Healthcare Global Enterprises Ltd (HCG) Q2 FY22 Earnings Concall Transcript

Healthcare Global Enterprises Ltd (NSE:HCG) Q2 FY22 Earnings Concall dated Nov. 11, 2022

Corporate Participants:

B.S. Ajai Kumar — Executive Chairman

Raj Gore — Whole-time Director and Chief Executive Officer

Srinivasa Raghavan — Chief Financial Officer

Analysts:

Unidentified Participant — — Analyst

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Dhara Patwa — SMIFS LIMITED — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Abdulkader Puranwala — Elara Capital — Analyst

Naman Bhansali — Perpetuity Ventures — Analyst

Dipti Kothari — Kothari Securities — Analyst

Aditya Khemka — InCred PMS — Analyst

Sabyasachi Mukerji — Centrum PMS — Analyst

Pallavi Deshpande — Sameeksha Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 FY ’23 Earnings Conference Call of HealthCare Global Enterprises Limited.

This conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinions and expectations of the Company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

Now I hand the conference over to Dr. B.S. Ajai Kumar, Executive Chairman of HealthCare Global Enterprises Limited. Thank you, and over to you, sir.

B.S. Ajai Kumar — Executive Chairman

Thank you very much, and a warm welcome to you all. At HCG, we are very happy with our performance for this quarter. We’ll of course hear all about this in the next few minutes from our CEO, Mr. Raj Gore; and CFO, Srini Raghavan.

I would like to take this opportunity to provide some information, how HCG chain of dedicated cancer centers is consistently moving up the value chain of high-quality critical care powered by high-end technology. In recent times, cancer is fast moving towards precision therapy, which explains why outcomes have significantly [Technical Issues] and more so over the past [Technical Issues] years.

Let me take a few minutes to elaborate on some [Technical Issues]

Operator

Sir, sorry to interrupt, but your audio is breaking up in between, sir. Your voice is going in and out.

B.S. Ajai Kumar — Executive Chairman

[Technical Issues] I can do. I would like to take a few minutes to elaborate on new technology we have launched at our Center of Excellence Bangalore. This technology is Ethos from Varian and it helps to perform adopting radiotherapy. Adopting radiotherapy is something [Technical Issues]

Operator

Dr. Ajai Kumar, so sorry to interrupt, but your audio is breaking up in between, sir.

B.S. Ajai Kumar — Executive Chairman

I don’t know what else I can do here. Hello? Can you hear me now better?

Operator

Yes, this is better, sir. Yes, sir, please proceed.

B.S. Ajai Kumar — Executive Chairman

Just to repeat myself, I will take [Technical Issues] elaborate [Technical Issues] technology [Technical Issues] our Center of Excellence. This technology is Ethos from Varian [Technical Issues]

Operator

Sorry, Dr. Ajai Kumar, still your audio is breaking up once again, sir.

B.S. Ajai Kumar — Executive Chairman

I don’t know. [Technical Issues] Can you go to the computer.

Operator

[Operator Instructions] Ladies and gentlemen, the line for the Management is reconnected. Over to you, Dr. B.S. Ajai Kumar.

B.S. Ajai Kumar — Executive Chairman

Thank you very much. I’m sorry about this disturbance. As I was saying, I’d like to take a few minutes to elaborate on new technology we have launched at our Center of Excellence Bangalore. The technology is called Ethos from Varian, and it helps perform adaptive radiotherapy and it’s one of the first few in the world we have established here now at our Center of Excellence. Adaptive radiotherapy is something which continuously probes deep into the tumor and intelligently adopts the treatment to the tumor configuration using an AI platform. We can use the actionable information generated from it in the treatment of subsequent patients. Our area of interest is to collect proper data and see how the tumor responds to the treatment.

This technology will finally help us answer some critical questions like when do we get a complete remission, how long should the treatment span be, questions that have challenged radiation oncologists for several decades. Being a leading cancer care provider, we are deeply engaged in academics and research. And I would like to highlight our several paper publications. Talking of academics, we are very proud to announce that we have fellowship programs of over 170 fellowships and different DNB programs and all of our programs are in high demand, not only in Bangalore, but also importantly, in Tier 2, Tier 3 cities.

As we all know in the past, it is very difficult to ensure high-end training in Tier 2, Tier 3 cities and also to find personnel who are willing to relocate and practice there. But we are very fortunate that now even in Tier 2, Tier 3 cities, like even Ranchi, Vizag, and Ongole, we have fellowship programs, DNB students for training, which undoubtedly augurs well for the community of these regions.

We take research very seriously. Till date, we have published close to 756 research papers. For October alone, we have nine publications. And more importantly, a significant number of them have been a podium presentation. This clearly reflects our high quality of work, which is one of the best in oncology globally, not just in India. We have some doctors who have also written key chapters in textbooks. We have won best paper awards and been in top in the clinical research abstracts. Recently, we participated actively in a radiation immune conference where we won one of the best awards for it globally.

This is just a gist of our achievements in academic and research. And going forward, we will continue to ensure a seamless integration of clinical services, academics and research, such that all our breakthroughs should serve the large purpose in the form of better treatment outcomes and improving the quality of life for our patients. The future is very bright for HCG across all aspects of cancer management. We will continue to strive hard to make cancer a chronic disease and bring higher success to HCG. Thank you very much.

Now, I hand over to Mr. Raj Gore, our CEO.

Raj Gore — Whole-time Director and Chief Executive Officer

Thank you so much, Dr. Ajai. A very warm welcome to all the participants on the call. We are delighted to share yet another quarter of good performance. We’ve been delivering growth on a year-on-year basis, as well as sequentially for the last eight consecutive quarters now, and this quarter is no different.

We are happy to report another strong financial performance for the quarter ended September 2022. Our consolidated revenue for Q2 stood at INR420 crores, a growth of 19% on Y-o-Y basis. This strong revenue growth, coupled with our focused efforts on cost rationalization, has resulted in year-on-year margin expansion of 130 bps, leading to adjusted EBITDA margin of 19.3%. Our adjusted EBITDA for Q2 FY ’23 stood strong at INR81 crores, a growth of 28% over Q2 FY ’22. As a result, our Q2 FY ’23 profit after tax on a pre-Ind AS basis stood at INR10.5 crores, up by 137%.

Over the last few quarters, we’ve been regularly informing you about our efforts to drive growth on several fronts, like enhancing our clinical services portfolio, increasing our clinician bandwidth and our go-to-market initiatives to increase reach online and offline, retail and institutional accounts, domestic and international fronts. We are making encouraging progress on all these fronts, resulting in a steady growth in new patient registration, higher utilization across all modalities of treatment across metro and non-metro markets.

While our matured centers continue to show higher than market growth rate, the growth strategies implemented for the emerging centers has started showing promising results. Kolkata and Mumbai centers has grown by 40% and 30% respectively on a year-on-year basis in the current quarter. I’m happy to highlight here that our Jaipur center has more than doubled revenue on a year-on-year basis with more than 25% EBITDA margin. Our two linear accelerators there are gearing with full capacity utilization, and we will be commissioning one more linear accelerator early next year.

Our differentiated and specialized cancer care, along with strong brand positioning, have enabled us to attain leadership position in 13 out of 18 locations where we are settled. Going forward, we will continue to invest in HCG brands to make it the most preferred choice for cancer patients across India. We are very optimistic of ensuring our market share and strengthening our leadership position going forward.

Now, I would like to hand it over to Srini, our CFO.

Srinivasa Raghavan — Chief Financial Officer

Thank you, Raj, and very good morning to everyone. We have uploaded our Q2 FY ’23 financial results and updated investor presentation on the stock exchanges and Company website, and I hope everybody had an opportunity to go through the same. We are delighted to share that we have been able to grow our revenues ahead of the industry growth due to the trust and brand created for HCG.

On the revenue front, our consolidated revenues for Q2 FY ’23 stood at INR420 crores as compared to INR350 crores in Q2 FY ’22, a growth of 19%. Our revenue for H1 FY ’23 stood at INR828 crores, a growth of 23% year-on-year. Revenue split between HCG and Milann stood at 96% and 4%, respectively for Q2 FY ’23. Revenue growth for HCG stood at 21% year-on-year and for Milann, excluding for quoted revenues in Q2 FY ’22, stood at 15% year-on-year.

As mentioned in Slide 25, revenue from the mature centers stood at INR309 crores, a growth of 19% year-on-year basis for Q2 FY ’23. Revenue from emerging centers stood at INR95 crores, a growth of 26% on year-on-year for Q2 FY ’23. We are delighted to say that our emerging centers are inching towards maturity and are seeing good traction across geographies.

I now request your attention to Slide 26, where we have disclosed our operational parameters across our matured network and emerging centers for Q2 FY ’23. Our Company-wide AOR stood at 66.4% and AOR for matured versus emerging centers stood at 65% and 69.9%, respectively. Higher occupancy for emerging centers is due to 72% of beds were operational in new centers. AOR on capacity beds stands at 57%. Our ARPOB on Company level stood at INR36,914 and our ARPOB from mature centers stood at INR39,684 and for emerging centers stood at INR30,145.

So, de-growth of AOR in emerging centers were majorly attributed to a couple of centers in the emerging markets, growing at a very fast pace with higher share of institutional business as compared to business from out-of-pocket patients. However, we believe this is a temporary phenomenon and should stabilize and we see increasing ARPOB from our emerging markets as well.

Across geographies, we have given our revenue breakup in Slide number 27. Jaipur grew by 205%, revenue from Rajkot grew by 80%, Mumbai grew by 30%, Bangalore Center of Excellence grew by 35% year-on-year for Q2 FY ’23. Our Milann business is also doing well. Revenues have increased by 15% in Q2 FY ’23 on Y-o-Y basis, excluding the vaccination revenue for Q2 FY ’22 on a like-to-like basis, and new registrations grew by 14%.

On the EBITDA front, our consolidated reported EBITDA stood at INR74.7 crores as compared to INR61.7 crores in Q1 FY ’23, a growth of 21%. Reported EBITDA for H1 FY ’23 stood at INR146.9 crores, a growth of 40% year-on-year. Adjusted EBITDA for Q2 FY ’23, that is after adjusting the onetime value creation cost and adjustment of ease-off expenses stood at INR81 crores as compared to INR63.9 crores in Q2 FY ’23, a growth of 28%. Adjusted EBITDA margin stood at 19.3% as compared to 18% in Q2 FY ’22, a growth of 130 bps. Adjusted EBITDA for H1 FY ’23 grew by 39.6% year-on-year with margins at 18.9%, a growth in margins of 240 bps. We have also given bifurcation of EBITDA across matured and emerging centers, and I would request the participants to view Slide number 25 for further details.

On profit after tax. We have been delivering positive PAT for the last three quarters now. PAT for this quarter stood at INR7.4 crores as compared to INR0.8 crores in Q2 FY ’22. H1 FY ’23 PAT stood at INR13.4 crores as compared to a loss of INR8.7 crores in H1 FY ’22.

Other facts. Pre-Ind AS adjustments for Q2 FY ’23 stood at INR10.5 crores as compared to INR4.4 crores in Q2 FY ’22. As for H1 FY ’23, pre-Ind AS adjusted stood at INR19.7 crores as compared to a loss of INR1.5 crores in H1 FY ’22. ROCE for matured networks stood at 20% annualized for H1 FY ’23 as compared to 24.8% in FY ’22, a growth of 460 bps. ROCE before corporate allocations for matured centers stood at 24.8%. ROCE for emerging centers stood at negative 4.9% annualized for H1 FY ’23 as compared to negative 8.3% in full year FY ’22. This is again an improvement of 340 bps. ROCE before corporate allocations for emerging centers stood at negative 0.9%.

Our net debt position, excluding capital leases as on 30th September stood at INR211 crores as compared to INR190 crores as on March 31, ’22. Our expansion of the existing facilities at Ahmedabad Phase II and Whitefield Extension of Bangalore COE is on track. Total planned CapEx for Ahmedabad is INR85 crores, expected date of operations being Q1 FY ’25. And for Bangalore COE is INR25 crores, expected date of operations being Q4 FY ’24.

With this, I would now like to open the floor for questions and answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Karan from Sunara [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hello. Hi, sir. Am I audible?

B.S. Ajai Kumar — Executive Chairman

Yes, you are. Thank you.

Unidentified Participant — — Analyst

Sir, my first question would be on the INR5 crore consulting costs that we booked in Q2. Can you just, sir, give us some color on where this INR5 crore consulting cost has been spent? And what kind of benefits are we going to see from this? That’s my question number one, sir.

And my question number two is that we see some sequential decline in our emerging centers revenue and some decline in ARPOB as well. So, can you just give us some more color on how do we see this shaping up for us? And what exactly are we doing in our Bombay and Kolkata center? And we said that we’re going to get new talent in and a new surgical head over there. So, can you give us some color on both of these centers as well? Thank you, sir. That’s it from my side.

B.S. Ajai Kumar — Executive Chairman

Thanks for the question, and I’ll take the first question. Regarding this INR5 crores that we are talking about, this is regarding the value creation activities that HCG has embarked upon. We are working on two things. One is, how do we drive productivity and efficiency across the system, that is one line of activity. And the second area that we are working on is on the digital front, as to how we can use technology platform and digital platform to drive revenue. These are the two activities that we have embarked on. And as we sit, the progress is happening and the cost of INR5 crores is for these activities. In terms of your question, in terms of what kind of benefit if you kind of entitle our result in, we expect this should result in the next year, a profit overall EBITDA improvement of about 100 to 150 bps basically on the EBITDA margin.

Unidentified Participant — — Analyst

Got it, sir.

B.S. Ajai Kumar — Executive Chairman

And the second part of the question, Raj would like to answer.

Raj Gore — Whole-time Director and Chief Executive Officer

So, if I understood your question, one was about emerging centers ARPOBs. As Srini mentioned in his opening remarks, that when you open a new hospital, the first goal is always to get the utilization up on different modalities. So usually you drive more institutional business. And quarter-on-quarter that mix sometimes can change between different hospitals. We are not concerned about it. We think it’s a one-off, and it will get back on track going forward. Regarding — can you repeat the third question that you had?

Unidentified Participant — — Analyst

Yes, sir. So, on our strategy in both in Bombay and Kolkata centers. So what exactly are we — yes, sir.

Raj Gore — Whole-time Director and Chief Executive Officer

Yes. So as discussed in the past also, Kolkata and Colaba in Mumbai are our newest centers. As soon as COVID went away, we started doing our go-to-market initiatives. We started increasing our clinician bandwidth, improving our clinical services portfolio. Those are showing results. As I mentioned in my opening remarks, Kolkata has grown 40% year-on-year. Mumbai hospitals have grown 30% year-on-year. We’re very confident that in subsequent quarters, we will continue that growth momentum.

Unidentified Participant — — Analyst

Okay, sir. Sir, just a follow-up on the consulting costs. Will we see this INR5 crores continuing in Q3 and Q4 as well? Or will this now start trending on a downward trajectory in Q3, Q4?

Raj Gore — Whole-time Director and Chief Executive Officer

Yes. So it will start coming down by end of this financial year, we expect it to go away, yes. So in following your next financial year, this will not be there. That’s why we’ve identified it as a one-time separate expense.

Unidentified Participant — — Analyst

Okay, sir. Thank you. That’s it from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNB Paribas. Please go ahead.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Yeah, good morning, sir. Thanks for giving me the opportunity and congrats for good set of numbers. Sir, my question is on margin front. So of the total material medical equipments, how much is the imported equipment because what I’m trying to understand is because of this rupee depreciation, will it have any impact on your cost element and that might result in margins coming lower in the coming quarters?

Srinivasa Raghavan — Chief Financial Officer

As far as the rupee is concerned, there are two things. We don’t see any margin impact because the agreement we have with some major suppliers are, as we have already indicated in the past, are the pay-per-use model. So that will — and also we have — we do earn a lot of foreign exchange, which is a natural hedge. So because of these two things, we don’t see any margin impact from the procurement of equipments.

B.S. Ajai Kumar — Executive Chairman

And secondly, we do not have any dollar exposure.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay. And just to understand the question a previous participant asked about the ARPOB remaining flat. So this is like a one quarter impact, you might see ARPOB coming in better in the subsequent quarters?

Raj Gore — Whole-time Director and Chief Executive Officer

Absolutely, Kaustubh, thank you for asking that question. See, emerging centers is a bucket. You also have Mumbai there. You also have Kolkata there. Kolkata ARPOB is almost close to 50,000 per day. Mumbai ARPOB is in mid-50s, right? So as these two — these three centers, two in Mumbai and one in Kolkata, continue to grow in terms of their contribution to total revenue of emerging centers, the ARPOB will start going higher and higher in subsequent quarters. In addition to that, these are also the two locations where we will get a higher international business than compared to other non-metro locations. So that’s another lever that we have to drive price realization as well as ARPOB.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Right, sir. And one last one, if I can.

Raj Gore — Whole-time Director and Chief Executive Officer

Usually what we do Kaustubh usually what the playbook for new hospital commissioning is you open the hospital. First, you go for footfall. First you go for higher occupancy, higher utilization on different modalities. You create a significant number of prepaid patients to drive word of mouth. And then you start optimizing different mixes to drive your realization ARPOB margin. So we are in that journey right now.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Right, sir. Thanks for the understanding. Sir my last one is on — as you said in your initial comments that patient registration is one of your key drivers in terms of occupancy. So on a year-on-year basis, can you give us some idea of what was the increase in the patient registration because word of mouth and whatever technology you are bringing in. So that is — that will also help you to have more and more registrations going ahead. So any understanding on how it was in this quarter? And any expectation in the quarters ahead?

Raj Gore — Whole-time Director and Chief Executive Officer

Yes. So on a Y-o-Y basis, last quarter, we saw NPR registration growth in lower teens, about 11%, 12% at a network level. Obviously, it will vary from geography to geography majority of the centers.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay, sir. Thank you.

B.S. Ajai Kumar — Executive Chairman

One thing is we are not seeing the full impact of our other initiatives like what Raj and Srini mentioned. That impact is still to be seen in the last quarter at the beginning of the next year.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay, sir. Thank you for the understanding and all the best for the future quarters.

Raj Gore — Whole-time Director and Chief Executive Officer

Thank you.

B.S. Ajai Kumar — Executive Chairman

Thank you, Kaustubh.

Operator

Thank you. [Operator Instructions] The next question is from the line of Dhara Patwa from SMIFS Limited. Please go ahead.

Dhara Patwa — SMIFS LIMITED — Analyst

Yeah. Thanks for the opportunity. Sir, I just wanted to understand like how much time does the emerging centers take to become mature. Like when can we expect East India hospitals to deliver margin of 15% plus? Sir, that’s my first question.

Raj Gore — Whole-time Director and Chief Executive Officer

Thank you, Dhara. Sorry, if I’ve got the name wrong. Now this is a bucket, right. So different hospitals are at a different maturity stage. I gave an example of Jaipur. Jaipur is already double the revenue, has started delivering EBITDA margin 25-plus percent. So Borivali similarly in Mumbai is delivering in mid-20s EBITDA margin. Kolkata is our newest center. We expect it to start giving — start breaking even early next year. And then we will continue to grow that margin. 15% is probably the subsequent year following the next year because it’s — because that’s our newest center.

Dhara Patwa — SMIFS LIMITED — Analyst

Right. Okay, sure, sir. Got it. And I wanted to understand like 88% of revenue comes from Oncology. Sir, do we have any a cost breakup like how much of that would be from medicines and how much will be from the surgical procedures?

Raj Gore — Whole-time Director and Chief Executive Officer

Okay. Split by radiation?

Dhara Patwa — SMIFS LIMITED — Analyst

Right.

Raj Gore — Whole-time Director and Chief Executive Officer

So usually, we break our business in four big buckets, right? One is our consultation and diagnostics, which is about 20% of our top line. Medical oncology, which is chemotherapy, immunotherapy, et cetera, that’s about 35%. Radiation oncology is about 20% and surgical would be about 25%.

Dhara Patwa — SMIFS LIMITED — Analyst

Okay, sir. That’s it. Thank you. That’s it from my side.

Raj Gore — Whole-time Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Karan Vora from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Hi. This is Shyam Srinivasan. Thank you for taking my question. Just one on slide 11. Yes, maybe I have not seen this slide before, but it seems very interesting. Doctor, can you just explain the non-metro versus metro? I think many of the other health care companies now are talking about going into non-metro locations. But you seem to have made a pretty decent job of it. So just if you could explain this slide, please?

Raj Gore — Whole-time Director and Chief Executive Officer

Yes. So Shyam that slide — what we are trying to say is look, health care opportunity in India, demand supply gap, accessibility, availability, we all know about it. But I think the bigger problem we have in this country is disparity, right? Most of our health care supply is in metro, big cities, state capitals. The real need to provide quality health care. Bigger need to provide quality health care is outside big cities.

I think this is where HCG has a unique business model. What this slide basically says is that we have 13 locations, which are Tier 2, Tier 3, Tier 4 places like Ongole, like 2 to 3 lakh population, Shimoga, again 2 to 3 lakh population. So it was almost Tier 4 kind of a category. Now out of those 13 locations, 11 locations we have a number one market leadership in oncology.

The way the business model works is the result of our business model is out of those 13 locations, we are delivering EBITDA margins in the range of 15% to 28%. Some hospitals, the lower side is 15% and the higher side is 28%.In terms of ROCE for these 13 locations, the range is between 15% to 24%. That’s because, one, we have an early mover advantage, first mover advantage.

Second our unit economics, we are about 20%, 25% lesser cost in terms of our CapEx in this market. In these markets, our operating costs also tends to be lower, and then we go for more institutional business to drive higher volumes at relatively lower price points to make this model work for us. I think that — if you look at all the health care players in India, I think HCG is probably the only one who has made its model work in different tiers of cities in India, delivering pretty much similar EBITDA margins as well as ROCE returns across our locations.

Shyam Srinivasan — Goldman Sachs — Analyst

Just to following up there Raj, just on the payer mix, which you also highlight, right? You take on more institutional, even government scheme patients. So ROCE you’re mentioning greater than 15% still — but is there no worries around receivables from the government and how do you navigate that?

Raj Gore — Whole-time Director and Chief Executive Officer

So look, I think when it comes to receivables, the trick is get your processes in terms of documentation, submission on time and follow up, get that discipline in place. A lot of these schemes have gone now in terms of their processing online. You have portals to submit, there is better visibility coming on in these channels. In fact, our DSO is consistently going down over last quarter for this particular payer mix in this market. So I think on these institutional channels, and we made it work for us.

B.S. Ajai Kumar — Executive Chairman

I think to add to what Raj mentioned, Shyam and this is really where — yes, while there could be some payment challenges in terms of collection. But as Raj rightly pointed out, our net DSOs kind of coming down quarter-on-quarter, that’s point number one. And as we do say that this quarter ended September was our highest collection month in terms of overall receivables as well. So while there are challenges. But there is clear focus in terms of how we drive collection and ensure that we stay on board.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. And last question, just back on ARPOB. So I’m talking now only just matured center ARPOB, right? I think remember, last quarter or before, we did the rationalization exercise to look at how our prices are versus competition. And if you are a leader, we have taken some price increases up. Is there something that — I know it used to be a 12 to 18 month exercise, but do you think that could be a lever in the next 12, 18 months also that you could do the rest of the portfolio where you have not done that exercise?

Raj Gore — Whole-time Director and Chief Executive Officer

Absolutely. Just to recall, recollect what we informed last time, so we started that initiative from our Bangalore Center and we are in process of rolling it out to rest of the locations. In Bangalore Center alone, we’ve had about 25 basis points impact on an overall P&L, overall EBITDA margin of the company by just holding out this initiative in our Bangalore market. Now we are rolling it out, as we have mentioned earlier, Srini also covered it in his remarks that we are looking at about 100, 150 basis points improvement in our EBITDA margin by end of the — once we finish the rollout of the initiative. Obviously, it will also help us to drive ARPOB.

Our mix is very different, right? Because our locations are Bangalore market, Ahmedabad market, which are our core home markets, where we have dominant market position for a longer period. Our ARPOB is 75 plus, around 75,000 per day. Mumbai, as I mentioned, is in mid 60s, Baroda is in mid 60s, Kolkata is almost close to 50. So as our centers start getting at a higher utilization level, we’ll continue to optimize mix, drive price realization, pricing as a lever and we’ll continue to increase, grow our ARPOB in the right direction.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Just following up there. So that 150 is it like a 12, 18 month journey or how should we look at that, just from this activity?

Raj Gore — Whole-time Director and Chief Executive Officer

So we’ve already got some impact. We feel that at a quarterly level early, I think first quarter of next year, we will start seeing that impact in our P&L.

B.S. Ajai Kumar — Executive Chairman

We are expecting the full rollout implementation of these initiatives across different hospitals by end of Q4 of this year.

Operator

The next question is from the line of Abdulkader Puranwala from Elara.

Abdulkader Puranwala — Elara Capital — Analyst

Just one question. Could you please elaborate on the status of our expansion plans at Whitefield and Ahmedabad, because if I see sequentially, the CapEx incurred this quarter, I mean it’s flattish. So just some color on that?

B.S. Ajai Kumar — Executive Chairman

Yes. In Ahmedabad, we have started the new projects. The work is going on. We expect the transition to happen by October of 2023. And so that is going as planned. As you know, there are also certain transfer technology, linear accelerator all of this will happen. So we hope that by October, this will all be completed. It will be fully operational. Regarding the Whitefield, we have just got approval from the local authorities. The BBMP, so far the plans have been approved and we expect the projects to be completed in about maximum of 2 years that is 18 to 24 months, so once the construction work starts okay.

Operator

The next question is from the line of Naman Bhansali from Perpetuity Ventures.

Naman Bhansali — Perpetuity Ventures — Analyst

You previously talked about some diversified revenue from various modalities. So could you please help me understand the margin dynamics in that region? That is the margin dynamics in the medical oncology, surgical oncology in that part. So that’s my first question, right.

B.S. Ajai Kumar — Executive Chairman

I think, we do not give margin dynamics quite early so, right? So that is why we give it at a consolidated level and the overall contribution margin is a good indicator of our overall business.

Naman Bhansali — Perpetuity Ventures — Analyst

Okay. And the second question —

Operator

Mr. Bhansali. So once your question is done, may we request you to mute your handset from your end please.

Naman Bhansali — Perpetuity Ventures — Analyst

Yes, sure. So my second question was on the unit economics. So you talked about 20% lower cost. So what is the CapEx per bed or CapEx per center, which you incur versus the industry?

B.S. Ajai Kumar — Executive Chairman

[Technical Issues] Okay, let me put it this, as far as you’re looking at Tier 2 centers, right?

Naman Bhansali — Perpetuity Ventures — Analyst

Yes.

Raj Gore — Whole-time Director and Chief Executive Officer

So see again, I would like to differentiate here. We are not [Indecipherable] beds. Bed capacity is not necessarily the main driver for our Group. We have four modalities, OPD diagnostics, chemotherapy, medical oncology, radiation. These are all daycare or outpatient services, only surgical largely is our inpatient. So we do not — that metric is not necessarily relevant for us. However, if I have to give you a ballpark, our cost per bed in metro cities will be about INR65 lakhs to INR75 lakhs and in Tier 2, Tier 3 cities, it will be about INR50 lakhs to INR55 lakhs for a hospital size of about 80 beds.

Naman Bhansali — Perpetuity Ventures — Analyst

Okay. Got it.

Raj Gore — Whole-time Director and Chief Executive Officer

I just want to address the previous question that we had. The reason we do not give margin by modalities is, because it’s not necessarily a driver for margin improvement. When a cancer patients walks in, we do not have a choice to the modalities that you need to treat that cancer patient. It’s not a choice, it depends on what type of cancer, what stage of cancer. So that’s not necessarily a controllable variable for us. It’s more of a — it depends on what the patient’s state is, so it doesn’t make sense to track it that way, because it’s not really a variable that you can control or optimize or drive.

Srinivasa Raghavan — Chief Financial Officer

Now just to add to what Raj said, in a multidisciplinary approach what we have, the team decides whether the patient should undergo chemotherapy or radiation or surgery or an integrated approach. Nearly 60% of the patients end up having all three modalities of treatment. So you cannot really break up into which is a high margin, which is no margin. We have to look at it at a consolidated level. For us, what we try to look at is, per patient, new patient, what is it cost to do certain treatments combined. So obviously, there are ways, contribution factor maybe more from radiation. So we do look at all that, but it is not the driving force for us to do the right treatment for the patient.

Operator

The next question is from the line of Dipti Kothari from Kothari Securities.

Dipti Kothari — Kothari Securities — Analyst

So my first question was that, we have been increasing in terms of revenues and margins, have also expanded over the last 6 to 8 quarters. However, we are still not a high PAT generating company. So what is your sense on PAT going forward?

Raj Gore — Whole-time Director and Chief Executive Officer

If you go back to my earlier part of the thing, I talked about PAT before IndAS impact, so let me set the context here. If you look at it, my PAT at the pre-IndAs level, is close to INR10.5 crores. And if I adjust for the onetime impact that we talked about on value creation, overall PAT at a pre-IndAS level is INR14 crores. So let me explain couple of nuances in this.

Point number one, basically because of the IndAS impact, the long-term lease rental model that we have. Because of that, my first IndAS PAT is getting depressed, because of the initial year of the lease rentals, given the equalization of lease costs. But having said that, over a period of time, especially at the midway price, this should kind of reverse basically. So you’ve got to look at pre-IndAS impact as far as PAT is concerned.

And secondly, I did talk about the value creation activity. There is onetime cost of INR5 crores that is sitting, which is in the EBITDA and kind of flowing into the PAT number also. If we exclude the impact of that, my PAT should look better. And last but not the least, since you asked about how is the future looking like. We are currently at a tax regime of 35%, we are going to be moving to a 25% tax regime next year onwards. So putting all these factors together, on a pre-IndAS fact basis, my PAT is at about INR14 crores for Q2 FY ’23. That’s the way I would put it.

Operator

The next question is from the line of Aditya Khemka from InCred PMS.

Aditya Khemka — InCred PMS — Analyst

Ironically my question sir, is exactly the opposite of the previous participant. So I see you have a lot of intangibles. And obviously, we do acquisitions and alliances that creates intangibles. But I don’t see a lot of amortization of that intangibles, as in we’re amortizing — either not amortizing or if you are amortizing, we are amortizing at a very, very slow pace. And I understand the higher the amortization, the more depressed the PAT will be.

But as an investor, we don’t really care about PAT, we care about cash flows. And the cash flows has actually been really healthy for the past 4, 5 years and they continue to be healthy. So my question to you is, why don’t we amortize intangibles at a faster pace, so that our ROC, ROCEs can look better. And we get tax exemptions, tax break on our intangible amortization and that helps us save cash. End of the day, any company’s job is to generate cash and PAT is just a number.

B.S. Ajai Kumar — Executive Chairman

Yes. I understand. It’s a good point that you are bringing up and it’s quite interesting that we [Indecipherable]. I also appreciate the fact that we have talked about positive cash flow in the last few quarters, which is a good thing, yes. It’s getting the right balance basically, getting the right balance in terms of amortizing the intangibles. We are not aggressive, at the same time, we are not very slow as well. We are doing it as per the law, as per the procedures basically.

And intangibles comes only in the case of new acquisitions. In the last few quarters, we have seen — we had this large acquisition, we had this Suchirayu acquisitions. Those are kind of created those intangibles basically. But having said that, it will be amortized on a basis which is — that allows as per the Companies Act as well as, as per the Accounting Standard.

Aditya Khemka — InCred PMS — Analyst

Yes sir, but your Accounting Standard actually gives you a very large range of amortization. It is 10 years to 50 years that you can use to amortize intangibles.

B.S. Ajai Kumar — Executive Chairman

I agree.

Aditya Khemka — InCred PMS — Analyst

Yes. So my point is that, instead of using 50 years or 40 years, you could do it over time?

B.S. Ajai Kumar — Executive Chairman

See, our philosophy is, and our amortization happens anywhere between 5 to 8 years, basically. I think that’s the kind of trend that we have been doing and that is the way we would move forward as well.

Aditya Khemka — InCred PMS — Analyst

Fair enough. My second question sir, is regarding the multi-specialty and the super specialty makeup of our company. Obviously, I’m keeping Milann aside here, given that it’s very small in the context of things. But the multi-specialty hospitals, your super-specialty obviously seems to be doing phenomenally well. On the multi-specialty side, what is the plan? Do we plan to remain a company, which is both multi-specialty and super-specialty? Or at some stage, do you have any restructuring in mind for either of these verticals?

Raj Gore — Whole-time Director and Chief Executive Officer

I think we stated earlier also that, our strategy is to be oncology focused organization. That’s what HCG is synonymous for, that’s what is our core competition. We would like to pursue oncology business going forward. Now as a legacy, we have a few multi-speciality hospitals. Currently, what we are trying to do is see how we can grow oncology specialty business within those multi-specialty hospitals.

A good example of that is Bhavnagar, it was a purely multi-specialty hospital with pretty much no oncology business. Last few years, we added a linear accelerator there. We started growing surgical and medical oncology and that specialty is growing there. We will do similar things at Rajkot. So right now we will focus on growing the oncology share of business within [Technical Issues] that’s what our current focus is.

Aditya Khemka — InCred PMS — Analyst

So basically your multi-specialty setups, you’re trying to sort of tweak them to be more super specialty within the multi-specialty? Is that how I should read it?

Raj Gore — Whole-time Director and Chief Executive Officer

Yes.

Aditya Khemka — InCred PMS — Analyst

But why not divest those assets really?

B.S. Ajai Kumar — Executive Chairman

That’s what has been Bhavnagar. So we’re trying to replicate that in other locations also.

Aditya Khemka — InCred PMS — Analyst

But Raj, you could actually divest those assets. So if you look at the private market transactions in the hospital space, the multiples at which these transactions are happening are far higher than the [Technical Issues]. So it is actually going to be value accretive for you, if you divest your multi-specialty assets, get the cash, pay off the debt and use the cash to acquire super specialty or quality assets.

B.S. Ajai Kumar — Executive Chairman

Yes, Aditya. This is Ajai Kumar. In this regard, obviously this has been internally discussed quite a few times. In fact our multi-specialty is very limited, if we have to look at it, diversify and everything, it requires for us to maybe put more emphasis on multi-specialty. Instead of that, we’ve decided we’ll do more specialty and also we really do not have that much debt. So we are looking at various models. What you have suggested is also has been discussed internally and obviously we’ll continue to discuss. As they said, there is a time and place for everything. We’ll look at it when the right time and see whether we should do some of these things what you are suggesting also.

Aditya Khemka — InCred PMS — Analyst

Understood, sir. One last question, sir. On the CVC stake in our company, which is currently, if I’m not mistaken around 58%. Have they shared any time line with you, as to how long they plan to hold on to the lion’s share of the company? And the fund which has invested in your company, how long will they stay invested? And when do they plan to liquidate and will the liquidation be one shot or multistage staggered liquidation? How will that work?

Raj Gore — Whole-time Director and Chief Executive Officer

Yes. This discussion has not taken place yet, because it’s too early possibly. They have been with us for a little over 2 years now. And so obviously, the time horizon will be 5 years or longer for any private equity. So they are — at this point, obviously they have done well. And they have been continued support to us in our new — whatever endeavors we have taken. So it is a good partnership and at this point, we want to really keep that good partnership and grow.

Aditya Khemka — InCred PMS — Analyst

Understood. One last question, its Dr. Ajai or for you. So a lot of the hospitals that we meet and speak to, obviously all of them want to focus on oncology as a specialty given the growing incidence of the disease and the lack of treatment options available in our country. My question to you is, have you explored the opportunity of doing — of operating in maintenance contracts with many of these, let’s say, stand alone hospitals, which might have oncology wing, but may not be making much money or may not be doing very well in that wing, because they just don’t have the expertise or the knowledge or the technology to deal with the therapy area.

And that could be a very asset light model for you, because it’s just knowledge based revenue. So have you explored such opportunities? If yes, what is the kind of feedback you’re getting there? What is the traction in that business model? Yes. Aditya, in the past we have already — we have looked at that models, we’ve also looked at the implant model. To begin with, I would like to say the implant models are not workable for us, because we want to be an independent dedicated cancer center. Given those asset light module, what you talked about, it’s not long lasting. The problem with this is, maybe it’s the Indian DNA, where the person to lead to cut the contract at some point would like to say, I know, should we feel like they are doing good, we are generating income, they would like for us to exist. They say we ourselves will do. We have seen that all happen a lot in Apollo model in the past, as you know, where they have been now. So the model we feel, as a — just to take a minute and say, strategically, there is immense opportunity for us to grow in oncology. And for us, like what we have seen in Jaipur and other areas, where we went into a market relatively competitive, but just establishing a dedicated oncology center we have grown in Nagpur. So we have this kind of significant opportunities, also for M&A we have some opportunities, we are exploring that seriously. So that is the way forward for us. Dedicated oncology centers, either through M&A, brownfield to grow. And also, capacity utilization of our own centers. For example, some of our centers like what we discussed are capable of increasing the revenue significantly with all the systems we put in place. They are at an inflection point, so our focus will be on that. So our idea is to focus and bring these centers to the level we want. Even our Bangalore center, Whitefield coming up, which will add significantly in the hub and spoke model we have. So there is so much opportunities in strategic areas we want to focus on that. And of course, our focus is on quality of care to the patient. Being a dedicated oncology that is when we can deliver the real quality and real outcome. So this — when we look at the clinical attune we have, the type of doctors we have, 400 doctors across India and type of service we are doing and outcomes we are producing, research, academic, it has to be a dedicated oncology like what we have MD Anderson, Sloan Kettering. That is the model we want to drive. And that will give us significant revenue and upside. There is no doubt in my mind. I don’t know investors may have something, but I feel as a founder and entrepreneur, there’s absolutely no doubt in my mind how we will grow.

Operator

The next question is from the line of Sabyasachi Mukerji from Centrum PMS.

Sabyasachi Mukerji — Centrum PMS — Analyst

Hi, I have two questions. First is, if I look back to your matured centers’ revenue profile and EBITDA margin pre-corporate expenses. The EBITDA margin pre-corporate expenses has been stable over the last 6 quarters at close to 25%, right? But if I look at your Y-o-Y change in occupancy that has moved from 57.6% to 65% Q2 FY ’23. And you have also I think there is an improvement in ARPOB as well of 5% Y-o-Y. Why the margin has not improved? What is the reason behind this?

Raj Gore — Whole-time Director and Chief Executive Officer

See, as we’ve been saying since last quarter, the value creation plan that we have rolled out, we are incurring a onetime cost. So that cost is largely allocated to mature centers in proportion of the revenue contribution to the total revenue, you will have to take that away to see the impact. That’s one explanation. So if you look at — if I’m correct, the graph you’re referring to, the quarter-on-quarter trend, you have a 19% growth on revenue, but only 20% growth on EBITDA, right? But if you look at — if I take away that onetime cost, that 20% will become 26%. So 19% revenue growth is contributing to 26% EBITDA growth for the corresponding period. That’s the difference, it’s a onetime cost.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. And this — you are saying that this will go away in — by the end of FY ’23 and FY ’24, we’ll be able to see the full impact and full benefit of the cost exercise?

Raj Gore — Whole-time Director and Chief Executive Officer

Absolutely.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. So and that benefit would be close to 150 basis points you are saying? So this 25% whatever we are seeing in the pre-corporate margins that will probably move to 26.5% roundabout. Is that understanding correct?

Raj Gore — Whole-time Director and Chief Executive Officer

Yes. That’s at a network level.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. So 150 basis points you are saying on a network level?

Raj Gore — Whole-time Director and Chief Executive Officer

100 to 150 bps at a network level, yes.

Sabyasachi Mukerji — Centrum PMS — Analyst

My other question is related to that only. On the emerging centers, if I heard you correctly, Jaipur has been doing very well, probably operating at more than 20% or I think, I heard your 25% operating margin. Borivali is also operating at good margin levels. So where do you see the operating margin trajectory of the emerging centers which is currently at 10% level? Where do you see this going in FY ’24?

Raj Gore — Whole-time Director and Chief Executive Officer

Let me give you a trend to figure out how it will go. 6, 7 quarters ago that was at minus 8%. Today, we are at plus 10%. So that’s the track record we have. And [Speech Overlap] like I said, we will continue to drive the growth.

Sabyasachi Mukerji — Centrum PMS — Analyst

Sir, I am aware of the trajectory it has been — I mean, very steep. The point I want to understand here is, I believe the major drag in the emerging centers margin is Kolkata. Where you are kind of seeing a 50,000 kind of ARPOB levels. And eventually, the emerging centers’ occupancy has almost touched 70% this quarter. So eventually going ahead, once the occupancy level settles, then probably the margin levels will go up. That is the thought process. So I was coming from there and that is why the 150 basis points improvement in the network level margins look a little conservative, if I say so.

Raj Gore — Whole-time Director and Chief Executive Officer

Sabyasachi, let me clarify. 100 to 150 basis point impact is just on the initiatives that we have launched, right? But we are driving higher than market revenue at a higher than market growth rate, right? The operating leverage will kick in. So our endeavor is in next 18 to 24 months, our endeavor is to get emerging centers update, start coming closer to mature centers assets. That’s the aspiration that we are driving for.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. So the total impact in margins would be a lot higher probably in the range of 300 to 400 basis points, right?

Raj Gore — Whole-time Director and Chief Executive Officer

That’s what we are going for.

Operator

The next question is from the line of Pallavi Deshpande from Sameeksha.

Pallavi Deshpande — Sameeksha Capital — Analyst

I was just a little late in joining the call. So on the 5 crore onetime expense, if you could just elaborate who has this been? Who is the consultant and I think you mentioned that it will continue in the balance 2 quarters. Is that right?

Raj Gore — Whole-time Director and Chief Executive Officer

Just to recap, end of last year, we engaged 1 of the big 4 to start driving operational efficiency. Operational efficiencies on multiple levers. One was strategic pricing based on our market positioning in terms of market share, competitive strength or internal economics, utilization rates, et cetera. So that’s one component. This is more over and above the inflationary price increase that one takes every year. Second is staffing productivity, staffing norms, dynamic staffing based on variability and utilization rates in different hospitals across different seasons.

Third is, the fixed costs that we have. The long tail of items in the midline that we have. Then you have areas of improving, reducing, our discounts, revenue assurance, et cetera. So there are different levers that we are working on with the help of 1 of the big 4s. And we expect that will roll out all those initiatives by end of the year and this cost will go away starting from next year.

Pallavi Deshpande — Sameeksha Capital — Analyst

Right. So we can expect a similar cost in the second half INR6 crores versus what you saw in the first half?

Raj Gore — Whole-time Director and Chief Executive Officer

It will start tapering down in remaining quarters of this year, and it will completely go away by end of this year.

Pallavi Deshpande — Sameeksha Capital — Analyst

And sir, secondly, you mentioned about the ARPOB in the Mumbai property, I think. And when do we see them — any time line for it to catch up with what you have at Ahmedabad?

Raj Gore — Whole-time Director and Chief Executive Officer

See, that ARPOB is a function of your high end work complex work that you do, your specialty mix. It’s a function of your payer mix, it’s a function of your market position where you can command premium and drive your mix optimization. That’s why these centers are in emerging centers buckets. So eventually, it will happen. Anyway I mean, even if you compare mid 50s is a good ARPOB, even if you compare it with multi specialty. There are not too many players who are more than 60-K per day. I think as the centers matures, it will happen. I’m sure, if we can give a time line for that. But our endeavor is to go there as soon as possible.

Pallavi Deshpande — Sameeksha Capital — Analyst

Then the South Mumbai lease is for how long from that [Indecipherable]?

Raj Gore — Whole-time Director and Chief Executive Officer

So it’s another I think another 9 years, but it’s mutually renewable agreement.

Pallavi Deshpande — Sameeksha Capital — Analyst

And so that center only directs the patients to Borivali, right? Its not…

Raj Gore — Whole-time Director and Chief Executive Officer

No. It has everything and more than what Borivali has in terms of [Technical Issues]. That’s the only other center other than our flagship at Bangalore, which has a [Indecipherable]. It also has two more. So the — in many ways, the radiation technology that we have is best-in-class in entire Western India.

Operator

Ladies and gentlemen, due to time constraints, we take that as the last question. I now hand the conference over to the management for their closing remarks. Over to you, sir.

Raj Gore — Whole-time Director and Chief Executive Officer

So once again, I take this opportunity to thank everyone for joining the call. We will keep updating the investor community on regular basis for incremental updates on the company. I hope we’ve been able to address all your queries. For any further information, kindly get in touch with us or Strategic Growth Advisers, our Investor Relations Adviser. Thank you once again. Have a good day.

Operator

[Operator Closing Remarks]