Max Healthcare Institute Ltd (NSE: MAXHEALTH) Q3 2025 Earnings Call dated Jan. 31, 2025
Corporate Participants:
Suraj Digawalekar — Investor Relations, Citigate Dewe Rogerson
Abhay Soi — Chairman & Managing Director
Yogesh Kumar Sareen — Senior Director – Chief Financial Officer
Keshav Gupta — Senior Director – Growth, M&A and Business Planning
Analysts:
Amey Chalke — Analyst
Sumit Gupta — Analyst
Damayanti Kerai — Analyst
Prashant Nair — Analyst
Tushar Manudhane — Analyst
Rishi Mody — Analyst
Andrey Purushottam — Analyst
Vaibhav Saboo — Analyst
Neha Manpuria — Analyst
Kunal Dhamesha — Analyst
Presentation:
Operator
Ladies and gentlemen, good morning, and welcome to the Max Healthcare Institute Limited Earnings Conference Call. As a reminder, all participant lines will remain in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded.
I now hand the conference over to Mr Suraj from CDR India. Thank you, and over to you, sir.
Suraj Digawalekar — Investor Relations, Citigate Dewe Rogerson
Thank you, Ryan. Good morning, everyone, and thank you for joining us on Max Healthcare’s Q3 and nine months FY ’25 earnings conference call. We have with us Mr. Soy, Chairman and Managing Director; Mr Yoghi Sarin, Senior Director and Chief Financial Officer; and Mr Keshav Gupta, Senior Director, Growth, M&A and Business Planning. We will begin the call with opening remarks from the management, following which we will have the forum open for an interactive Q&A session.
Before we begin, I would like to point out that some statements made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.
I would now like to invite Abhay to make his opening remarks. Thank you and over to you,.
Abhay Soi — Chairman & Managing Director
A very good morning to everyone and warm welcome to Max Healthcare’s Q3 FY ’25 earnings call. We are considerably pleased by our performance this quarter with over 30% year-on-year growth across parameters such as revenue, EBITDA and occupied bed days, notably supplemented by the growth momentum of our recent acquisitions. We are happy to share that we achieved EBITDA breakeven in December 2024 within a record period of six months from the launch of our greenfield hospital in. This hospital reported a revenue of INR59 crores and an EBITDA loss of INR5 crores in Q3. Max Luckdown demonstrated year-on-year growth of 58% in revenue and 94% in EBITDA, while Max Nagpur reported year-on-year growth of 22% in revenue and 50% in EBITDA in the 3rd-quarter. Additionally, JP Healthcare Limited became a only subsidiary of the company during the quarter.
JP Noida is presently being integrated into our network and reported a gross revenue of INR112 crores with an operating EBITDA of INR23 crores at a margin of 21% in the 3rd-quarter. We have now been able to demonstrate remarkable operating efficiencies across all formats of inorganic growth, namely greenfields, acquisitions and brownfields. This fortifies our confidence for the upcoming phase of accelerated growth driven by significant brownfield additions within the next six months. Consequently, we continue to strategically pursue inorganic opportunities. We are expanding our footprint in the Mumbai metropolitan region through our foray into the attractive micro-market, given its rapid urban growth and proximity to Mumbai.
Our Board has accorded its approval to enter into an asset-light build-to-suit agreement for a 500-bed hospital at a prime location in Thane to be set-up by the partner as per our specifications on a built-up area of approximately 6 lakh square feet. The hospital is expected to be commissioned in 2028. This marks our third asset-light transaction designed to drive growth and maximize potential return on capital employed with minimal investment. Board has also provided this approval for enhancing the capacity of an upcoming asset-light build-to-suit hospital in Mohali, to 400 beds from 250 beds planned previously. Now coming to the 3rd-quarter performance highlights, which is our 17th consecutive quarter of year-on-year growth.
Our average occupancy for the network stood at 75% versus 73% in Q3 last year and 79% in the trailing quarter, while the occupied bed days grew by 36% year-on-year and 8% quarter-on-quarter. Average revenue per occupied bed for the quarter stood at 75,900, remaining relatively flat both year-on-year and quarter-on-quarter. Like-for-like ARPOC for existing units, however, grew by 7% year-on-year and 3% quarter-on-quarter. Network gross revenue was INR2,381 crores compared to INR1,779 crores in Q3 last year and INR2,228 crores in the previous quarter. This reflects an increase of 34% year-on-year and 7% versus the trailing quarter. New units reported a gross revenue of INR323 crores, which while existing units registered a year-on-year growth of 16% in revenue, driven by 8% growth in occupied bed days and 7% growth in.
The international patient revenue stood at INR201 crores, registering a growth of 28% year-on-year and 8% quarter-on-quarter, despite contraction in-patient footfalls from Bangladesh and Yemen due to political unrest. Net-worth operating EBITDA stood at INR622 crores, reflecting a growth of 32% year-on-year and 10% quarter-on-quarter. This includes INR60 crore EBITDA contribution from new units. Network operating EBITDA margin stood at INR27.3 crores for the 27.3% for the quarter. Existing units improved their EBITDA margin by 70 basis-points to 28.6%. Annualized EBITDA per bed for the network stood at INR73 lakhs. Like-for-like EBITDA per bed for existing units stood at INR82.6 lakhs, reflecting a growth of 9% year-on-year.
Profit-after-tax before exceptional item was INR390 crores versus INR338 crores in Q3 last year and INR349 crores in the previous quarter, reflecting a growth of 15% year-on-year. The exceptional item of INR74 crores was towards charges paid to Yamana Expressway Industrial Development Authority for securing permission for a change in shareholding of JP Healthcare Limited prior to acquisition. Overall free-cash flow from operations was INR303 crores. During the quarter, INR362 crores was deployed towards ongoing capacity expansion projects and upgradation of facilities and acquired hospitals, while INR146 crores was distributed as a dividend and INR1,716 crores, net of cash at JP Healthcare Limited was used for JP acquisition.
Consequently, net-debt for the network stood at INR1,608 crores at the end of December 2024. Continuing our efforts to support the local communities, we treated approximately 37,500 outpatients and 1,300 in-patients from economically weaker sections of society entirely free-of-charge, worth INR52 crores at hospital tariff. Both our strategic business units continued to report significant growth in the revenue and profitability. Max home reported a top-line of INR55 crores, reflecting a robust growth of 24% year-on-year. It now offers 15 specialized service lines across 14 cities with over 50% repeat transactions. MaxLab reported a gross revenue of INR41 crores, reflecting a strong growth of 22% year-on-year. It provides services in 48 cities through its network of more than 1,200 collection centers and active partners.
Now coming to the status of our expansion projects. 128 beds at Max Lucknow. 64 beds have been commissioned in January 2025 and balanced 64 beds will be added in February 2025. Further, we are awaiting in-principle approval for the existing 13th to 17 floors for hospital use, which will add another 140 beds almost immediately. 127 beds at Nagpur, 12 beds have been added in October 2024. For the balanced beds on additional floors, we’re expecting the environmental clearance to come by March 2025. Project completion should take another 24 months thereafter. For the 268 beds at Nanavati in Phase-1, interior fit-out works are in-progress currently.
The project continues to be on-schedule and we expect completion within the next three to four months. 400 beds at MaxSmart at Saket Complex, majority of the structured work is complete, the project is on-track and we expect its completion within the first-quarter of FY ’26. 155 beds at Mohali, the interior work is in-progress and we expect its completion again by the first-quarter FY ’26. 500 beds at Sector 56 is Gurgaon, structured work is in-progress. We expect completion of the first phase of 300 beds by end of Q3 FY ’26. All of these are on-schedule and we will see significant ramp-up in our capacity over the next 12 months, a large part of which is coming through Nanavati, Mohali and MaxSmart within six months.
Thereafter, 367 beds at. Post receipt of environment key clearance, tendering work is in-progress currently. This project is largely on scheduled. 550 beds at Max at Saket, the forest approval is delayed due to Supreme Court proceedings in relation to tree filling involving DDA and the lieutenant government — Governor of Delhi for the past six months. They have not permitted anybody to remove any trees in Delhi, but we think that this should get fairly resolved soon. All other statutory approvals are in-place. 400 beds at Jiraqpur Mohali, no objection certificate from fire NOC has been received. Project is expected to be completed within 30 months.
And finally, moving on to the overview of company’s performance for nine months ending December 2024. Net-worth gross revenue stood at INR6,636 crores, reflecting a growth of 25% year-on-year. New units contributed INR585 crores to the gross revenue. Overall network operating EBITDA grew by 20% year-on-year to INR1,687 crores, reflecting a margin of 26.6%, while EBITDA per bed stood at INR71.5 lakhs. Existing units reported an EBITDA margin of 27.7% and EBITDA per bed of INR78.5 lakhs. Max demonstrated year-on-year growth of 41% in revenue and 67% in EBITDA, while Max Nagpur reported a year-on-year growth of 26% in revenue and 118% in EBITDA within nine months of acquisition.
Since becoming operational in July, Max clocked a revenue of INR92 crores, an EBITDA loss of INR29 crores. This Greenfield Hospital achieved EBITDA breakeven in December 2024, like I said, a record of six months from its launch as highlighted previously. During the nine months, we generated INR1,025 crores of free-cash flow from operations after interest, tax, working capital changes and routine capex. INR793 crores was deployed towards ongoing expansion projects and upgradation of facilities at acquired hospitals. INR146 crores was distributed as dividend and INR1,716 crores was used for JP acquisition.
With this, we open the floor for any Q&A.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question comes from the line of Amey Chalke from JM Financial. Please go-ahead., if you can please unmute your line and proceed with your question.
Amey Chalke
Hello. Thank you so much and congrats to the management on good set of numbers. So the first question I have is on the revenue from the existing units. It seems that quarter-on-quarter from Q2 to Q3, the revenue have remained largely flat despite being the weak quarter of quarter three. Is it possible to give explanation on the front, where we have seen the improvement or performance improvement during this quarter for the existing units?
Yogesh Kumar Sareen
So, basically quarter three is typically a weak quarter because of — you have festivals in this quarter. And if you see the history, you will find that typically the revenues come down by 2% to 3% and EBITDA also dropped by 3% to 4% in this quarter. Despite that despite the history, this time it’s flat and in fact, the EBITDA has improved over the — over the previous or on a Q2 to Q3 basis, right? So that way, I think the performance has been much better and it’s mainly because of the fact that the Diwali month, right. Typically you see occupancies drop by to around 65%, 70% range, but this time we had very, very healthy occupancies even during Diwali, and that’s what made all the difference in this quarter.
Abhay Soi
You must look at it on a year-on-year basis because of seasonality. Every quarter must be seen on a year-on-year basis rather than sequentially quarter-on-quarter.
Amey Chalke
Sure. No, because I was expecting a drop this quarter considering it is a seasonally weak quarter. That’s why the question was okay. Sure.
Yogesh Kumar Sareen
I think basically the Diwali months made lot of difference. I think typically the occupancies do drop, but this time didn’t happen. I think also with all of the fact that Diwali fair end-of-the month that also in a way helped. If it’s mid of the mid of the middle of the month, then in Q1 we have more impact.
Amey Chalke
Sure. And second question I have, we were expecting a price increase for some of the insurance schemes. So have that been taken place or you expect in next one year any price increase to happen on the insurance side.
Abhay Soi
So we’re not expecting a price increase on the insurance side. I think that happens you know, we were looking at a price increase on the institutional side. I think we’re still expecting that it’s long overdue. My belief is it should come within a month or two, but let’s see what happens on that. It’s mostly on the institutional side. On insurance side, it happens on a rolling basis. So I mean, whichever insurance contracts come offline every two years, that kind of you get the new rates over there. So that’s happening as cost of hygiene.
Amey Chalke
Sure. And if you see our therapy mix, it has continued to improve. The oncology mix has also improved from quarter three of last year to this year. Considering the new bed addition, which has happened would have a little bit lower oncology proportion, I believe for existing hospital the mix would have moved up sharply. So where should we see the optimized mix for the oncology revenues going ahead?
Abhay Soi
So, I think in the new hospital, it should be increasing considerably, in fact, because you know, for, for example, the new bunker is yet to get ready, I think in April in April, May, I think it’s coming on-stream. So that should increase what happens is without radiation oncology, even the other programs suffer in as far as oncology is concerned. So you will see a major uptick over there. I think we are looking at the new bunker coming on-stream even in Dwarka. So right now the facility is without a bunker, so there is no radiation oncology there. So that needs to kick-in over there as well. I think besides that, even in JP, et-cetera. So we are going to see a further increase in oncology. You’re absolutely right, the current pie also takes into account improvement or increase in oncology business, but that number is kind of subdued or pulled down by the new hospitals, new acquisition, where we are looking at perhaps a significant increase in oncology business.
Amey Chalke
Right. Just to add more like which would be the hospital which would have highest oncology mix and what would be that number so that we would know the upper to-upper limit for the oncology.
Yogesh Kumar Sareen
We can’t give you the hospital wise numbers, but I mean the very fact that we have 25% plus as a percentage in the overall setup, obviously, there’ll be hospital which will be in the range of, 29%, 30% also. But lower the new hospital new hospital will be lower, right? For example, be around 12%, right?
Abhay Soi
So those are the kind of that will be single-digits again.
Yogesh Kumar Sareen
The no will also be around there now.
Abhay Soi
Yeah, maybe 10%, 11% half the average, yeah.
Amey Chalke
So just last question, the PHF profitability has pulled down a bit this quarter, any reason for the same.
Abhay Soi
PHF?
Yogesh Kumar Sareen
No, so I think you’ll have to see it in the overall aspect. I think if you read the notes out there, these people have donated some money to the other trusts. So that’s the reason you see that there. And also we have revised the fee structure for two of the PHS. So which means that there are more upstreaming happening on the first column, right? So we’re getting more fees into the MHAL, especially from Balaji and.
Abhay Soi
More less pocket by pocket.
Yogesh Kumar Sareen
Yeah.
Amey Chalke
Sure. Thank you so much. I will join back with this.
Operator
Thank you. The next question comes from the line of Sumit Gupta from Centrum. Please go-ahead.
Sumit Gupta
Hi, thanks for the opportunity. Am I audible?
Yogesh Kumar Sareen
Yeah.
Sumit Gupta
Yeah, hi. Sir, on the performance overall, sir, it is really good. So I just want to understand how is the market panning out and what kind of trend do we expect in the overall profitability going-forward?
Abhay Soi
And so let’s not clear the market, how the market is panning out and…
Sumit Gupta
How is that sell-in the profitability that we expect going-forward for.
Abhay Soi
So I’m not going to give you any forward guidance, but the market is panning out very well. Like I said, we are launching another 140 beds. The reason we are doing that is because the occupancy is — requires that 67 beds — sorry, 64 beds have already been commissioned in the month of January. These are new beds and another 65 beds will be commissioned in February. So in the current months. And thereafter, we are looking-forward to another 140 beds, which can immediately come online post-approval. So you know, we have requirement of the bed and that’s what our trajectory kind of — that is what we anticipated. And therefore, we’re getting the beds online. We’re also looking at the new bunker to come on-stream over there. So with the new bunker you with the oncology business, the daycare business, all of that sort of increases. So — and we are seeing a very good traction with clinical clinicians, building in new clinicians and so on. So I think yeah look now has a significant amount of more way to go more meat over there.
Sumit Gupta
So what are the competitive scenario there? Have you seen intensity being stagnant or like it is going up? What is the trend intensity?
Abhay Soi
What is the what?
Sumit Gupta
The how the intensity coming out?
Keshav Gupta
The same as earlier today, there is a and there’s a, the same tend to say.
Abhay Soi
Yeah I mean there is a there is Apollo there and there’s us over there are other smaller nursing homes and hospitals.
Sumit Gupta
Okay, okay. And sir, on the facility, the Q-o-Q, there is a decline in the overall profitability, what has led to that particular job.
Abhay Soi
Okay. It’s not a — but Q-on-Q is — like I said, it’s a seasonal business, right? You can’t look at Q-on-Q, you have to look at Y-on-Y.
Sumit Gupta
Okay. Understood. Thank you, sir.
Abhay Soi
Thank you.
Operator
Thank you. The next question comes from the line of Damayanti Kerai from HSBC. Please go-ahead.
Damayanti Kerai
Hi, thank you for the opportunity. My first question is on your debt side. So INR1,600 crore net-debt after payment for JP, etc. So now in view of multiple projects coming in like coming quarters or years, how should we look at the funding side? And then maybe you can just like give your upper limit for net-debt to EBITDA, like what will be your upper tolerance level there?
Abhay Soi
So our upper limit is 2.5 times net-debt to EBITDA, okay. I think we are far from that. You know most of the — but the new ones that we’ve announced such as Mohali, as well as Dhane, they are both asset-light models. So the developer incurs the cost, we are essentially leasing these spaces from them thereafter. Dwarka expansion again is in a similar line, which is asset-light model. As you’re aware, the Duarka itself is asset-light model. Now other than that, we are looking at, I think, INR500 crore to INR600 crores over the next three to four months of capex towards the brownfields and then thereafter. But yes, our overall cap is 2.5 times debt-to-EBITDA. This would include not only current capex, but also any further inorganic growth or whatever else we may do, including on and off-balance sheet debt.
Yogesh Kumar Sareen
And we are at 0.65 at this point after this taking the — after the GP accretion, right?
Damayanti Kerai
Okay. So comfortable headroom to go for any capex?
Abhay Soi
Yes. No, we are very conservative on the debt side, I mean.
Damayanti Kerai
Okay And just if you can remind us like what kind of cash is currently generated from the existing business?
Abhay Soi
So this quarter we generated INR303 crores of free-cash flows. This is after tax after working capital increase, maintenance capex and with any interest.
Damayanti Kerai
So on an average, we can assume like INR1,000 crore INR1,200 crore of cash per year is getting generated against your all growth needs?
Abhay Soi
Well, hopefully more given the growth and quarter-on-quarter or the year-on-year growth that we have?
Damayanti Kerai
Okay. My second question is on price increase, which you mentioned on the institutional channel. Can you elaborate, are you expecting something to come up on the CGHS rate or what is it regarding?
Abhay Soi
That’s right. We’re expecting something to come up in CGHS rates, which also impacts our PSU business. Having said that, in-spite of the — this thing, we have been sort of selective in the kind of specialties we’ve been attracting even in institutional business. So the gap earlier used to be 44% between our cash rates and our institutional, now it’s come down to 36%. So the delta is also reduced. On-top of that, we’re expecting better rates now coming through on CGHS, but we’ve been expecting this for some time. My hope is that this comes in this quarter.
Damayanti Kerai
So have you heard any announcement from the government, sir? You mentioned next two to three months, right, you are hoping to hear something?
Abhay Soi
No, we’ve had many assurances from the government and we continue to have them at the highest-level, but it doesn’t — till it comes through, it doesn’t come through, right?
Damayanti Kerai
Okay. Okay, great. And then my last question will be on institutional bed share, so which is around 30% for the quarter. So how should we look at — because earlier you mentioned your endeavor is to bring it down, right? But eventually, I understand you will take-up scheme patient as and when you have bets to wrap-up should — but any like guidance or any target in your mind for this part of the business?
Abhay Soi
So see, what happens is that as we add new hospitals or new capacities, right, your institutional business is going to go up with that. You know our endeavor is not to reduce institutional business. Our endeavor is to accommodate growth in our preferred channels of business. But if I can do both, I don’t have a problem doing it. So you distill it when you have a capacity constraint. If you’re able to sort of add more-and-more capacity to it, okay, because even the institutional business is contributing, right, towards your fixed-cost. So the idea is not to unless it was a loss-making business, then you will be doing it in the first-place. The first choice is you create more capacity, okay, to accommodate that business as well as any growth in your CPI or your deferred channel business, okay. And whenever you can’t do that, you start distilling that business.
Damayanti Kerai
Okay. So you have the flexibility to play around with this mix, right, to optimize the asset utilization.
Abhay Soi
We’ve done that, right? So you’ll see plenty of facilities where we brought it down to zero, but now you’ll see that some facilities that we open up now, like let’s say, Bombay, we’ll start that business because we’re coming up with new capacity, first idea is to fill the beds, because it contributes. You’ve seen it in the Shalimar Bal brownfield for example. But having said that, even with the lower rates, EBITDA per bed is higher simply because you got operating leverage also, right, when you’re adding brownfield capacity on existing hospitals.
So if you take an example of Nagpur, Nagpur used to operate at a 55% to 60% occupancy, but we’ve been able to ramp-up the occupancy by taking an institutional business. It never used to do before our acquisition. And the immediate fallout of that is it all percolates down to your EBITDA. So you’re better-off taking where you have ideal capacity. But if you don’t have idle capacity, then you should not be taking institutional business. You should take institutional businesses where you have ideal capacity. So if we can create ideal capacity, great. I mean, you take institutional business, your personal is down to EBITDA and do you have higher EBITDA per bed on that incremental institutional business?
Damayanti Kerai
Okay. Thank you. That’s very clear. Thank you,.
Abhay Soi
Thank you.
Operator
Thank you. The next question comes from the line of Prashan Nair from Ambit Capital. Please go-ahead.
Prashant Nair
Hi, thank you and good morning, everyone. Can you share your details on how much your investment would you…
Operator
Prashant, but your audio is not clear. Could you please lift your receiver and speak your questions?
Prashant Nair
Is it better now?
Abhay Soi
Yeah.
Prashant Nair
Yeah. So my first question was on the Mumbai project and the additional beds that you intend to add-in Mohali. So both are build-to-suit projects. What would your investment outlay be for these two assets?
Abhay Soi
Essentially it’s going to be medical equipment, which will be, let’s say, about INR150 crore INR200 crores, but that only happens at the end when it’s constructed, right, last three months, six months or whatever.
Yogesh Kumar Sareen
INR30 lakh rule.
Abhay Soi
Yes, about INR30 lakh per bed, but it’s all back-ended. Medical equipment comes after the entire project is almost complete.
Prashant Nair
Yeah. So and Mumbai, you intend to operationalize in fiscal ’28, is that right?
Abhay Soi
No, in…
Keshav Gupta
Yes, Khanay yes.
Abhay Soi
Yes. Yeah it takes about three, three and half years to build after — with including permissions.
Prashant Nair
And Yogesh, for your business, would say 65% cash conversion be kind of a reasonable number to work with, assumption to work with or can this change say at any point over the next few years?
Yogesh Kumar Sareen
No, I’m not clear what I’m saying, Prashant.
Abhay Soi
I think you’re referring to EBITDA to free-cash flow.
Prashant Nair
Yeah.
Yogesh Kumar Sareen
Yeah. Think 55 is the right number. I mean we only hope that the tax numbers will come down going-forward in terms of cash outflow. So this should be put it.
Prashant Nair
All right. That’s it from me. Thank you. Thank you.
Operator
Thank you. The next question comes from the line of Tushar from Motilal Oswal Financial Services. Please go-ahead.
Tushar Manudhane
Yes, thanks for the opportunity. Sir, first one on the tech — the hospitals which are coming up over the next six months. So with respect to those, what kind of operational cost addition can be factored for FY ’26?
Abhay Soi
Is it for the brownfield?
Tushar Manudhane
Yes, sir. Those ones which are coming up in say 1Q FY ’26, Mohali, MaxSmart, Saket…
Abhay Soi
Marginal operational cost because these are all brownfields. We already are incurring all the media costs in the existing hospitals.
Tushar Manudhane
Got it. Sir, secondly, with respect to this the build-to-suit where the investment is lower, but accordingly, as in subsequently, as and when, let’s say at a steady-state occupancy of, say, 55%, 60% as and when that happens what kind of margins we are sort of assuming in this build-to-suit because there would be rent share or there could be some revenue-share with the partner unlike own greenfield, brownfield expansion. So what kind of basically trying to understand what kind of margin dilution happens I can tell more have to look at what we get vis-a-vis what we invest.
Abhay Soi
So you have to look at on a ROCE basis, right? Now if 80% of the capital cost in this case, which is land and building is incurred by the partner and you’re looking at that 8% or 9% yield, right, and we enjoy a 35% ROCE at a stable state on the whole hospital. You can imagine what it does to your 20% contribution. Your ROCE goes beyond 100% effectively, right? And most importantly, any cost and time overrun you insulated against because that is to the partners account and not to your account.
Tushar Manudhane
Understood. And what kind of using this location can drive that compared to say metros or Tier-1s where currently Max is at 76,000, 75,000. What’s sort of assumption for these location?
Abhay Soi
I think Thane is metro does, I don’t think there’s any difference between Thane and what any of the Mumbai hospitals will be operating and you have some listed players like, I think, which are operating in Hone 75,000. I think 75,000 to 80,000 is ARPOB at present three years later, hopefully it will be more. In Mohali, it should be no different from our existing hospital in Mohali, which has a bit of 5, which is about 55,000 ARPOP at this point of time. Three years later, it should be more. You’re aware, ARPOP is growing by 7%, 8% everywhere per year.
Tushar Manudhane
Got it. And just one more on Lucknow, given the current occupancy and the current profitability, at least at the existing centers, while the — so the growth would be more driven only by bed now given that the operational efficiency is largely in-place or do you think there is still some more efficiency which can drive the profitability, while beds will drive the volume growth.
Abhay Soi
So when you have higher occupancy, obviously have the cost also to a larger number of beds. So automatically you have operational efficiency coming through. Other than that, like I mentioned, you have daycare, which is really your radiation and so on and so forth that there is no bunker over there right now, which should come on-stream shortly. I think it’s going to actually by July, it’s coming on-stream and thereafter, you’ll have higher amount of ARPOP emanating from that particular facility. You know, the other clinical programs, equipment which is in online which is coming, we ordered these equipment, it takes time for it to come and so on. So I think all of this will contribute to a higher ARPOP, better operating efficiencies and so on.
Yogesh Kumar Sareen
Also, some of the doctors had joined during the quarter, right, quarter three. So obviously, there will be a full-quarter impact going-forward.
Tushar Manudhane
Understood. And just one more, if I may, on, given the kind of size of revenue, in fact, it’s relatively smaller in the overall scheme of things, but just to understand here in terms of the current — the occupancy which is sort of dragging down and subsequently having impact on profitability, even if I leave aside seasonal impact, still just to understand the potential to add another 115 beds in the quarter.
Yogesh Kumar Sareen
But the occupancy on a year-on-year basis increased. I think only last — quarter two was 91%, this quarter is 79%. So we know that — and they had the vector bone disease last quarter. So, I think seasonally does happen. So our is quite good there.
Abhay Soi
79% is by no means a low occupancy in a low season. I think 79% bid that occupancy and like I said, it’s going to take us 24 months-to build additional beds. I have no doubt that even if you take a 5% increase in occupancy over the next two years, okay, you already occupied out. And do keep in mind that you create infrastructure for your peaks, not for your troughs. So your peak occupancy was 91% last quarter.
Tushar Manudhane
No, no, I meant to say that at 79% occupancy, we are at, say, INR54 crore revenue, INR11 crore EBITDA, which is like roughly 20%. So from a profitability point-of-view, we are more or less there and still — and then given the kind of profitability here, we intend to still add 115 beds is what I’m trying to ask or is the EBITDA margin still possible to get better at this site.
Abhay Soi
Of course, it is better to — possible to get EBITDA — higher EBITDA margins. Also the new beds — so if you take — if you say occupancy is not an issue, okay, then as far as the higher occupancy is concerned, you also get huge amount of operating leverage, right, because it’s a brownfield. So EBITDA per bed is significantly higher than. We also have to visualize this basis, you also have to visualize this basis, the entire ROCE that we’re shooting for, which is 20% to 25% within four years.
Yogesh Kumar Sareen
The other important aspect is that we still have to get to the expectable ROC there, right? We are — I mean, our target is 20% 25% range. We are at 10%, 11% range as now. So we have to have those additional beds to get to that ROC level. And that’s how it was all planned when we acquired the hospital.
Abhay Soi
Keep in mind, this is only the nine months, right?
Tushar Manudhane
Got it. Got it. Thanks that’s it from.
Operator
Thank you. The next question comes from the line of Rishi Mouri from Investment Managers. Please go-ahead.
Rishi Mody
Yeah, hi. Am I audible?
Abhay Soi
Yeah.
Rishi Mody
Yeah. So, just wanted to understand this partner healthcare facility. So we have used the profitability there to fund the new and the other — which is again a PHF facility. So wanted to understand like do we to just control the cash-flow or do we have ownership over that free-cash flow that these Balaji society and all of these guys create, like can you give out that money as dividends to the shareholders or you’re not allowed to do that?
Yogesh Kumar Sareen
No, so there is no dividend can be declared for any society, right? But one society can obviously contribute to the other society if the objectives are same, right? So for example, Balaji society and society objectives are same. So if they have surplus stats, they can obviously donate to the other society to use it for their construction purposes and that’s what we did, right? But what that — what can be given as definitely basically you have to upstream to the main company then, right? But the moment you mainstream it to the main company, then you get only 75% of it because you have to pay tax on it. So endeavor is always to — if you need is cash-in society, move it from months study Augustry.
Abhay Soi
But you can upstream it. But you have the ability to substream. You have the ability — your question is, can it be dividend? Yes, it can be upstreamed and then dividend, but of course, you’ll be paying a 25% tax.
Rishi Mody
Okay, got it. And second, you’ve mentioned on the PHF, the fee has been revised. What’s the change like today, I’m guessing we are getting around 25% to 28% of that revenue out as fee, which gets recognized in our MAX Healthcare revenue books, is.
Yogesh Kumar Sareen
So basically every two years, the fees is fees that’s revised in each of these PHFs, right? There is a method to the madness. And we review the — review the cost, et-cetera. And based on that and the cash flows and based on that fees is very — I think Balaji impact — annual impact will be around INR25 crores for the fee division. Now I don’t know the percentage, but I’m going to have the impact absolute amount of PAT, which will be upstream into the — into the MHAL through the MSAs that we have.
Rishi Mody
Okay. So we will get extra INR25 crores going-forward from Balaji.
Abhay Soi
Yes.
Rishi Mody
Okay. Second, on the hospital, so I read that the lease is only for five years, the initial lease and then you have two renewals, versus when I look at the one, we have around a 20-year lease with some 20-year renewal. So just wanted to understand like, is there a risk of that property post we getting it being taken away by the developer and being given to someone else for a higher rental because — or like why did we get into only a five-year lease or and secondly, the two renewals post that five years, how many years are they for and who has the right for that renewal?
Abhay Soi
So there are two things, it’s not five-year to three years, it’s actually 15 years.
Keshav Gupta
I think there was a five-plus five-plus 5. So it’s five-plus two, 15 years. So 15 years…
Abhay Soi
15 years after that. Second is that after 12 months of operations, we have a call option on it. So we can acquire it at any point of time, right? We can acquire it, we can sell it down to a REIT, we can acquire it and nominate somebody else or whatever else it is.
Yogesh Kumar Sareen
Understand the commercial logic a bit, because if we do a 50-year lease that lease and we have to pay higher stem duty. So if since we have the option, we said, okay, we’ll take a call and then renew it. It set our option, right?
Rishi Mody
Okay. So like five-plus five-plus 5. Okay. All right. Just fine. Second, the last question from my end is the IRDAI regulations or the guidelines that have come through.
Abhay Soi
Sorry, just one. I just want to go back to that point. It’s 15 years with the call option at our choice.
Rishi Mody
Yeah, to buy the property within 12 months, I heard that.
Abhay Soi
Yeah, yeah. So don’t look at it only 15 years. We can always sort of change the — if the 15 years now extended, we can buy it and we can all get some somebody else to buy on the same lease.
Rishi Mody
And what would be that amount if you exercise the call option, like how much do you end-up paying to the developer?
Abhay Soi
It’s a cost printing, I think debt cost is a…
Keshav Gupta
Cost and a very nominal yield on the real-money spent on the project.
Rishi Mody
Okay. All right. So INR1 crore per bed would effectively one INR1.5 crore per bed would become the cost if you end-up acquiring it.
Keshav Gupta
Yeah, that’s a large range of INR crore 1.2 crores. The real cost is for putting a project up is about INR1.9 crore to INR2 crores per bed for a greenfield. So that’s the real cost. Cost.
Rishi Mody
Okay. In fact, last on the IRDI guidance or that’s come out today or yesterday where they have decided to cap the increment on senior citizens insurance policy price hikes and they’ve asked these insurance companies to get back together and negotiate rates with hospitals and bring it closer to the AMJY rates. So just wanted your view on, firstly, how much of our revenue within the insurance pool comes from India? And secondly, like do you see any rate negotiation impact from this instruction?
Abhay Soi
So there is no rate negotiation impact. In fact, I see a benefit from it because the number of people who may be going out-of-the insurance net because that premium goes, there’s a step jump-in that premium now won’t go out-of-the insurance net because of this, right, because then it’s more palatable you know as far as premium is concerned, there is no premium change between sorry, there is no rate negotiation of different age groups it’s not cut that way. I mean, the cost is cost is right, whether it’s for a senior citizen or a junior citizen from our standpoint.
Keshav Gupta
And that giving a price hike of 10% per year, what we negotiate with insurance companies is around 10%, 12% per two years. So if all insurance underlying logic was to continue through and through, the reflective increase that hostil seeks and versus seek is lesser than what they are doing anyways.
Abhay Soi
The insurance price change on insurance, okay, every two years is about 12% to 13% at best. So that comes to inflation of a health — medical inflation of about 6% per year effectively, right, at best, 5% to 6% a year.
Rishi Mody
Right. Yeah, I got that. So that’s the secure part. Just like these guys collectively, the insurance companies collectively coming in and bargaining, does that impact…
Abhay Soi
That was — that would be a competition commission issue, right? I don’t think you can. But no, I don’t see any — I mean, if that was to happen, then they should be kind of getting together and negotiating current rates, right? So why would you take one segment? Like Yeshav said, I think if our increase is 6% per year and they have been permitted 10% per year, so where-is the problem?
Rishi Mody
Okay. All right. Understood. Yeah, that’s it from my end. Thank you. Thank you for taking my questions.
Operator
Thank you. The next question comes from the line of Sangita from Advisors. Please go-ahead. Hello, if you can please unmute your line and proceed with your question.
Andrey Purushottam
Hello. Hello, this is Andre husband. I think she’s gone to the loo. I had one question regarding the payer mix. How much of the payer mix is in your control? And to the extent that is in your control, what are the steps that you’re taking in the next year or so to hopefully in favor of higher profitability.
Abhay Soi
No, it is not. I mean, it’s a burden of disease, right? Effectively we start adopting — you have to align yourself with what the market demand is. One, you move towards higher technology, of course, okay, and with perhaps more robotics and more higher-end programs, that is what drives the clinical mix.
Andrey Purushottam
Yeah. No, I’m talking about the payer mix.
Abhay Soi
Sorry. As far as the payer mix is concerned, you’ve seen there is an increase of 28% in international business. So this is because we’ve engaged deeper with the various geographies that we get patients from. As far as the domestic patients are concerned, up-country is 40% of our business that’s been growing at a very fast clip of some 24% 25% per a majority of it is CTI, which is cash and TPA related. So all of that is growing at a faster clip. And so we want to have deeper engagements with upcom. And I think some of these things and other activities that we do to engage with the communities that should enhance the preferred channels for us.
Andrey Purushottam
Okay. Thank you.
Operator
Thank you. The next question comes from the line of Sabu from Nippon AIF. Please go-ahead.
Vaibhav Saboo
Thanks for giving me the opportunity and congrats on a good set of numbers. Just wanted, I think that was asked previously also, but just wanted to understand that on a consolidated basis, for example, our EBITDA margin is somewhere around like 30% is around 27%, but you to assume for mature hospitals, it would be around 28%, 30%. I just wanted to understand for the asset-light model, while I understand completely that ROCE would be very much attractive, I just wanted to understand what would be a similar — what would be the EBITDA number for on a mature basis for asset-light models, it would be around 20%, 25%. Just wanted to understand that range.
Abhay Soi
Indias, right, the rental line comes below EBITDA.
Vaibhav Saboo
Yeah. But if I — so for a pre-Inders basis, what could be the EBITDA.
Abhay Soi
Take-out — you should depend on what the majority of the hospital is, I think it should be around 5% to 6% each.
Vaibhav Saboo
Yeah. No, that was it from my end. Thanks and all the best. Thank you.
Operator
Thank you. The next question comes from the line of Neha from Bank of America. Please go-ahead.
Neha Manpuria
Yeah. Thanks for taking my question. Abhi, just one clarification on the Mumbai expansion. I think once the new tower is commissioned, we are planning to phase-out some of the older ones and rebuild that. So would the net addition still be the 268 beds that we have talked about or should I also adjust the beds that will be going off for some time till we get it back? How should that phasing happen?
Abhay Soi
Yes. No, so it is going to be a net reduction there. When we start Phase-2, okay, which should be almost immediately, you will have a reduction of 100 beds, okay. So your net addition is 168 beds on the current 30 — yeah…
Keshav Gupta
We are adding currently 283 beds. After that is commissioned, we will be — we have to tear down 160 beds. The immediate will be 100 beds. The next will be adding 261 beds and take on another 60 beds. That’s a phase of about 1.5 year, two-year period. So net reduction eventually will be 160 beds and net creation would have been for around 580 beds.
Abhay Soi
So for the time bed, we should take 268 beds. There is no reduction there. We have to take a call on reduction once we do these Phase-2, then the reduction will happen, right?
Neha Manpuria
So the Phase-2 is not happening immediately.
Abhay Soi
Yeah, you will — at that stage, you will bring down about 100 beds. Okay. I will bring down 100 beds.
Neha Manpuria
Okay. And this is over the next two years. This entire process will get completed in the next.
Abhay Soi
Right. But we the beds which are being pulled down, okay, are more old-style, et-cetera, one of the things we’ve been able to do through this expansion is right-size the beds because the kind of beds that we have demand for and occupancy for are single beds and deluxe beds and so on. Whilst the present facility, one of the reasons that the occupancy levels typically have been lower over here at compared to the rest of the network is because a lot of the beds were old-style, style Nightingale beds. Those are the beds which are getting pulled down. So we are rightsizing the beds. So the net impact shouldn’t be that much. You’re getting what is required where we have almost a 90% occupancy, single beds and ICUs, et-cetera, those continue, while the side — a lot of the side nighting watts et-cetera, come down, which any case won’t in.
Neha Manpuria
Okay. So there won’t be necessarily be a financial impact from it because of the rightsizing of bed. But then how should I think about the improvement? Because I think one of the areas that we wanted to improve was also the margin of the Nanavati hospital. So does that start happening once we’ve commissioned all of the — when you’ve completed Phase-2 fully?
Abhay Soi
Absolutely. And it happens on two counts, counts because one is your number of beds, right, okay, increases. So right now, let’s say, if your operational beds and occupied beds about through 30 to 40. And even if you take increase about 150, 40, 150 beds on-top of that net increase, okay, you’re looking at 50%, 60% more capacity addition, right? So what you’re having is you’ll have the same cost structure, A, defray over more number of beds and even the higher-cost structure defray over the more beds and the right-sized beds. So you will get the operating leverage and your your margins will certainly go up.
Neha Manpuria
Understood. Okay, that’s helpful. My second question is just extension of the previous question. I think there has been some chatter among insurance companies about getting together and trying to negotiate pricing, you know, even using IRDA as one of the agencies does that. I know you mentioned competition commission, but do you see that as a risk when we’re thinking about pricing with insurance, could that 10% over two years be much lower as we think about the next, let’s say, three to four years depending on how this process progresses?
Abhay Soi
Not at all. I mean, I haven’t seen any approaches, any discussions, anything other than that. I mean IRDA is actually the regulator for insurance companies. Yeah. So I don’t think insurance companies can get under the umbrella and have IRDA negotiate that or get into the discussion, et-cetera, because I think it is far beyond their mandate, right? I mean, other than you know a conversation like this where you’re mentioning the rumor, okay, and that also far and few that have sort of come my way there’s never been any approach on that.
Neha Manpuria
Understood.
Abhay Soi
I think secondly, I think most importantly, the mood point is that look medical inflation is 6% to 7%. Okay, that’s the increase we get, okay, every year. You just get it every two years, so it shows up at a 12% increase every two years. But the fact is two years on an annual basis, still 5% to 6%, my salary increase is pretty much that. Yeah. Any increment that you see is on real growth, which is new technology, new thing, robotics come in, of course, in terms of percentage margins, you get less margins. But in terms of value, you get more.
Because I do understand eventually all the innovation which happens in the healthcare sector eventually has to pass-through the doors of hospitals, right? I mean, the same hospitals 30 years back, we used to do conventional surgeries and now doing robotics, the same hospital which used to do CAPGs at best you are doing transplants now. We used to have general surgeons working on oncology. Now you have organ-specific oncology for radiation, you’ve got, you’ve got other robotics, etc doing those surgery. So all of that you go up the value chain as well, right? So there is real growth.
Keshav Gupta
And also, I think if the insurance companies get organized, I think there is — on the other side also, I think the hospitals can also get organized, right? There can also be a selective bargaining on the hospital side. That’s easy to impact. Hospitals are far lesser in terms of if you take organized chain.
Neha Manpuria
Yeah. The demand-supply equation, I guess, is in your favor?
Abhay Soi
No, not that also the density of beds, right? I mean, we are dominant players in Delhi and CR. I think some of our peers are in their own markets, etc. So if you kind of dissipated across the country, then it’s a different matter. I mean today, look, we’ve got more facilities, we got 15 facilities in Delhi NCR. We are twice the number of facilities of the next three listed players put together. So literally three players get-together, okay, and you’ve got another next 20 players are not even the same size. So your bargaining bar is slightly different than. It’s not even a question of bargaining bar. I think it’s a question of what is what is the rise and what is it 5% to 6% growth every in pricing every two years is not something that you can weigh, right? Or how much lower do you want to be the question. Yeah, fair enough. Thanks so much. Thank you.
Operator
Thank you. We take the next question from the line of Kunal Dhamesha from Macquarie. Please go-ahead.
Kunal Dhamesha
Hi, thank you for the opportunity. The first one on the, while we have done a very good job of breaking even, based on our reported number, if I look at the indirect cost in Hospital for the 140 bed, it seems to be roughly around INR150 crore INR160 crore a year. I mean, assuming that our direct costs are similar in-line with the network average. So my question is, given that we are going to add almost around 1,400, 1,500 crore by next year how should we think about the indirect costs related to that? I know there are some brownfields, etc., as well. But again, these brownfields are separate towers from versus the current towers and all right. So there might still be higher kind of indirect cost there. So let’s say all-in all this 1,500 bed, what is the indirect cost that we should assume, whether it’s INR1,000 crore or INR800 crore or how should we think about that?
Abhay Soi
No, I think the way you need to think about is that indirect cost is not linear, right,
Kunal Dhamesha
Correct?
Abhay Soi
And it’s not linear year. Sorry.
Kunal Dhamesha
It would come primarily in the first year and then operation…
Abhay Soi
There. Whatever indirect cost is you’ve been incurring, okay, up breakeven we’ve incurred indirect cost, right? That indirect cost on 140 beds, we have broken even, correct? Okay. Thereafter, every bed that you add, your indirect cost is not going to be linear right, it’s only a direct cost which is going to be this thing. Indirect cost will be just some nurses and some you know resident doctors etc., which is a marginal cost. So what is going to happen is every bed that you add, the revenue from that bed, okay, will give you a lot more leverage onto your EBITDA. So a lot more for almost your entire contribution margin. So let’s say if you’re operating at a 60% or contribution margin, okay, 50% is okay of your top-line or that means almost your entire contribution margin will flow to your EBITDA because your indirect cost is not linear. And that is the basic principle, that’s the basic principle of any brownfield or opening any hospital. And frankly, I think over the next few quarters, okay, you’re going to see that being demonstrated.
Keshav Gupta
And those beds are not coming in new towers, the existing structure already has 300 and
Abhay Soi
It only has the beds. The beds need to be fitted out.
Keshav Gupta
We only opened 140 beds.
Kunal Dhamesha
Correct, correct, correct. So once you operationalize another 160 beds, there would still be some incremental costs related to it, right?
Abhay Soi
So my if you have a hospital with eight floors, okay, you operationalize four floors. Now you need to operationalize the four floors. All your costs of your clinicians, of your management, of your utilities or common areas, the all the support functions, kitchens, everything is already incurred. When you open up another floor, what do you do? You get nurses and resident doctors. So nurses cost me INR23,000 a month, okay, and a resident doctor cost me INR45,000 a month. Effectively, you’re looking at maybe 8% of your revenues, okay, 9% of your revenues attributed to this cost right so if your contribution if your gross — if your gross margin, if your contribution is 60%, you take-out 8% from that. So 52% of your top-line is going straight to your bottom-line.
Kunal Dhamesha
Sure, when you ramp-up. Obviously, when you ramp-up, right, so every incremental bed will give you more-and-more.
Yogesh Kumar Sareen
Post the project stage.
Abhay Soi
Post the breakeven stage. And that’s not only a hospital, any venture works like that, right, right? I mean that’s basic economics.
Kunal Dhamesha
Sure, sure. And another one on the institutional mix and the peer mix, bet share and the peer mix. If I look at the Nine-Month nine-month payer revenue from the institutional patients have grown at roughly around 34% year-on-year and the pet share has only grown at around 20%. So my view is that there is a decent amount of kind of rebasing of the pricing of some sort was happened? And I also see there was some order passed in February ’24 from Delhi government advising the CDHS rate. So what are we looking-forward in the next two, 1 or 2 months incrementally?
Abhay Soi
Delhi government has nothing to do with CGS rates. CDSS rates is central government central government health scheme. It’s got nothing to the Delhi government. Delhi government cannot dictate or decide central government rates.
Yogesh Kumar Sareen
Yeah. And Kunal, already mentioned that the gap between the cash, the self-pay and the institutional segment has come down in terms of ARPOP, right? Earlier, it used to be 44%, now it’s only 36%, that means there is a 8% improvement in terms of the ARPOP that we have, right? So basically, they obviously doing more ontology and also we are able to stick some of the impediments whereby the ARPOP in the institutional has grown. So as a result, you find that the growth is not there, but there is — there is a revenue growth. That obviously means that is growth which is happening and it’s not the rates. There’s nothing happening on the rate, it’s only because of the change in the mix of the patient and also the focus that we have on surgical business.
Kunal Dhamesha
Sure. I have some document, probably I’ll share detail on that. I have just one more one more question if I can.
Abhay Soi
Yeah.
Kunal Dhamesha
Sure. So sir, this INR40 crore donation that we have done from Balaji and Society and that kind of we have taken it pre-EBITDA, which kind of reduces our profitability. So does this kind of help with maintaining the tax-exempt status for this trust hospital?
Yogesh Kumar Sareen
So to all first of all, this is this is not — it’s not before EBITDA after EBITDA it’s in the EBITDA only. It’s basically from one to the other society. The other societies are not having operating income, so we didn’t show them as a separate — separate column, right? We put it that under the elimination column, right? And you see that the overall number is matches. So it’s not a major movement. It’s only movement of one society donating to the other one and it has nothing to do with tax status. It is basically under the tax status, you are supposed to use the money that you have for the objective of the society and that part of the objective is also to help other societies, right? So if this human society has surplus cash, then can always donate to the other society. So it’s within that ambit of their objective clause and within the ambit of the approvals that we have in terms of assumption from the department to donate money to their certi for furthering the objective of.
Operator
Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments.
Abhay Soi
Thank you everyone for taking time-out to join us for 3rd-quarter results. We look-forward to interacting with you again next quarter.
Operator
Thank you. On behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.