Healthcare Global Enterprises Ltd (HCG) Q3 FY23 Earnings Concall Transcript

Healthcare Global Enterprises Ltd (NSE:HCG) Q3 FY23 Earnings Concall dated Feb. 09, 2023.

Corporate Participants:

BS Ajai Kumar — Executive Chairman

Raj Gore — Whole-time Director And Chief Executive Officer

Srinivasa Raghavan — Chief Financial Officer

Analysts:

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Anil Sarin — Centrum Asset Management — Analyst

Dhara Patwa — SMIFS Limited — Analyst

Aditya Khemka — InCred PMS — Analyst

Reshab Sisodiya — Sameeksha Capital — Analyst

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sagar Shah — Phillip Capital — Analyst

Pallavi Deshpande — Sameeksha Capital — Analyst

Naman Bhansali — Perpetuity Ventures — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to the Q3 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 do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict.

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

BS Ajai Kumar — Executive Chairman

Thank you and good evening, and welcome, and a warm welcome to all present on the Q3 FY ’23 earnings conference for Healthcare Global Enterprise. Today, I’m joined by Mr. Raj Gorey, our Chief Executive Officer; Mr. Srinivasa Raghavan, Chief Financial Officer, besides the few members of the senior management team to share our operation and financial highlights for the quarter ended December ’22. HCG has been not only a cancer destination for critical services but also a destination in research and academic excellence. We have been being very successful in gaining our hub-and-spoke model across the country and I’m happy to report that we have made long strides in academics and research where we nearly have 150 students strength present spread across —

Operator

The audio is breaking from your line, sir. It’s unclear.

BS Ajai Kumar — Executive Chairman

Okay. Can you hear me now?

Operator

Yes sir.

BS Ajai Kumar — Executive Chairman

Okay I’ll try. So we have been very successful in creating a hub-and-spoke model across the country, and I’m happy to report that we have made long strides in academics and research where we have nearly 150 students at present spread across various oncology programs in Bengaluru and nationwide. Recently, we have published the third edition of the dedicated journal named Precision Oncology, talking about the closing gap in cancer care, including one of the kind general called antimicrobial policy in cancer management with our own data, which will help to treat cancer patients with infections the right way for the first time in our own country.

We have collaborated with Intuitive to augment the accessibility of new-age surgical technology and robotic-assisted surgery across India, including non-metro cities by now going in the installation of the fourth-generation da Vinci surgical robot U.S.-based Intuitive in Vadodara, Mumbai, Kolkata to make this technology accessible to a wider population in the country to further yielding fruitful results with better clinical outcomes. Our Ahmedabad center, I’m proud to say, has completed 700 robotic surgery, GI and hepatobiliary thoracic oncology department completed 500 robotic surgery, possibly the highest type of surgery in the country as far as we know. In the academic and research, we are proud to announce that our doctors, Dr. Lohith Reddy and Dr. Krithika from Bangalore have been named in the prestigious National Cancer Institute of U.S.A. as working committee members in their immune division.

This kind of recognition is taking HCG to newer higher levels globally. In clinical trials, we have been one of the few in the Phase one trials and several other investigator-initiated trials are also ongoing. There are many more studies in the pipeline go through a lot of iterations and the guidance of our solid ethics committee. We have taken a leadership role in genomics-driven tumor boards and profile complete 500 gene sequencing for over 1,500 patients, which is the largest in the country to the best of our knowledge. This has given insights into patient-centric approach, particularly for advanced and recurring tumors, not only from India, but from Africa and Middle East, making HCG a destination of cancer care.

With a wealth of data emerging from cancer genome studies and data lake, which we have created, we feel this is just the beginning of our journey in the precision medicine trying to win the war on cancer, not only in early stage, but in advanced cases to convert cancer to chronic disease.

I now hand over to Raj Gore to take you through the strategic initiatives and financial highlights. Over to you, Raj.

Raj Gore — Whole-time Director And Chief Executive Officer

Thank you, Dr. Ajai. A very warm welcome to all the participants on the call. 4th February was the World Cancer Day, and this year’s theme was Close the Care Gap. Being an oncology player, I would like to spend a couple of minutes on this important matter. The global burden of cancer is growing steadily. India is no exception to this trend. More people died due to cancer than COVID in last three years across the world. In 2020, there were eight to nine lakh deaths due to cancer in India, an estimated economic burden in terms of GDP losses is in the range of USD11 billion, that is 0.4% of national GDP in 2020. I would like to highlight four major gaps in India that we must address.

First, awareness and prevention gap. While awareness levels about tobacco-related cancers is high in India, we still need to create awareness about other risk factors such as HPV, alcohol and obesity and drive implementation of prevention measures. number two, screening and diagnosis gap. Only 1% or less than 1% of India’s population is covered under screening programs for major cancer types, such as oral cancer, breast and cervical cancer, and more than 2/3 of cancer patients get diagnosed late at advanced stages of the disease. number three, access to treatment gap. Population living in more than 70% districts in India do not have access to comprehensive cancer centers. Of the 480 cancer comprehensive cancer care centers available in the country, about 40% are concentrated in metros and state capitals.

We need to add another 570 comprehensive cancer care centers by 2030 to meet the demand. Fourth, outcome gap, challenge of growing incidences is further intensified due to suboptimal outcomes compared to global counterparts across all major cancer types, due to all other gaps. While these gaps and challenges seem daunting, together, we can change that by forging alliances, uniting our voices and taking action. HCG has been a pioneer and the leader in addressing all these gaps with our 21 comprehensive cancer centers, largest in India. With 2/3 of these centers in nonmetro locations, we have been making quality cancer care more accessible and affordable in India since our inception. We have not only provided latest technology and treatments available across the world, but also been able to deliver outcomes compared to leading institutions across the world at a fraction of cost as acknowledged in a Harvard Business case study.

Coming back to the quarterly performance. We are very happy to report yet another strong financial performance for quarter ended December 2022. We have continued our streak of highest-ever revenue for the eighth quarter in a row and highest-ever EBITDA for seven quarters in a row now. Our consolidated revenue for Q3 FY ’23 stood at INR425 crores, growth of 19% year-on-year. Over the last few quarters, we have been regularly informing you about our efforts to drive growth on several fronts, like enhancing our clinical services portfolio, increasing our clinical bandwidth and our go-to-market initiatives to increase reach, online and offline, retail and institutional accounts, domestic and international funds.

We are making encouraging progress on all these fronts, resulting in a steady growth in new patient registrations, higher utilizations across all modalities of treatments across metro and nonmetro markets. In our emerging geographies, our priority is to create scale and grow revenue with an objective to improve capacity utilization and create higher visibility for HCG. In this regard, the company continues to make operating investments in engaging quality clinicians and brand building. We have started implementing few modules of our digital platform across key functions of patient services, sales and marketing successfully.

We have recorded highest-ever revenue in both digital and international business. On the margin front, we will be able to improve our margin from 17% in FY ’22 to adjusted EBITDA margin of 19% in Q3. Our efforts during the last 12 months on pricing optimization and cost rationalization has started to yield and major benefit will flow in FY ’24. We are confident of maintaining our leadership position in our mature markets and gaining market share and leadership position in our emerging geographies.

With this, I hand over to our CFO, Srini, for financial highlights.

Srinivasa Raghavan — Chief Financial Officer

Thank you. Good evening to all of you. We have uploaded our Q3 FY ’23 results and updated investor presentation on the stock exchanges and company’s website, I do hope everybody had an opportunity to go through the same. We are delighted to share that we have been able to grow revenue ahead of the industry growth due to the trust and brand created for HCG. On the revenue front, our consolidated revenues for Q3 FY ’23 stood at INR424 crores as compared to INR358 crores in Q3 FY ’22, a growth of 19%. Our revenues for nine months FY ’23 stood at INR1,254 crores, a growth of 21% year-over-year. Revenue split between HCG and Milann stood at 96% and 4%, respectively, for Q3 FY ’23. Revenue growth for SCG stood at 20% year-on-year and for Milann, stood at negative 1% year-over-year.

As mentioned on slide eight, revenue for the matured centers stood at INR306 crores, a growth of 17% year-on-year basis for Q3 FY ’23. Revenue from emerging INR101.5 crores, a growth of 29% on a year-over-year basis for Q3 FY ’23. We are delighted to state that our emerging centers are inching towards maturity and are seeing good traction across geographies. I now request your attention to slide number nine, where we have disclosed our operational parameters across our matured network and emerging centers for FY ’23. Our company-wide AOR stood at 65.7% and AOR for matured emerging centers stood at 63.2% and 71.9%, respectively. Our ARPOB on company level stood at INR37,140 and our ARPOB centers stood at INR40,154 and for emerging centers stood at INR30,057.

Across geographies we have given our revenue breakup in slide number 10. Rajkot grew by 114%, revenue from Jaipur grew by 104% and Mumbai grew by 28%. And new center of excellence grew by 15% year-over-year for Q3 FY ’23. Our Milann business is also doing well. Revenue stands at INR16.8 crores in Q3 FY ’23 and new registrations grew by 53%. On the EBITDA front, our consolidated reported EBITDA stood at INR75.5 crores as compared to INR61.3 crores in Q3 FY ’22, a growth of 22%. Reported EBITDA for nine months FY ’23 stood at INR222 crores, a growth of 27% year-over-year. Adjusted EBITDA for Q3 FY ’23, that is, after adjusting the onetime value creation costs and adjustment of ESOP expenses stood at INR81 crores as compared to INR636 crores in Q3 FY ’23, a growth of 28%.

Adjusted EBITDA margin stood at 19.1% as compared to 18% in Q3 FY ’22, a growth of 156 basis points. Adjusted EBITDA for nine months FY ’23 grew by 35.3% year-over-year with margins of 19%, a growth in margins of 200 basis points. We have also given bifurcation of our EBITDA across matured and emerging centers, and I will request the participants to view slide number eight for further details. On PAT, we have seen — we are delivering positive PAT for the last four quarters now. PAT for this quarter stood at INR7.5 crores as compared to a loss of INR0.3 crores in Q3 FY ’22. nine-month FY ’23 PAT stood at INR20.9 crores as compared to a loss of INR nine crores in nine months FY ’22 adjusted for onetime exceptional gains or losses in FY ’22.

Our past three Ind AS adjustments for Q3 FY ’23 stood at INR11.3 crores as compared to INR3.1 crores in Q3 FY ’22. PAT for nine months FY ’23, pre-Ind AS adjusted stood at INR31 crores as compared to a profit of INR1.6 crores in nine months FY ’22. ROCE for matured network stood at 19.7% annualized for nine months FY ’23 as compared to 15.7% in FY ’22, an improvement of 400 basis points. ROCE before corporate allocations for matured centers stood at — ROCE for emerging centers stood at negative 5.3% annualized for nine months in FY ’23 as compared to a negative 8.3% in full year FY ’22. This is, again, an improvement of 300 basis points. ROCE before corporate allocations for emerging centers stood at negative 1.4%.

Our net debt position, excluding capital leases as on 31st December stood at INR212 crores as compared to INR211 crores as on 31st September 2022. Our expansion of the existing facilities in Ahmedabad – Phase II and Whitefield expansion of Bangalore COE is on track. Total planned capex for Ahmedabad is INR85 crores. The expected date of operations in Q1 FY ’25 and for Bangalore COE is INR25 crores, expected date of operation being Q4 FY ’24. With this, I would now like to open the floor to Q&A. efore corporate allocations for matured centers stood at — ROCE for emerging centers stood at negative 5.3% annualized for nine months in FY ’23 as compared to a negative 8.3% in full year FY ’22.

This is, again, an improvement of 300 basis points. ROCE before corporate allocations for emerging centers stood at negative 1.4%. Our net debt position, excluding capital leases as on 31st December stood at INR212 crores as compared to INR211 crores as on 31st September 2022. Our expansion of the existing facilities in Ahmedabad – Phase II and Whitefield expansion of Bangalore COE is on track. Total planned capex for Ahmedabad is INR85 crores. The expected date of operations in Q1 FY ’25 and for Bangalore COE is INR25 crores, expected date of operation being Q4 FY ’24.

With this, I would now like to open the floor to Q&A.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go-ahead.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Yeah, good evening, sir. Thanks for reason that opportunity. Couple of questions. First, ARPOB for this quarter is down. So any particular reason for this?

Raj Gore — Whole-time Director And Chief Executive Officer

Kaustubh, Raj here. Look, as I mentioned in my opening remarks, in our emerging centers right now, we are going for volumes, we’re going for scale. We’re going for higher utilization of our capacity. It’s reflected on a very good growth in Rajkot, Jaipur and across various emerging centers. That’s the reason ARPOB is lower. But if — I would like to draw your attention, this is still an improvement over the Q2. So as we’ve always stated, first, we will go for volumes, and then we will go to improve the quality of the business and go for ARPOB.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Right. My second question is on the consolidation fees. So this has been there for past two quarters. So when should we expect this in what time it will continue on your books is reflective because we are setting it as a onetime exchange so.

Raj Gore — Whole-time Director And Chief Executive Officer

Correct. Correct. So this last quarter, Q4 of this financial year would be the last quarter.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay. Q4 of this financial year. And your bed, till last quarter, it was around 1,794 beds. This quarter, it has increased around 36 beds to 1,873 so any new — I mean where this addition has been done, 36 beds?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. So we have this operational more beds in Jaipur. These beds were always there. It’s as an installed capacity, we’re just operationalizing it.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay. And another question is on your fertility business part. So there, we have done seeing the revenues at around INR16 crores to INR17 crores. And even on registration side, what I’m struggling to understand is whether there would be improvement in terms of operational impact — or where the company wants to focus on that part of business? So any thought focus on that.

Raj Gore — Whole-time Director And Chief Executive Officer

So look, I know that Q3 was flat. But if you look at year-on-year, we have about 9%, 10% growth. Q3 could be just a matter of seasonality. There have been certain regulatory changes as well. So the whole industry is adjusting to new regulatory requirements. So we feel that going forward, it will continue to grow.

Srinivasa Raghavan — Chief Financial Officer

Explain man. Presently, this government of India has got into regulatory act called ART. I think in the state of Karnataka it to be awarded, its pumps. I think probably in the month of March and April that Board is going to form and the next level of patients going to get engaged. That is because 30% to 40% of our donors programs are — So going forward and probably be Q1 of FY ’23, ’24 could see the big numbers growth on that respect.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay, okay. So this is a temporary thing maybe by quarter 1, things should improve for this business?

Srinivasa Raghavan — Chief Financial Officer

Q1 FY ’23.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Yeah, thanks for that. thank you and all the best

Operator

Thank you. The next question is from the line of Anil Sarin from Centrum Asset Management. Please go-ahead.

Anil Sarin — Centrum Asset Management — Analyst

Hi, good evening, everybody. Am I audible?

Operator

Yes, sir you are.

Anil Sarin — Centrum Asset Management — Analyst

So first of all, good job once again. I will start with a request that if you can postpone the call for the next day post declaration of results, that would give all of us time to go through the presentation in more detail, and we can ask better questions that way. So if you could consider that for next time, that would be great.

Raj Gore — Whole-time Director And Chief Executive Officer

We’ll take that into —

Anil Sarin — Centrum Asset Management — Analyst

Sure. Sir, the question I had was the next —

BS Ajai Kumar — Executive Chairman

We will do next day because last time, there was some decrease we do it on the same day, there’s conflicts context and all. We certainly will take your request and see how we can accommodate, okay?

Anil Sarin — Centrum Asset Management — Analyst

Sure, sure or at least giving a gap of a few hours, as you know, I mean, this is result season, a lot of results coming, but some time, the quality of questions would improve if we’ve had time to go through.

BS Ajai Kumar — Executive Chairman

So a good point. Good point, will take it.

Anil Sarin — Centrum Asset Management — Analyst

Sure. The question I had was that there has been a steady improvement on a sequential quarter basis for the last seven or eight quarters that I have been seeing this, this is perhaps the ninth quarter. So — but on a sequential quarter basis, the EBITDA margin has not improved in any material fashion, unless I’m mistaken, if you can just throw some light on that because revenue has grown, but the EBITDA margin post adjusting for these onetime costs, I doubt if it has gone up, if I’m inaccurate, you can please point out.

Raj Gore — Whole-time Director And Chief Executive Officer

So Anil, good question. So one reason is our onetime expenses in our value creation plan. The second reason is we are disproportionately investing in hiring clinical talent and building brand for our emerging centers to drive scale, to drive volumes across those centers. And we are seeing the results of those efforts in the revenue growth across emerging centers. So that’s an upfront investment to ramp up the utilization going forward to take it to a next level.

Anil Sarin — Centrum Asset Management — Analyst

Okay. Okay. Great. And so, post this coming quarter, that would be the last time when you will have this consultancy charges, unless you go for absolutely a new project. So next year, what kind of overall growth can one expect? And what kind of overall EBITDA margins can one expect including Milann, including all the constituent parts?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. So, Anil, without the onetime expenses, we are about 19% in the last quarter, EBITDA margin. And we are confident maintaining our growth momentum going forward on a quarterly basis. We usually don’t give forward-looking guidance on numbers.

Anil Sarin — Centrum Asset Management — Analyst

Okay, great, thank you very much and all the best.

Operator

Thank you. 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 have two set of questions. So despite higher occupancy of 72% in the emerging centers and ARPOB of INR30,000, which is flat on the sequential basis, still the EBITDA margins have not seen a decline to 7.5% as compared to the average of 10.5% in the previous two quarters. So is it the new normal should we expect it or going forward, it will increase to 10%, 12% or let’s say, 15%? So what should we assume for the emerging market — emerging centers sorry?

Raj Gore — Whole-time Director And Chief Executive Officer

So again, we don’t give forward-looking guidance on numbers. But as I explained, a lot of our growth in emerging center is coming because we have higher clinical talent, we’ve increased our clinical bandwidth. We are investing disproportionately higher in our sales and marketing activities. As a result, we are seeing revenue growth. It’s our upfront investment. The margins will follow. On question of ARPOB again, initially, we would go for scale. We would go for volume. Usually, the playbook in hospitals, is you fill the hospital first and then you optimize your mix, your payer mix, your — and that will drive your realization all operating performance indicators going forward. So we are following the same playbook center by center in emerging geographies.

Dhara Patwa — SMIFS Limited — Analyst

So should we expect at least a 10% plus margin for the emerging centers going forward? Like at least a direction like, it won’t be below 7%, but it will be above — in the range of 10% or something?

BS Ajai Kumar — Executive Chairman

It will start moving towards our mature center bucket slowly.

Operator

Thank you. [Operator Instructions] We’ll move on to the next question from the line of Aditya Khemka from InCred PMS. Please go-ahead.

Aditya Khemka — InCred PMS — Analyst

Yeah, hi, thanks for the opportunity. I’d say, Dr. First question, if you could help us with what is the current EBITDA margin we do, let’s say, at our flagship facility in Bangalore?

Raj Gore — Whole-time Director And Chief Executive Officer

I think — yes, so go ahead.

Srinivasa Raghavan — Chief Financial Officer

The EBITDA margin in Bangalore, you were talking about center of excellence, it’s about post Ind AS is about 28% – -27%, 28% is our EBITDA margin.

Aditya Khemka — InCred PMS — Analyst

And this number would not include any profit overhead, right?

Raj Gore — Whole-time Director And Chief Executive Officer

This should just be the unit economics.

Srinivasa Raghavan — Chief Financial Officer

This can improve by a couple of basis points. But as you know, we are reaching the top in terms of the EBITDA margin for the center of excellence. Okay.

Raj Gore — Whole-time Director And Chief Executive Officer

Correct. If that they what level EBITDA.

Aditya Khemka — InCred PMS — Analyst

Yes, it’s on a unit level, it does not include corporate overhead, right?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. Right.

Aditya Khemka — InCred PMS — Analyst

Okay. So therefore, my question is that I believe the endeavor of the company would be to move as many units as possible closer to the EBITDA margin that we do with our flagship facility over a period of time. Obviously, it can’t happen as soon as we open the facility, it takes to ramp up and mature the facility to get to an EBITDA margin of 25% plus, which would also imply that at the time when the majority of the capacity of your 1,800-odd beds, which is 1,500 or so 1,800 beds actually become “mature”.

Then at a unit level ex corporate head, we should be at an EBITDA margin of 25% plus minus then the corporate overhead with, I don’t know how much it is, but I’m guessing it to be around 5% to 8% of pay. So my question to you is, when do we see that happening? When do we see a lion’s share of our beds, more than 80% of our beds maturing to a level of profitability that we do in our most flagship facility?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. So Aditya, good analysis. Our model — our business model has been able to deliver a mid-20s EBITDA margin in metro markets, nonmetro markets, when the center becomes mature. So we will drive the performance of individual units to get to that level. We are looking at about two years span for the entire current base to move in that direction.

BS Ajai Kumar — Executive Chairman

So as you know, we are reaching the top in terms of EBITDA after onetime charge, we are at 19% already. This is including the corporate cost. So if you kind of take out the corporate cost at a unique level, we are already in the low 20s. For them to reach ’25, it should be doable. And I think we are on track to, I can say, confidently.

Aditya Khemka — InCred PMS — Analyst

So sir, at a unit economic level, are we already at 21% 22%? Is that what you mean by low 20s?

BS Ajai Kumar — Executive Chairman

Yes, at our economics, we are already at 21%, 22% because our 19% includes the corporate cost.

Aditya Khemka — InCred PMS — Analyst

Which is about 2% to 3% is what we’re implying?

BS Ajai Kumar — Executive Chairman

Yes, yes.

Aditya Khemka — InCred PMS — Analyst

Okay. Okay. So I get it. So this is not unreasonable

BS Ajai Kumar — Executive Chairman

I said, we can order lighter, not take more assessment of 5%

Aditya Khemka — InCred PMS — Analyst

No that’s — if you’re doing it on a leaner organization, it’s actually excellent, because I understand hospital business if actual facility would actually include a lot of corporate costs, this gets called out at the EBITDA, I get that. I get all that. So I understand that you’re at 2% to 3% corporate cost so which means Dr. Ajai or Dr. Raj essentially, it means that it is not unreasonable for a shareholder today to believe that in the next two to three years, we will be 200 to 300 basis point expansion in EBITDA margin, am I right?

BS Ajai Kumar — Executive Chairman

Yes. It’s certainly not unreasonable and before our token we can’t guarantee we can even better that — that is what we will strive for. As it is a lot of effort is going on in terms of operational efficiency and doing. But if all the centers come to mature, and we have good efficiency as we are planning and our revenue growth is there with fixed cost remaining, and as you said, our corporate cost, we should be able to restart and hopefully even better that.

Aditya Khemka — InCred PMS — Analyst

That’s awesome. That’s very good to know. My second question is essentially on the cash flow. So I heard the net debt numbers. And correct me again if I wrong, this would be excluding lease liability. I think it is around INR210 crores to INR212 crores for the past two quarters, am I right?

BS Ajai Kumar — Executive Chairman

Yes. That’s right.

Aditya Khemka — InCred PMS — Analyst

So where is the free cash flow? I mean, ideally, the number should have gone down given that we have had a very profitable quarter — what are we investing in? And this is coming off after your PAT, so obviously, your investment in manpower, center of excellence, R&D scientists, all that is the cash flow after those investments. So are we — so where are we making those capital expenditures, which is not helping us reduce our debt further.

BS Ajai Kumar — Executive Chairman

Okay. Point nuber one, I think it is largely flat as you see over the last couple of quarters. But having said that, we have invested in revenue-generating activities. For example, we have invested about close to INR18 crores in solar in our Karnataka center that’s like. That is giving us some savings in our electricity bill. We have also invested in a high-end equipment in our center of excellence which we talked about in the last quarter. And we are also investing in robotic surgery. So these are the places where we are investing and as I mentioned earlier, these are all revenue-generating capex, which will kind of give benefits to the business in the future quarters.

Aditya Khemka — InCred PMS — Analyst

I understand that. So could you give me capital expenditure run-off for the nine months this fiscal?

BS Ajai Kumar — Executive Chairman

About INR96 crores is the capex for nine months. INR56 crores.

Aditya Khemka — InCred PMS — Analyst

INR96 crores okay, then it makes sense. I understand. My last question is on the technology side. So I think Dr. Ajai, would be the right onto the pond. So this da Vinci robots, the first edition that you are acquiring. First of all, the acquisition of these robotic machineries, I’m assuming these are on lease and not outright purchases?

BS Ajai Kumar — Executive Chairman

Yes. We have cleared the first-of-a-kind model with them. It is not really a lease. It is our model of where I think first time da Vinci to best of our knowledge instantly where we have without any minimum guarantees making, there is a model where we share in our revenue and certain fixed amount, and we found that it’s doable, and that is we can penetrate Tier 2, Tier three cities apart from doing where we expect the volume to grow over the next year or two. So this is the model we are trying it out with the new da Vinci three units

Aditya Khemka — InCred PMS — Analyst

Understood. So we are using this da Vinci model — so the da Vinci robots to my understanding for first benefit is obviously cosmetology because the arms are flexible and you can have better holes in the body of the patient than let’s say laparoscopy.

BS Ajai Kumar — Executive Chairman

The da Vinci came about two decades ago because of the precision surgery. We talked about precision variation, targeted, but surgery was always not precise, extensive surgery was done. With the da Vinci unit, what happens if you get that microscopic look and we use the da Vinci handles to really do precision where the normal tissue is not hit. The normal issue doesn’t suffer and it is precise excision of the tumor or whatever your target is, thereby, the patients recovers fast, complications are less. So overall, as you said, the cosmetic scar also will be less. So based on all this, more and more da Vinci users have come compared to the time for neuro-oncology first; for doing prostate was the first time it came. Now we are doing significant like I said in my opening remarks, we have done in Ahmedabad one of the highest renewal of esophagus using da Vinci.

It’s a remarkable feat because it is — almost in three days, the patient can go on literally no pain and no complication. We used to have this leakages at the anastomotic side, we don’t see all that. So it is a near perfect you can reach in terms of surgery and outcome will also be good, unless it hits on the normal tissue. And again that also, we are beginning to do without any scar imagine doing a head and neck surgery, overhead, where there is no scar and a good outcome. So we are also having signed up an agreement with the da Vinci where we will be doing not only training, but we, together, will create some innovative platforms. So that is what I personally as a doctor am looking at how will we innovate new techniques, new technologies.

Aditya Khemka — InCred PMS — Analyst

Sorry, I have two more questions on this platform, Dr. Ajai. Firstly, how many clinicians are running doctor to surgeon? Do we have certified by da Vinci to operate and use the da Vinci system?

BS Ajai Kumar — Executive Chairman

Today, in Bangalore, we have about five surgeons who are certified, and we are starting — we have our own training program da Vinci. In Ahmedabad, we have another five people, four to five people who play in the northern head and neck for GI. And we have others like who’s already waiting for da Vinci, and they are two or three trained in Mumbai were ready to do surgery now. So we have quite a few, and we intend to increase this number not only for HCG doctors, and we want to make sure even outside doctors can come and try precision so that essentially, the patients at large can benefit. That is what we are looking at, okay?

Aditya Khemka — InCred PMS — Analyst

That’s enough from objective. Last question on the da Vinci platform. Intuitive also has this new system or this new sort of a diagnostic machine that helps in diagnosing lung cancer early or the smoking population. Any thoughts on that, Dr. Ajai, have you explored that option with Intuitive?

BS Ajai Kumar — Executive Chairman

No, we have not explored that. We will certainly look into that and explore. We have explored this lower level of CT scan for smoking population. We are thinking of launching that on Sundays, where we can do lower CT scan, because this is a big trial, which was done in U.S. years ago, very successful. So we have been working with the radiology group. We are bringing in possibly a new radiologist who’s experienced in that. But da Vinci part, I have not explored. I will certainly look into this.

Aditya Khemka — InCred PMS — Analyst

Yes, they call it the lung biopsy or something, I think. When I studied it, I found it really exciting. So maybe something because —

BS Ajai Kumar — Executive Chairman

I know what you’re talking about, it’s the robotics-guided lung biopsy, where there is very minimal intervention. But there are parallel units available. So certainly, we look at it, but they did make a — come and make a presentation a few months ago. So we are evaluating what is suitable for our people here, okay?

Aditya Khemka — InCred PMS — Analyst

Okay. Thanks a lot of sense. And more power to you guys to help our country and our society.

Operator

Thank you. The next question is from the line of Reshab Sisodiya from Sameeksha Capital. Please go-ahead.

Reshab Sisodiya — Sameeksha Capital — Analyst

Sir audible.

Raj Gore — Whole-time Director And Chief Executive Officer

Yeah, really audio is slightly breaking.

Reshab Sisodiya — Sameeksha Capital — Analyst

Sir I am audible now.

Raj Gore — Whole-time Director And Chief Executive Officer

Yes, please go-ahead.

Reshab Sisodiya — Sameeksha Capital — Analyst

Sir, one question on the growth guidance that we have. So given that you are reaching almost 70% occupancies now, and our new bed capacity that you mentioned is coming up by the end of FY ’24. So how confident are you for the growth momentum for the company? And at the same time, where do we see our ARPOB growth going ahead for both the centers, emerging as well as matured?

Raj Gore — Whole-time Director And Chief Executive Officer

The occupancy numbers the reports are on operational beds. If we do — not all the beds in some of the emerging centers have been operationalized. If we take this occupancy on an installed bed capacity, it becomes 56%. So we don’t expect bed capacity being a constraint in our growth, especially since our chemo modalities, day care modality, radiation doesn’t require bed. It’s only the surgical patients who require largely overnight admission on inpatient beds. So we don’t see bed being a constraint for us going forward in terms of driving growth.

BS Ajai Kumar — Executive Chairman

I just want to add what Raj said is absolutely right. I just want to say, in oncology, historically, it has been more and more outpatient and less hospital say, as you look at the ALRs, it tends to come down as we move forward year-on-year. So that is the reason the bed is not the way we feel to measure the growth. There are other parameters we should take into consideration to look at the growth.

Reshab Sisodiya — Sameeksha Capital — Analyst

Okay. Sir, that’s helpful. Sir, on the Mumbai center. So the current growth given as compared to other centers like Jaipur, Rajkot, they have very high growth. So why is the Mumbai center having a bit of low growth even required — we acquired new assets recently?

Raj Gore — Whole-time Director And Chief Executive Officer

So I think the Mumbai growth looks subdued because last year, we had a significant vaccination revenue in our Mumbai center. These were the emerging centers, COVID came, we couldn’t go out and build brand HCG among the communities that we serve. Vaccination was a good opportunity to respond to nation’s call as well as reaching now to the community to build our brand. So we do that very well. If you adjust that, this growth will look better. The other part is in Mumbai, we go for a better payer mix compared to Rajkot and Jaipur. So it’s more cash TPA corporate driven growth rather than government-driven growth. So that’s also another reason that this growth will be a better quality business growth yielding better ARPOB eventually and better margins.

Reshab Sisodiya — Sameeksha Capital — Analyst

Okay, sir. Just the last question. From a entire community for the cancer part. So what would be a. I mean, if you could just break it down?

Raj Gore — Whole-time Director And Chief Executive Officer

So about almost 65, 70 will be cash plus insurance. And then remaining will be government as well as corporate business.

Reshab Sisodiya — Sameeksha Capital — Analyst

Okay. So are we facing any repricing issues with insurance companies or with corporate? And do we see that any further repricing ahead that would help us in the ARPOB growth going ahead?

Raj Gore — Whole-time Director And Chief Executive Officer

Sorry, can you repeat your question?

Reshab Sisodiya — Sameeksha Capital — Analyst

I’m asking given that insurance in corporate parts, are we looking at increasing the rates with them and that could help our ARPOB next year, growth?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. So usually, this comes for renewal every two years. So it will come up for renewal next year in some of the — it’s a center-by-center thing. So after the contractual period, we go for a rate increase. In general, if you look at historically, we have a larger presence outside big cities, outside metro cities. Many of our new centers are in bigger cities relatively, two in Mumbai, in Kolkata, Nagpur, these are better markets. So as this share of the emerging centers grow as a share of total revenue, our ARPOB will automatically start growing to a higher level.

Reshab Sisodiya — Sameeksha Capital — Analyst

Okay, that’s. Thank you.

Operator

Thank you. The next question is from the line of Urmil Shah from Aegis Federal Life Insurance. Please go-ahead.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Yeah, thank you for the opportunity, Sir, my first question is, you mentioned a 56% occupancy on installed bed, that’s at the company level or if you could split between mature and emerging centers?

Raj Gore — Whole-time Director And Chief Executive Officer

So 56% on a total capacity. Yes.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure. So what would be the same number for mature and emerging centers?

Raj Gore — Whole-time Director And Chief Executive Officer

So whatever you see on the slide as far as established and the adjustment is concerned, there — I mean, there, we don’t have any difference between operational and capacity beds. It’s primarily the new centers where there is a difference of about 250 beds, where we have installed 250 less in our emerging centers. Thereby, if you take capacity utilization in terms of beds at emerging center is around the 56%.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure, sure. And from a medium-term perspective, up 65%, which is occupancy for the mature centers that’s — what should be doable — of course, it will be depending on each center. But from a 3, 5-year point of view, your current bed should be reaching that kind of occupancy?

Raj Gore — Whole-time Director And Chief Executive Officer

Sorry, which is your question. Is it a bed question or —

Urmil Shah — Aegis Federal Life Insurance — Analyst

So you mentioned that the occupancy level in your mature centers, it’s similar for when calculated on operational beds or installed capacity. My question was as regards to emerging centers from a next three to 5-year point of view, they should also be getting to a 65% kind of occupancy level? And in your case, generally, at what kind of occupancy levels you would further need to add capacity in a particular center?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. So we do expect emerging centers to start reaching to mature center occupancy. Usually around 75% when the occupancy is 75%, we start looking at how do we create capacity. So one of the things you must understand, as I mentioned earlier, that it’s only surgical specialty, which largely uses overnight inpatient beds. That average length of sales going down with minimally invasive technique robotics. So what you — what we’ve seen in our experience, what is happening is we are converting inpatients beds into daycare beds. We have — on daycare base, we have ability to increase number of shifts in the same day. So for us, bed is not as much a concern as one would think in a multi-speciality environment.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure, sure. Sir, my second question was more on the emerging centers. So we’ve discussed about the margin performance over there. So what could be the drivers for getting the margins, if not to the mature center levels, but at least to mid-30s, what could be the drivers keeping into account the current ARPOBs and the AOR, which we are currently doing?

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. So Urmil, as we mentioned, right now, we’ve invested in clinical talent. We’re bringing them out in our outreach markets. We’re investing in branding and marketing sales activities, basically driving more new patients, driving utilization of different modalities, driving capacity utilization, driving revenue. That’s the sure short way to improve margin in these centers.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure. And just to dissect on the AORs of emerging centers. Of course, this is an average. So does the emerging centers also have a few centers where the AOR would be 75% plus?

Raj Gore — Whole-time Director And Chief Executive Officer

So yes, like for example, Jaipur, where we just mentioned earlier that we commissioned more beds because we were reaching higher occupancy. So yes, in that bucket, we do have a center, which is a higher capacity — higher occupancy.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure. Sir so then in such centers like there are two centers, how different is the profitability as compared to the emerging center category as a whole?

Raj Gore — Whole-time Director And Chief Executive Officer

So Jaipur in a span of year has gone to EBITDA margin of mid-20s post Ind AS.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure, sure. Okay. Yes. Sir, my last point was on the free cash flow question, which was there. So this year, we are having the investments for new high-end equipment also in talent also on the consultant fees, which are there. Next year, if we look into — we’ve already talked about the capex for the capacity addition. So adjusted for the one-timers and the investments which have gone in this year, would it be fair to assume that that’s the bare minimum increase in free cash flow on NOPAT that should come in?

Srinivasa Raghavan — Chief Financial Officer

Yes. See, the way to look at it is — we will have to look at our ratios — our debt-to-EBITDA ratios, which is at a very, very acceptable level as well as the overall business is concerned. So if you see, we are at about 2.3%, and we should be around that it would slightly come lower as soon in the future quarters. But having said that, the key point is there is some amount of capex, while there won’t be any GPP costs next year, there will be some amount of capex towards 21 capex growth oriented capex, both will be there in the future years as well. But the key point to note is this will not come out of any additional extra borrowing, we will be able to manage out of our internal approvals, point number one. And number two, we will be able to maintain some of our fee ratio at an acceptable level, which is accessible to the market.

Urmil Shah — Aegis Federal Life Insurance — Analyst

Sure sir, thanks for answering my question and all the best.

Operator

Thank you. The next question is from the line of Sagar Shah from Phillip Capital. Please go-ahead.

Sagar Shah — Phillip Capital — Analyst

Yeah, good evening, sir. Actually, I just had one question. Actually, we were looking to open our 203-inpatient beds in the time to come. So can you specify your time that in which — something like in six months or in 12 months or the next 18 months, are we going to open up the bid? And my second question was related to our growth drivers. For FY ’24, what would be our key revenue drivers for the same?

Raj Gore — Whole-time Director And Chief Executive Officer

Also, Sagar, I mean, the answer to your first question really depends on how — will change from hospital to hospital. But as a total bucket, it next around 18 months, we’ll have to deploy all our installed capacity, which is not operational as we operationalize it. In terms of revenue growth drivers, look, the growth drivers for next year will continue to be the same growth drivers that have entered this year also.

BS Ajai Kumar — Executive Chairman

And just to add on that the growth drivers, obviously, we are looking at the ones which are not mature. So those which are not mature center, we grow faster, obviously, than those who are nature that, that could be and also the technology we are investing and they like what our CFO said new technology we have brought, those will be also drivers for the future.

Sagar Shah — Phillip Capital — Analyst

So basically, you are saying the improvement in the utilization of the emerging hospitals, improvement in the some — improvement in the volumes of new patient volumes in the emerging hospitals would be the same growth driver for emerging — for the company in FY ’24, right?

BS Ajai Kumar — Executive Chairman

Did that yes.

Sagar Shah — Phillip Capital — Analyst

Thank you so much. All the best.

Operator

Thank you The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go-ahead.

Pallavi Deshpande — Sameeksha Capital — Analyst

Yes sir, thank you for taking my questions. So Just on the part where you mentioned about having talent, etc.. Will we be done with that this year or will this be a continuous process on the clinical talent side —

Raj Gore — Whole-time Director And Chief Executive Officer

Pallavi I don’t think we’ll ever stop adding clinical talent. In new centers, you will first make sure that your clinical services portfolio is complete. When those start growing, their bandwidth starts getting choke, you will add more clinicians under each as the program evolves we’ll start creating vertical specialization, head and neck, breast, etc.. So this is a continuous process. We’ll continue to invest in talent going forward.

BS Ajai Kumar — Executive Chairman

And just to add to that, for us, being a very speciality focused, as you know, the way oncology is growing is in multidisciplinary clinic tumor boards. But this, we definitely not only have they have training doctors and also have additional talent. And that is what we are doing, not only in big centers, but even in Tier 2, Tier three cities. Our talent pool is increasing and definitely increased, and that will definitely add to our overall growth, and we have proven that again and again.

Pallavi Deshpande — Sameeksha Capital — Analyst

Got it. My second question was on the ROCE. So ROCEs of the emerging centers, we’re just seeing a small decline quarter-on-quarter is not material, but we are giving adjusted direction seems to.

BS Ajai Kumar — Executive Chairman

So, as Raj said, it is not material. And for the fee as Raj said, we have sort of invested more on operating expenses related to clinical talent, hiring and business promotion. This will start to — into our higher revenues going forward however, it is temporary as you rightly said. And sir, you mentioned about the mix of the government and corporate at 30, wouldn’t that — wouldn’t the government, I think the last time I had the number plus 14%.

Raj Gore — Whole-time Director And Chief Executive Officer

So Pallavi, historically, our presence outside metro cities was larger, where we had a mass market strategy, low price, higher volumes with government schemes. Many of our emerging centers are in bigger cities. We have, for example, we have two in Mumbai, one in Kolkata. They will have a better payer mix, better ARPOB, better realization. So as that — as share of emerging centers to the total revenue goes up, all these parameters will start improving going northward.

Pallavi Deshpande — Sameeksha Capital — Analyst

All right, thank you so much.

Operator

Thank you. Ladies and gentlemen, due to time constraints, we will take one last question from the line of Naman Bhansali from Perpetuity Ventures. Please go ahead.

Naman Bhansali — Perpetuity Ventures — Analyst

Thank you. The pleasure in continuing good business. Just one request was that you used to give an FY ’22 a good breakup of ARPO EBITDA margins in occupancy on a region-wide basis. So it would be great if you could continue giving that in the presentation, if possible. So that was a request. And my first question relates to the international patients. How much of the business as a percentage of contribution was international patients? And what do we do to attract these patients?

Are these all organically driven or are we hiring any agencies to attract these patients from international borders? And the second question is on the industry and on HCG that how is HCG different from a proton and other hospitals in the industry who also have a high-end oncology machines like CyberKnife and etc.? And what risk do this industry in oncology face in terms of newer technologies being introduced in coming future? These are my two questions.

Raj Gore — Whole-time Director And Chief Executive Officer

Naman, this is Raj here. Let me take the first part and Dr. Ajai will take the second part on the difference between different technologies. So 1, we’ll take your suggestion into consideration about the breakup. Second, international business, look, we drive international business through all channels that are present to us. There are agencies, there are direct institutional tie-ups, there are tie ups with international insurance agencies and very direct business generation, which we do by taking our clinicians to these cities, to these markets.

If we have information centers in this market, we have permanent team members in these markets. So it’s a combination of both. For us, international business is doing really well. We had about 1.5 to 1.6 times of our pre-COVID high numbers. In fact, last quarter was our highest ever. We are close to about 5% of total revenue in our international business. I’ll request Dr. Ajai to take your question on Proton and —

BS Ajai Kumar — Executive Chairman

Yes. In terms of Proton, as you know, Proton has been around since 1970s, and it is mainly because efficiency was with Brad, three and a lot of issues are in in the maintenance of Proton apart from the cost and other things. There is no exit and entry dose. But as the time has advanced, now we have some units which are better than Proton. In fact, HCG considered Proton a few years ago. And I myself being an oncologist and radiation oncologist, I was looking at it. But after careful evaluation and looking at the global usage of Proton why it is coming down, attending the conferences and all, primarily because alternatives had come.

And one of the things we have installed in Bangalore of course, we have CyberKnife, which is precision medicine radio surgery, one in Bangalore, one in Mumbai, and doing extremely well in terms of physician and retreatment also can be done with literally very little exit dose. Now the advancement on this has been the Ethos, which is adaptive radiotherapy using the model of AI-based. And this has been a game changer for us. We have recently installed it. We have done a significant number of patients in the three months. And what we are seeing in our impact, I am involved in partially in the research with Dr. Lohith and Krithika. What we have seen is, as the tumor changes, day to day, we can make the change in the tumor lithography and also change the treatment.

And we are also studying what is the exact dose required. So this is a study in progress called radiosensitivity index. So with this kind of major developments, technology obviously becomes very important. Added to that, we are looking at how do we connect genomics to technology, where certain tumors respond well, certain tumors do not respond. Why? What is the genomic story behind it? So we can decide on the proper dosing of not only radiation, but also targeted therapy, immunotherapy, everything. Today, cancer treatment, as you may know, is multidisciplinary. And our outcomes based on this has been very good, very encouraging, not only in the early stages, but even in advanced stages. Today, lung cancer patient can live for even with advanced stages in to eight to 10 years.

A patient with breast cancer similarly can live for eight to 10 years. So a lot of changes have taken place. Technology is going to complement. AI is going to complement the way we see it, and that is why in HCG, we have become really progressive on it. We are spending significant our money also and just to see how this can translate to precision patient therapy. You are absolutely right in terms of technology going to play a very big complementary role for doctors to see what should be the right treatment for the patient at the right time. I always believe first-time right treatment will give us the best prognosis. And this, obviously, technology, virtual tumor boards are going to be big factors in future along with AI, of course, as we go forward.

Naman Bhansali — Perpetuity Ventures — Analyst

All right. Just from my questions. Thank you.

Operator

Thank you.Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Raj Gore for closing comments.

Raj Gore — Whole-time Director And Chief Executive Officer

Yes. Thank you, everyone, for joining the call, and all those — your interest in HCG. Hope we’ve been able to address all your queries. We’ll continue to keep you updated on a regular basis on developments in HCG. For any further information, please get in touch with us or Strategic Growth Advisers, our Investor Relations advisors. Thank you once again, and have a good evening.

Operator

[Operator Closing Remarks]