Max Healthcare Institute Ltd (MAXHEALTH) Q3 FY23 Earnings Concall Transcript

Max Healthcare Institute Ltd (NSE:MAXHEALTH) Q3 FY23 Earnings Concall dated Feb. 03, 2023.

 

Corporate Participants:

Anoop Poojari — Client Manager – Citigate Dewe Rogerson

Abhay Soi — Chairman and Managing Director

Yogesh Sareen — Senior Director and Chief Financial Officer

Analysts:

Nikhil Mathur — HDFC Mutual Fund — Analyst

Damayanti Kerai — HSBC — Analyst

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Naman Bhansali — Perpetuity Ventures — Analyst

Ashish Thakkar — IIFL AMC — Analyst

Lavanya Tottala — UBS — Analyst

Krishnendu Saha — Quantum Mutual Fund — Analyst

Sachin Kasera — Svan Investments — Analyst

Ranvir Singh — Nuvama — Analyst

Prakash Agarwal — Axis Capital Limited — Analyst

Kunal Dhamesha — Macquarie Group — Analyst

Sumit Gupta — Motilal Oswal — Analyst

Presentation:

 

Operator

Ladies and gentlemen, good day, and welcome to the Max Healthcare Institute Limited Earnings Conference Call. As a reminder, all participant lines will be in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.

Anoop Poojari — Client Manager – Citigate Dewe Rogerson

Thank you. Good morning, everyone, and thank you for joining us on Max Healthcare’s Q3 and 9M FY ’23 earnings conference call.

We have with us Mr. Abhay Soi, Chairman and Managing Director; and Mr. Yogesh Sareen, Senior Director and Chief Financial Officer of the company. We will begin the call with opening remarks from the management, following which we’ll have the forum open for an interactive question-and-answer session.

Before we start, 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 comments.

Abhay Soi — Chairman and Managing Director

A very good morning to everyone. I’m pleased to welcome you to Max Healthcare’s Q3 earnings call.

Our performance for this quarter was on the expected lines and reflected continued focus on execution by the hospital teams while maintaining high levels of medical quality and patient satisfaction. Compared to quarter three last year, the occupancies, revenues, EBITDA, and other operating and financial parameters have improved considerably. While compared to Q2, this quarter expectedly witnessed a slight dip in the occupancies due to festive season and revenue was relatively flat. However, we yet again reported our highest-ever EBITDA, both in terms of absolute value and margins, EBITDA per bed, ARPOB and ROCE for the third consecutive quarter this financial year. Our digital app, Max My Health, which was soft-launched at the end of September 2022 has already witnessed approximately 90,000 downloads. The app is now ready for a formal launch in the fourth quarter of the current year. Before I move on to the highlights of this quarter, please note that comparative numbers and percentages are being reported on a like-to-like basis excluding COVID-19 vaccinations and one-time tax gain in the previous quarter.

Key highlights of our third quarter performance are, occupancy for the quarter improved to 77% from 74% in Q3 last year. However, it was marginally lower than 78% for the previous quarter, due to festival season. Institutional bed share fell to 29% compared to 31% in Q3 last year. The bed share was 1% higher than the previous quarter due to relaxation owing to lower occupancy in festive season. Network gross revenue was INR1,559 crores compared to INR1,385 crores in Q3 last year and INR1,567 crores in the previous quarter. This reflects a growth of 13% year-on-year while remaining flat quarter-on-quarter due to seasonality. Revenue from international patients grew by 62% year-on-year and reflected 110% of pre-COVID average. This accounts for around 9% of the revenues now. Digital revenue grew to INR272 crores and accounted for 17% of overall revenue. ARPOB for the quarter rose to approximately INR66,800, reflecting a growth of 10% year-on-year and 1% quarter-on-quarter.

We reported our highest-ever network operating EBITDA of INR419 crore compared to INR364 crores in Q3 last year and INR410 crores in the previous quarter, reflecting a growth of 15% year-on-year and 2% quarter-on-quarter. We are actively managing the costs and there is a reduction in overheads quarter-on-quarter due to better collections [Technical Issues] power costs. Operating EBITDA margin improved to 28.3% versus 27.8% in Q3 last year and 27.7% in the previous quarter. Annualized EBITDA per bed, most importantly, rose to INR66.9 lakhs, yet again our highest-ever, clocking a growth of 12% year-on-year and 4% quarter-on-quarter. Profit after tax was INR269 crores versus INR252 crores in Q3 last year and INR267 crores in the previous quarter.

Net cash position stood at INR372 crores at the end of December 2022, compared to net debt of INR296 crores last year. This is after deployment of INR102 crore towards the ongoing capacity expansion projects.

Continuing our efforts to give back to the community, we treated 38,344 OPD and 1,264 IPD patients from economically weaker sections free of charge. In addition, we provided nutritional support to around 2,300 TB patients during the quarter. Both our SBUs continued to report robust numbers. Max@Home reported a top line of INR36 crores, reflecting a growth of 30% year-on-year and 4% quarter-on-quarter. It started immunization at home services and now has 14 service line offerings. Max Lab reported a gross revenue of INR28 crores. This reflects a growth of 46% year-on-year while declining by 4% quarter-on-quarter due to seasonality. The active network partners stood at over 900, spread across 34 cities and supported by a dedicated team of more than 700 personnel.

Now coming to the overview of the company’s financial performance for the nine months ended December 31, 2022, network gross revenue stood at INR4,597 crores, reflecting a growth of 16% on a like-to-like basis. Network operating EBITDA stood at INR11,099 crores, registering a growth of 20% on a like-to-like basis. ARPOB improved by 16% due to price, payor mix, case mix, etc and led to margin expansion by 92 basis points. EBITDA per bed grew by 21% to INR64.4 lakhs. COVID-19 bed occupancy was negligible throughout. On average, COVID-19 patients occupied merely five beds in Q3 and 20 beds during the nine months.

On our expansion projects, the current status of capacity coming on stream by FY ’25 is as follows. 100 beds at Shalimar Bagh have been more or less handed over to operations team and we are on schedule for starting the operations in the current quarter. 300 beds at Dwarka, the structure is complete and interior work is underway. We plan to file for occupancy certificate by May and operationalize in Q2 FY ’24 as planned. 329 beds at Nanavati; the contract has been awarded to Larsen & Toubro on a turnkey basis in December for handing over the hospital on or before 24 months. L&T is fully mobilized and we expect to commission the facility by end of FY ’25. 300 beds at Sector 56, Gurgaon; work has commenced, excavation — and 300 beds is the first phase. Work has commenced. Excavation and de-wall work will be completed by first quarter FY ’24, by which time the civil contractor will also be mobilized. We would also like to point out that Sector 53 land cancellation has no impact on our bed addition plan till FY ’28. It wasn’t part of an expansion rollout but was a part — will, if at all, impact bed potential post-FY 2028 as we have put down in the investor presentation.

So all-in-all, up till this stage, we are seeing no delays, we are focused on execution and it is going to be on spot as planned. 350 beds at Max Smart. The project is delayed by around three months for lack of final tree-cutting permission, which has been received in January this year now. The work will start in the current quarter and we hope to recoup the time lost as we progress on the project. While we continue our focus on the growth levers articulated in the past, we’ve also been evaluating avenues for catering to demand for quality healthcare in the near term. We expect to add over 100 beds in the next two quarters as some of our hospitals through internal reconfigurations. Moreover, with our net cash surplus and deleveraged balance sheet, we are extremely well positioned and actively evaluating inorganic growth opportunities. As of yesterday, our Board has given in-principle approval to raise finance of up to INR4,200 crores of NCDs for any future M&A. However, we intend not to breach 2 to 2.5 times net debt to EBITDA, considering that any new acquisitions will also bring its own EBITDA in play.

With this, we open the floor for Q&A.

Questions and Answers:

 

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Yeah, hi, good morning, sir. My first question was to be on net debt to EBITDA, I think you have kind of cleared it. But just at a slightly higher level, I wanted to understand, with so much of organic bed expansions planned over the next four, five years, is there a pressing need to do an M&A or whatever M&A that you are seeking is going to be very valuation-conscious and there has to be some clear rationale for you to be looking for an M&A, because I believe the bed capex plans itself, they kind of take care of the medium to long-term growth of the company?

Abhay Soi — Chairman and Managing Director

I think we’re not putting a cap on the long-term growth. I think if you look at the opportunity set which is out there, it is significantly higher than what we are looking to tap through our brownfields or whatever we are expanding. One is that. I think secondly also, given the fact that we have a completely unlevered balance sheet, we’ve got more than INR1,000 crores of cash sitting, we got a net debt position of some INR360 crores, INR370 crores, our entire expansion which is at a cost of about INR4,000 crores to INR4,500 crores over the next four years, okay, is going to be conducted entirely through about 50% of our free cash flows. So we have a totally unlevered balance sheet and we have the rest of our free cash flows to deploy. And given the opportunity set out there, and again, if you’ve seen our history, it’s been about buying assets at values which are intrinsically below what we believe we can eke-out over there in EBITDA. Okay? So these will all be massively value accretive. We are very, very conscious of ROCE. We are already operating in very, very high ROCEs like I’ve said before also in my past calls. So I think, anything that we will be acquiring is going to be accretive. We are not acquiring for the sake of it.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Understood. And sir, what are the priorities [Speech Overlap]

Abhay Soi — Chairman and Managing Director

And I want to add one more this thing, it also gives us presence in newer geographies.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Understood. And in terms of regional priorities, I think North looks pretty sorted for the company. There is obviously media article of you venturing out in Kolkata, looking out for something there, but would it be safe to assume that — I mean, my understanding, perhaps, the Southern markets is a bit more competitive, so you might be looking more for West and East. Would that be a fair assumption?

Abhay Soi — Chairman and Managing Director

Well, not really. I think if you look at — in the past I said, look, we won’t go to unchartered territory. I will go to any territory where at least two or three of my competitors have proven viability and we will do it better, like we pretty much have done, without exception, every micro market that we are present in. I mean, if you go by that list, I think the number of cities will be in the 20s, or mid-20s, where number of people have proven viability. I mean, we do operate our hospital in Mumbai, which is in Western India, it is only that we have been operating pretty well. And if we look at what we’re doing in even outside the cluster, Delhi NCR, in places — in Tier 2 cities like Mohali or Dehradun, it is extremely high ROCE business for us. So I think even entry into the southern markets, when you look at what their profitability etc are, I think so long as we have conviction that we can eke-out and we can make it accretive it becomes a sensible entry point for us.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Got it. One more question I had on the operations for this particular year. Now, I think the investor presentation gives a number of clinical update on liver transplants, kidney transplants and bone marrow transplants done till date, but can you give us some sense as to what is the number for these three categories of transplants looking like in FY ’23 and what growth are we envisaging in the number of transplant that we’ll be doing in the coming two, three years, because, I mean, the clear question here is that these initiatives are ARPOB accretive, so that could be a clear ARPOB driver for you in the coming two, three years.

Abhay Soi — Chairman and Managing Director

It doesn’t really move the needle. I mean, you have to look at it collectively. I think, overall, this transplant business will be about 5%, 6% of our —

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah. So, Nikhil, basically if you come to the liver transplants, we do around 40 to 45 of them every month, right? And kidney transplant will be again a bit higher than that, it will be around 60, 65 every month. And BMT would be another 25 to 30. So these are the ranges that we have. Obviously, the endeavor of the hospital is to start the program now in more and more hospitals, for example. That’s what we did in liver transplant. We started a program in Vishali, we started a program in BLK, we are starting the program in Mohali and in Dehradun now and we are bidding for the license. So what I am saying is, obviously, that’s all in the effort, right? So now to put a number — projected number, that’s very tough for us, right? We can’t really — there is no order book that we have, right? But, moreover, what I’m saying is, look, this is going to be incremental, because his is already a particular pace at which we add. So this is going to be incremental — you’re not going to see an exponential move, because even if I double this number, you are not going to see an exponential change in EBITDA or margins because of which.

Nikhil Mathur — HDFC Mutual Fund — Analyst

All right. Got it, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai — HSBC — Analyst

Hi, good morning. First, one clarification. Abhay, did you mention you would be able to add another 100 beds through internal reconfiguration, apart from the planned ongoing capex?

Abhay Soi — Chairman and Managing Director

Well, I said over 100 beds. So it’s a number which is higher than 100 beds. Yeah.

Damayanti Kerai — HSBC — Analyst

Okay, that’s clear.

Abhay Soi — Chairman and Managing Director

Through internal reconfigurations, okay, we will be adding this and we’ll be adding this over the next few months.

Damayanti Kerai — HSBC — Analyst

Next few months. Okay. My second question is, how do you see your operating cost inching up as your planned beds come online over next two, three years, both on the variable as well as fixed-cost part?

Abhay Soi — Chairman and Managing Director

I think, majority of the capex that we’re doing or the rollout we are doing is towards brownfields, right? I mean, 80%, 85% of the total rollout is towards brownfields, and brownfields by their very virtue have higher operating leverage because it doesn’t necessarily have a fixed cost associated to it, because the fixed cost, be it in terms of management or senior clinicians etc is already incurred by the existing hospitals. So when you add another tower next to it, it has lower sort of — or doesn’t have that. So you technically you have a higher operating leverage. So your operating cost overall should come down.

Damayanti Kerai — HSBC — Analyst

Okay. Because you would be able to expand the existing resources to a higher number of beds, right? So that’s why —

Abhay Soi — Chairman and Managing Director

That’s right. And what you are actually putting over there, nurses or resident doctors etc, your senior clinicians are already in play. And the reason you’re doing these brownfields in the first place is because your capacity is out, right, and we got unsatiated demand at your doorstep, your doctors have no — they don’t get OT time, they don’t get beds for the patients, and so on and so forth.

Damayanti Kerai — HSBC — Analyst

Okay. And in most of these brownfield expansions, should we assume the breakeven should be achievable within 12 to 15 months of the commencement of the unit?

Abhay Soi — Chairman and Managing Director

I’ve stated in the past, the brownfield should have a breakeven in the first quarter or two, if not the first quarter itself.

Damayanti Kerai — HSBC — Analyst

Okay. So, within two quarters we can reasonably assume that —

Abhay Soi — Chairman and Managing Director

Absolutely.

Yogesh Sareen — Senior Director and Chief Financial Officer

In a brownfield, you will not open the beds till such time you are able to fill it, right? So there’s no need for us to open all the beds.

Damayanti Kerai — HSBC — Analyst

Okay, understood.

Abhay Soi — Chairman and Managing Director

I mean, not that we don’t have the need. We have the need. I think the point which Yogesh is making, you’re holding the assets on your books, right, but there is no real fixed cost associated to it from an operating standpoint.

Damayanti Kerai — HSBC — Analyst

Okay. And my last question is, can you talk a bit about your ESOP programs? And right now what percentage of Max employees are covered by your ESOPs, and what kind of annual expense you expect for the stock option programs?

Abhay Soi — Chairman and Managing Director

So I think they are about —

Yogesh Sareen — Senior Director and Chief Financial Officer

81 lakh shares, 271 employees.

Abhay Soi — Chairman and Managing Director

271 employees, okay, are covered by the ESOP plan. I think the important thing is that the cliff for the ESOP plan is —

Yogesh Sareen — Senior Director and Chief Financial Officer

20%.

Abhay Soi — Chairman and Managing Director

Is 20% IRR and which comes to a price of, I think —

Yogesh Sareen — Senior Director and Chief Financial Officer

As in to vest the 100% of the ESOP, the price is 1,260 after five years.

Abhay Soi — Chairman and Managing Director

So there’s a cliff. If it doesn’t hit that price, the ESOPs don’t sort of [Speech Overlap] that’s right.

Damayanti Kerai — HSBC — Analyst

Sorry, I just missed the price, sorry 1,000?

Yogesh Sareen — Senior Director and Chief Financial Officer

Damayanti, basically the ESOP has a clause. So there are two portions to ESOP. So one is the — what is the individual performance, other is the company performance. So the company performance part, which is a large part mainly for the leadership team, basically will vest after five years, provided there is a 25% CAGR in the share price when we have ESOPs. So at that rate, the price required for 100% of these to vest is INR12.60 [Phonetic] at the end of five years.

Damayanti Kerai — HSBC — Analyst

Okay, understood. Thank you. I’ll get back in the queue.

Operator

Thank you. The next question is from the line of Amit Kadam from Canara Robeco Mutual Fund. Please go ahead.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Yeah. Hi sir. Am I audible, sir?

Abhay Soi — Chairman and Managing Director

Yeah.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Yeah. Sir, my first question is that can you dwell a little bit more on how the international patient pace is higher, how the things look forward. For example, in one of the line you mentioned that that the sales are already at 10% higher than the —

Operator

Amit, may I request you to use your handset, please?

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Okay, I’ll do that. Okay, is this fine now?

Operator

It’s a little low. Can you speak up a bit?

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Okay. Is this okay?

Operator

Yes.

Abhay Soi — Chairman and Managing Director

Yeah, better.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Yeah. So just like, can you dwell a little bit on the international patient, how that particular mix or segment is moving? In one of presentation — in one of the slide, you mentioned that the sales are already at — like 10% higher than the pre-COVID. Just wanted to know that on the footfall, how the things are looking, where that traction is coming, how do I see the year going forward, because last time when we spoke, you had mentioned about Afghanistan not present, but you are trying to cope-up that particular thing with some other geographies. Just maybe two, three minutes brief on that particular segment, please.

Abhay Soi — Chairman and Managing Director

No. We were trying to cope up, we have coped up, right? So in spite of Afghanistan, which is 12% of our business, down to zero, we had 110% of pre-COVID level. So what that basically implies is that not only we’ve coped up with the lack of Afghanistan, but we’ve sort of overcompensated for it, right? That’s one. Secondly, I mean to have a discussion on present footfalls, you’ll have to have a point of reference on past footfalls. I mean, the fact that this number has been moving up, I mean we are getting massive traction on this, it’s over 60% compared to last year, it’s over 110% compared to pre-COVID levels in spite of 12% of Afghanistan business not being there. Hopefully in the next quarter or two quarters, depending on the geopolitics, as and when Afghanistan does open, this will give us further thing. But in the meantime we will be looking at other geographies as well. We’ve been opening offices in other places and we are going to be looking at more direct to — and I guess, with also the support of the Indian Government, through Heal in India and Heal by India, there is focus on global medical tourism. So I think we can have a step-change over here. I haven’t given any guidances in terms of footfalls in future or revenue guidance in terms of international patients or any other sort of revenue guidance. I am going to avoid that even at this stage.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

So when we say like revenue is at, like, 10% higher, then even the footfalls are — I assume that if realization being same, then those — even footfalls are higher than the pre-COVID?

Yogesh Sareen — Senior Director and Chief Financial Officer

Yes, more or less yes but may not be 10%, maybe probably 4% to 5%.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Okay, got it. Second is, Yogesh sir, you can help me with this thing. In the presentation footnote you have mentioned that there was a recovery in terms of bad debt which you have booked under that overheads. So can you just help me with that particular number, please?

Yogesh Sareen — Senior Director and Chief Financial Officer

That number would be around INR7 crores during the quarter. So this is a charge during the quarter. So this is obviously — it’s a running system that we have. So at the end of each quarter, whatever billing is above 365 days, they will get provisioned for, right?

Abhay Soi — Chairman and Managing Director

We have a very stringent policy that anything which is over 365 days, okay, we provide for.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Right. Because you had mentioned that why the things — that OpEx is sequentially down. In one of the line item you mentioned that one of this is the reason.

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah, we did mention. Yes. That’s right, yeah. So there is an impact. And there’s always impact. This obviously depends on when the traction comes. So we have around 16%, 17% of business which is PSU revenue share, and the payment from [Indecipherable] they come in blocks.

Abhay Soi — Chairman and Managing Director

Sometimes they come over 365 days. Then we write it off at the end of 365 days. We provide for it and then when it comes back, we have to write it back.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Okay. Yeah. And just like want to know further, because you had said that another 100 you are expecting in next few months through the internal reconfiguration. Is it across the various hospitals or is it from a one particular thing? Second is that, is it safe to build this particular increase in terms of like somewhere in quarter one or quarter two of FY ’24?

Abhay Soi — Chairman and Managing Director

Yeah, I mean it should come into quarter one, quarter two of FY ’24. And these are in three or four separate — four or five separate hospitals. So it’d be 20 beds somewhere, 30 beds somewhere and so on. So yeah, so collectively it’s over 100 beds. And clearly, you eke-out this capacity in phases where you’re hitting thresholds. When you get to that stage you find elasticity, you find reconfiguration and so on to be able to get, I mean, you don’t do it in a place where you already have even little bit of leeway as far as idle capacity is concerned. See, you have to understand, as we are coming close to threshold capacities in place, or what we earlier thought were threshold capacities, both in terms of operations and number of beds, we find there is elasticity at the end, right? Once you get — it’s like a manufacturing process. Your rated capacity maybe 75%. When you come to the 75% utilization, you can operate 80%. When you get to 80%, you will realize you can get to 82%, 83% and so on.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Right. Yeah. So that’s it. I’ll fall back in queue. Thank you.

Abhay Soi — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Naman Bhansali from Perpetuity Ventures. Please go ahead.

Naman Bhansali — Perpetuity Ventures — Analyst

Hi sir, thank you for the opportunity. So my first question relates to the international patients, I think it’s around 8.5% contribution. But if you want to view it as a percentage of only Delhi hospitals, so how much would that percentage be? And relating to the international patients like what is the structure that we follow to attract these international patients, like do we pay some medical consultancy fees to any agencies or what sort of cost do we pay to attract these patients and how is it versus the industry and Max? So this is my first question.

And my second question relates to the margin structure of brownfield expansion which we are doing. So with every incremental bed addition, how do we see the incremental margins which we get on the brownfield beds?

And then lastly on the ARPOB difference. Like, what is the difference majorly in our business between the international and domestic ARPOB and how would it boil down in terms of EBITDA per bed? So these are my questions.

Abhay Soi — Chairman and Managing Director

Let me start by margin on brownfields and come to — so as far as margins on brownfields are concerned, our typical brownfield will cost us about INR130 lakh, INR140 lakh per bed. Our present EBITDA per bed is about INR66 lakhs last quarter. If you apply even a 75% occupancy rate to it, so that comes to about INR66 lakhs, it will be about INR45 lakhs, INR50 lakhs I presume. So you are looking at INR50 lakhs on top of INR130 lakhs. This is if you were doing business as usual. But like I’ve mentioned, there is operating leverage in brownfield, so EBITDA per bed should be northwards of that, and more importantly, over the next couple of years, by the time all of this comes on stream, you will have some real inflationary growth on top line as well. So it is massively accretive. Look, the most attractive thing you’ll ever do, more than M&A, more than greenfield etc is brownfields. Okay. Because A, your are building in a proven area where you are tapping into unsatiated demand and then you have a huge amount of operating leverage coming out. So that is exactly what we’re doing. So that’s one. I hope that answers your question as far as margins are concerned.

Now, coming to your —

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah. So on the ARPOB question that you asked on the international side, typically the ARR, the ticket size for the international patient is double of the domestic, because of the fact that these are more acute patients, but the LOS is also higher, right? So the average length of stay of this patient is also 1.3 times of the normal. So typically, that means that the ARPOB will be 1.5 times of these domestic patients. When I say domestic patients, there will be cash domestic patients, that’s on the ARPOB. Yes, the EBITDA per bed is higher because of the fact that these are higher ARPOBs. So even if you maintain the same margin percentage after payout to these facilitators, your EBITDA per bed would be around 20% higher than the domestic patients.

Abhay Soi — Chairman and Managing Director

But having said that, our marketing is done through multiple channels. At the very least, there are walk-in patients where there are no facilitators involved. Then you have patients and OPD people who come through our digital platform, come through our office in overseas and so on and so forth. Then you have patients who come through international medical tourism companies. So in those situations, we make a payment of facilitation fees to those international medical tourism companies. The third is, we have tie-ups with various ministries of health in various countries, we have tie-ups in hospitals. At any given point of time, a number of our doctors are traveling overseas, conducting OPD screenings, it’s a fairly organic process. We also have doctors from these countries who come to our hospitals and work as observers. They go back, they champion our thing. But we conduct OPDs, we screen the patients, we do pre-consults, post-consults over there and so on. And that’s how you — that’s the backbone of how you do medical tourism.

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah. Also on your question about the share of international patients in the NCR hospitals or Delhi hospitals. So it range from 18% to 4%. So the maximum is in BLK Max Hospital and then followed with Saket. And then you have other hospitals like Vaishali and Patparganj etc. So on an average, it would be probably 11% to 12% in the NCR hospitals.

Naman Bhansali — Perpetuity Ventures — Analyst

Okay, got it. And what is the maximum on a consolidated basis, like, we are currently at 8.5% international contribution and this can go up to, what, 10%, 11%?

Abhay Soi — Chairman and Managing Director

I mean, it depends on how much we are doing, right. Like I said, I would avoid giving any sort of guidance in terms of how much of this business we are going to be shooting for over the next five to five years. But like I said, the potential is exponential not incremental.

Naman Bhansali — Perpetuity Ventures — Analyst

Okay, sure. Thank you for the answers. That’s all.

Abhay Soi — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ashish Thakkar from IIFL AMC. Please go ahead.

Ashish Thakkar — IIFL AMC — Analyst

Yeah, thanks for the opportunity. Sir, if you could spell-out, is there a certain seasonality in our business, because if we try to have a look at the occupancy rates, quarter four seems to be much lower than the earlier quarters, so if you could just help us understand the nature of the business.

Abhay Soi — Chairman and Managing Director

Absolutely. So there is a seasonality in the business. So even if you go back to our last quarter’s investor call or the presentation, when we had the higher occupancy, we said in Q2 that the occupancy is higher because of seasonality, right. In the rainy season you have waterborne diseases, airborne diseases, etc. So in Q2, typically all hospitals have higher occupancies, right? I mean, this is like I mentioned due to the seasonality and the flu season and so on and so forth, so you’ll have a lot of internal medicine patients, you have a lot of pediatric patients etc. They come to the hospital for medical reasons, not for surgical reasons. So this quarter two is usually characterized by higher occupancy but lower ARPOB. And if you look at Q3, Q3 is typically a weaker quarter. Year-on-year, you will find it to be a weaker quarter which is this present quarter, because it is characterized by the festive season. A lot of festivals, the New Year, Christmas holidays etc, I think this year Diwali was also in October. So you will see patients postponing their surgeries or doctors postponing the surgeries etc during — by a few days or a few weeks whatever.

So typically, Q3 is a weaker quarter. So you have — which is characterized by lower sort of occupancies. But you have higher ARPOBs in this season because whoever is coming for surgery is somebody who can’t really put it off. So therefore, you are coming for more sort of acute and more quaternary care surgeries, etc, which typically will have a higher amount of billing, also because Christmas, New Year, lot of international patients don’t sort of come in, they postpone their this thing because, look, Christmas, New Year also etc. So the way to compare healthcare this thing is quarter compared to the previous year quarter, rather than sequentially the previous quarter because of the seasonality. Now Q4 is typically a stronger season, it is the strongest quarter in the year.

Ashish Thakkar — IIFL AMC — Analyst

Okay. Yeah, fair enough. That’s good. So again this ARPOB, we are already at 77%, 78%. Obviously, the concern remains, as last time you had highlighted, at peak you can go to 80%, 82%, and the bed additions, like you’re trying to reconfigure or internalize, so 100-plus beds over the next two quarters. Where do you find comfort and do you feel that before we materially add a higher number of beds, can we still manage to do 10% to 12% top line growth with this 77% or say, 80% kind of occupancy levels?

Abhay Soi — Chairman and Managing Director

No. So look, I think there are two or three separate things over here. Firstly, the number of beds we are coming out with over the next six, seven months, I presume, is going to be 300 in Dwarka, 100 in Shalimar Bagh and 100-plus that we are doing. So that’s over 500 beds. That’s one. Secondly, last quarter we were — quarter two we are at, I think, 81% — 78% occupancy. We’ve done months of 81%, 82% also, and we’ve done quarters of 81%, 82% as well. Some of our hospitals are operating at a higher occupancy and that’s where — when you start in those hospitals where you start hitting occupancy thresholds, we also have the lever of payor mix, right. I mean you start accommodating your preferred channel at the cost of the un-preferred channel and that’s why we had guided that the un-preferred channel or the distributing business would come down accordingly. So there is enough leeway in the system to accommodate any sort of growth that we have while the new capacity comes in. And I’ve only given you 500 beds, which is estimated to come in over the next six to seven months. And then in 2025, we have more beds coming in and so on.

Ashish Thakkar — IIFL AMC — Analyst

Yeah. Perfect. Sir, lastly, versus the volume growth, so typically industry does around 8% to 10% volume growth. Any color on how the pricing trends are currently in the industry?

Abhay Soi — Chairman and Managing Director

Year-on-year you normally have a 2%, 2.5% impact on revenue as far as pricing is concerned. That’s pretty much across the industry, right?

Ashish Thakkar — IIFL AMC — Analyst

Yeah. Fair enough. Yeah. That’s all. Thanks.

Operator

Thank you. The next question is from the line of Lavanya Tottala from UBS. Please go ahead.

Lavanya Tottala — UBS — Analyst

Hi sir, thanks for the opportunity. Sir, I just wanted to understand how you look for breakeven timelines for the greenfield project. I understand, for the brownfield it’s around two quarters. So for the greenfield project in Gurugram, how you look at the breakeven timelines?

Abhay Soi — Chairman and Managing Director

Yeah. So look, I think historically greenfields used to be about a two-year sort of breakeven. My belief is now it will be 12 to 15 months sort of a breakeven in greenfields.

Lavanya Tottala — UBS — Analyst

Okay, got it. And the brownfield, where the current occupancies are in the range of 75%, that should see somewhere like three quarters, high occupancy something like two quarters and greenfield two years. Is the right way of looking, sir?

Yogesh Sareen — Senior Director and Chief Financial Officer

No, we’re not saying that. So you take the example of Shalimar Bagh. Now in quarter three, the occupancy was 85% in that hospital, right. So in 85% occupancy, that means, obviously you are not admitting all the patients. So at that point of time when we open 100 beds, we think we should be able to — there should EBITDA accretion in the first quarter itself, right. So we’re not going to wait for three quarters for us to get some EBITDA from those additional 100 beds. So that should be immediate. Now it depends on where the occupancy is, but I would say, probably not more than three to four months for EBITDA accretion in a brownfield situation.

Lavanya Tottala — UBS — Analyst

I just got disconnected in the earlier commentary time. So if I understand right, like 100 beds with the existing capacity and the Shalimar Bagh, so these 200, 250 beds should be available for the full year FY ’24 and 300 beds from Dwarka should come in at what timeline sir?

Abhay Soi — Chairman and Managing Director

We said Q2 FY ’24. Same quarter. On or before September. Yeah.

Lavanya Tottala — UBS — Analyst

So around like for 2H it will be available, like the 300 beds of Dwarka?

Abhay Soi — Chairman and Managing Director

That’s right. Yeah.

Lavanya Tottala — UBS — Analyst

Got it. And so on the — like acquisitions which you have highlighted, so what kind of efforts you will be looking at like the standalone hospitals or a chain. I just wanted to understand your view on what kind of assets would you be looking, if you’re trying to enter a new region or at least certain number of beds is the thing which you look at to consider an asset for this opportunity. So how you will be looking at it?

Abhay Soi — Chairman and Managing Director

The bigger the better. I mean, if you have a chain versus a single hospital, we prefer a larger sort of this thing. It doesn’t mean that we don’t look at single hospitals. We look at that as well. What is important for us is that it has to be accretive to ROCE, that we have — we can build — there is intrinsic value for us to unlock over there. And like I said, ultimately over the medium term, it needs to be value accretive and needs to be ROCE accretive.

Lavanya Tottala — UBS — Analyst

Okay. Got it. Thank you. Thank you so much, sir. Thanks for the opportunity.

Abhay Soi — Chairman and Managing Director

I mean, if I have to go to South India, I won’t go with one hospital. But if I have to do it in — adjacent to a cluster that we are, then we may do one hospital over there. So I mean, I just won’t buy one hospital — random hospital in, let’s say, a 200-bed in Chennai. If I have to do in Chennai, it has to be a larger sort of this thing. If I have to do Bangalore, it has to be a larger format. It just can’t be a hospital for the sake of it and because we are acquiring some EBITDA or something.

Lavanya Tottala — UBS — Analyst

Yes. So this is helpful, sir. So that’s what I wanted to check if you’d be looking for certain — one asset in Chennai or a place like where other things are present. So that’s what I wanted to check. This is helpful. Thank you so much.

Abhay Soi — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Krishnendu Saha from Quantum Mutual Fund. Please go ahead. Krishnendu Saha, your line is unmuted. Please go ahead with your question.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Can you hear me? Hello.

Operator

Yes.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Sorry, this is the first time I’m on the company and I’m just taking everything on the fly. So maybe some of my data could be wrong. Just wondering if you just do the — divide by the revenue the number of beds, is it coming to — like revenue per bed is coming to around INR6 million? The reason I ask — hello, can you hear ne?

Abhay Soi — Chairman and Managing Director

Revenue per bed?

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yes.

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah, INR66,800 per OPD per hospital bed day [Speech Overlap].

Krishnendu Saha — Quantum Mutual Fund — Analyst

No, in the sense of — what you call? Is it ARPOB you are talking about, right?

Abhay Soi — Chairman and Managing Director

That’s right.

Yogesh Sareen — Senior Director and Chief Financial Officer

ARPOB is revenue, yes.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yes. But if I’m just — the reason I’m asking is, when I’m looking at you, you have a higher ARPOB compared to a lot of other players, but your revenue — if I just do a basic — so I’m just trying to understand what is actually giving this higher ARPOB. That’s the basic question.

Abhay Soi — Chairman and Managing Director

What’s the question? Is the question why we have a higher ARPOB [Speech Overlap]

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yeah, just trying to understand the business as to why we have a higher ARPOB, because of a lot of foreign clients or because of the mix issue. Just trying to get a feel of the business.

Abhay Soi — Chairman and Managing Director

We have a higher clinical mix. Firstly, I think if you look at the two things which drive ARPOB, one is the payer mix, the other is clinical mix, right. As far as payer mix is concerned, 7%, 7.5% of our beds are totally free for the poor, compared to 1% or 2% for most of our competitors. If you look at, 29% of our beds are catering to institutional business compared to maybe 20% and 13% for some of our competitors, right. So the payer mix is clearly inferior, but our ARPOB is maybe 20%, 25% better than the next best player in the industry. But more importantly, our EBITDA per bed is 55% better than the next best player in the industry. Okay. Now, EBITDA is better, because on each and every, I think, line item we outperform each of the hospitals that we compete in pretty much every micro market. But as far as the revenue is concerned, we operate at a higher sort of — above quaternary care, higher end of the clinical mix. So we also indicated in the facts that we have more beds, which are critical care beds, 35% of our beds are critical care beds. Most other people are between 25% and 30%. So it basically portrays that we are doing more high-end work as a proportion of the total work that we do. So it over-compensates for the lack of payers.

Krishnendu Saha — Quantum Mutual Fund — Analyst

And with high occupancy also compared to the peers?

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah. Occupancy has no role in the ARPOB, but the fact that we are present in the NCR, that also helps us, right. So NCR [Speech Overlap] gives the higher occupancies. Occupancy is not a function of ARPOB or this thing. Occupancy is a function of your brand strength.

Krishnendu Saha — Quantum Mutual Fund — Analyst

I see. And so just the expansion which we will have, do you expect to maintain the 35% of the speciality types of the revenue stream going ahead? Is it like — because we will be expanding at a faster click in the next two, three years. Just trying to get a feel that we will be able to maintain the 35% mix going ahead.

Abhay Soi — Chairman and Managing Director

It would be higher. I mean there is no reason for it not to be. We are looking at the same mix of business going into the future as well.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Right. In the sense more an understanding — yeah, there is available market, which you can definitely address to.

Abhay Soi — Chairman and Managing Director

Available market is, it’s where the crunch is, right. I mean if you look — 35% of our beds are critical care beds. Yet where we don’t have any beds available or the highest occupancy, if we look at in our system, it is not in the ward beds, not in the rooms etc, it is typically in the single-room that — more importantly in the ICU, the critical care. So as we are going forward, we are in fact intending to build more critical care beds, because that’s where the bottleneck is in our current system.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Okay, thanks.

Operator

Thank you. The next question is from the line of Sachin Kasera from Svan Investments. Please go ahead.

Sachin Kasera — Svan Investments — Analyst

Yeah. Good morning and congrats for a good set of numbers. I had just one question. As we bring this capacity to brownfield and some of these efficiencies, what is your thought in terms of being able to sustain or maybe improve the current payer mix and as well as sustain the current occupancy levels?

Abhay Soi — Chairman and Managing Director

So like I said, the majority of the expansion is coming in our — is brownfield, right? And the reason we’re doing it, we’re not doing it in order to tap the market, we are doing it because we got unsatiated demand at our doorstep. So, I mean the payer mix — we got waiting of six hours to two days in an ER for the sort of bed that you may want. If you want a ICU bed, you want a single room, it is not available. You go to Nanavati Hospital, you go to Max Saket, you go to Mohali, you go to any of our hospitals, that’s where the challenge is. If you will go to places like Gurgaon and all, we don’t have beds, right. So there is no reason for that payor mix not to be sort of — to be any differentiation over there. Of course, we’ve guided in the past that our payor mix should be improving to a certain extent and then it will be plateauing out, it will be plateauing out because this new capacity is coming in by then.

Sachin Kasera — Svan Investments — Analyst

So you think the current payer mix is already pressured out or you think there is still some improvement in the payer mix after which we will plateau out, sir?

Abhay Soi — Chairman and Managing Director

So we have guided that should be down to 15% in the next four, five quarters.

Sachin Kasera — Svan Investments — Analyst

Okay. And you remain confident on that number?

Abhay Soi — Chairman and Managing Director

That’s right. We have to keep in mind, if you look at sequentially, in a weak quarter you’re going to be accommodative, right. I mean a weak quarter in the sense that in a festive quarter where you have lower occupancy, why would you would have a idle bed, you’re going to take more institutional or whatever else it is at that point of time. And this was a weak quarter. I mean, this is a seasonally weak quarter for us, but from an occupancy standpoint.

Sachin Kasera — Svan Investments — Analyst

Sure. And sir, any thoughts in terms of the revenue per operating bed, how do you see that [Speech Overlap]

Abhay Soi — Chairman and Managing Director

Sorry. I think what needs to be looked at is the fact that in spite of it being a seasonably weak quarter, on an overall standpoint, we’ve navigated it to be the highest EBITDA quarter in margins, EBITDA per bed or absolute EBITDA in the history of the company, so what happens in a stronger quarter.

Sachin Kasera — Svan Investments — Analyst

Sure. So, which would mean that even with this additional capacity coming in and with the leverage that we are talking about, actually, we could see improvement in ARPOB, EBITDA per bed and EBITDA margins over the next few quarters?

Abhay Soi — Chairman and Managing Director

No doubt on that front. I mean, I’ve repeatedly said that in the past that EBITDA per bed it will be accretive.

Sachin Kasera — Svan Investments — Analyst

Sure. Great. Thank you, and all the best, sir.

Abhay Soi — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ranvir Singh from Nuvama. Please go ahead. Ranvir, your line is unmuted. There is some background disturbance as well.

Ranvir Singh — Nuvama — Analyst

Yes, thanks for taking my question. My question was more about the macro situation there in healthcare or hospital industry. I see in this budget, the government has allocated some, I think INR6,000 crore to INR7,000 crore for setting up AIIMS in different locations. Just I wanted to understand, going forward, because the government trust has been to improve infrastructure mostly in public sector. So do you see that public sector is emerging strongly here and that could give private sector a bit of competition in next three, four years? So how is your view on it?

Abhay Soi — Chairman and Managing Director

I think anybody who’s been to a public sector hospital should be able to answer that question. And even during COVID when healthcare was in focus and everybody was looking at it, you saw while there was no beds in private hospitals, there were idle capacity in government hospitals across the board. And I think if public sector supersedes, then probably in my memory will be the first time and first country where the public sector sort of outperforms the private sector. I don’t see it’s ever happened anywhere else. So I really don’t see that coming as a threat. I think public sector hospitals are free hospitals, they are free to the poor and to the rich and everybody else. When it is free, your idea is to provide health care coverage to more and more people, not necessarily the feature — it’s not your room having a TV over there, you have AC in the room and so on and so forth. I mean it’s a very basic sort of facility. I mean, you may not be aware, but most government — no government hospital even has a stream, which is called critical care. I mean, the ward size — Nightingale wards and so on and so forth. I think the whole push of the government is very, very different from that standpoint. I mean after that the next stage will be hospitals which are doing PMJAY. We are not even doing PMJAY, we don’t even cater to that sort of subject.

Yogesh Sareen — Senior Director and Chief Financial Officer

For us, the hospital like AIIMS is basically a source of mental talent, right? So typically doctors working in AIIMS after 20 years they take voluntary retirement and they try and work in the private sector. So I think that’s to us is a good thing, right?

Abhay Soi — Chairman and Managing Director

I mean, there’s massive — because of the sort of range of skill-sets that they develop in public hospitals is immense, simply because of the volumes and the complexities they see over there. So typically you will see a doctor having worked in any of the government hospitals, after a while leaves and joins the private sector.

Ranvir Singh — Nuvama — Analyst

Understood. Thanks for your view. And specific to company, just I missed the number that what was the contribution of international patients during this quarter in revenue?

Abhay Soi — Chairman and Managing Director

9%.

Ranvir Singh — Nuvama — Analyst

And what was in Q2?

Abhay Soi — Chairman and Managing Director

Same.

Ranvir Singh — Nuvama — Analyst

Same? Okay. And ARPOB is normally much, much higher in international. So what would be the average ARPOB in international patients?

Abhay Soi — Chairman and Managing Director

I think Yogesh mentioned in the previous this thing, it is 50% higher, ARPOB.

Ranvir Singh — Nuvama — Analyst

Okay, thanks. That’s all from my side. All the best.

Operator

Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Prakash Agarwal — Axis Capital Limited — Analyst

Yeah, thanks for the opportunity. Good afternoon. Just trying to understand the margin outlook better for the next four to six quarters. I understand the bed additions of Shalimar Bagh, Dwarka and the others you mentioned, they would have a little lower EBITDA per bed and the ARPOBs than the average. Would that understanding be correct and would it have any impact on the margins?

Yogesh Sareen — Senior Director and Chief Financial Officer

Not in the brownfield hospitals, but Dwarka, yes, it will take time for Dwarka to start generating EBITDA. So as I mentioned, 12 to 15 months is when we see the breakeven in terms of EBITDA in Dwarka. That’s a greenfield site. But other than that it should be all better EBITDA per bed etc and better margin because these are all brownfields. As I mentioned, Shalimar Bagh, 85% occupancy in quarter three, right. So in that hospital, I had 100 beds, you can understand how the occupancy will — there’s will be uptake in the occupancy [Speech Overlap]

Abhay Soi — Chairman and Managing Director

And the 100-plus beds which we are eking out of the present capacity, right, I mean there EBITDA, again, you will be swinging for the fence over there literally with the EBITDA margins. So that 200-plus bed, 200 to 250 beds should give you a higher EBITDA day one sort of thing and Dwarka will take 12 months to sort of get there, and thereafter.

Prakash Agarwal — Axis Capital Limited — Analyst

Yes. But the 200 addition is higher than the average that the company is clocking like [Speech Overlap]

Yogesh Sareen — Senior Director and Chief Financial Officer

Yes, very much. No doubt about that.

Prakash Agarwal — Axis Capital Limited — Analyst

Okay. So on a blended basis, you are okay with the margin trajectory or maybe see an improvement also?

Yogesh Sareen — Senior Director and Chief Financial Officer

That’s right.

Prakash Agarwal — Axis Capital Limited — Analyst

Okay. And how about M&A? I mean, clearly with the fundraise plans and the cash, I mean we are sitting in Delhi NCR which is the best micro market as such. But if we expand in the gaps, maybe in Mumbai or even other Tier 1 metros, these kind of ARPOBs are unheard of. So when we look into this M&A, would it be fair to see that we would be okay with the lower ARPOB to start with and with case mix, etc, we would be improving, or how should we think about it in terms of M&A going into that particular micro market selection with respect to our margin stability and ARPOB stability?

Abhay Soi — Chairman and Managing Director

I think, Prakash, firstly, our highest ROCE businesses are not is not Delhi, it is the Tier 2, Tier 3 cities. Okay? Secondly, my ARPOB in Mumbai is comparable if not I mean higher than any of the Delhi hospitals.

Prakash Agarwal — Axis Capital Limited — Analyst

Yeah, barring Mumbai, Delhi, we would be looking at M&A outside also, right?

Abhay Soi — Chairman and Managing Director

No. So I’m saying outside Delhi and Mumbai, like I said, even if I look at Tier 2, Tier 3 cities, my ROCE over there is much higher than Delhi.

Prakash Agarwal — Axis Capital Limited — Analyst

Understand ROCE concept, but from the ARPOB and margin perspective, would we be open for lower ARPOB and lower-margin business?

Abhay Soi — Chairman and Managing Director

Of course. I will be very open to lower — only thing I’m concerned about is ROCE. I’m okay with lower ARPOB, I am okay with lower margins, so long as whatever in absolute terms is EBITDA per bed vis-a-vis what we put in over there is accretive to us, on a return on capital basis.

Prakash Agarwal — Axis Capital Limited — Analyst

Understood. Okay. And just one more clarification. So during COVID times, there was a higher cash patient mix. So has that normalized now post-COVID and how is the cash versus insurance, I mean, insurance would have gone up, right?

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah, Prakash. So yes, insurance has gone up after once the COVID set in and there were more policy being sold and that trend is continuing right? So it’s not that the — it was one-off and the share of insurance business come down. It’s being maintained at the same level now.

Prakash Agarwal — Axis Capital Limited — Analyst

And cash would have gone down?

Yogesh Sareen — Senior Director and Chief Financial Officer

Yeah, it did. Yes.

Prakash Agarwal — Axis Capital Limited — Analyst

And [Speech Overlap] as per you would be about what 20% in pricing, 20%, 25%?

Yogesh Sareen — Senior Director and Chief Financial Officer

Prakash what’s the question? Pricing?

Prakash Agarwal — Axis Capital Limited — Analyst

So in terms of — insurances are obviously contracted rates. So would — I mean that is about 20%, 25% lower in the cash patient billing or —

Abhay Soi — Chairman and Managing Director

7% to 8%.

Prakash Agarwal — Axis Capital Limited — Analyst

So that’s it?

Abhay Soi — Chairman and Managing Director

Yes. And it actually works out better, because when you have an insurance policy, we get — and yes, there has been a step change in the frequency of people buying health insurance being more, but this trend has been on for the last 10-odd years in some manner or the other, and it works out well for the corporate hospitals, because as and when you have an insurance policy, you’re paying the same amount of premium, whether you go to MAX or you go to ABC nursing home. And what we see is, people don’t window shop at that stage. And you’re less price sensitive, you’ll go to the better brand, better hospital because eventually you pay the same premium.

Prakash Agarwal — Axis Capital Limited — Analyst

Okay. Fair enough. Thank you so much.

Operator

Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.

Kunal Dhamesha — Macquarie Group — Analyst

Hi, thanks for taking my question. So the first one on the 100 beds that we are adding in our existing capacity. Would that be more kind of deluxe beds or the private room etc or would it be a mix of everything?

Abhay Soi — Chairman and Managing Director

No. It will be more critical care beds than more single rooms, etc, more of what we need.

Kunal Dhamesha — Macquarie Group — Analyst

Okay. So, probably more ARPOB basically if those gets filled, right, because if it’s single room or deluxe room or critical care beds etc?

Abhay Soi — Chairman and Managing Director

We make more out of doing liver transplants in a general ward than we do from doing a delivery in a suite.

Kunal Dhamesha — Macquarie Group — Analyst

Right. But over a longer period of time, that’s not in your hand, right, like over a longer period of time, the private room would be obviously better, assuming that the mix over a long period across beds remains same?

Abhay Soi — Chairman and Managing Director

That’s right. So I would actually take the current mix and project it. It won’t be lower than that because it’s a general ward or whatever else it is. Like I said, most of our hospitals are suffering from bottleneck at the critical care.

Kunal Dhamesha — Macquarie Group — Analyst

And as per I believe that those critical care bed additions, etc require permission or something. So all those are in place for us?

Abhay Soi — Chairman and Managing Director

Yeah. I mean, these are — no permission is required within the existing capacities.

Kunal Dhamesha — Macquarie Group — Analyst

Okay, great. And second, more of a longer-term perspective. I believe that at one point you were saying that government would face challenges in terms of operationalizing this AIIMS kind of facility because of the cost-over and etc. So has there been any talks between a player like Max and —

Abhay Soi — Chairman and Managing Director

I didn’t get that, what are you referring to?

Kunal Dhamesha — Macquarie Group — Analyst

In terms of government being able to operationalize AIIMS etc, which they are kind of opening up now or investing in now, because their operational cost or operational cost structure is very different from private players, right, maybe around the nursing expenses or nursing salaries, around maybe 2, 2.5 times than what they get in a private hospital. So at any point, is there any talks between government and a player like you to hand over the operations and management of such apex institute to a company like Max, given we are also kind of providing similar kind of care and —

Abhay Soi — Chairman and Managing Director

No. It’s a different profile and a different thing. But what we’re seeing is a lot of state governments, be it Haryana, be it UP and so on and so forth, are inviting private players and there’s been some RFPs and RFQs to that account for public-private partnerships, on creating newer facilities. I mean, the government has its own way of working, you would have seen even the total outlay has been increased by about 13% towards the healthcare sector. So I’m sure the government will be able to — and whatever the economics of the government are, are the promise of the government facilities. Their viability I’m not going to sit and question. The fact is they are trying to cater to perhaps an audience, which is an unaffordable audience, right, which can’t even afford a PMJAY sort of rates etc. That’s for free healthcare effectively. And irrespective of viability, I don’t think a private player is going to be catering to anybody who can’t afford to pay at all.

Kunal Dhamesha — Macquarie Group — Analyst

Okay, great. Thank you.

Operator

Thank you. The next question is from the line of Sumit Gupta from Motilal Oswal. Please go ahead.

Sumit Gupta — Motilal Oswal — Analyst

Hi, thanks for the opportunity. Yeah, just I have few questions regarding international patients. So just want to get a gist on the overall pricing. So I presume that international ARPOB is more than INR1 lakh. So it is gross or net of of discounts and every other thing that you pay to the overall medical tourism agents and all?

Yogesh Sareen — Senior Director and Chief Financial Officer

So ARPOB is always gross. It’s based on the revenue that you booked. There may be some expense linked to the revenue. So we don’t net that. That come in this expense side.

Abhay Soi — Chairman and Managing Director

No matter how you look at it, EBITDA is 20% higher like what you just said, per bed.

Sumit Gupta — Motilal Oswal — Analyst

Okay. And one more thing regarding like sequentially if I see that payor mix for international patient, it is nearly like 9% consistently. So going forward do you see it at 9% or like moving into 10%, 11% also with like new geographies opening up?

Abhay Soi — Chairman and Managing Director

No. So our focus is always on the occupied bed days increasing, right? I mean, if it remains 9% and other business is also increasing, so be it. So as long as the operating bed days are on absolute or a standalone basis for medical is increasing. So we don’t necessarily look at it as a percentage of the overall pie. We look at it as a separate segment altogether. So we look at — look, is international number of bed days occupancy increasing or not, is the total revenue in absolute terms increasing or not. And then separately, we look at the same way for upcountry business. We look at at the same way for cash business. We look at it the same way other business, right? Not so much — my focus or our focus is on this thing. 9% being flat on two quarters is also because just, like I said, it’s seasonality. People don’t travel during the festival season. Doctors themselves put off surgeries etc. because they are on holidays.

Sumit Gupta — Motilal Oswal — Analyst

Sure. Thank you, sir.

Abhay Soi — Chairman and Managing Director

I mean, the better way to look at it is same time last year. Unfortunately, last year being a little bit of a COVID year you have kind of uneven comparison, but then you will — and we all are forced look at pre-COVID levels. But sequentially one should avoid. You typically see the first quarter and the third quarter are weak quarters and fourth is [Indecipherable].

Sumit Gupta — Motilal Oswal — Analyst

Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Amit Kadam from Canara Robeco Mutual Fund. Please go ahead.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Yeah. Hi, sir. Just one small question to maybe Yogesh sir. Like, can you help me with the tax rate for — maybe how do we look at it going forward, maybe FY ’24?

Yogesh Sareen — Senior Director and Chief Financial Officer

Tax rate, I said this earlier also, it should be in the — the ETR should be in the range of 18% to 20%. So this quarter was 18%-plus. But I would say it will peak at 20% on the network basis, but you will note that this quarter the CTR has come down. The current tax rate has come down. It’s by virtue of the fact that last quarter we did some voluntary liquidation, and there are some benefit of that liquidation in terms of depreciation of intangible. So I would say two things. One, that the rate would be 18%, 20%. Secondly, I would say watch out the CTR rate, that’s better because that’s where the cash outflows are linked to. And that’s improved over the quarter one and quarter two.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Okay. Yeah. So 18% would be a fair assumption to consider — somewhere between 18% to 20%?

Yogesh Sareen — Senior Director and Chief Financial Officer

I would say, go towards the higher range of 18% to 20%.

Amit Kadam — Canara Robeco Mutual Fund — Analyst

Okay, fair enough. Thanks.

Operator

Thank you. The next question is follow-up question from the line of Ashish Thakkar from IIFL AMC. Please go ahead.

Ashish Thakkar — IIFL AMC — Analyst

Yeah. Thanks for the opportunity again. Sir, given an opportunity, would you also like to consider standalone hospitals which are very specialized in, say, oncology or child health care?

Abhay Soi — Chairman and Managing Director

Sorry, can you repeat your question?

Ashish Thakkar — IIFL AMC — Analyst

Yeah. So if you get an opportunity in future, would you also be willing to consider standalone hospitals, which are specialized in oncology, pure-play oncology or say something like pure play childcare?

Abhay Soi — Chairman and Managing Director

We’d evaluate everything. I have no issues evaluating anything. When the opportunity arises, we will evaluate.

Ashish Thakkar — IIFL AMC — Analyst

Okay, it helps. Sir, lastly on this app-based model, if you could just give some color on the potential of this model, and would there also be a cash one?

Abhay Soi — Chairman and Managing Director

Sorry, on which mode exactly?

Ashish Thakkar — IIFL AMC — Analyst

On the app-based model, how you’re planning to position yourself through the app, the digital one?

Abhay Soi — Chairman and Managing Director

On the app? So there is no cash burn. We’re not doing agnostic this thing, it is not a platform. Well, it is a platform for our patients to interact with our doctors and our doctors to interact with our patients and for the hospital to provide services to the patients, right, be it diagnostics at home or homecare business or video consults and so on and so forth. I mean, I’d encourage you to actually look at the app, download it and look at it. So I think all your reports, everything is sort of stored over there. So it’s effectively a platform between the hospital and the patients to interact and for us to deliver those services to the patients. It is not a platform for third-party players, etc. So I mean it’s very, very different. I mean it’s not 24/7 or anything like that. I mean it is 24/7 but it’s for us. So we’re not marketing it as a third-party platform. [Speech Overlap] essentially what it is for technology and a little bit of marketing that we will be doing within the Delhi NCR or whatever reasons through the hospital, etc. So I’m not looking at any significant cash burn or anything which will even move the needle over here.

Ashish Thakkar — IIFL AMC — Analyst

Okay. And would your diagnostic offerings would also be clubbed with this app?

Abhay Soi — Chairman and Managing Director

Absolutely. So we will be providing diagnostics through the app as well.

Ashish Thakkar — IIFL AMC — Analyst

Okay, sounds good. Thank you.

Abhay Soi — Chairman and Managing Director

Okay. So on our app, at the top, there is a red button which can get you an ambulance in Delhi anywhere, anytime within 20 minutes. That’s one, which will take you to a Max Hospital. Then diagnostics, then nurses, then all your medical records, then any video consults that you want, any scheduling of appointments that you may want to do, and so on. Physiotherapy at home, anything. So anything that — so the entire suite of services that the hospital provides can be provided to you at your doorstep, effectively, or without you entering the hospital premises. That’s what the app does.

Yogesh Sareen — Senior Director and Chief Financial Officer

And also it will give you trends of your diagnostics etc reports. So in a way it’s there to improve the experience. It’s there to improve the — I would say the interaction of the patient with the hospital and vice versa. And ease these —

Abhay Soi — Chairman and Managing Director

But check it out, it’s out there. I think that’s the most important thing.

Ashish Thakkar — IIFL AMC — Analyst

Yes, sure, I will. Yes. Thanks, sir. This is helpful and all the best.

Abhay Soi — Chairman and Managing Director

Thanks.

Operator

Thank you. Next question is a follow-up question from Krishnendu Saha from Quantum Mutual Fund. Please go ahead.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yeah, just thanks for the question again. Just clarifying, our average length of stay at 4.2, is there higher or it could not — probably could go down a little bit more. Just trying to understand this is high because of the critical care being a larger portion, is it? And can it go down further?

Abhay Soi — Chairman and Managing Director

And higher services. And eventually you need to look at average revenue per occupied bed because your inventory in hand effectively is number of bed days that you have, but which leads to higher ARPOB works for you that’s because you’re doing more higher end — I mean, so look, if a person has — medical patients your this thing is lower, but if you have more transplantation is longer, but a transplant patient will pay you more. I mean the more BMT transplants, lung transplants, heart transplants you do, people tend to stay longer and the billing is more, the ARPOB is more, the length of stay is more. So you can’t really compare A particular hospital chain with B and C.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yeah. So some metrics which you look at ALOS and all these days, and occupancy and all, so just trying to figure out as to why, because we have a little bit higher ALOS.

Abhay Soi — Chairman and Managing Director

You can’t compare. That’s what I’m saying. Even within my chain I can’t compare two hospitals, because they may be leading two different medical programs. I have [Speech Overlap] compare programs to programs or I have to compare the same hospital to its absolute within the previous year.

Yogesh Sareen — Senior Director and Chief Financial Officer

Actually, it will be procedure to procedure, right. So that’s how you can compare ALOS. The average revenue per occupied bed is the better metrics, perhaps that will have ALOS play into it already, right? So if that metric is growing, then it is better. That to my mind, that means ALOS should not be even looked at.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Thank you.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you.

Abhay Soi — Chairman and Managing Director

Thank you. I appreciate everybody coming online. And I just want to reiterate that we are — the two pillars — the foundation that our organization rests on are execution. So we are very, very focused on execution, not only in operations but on projects as well to see that they are rolled out in time. And secondly is fiscal discipline. So you would see that any leverage at all we use for inorganic growth we would be within what are declared norms or prudent norms for leverage in the company, which are not more than 2, 2.5 times EBIT to EBITDA.

So thank you for the opportunity. Goodbye.

Operator

[Operator Closing Remarks]