SAT has at this point of time.
So if we're talking for the SAT in terms of term loan, the outstanding amount is close to around $6 million and in terms of working capital -- sorry, working capital is $6 million and term loan is close to around $8 million.
We will take the next question from [ Avaya ]. I request participants to please introduce yourself along with your company name before asking the question.
This is [ Avaya ]. I'm an individual investor. Many congratulations on an excellent set of numbers. So I had a couple of questions. First on the implant business, so how are we priced in terms of implants as compared to our competitors like Zimmer Biomet or the other competitors?
Yes. So when you look at from a pricing standpoint, we are present today in 2 countries, we're in the U.S., the other one is in India. We also have business in Japan as well, but a much smaller business. But when you look at U.S., our prices are slightly lower than the 4 multinational companies. As you know, in the U.S., the 4 multinational companies, which is Zimmer Biomet, which is the #1 and the Stryker. The third is Johnson & Johnson and the fourth is Smith+Nephew. They control over 90% of shares, which is very unique versus any other industry.
So if you look at their prices, their prices are always a notch above the others. And the rest of the market, which is us along with many other competitors, our prices are slightly below, then it's not about the quality, it's more about the branding that has been built over several years that they have put in along with a lot of capital that makes their price much more rather slightly attractive than ours. When you look at India, prices are same across everybody because, as you know, it's a regulated market, especially on the knee side. So it's a regulated market. And so the prices are exactly the same than anything else.
Okay. And so I just wanted to understand, so the implants business from the past 3 or 4 quarters has been in the range of INR 20 crores to INR 23 crores, INR 24 crores. So is it that we are not able to -- or we are waiting for approvals to increase our revenues there or by arbitrarily growing there?
No. Actually, what has happened is we have launched a product called TUKS, which is a unique compartment to me. Right now, when you look at the implant business, all the products that we had were all quite a legacy product that have been there in the marketplace for a long time. So over the last few quarters, we have been trying to ensure that we are well ready enough to be able to satisfy our customers and provide the customer delight that is needed.
The worst part in orthopedics implant business, what happens is if you are -- have been able to win a customer and not been able to provide 100% of the inventory and the instrumentation that they require, and this is not a suture business or even a cardiac stent business for an implant business for just a knee or a hip to use and it is something that is interesting for everybody to hear that if you're not acquainted with the implant business.
For a knee or a hip that a patient uses or a doctor uses on a patient in a hospital that are at least 4 sizes that are there, which are kept in the OT of 4 to 5 sizes, some surgeons even prepare 6 sizes in spite of the X-ray being done, to be ensuring that when they open up the knee or the hip, they are very sure after they do measure -- and open up and measure which size will be required.
So the amount of inventory that is needed is very, very huge. And that, I guess, would be able to answer the question that you were asking. So it's a lot of, I would say, investment that is needed, a lot of, I would say, inventory that is needed. And so we are ensuring that we are completely ready to be able to go in.
The other point which is important to note is that there is a big, large hospital or larger account that we had in one of the states in the U.S., which we lost for the time being because they went into contract or as you call it, the contract and where we have our 8 companies, and we were one of the large companies that were supplying or large volume companies that we were supplying, and they chose only 2 companies. Unfortunately, some of the big pools also went out of that business. We are trying to reinstate that business plus get in some of the other business, and that created a bit of a lull in one of the quarters.
Okay. And sir, on the inventories. So in the last 2 years, we've added close to INR 160 crore, INR 170 crore of inventories. So is it primarily on account of the implants business because what I understood from the press release and calls, we would require 6 months of inventory for the implant business, which is INR 50 crore inventory, right? I mean but why is there such a huge increase in inventory? Are we not able to monetize it? Or I mean...
No, it is not about monetization. Basically, what we are doing is when we said 6 months or 7 months' inventory, it's basically on a certain size of a product. But what you're looking at is we are dealing with 2 different countries. One is the U.S., other is the Japan and third is India. So what is happening, the amount of production that is happening has to cater to a lot more sizes in India, especially, your sizes that are used mainly is 0, 1 and 2 and maybe 3. But when you look at the U.S., your sizes are used is mainly 4, 5 and 6 and 7 and sometimes, 8.
So what happens is that your spread of the inventory is growing much bigger than what your original thought process was that you are focused on, say, 2 or 3 or 4 sizes where you have a 6-month inventory, that's fine. But when your spread is going bigger, that's where your amount of inventory goes. And as I said earlier, the worst possible thing that can happen in orthopedic implant business that you have not been able to satisfy a customer with a product or a size that he or she needs and that's what we don't want to get into.
And that's the reason our inventory or build up to a certain scale. But having said this, we believe with the ramp-up in our sales in this year, we believe a lot of inventory would be streamlined and more standardization will happen in the inventory section.
And last question. So the implants that are supplied to India and the ones that are sold in U.S. they are both of the same quality, right, and there's no change in the quality, right?
No, absolutely not. We don't even differentiate. We don't even know when we produce whether this is coming from India or going for the U.S. because the factory that produces is the same factory, the people who produces is the same people, the quality standards that are put at the same quality standards. So -- and the package and the boxes that come out are the same thing. So we don't even know whether the quality is exactly the same. We don't even differentiate which is happening in India. What is going to Japan, what is going to Argentina, what's going to U.S.
Got it. Look, what would be the contribution margin for the products sold -- for implants sold in the U.S. vis-a-vis India?
I would not give you the specific numbers, but I could tell you, when you look at the pricing, the pricing in the U.S. is at least 3x than what we sell in India.
We'll take the next question from Girish.
This is Girish from OrbiMed. Just on hospital side. First, I'm just looking at the numbers. So this quarter, there was good growth full year, you've done 10%. This quarter was 20%. I mean numbers still came a bit lower than what you guided around INR 720 crores overall for the full year. Just trying to assess if there is some kind of seasonality element or what is that one we should look at and if this growth in Q4 is sustainable?
Girish, this is Shanay. So basically, if you look at this quarter, we have grown at about roughly between 18% to 20%. And the way I would look at it is, when I look at -- when you commented on the growth for the full year at about 11%, I would see it slightly differently. I would break it up because in FY '22, the first quarter was affected by COVID, where we had a lot of COVID revenue. So if you look at quarter 2, quarter 3 and quarter 4 of FY '22, we averaged at about INR 150 crores a quarter, right? And in the first quarter, we did about INR 200 crores because of COVID.
So if I take out that INR 50 crores to INR 60 crores from FY '22, I'm looking at about INR 600 crores, INR 610 crores for the year FY '22 in the hospital business. And then FY '23, we have done a little over INR 27 crore, INR 25-odd crores. So we are talking of 20% growth in the hospital business in this year. So I think we are quite satisfied with our performance. And at the same time, because of a strike in Jaipur, which affected not only us, but all the corporate hospitals in the city and all the other hospitals in the city, we got affected by 15 days in this particular quarter, and that has affected another INR 5 crores to INR 7-odd crores of revenue.
So otherwise, we are basically in line, Girish, as I see it for the hospital business.
And Shanay, when you look at the numbers like patient -- inpatient count, and I mean, I'm trying to see ex day care here. So would that number also be growing at 20%? I mean I don't have the exact detail there. What is the ex day care?
Absolutely. So let me tell you that the surgery count has grown by a little over 30% for this year, right? And if you look at the day care count, we have grown by almost 25% for the year and the inpatient count has grown by about 17%, and that is again partially affected by the high -- very high occupancy during the quarter 1 of FY '22, which was affected by COVID. So overall, yes, there is a 20% kind of growth across most parameters.
And what would, let's say, be a full year occupancy according to you next year? I mean...
See, if you're asking me what are the -- what are going to be the biggest growth drivers for next year, I would say the biggest growth drivers for us would be the Naroda and Mohali unit, where there is a lot of upside that we have. And yes, the other bunch of hospitals will continue to grow at 15%. So you will see that extra pop coming in from Naroda and Mohali.
Okay. But you're saying that this 20% growth, of course, is very possible next year also, right, from the topline perspective?
Yes. So we have demonstrated that in this year. So we are confident that we will be able to deliver anywhere between 15% to 20% next year as well.
And what would margins look like? Broadly, I mean assuming, of course, implant business performance better incrementally.
So you're talking about the consolidated margins?
Consolidated margins, yes.
Consolidated margin, see, the way we are projecting the hospitals business, we believe it will grow at 15% to 20%, and there will be a margin expansion because operating leverage will come into play. And for the implant business, yes, we are projecting a higher single-digit, lower teen kind of EBITDA margin for the year as well with a very high growth compared to FY '23.
And just last one. This SOCE number, I know you're adding more cities there still, but does it eventually translate into higher occupancy in your network? Or is it just more the management fee component that comes through?
Yes. So I think Parag will take the question on the SOCE. But yes, it has a lot of ripple effect on our main hospitals as well. We get a lot of drainage, but how the SOCE business will play out, I think, Parag will be able to take you through that.
So to your question, that does it have an impact on the existing hospital business? Yes, there is a lot of ripple effect, which comes through once you have a permanent hospital in a particular town. There are people who are still willing to come to Ahmedabad, come to Jaipur, come to [indiscernible]. At the same time, we have people who are willing to get operated in the city, and they are not willing to move, and that's the entire logic behind SOCE, and we continue to move upwards in terms of our number of surgeries.
Vishal, please go ahead. We can take the next question from you.
So if I heard correctly, we manufactured 40,000 implants...
Can you please introduce yourself first?
Yes, I'm an individual investor and been here for a long time, yes. So I heard correctly that we manufactured implants for 40,000 in this FY. Yet the investor presentation says that we sold roughly 10,000. So my first question is, could you please give me some understanding on why our sold units look low and second is, could you please give some color to our sales efforts in U.S.? And what would be the margins on implants in Indonesia and the upcoming geographies?
All right. Vishal, thanks for the question. When you look at the implants sold versus the components manufactured, when I said 45,000-plus parts manufactured which means 45,000 components of the hip, knee parts that have been manufactured. When we say 9,700-plus implants being sold, each implant consists of 4 components usually. For the knee, it's the tibial base plate of female, a tibial insert and a patellar.
For a hip is a metal head, the metal stem and the acetabular liner and the acetabular cup. So that's where I think you are getting the difference in terms of the implant sold versus the components manufactured.
To your second question, in terms of your U.S. sales efforts, what we have done is we have done a segmentation strategy of our customers, where we are looking at 3 ways. One is how could the present customer that we inherited when we took this company? How we could increase the market share of those customers because those customers that we inherited are not 100% of our [ Shalby-an ] plant users. Some use 20%, some use 30%, some use 60%. So that's one of the ways we are looking at it. The second way is we are looking at it, who are the customers that we lost over the last 4, 5 years period? We are connecting with all of them, and we are telling them that with the new initiative of the new strategy, of the new company that has come up, we would be ready to service.
And we are obviously getting some resistance because they have had some bad experience with the previous company.
But it's all about persistence and how much we can talk and demonstrate. The third thing that we are doing is in terms of getting new customers. We are looking at new opportunities, new customers. And for that to do that, we're hiring 3 new regional sales directors in 3 different areas or regions of U.S., where we do not have currently presence with. And the last one that we are doing is we are launching new products. Our TUKS, or the Tahoe Unicompartmental Knee System, we believe, and there's many surgeons who have used to believe is one of the best in the world.
So we are manufacturing instruments. All the instruments are still not in hand. We have given it to an external vendor who manufactures those instruments, which we have been able to get in some time around July time frame where we'll be able to then go full commercial launch in the U.S. We are having a pipeline of very exciting new products, including a total knee that will be able to launch towards -- close towards the end of this year that would also bring in a lot of competitors. We are looking at portfolio expansion of the current knee, which for 4 or 5 extra different sizes that would also help us to gain traction in the U.S. market.
To your question on Indonesia versus the U.S., where we are, the prices, as I said, in U.S. are 3x more than India. In Indonesia, the price is around 1.2x more than where the India market is. So we have to play the markets where the prices are predetermined. And Indonesia is a market that has slightly better margins and what we'll get in India. Thank you.
Thank you, sir. We'll take the next question from [ Janardan ]. I think there's a problem with this audio. Divya, do you have a follow-up question?
Yes, I have a question. As you know, I'm Divya Daga from Vijit Global Securities. And my next question is, can you provide us the percentage of revenue we are giving to franchisee FOSO model and the percentage we are receiving in FOSM model and how company recognized revenue from SOCE model? Do we include it in sales or other income?
This is Parag here. For the exact percentages depend on the kind of investment of the franchisee needs in both the models because this is a satellite model. There's a difference in the investments made in terms of land, building, furniture, pictures, equipment. It ranges -- both sides, it ranges anywhere between 4% to 7%. When we share the revenue or when we get the revenue share from our franchisee.
In terms of revenue recognition for our operated model, these are our own units, we operate them as our own units, therefore, the entire revenue as well as the bottom line comes into the -- as a regular hospital. When for the FOSM units, we recognize only the franchisee revenue, which we received in our force.
While we track the revenue very closely with our franchisees, we have worked with them in increasing their revenue, so as to increase our revenue. But in our books, we recognize only the franchisee revenue.
And was -- what about student enrollment fee? Do we include in revenue or other income?
Both the FOSO and FOSM model, the contribution that we have that is getting included into the revenue, not into the other income.
Amit, about -- there is a follow-up question of the food and revenue.
Academy students is getting included into the other income.
Can I ask more questions?
We have a few more questions. So is it okay if I -- if you come back in the queue. [ Jatin ], you can please go ahead and ask your question.
So most of my questions have been answered. I have only one question left that is regarding to margins. So when you -- when we look at the margin after excluding the other income, it came at 13%, which was around 17% last quarter and around 15% Y-o-Y. And I think the margin is strong because of the higher employee cost, which has gone up to 21% to -- from 18% Q-o-Q. So can you throw some light on this? Why is the employee cost gone up in this quarter? And what would be a sustainable margin?
There is 2 things. First thing is, one is the normal increments what we have given to employees in line with the inflation index. Another thing as our implant business is growing up, there are certain additional costs in terms of the manpower for our implant business, which we have infused in this year.
Okay. So what will be a sustainable margin this year, the blended margin I'm talking about. Will it remain around 17% and the employee cost, which has come, is it sustainable for the next few quarters also? Is there a base revenue employee cost now?
So the topic for stand-alone or consolidated?
So I'm talking on console level, sir.
Yes. So console level, again, for the stand-alone, we are going to sustain our margin, which has already been sounded by Mr. Shanay. In terms of the implant, we have infused a lot of manpower cost in current year, and we are seeing the sustainable inflation cost into the next year for our implant business and maybe some more addition. So it will not be like the current year, whatever the increase what we are seeing into the employee cost. That will be in terms of percentage, that will be continued with the normal inflation index into the next year.
Just to add to that, the margin, this is Shanay again. You will see that there will be a margin expansion because as Sushobhan Dasgupta just said, we are looking at higher single-digit kind of EBITDA margin for the implant business. And we are going to grow at between 15% to 20% for the hospital business, there will be a margin expansion there. So at a console level, you can expect close to 20% kind of EBITDA margins for the year.
Okay. So when you say 20%, you also include other income in that, right?
Yes.
We'll take the next question from [ Dharmik Prajapati ]. Just to remind you that participants request to please introduce yourself before asking the question.
This is [ Dharmik ] from ProsperoTree Wealth Management. Could you please update about the implant business segment in terms of the key strategy to compete with the other established players in [ ES ] as they have already built a plant, which is crucial for the business, I believe, and the size of the industry?
Yes. So I think what you -- in your question, you said I think that has a lot of answer and meaning to it. And I worked in one of the large companies, as you know, and I was a part of the Global Management Board for Johnson & Johnson. So one of the things that happens is sometimes when you look at these companies, they -- most of the businesses that they're getting, they're getting from large volume customers. So they do not really take care of certain customers who are in their minds, larger or smaller players or smaller volumes.
Whereas those small volume surgeons feel very neglected because in the recent path, they were catered to by these bigger companies. So the service levels come down and they feel very disenchanted. So these are the target customers. When I talked about the segmentation, when I said new customers, these are the new customers that we are looking who are disenchanted with the service levels of the big 4 and they would like to come into the companies that would be able to service. So we have been going into 2 or 3 strategies with them.
One is obviously, as I said, increasing our sales footprint to appointment of the regional sales directors and the distributors. The second is to introduce new products to them. And thirdly, being able to take across them to several of our key opinion leaders who are using our products to -- in orthopedics, one of the ways of strategy to convert a customer is to give them the hands-on feeling of coming into a surgery and observing the product perform live in a patient.
So what we are doing, we have created centers of excellence with certain KOLs in our countries in the U.S., especially and also in India, where we would be getting surgeons who are interested to see how our products perform in a live case. And when they see, seeing is believing, they'll be able to go back and use our cases. So that's where we are focusing. Having said this, we are also looking at getting shares not only from these large 4 players, but also from the mid segments as well.
If you look at it, there are almost 25 or 30 companies who play in the mid segment in the U.S. And we are also targeting these companies because these companies either have a gap in their portfolio or they have product-related recall issues. And one of the things of 3 unique value proposition of this company that we have now acquired, which is consensus. And I think you know about it, 28 years in the U.S. and in other parts of the world, 0 product recall from FDA and if you go on Google and go do a Google search for any company in the world which sells implants, you'll see almost all, if not all, will have product recalls being initiated by FDA.
And we brag pride on the fact that we do not have a product recall. And that's a huge [indiscernible] proposition because I know at least 2 customers in the U.S. who use our product simply because we have 0 product recalls and that gives them the testimony that we are a quality company.
Just a bit some color on the size of the industry and what would be the top line and margin guidance for FY '24?
The size of the industry is $18 billion. Out of the $18 billion, $8 billion is in the U.S. and the $10 billion is outside of the U.S. And when you look at from a volume perspective though, that it's a 60-40 split, where 60% is outside of the U.S. and 40% is in the U.S. because the U.S. ASPs are higher. What was your second question? Sorry, I didn't follow.
So it's about the top line and margin guidance for the segment for the next year.
So basically, we are providing a range. And when we look at the range, we are trying to grow almost around 60% to 70% of where we currently landed this year. So that's where the range that we are looking at. The guidance says, I think from a bottom-line perspective, as we said, we are measuring ourselves from EBITDA and we would like to get into a single high-digit percentage for EBITDA for the end of this year.
It is high digit and top line, sir, you were saying 60%. Is that correct?
Yes, around 50% to 70%. So I'm giving you a range between 50% to 70% of growth versus what we did this year.
We'll take the next question from Surya.
Just a couple of clarifications, sir. If you can share even more on the implants business, so what is the like-to-like volume growth that you would have seen in FY '23, sir? And also, if you can share what is the current utilization that you have reached in FY '23?
So if you look at from a volume growth perspective, the volume growth has been much higher. I think I would fall back on finance because I don't the answer offhand, but I can tell you the reason why I'll tell is in FY 2022, our sales entirely came out from U.S. and a bit from Japan. We didn't have any India business at that time. In FY '23, of the $11.7 million that you see, as I said, 60% came from the U.S. and 40% came from India.
So if you calculate that out of $11.7 million, almost close to $6.9 million came from the U.S. and $4.7 million came from India. And because the India ASPs or the selling prices are much, much lower than the U.S., and last year, there was no India selling prices or India sales. Obviously, then your volumes of FY '23 is much more than 3x. So if I said our sales was 3x in terms of dollars, the volume could be 5x, but I do not have the right exact answer, but definitely much, much higher than 3x because we sold much more in India or rather we sold in India in '23 versus 0 sales in '22 for India.
Okay. Yes. This is helpful, sir. And about the utilization of the capacity and also what -- is it possible to say the -- like what is the kind of progression that we are witnessing in terms of captive uses of our implants?
Sorry, progress on what? On...
The utilization of the capacity that is -- and the second point that I talked about is what is the captive you say that we have utilized -- we have seen for the implants in India?
Okay. So when you say captive usage means internal usage, right?
Yes.
Okay. So when you look at the first half of the capacity utilization, we see our plant right at this moment with plus/minus put together, we see that this plant can manufacture at around between 70,000 to 80,000 components in a year. Again, I wanted to remind you, there's a difference between implants and components.
So 80,000, we can -- 70,000 to 80,000 and if you see, we manufacture close to 50,000 components in this year. So if you do the math, you'll be realizing we were around 60% to 65% capacity utilization. Now we do have space in our factory in El Dorado Hills in California. We have 10,000 square feet, which we have kept it so that we can use it for the future, and that would be used obviously, to get in some more machines that we are looking to automate going forward.
We are still in the thinking process. We've still not gone into details of which machines will be coming in. And that's the reason when a gentleman asked a question about what would be the CapEx. I could not answer it in sort of discrete terms because we've still not decided. But we have an area that we could use.
We could even use it to get our warehouse much more streamlined going forward, that will be much less CapEx. So to your point, we are at 60% to 65% capacity utilization. And from a captive standpoint right now, our strategy in India was very clear. If we have to sell it outside of Shalby, we have to first be completely convinced about how we are using it in Shalby. So our objective was to really make it use in Shalby. Right now, what we see is almost 70% to 75% usage is within Shalby, and 25% is outside of Shalby. And that has been intentional because we wanted to first be very confident about the usage in Shalby and I can tell you right now is that the Shalby surgeons who have used our products and are continuing to use our products are exceptionally happy about it. And that's the reason that has given us confidence to go now to the outside world, outside of Shalby to be able to. So to your question -- answer your question directly, at 75% to 80% is captive and the rest 20% is outside of Shalby, which will change this year as well as in the coming years.
Sure, sir. So I think this is interesting to know that, okay, this is a kind of a brand building in-house and then obviously, building it for the world.
So sir, I just wanted to -- just had a last question, sir, I wanted to check and understand, what is the scope of a price play, let's say, in the existing market and beyond existing market, what we are thinking? And also the scope of brand buildup also?
So when you look at the scope of price -- the -- if you look at the business that we operate in India, and I'll go into 2 segments, like the price elasticity is very different in India versus the U.S., right?
Now U.S. already, when you look at there is almost very little opportunities to increase prices because the prices are already at a very high level. And you can understand their health care systems are a lot of pressurizing, there's a lot of central purchasing groups coming in. So we do not believe that we'll get price increases in the U.S. But having said this, our profitability in the U.S. will continue to rise because we'll change the mix.
What we are doing is we are looking at the product mix, and we are trying to sell -- we talked about the TUKS, Tahoe Unicompartmental Knee System, that has better GP -- better gross margins or gross profitability as we call it. So when we sell more of TUKS and that increases the ratio of our sales, that brings in better margins, though we cannot increase our prices, whereas in India, almost 60% of the business -- 65% of the business is knees and 35% of the business is hips.
And we expect that next year, again, in September, the price regulators or the regulators who regulate price in the government may increase by another 10% because of the cost of inflation like they increased it last year. The industry has been working very hard with it, and the association is working very hard with it. 10% comes in, that benefits us because India is one of the lowest priced implant companies -- implant industries in the world, but because of volumes, many companies are being able to supply. So 10% increase will come up, we believe, in India from a price standpoint. And again, the price mix -- the product mix that I talked about will also be applicable in India, and we will be selling more TUKS in India, which will help us to also develop our margins.
We'll take the next question from Rikesh Parikh.
Rikesh Parikh from management of Rockstud Capital, LLP. My question is for Sushobhan Dasgupta. First we are on our utilization -- we are around 55% capacity utilization in the implant business. So when do we see a PAT breakeven level for this business now?
I think we answered the question on this and the question that -- the question was asked, and the way I answered is basically, we'll be doing EBITDA single-digit positive at this fiscal year-end, and we are trying all our efforts to be able to be operation expenses-neutral and be self-sufficient in SAT in this year itself. That's our plan.
Secondly, if I look at it, I mean, we are at 50% utilization levels as such. And let's assume we can hypothetically go to 80%, 85% utilization levels. So what kind of ROE this business can generate over the next 2 or 3 years?
Say that -- RO what? ROCE?
Return on capital implant.
So basically, the objective -- I understood now. So basically, you're asking on the return on capital implant. We expect this return on capital implant to be coming at around 15%. That's the potential and the possibility that we see over the coming years.
Second, on the SOCE model, what was the revenue for the Q4? I understand it will be nominal. And what are our plans for the next 2 or 3 years based on our initial implementation?
Amit, you have the Q4 numbers because I'm tracking a number of surgeries given the initial stages of the business.
Yes. So just give me a second. So for FY '23, it is close to around 4.5 cm. And for the quarter, it is 1.5 cm.
Okay. That helps. And directionally, how do you see this business shaping up now?
So directionally, we see a number of surgeries improving as we enter the new quarter. And as there are 2 new units in Gwalior and Lucknow, they take shape and the 2 older units in Ahmedabad and Jaipur, also enter up and mature up a little bit more, we see the revenue only moving up for the existing 4 units. And as we add more units, we move forward quarter-on-quarter, we see a healthy revenue growth on the business.
The exact numbers I'm not putting through because each unit will add up and very, very recent time where the units will grow up quarter-on-quarter. So the exact number guidance is something which is difficult at this stage. As I said, I'm tracking more on the number of surgeries, which are done, and that gives me confidence on the business growing in the new [indiscernible].
How many SOCE centers do we plan to open this year?
This year, we have plans to add anywhere between 8 to 10 centers and not rationalize them by the end of the year.
Okay. My last question is on the overall hospital business. If I look at our ROCE on a console basis, it's 13.2%. And on hospital, the presentation suggested is around 16% level, understand the drag will be largely from the implant business. So directionally, how do we see this shaping up going forward if we can have your thoughts on for the next 2 or 3 years?
Sure. So as I said earlier, we are expecting a growth similar to how we have grown in the past. And based on that, we will see the ROCs go up because the incremental capital employed in terms of the replacement CapEx will be a very nominal amount. On an average, we spend about INR 20 crores to INR 25 crores in a year, and the incremental EBITDA will be far superior than that. So there will definitely be an expansion. And as we see, we can definitely do between 20% and 25% over the next 2 to 3 years as the occupancy goes up and the revenues right.
We'll take the next question from Divya. Would you like to go ahead and ask a follow-up question?
As we are expecting Nashik Hospital in this year, can you tell me the quarter when it will be get operationalized?
Parag, you want to take that?
We are right now working with the franchisee for completion and handover of the premises so that we can start the fit out and work on the other parts to operationalize. So we do look at somewhere towards quarter 4 only where we will be able to operationalize. We are still awaiting the handover. There are certain delays at the end of the franchisee in the -- who's doing the [ property ] for us.
Okay. As I sought a few numbers like ARPOB and surgery counts on Q-o-Q basis has fallen, is this -- can we expect this trend to reverse in next quarter?
See, the ARPOBs are a function of the specialty mix. So if you look at ARPOB for the year, they have grown and that is also because the arthroplasty business has grown significantly. So we have grown almost 30% to 35% in terms of the arthroplasty surgeries. So yes, ARPOB will be a function of that. But we do believe that the specialty mix will remain the way it has been and which is why we see that the ARPOB will remain flat or grow at between 3% to 5% over the next year.
Okay. I have just one more question. In every company hospital, we can see that there is a pharmacy. So do you outsource it from third party or is it our own? And what is the overall contribution from that?
So in general, all our pharmacies are operated by us. They are all in-house, whether it is the inpatient pharmacy or whether it is the outpatient pharmacy. On an average, on the outpatient pharmacy business, we do between INR 15 crores to INR 18 crores of revenue per annum. And of course, the inpatient pharmacy is something that we are not kind of disclosing as a breakup of the total IT revenue.
The next question is from Vishal.
The question, please help me understand, how many contracts did we got from that implant business in-house? And how many of them we lost? And second question is that how long is a usual contract and what is our average contract duration?
Yes. I'm saying that we lost 1 contract only in the Midwestern states, as I said earlier. And we have not lost any contracts. We have won a couple of contracts as of now.
And we actually expect that the contract that we have lost though it's a centralized contract, but it also has several hospitals within that contract, which has a capacity of buying local purchases as well to a certain amount, which will actually help us to mitigate some of the losses that we had. So that's the question on the contract. What was your second question, I'm sorry?
Just how long a usual contract looks like? And what is our average contract length?
Most of the contracts are annual, but certain contracts go for 3 years. The contract that we lost is an annual contract and we lost it some time towards the third quarter of the last fiscal year.
We'll take the next question from [ Abhay ].
Sir, on the implant business, so you've mentioned that we've utilized close to 65% capacity right? And we produced close to 55,000 components. And we sold close to 45,000 components. Is that understanding right?
Yes, around 47,000. Yes, 45,000, 47,000 components.
Then it would mean 10,000 implants?
No, 47,000 components which you've divided by 4 on an average, will be around 10,000 plus, yes.
12,000, right?
Yes.
So at 12,000, we're able to achieve close to INR 93 crores revenue. So we are looking at 100% capacity utilization is looking at INR 150 crores, INR 160 crores of revenue, right, from the implant business?
Yes. First of all...
And considering the realizations...
First of all -- No, I need to correct you here. Very few industries can do 100% capacity utilization especially in orthopedics, you cannot. Because if you look at the machine, you have to keep some machines idled so that you ensure that you do not get into a problem of 100% capacity. Because if you look at the sequence of the machine that it runs, the mills and the lathes and many other things running in a simultaneous manner. And some of the mills and the lathes, you cannot use a plastic in a metal and a metal in a plastic, they're very exclusive.
Because if you use that, this cause contamination, that will injure the patients. So this is something that we all need to know that in orthopedic implant business, you cannot have 100% capacity utilization. The maximum that you could do, and this is my understanding, would not be beyond 80% to 85% capacity utilization that it could go. So I just wanted to correct you this before you could -- I could answer the question.
So we are looking at a revenue of, let's say, INR 130 crores, INR 140 crores with, let's say, 85% capacity utilization?
Correct.
Okay. And the realizations also would drop a bit because we are entering Indonesia where we are 1.2x India, which is, I think, the average realization would also drop, right? So -- and in terms of the costs in the P&L since this year was we -- as Mr. Amit told that there are a lot of recruitments in Q4 this year, so in terms of other fixed costs, how much would that be on a year-on-year basis?
Yes. So if you look at the recruitment, we do not envisage that we will have too many recruitments. So obviously, the ratio of sales or the ratio of sales to recruitment would be much higher in this year versus the previous year. That means the recruitment as a percentage of sales will be lower this year versus the previous year. And the reason being is, when I said our recruitment will be mainly focused on the sales aspect of the business, especially in the U.S. and in parts of some of the other areas, including India where we need to put in our sales organization. But you look at the other areas, the reason of the recruitment that happened was we had to include a lot more finishes in the operation area.
We had to recruit quality and regulatory director in our organization. So all this actually increased. So now the functional areas, that is the support area of the business, we have the full team. We don't need to recruit for this year. We have already recruited for last year. But this year, the recruitment will happen is in the sales area, which will have a direct impact on the revenue line or on the -- on your top line. And that would help us to keep the margins or increase the margins going forward.
Okay. Understood. And sir, in terms of incremental CapEx, you told us that you would not be able to readily estimate the number but -- is my understanding correct when I say that there would be certain processes or certain missionaries which would have a bottleneck capacity? And maybe to -- the incremental CapEx would not be the same as what we have already installed, the amount that we -- our outgo in terms of incremental CapEx?
Yes. So when I said about the incremental CapEx, you look at -- there are 2, 3 areas that you really put in your CapEx, right? So one, as I said, in orthopedic implants. One is your machinery, plant and equipment, right? The big CapEx comes in. The second is your infrastructure, which includes buildings and some of the other aspects you put in your CapEx. And that also includes a bit of maintenance. And the third one is your instrumentation. So when I look at for this year, which is this fiscal year, our main CapEx investments will be on the instrumentation area.
Because the way we are trying to expand in countries like Indonesia, in countries, as I said, Latin America, we also plan to get into Malaysia in the near future, plus in the certain regions of India as well as in the U.S., we would require to buy a lot of instruments from the outside vendor. So our CapEx, we are still in the process of calculating because when we are looking at, as I said, because your turnaround of instrumentation is very different in the U.S. versus in Indonesia and in India.
We're still in the process of calculating how much will be the CapEx on the instrumentation side, from the machinery side, of the plant and equipment side, we do not envisage to be too much of increase. Say, for example, we have a templating -- x-ray templating machine, which needs to be replaced, that's around $50,000, $60,000 of replacement. So that's not very much of a replenishment that we see. Our machines that we currently have are in great condition. The big investment we come, and we still -- as I said, we are still not in Vizag, and we're still in a strategic plan, if you want to automate our plant.
So our plan today is not having the automated completely -- fully automated capability. If I have to automate the plant, that's a huge amount of CapEx expenditure, which we do not have right now the plans to do it because the way the machines are functioning and with the idle capacity that we have set because of 80%, 85% capacity utilization, we'll be able to manage the strategic plan numbers that we had put forward over the next 5 years.
Sorry to interrupt due to time constraints, we'll have to take the next question. Thank you. Surya, please go ahead. We'll take your questions.
So just one simple clarification, I wanted to have. In the stand-alone cash flows 4x, seeing that there is a kind of investment of INR 100 crores that we have done in our subsidiary. So can you just say what is the nature of the investment and yes, that's the question.
So that investment we've done into the mass, and this is in the nature of different share [indiscernible].
And that is for, sir?
Yes. So mass is going to invest into the SAT for our implant business.
Okay. So this is for any capacity buildup, debottlenecking or anything because we are kind of still in the process of deciding our [indiscernible]?
No, this is more to meet the requirement of the working capital towards the inventory income.
I will add to this basically, a part of this -- a large part of it is to pay back the existing loan facility that we have and a small part of it is part of -- is going to be part of the working capital requirement for the company.
Okay. Possibly because of expansion in the volumes that we are witnessing the working capital need also would be higher.
Yes, the working capital need is there. But as I said, the majority of it was used to pay back loan -- existing loan that we had.
Since we have no more questions, I hand over the call to the management for closing comments.
On behalf of the management, I would like to thank each one of you to attend our earnings call. Thanks for the engagement. Thank you everyone.
Thank you, Puneet. Thank you to the management and all the participants who joined us. Have a good day.