Narayana Hrudayalaya Limited (NSE: NH) Q4 2025 Earnings Call dated May. 27, 2025
Corporate Participants:
Unidentified Speaker
Nishant Singh — Vice President, Finance, Mergers & Acquisitions & Investor Relations
Ravi Vishwanath — Chief Executive Officer, NHIC
Sandhya J — Group Chief Financial Officer
R. Venkatesh — Group Chief Operating Officer
Viren Shetty — Vice Chairman
Anesh Shetty — Managing Director, Overseas Subsidiary HCCI
Analysts:
Unidentified Participant
Presentation:
Nishant Singh — Vice President, Finance, Mergers & Acquisitions & Investor Relations
It foreign. My name is Nishant Singh. This meeting is being recorded by 25 one is call of Narayana Hrudayalaya L imited to discuss our performance and address all your queries. Today we have. We also have with us Mr. Viren Shetty, our Vice Chairman, Dr. Emmanuel Rupert, our CEO and MD Mr. Sandhya Jaraman, our Group CFO Mr. Bangladesh, our Group COO Dr. Nishetty MD of our overseas subsidiary HCCI Mr. Rabi Vishwanath, CEO of NHIC and Vivek Agarwal, Senior Manager in the IAT 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 our website as well as on the stock exchange later.
We 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 uncertainties and the risk that they face. With that now we would like to start the Q and A. I request everyone to now use the raise hand feature to start posing their questions. Yes, please go ahead.
Questions and Answers:
Unidentified Participant
Thanks Nish. So the first couple of questions are on Cayman business. If you look at the extent of growth that has suppressed quite possibly in this quarter.
Sanish, could you provide some color on which are the departments that are doing quite well? You know, how is the reception from the residence date? Also just a follow up on this. Is it fair to assume that $45 million will now be the new base for Cayman business going forward?
Unidentified Speaker
Yeah, thanks for the question. So to the first part of your question. The hospital has been received very, very well. We’ve been very surprised with the response from patients. As you can see in the. In the results. What we expected to take much, much longer has happened in the first quarter itself.
In terms of the new departments that you asked about, we have the urgent care and emergency which is the trauma center. We started Obstetrics and gynecology, essentially women’s health, women and children because we have pediatrics and neonatal care as well. So those started towards the end of the quarter. These are the few new departments. But more importantly for all our departments were available now in a more premium and a more convenient location. So that helps as well. To the second part of your question about the revenue run rate being a base, you know, there will always be some fluctuations here and there.
But I think that this is a good assumption to make that things will. This will be here in terms of a sustainable revenue. There will always be some quarters where things may fluctuate up and down which is the case in Cayman given the low volumes. But this is a good starting point. We don’t see it going below this significantly for a sustained period of time for any reason.
Unidentified Participant
Got it. Moving on to the Cayman margins again you have done exceptionally well with respect to margins. Again coming back to 45%. Given that there is still scope for utilization or occupancies to further ramp up in Cayman, can we expect margins to slightly inch higher or do you want to retain margins at these levels and focus on volumes?
Unidentified Speaker
Definitely.
Beyond the point where we are, it doesn’t make much sense to focus on improving margins at the expense of not tapping into a bigger revenue base. So we’re happy with where we are, it’s a good place to be. The goal now would be revenue growth and you know we, we don’t see it would be very hard to cross this, this, this level in terms of margins and it wouldn’t make sense long term sense quite frankly.
Unidentified Participant
Moving on to the NGAM business, Viren, this question is on the insurance and kma. I mean insurance and the clinic losses.
I think for the last few quarters the incremental margins that the hospitals are making in India that’s getting offset by the higher losses in clinic and insurance business. Just wanted to get a color from you. You know how are we looking at this from a long term, I mean are we at the peak losses or do you think the losses can further extend going forward?
Sandhya J
Hi Prithvi, I will take this for FY25 like you said, 65 crores is the loss which we cash burn that we have taken in insurance. This is a business that is, has.
Every time we are adding a new clinic or we are adding a new city, we will have initial costs that we will have to incur and therefore we will have a cash burn scenario. And as we complete a certain timeframe like for clinics it’s 18 to 24 months, we break even and then we move on to the next cohort. So given that we have a certain expansion plan in terms of the clinic portfolio in the current year, there will be some amount of growth that you will see in the losses. So it won’t stagnate at this level.
The losses will grow. But on an overall basis over a time frame of three to four years, we have a certain number with which we are working as an investment in this business and we will be very careful that we are able to stay within that broad investment horizon we have set for ourselves.
Unidentified Participant
Is it possible to share that number? I mean the investments with respect to clinics and insurance.
Sandhya J
Around 400 crores. Petri.
Unidentified Participant
Both put together, right?
Sandhya J
Both put together. Yes.
Unidentified Participant
Okay, thanks. That’s all from myself.
Sandhya J
Thank you.
Nishant Singh
Can you please have the next question? Anybody with any questions.
Yes, Dikshan, please go ahead.
Unidentified Participant
Hi. Congratulations on good numbers here. So the first question is really on till the time that we are seeing our greenfield expansion starting place and kicking in. What kind of growth can we expect before that?
Sandhya J
Yeah. Hi, Dikshant. We will sustain growth through throughput like you’ve seen in the past several years. We have not added any capacity but we’ve been able to deliver a sustained growth momentum driven by our throughput initiatives. So we will continue to do that without giving any forward guidance. I think we aspire to be the way we’ve been in the past few years.
Unidentified Participant
Yes, ma’ am. So last two years we have been growing around 10%. Is that going to be an. Are we going to grow higher than 10% till FY27 or are we going to grow at 10%?
Sandhya J
That would tantamount to a forward guidance, Dikshan. So we would refrain from that. But we are definitely aspiring to grow in line with market on an organic basis and also in line with what we have done in the past.
Unidentified Participant
Sure, ma’ am. Second question is on our insurance business. Can you. I see it in the presentation giving some basic numbers.
But can you share how our patients are reacting to our product portfolio right now and what kind of throughput are we seeing in our hospitals right now?
Nishant Singh
Request. Mr. Ravi, can take this question.
Ravi Vishwanath
Sure. Thanks for the question. So yeah, I mean, I think customers have been responding very positively to what we’ve been doing with insurance. You know, we’ve had one product earlier and then in the last quarter we also launched another product which is called Aria. And we are currently providing insurance in or as of last quarter we were providing insurance in Bangalore and in Mysore.
We’ve got about 4,000 lives that have been covered by insurance so far. And as you know, as you may recall, you know we are taking a very differentiated strategy when it comes to insurance. So very high quality underwriting and risk management which is quite different from the way the market approaches this. Our focus is on providing exceptional experience at time of claim which we’re able to do one because of the underwriting and also because we have a narrow network. The claims experience that we’ve had, you know, customers, you know, we’ve got feedback from customers. You can check our website.
There Is there are videos there of customer feedback, you know, which has been very, very positive. We do have a direct distribution model and so we are building on that. And our focus now, you know, we’ve been in market for about six months and our focus now is on building our distribution going forward. So very happy with the processes that we put in the systems. We put in the early response from the customers and our focus now is to build distribution and take the message of Aditi Nadia to more and more people.
Unidentified Participant
Thank you sir for the explanation.
So at 4000 I think we have reached enough of trial and error for ourselves to have a go to risk model route. At what point? The question really is what are we waiting for before we push the accelerator?
Ravi Vishwanath
I think the things that we needed to put in place we have put in place and we’re now, as I said, we’re now in the process of building distribution capability and capacity and accelerate our growth.
Unidentified Participant
So you’re saying that we would start pushing the accelerator now?
Ravi Vishwanath
That’s our aspiration. In this quarter we have expanded to Kolkata. We will also be expanding to Raipur.
So we’ll be opening more markets as well. We’re also building our direct distribution capabilities, we’re building out our data driven marketing capabilities. We’re also looking at other opportunities and areas for growth. And so that’s been our focus as you know. You know, getting the processes systems right is absolutely critical. I think we have done that, we put those things in place. So now our focus is on growth.
Unidentified Participant
So one last question on the insurance front, at what number of lives can we say that we are approaching break even?
Ravi Vishwanath
That really depends on a number of things.
I think it’ll be maybe a little bit early to answer that. Primarily because our approach to market is so radically different from what everybody else is doing. Right. So the way that our book will develop I think is going to be very different from the way a normal insurance book develops because of the underwriting that we’re doing, because of the broader terms and conditions that we have in our policy compared to others, because of the network strategy that we have and the distribution strategy that we have. So I think it’s a little bit early to kind of give a number around that.
You know, we’ll the, the point though is that we are focused on building a book that is where the quality of risk management is very high and there is, you know, superlative focus on the customer experience, especially at time of claim. I think those are two big pain points, one from the customer side and second from the Industry side, you know, that industry generally is looking at right now in terms of risk and customer experience. And those are the things that we all kind of totally focused on. Yeah.
Unidentified Participant
Got it. So thank you so much.
I’ll join back.
Ravi Vishwanath
Sure.
Nishant Singh
Yes, please go ahead.
Unidentified Participant
Hi. So I had two questions. One is regarding bed capacity. If we see from financial year 23 Till this financial year the bed capacity has been decreasing In India it decreased by around 398 beds in financial year 23. In financial a 24 by 112 beds. And this year also 160 beds. What is exactly the reason for that?
Unidentified Speaker
See this this quarter, the reason is the. We have, we have changed our contract in the Jammu region, Qatar region. So that’s why the number of bets has come down by 370 odd beds.
And for the other quarters we have discussed that we did not continue to continue one of the. Our partnerships bilary and other stuff before. But this quarter the reason is that the large number is coming from the Jammu beds.
Unidentified Participant
Okay. So that is the reason. Even the hospital, when you say own hospital, it has decreased by one hospital.
Unidentified Speaker
Excuse me, can you please.
Unidentified Speaker
Some reorganization we have done in terms of general wards capacity being upgraded to private and semi private. We’ve been doing it over a period of time across our large hospitals. So it’s not a big number.
But there is some amount of reduction that has come because of the reorganization also.
Unidentified Participant
So this reorganization restructuring will happen like any particular year till when when this restructuring is going to happen.
Unidentified Speaker
It’s an ongoing process. But I think it will be a very small impact on the overall numbers. And if at all, it will only give a positive benefit to the ARPP as well as to the. To the financial position. It’ll be a small impact.
Unidentified Participant
Okay, that’s about it. Thank you.
Nishant Singh
Rajith, can you please have a question?
Unidentified Participant
Yeah, grab sir. And congratulations on a good set of results.
Just following up from previous participants. Question on insurance, do you have any number for the year as to. On the number of cities that you plan to launch insurance in or the number of lives to be covered for? FY26.
Nishant Singh
If you can please respond to that question.
Ravi Vishwanath
Sure. I mean I’ll answer in terms of the cities. You know, as, as I said earlier, we are expanding to Kolkata, Raipur and also Shimoga. That’s our immediate plan for now. And you know there are obviously a number of other markets that we’re very interested in where NH also has a strong presence and we keep.
We are exploring those. Those markets as well. In Terms of number. While of course we have internal targets, we think it’s a bit early to share those publicly at the moment. And so it means too soon to do that. But we are looking at expansion, certainly the location that I mentioned and we’re constantly looking at other markets where it would make sense and where the market dynamics are appropriate for us.
Unidentified Participant
All right, thank you sir. And the question is on an announcement which was recently made regarding opening up of chemotherapy centers, is it possible to share further details on the same as in, on the typical size of a center, what kind of revenues we are expecting something on those lines.
Viren Shetty
Yeah, just request the rest of the participants to keep their microphones on mute. Thank you. So the announcement was relating to an investment we’ve made along with a venture funded startup called 2070 Health. The idea is for us to create a series of retail chemotherapy centers across the country. So we will be contributing half the capital, investors will be contributing the other half. Our idea is to create chemotherapy centers outside the hospital in retail locations in the areas of the city where there’s great demand by partnering with doctors and partnering with the real estate people who provide the space.
The size, we’re not yet finalized. Our first center is coming up in Gurgaon. This is about a 5,000 square foot space. We’re not yet sure if this is too big or too small. But based on the first model, we will try and see if we can come up with a scalable model around this.
Unidentified Participant
Right. Thank you sir. And by when will this first center be coming up?
Unidentified Speaker
By this week we’ll start seeing patients and there will be a soft launch. It will officially start in a big way in about a month’s time.
Unidentified Participant
Okay, thank you sir.
Thanks a lot.
Nishant Singh
Thanks. Ajit Dikshant and Riddhi, you have more questions to ask? Yes, you’re still showing the raisin feed.
Unidentified Participant
So you have mentioned that we are looking at organic ways of growing. And without giving any forward guidance, would you just say that what is the input that we are looking at? What are the growth drivers for us for this organic growth? And also how are things progressing in the Mumbai facility right now?
Unidentified Speaker
So from an organic growth point of view, I guess it is the same that we have explained earlier which is improved throughput, higher order procedures, better payer makes better bed mix, being able to continue to keep providing higher order care.
And also this integrated care is helping. As far as Mumbai is concerned, we are continuing to be in that near break even kind of situation. We aren’t losing money, but we aren’t really Adding financially, we’ve already explained this journey earlier. It is a long journey for us in terms of recovery and we are working with the Trust in terms of levers that can enable us expedite that. But those discussions are in various stages and so when we have greater detail to update, we will share with you.
Unidentified Participant
Have we started our operations? We’re just periodic and we were looking at serving also the adults.
Have we started those operations yet?
Unidentified Speaker
No, we don’t have approval for adult yet and we are working with the Trust in terms of the same. That was the thing I was referring to as we are having some conversations. It will take some time. It is work in progress,
Unidentified Participant
Ma’ am. Last question is on a Bangalore, Kolkata and Southern pedophile still are a good percentage of our overall revenue. Of course, north is as well. But out of these three, where are we seeing the most amount of satisfied customer who are sort of, you know, giving word of mouth? What kind of.
Where are we really sort of concentrated right now? Where word of mouth is improving for our brand?
Unidentified Speaker
If you look at our overall Google rating across the country, it is the high, one of the highest at hovering between 4.8 and 4.9 across all our facilities. So from a customer satisfaction point of view, both in terms of value for money as well as the quality of care, I think we are able to provide that impact to our customers across the country. Not necessarily in the flagships, of course, because of the high throughput in the flagships and the level of sophistication and complex work that happens.
So therefore the word of mouth for higher order work that we do in the flagships is also more prominent. For example, we do the largest number of robotic cardiac procedures in the country and it is done largely in our flagship location in Bangalore. So some of those we again do the largest number of pediatric bone marrow transplants in the country. A lot of it is performed from our flagship locations. So in terms of word of mouth, we have very high recall both in terms of the quality of service we provide for basic care, but also in terms of the high end capabilities that we have in our large units.
Does that answer your question, Dikshant?
Unidentified Participant
Yes, ma’ am, it does. Just what kind of pricing differentiation are we offering with the higher quality of service that of course we have been offering that. So we are getting such good reviews. But ma’ am, what kind of pricing differential is really driving sustained growth for us? Are we higher than the market?
Nishant Singh
Requesting Mr. Bangladesh to take up this question, please.
R. Venkatesh
Obviously, when we are looking at if you’ve seen the performance across. We’ve been doing well, we’ve been growing recently. Well and more on our domestic throughputs, domestic volumes.
When it comes to pricing, pure price increase is very low, single digit numbers just to cover up the inflations. But when it comes to differentiation between award to a semi private and private, what we have done is because of the recent transformation programs which we have done in the major units, that is the flagship units, we have tried to do more of private semi private bets from the general ward bets and we’ve realized that the patients are actually preferring more of these private bits than general ward beds which has actually been a contributor to our margins.
But when it comes to pricing as compared to market we would be at least 5 to 10% lower. I won’t be able to indicate exact numbers but in terms of numbers will be slightly lower than the market in terms of pricing. But we focus more on the service and the outcome and the quality of outcomes to improve on our end product and repetition in the market.
Unidentified Participant
Do I have permission to ask one last question?
R. Venkatesh
Yeah.
Unidentified Participant
So while we are now going on this capex spend and of course we are going phase wise there is of course we will need the doctors, we will need the nurses, we will need the support staff.
So how do we expect that once we have hit this sort of new openings what kind of way can we integrate our staff overall so that we are up and running on time and also providing the superior care at affordable prices?
Nishant Singh
I request Dr. Rupa to take this question please.
Unidentified Speaker
Yeah. Hi. So our expansion is mainly in Bangalore cluster and the Kolkata cluster. And so if we look into that we already have a large base of clinical staff as far as nursing is concerned. We do run two large nursing schools and we constantly incorporate them once they finish the training into our own system.
So as the number of seats keep going up year by year the do have a very will have a large volume of people whom we can deploy into our new centers knowing our cultures and knowing the way of functioning and the clinical governance and other structures which we were put into place. Similarly we have the largest doctor training programs in the in the private sector in the country. We have almost 800 postgraduates in training across the network predominantly in Bangalore and Kolkata cluster. And we have cross movements of these trained manpower across our entire structures.
So we are already well on our way to have a manpower planning, clinical manpower planning for all the centers. Right away we will be identifying key staff not only for the middle and the senior level but also for the others support structures across all the hospitals that we are planning to start. So we have a very clear plan in place and we’ll be able to execute it to the best of our ability.
Unidentified Participant
Thank you so much management. Really appreciate your detailed answers.
Nishant Singh
Yeah, Rajit, you have any question, will please move to Pratik. Pratik. Yeah, sorry.
Yes, Rajit.
Unidentified Participant
Okay, sorry. I’ll just go ahead with a follow up question on what regarding the chemotherapy centers in terms of services to be offered. Will there be pure chemotherapy centers as of now or do you plan to extend surgery or any other diagnostic services etc as well?
Viren Shetty
For now it will just be providing daycare chemotherapy in a retail setting. But going forward, if we find a good opportunity to get into the entire spectrum of on course services, oncosurgery later and radiation therapy last, but for right now the focus is on chemotherapy.
Unidentified Participant
Okay, thank you.
Viren Shetty
Thanks.
Nishant Singh
We’ll take one question from the chat. This is for Viren. The question is, Viren, can we say the success of Kamana Bay in Cayman serves as an indicative benchmark for NHS footprint at Africa?
Viren Shetty
No, we’re not looking at Africa at this point. Kemana Bay is, is a development in the Cayman Islands. The fundamentals are very different. Cayman Islands, the first world country serving a primarily western clientele. We did try to set up a joint venture in Africa with IFC and Abraj Capital a long time back. But we were not able to conclude that successfully.
The operating challenges of working in other developing countries are very unique and even different parts of India offer different challenges for our overseas expansion. We would focus a lot more on Caribbean like geographies, which are smaller overseas territories with very stable currencies, developed economies, very large insurance penetration, stable rule of law and an ability for us to run something that operates with a great amount of benefit for our low cost operating model.
Nishant Singh
Pratik, please go with the question.
Unidentified Participant
Yeah, can you hear me?
Unidentified Speaker
Yes.
Unidentified Participant
Yeah. Sir, can you tell me just the reason behind the increase in working capital days which was in March 24th it was in negative minus 9 and in the March 2025 it is in 66 days.
So can you just tell me the reason behind that?
Sandhya J
Yeah, Pratik, it wasn’t negative in March 24, but yes, the working capital days has gone up for us. The reason being that we have a certain exposure to government payers. As you are aware, 90 to 90 to 20% of our revenue comes from government payers. And in March, typically we get in the March quarter, typically we get settlement from government payers. But there was a slowness in the payout Mainly payers like ECHS and rghs and that kind of impacted the DSO for the, for the quarter and hence we ended up at a slightly higher number than what we usually finish at.
Unidentified Participant
Yeah Ma’ am, any future guideline for the FY26 for the top line?
Sandhya J
From a peer mix point of view?
Unidentified Participant
No, no. An overall business point of view, the sales side, revenue side.
Sandhya J
Okay, we answered that question earlier. Given that we are not having any capacity.
Unidentified Participant
I wasn’t there in the meeting that.
Sandhya J
Yes, given that we are not having any capacity addition coming up. So our growth will be organic and we aspire to be able to deliver the kind of growth we’ve delivered in the past without giving any forward looking statement.
Unidentified Participant
Any guidance on CapEx?
Sandhya J
Yes, we have put out our CapEx number as part of our investor presentation that we have uploaded.
There are two sites for the FY26. There are two parts to the CapEx. One is the regular CapEx that we incur which is about 300 crores which is on replacement, maintenance and new capacities or that we are creating inside our existing facility and of course we have, we have also indicated investment in Greenfield and brownfield capacity so that is approximately 4450 crores that we will spend in these new capacities. Of that also depends on the progress of the construction so there will be little variability to that. But the money we will spend may move a quarter or so
Unidentified Participant
man, the the fund which you are getting for then capex, it’s all coming from debt or we are getting also from the cash flow of our own, you know, from the market, from the capital or we are getting from all from debt.
Sandhya J
Yes. So some part of the CAPEX is funded by own capital because banks have a certain own contribution threshold. Beyond that we are raising debt and we are funding capex through debt only.
Unidentified Participant
So in future we are still having a mindset of getting more debt or we are into the phase that we are reducing the debt in coming future.
Sandhya J
At the moment our Debt EBITDA is 0.15 so we have a huge headspace in terms of our ability to borrow. So we will leverage that headspace at least. Yeah, for the growth.
Unidentified Participant
Okay, thank you man,
Sandhya J
thank you.
Nishant Singh
There’s one related question on the chat which is for Anish, are you looking at any other overseas expansion now since your model in camera is working in Cayman
Anesh Shetty
we have looked been looking at several markets for for a while. In fact we made an initial small investment in the Bahamas a few quarters ago. Nothing significant or nothing to report at this moment. But we have been looking for some time
Nishant Singh
pr. If you’re done with the questions, can you move to Vinay?
Unidentified Participant
Yes, sir.
Unidentified Participant
Yeah, thank you. Just couple of things. In your ICU occupied bed days, it has moved from 346,000 in FY23 to 368 to 372.
Can I know what is the occupancy? How much is the. What are the total number of available bed days?
Unidentified Speaker
Our occupancy normally ranges between 60 to 65%. You’re asking for ICU occupancy?
Unidentified Participant
Yes,
Unidentified Speaker
ICU bed days. ICU occupancy is not a useful measure.
Unidentified Participant
The reason why I’m asking you this is if I look at your patient footfalls in outpatients, rather inpatients. It has moved from 229 to 216 to 220 in three years. So it’s hardly any great movement in terms of number of thousands. Your average length of stay is also at stagnating at 4.5. So the growth is coming primarily from the new, what do you call new methods or whatever, whichever new ideas that you are bringing in.
How do you increase your footfalls to drive the sales further? Otherwise it will be stagnating at this 10% growth rate. Right. Is there any problem in getting higher footfalls?
Unidentified Speaker
So there are capacity constraints. Yeah, there are capacity constraints. A lot of the hospitals are fairly mature and we’re also going through a lot of the retrofitting of the existing infrastructure to move out certain beds and add in different quality of beds and adding your ICUs. So you are right. Until we add new greenfield capacity, you’re not seeing any dramatic jumps in the volumes. The existing hospitals can take more patients.
It’s that we are prioritizing certain payer classes that allow the hospital to have a healthy sort of revenue growth without overburdening the system with receivable days and working capital issues. So what we’re doing is taking a judicious mix between some amount of growth, some amount of payer changes as well as renovating the existing hospital to reduce the beds and add in private, semi private rooms, ICUs and OTs.
Unidentified Participant
Yeah. Then I just wanted to check out how do I read this ICU occupied bed days number? I mean, how does it relate?
Unidentified Speaker
You see, the bed days is just a calculation of the occupancy of that particular number of patients they spend in the ICUs.
And because we do, you know, as science is progressing, the lesser you keep the patients in the ICUs, the better it is from capturing, I mean from the patient acquiring some, you know, hospital borne infections and few other things. So we are constantly keep working on that as well. So it may not be exactly an ideal way for you to look at it but we can connect with you outside this call to explain if you need further explanation.
Unidentified Participant
Thank you very much. Thanks a lot.
Nishant Singh
Yeah Abhishek, can we have a question please?
Unidentified Participant
Hi, am I audible?
Nishant Singh
Yeah, yeah, go ahead.
Unidentified Participant
Yeah, yeah. Thank you for the opportunity and congratulations on another quarter of excellent execution. My question is around the capex guidance on the India business. Now for the next three years we are going to be adding a significant amount of capacity and the total project cost that you’ve given to us is roughly around 2,800 to 3,000 crores. For FY26 the projected spend is around 425 crores. And if we look at in conjunction with the fact that even last year our actual expenditure was 400 crore lesser than what we had initially planned. This capex number for FY26 seems to be a bit on the lower side.
So just wanted to know what could be the reasons for this and if those capex spends are going to be back ended towards FY27 and FY28.
Unidentified Speaker
So this KBS numbers it’s very difficult to match with the exact positions because this, this projects, they take a lot of time and even the selection of projects is also subject to our diligence process which also takes a lot of time. So because of this some of the numbers may get pushed to the next year. So whatever we had indicated previously for FY25 we may be a bit short but all of that may come up with this in this, this FY26 and also for the ongoing.
So the CapEx number which you see here is the actual cost which will incur on the committed projects. Right. So these are just the numbers for the ones which are already in the pipeline and which have been committed and signed up. So these numbers may vary depending on that. If you get some more opportunities which we think is going to add value to us. So we will take up these projects and we are adequately capitalized to, to take up anything which interests us in the future future. So there’ll be a bit of variance. There may be a bit of a delay in, in terms of closing a project because it involves a lot of diligence processes.
But you know we will probably stick to this number especially for the committed ones and whatever new comes will we are adequately, you know, have enough cash in the bank balance to take up new projects as and when it comes.
Unidentified Participant
Understood. Thanks for the clarification. Just if I could ask one more follow up to that. So you know this year we generated around 1000 crores from our operations. So if there’s any construction delay or there are delays to this project that gives more time for our existing business to generate more cash. So do you think in that sense the target net debt to equity or net debt to EBITDA levels.
The target levels might come a bit down if our existing business gets more time to generate more cash for these projects.
Viren Shetty
They will, unless we find something else to build.
Unidentified Participant
Sure, sure. Makes sense. Thank you and all the best.
Nishant Singh
Thanks. Can we have a question please?
Unidentified Participant
Yeah. Hi. Congratulations for the great set. Two questions from mine. First on the capex again continuing what the participant asked this year we have a guidance of around 400 to 450 crores excluding the replacement out of which how, how much are we planning to raise the debt? Because currently on the long term side we a 2000 crore mark on a gross level.
So how much do we plan to scale it up in this year?
Unidentified Speaker
See the gross debt is obviously above 2000 crores but if you look at the cash, we also have a very large cash copper sitting in the balance sheet of around 1,600 crores. So our net debt levels compared to EBITDA is still very small. So your other question of how much Capex Borvi will take from the plant Capex for next year it should be around 60 of the overall numbers.
Unidentified Participant
60% includes the replacement cost as well. So total.
Unidentified Speaker
Yeah, so see what we actually do is that for the project finance for the new projects we are committed with the in terms of the project finance.
So that would be 80% but for the regular maintenance capex we do maybe around 50 so the net average should be around 60 to 70 to 65% of the entire spend.
Unidentified Participant
Understood. And sir, we have a lot of cash park in our investment as well as in current books. So on a consistent basis we are getting a yield of around 24 to 25 crores of other income. If possible, can you give a split of the other income quarterly?
Unidentified Speaker
Just give us a second.
Unidentified Speaker
Yeah, we will just
Sandhya J
mostly our other income comes from the interest that we earn on the cash that we are holding.
In addition to that some accounting entries get passed by auditors, certain items get reclassed as other income but broadly it is coming from the interest line item.
Unidentified Participant
Okay, just last question on the taxability bound.
Sandhya J
Pardon me, can you repeat your Question.
Unidentified Participant
Yeah, the last question on the taxability part. So Cayman giving us the advantage and now scaling up of Cayman, can we assume this 16% to be a sustainable tax rate for next two years or we might go higher with the new India business coming up.
Sandhya J
Yes. For FY26. Yes. 15 to 16% looks like a reasonable assumption to make on tax.
FY27 is a little, little difficult to commit at the moment. We’ll have to see how the business context evolves at that time. But you can work in this range.
Unidentified Participant
Okay, Understood, ma’ am. Thank you. And all the best.
Sandhya J
Thank you.
Nishant Singh
Thanks. Can we have your question, please?
Unidentified Participant
Yeah. Good afternoon. I hope I’m audible.
Nishant Singh
Yeah,
Unidentified Participant
yeah. So the first question is for the tax rate effective for the fourth quarter year on year, there’s a substantial increase in the tax rate for 4Q. Any explanations on that?
Sandhya J
Yeah, Gagan, actually we received dividend from Cayman. The dividend gets a tax shield when it gets paid out to the Indian shareholders, for which we need the approval of the Indian shareholders.
So that will come only in Q2 of FY26. So therefore we had that timing difference where we had to do the deferred tax hit for the dividend we have received, which we will reverse in Q2.
Unidentified Participant
Okay. And if I look at your India business EBITDA margins, 3Q to 4Q is a good jump. Can you explain what went there into, into that improvement? And also is the 4Q sustainable?
Sandhya J
So for maybe what went into the improvement of the EBITDA margins, I’ll request Venkatesh to comment.
R. Venkatesh
You’re talking about the current quarter vis a vis the previous quarter?
Unidentified Participant
Yeah, the improvement in India business EBITDA margins from third quarter to fourth quarter.
R. Venkatesh
Yeah. So one is, if you look at the quarter on quarter, we have had improvements on the manpower costs by around 2% and also improvement in the 1% on an overall, but more importantly, over and above the cost discipline. If you also look at the realization, there are increased realizations. If you look from the previous part of the current quarter, which I’ve already said earlier, these come from patients preferring higher bed categories in semi private and private, which also results in higher elevations on a similar cost structure, which as a combination with cost discipline has helped.
As for Q4 as compared to Q3,
Unidentified Participant
my confusion is that on the one hand you are pointing out that, you know, you’re, you’re upgrading, you’re, you’re basically upgrading general wards to semi private and private wards and which obviously means that your average, you know, realization will push up because of that. But then at the same time it would favorably impact your working capital but your working capital is deteriorated. So how does one reconcile these two?
Sandhya J
So the working capital deterioration is a temporary phenomena because of certain payers who excessively delayed the payouts. Also if you see from a payer mix point of view we’ve, we’ve, we are making more conscious choices even within the scheme business to be able to pick up volumes which are more accretive in terms of realizations.
So that’s the reflection of that you are able to see. So overall percentage of schemes have not significantly changed. They’ve hovered between the 19 to 20% range. But we’ve been able to improve the overall ERPP because of that. So working capital impact on schemes will be there depends on the cash flow for these payers. And this ups and downs will be there. The positive part of this is that the money will come. The only impact is that sometimes it gets delayed.
Unidentified Speaker
But yeah, and just add one more to this which is if you look at the schemes, of course it has gone up, gone down a bit from 19.5 to 19 and that has primarily happened only because of the slight increase there in northern region and some part of the eastern peripherals.
But when it comes to flagships because of the transformation programs there is not much of intake of scheme at all. And as Sandhya said, I’m just adding more to it. Even though the numbers have gone a bit high in the northern and certain part of the eastern peripherals, we, our choice in schemes is reflecting more on effective realization and good peer capabilities in the scheme. So even though there was a little bit of an increase in the working capital, we sure that stores will remain but we’ll be in a position to regulate this in the quarters to come.
Unidentified Participant
I mean if I, you know, simply, simply try to reason this out. You know, given that you are, it’s a continuous process of, you know, reducing general wards and moving, increasing more, more share of the semi private and private wards. There’s a natural increase in ASP3 hospitals. I think Mumbai Gurugram are an improving trajectory. Perhaps you could, you could elaborate further on that. It would seem that, you know, the India margin should further improve. Is that a reasonable surmise or am I wrong there?
Unidentified Speaker
No, no, you’re right and it should.
Unidentified Participant
Yeah. Okay. And if I look further into the breakdown of your India sales growth while overall reported is what, 10, 11.
But if I knock out the international patients, I think your presentation indicates a 14, 15% growth for the India business on a, on A standalone basis without the international patients. And the international patient flow is revenue contribution in 4Q sort of bottomed out to 40 crores. If I, if I got it correctly, are we therefore, you know, looking at a 15, 16% India growth x of international patient flow to maintain going ahead and for the international, are we looking at stabilizing at 4Q level or you see further deterioration there
Unidentified Speaker
and hit 14% India growth. But then Venkatesh will have to just move into the hospital.
We never get to see his wife and children again.
Unidentified Participant
No, I’m simply taking a cue from your, your, you know, your statement that you can maintain the past growth rates and, and therefore the question,
Sandhya J
we don’t want to give a forward looking guidance but we aspire to maintain our past growth rate. So we’ll try to do our best. As far as international is concerned, it is not bottomed out yet. I think we will, it will go down to zero eventually. It’s just a matter of time.
Unidentified Participant
Okay, and does that have any bearing on your margins?
Sandhya J
It has a slightly positive impact on the margins because it is a low realization book for us.
So some of the improvement you have seen in the ERPP has also been because of the reduction in the international revenue and increase in the domestic revenue.
Unidentified Participant
Right. And if I look at, you know, the India OP and IP volume, very marginal growth and yet your revenue growth is double digit. Right. Which basically means that almost entirely it’s coming from an increase in realization per patient or per bed, whichever way you look at it. Is it, I mean, possible to sustain this kind of realization grows further? Because I’m presuming, you know, you have a capacity constraint and therefore OP and IP volumes may not really substantially move.
Sandhya J
Actually. Just one second.
Unidentified Participant
Hello?
Unidentified Speaker
Yeah. Yeah. So constantly, you know, the idea is to keep coming up with new procedures. Like we mentioned in some of the data we gave you, a lot of our procedures are moving to minimal access cardiac surgery and robotic cardiac surgery wherever it’s indicated. And we’ve seen that, you know, a lot of people are, you know, taking that up. This is just an example of some of the things which we are moving towards more and more of minimal invasive and shorter and enhanced recovery program for many of the procedures and things like that.
So by doing these things we feel that the complexities of the work will constantly keep moving up the chain and we will be able to sustain what we have been able to do.
Unidentified Speaker
It’s harder to do. It takes longer than simply just raising the prices year on year. But that’s the path that we choose.
Sandhya J
One more point I want to add, Gavin here is that we’ve had a huge volume dip in Bangladesh and we have compensated it with domestic volumes. But the realization, domestic realization is higher than the Bangladesh realization. So that mix effect is playing out.
Unidentified Participant
How much of an impact would that have had on you know, the average realization per patient?
Sandhya J
We have not quantified it at that level. But you have the revenue dip numbers available with you and you can take an assumption on a lower realization, more closer to schemes kind of realization. So you will be able to calculate.
Unidentified Participant
Okay, I. I have a few more questions. Should I get back in the queue? Would it be okay if I go ahead with them?
Nishant Singh
Yeah, finish it up.
Unidentified Participant
Okay. And for the year closing FY25, your discharges in Bangalore and eastern periphery have come actually.
Any, any particular reason there,
R. Venkatesh
I can I take it?
Sandhya J
Yeah.
R. Venkatesh
For eastern peripheries it’s not going to be a major number. Certain flows in this region is impacted due to local dynamics and local development. So this is going to be kind of a very temporary phase which will recover soon. And of course payer mix optimization is something which we are always looking at, that’s also a contributor. But then this is the temporary phenomenon in eastern peripheral, it gets recovered. When it comes to our flagships and majorly in Bangalore and Calcutta, we have seen that more than 60% dip is there in international patient volume.
But in spite of that, we’ve been able to sustain a growth of 11% in spite of a dip of more than 50% in international volume, only because the domestic has gone up by 15 to 16%. You can see the numbers from the last year Q4 to what we have done in this year Q3 there have been increase in numbers. But on a broader scale we are not only trying to drive volumes as we discussed, but also focused on controlling realization which is apparent in our strong domestic revenue growth. And when it comes to schemes, we are also targeting schemes, as I am saying, which are more selective in terms of higher realization and better payment history.
So in spite of this dip, because of a good performance on the domestic front, we’ve been able to sustain to a growth of 11% on the whole when it comes to a quarter on quarter or on a year on year basis.
Unidentified Participant
Okay, one question on Cayman, I mean you talked of margins in Cayman, you know, have sort of reached a peakish level. Is it possible to understand one, you know, the occupancy levels in your new hospital? Because in principle I would have thought there would be a ramp up in Occupancies, which would create operating, you know, leverage of some sort.
And in the past, you’ve, you know, when you were on the verge of commissioning the hospital, you indicated that it might actually divert some patient flow from your existing Cayman facility to the new one. So has that been the case or has the response been strong enough for, you know, the existing facility also to sort of hold on to its, its business?
Unidentified Speaker
Yeah, Gagan. We don’t run the two hospitals as separate units. So it’s the same doctors, it’s the same services. With a few exceptions, it’s just a different campus of the same hospital. So, for example, the same doctor would see an outpatient on Monday in one facility, do the procedure on Tuesday in the old hospital, and back on Wednesday for something else.
You know, so it’s not really. We don’t. You can’t think of it as moving volume of business from one hospital to another. It’s just one unit with two campuses or two buildings. To the second part of your question around operating leverage. So, you know, it is a new building, a new infrastructure. So the, essentially the operating leverage we were getting in the old hospital, now that we have a new building, essentially gets reset pretty much to zero because we have to cover all our fixed costs of the new hospital, which we have done now and been able to restore margins to where they are.
So the reason, if I think, if I can guess your question, was as to why we didn’t go higher than where we were before, it’s because we have to cover an entire new building’s fixed cost, which, which we’ve done now. But I hope that answers the question. Yeah, please, go ahead.
Unidentified Participant
Just a clarification there. Are you, are you therefore indicating that the occupancy levels in the new hospital are optimized?
Unidentified Speaker
What do you mean by optimized? Sorry.
Unidentified Participant
I’m basically saying that if, you know, if the sustainable occupancy is whatever, you know, whatever be the number, you already attained it.
Unidentified Speaker
No, no, no. Between the old hospital, between the old hospital and the new hospital, we still have, we believe we have room, room to grow, and we have capacity to grow into it as well. So we’re not capacity constraint. And there is an opportunity to grow into that will take some, some time. Our first big leap happened when we opened the hospital because it’s a new campus, a new pool of patients and new services. And going forward, we will gradually cover up a few gaps that we have
Unidentified Participant
while you can plan the itinerary of a doctor for a certain surgical procedure.
And for his opd, but on a regular OPD volume basis you will need to have certain set of doctors dedicatedly operating in each of these hospitals. You can’t have all your doctors circulating between the two hospitals which are quite, quite a distance apart from I think what I understand
Unidentified Speaker
that is correct. So all appointment, I mean all OPD consultations are by appointment unless it’s a semi emergency which is called urgent care or actual emergency. So those are walk in but everything else is by appointment within. So every doctor has their schedule decided as to which, which day they’ll be operating out of which, which campus and where their patients are going to be seeing them.
And for most specialties where we have more than one doctor. So we’ll be covering both facilities.
Unidentified Participant
Right. And on funding of the capex, you know you generated thousand crores of operating cash, you have cash on the books, you will perhaps be generating another thousand crores if not more next year. I, you know, while I understand part of it is in Cayman and you can’t repatriated but there’s still a substantial portion coming from India. In principle it would seem that 700, 750 crores of you know, capital requirements for your capex can to a substantial degree be funded by your own cash flows, if at all.
There’s a timing mismatch could use perhaps recourse to short term debt and repay it as soon as the cash flows in. Is that not a reasonable understanding of this? I mean why would you require 60% or 70% of your CAPEX to be debt funded?
Unidentified Speaker
So you’re right in one sense that we are generating a lot of cash as well. See but our cash generation is also a bit staggered as Sandra mentioned in one of the answers before that we get a lot of cash in the month of March because the receivables which we get from the government payers is not very uniform.
Unidentified Participant
Yeah. So March is start of the new year, you will get your cash now.
Unidentified Speaker
Yeah, so that’s what we are seeing now. See it is a temporary phenomenon. We will not have this kind of cash at all points in the year year and it’s more like a watches. We are very keen as we are continuing in the expansion mode. So we want to retain some cash for any sizable good opportunity which we see during the year. But we understand that if we don’t find any suitable purpose for this cash we would like to use it for some other purposes like maybe even look at repayment of some other, some very high cost interest loans.
Yeah, but for the Time being, as we continue to expand, we would like to retain this cash so that whenever good opportunity comes we’re able to seize it up.
Sandhya J
But just to summarize Kagan, I think we will be prudent with the negative leverage. We will not put too much negative leverage on the books unless we have definitive reasons on why we want to carry that.
Unidentified Participant
Okay, so you’re saying 60% is perhaps, you know, the max, if at all required. I mean you may not necessarily even require it.
Unidentified Speaker
Project Finance loans are for a bit long term, so we can’t take decisions of not taking those loans.
This is our temporary, you know, cash dislocation because these are going to be 15, 20, 25 years loan, which we cannot say that we will not take this because we have got a very large cash purpose now. So those loans, we will continue with that 80% debt for the other loans will, as Sandeep mentioned, that we’ll always calibrate in terms of what is better.
Unidentified Participant
Okay, so final one from my side. A few months ago there were articles in the media that you, you know, you are interested in Spire Health in, in uk. I, I don’t know, I haven’t followed it thereafter.
But any comments from you on that side? Are you, you have appetite for doing deals in, in the European market or the, or the British market?
Nishant Singh
Anish, would you address the disclosure that we made?
Anesh Shetty
Yeah. So Gagan, as soon as there was that information in the, in the media, we issued a clarification to the regulators in both markets that we had no intention of pursuing or making any offer or investment in Inspire Healthcare. So that was a formal clarification. We did, I think the next day itself.
Unidentified Participant
Okay, thanks. Thanks for taking my questions. I’ll get back in the queue.
Thank you.
Sandhya J
Any questions?
Nishant Singh
Thanks again for all your questions. Can we move to Ravi please?
Unidentified Participant
Yes. Is my voice audible?
Nishant Singh
Yeah.
Unidentified Participant
My first question, I, although I know that the guidance are like not given in the call, but still like if I talk about a three years perspective then are we expecting like 10 to 15% kind of sales and profit growth over the next three years? Every year.
Sandhya J
Ravid, we have answered this question actually we are aspiring to improve profitability. Every year we are aspiring to grow like we’ve grown so far and we do believe that we have put in the right measures in place but we can’t really give a forward guidance.
Unidentified Speaker
But to the latter end of the three years is when the hospitals will start coming online at which point then these become comfortable targets to achieve.
Unidentified Participant
Okay, and the FY25 numbers like those will be the base numbers. Like we are not having any risks to those numbers. Right on. On top line and bottom line that we may see any slowdown kind of thing. Like are we expecting any like negative on prudent side or. It will be positive only
Unidentified Speaker
more slowdown from Bangladesh. Whatever little revenue we’ve been getting there may drop even further. This we had anticipated above and beyond that.
If you’re asking about macro slowdown, those are very hard to predict. And healthcare is one of those things that are really not discretionary. It may shift from quarter to quarter, say a festival quarter, you may postpone something but get it done in the quarter after that. But the long run trend, we don’t anticipate any sort of slowdown in the growth.
Unidentified Participant
Okay, second part, I want to know about the current utilization percentage. Like company as a whole, console level, how much utilization we. We are at like considering FY25 numbers.
Sandhya J
You want to take that question?
R. Venkatesh
No, I mean when we talk about the group as a whole, when it comes to utilization, it is a.
We’re working more on throughputs. So when it comes to effective utilization, we keep striving hard year and year to improve on throughputs. We work mostly around the daycare, improving the daycare numbers. Even a lot of these robotic surgeries, cardiac surgeries, where you have these morning, evening discharges, admission and discharges, TV throughputs keep increasing. Your utilizations are also effectively done. Wherever there are bottlenecks in terms of utilization of Catalan or operation theaters, we try and improve on those bottlenecks to improve for the utilization. So though we hover around reasonable occupancies between 60 to 65%, those are the numbers within which we do it.
But those are not. Those are just numbers. But since we are mostly a high throughput center, we focus more on efficiencies. And that’s how we’ve been growing in the last two to three years. And we also work, we will be working towards such growth even in the next three years to keep keep aspiring for those numbers which Sandhya indicated till our greenfield capacities keep coming up. So that’s how we will focus on improving our utilization and working towards others.
Unidentified Participant
Okay, throughput and efficiency part I understood. So we can safely assume that another 20 to 25% capacity can help us to increase the revenue over the next two to three years apart from the expansion we are having.
Like, is my understanding correct? Since you mentioned about 60, 65% like,
Unidentified Speaker
so the 66. That’s been the case for nearly the past 10 years, the total occupancy number never goes down because we just are able to do much more with the space, discharge people faster and move people away from spending the night here to getting discharged in the morning. So it’s not a hotel business where it means that I have in 100 bed hospital, 40 beds empty. Those beds are used. It’s just that it cannot, you know, stay occupied overnight. But it means that we do have capacity.
We can keep further increasing the number of people who come in and out of the hospital, but that will show up in different numbers, not just the occupancy.
Unidentified Participant
Okay, understood. One more thing, like what I am able to because I invest decent amounts in the healthcare sector as a whole. So when I read about like other hospital institution, I find that their expansion is relatively higher side on number of bets in comparing to Narayana. But I feel that the business which in. In which Narayana is catering, that is a very high growing business in India.
So is my understanding correct or is it is this a misconception that the growth number which we are targeting in the investor presentation is relatively slower than what it should be considering the growth opportunities in India?
Unidentified Speaker
So you’re right in that if you consider the overall India growth opportunities. Yes, this is. Ours is a very conservative company. We are not expanding to fully capture the entire India market. Nor is the pace of our expansion in India matching up to what the Pearset is investing now. Why that is is for many reasons. Chief among them is that it really the return on capital for any new capacity, Greenfield, Brownfield, whatever you want to call it, is quite poor, has been for a very long time.
Whereas ours is a company that really focuses a lot on the return on capital and return on equity. So our expansion is a lot more measured and focused on the cities where we have the strongest presence and where we’re able to justify investments we make. Furthermore, our investments are not just in hospital beds. We’re investing in the insurance, investing in the clinics. We invest a lot in technology as well as overseas. We’re trying to build a much stronger balance sheet and a company that’s able to perform similar to peers at a realization that is half of the peer set.
So it means we can’t do the same things.
Unidentified Participant
Okay. And regarding the long term vision, since we primarily invest for very long term, like 10, 20 years even. Just to mention that I am have I’m invested in Apollo Hospital since last like 10, 15 years. So can we expect that maybe another in 10 years Narayana will have. Will have cell phoned hospitals nearly to 40 or 50 from today, around 20. Is that assumption correct? Keeping the long term vision in mind,
Unidentified Speaker
40 hospitals in 10 years seems reasonable. Now if we have as much of the footprint as Apollo, that’s hard to tell because Apollo is also not going to sit still.
Unidentified Participant
Okay, okay, I will get back into the queue and firstly I want to. Sorry. Lastly I want to thank you as well to fantastic management. We have been invested since last two, three years and the growth and returns are very fantabulous. So thank you so much for all the hard work and delivering the shareholders growth value.
Unidentified Speaker
Thank you.
Nishant Singh
Thank you. Ajay, can we have your question please? Now?
Unidentified Participant
Yes, so I’m audible.
Nishant Singh
Yeah.
Unidentified Participant
So basically my question is on revenue mix. So as I see cardiac segment share as a percentage of revenue is coming down while segments like oncology, orthopedics are growing significantly.
So what kind of margin these segments offer and can we expect the same kind of growth in the segments which are going faster at the compared to the revenue? So what does this impact in the overall revenue it has?
Unidentified Speaker
Sorry, which department you’re saying is the impact on the revenue?
Unidentified Participant
Onco and orthopedics.
Unidentified Speaker
Yeah, so I mean we still have a very large share of the cardiac sciences giving to the revenue. Still it’s around 34% of the overall revenue coming from cardiac sciences. Some of these marginal dip which has come is only because of the Bangladesh patients in the Health City hospital which has got the work coming down.
But we’ve seen reasonable upward trend in the last few months and we have been focusing on orthopedics and the other specialties and especially, especially oncology. We have been doing a lot of good work in the last few years and that is beginning to show. And I’m sure going forward we would like to have a healthy mix of all centers of excellence and subspecialties so that we have a much more meaningful growth in all specialties.
Unidentified Speaker
The specialty mix is more reflective of the demographics since the incidence of oncology has gone up. So hospitals have naturally had to to add oncology as a department.
So the fact that it is growing is a reflection of the sheer amount of cancer that exists in society. Cardiac will still be a very large contributor, but orthopedics and oncology will keep increasing as well.
Unidentified Participant
Okay, so I can consider that what the current pace of the growth is can sustain in the future, right? Around 20, 25%. What oncology is growing and 20% around is orthopedics is growing, right?
Unidentified Speaker
No, the. It may not be a stable state that These are temporary things because of our addition of orthopedics as one single unit in the Health city and oncology, we made some investments in Shimoga, a few other cities.
Just think, I would say just take the three year run rate and look at where the trend is and I think that’ll be easier to project. But I don’t see the cardiac business ever going below 25 to 30.
Unidentified Participant
Yes, yes. Fitted in the first phone calls. Right.
Unidentified Participant
Hey, thank you so much for taking my question. So basically want to understand that we have been working also on Caymans for some time now and I’m sure that the management has discovered a secret source, as I’m sorry if I am not able to use the right words here, but it seems like the average revenue per customer, per user is much better, per patient is much better in Caymans and going ahead with an international expansion would make sense.
But what is it that is our secret that is helping us be better than even the people who are currently serving the market in Caymans or maybe in other expansionary geographies? What is it our edge over the others that is helping us be more competitive in the market?
Unidentified Speaker
You want to take this?
Unidentified Speaker
Now, if we knew what the secret was, we’d apply it everywhere and we would, I would say that it’s just been a very long slog. So we spent 10 years in Cayman with the wrong business model, which is catering for medical tourism for the US And I think a lot of it came from experience and the humility to understand what we are good at and what we are not.
And so by refocusing on the Cayman, building a very strong relationship with the patients and reflecting more what the on ground domestic customer demand looks like, rather than wishing what it could be, I think is what made us successful
Unidentified Speaker
to that very, you know, detailed focus around costs and controlling our administrative costs, especially manpower costs. A lot of it is made possible by the investments we’ve made over the years in our software platform. So if we had to, you know, identify a few key differentiators between us and the rest, it’s our fantastic technology platform that really allows us to perform the same tasks with much fewer resources and much more efficiently.
Unidentified Participant
Why I asked this question is that it takes us to know what not to do to understand what to do. And since you have been in the market for some time, you know that what does not work very well and what is starting to work, this gives us, let’s say, progression towards a recipe of success which can be further replicated in other geographies. Tier one, sort of a place where people have higher spend is obviously one of them. But the way that we are taking care of our people, our staff, how important is that playing a role if we are not in the home country?
Unidentified Speaker
It’s always going to be, you know, important because we have to convince people to relocate and to move to a very different geography.
They obviously get paid better, but there are other trade offs as well. That’s always going to be difficult. Having said that, we also hire a significant number of people locally and experts from other countries as well. It’s a very, you know, a global workforce and it’s. It’s as important as. As in any other place when we’re trying to convince people to move, move to a different country.
Unidentified Participant
Anish, just a last question here. See, the software thing is really giving dividends as you have said in the last couple of phone calls. And what is it that we are looking out for? If you could paint us a word picture.
These are the sort of things if I look at, I’ll take the opportunity in an international market. What are those things that you’re looking for that will enable you to take that opportunity?
Anesh Shetty
Sure, I think touched upon that at the beginning of the call. But I think we, you know, it has to be a stable market with stable rule of law, an established insurance penetration and a mechanism to pay. It has to have a high purchasing power, essentially high GDP per capita. We’re not looking to go into a frontier country and there has to be an existing track record of successfully managed private healthcare assets.
We’re not trying to in outside India and outside came in. We’re not trying to be very innovative over here. We’re just trying to find a place where there is an established track record and maybe we can do it better. Better than the others.
Unidentified Participant
The management has said in the past that we are also giving our software product to another hospitals in order to test it out maybe to make it better. Are we sort of thinking of monetizing this or is this still a work in progress and we want to improve on it right now?
Anesh Shetty
Maybe we can if you could get back in in the queue Nishant, how you want to manage it and we can go to the other question.
Unidentified Participant
No problem. I’m so sorry for taking so much of your time. Thank you so much.
Nishant Singh
So Sahil, I think you’ve already put questions and questions in the chat. Do you have any more questions or. We should take the chat questions first.
Unidentified Participant
It’s the same questions.
Nishant Singh
Yeah. So we’ll just quickly go to the chat questions.
Unidentified Participant
Sure.
Nishant Singh
There is a question from Muthu or let me just take your question. What would you do differently if NH were a private company again with less investor pressure? Are we open to new land parcels? If you get. Which is not a part of the current Capes plan.
Unidentified Speaker
Yeah. So there’s also a couple more questions on chat about why we’re doing organic and land parcels and so on. We’re doing a mix of both. It’s that there are parts of Bangalore where we want to be present but there are no inorganic opportunities available for us so we have to make our own. And thus in HSR and in Banargatta we had to buy land whereas other places like Banshankri and Chamrajpet where we able to tie up with developers then we went to the inorganic route. Being private or public really does not make that much of a difference because most of the company, most of the money the company raises is debt funded.
So in the end we just get to have more people to give us feedback on the business that we’re doing and at some point, you know, participate in the success.
Nishant Singh
Yeah, there is question from Sahil again on that. I think tech we’ve already covered. So you asked about this. There is another listed company and insurer that is aiming to build a hospital chain. Effectively they’re aiming to do what NH is already doing. Do we see this as a threat or a market validation of.
Unidentified Speaker
Yeah, not threat. We don’t have a significant presence in ncr. Proof of concept and validation we would say it remains to be seen and we haven’t validated for ourselves yet that running insurance, hospital, clinic, all under one entity serves the patient need.
In most parts of the world these operate independently. In very few parts of the world there are companies like Bupa, Kaiser, Hapeeda that run all of them. But even they are not the largest providers in their home markets. We just want to be different. We always want to keep trying to provide much more value to the customer. And we thought that being an insurer as well will allow customers a completely seamless experience. But our hospitals will cater to all payer classes and the insurance will allow customers who buy the insurance to have some. You know there’s advantages of course coming to Narayana Network but you can get treated anywhere you wish.
Nishant Singh
Yeah, there’s a question.
Unidentified Participant
Thank you
Nishant Singh
from Sevan.
Unidentified Participant
Yeah, sorry,
Nishant Singh
the question from Sevant on the chat. Why are we giving dividend and raising debt at the same time?
Unidentified Speaker
So the dividend is coming from Cayman. So our dividend policy is linked entirely around being able to monetize the Cayman cash reserves and doing it in a more tax efficient manner. Raising debt is for expansion.
Nishant Singh
Question on expected interest cost going forward and interest rate. So this I’ll take. See the. You can assume my interest cost of around 8% which is actually coming down because of the movements in the T bill.
On our overall borrowing for India and for the Cayman, you can take a rate of around 6 to 6 quarter percent.
Unidentified Speaker
Okay. The last question was while we’re not successful in medical tourism, are we looking to reconsider it because the sheer size of the American markets. No, we will never make that mistake again. The American market is huge and overwhelming. The only way you can get American patients is to run hospitals in the US which we’re not looking at right now. There are other overseas geographies we’re looking at and the Cayman market, the Caribbean market is much more attractive for us.
Some US medical tourism does come, but that is incidental to the overall business. There’s a much larger opportunity in the Caribbean.
Nishant Singh
There’s a question on the. Despite having a large catch reserve, we are using debt but that we’ve already covered as a response to Gagan’s question. So I think with this we are done with Sahil’s and Ravi’s questions. Am I right?
Unidentified Participant
I have two small questions if comfortable. Firstly, are we planning to have any preferential issue in the next like one year to raise the funds? Any equity preferential issue?
Anesh Shetty
There’s no need for it right now.
Viren Shetty
Okay.
Anesh Shetty
Should the need come, we would look at it, but that’s much in the future.
Unidentified Participant
Okay. And another thing is, I know it, it must have been already covered. But what is expected tax rate on company as a whole for FY 26
Sandhya J
15 to 16%.
Unidentified Participant
Okay. Thank you.
Nishant Singh
Yes. Can we have a question please?
Unidentified Participant
Hello. Hello. My audible.
Nishant Singh
Yeah, yeah.
Unidentified Participant
Thanks for taking my question. And first of all I want to congratulate the management for doing the great job in the sector that is pretty much competitive in India right now. So my questions are on more on a qualitative side first my question is as we are not being as aggressive as other peers in terms of pricing.
Okay. Or improving our arpu. So. And we focus more on efficiency improvement and the throughput improvement. So what are, what, what can be the long term ETA margin or sustainable EBITDA and operating profit margin that we can, we are looking at
Anesh Shetty
not giving guidance on margins. We’ll just look to improve the margins from where we are and try to see if we can sustainably grow it.
Unidentified Participant
Will it be what we have right now wasn’t that operating at or as Our new facilities will come up in three to four years. So obviously margin margin will be so.
And will it sustain at this level or it will be reward going forward?
Sandhya J
There are three parts to the margin, Sukanta. The India hospital margin. We are aspiring to grow every year. So we will see an improvement day. There will be cash burn on the integrated care side, so that will dilute the margins. And Cayman, as Anish indicated, will be more or less stable.
Unidentified Participant
So overall we can say that, okay, it will be around 25, so 24%. Am I correct in the assessment
Anesh Shetty
console level? Yes.
Unidentified Participant
Okay, so my second question is as our new facility is coming at in la, so what is the capacity? What.
What will be the efficiency that we can bring in? Because as we see the entire. If we see the Kolkata, then there is a high possibility of the entire. It is the ship is going on. So. And our facility, new facility that is coming at the heart of Rajara. Okay, so how fast we are aiming to replace the gates that we are coming up with now. First we can ramp it up.
Anesh Shetty
Construction started. Venkatesh, do you want to give some color on when it will be ready?
R. Venkatesh
Yeah. So we’ve just started the construction in Rajarat after all the approval processes have got through.
It happens in stages from the piling and then into the construction. So as we talk about phase one, we’ve already given an indication that it will take us at least 30 months as we speak from now for this commissioning to happen. So mostly it will be functional somewhere near FY28 when it comes to Rajarat at a first phase of around 350 bits. 28, I think 29. Sorry.
Unidentified Participant
Okay, now finish. Finish what you are saying. Hello.
R. Venkatesh
Yes. You wanted to ask something else?
Unidentified Participant
Yes.
R. Venkatesh
What I said is at least two and a half years from the start of the construction which we’ve just done.
Now that’s the timeline for starting of phase one.
Unidentified Participant
Phase one will be 350 bits, right?
R. Venkatesh
That’s right.
Unidentified Participant
And how long it will take to. If I can recon correct, what we have projected is 1100 beds in total, right?
R. Venkatesh
Yeah, that’s right.
Anesh Shetty
That’s. That’s been projected. But for now we just focus on getting the first 300 beds off the ground. Remainder will take up as and when that capacity becomes full.
Unidentified Participant
Okay, I have two more questions. Two, three more questions. So should I ask it right now or.
Anesh Shetty
Yeah, yeah, please, please go ahead.
Unidentified Participant
Oh, in. In one of the previous Calls management said that okay, the doctors are retaining doctors and nurses.
It is becoming very difficult day or day after day because of the competition and all the facilities and everything coming up in India. Although India is a growing market, but still there are peers, other hospitals that are funded by episodes players and the venture capitalist. So as our model is we have. We keep doctors on payroll. So is it the model that we are going to follow in future also or we are looking at in a different way.
Unidentified Speaker
We all our clinicians are on a professional contract and they work predominantly with us and because the volumes of work is so much they hardly have any time to go and work in any other place.
But they. They work mainly with us. And as far as the manpower is concerned, I think we did mention about this in the previous question, but we do have in both the Bangalore and Kolkata and as well as in the Raipur clusters, nursing schools and paramedical training programs and the postgraduate training programs which is very. It’s the largest in the private sector and we have a very careful manpower planning right from beginning itself so that we know exactly whom all to identify and recruit well in advance to the. To the projects being materializing. So we are fairly confident that we’ll be able to handle these expansions and not have any major issues with the manpower.
Unidentified Participant
Actually my question was exactly how we are planning to retain our high quality because if.
Unidentified Speaker
Sorry a clarification, I. I don’t think we said that we had challenges retaining staff or nurses. In any previous call you could please let us know where you heard that so we can clarify.
Unidentified Participant
Not exactly challenges but what we are seeing in the industry that more and more hospitals and large hospitalizations are coming up. So if few of our doctors and the doctors, if they get a chance to get an offer to go to some other hospital on a higher package or like that, something like that.
So will there be any challenge to retain them or. We are pretty much sorted there. There will be no challenge in returning or talent.
Unidentified Speaker
We are fairly very good with our doctor engagements and especially our senior and middle level doctor engagements and we hardly have any attritions at that level. And we are very confident going forward in spite of all the competitions and new opportunities that keep coming up in every cities we will be able to retain our doctor talents. It’s got lots to do with doctor engagements and we have a unique way of doing it and we are confident of.
Of continuously engaging with them.
Unidentified Participant
Thank you for. And another question is. See, whenever we talk about international patient, we mainly talk about the patients from Bangladesh that we cater mainly from our hospitals that we have in Kolkata. So my question is why you are not looking at international patients from some other geographies from other countries. Because as we can see, and through various reports on our medical tourism in India and all, all sort of things, that India is a very competitive market. India is a very. India is, is at a advantageous position in terms of cost.
So what the procedures that we, that we do in India, it is far superior in terms of quality and also it is very less expensive.
Unidentified Speaker
Sukanta, in the interest of time, I’ll answer that very quickly. Pre Covid in 2018 we took a call to slowly ramp down all our international medical tourism patients. All the things what you said are correct and all the hospitals are investing a lot of money in trying to attract international patients. We do not want to be one of them. We see significant domestic opportunity. We see a significant opportunity for Indian customers and for people who live within the close vicinity of the hospital that we have.
So our services cater, will cater mostly to the domestic patients. Those that come from abroad will come, but we will not actively pursue this. If there is international opportunity to be had, it will only come from us building facilities in those international geographies which will follow the criteria that Anish and I laid out earlier.
Unidentified Participant
Okay. Okay, thank you for that. The last one, only the last question. So, and we, we talk a lot about AI incorporation and the technology that we put in, in. In our procedures and in the operation. So how it is going to change and how it is going to improve our efficiency and everything in the long run.
Talking about in coming 15 years. So how AI can impact our business and how can it improve our efficiency and incorporating AI and machine learning, how it can affect our profitability.
Unidentified Speaker
Yeah, not AI specifically, but digitization particular. See, no modern business can survive without digitization. The healthcare industry has been uniquely resilient towards adding electronic medical records, towards using the computers in all the basic transactions. And patients most common experience is going from one doctor to the other carrying big files of paper. And you go from different clinic to hospital, hospital to lab, lab to blood bank.
Again, file, file, paper everywhere. So one of the most obvious things that we said is we want to be the most digitally efficient healthcare institution in the world, not just the country, in the world. And so we invested a huge amount of money in building a large team in Bangalore who are building all the technologies we need to make the patient’s journey inside the hospital seamless. We’ve eliminated nearly all paper from all the departments we’ve made it so that our doctors can get data instantly and they can do the rounds of the ICU in their house.
Now why is this important? This is important because we constantly look to lower cost and reduce inefficiencies. So if you ask what the impact is, the impact may not be directly attributable to what is the spend on the software. But the very fact that as the only healthcare group that has not added a single bed since 2016, but has in fact reduced beds, yet continue to grow revenues in line with the industry is just testament to how much we were able to do by looking at our efficiencies and looking at all the manual processes and making it as digital.
So this is just what any modern corporation should look like. And we have to invest because no one is going to invest and give these products for us. AI, that’s just the new flavor of whatever digital tools that we use. When they become stable, we will start using that as well.
Unidentified Participant
Okay. But thank you for your answer. Thanks for all the clarification. Good luck to the management and to the to the intact team for the journey ahead because we have a huge opportunity in India in terms of healthcare specifically and healthcare as a whole. So best of luck.
Unidentified Speaker
Thank you.
Nishant Singh
Just to very quickly answer one of the question that Sahil asked in the chat, which is what is our attrition for the technology team given that they sit in HSR Layout, which is the startup capital of India. Our attrition so far has been 7% for the technology team, which is, I’ve been told, highly impressive.
Unidentified Speaker
Thanks B. So are there no more questions? We would like to conclude our session. Thanks everyone for your active participation as always. Thank you.
operator
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