Narayana Hrudayalaya Limited (NSE: NH) Q3 2026 Earnings Call dated Feb. 17, 2026
Corporate Participants:
Unidentified Speaker
Nishant Singh — Investor Relations
Viren Shetty — Executive Director and Group Chief Operating Officer
Anesh Shetty — MD of Overseas Subsidiary HCCI
Sandhya J. — Group Chief Financial Officer
Venkatesh — Group Chief Operating Officer
Emmanuel Rupert — Managing Director & Group Chief Executive Officer
Analysts:
Unidentified Participant
Presentation:
Nishant Singh — Investor Relations
Good afternoon everyone. My name is Nishant Singh and I welcome you all to the quarter three. FY26 earnings call of Marana Hidal Limited. To discuss our performance and address all your queries. Today we also have with us Mr. Viren Shetty, our Vice Chairman, Dr. Emmanuel Rupert, our CEO and MD Mrs. Sandhya Jayaramana Group CFO Mr. Venkatesh, our Group COO Dr. Initiative MD of our overseas businesses. Mr. Ravi Vishwanath, CEO of NHIC and Mr. Vivek Agarwal, Senior Manager in the IR function. Before we proceed with this call we. Would like to remind everyone that the. Call has been recorded and the transcript of the same shall be made available. On a website as well as on. This topic screen at a later date. Would also like to remind you that everything that is being said on this call that reflects any outlook for the future or which can be construed as a forward looking statement must be viewed. In conjunction with the answer identities and. The risk that they face. As a special request for this time, as we now have multiple business streams across the globe we suggest we spend first 30 minutes Q A on India and there is 30 minutes on the UK and Cayman piece with that. Now we would like to start the Q A. I would request everyone to. Now use a raise hand feature to. Start posing their questions. Please go ahead.
Unidentified Participant
Hi. You know, congrats for a good set of numbers. Let me start with India first because you know you mentioned that this is the second consecutive quarter where we have seen a very high profit growth for India business. I mean looks like finally we are benefiting from the initiatives that we have been taking over the last few years. The Martin expansion that we saw in India business over the last two quarters which is almost 150200 basis points on yoy basis. Do we expect the same trend to continue for few more quarters you think still there are levers for margin expansion in India business.
Viren Shetty — Executive Director and Group Chief Operating Officer
I’ll take this. See we’ve been putting a lot of efforts over the last couple of years on our transformation programs, our peer mix optimization initiatives. So the effect of our transformation program has seen results now where patients opting for higher bed configuration of course keeping our volumes and occupancy intact. Also with a lot of technology infusions and increased volume of probability, cardiac surgeries and other procedures realizations have increased substantially resulting in higher revenue and better margin. And as I said peer mix optimization initiatives consistently helping in building upon the margin and increase in realization. Though we can’t have A specific indication of guidance.
But our efforts will always be to maintain these margins. We realized in the last couple of quarters, except for unknown short term impacts.
Unidentified Participant
Got it. Yeah. A follow up on this. The losses that the company has been making on insurance and clinics has been coming down in the last few quarters. So when shall we expect break even for this particular business segment?
Viren Shetty — Executive Director and Group Chief Operating Officer
I ask to answer and then I’ll follow up at the end.
Unidentified Speaker
Yeah. So you know, we are still in building stage in these businesses pr. So right now our focus is on making sure that we are attracting customers. And taking care of them and building. Out the, the various propositions for them. So that’s our focus right now. I think it’s a little bit early. For us to talk about break even on this, but I’ll ask, I’ll request Virain to add. Any further comments?
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah, we are balancing out the scope of expansion of our clinic program across the country and merging it into NHL. So we’re better able to manage the synergies and cost between two entities. So the diluted impact should minimize over the coming quarters. Having said that, this is a business that still we want to invest in and build out across all our core geographies. So there will be some amount of margin dilution going forward. We will call it out in the investor decks and you’ll get a sense of how much we are spending on this.
But too early at this point to tell when the break even will be achieved.
Unidentified Participant
So it looks like, you know, at least we are behind the peak losses. Okay, I have a couple of questions on Cayman and uk but you know, I’ll join back in the queue.
Nishant Singh — Investor Relations
Thanks. Just to repeat, first 30 minutes will be for India questions. Those with India questions please raise hands. All right. Until the question get populated. Prithvi, you want to move on to Cayman? Yeah, we have Rajit with his questions. Okay. Can we add a question please?
Unidentified Participant
Yeah, just a small request. And if it’s possible to you know, present the financials of each of the three entities in a pro forma way. The way you, you know, file your. Financials with the, with the, with the exchange and you can have, I mean they, they, they could be unreviewed or unaudited as well. Will that be possible going forward?
Sandhya J. — Group Chief Financial Officer
We are presenting relevant information, different segments. I think uh, this is the model supposed to continue with. However, if you have any specific questions on how to understand the numbers from our investor deck, you can set up time with our IR team and they’ll be very happy to help you construct your entity. Wise pnl.
Unidentified Participant
All right, thanks a lot. And just a quick, quick question on an announcement that was made sometime back on setting up a subsidiary to look after some initiatives in North. I think you, you announced a subsidiary being set up for the specific purpose, am I right?
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah.
Unidentified Participant
Could you elaborate on that? What are we looking at? You’ve been present in north for quite some, quite a long time. Is there anything specific that you’re looking at?
Viren Shetty — Executive Director and Group Chief Operating Officer
Nothing that we can disclose as of now, but the north is an area of interest for us and it’s something that we’re looking to see what we can do there.
Unidentified Participant
Okay, thank you.
Nishant Singh — Investor Relations
Nitin, can we have a question please?
Unidentified Participant
Hi, thanks for taking the question on. You know, this quarter we’ve had a pretty strong growth in, in the Bangalore cluster. So anything which sort of stands out in terms of what has gone differently in Bangalore this quarter,
Viren Shetty — Executive Director and Group Chief Operating Officer
I would request. Bangladesh to take this up.
Venkatesh — Group Chief Operating Officer
Yeah, yeah. So I have already mentioned in the previous question about how the transformation has given the results for us in mainly our fractures, where higher realizations have come out from the high level of bets. Of course, again I’m repeating the PMIX optimization which has consistently helped our flagships and including Bangalore cluster to work constantly on increasing realization. Plus the most important thing is the high end robotic work aided with technology across all the specialties including cardiac surgeries which have really improved our margins and also on the volumes. So plus a lot of emphasis have been put in along around Bangalore, urban, rural and also the northern parts of Karnataka to have more footfalls coming in from domestic.
As we’ve specifically mentioned, our whole emphasis going forward will be to consolidate on the domestic volumes and revenues and that’s exactly what we’ve been doing over the last six quarters. And all these together have improved our volumes, margins, realizations and revenues in this quarter. If you compare on a year, on year basis for the Bangalore cluster and.
Unidentified Participant
Bangladesh, does it become a template for the other clusters or. This is more of a Bangalore phenomena that we’ve seen, you know, some of these initiatives talking about.
Venkatesh — Group Chief Operating Officer
So this is the same template we go to follow for all our clusters, including the eastern cluster. They are also following suit in terms of how the margins and the realizations are working because these are the two major clusters where our flagships are there and we will continue to work towards the same type of objective in the north cluster as well. There is a little bit of a gap which we have to cover up there, but with the way things have set up for the north, this is going to be the template for all our regions going forward.
Unidentified Participant
And on that point, you know, on the, on the northern cluster, you know, there has been a little bit again it’s sort of quite contra to where Bangalore played out. Anything that you want to call out on what, you know, how the, you know, what sort of kept the growth a little soft on the northern cluster this quarter?
Venkatesh — Group Chief Operating Officer
Yeah, we have been a bit cognizant on the receivable problems in some of the scheme pairs and also on the capping on reimbursement of certain drugs which has actually resulted in a conscious call in controlling volumes on the schemes. Plus a little bit, I mean constant efforts towards optimizing the payer mix has resulted in volume reduction in schemes and we are yet to catch up on the preferred pair. But of course the volumes will catch up soon. But having said that, this optimization actually has led to an increased realization and revenue in spite of slight dip in volumes plus increased competition from new hospitals in the region around north has also contributed to a bit of a shortfall.
But we are confident of overcoming this because it’s going to be short term measure comfort of overcoming this through our active marketing and operation strategies over the short period of time because it’s just time bound and I don’t think this problem will persist beyond a quarter or a couple of quarters.
Unidentified Participant
Okay, thank you so much.
Viren Shetty — Executive Director and Group Chief Operating Officer
Can we have the next question please?
Venkatesh — Group Chief Operating Officer
Nishant Alankar has his hand up.
Nishant Singh — Investor Relations
With the question.
Unidentified Participant
Yeah. Hi, good afternoon everyone. One question. Yeah, one question on Bangalore and contrasting it with some of the other clusters. So firstly you spoke about following the same template in the other clusters. Now if I look at the ARPP in Bangalore, it’s significantly higher than other. Clusters including Kolkata as well as the. Two hospitals in Delhi. And just wanted to understand even once you try and bridge that gap and follow the same template in say Kolkata. The East cluster as well as Delhi. Ncr, structurally, is there anything different which which is happening in Bangalore on case mix or peer mix which is likely to keep the realizations in Bangalore significantly higher than these two other clusters going ahead, assuming those changes which you mentioned are incorporated over the next few years. In these other clusters.
Nishant Singh — Investor Relations
Yeah, Dr. Rupert will answer this.
Emmanuel Rupert — Managing Director & Group Chief Executive Officer
the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. the last. Higher band compared to the Kolkata cluster. So you are going to see these. Kinds of numbers especially in robotic cardiac surgery, bone marrow transplants, all these are. Very large numbers here the last.
Sandhya J. — Group Chief Financial Officer
In the last. Quarter and in fact past few quarters we have done the largest robotic cardiac surgery in the country from our, largely from our Bangalore unit. Similarly, we continue to do the largest volumes in terms of bone marrow transplant in terms of several advanced procedures. So that comes in at higher.
Unidentified Participant
Yeah. Hello, can you hear me?
Viren Shetty — Executive Director and Group Chief Operating Officer
Yes.
Unidentified Participant
Okay. Okay. So my question was not specifically for the third quarter, but. Yeah, I mean structurally also. I think some of the points which you mentioned are fine. Okay. The second question was if I just. Look at Bombay, the Mumbai hospital you. Had spoken about trying multi specialty there or adult multi specialty there earlier. Any update on those plans?
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah, we’re still working with the trustees and the charity commission on getting the licensing shifted.
Unidentified Participant
Okay. By broadly, when can we expect any progress there within.
Viren Shetty — Executive Director and Group Chief Operating Officer
We don’t have a timeline of this as well.
Unidentified Participant
Okay, fair enough. That’s it from my side. Thank you.
Nishant Singh — Investor Relations
Thanks. Can we have the next question please?
operator
There is a question.
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah, there was a chat question which is does the OP consultation Dr. Revenue count as part of the overall OPD revenue? Do we track it? The quick question is we track it internally. But OP consultations are a very small part of the overall OPD revenue and all of that payout goes towards the doctor. If we have no other questions on India, we’ll probably move to Cayman. So could you raise anyone raise their hands for questions on Cayman for Q3?
Nishant Singh — Investor Relations
We have a question from Damyanti Damanti. Please go ahead.
Unidentified Participant
Hi, thank you for the opportunity. I just have one question on your. India business regarding the competition scenario in Bengaluru market. So we have, we are seeing a. Couple of competitors expanding their presence there. So from your perspective, how do you see this dynamics to play out for your business? Thank you.
Viren Shetty — Executive Director and Group Chief Operating Officer
There is enhanced competition. A lot of new hospitals are coming up in Saapur area and in North Bangalore. We currently don’t have hospitals there, so it’s not easy for us to comment on the impact it has. But just broadly, if you were saying that Bangalore is a large market, it is well served. More hospitals would serve the community even more. There may be a lag between any new hospital that comes up and the time it would take to break even and the business practices that have to be followed to fill up those bets. We would say, like all competition has definite short term impact in terms of enhanced cost and time to break even.
But long term it evens out because still all the organized corporate hospitals put together are barely able to service the true demand that exists. But the lag exists because not everyone gets treated for the procedure that they require. Not everyone is aware that they may be suffering from underlying chronic or any sort of life threatening condition.
Unidentified Participant
Sure. And in your flagship hospital, the majority of volume will be the local population. Volume or you see mostly the stations. For high end procedures, etc.
Viren Shetty — Executive Director and Group Chief Operating Officer
Most of the business we get comes from within a 15 kilometer radius.
Unidentified Participant
Even the high end transplant, bone marrow surgeries, etc, that is within this 15 kilometer catchment.
Viren Shetty — Executive Director and Group Chief Operating Officer
That’s two different questions. So bone marrow transplant. Yes, that comes from across the country. So that will have a very high representation from eastern India. But for very high end cardiac procedures they are more represented by people traveling locally.
Unidentified Participant
Okay, thank you.
Nishant Singh — Investor Relations
In the chat. All right. How do you see the oncology share and revenue mix going forward? The oncology started from a very, very low base to becoming a second highest specialty. It is the fastest growing department. We believe going forward oncology and cardiac will account for more than half of our revenue going forward. But as to what percentage share it will constitute going forward, we would. It will be hard for us because with the newer hospitals the case mix may skew slightly differently. So cardiac at a third will continue to remain our largest department. On oncology could go up possibly another 20% depending on the years going forward.
The vision objective coding are now do you want to be in the next five years? We will take that last RP in oncology, we don’t break out department wise. Rp.
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah. Vinay, do you have any questions? India specific?
Unidentified Participant
Yeah, just wanted to. Your gross return premium has really gone up quite significantly this quarter. Is there any. I mean how many new policies have. We done or what exactly has led to this expansion?
Anesh Shetty — MD of Overseas Subsidiary HCCI
Should I take that?
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah, please,
Anesh Shetty — MD of Overseas Subsidiary HCCI
yeah. It’s a combination of things. I mean so you know our retail. Business, which is where we started, you. Know, that’s the productivity there and the acceptance of that. The market has been increasing as we told you last time. We’ve also started offering business in outside of Bangalore. So we’ve got Kolkata and Raipur and Mysore also available. We’ve also entered the SME market where we are looking at small and medium enterprises and providing them with an integrated approach for not just hospitalization but also comprehensive care which also includes outpatient care, consultation, medicines, etc and that’s been appreciated. Quite well. By our customers. And you know, those are some of the things that have been driving our performance this quarter. And yeah, we continue to work hard to keep that trajectory going.
Unidentified Participant
Any numbers that you could share if you have plans for F27 in insurance?
Anesh Shetty — MD of Overseas Subsidiary HCCI
We know we’re working through those things. Now but we continue to be optimistic. About the pace of growth in insurance. And we think there’s quite a large. Market for it, especially for an integrated approach which combines hospitalization and Primary care at our clinics as well as at our hospitals. We think that’s a proposition that is A unique and B, that is relevant. And resonating with the market. So we’re quite excited about, about the future growth. We don’t, don’t wish to comment right now on next year’s numbers.
Unidentified Participant
Okay. You, you are now looking at delinking it from the nhic. So therefore going forward NHIL will be reported as independent of the business of the care, correct?
Sandhya J. — Group Chief Financial Officer
Yes, correct. The insurance business, even otherwise we are reporting out separately only in our investor day. And integrated care, we are reporting separately. Integrated care will merge into NHL. The insurance business will continue to report out separately.
Unidentified Participant
Would we get some color on the the profitability of that business, the insurance business, or is it too early to comment on that?
Sandhya J. — Group Chief Financial Officer
Yeah, we have given the integrated care losses at the moment. We are giving that out as part of our investor deck. We will report once the merger happens, we will report out the profitability of the insurance business separately.
Unidentified Participant
Okay, thank you very much. Thanks.
Sandhya J. — Group Chief Financial Officer
It’s not very substantial right now.
Unidentified Participant
I understand. Yeah, that is understood. Yeah.
Emmanuel Rupert — Managing Director & Group Chief Executive Officer
Thanks a lot.
Emmanuel Rupert — Managing Director & Group Chief Executive Officer
While we wait for ants to populate for the India questions, any plans of diluting stake to offset debt? No. Our view on Gurgaon Delhi Hospital profitably aspects and ability to fill the best from a competition viewpoint giving multiple large players are expanding already and have an existing presence. That has been our biggest challenge. Gurgaon there are much larger hospitals that our existing Gurgaon hospital has had to after acquisition as well as patients coming in. It’s been quite challenging for us as no doubt all of you have been aware. We have done a lot of things to improve profitability.
We’ve done a lot of cost optimization and we run a lot of efficiencies within the overall network to make the hospital break even and run in a sustainable manner that delivers very high quality of clinical care. Its path going forward could not get more challenging. If more hospitals come in, it would continue on its current path. But yes, this is something that is a challenge faced even by the largest hospital, which is every incremental bed does have a short term dilutive impact. But over the long enough time frame there is still sufficient demand to fill up these beds.
There was a question on reason for such a high increase in salaries and doctor fees. I’m guessing the person who brought this question up would have been looking at the consolidated numbers which adds the UK to that. But from an India mix we’ve actually improved the doctor cost as a percentage of the overall Payouts. A question on sharing occupancy rate for the current quarter. This is a number we are moving away. We have moved away from. We are not in the hotel business and occupancy matters less to us as the overall patient volumes that come in.
Are there any other one more on the insurance? Just wanted to know whether we opted. Only in Bangalore and Mysore markets for insurance segment. Which are the markets do we look to tap for insurance segment?
Viren Shetty — Executive Director and Group Chief Operating Officer
Have expanded to Calcutta and we will be slowly expanding to Raipur as well over time. We want to operate our insurance plan in all the markets where we have a significant physical presence but we will be opening it up phase wise. Question is are we looking at growing the pharmacy business? The pharmacy is an integral part of the NHIC clinics. So pharmacy as a proportion of business within NHIC is quite high and that’s how we will be growing. It would not be running a standalone pharmacy business in a big way.
I think we should come back on the online questions. Prithvi, can we please have a question?
Unidentified Participant
Yeah thanks. Before getting into Cayman I just have one question on India business. Given that you mentioned you will implement the similar template even in Calcutta cluster. How many years it will take for Calcutta cluster ARPP to reach closer to Bangalore Just to get a sense, you know how many years it will take for you to implement all these measures?
Unidentified Speaker
Yeah Prithvi, I can answer that very quickly. Calcutta Will the hospitals in Calcutta given the payer mix and sort of patient whereafter will always be at a discount to the Bangalore hospitals?
Unidentified Participant
I mean yeah, I understand there will be a discount but I’m just trying to understand the extent of discount. Because the way the Bangalore ARPP has risen in the last few years, do we expect similar trend to happen even in Calcutta?
Viren Shetty — Executive Director and Group Chief Operating Officer
Not in the near term. The Rajar hospital which we are planning as a flagship health city built along the same lines as the health city in Bangalore with modern construction and the best equipment and getting very good infrastructure should serve to fill up that gap a little bit. But it will still be diluted a lot by the impact of our older hospitals there.
Unidentified Speaker
Just one final question on India business. You think before the new hospitals get commissioned, can you sustain this double digit revenue growth momentum or you think the great roads might moderate by FY29 before you commission a new hospital.
Viren Shetty — Executive Director and Group Chief Operating Officer
The like to like hospital growth we believe definitely should be able to sustain. There will be quarterly variations barring any kind of major adverse events. Say for example should a hospital poach an entire clinical department or anything of that Nature. There’s no reason that the same hospital growth should not be sustainable till the new hospitals come online.
Unidentified Participant
Okay, thanks. Can I move to Cayman now?
Unidentified Participant
Just have a couple of questions on the chat Prithvi and then we can start the Cayman. Yeah, yeah. So there’s a very quick question on thousand crore capex to be funded. It will be internal accruals and debt. The number is actually closer to 3,000 but the answer is still the same. Any other chat questions? One more on the expansion time. What’s the question? Was there? All right, sure Prithvi, we move on to Cayman.
Unidentified Speaker
Anish on that Cayman revenue, I mean especially for the hospitals. Right now we are at $45 million. I know occupancy is not a right metric to look at it but can you give some data or some number that will help us to understand? How about we with respect to the percentage of full potential for Cayman hospital business? So there are two aspects to that pretty One is the local market, one is the international market. The international market obviously we have no way of quantifying how big it is. We just know the progress we are making locally in Cayman.
We know that the government hospital is still larger than us in terms of revenue. So of course there are certain structural reasons for that. They have an exclusive right over an entire payer class that that we don’t have. There is another private hospital that that also does well. So we, we know that there is room to grow. Bit tricky to put an exact number to it but you know that there is still market share to to be had.
Viren Shetty — Executive Director and Group Chief Operating Officer
Got it. And on the insurance side, I mean despite having higher revenue for Cayman insurance this quarter we saw even losses widening on sequential basis. I mean what explains that? And also I think last quarter or a quarter back you mentioned by Q4 or Q1 you might reach break even for the Cayman insurance. We just update on that. Sure. I think even when we spoke last quarter, like we said it is quite challenging to have a quarter on quarter predictability in insurance loss ratio. There will be large claims and things like that. There’ll be quite a bit of volatility.
If we take a rolling a couple of quarters that should give a better, better picture. Having said that, up until now our focus has been on aggressively expanding the size of the book which we have been successfully able to do or from the coming quarter onwards the focus will be more on improving our underwriting performance and improving the underlying processes as well as the clinical decision making Better. But we achieved where we wanted to get fairly quickly ahead of schedule. In terms of the size of the book that we have, we have most of the marquee clients now.
The focus will be on optimizing the book that we do have. Is it possible to give market share number for insurance business? It’s actually publicly available on the Monetary Authority website. One can derive it with a lag of a few quarters because it’s not up to date. So. So even we would wouldn’t have the most up to date. Up to date figures. But with a couple of quarters lag 1 one can understand the size of the market.
Okay, fine. We’ll take from that. Thank you. I have one more question on uk. I’ll join back in the queue.
Unidentified Participant
Any other questions on Cayman?
Unidentified Participant
We can move on within.
Viren Shetty — Executive Director and Group Chief Operating Officer
Okay, so there was a question on this is more group level. There’s some previous question in the chat. Are there targets for net debt to equity? Just Nishant.
Nishant Singh — Investor Relations
So we track the ratio of net debt to EBITDA on the console basis and our endeavor is to maintain the number below 2.5.
Viren Shetty — Executive Director and Group Chief Operating Officer
Another point that came up is I mentioned poaching of entire departments. This is anecdotal. It has not happened to us. There are doctors who leave for various reasons such as relocating to cities where they would like to move to be with their families. I was just using this to illustrate.
Oh, but our doctor attrition at the senior level is high. Single digits. It’s quite low. Okay, this question has come up. Vision, objective, goal in Narayana. What do you want to be in the next five years and where you’d like to be? The vision is as Dr. Shetty had always defined for us which is building a world class healthcare institution that provides accessible, affordable care for everyone who comes in. The objectives are to build a healthcare institution that’s able to deliver on that. The goals are how we achieve those objectives. The goals used to be bed driven which is chasing after having the largest presence and the largest number of beds all over the country.
We found out that using that as a route to getting to our objective was diluting it a lot because we entered into markets where we had very little presence and recognition and we were not able to execute. Well. As of today, what we are working on is consolidating our presence in our core markets. Starting with Bangalore and Delhi and from there the other markets where we have success such as Raipur, Jaipur, Delhi, Bombay, etc. We are growing that with a combination of hospitals, clinics and insurance. And we will also be offering our integrated care offerings to patients so that we can offer healthcare services to them throughout the year rather than them coming in for cancer and cardiac services.
What we would like to be in five years in our core markets is a significant operator with the presence of, so that wherever you are in, at least in Bangalore or Calcutta, you’re never more than 25 minutes away from an NH center, be it a hospital or a clinic. With those points of presence, we would then work towards earning the trust of our patients and increasing our market share and total overall health spent, which is money spent in clinics, pharmacy, procedure level and health insurance. The steps we will take to do it will be the combination of all the offerings that we have invested in.
Has a question? Yeah, please go ahead.
Unidentified Participant
Hi, I have question on the UK operation. Shall I go ahead?
Nishant Singh — Investor Relations
Yeah.
Unidentified Participant
Okay. So we have some data available in the presentation for the UK operations and when we look at the profitability that obviously is significantly below your India operation. Or given operations and we understand the. Market is different there. But from your perspective or strategies, what. Are the key points which you will focus on to improve margins from here. On and reducing the gap between what. UK operation has in terms of margins versus the console numbers?
Nishant Singh — Investor Relations
Yeah, yeah. Thanks Damayanti. So as you identified in the beginning, you know, every market will have its potential. We don’t think that the profitability of what we, the operations in the UK will ever reach where we are in, in Cayman, because they’re very different markets, very different risk profile. Secondly, in terms of, you know, what are we going to do? So we, it’s been about a little over a few months since we acquired the company and there are quite a few opportunities to implement essentially our entire technology platform and what we’ve done with Cayman from India, which is a lot of operational process level efficiencies related to both clinical and non clinical functions as well as the company has a very, very small revenue composition from non NHS sources, I.e.
private insurance and self pay. Those tend to yield higher realizations on a like to like basis compared to nhs. There are some initiatives related to growing that market share, the private market share. Those will also help meaningfully contribute to the margins along with revenue growth. But in, in a summary, the broad idea would be a much larger scaled version of what we’ve been able to do in Cayman, which is essentially implement our technology platform and other operational efficiencies, but at a larger scale.
Unidentified Participant
Sure. And these majors will take say how much time before we start seeing some notable changes happening in the UK Numbers, you do have avenues, but in general. Shall we assume two to three years or even higher? Time timeline to see these initiative to bring fruits.
Nishant Singh — Investor Relations
Yeah, I don’t think we’ll have to wait two to three years to start seeing results, but obviously to, to get the entire, you know, to do a lot of what we can do will take, you know, some time but, but we should start seeing early results trickle in. No guidance on exactly how long that will take, but I don’t think we’ll be waiting two to three years to see benefits start flowing in.
Unidentified Participant
Okay, and my last question is in these UK setup it’s all local teams, right?
Viren Shetty — Executive Director and Group Chief Operating Officer
In terms of doctors as well as non medical teams, is the local. Yeah, absolutely.
Unidentified Participant
Yeah. Okay. Yes. Okay, thank you.
Nishant Singh — Investor Relations
Yes, please go ahead.
Unidentified Participant
Yeah, just wanted to check out on your. You have been mentioning this Birmingham unit. Of the UK operations. How big is it and how long will it take to come out of the losses there? But how long will it take to get completed and completely operational?
operator
Sure. So the hospital is operational, but recently. So in terms of. It is a hospital that the erstwhile owners had acquired from another health system as part of a divestment. So it, it has been a hospital for, for decades, but it was largely neglected for a long time. So under our ownership, sorry, under practice plus ownership, it’s, it’s been about a year, year and a half and NH for the past few months.
So the hospital is fully operational. To your question about how long it will take to come out of our losses, we’ve always hoped that such an operation would take about four quarters or one year. It’s been half that time. We will continue to monitor it. There are some positive changes on the ground, but it is still a new market for us and a new asset for the company that we are still getting our hands around in size. Is it bigger than the average ppg? No, no. The, the. All the hospitals are more or less the same in terms of templates.
There are minor variations here and there, but in terms of number of square feet or number of operation theaters or beds, etc, they’re very little variation between them.
Unidentified Participant
Yeah. Okay. And lastly, would you be required to put in some money on Capex in Birmingham or is that all done already?
Nishant Singh — Investor Relations
No, that’s done. There are some minor equipment that will be coming online in the next few weeks, but the bulk of the investment was done before. Nothing major. There are some, you know, some sterilization units etc, but nothing that was left for us.
Unidentified Participant
Okay, just one last question. On the total, it is net 183 million GBP. Right. How much of it is equity and how much of it debt. I may have, you may have mentioned that in the past.
Maybe if you can just let us know repeated.
Sandhya J. — Group Chief Financial Officer
I’ll take this. We have taken a debt 150 million on this. I also want to take another question here which is on the repayment of the debt. We have a two plus five years repayment schedule over the period of which we aspire to repay this debt.
Unidentified Speaker
So it is 33 million equity and 150 million debt. Is it?
Sandhya J. — Group Chief Financial Officer
We had put in 45 million equity because there were also deal costs which we had to spend on. So 150 million debt and 45 million equity is what we put in but what we paid was 183 net in after netting of the cash which was there in the entity.
Unidentified Participant
Yeah, thank you. Thank you.
Nishant Singh — Investor Relations
Ricky, do you have any follow on questions on uk?
Unidentified Participant
Yeah, I just have one question Anish. This is again on UK setting. It would have been couple of months for you taking over the business. Are there any shocks that you’re facing because it’s a new geography etc or is it fairly, I mean or relatively easy for you to implement whatever you wanted to implement it? It’s still too early to to say Prithvi so no, you know fortunately no bad shocks but it’s been about three months. We have a good idea of essentially we’ve scoped out a lot of the process changes. We’re going to be making a lot of the digital applications and the rollout of certain transformations that we’re going to be doing in terms of how hard it is to roll these out.
We’ll know in a few quarters but so far we’re fairly optimistic. I don’t think there’s any negative surprise thankfully yet. And you think there are many low hanging fruits for you to implement in the first few quarters. We definitely will get started. There are obviously, you know, some initiatives that are easier than others, some that will be quicker, some that will take a longer time. But I think you know, in a few quarters we, we will get a better sense of the timelines as well as, you know, a better quantification of these things. We have a broad sense of where we’re going and internally, you know, obviously we do have a roadmap for what we’ll do when and when we expect these synergies to start kicking in.
But nothing to share as of now. Okay, thanks Anish. All the best. Thank you. Yeah, Vinay, I think you have your hand. Yeah. Just one more question on uk. You mentioned about there being a four to six weeks waiting Time for surgeries in uk, Was that because of operational constraints or is that just the sheer number of people and the capacity to occupy them? Is there a chance of reducing this backlog? When I, when you say four to six weeks, I assume. Are you referring to our waiting time within our hospital or in the nhs? I, I mean, I’m, I’m looking at your deck that you had circulated in November where it says latent demand, four to six weeks waiting time for surgeries.
So I was just trying to see how quickly can we increase our EBITDA there. So is that one of the options to go about? Is it a problem or is it a opportunity? Sure, I’ll, I’ll try and answer that question because I’m, I’m not very sure I’ll look back at the slide you’re, you’re referring to later.
Nishant Singh — Investor Relations
But essentially background information, four to six weeks is NHS waiting list.
Viren Shetty — Executive Director and Group Chief Operating Officer
Yes. Yeah, so that’s much larger. So it’s not four to say, it’s actually, I mean the national waiting time for, depending on which elective procedures, more than 18 weeks to 20 weeks. And there are some that are, that are quicker. But essentially the concept that we shared was that there is a waiting time for elective surgeries more than, which is more than ideal in the public health system. That’s the opportunity that exists for all private operators. So the motivation for patients to pay out of pocket rather than get good healthcare free is the waiting time and the quicker access in the private sector.
So this is something that all private operators are looking to capitalize on. And this is particularly related to certain procedures such as joint replacement cat tract, you know, other orthopedic procedures, general surgery, etc.
Unidentified Participant
Okay, so it, it makes sense to keep with that long waiting list.
Viren Shetty — Executive Director and Group Chief Operating Officer
No, it’s not up to us. That’s the, that’s the restriction that the government, the public NHS trust hospitals have with regards to their resources available. And you know that that’s been a, a multi decade problem and it doesn’t appear that it’s going to go away anytime, anytime soon.
Unidentified Participant
Okay, thanks a lot.
Nishant Singh — Investor Relations
Rajit, do you have any questions?
Unidentified Speaker
Yes. On the UK financials, Just wanted a few clarifications on the numbers. So the depreciation for UK as per the slide 14 comes to around 40 crores. Now the balance sheet of the annual report of practice plus gives a very different number. So how do we understand this and is this the number which we should take going forward as well? 40 crores for two months kind of a number?
Sandhya J. — Group Chief Financial Officer
Yes, you should make this number going forward. So the practice plus balance sheet was three legal entities which were there and this is now after the carve out there is also the most of the depreciation is also coming from the leases. And as we consolidated there was a re accounting that we did with the statutory auditors in terms of some of the lease charges. So that’s why you’re seeing a slight. It’s not a very material deviation from the number. So this number you can take going forward. I would just recommend that you wait for Q4 where we get the full effect of all the numbers in our PL.
I think that’s a good Q4 or Q2 of practice plus that will be a good representative of a full quarter number for us.
Unidentified Participant
Okay, okay, understood. Okay. So similar would be the case for interest cost as well, I guess.
Sandhya J. — Group Chief Financial Officer
Yes. Interest cost has gone up because we have borrowed. Entire borrowing has come on the. And I think we’ve given a small schedule on that for clarities.
Unidentified Participant
Yeah, yeah, that’s fine. And, and just a subjective question on the doctor’s expenses and other employee expenses compared to the rest of your. I mean EX uk. UK obviously has these expenses. Much higher expenses, percentage of sales. So is there anything which can be done or which you think can be done to bring them lower by any margin?
Sandhya J. — Group Chief Financial Officer
You would see our doctor costs. Doctor and employee costs. Whether you take it year on year versus last quarter or you take it quarter on quarter. Quarter on quarter is almost flat. It increases there mainly because of the lower revenue in quarter three and it has improved year on year.
Viren Shetty — Executive Director and Group Chief Operating Officer
No, what I meant is a percentage of sales is it’s much higher compared to EX uk. Right.
Sandhya J. — Group Chief Financial Officer
Including UK will be higher. Yes. Because UK or Dr. Cost profile is very different. I think for India. You could look at the India slide that where we call out the doctor costs separately. You know there is a table that. We give which is fine.
Unidentified Participant
So my question is do you think these expenses in UK can be brought down to certain extent?
Sandhya J. — Group Chief Financial Officer
Oh, in uk. Okay, okay.
Viren Shetty — Executive Director and Group Chief Operating Officer
Okay. Yeah. No, no Rajit. So I mean essentially anything we do around improving the payer profile will lead to a reduction in the doctor cost as a percentage of revenue. And of course any other savings we have with regards to clinical efficiency would, would also help. It’s. That is definitely in the bucket of what we are targeting but it’s more a mid to long term ambition. Okay. And other employee expenses as well will be similar. Other employees. There is definitely much more scope to put it in perspective compared to peers. The doctor cost as a Percentage of revenue is by far the lowest compared to peers.
But in the non doctor Bucket, you know, there are a lot of operational efficiencies as our software is implemented that, that we hope to realize. Okay, thank you. Thanks a lot. Should we take some questions from the chat, Nishant?
Nishant Singh — Investor Relations
Yeah, Anish, on UK hospitals? Go ahead. The expected timelines around payer mix improvements away from nhs.
Anesh Shetty — MD of Overseas Subsidiary HCCI
Yeah, I’ll read these two and answer them as we go. Again, you know that’s, that’s an ongoing. I mean directionally, we obviously want to improve the private payer mix. No, no expected timelines and you know, to quantify that. But hopefully in one direction, which is upwards. The next question is, in over five years, would NH significantly scale up international presence, Blah, blah, blah. Are you open for another international acquisition opportunity? Definitely not for the foreseeable future. I think we have our hands full with this large operation in the UK and what we already have happening in Cayman and as we’ve said several times before, the right of first refusal, so to say, for our capital will always be at home country in India, where we are most familiar and where we have the most opportunities to grow and where we are deploying the bulk of our capital presently and over the next five years as well.
The next question is from an ROCE perspective, why UK isn’t this ROC dilutive move in case there is a cap on profitability compared to your Indian operation? As NHS share can’t reduce substantially. The entire private sector compared to the NHS is a very, very, very tiny percentage of the market. Far lower than it is in surrounding European countries or other first world countries as well. We don’t. Our thesis wasn’t counting on the NHS share reducing materially. There is far more than enough to go around for the size of where Practice plus fits in in the private market hierarchy as well.
And even a tiny, tiny shift from the massive elephant that is the NHS has very, very significant positive ramifications for all private players. So we aren’t counting on any drastic moves in, in the market share. The next question is for adjusted EBITDA numbers for uk, should we look at post ifrs or pre ifrs as the one that gets into the console EBITDA in NH books?
Sandhya J. — Group Chief Financial Officer
I can take that.
Anesh Shetty — MD of Overseas Subsidiary HCCI
Yeah, yeah, yeah.
Sandhya J. — Group Chief Financial Officer
Correct, Anish. It will be post ifrs only. The reason we are calling out pre ifrs, at least for some time. We will call out is because it’s a substantial number the lease charges. So just to give that transparency, we are calling it out separately.
Unidentified Participant
Question, Anish, on Revenue seasonality of UK hospitals across each quarter?
Anesh Shetty — MD of Overseas Subsidiary HCCI
Yeah, no, not much seasonality because ours is elective work. There is seasonality depending on contracting with the NHS Trust but that’s subjective for each location and each hospital. Because the work we do is not. Is different from India. We are not a full spectrum hospital. We only do elective secondary care surgeries. So there isn’t much seasonality here. The variation quarter on quarter would depend on contracting relationships with. With the trust. Okay, the next one could you early observations on how the disease burden there differs from India across key specialties evolving UK demographics, age, migration etc.
No, I don’t think this is the. The correct way to think about our UK hospitals. And all private hospitals in the UK are not general tertiary or secondary care hospitals like you see in India. The NHS is the primary place where people would go to. For. For. For what this question seems to be asking about. Private sector providers only do a very narrow spectrum of elective cold surgeries. So we don’t have any specific insights about the question that the gentleman is asking. The next one. We mentioned last quarter that the UK acquisition is expected to be EPS neutral to slightly positive even in the near term.
Based on the disclosed pro forma financials. After the interest and amortization costs it seems that we will have losses for full year. There are elements of one timers. But Sandhya, you want to take that question.
Viren Shetty — Executive Director and Group Chief Operating Officer
Now the question is on EPS neutrality.
Sandhya J. — Group Chief Financial Officer
Yeah. So this quarter has been slightly distorted because we had the one timer of the deal cost also coming in into the UK pnl. We do expect that the PAT will be flat or mildly positive like we had indicated earlier. So therefore we do continue to hold our position that this acquisition will be EPS new for the group. Because we’re just two months into the business, we are still getting our hands around it and you have to give us some time to be able to give a more confirmed view on this.
Nishant Singh — Investor Relations
I think we’re. Vinay, do you have. Your hand is up?
Unidentified Participant
Sorry. No, no, I. You have answered my question. Thanks a lot. Okay, thank you.
Nishant Singh — Investor Relations
So the other question from the chat on the direction of the doctor related costs over the next couple of years. Dr. Rupert, if you could just address.
Emmanuel Rupert — Managing Director & Group Chief Executive Officer
It is on track. We don’t see a major change in. What is happening and even with the new hospitals I think there will be. Some minor fluctuations here and there. But we have it well covered as far as that is concerned.
Viren Shetty — Executive Director and Group Chief Operating Officer
Your question is what is the core competency of NH compared to experience? I think that we do a lot of Work on improving the in hospital efficiencies both by using operational expertise, by doing streamlining, cost cutting and using digitization to be able to provide a like for like experience and world class life clinical service at a price that few institutions can match without compromising on the clinical quality that it’s not core comp. Every hospital is supposed to do that, but we’d like to believe that we do it far better than most.
And how it manifests itself is in the almost close to what the industry is able to get on the India levels of ebitda at a realization that average realization that is far, far lower. The expansion plans, that’s another question from the chat for India are as we had mentioned earlier, it’s in the slide in the investor presentation. The core focus is in Bangalore and Calcutta. That’s where the bulk of our spend is going to be. There is some expansion happening in RIPUR as well with an expansion to the existing hospital. And we will be adding a lot of medical equipment next year.
We plan for four DaVinci robots so that all our hospital become robotic surgery equipped. We’ll be adding a lot more oncology services in all the hospitals. So these are minor investments. Anish, how does PPG compare on average revenue per patient compared with peers in the UK?
Anesh Shetty — MD of Overseas Subsidiary HCCI
Yeah, so private peers in the UK have anywhere from 30 to 50, 60% of NHS work, whereas we are almost 90% or more NHS work. So on an average revenue per patient, those numbers would be quite, quite different given the payer mix change. The next question is around what kind of PAT growth should we expect in next financial year? Sandhya can take it, but we usually don’t give guidance.
Sandhya J. — Group Chief Financial Officer
Yeah, I think we have given a reasonable view of where looking at India, Cayman. India will grow, Cayman will sustain. And uk, we are looking to grow. So that gives you a direction of where our EBITDA is headed. PAT will follow the same direction. We will have interest costs coming on. And we have given our capex plan for India. There is no significant capex in Cayman that we anticipate and uk it will be largely the borrowing costs that we will service for the acquisition. So this will give you a fair idea of how you could calculate our PAT for the next financial year.
Viren Shetty — Executive Director and Group Chief Operating Officer
Sorry, go ahead, Nishant.
Nishant Singh — Investor Relations
No, no, we can, we can come. Back on the chat questions. We’ll take Gaurav’s question first. Yeah, Gaurav, please go ahead. Yeah, hi.
Unidentified Participant
Thank you and good evening. So firstly, on Practice Plus’s margins, if I recall correctly, you know this business was At a margin of 12% X of the Birmingham asset. And this quarter we’ve done close to 10%. So anything that’s changed in the business post acquisition where costs have gone up and do we expect this 10% to stay here or improve again back to, you know, 12% going forward?
Sandhya J. — Group Chief Financial Officer
The business was always in that 8 and a half to 9% range and it continues to be in that range over a period of time. Birmingham losses will come down. It has come down also. It will come down further as well. And as far as the base core business is concerned, I think it’s just too early for us. We’re still getting a handle of the business, so we’ll need some time to comment on it. But broadly, we have not seen any dilution in the performance in the two months that we have seen or we have taken over the business.
Viren Shetty — Executive Director and Group Chief Operating Officer
If the number was from the practice, plus disclosures, just know that it accounts for three separate businesses with corporate costs allocated across three different business units. So there would be a distortion. Once you self only the hospital, then we are fully responsible for that.
Unidentified Participant
Yeah, we had done that. But you’re saying that 8 and a half, 9% is the normalized EBITDA X of Birmingham for now, that this business. That was always what it was. Gaurav. I’m actually not sure where you got that. Yeah, yeah, got it, got it. And you know, you’ve taken 115 million of pounds of debt and if you’ve spelled out the interest cost. So if I back calculated the cost of debt, is it four and a half percent? Is that assumption correct? Is the cost of debt for us at four and a half percent?
Sandhya J. — Group Chief Financial Officer
It’s not a number that we’ve kind of made available public, but broadly we have taken software. Plus 200 bips is the broad range we have taken. Obviously there are lot of plus minus in that number and that’s the reason you’re not able to see it clearly.
Unidentified Participant
But it’s 200 bips plus of.
Sandhya J. — Group Chief Financial Officer
Okay, yeah, yeah, Sonia. Plus 200. Yeah.
Unidentified Participant
And what was the two plus five? If you can just help me understand that two plus five a little better in terms of we have a two.
Sandhya J. — Group Chief Financial Officer
Year of moratorium in which we are only servicing the interest for the debt and then we have a principal and in servicing for the next five years.
Unidentified Participant
And is that equally over the next five years or is it, you know, again skewed towards the end of the five years?
Sandhya J. — Group Chief Financial Officer
It is equally over the next five years after the first two years is finished.
Unidentified Participant
Got it, got it. Separately on your, you know, joint venture where you’re looking at healthcare centers for the treatment of cancer patients and specifically provide chemo services. You know, which geographies would that be. And you know, how many centers you. Plan to come through with this jv, any color.
Anesh Shetty — MD of Overseas Subsidiary HCCI
This is an investment we made in Everhope Oncology. Their focus areas are creating chemo centers in Delhi. The first center has come up in Gurgaon. They’re scouting for more partners to open up more centers with. The next investment they made is in SSO Oncology Surgical Service Oncology in Mumbai. And they have three centers and they’re looking to expand more.
Unidentified Participant
So any investment that we’ve earmarked, you know, for this particular venture over the next three years.
Anesh Shetty — MD of Overseas Subsidiary HCCI
No, we’ve just made the initial investment. The rest will take a call once you see the trajectory of the existing business and how they’re able to scale.
Unidentified Participant
Perfect. Thank you. All the best.
Viren Shetty — Executive Director and Group Chief Operating Officer
Thanks. We can go to your question please.
Unidentified Participant
Yeah. Sir, in Bangalore market, as you see in the presentation, there are for the. Next four years, you’re doing a additional. Bid of around 900 beds. Also, if you see other peers, listed. Peers, they are also doing aggressive tapets. Towards the Bangalore market. Do you see? Do you think there would be enough room for growth in this market?
Viren Shetty — Executive Director and Group Chief Operating Officer
Yes.
Unidentified Participant
Any color on that?
Viren Shetty — Executive Director and Group Chief Operating Officer
Sir, there is room for growth in these markets.
Sandhya J. — Group Chief Financial Officer
There was a question in the chat on the ROCE dilution impact because of uk. What we’d like to say is that initially because of the size and scale, I think we are seeing the dilution. But A, it’s a leveraged buyout, B, it’s a asset light model. So we do believe that the UK acquisition will deliver reasonably strong ROCs for us. Our current ROC is very high because of the assets in India coming up, you know, long back and therefore the cost of acquisition is lower. There is a normalization that is happening on ROCE at the exclusively also at a group level.
We will still be healthy. We won’t be at that very high level last year and UK will in the medium term not be dilutive to the group roc.
Nishant Singh — Investor Relations
There was a question on the expansion plans for Cayman and UK over five years. Good. NH would significantly scale up international presence based on Cayman UK experience or remain.
Anesh Shetty — MD of Overseas Subsidiary HCCI
Yeah, we answered that. Nishant. Happy to do we need.
Viren Shetty — Executive Director and Group Chief Operating Officer
Yeah, no, we have our hands full right now. Until we are able to improve the performance of the uk, there’s no scope for us to expand internationally. In India, we’ve already spelled out what our expansion plans are. The question is, when you look at the payer profile, our government schemes is the highest in the industry. This has always been the case for nh. We cater to the mass market and the government payers are a very large portion of that. We try to balance out our commitments to society and maintaining a healthy mix of different patient based instead of cash flow requirements.
So the government numbers will question is, are there plans to raise equity capital? Not right now, we don’t see a need for it. Anish, there’s a question on sourcing elective treatment from the NHS Board. You’ll be able to. So that.
Anesh Shetty — MD of Overseas Subsidiary HCCI
Yeah, when you refer to sourcing elective treatments, could you clarify the types of disease and procedure involved? So for the most part they are joint orthopedics would be joint replacement arthroscopy, some amount of general surgery, gastroenterology and ophthalmology as well. So this is the the bulk of what we source from the NHS pool, which is elective secondary care surgeries. That’s also the answer to the treatment mix. The last part of the question, are you primarily focusing on building cardiology in the UK or are you opening to scaling other specialties as well? We will not be building starting cardiology services immediately.
There are very, very few private cardiology services in, in the country and especially outside of London, so this isn’t a first step forward. There are diversification and enhancements of the existing specialties that we will be doing, such as getting into back and spine surgery, more complex orthopedics etc, so those would be the first topics. We’ll be taking up the first new services. We’ll be starting with. Sandhya, I think the next question is why does NH come out with its results towards the end of the period? Is there any particular reason?
Sandhya J. — Group Chief Financial Officer
Yeah. So I think this is something that we’ll have to work on. This quarter especially was because we had to go through the consolidation with UK and we are still getting the systems in place. But even otherwise in general, I think we come out a little late in terms of how we are able to release our results. This is work in progress for us and we take your feedback and we’ll work on this.
Viren Shetty — Executive Director and Group Chief Operating Officer
The next question on the chat was on India business, what is the impact of the increase in CGHS rates? I think we had given this number last quarter. Nishant, do you recall what the impact of enhanced CJS rates would be? It was a non material amount for us given our limited presence in Delhi and that we have limited exposure to chs. But the exact number. We can come back to you on later. All right. If there are no other questions.
Sandhya J. — Group Chief Financial Officer
There was just one small clarification I wanted to give. See, I’m not sure who it was. You pointed out this 12% versus eight and a half to 9%. I think one small thing is we were tracking the pre IFRS number which is eight and a half to nine. You’re right. Post IFRS is 12%. So that has. You’ve seen a slight moderation in Q3 because Q3 is also like a partial quarter for us and we are still getting complete handle of how the numbers are rolling up. We do aspire to be at that 8 and a half to 9% pre IFRS.
Next time onwards we will start giving the same ambition post ifrs. I think that will clear the confusion which got created in that answer.
Unidentified Participant
Sure. Thank you.
Nishant Singh — Investor Relations
Raise of hand. So. So we with this we’ll like to conclude the session and thank you everyone for the active participation as usual. Thank you.