Rainbow Children’s Medicare Ltd (NSE: RAINBOW) Q3 2025 Earnings Call dated Feb. 10, 2025
Corporate Participants:
Ramesh Kancharla — Chairman and Managing Director
Vikas Maheshwari — Group Chief Financial Officer
Saurabh Bhandari — Head of Investor Relations and Business Intelligence
Analysts:
Rahul Jeewani — Analyst
Unidentified Participant
Damayanti Kerai — Analyst
Sumit Gupta — Analyst
Alankar Garude — Analyst
Nitesh Dutt — Analyst
Nitin Subramanian — Analyst
Anshul Agrawal — Analyst
Pritesh Chheda — Analyst
Deven Kulkarni — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Rainbow Children Medicare Q3 FY ’25 Earnings Conference Call hosted by IIFL Capital. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zer on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Jeewani from IIFL Capital. Thank you, and over to you, sir.
Rahul Jeewani — Analyst
Yeah. Hi, good morning, everyone. I’m Rahul from IFL Capital. I welcome you all to the 3rd-quarter earnings conference call of Rainbow Hospitals. From Rainbow, we have with us today Dr. Ramesh Kancharla, Chairman and Managing Director; Mr. Vikas Maheshwari, Group CFO; and Mr. Mr. Saurabh Bhandari, Head Investor Relations and Group Business Analyst.
Over to you, sir, for your opening comments.
Ramesh Kancharla — Chairman and Managing Director
Thank you, Rahul. Good morning.
So wishing you all a very Happy New Year and a very warm welcome to earnings call for the Q3 and the nine months of the FY ’25. I’ll discuss the company’s robust vision and exciting opportunities — opportunities ahead. Before that, I would like to take a couple of minutes to share that we have successfully concluded the Silver jewelry celebrations of Rainbow Hospital. Being an organization with an average age of 32, the events were energistic and electrifying, featuring outstanding performances from our employees. It was an immense joy and to celebrate this milestone with our entire Rainbow family and I was deeply touched for the love and strong bonding the team shares with the Rainbow. We have recognized and honored hundreds of employees for their outstanding contributions. Over the last 25 years, this incredible journey has touched millions of children for their healthcare needs and saved thousands of lives, hundreds of doctors have been trained and created value for all the stakeholders.
I would like to take this opportunity to thank all of our medical — paramedical and support teams for their unwavering commitment in delivering exceptional medical care for children and women positioning Rainbow Students Hospital as India’s leading Hospital Group. Now I would like to focus on the results of Q3 and here are the key highlights of the first-nine months of the year. We had a strong Q3 performance with a growth across all operating metrics, including our new hospitals launched in Hyderabad, Bangalore and Chennai 3/4 ago. These new facilities are now well-integrated within our rainbow hub-and-spoke model.
Our IEF services have shown good progress, gaining traction, reinforcing the potential as a key growth driver for future. Recently, we have added a new IEF clinic close to Rainbow unit Road, Bangalore, bringing our total number of IEF clinics to 12. As highlighted last — in the last quarter, we have launched Birdfry Essentials, a dedicated retail stores offering a comprehensive range of baby and woman care products. So we have successfully opened butterfly stores in all of 15 hospitals. This initiative is progressing well with a good footfalls and with an enhanced patient experience. Rainbow opened a state-of-art children in the last quarter at Hills, Hyderabad the new benchmark in a pediatric care. This facility now serves as a central hub consolidating chain development services from all the rainbow hospitals in Hyderabad to ensure comprehensive and efficient care for children in one location.
We are still encountering challenges in our international business, particularly in countries like Bangladesh, Bangladesh, Oman, Kenya and Sudan. There was a — there has been a significant reduction in the issuance of healthcare permits for patients seeking medical travel. Now dwelling on to the numbers for the Q3 FY ’25, our revenues registered growth of 18.5%, amounting to INR398 crores. Similarly, our EBITDA increased by 14%, reaching to INR134.3 crores, while PAT registered growth of 10.2% to 68.9 crores. Our overall occupancy rate for the quarter was 53.2% with the mature hospitals achieving 60.2% of 20 and new hospitals, including a new hospital recording a 39.6 occupancy rate.
Coming to projects update, we opened a new clinics in the busy business area of in Hyderabad. This clinic operates in conjunction with the Banjara facility ensuring a wider coverage for the hub hospital. The regional hub hospital in Rajimandri, Andhra Pradesh of 100 beds is nearing completion and is expected to commence operations by May ’25 of the calendar year. The project work at the Spoke hospital in City of 90 beds and the Hennu of Bangalore of 60 beds are progressing well with both hospitals are expected to commence operations by end-of-the Q2 FY ’26. The project work at a — commenced at a regional hub hospital in Kombapur for 130 days. The project is running slightly delayed with our operation — operations anticipated in to commence in about 24 months’ time.
The company has outlined official building plan approvals for the land coffee sector 56 in Gurgaon and while approval for Sector 44 is probably a few weeks away, our project team is busy in the tendering process. In addition to our growth plans, I would like to highlight some key achievements that reflect our — the commitment to delivering the high-quality pediatric and care. Over the past nine months, we have successfully treated a number of children in intense care services and also for the group level, unmanaged complex media specialty cases.
So here are a couple of notable examples which I would like to present. Our team at Rainbow Heart Institute performed their world’s first fetal balloon iotic Walvo plus 3 with a pioneer enclosure device. So I will explain a little bit about this patient. It’s an interesting from a 35-year-old lady who was carrying a free test for 27 weeks with a severe IO and less and flow was reversal in the. Our multidist team, including the cardiologists led by, fetal medicine specialist and have successfully performed their fetal Baloon Iotic wall of plasty on a 27 week baby of 700 grams within the womb for critical. The groundbreaking aspect of this procedure was usage of approve the device to seal the puncture site, making the first known globally with this innovative approach.
What I’m trying to say is that the heart size of this of 700 RAMs will be about a large grave size. Normally, we have to approach this heart through the puncturing the ventricle the bottom of the heart and then go and do the balloon plastic so this baby is so small if we do a small puncture, the will not go through. Therefore, our team has to use a large board and wide-open so that the billion can go and do the to complete the procedure. So that will lead to the massive blood coming into the — around in the heart, so will compromise the life. So therefore, the closure of this hole was done by the device.
The heart was actually being closed with the device closure. This is a lot groundbreaking in this particular case. This is done the first time in the world. So obviously, this — this pioneering success marks a milestone in util cardiology, expanding the possibilities of neutral interventions and also bringing hope to the families worldwide facing severe future conditions. This case was wide — has gained wide interest in national media and almost all major national publications carried the news article. Perhaps the Prime Minister acknowledged this groundbreaking procedure.
The second case is successful keyhole surgery for a rave brain tumor. A 7-year old child who is experiencing persistent headaches for 10 months and gradually losing the peripheral part of the vision along with the two episodes. The family consultant, our periodic neurology team, the MRI revealed a cystic tumor in the cellar and parts of the brain, extending it to frontal loop. The biopsy confirmed to be, a rare type of surgically treatable brain tumor. The child underwent minimal active, minimally access invasive keyhole surgery and our surgeons could manage to exercise completely of the tumor.
So doing a keyhole surgery in this reduce the complications like a reduce complications and ensure the short-stay and also providing a better cosmetic outcome. So two weeks post-surgery, the child was discharged with a complete neurological recovery. So these cases underscores our critical role of your multidisciplinary team in managing treasury and quarterly care patients.
So with that, I will — I will now pass the mic to our Group CFO, Mr. Vikas Maheshwari, to take through the financial update. Thank you once again for joining us today. We look-forward to your questions and insights as we move forward. Thank you.
Vikas Maheshwari — Group Chief Financial Officer
Sir. Thank you, sir. A very good morning to all of you and thank you for attending this investors Conference. I am pleased to brief you on the financial performance and the key developments of Rainbow Hospital for the 3rd-quarter and the first-nine months of current financial year. Our operating revenue for the quarter stood at INR398 crores, reflecting a growth of 18.5% when compared to the corresponding quarter of the previous financial year. For the first-nine months, our revenues stood at INR1,146 crores, reflecting a growth of approximately 20% when compared to the nine months of the previous financial year.
Our EBITDA for the 3rd-quarter amounted to INR134 crores, marking a 14% growth compared to the same-period last year. For the first-nine months, our EBITDA stood at INR375 crores, reflecting a growth of 16% when compared to the nine months of the previous financial year. For the nine months of the current financial year, EBITDA is slightly impacted by close to INR7 crores due to one-off event-related to 25th year’s celebrations. The EBITDA margin for the current quarter is 33.8%, while for the first-nine months, our EBITDA margin is 32.7% 22.7%. The profit-after-tax for the quarter is INR69 crores, marking a growth of 10.2% in comparison to the corresponding quarter of the last financial year.
For the first-nine months, our PAT stood at INR188 crores, reflecting a growth of 12.2% when compared to the nine months of the previous financial year. In terms of the operational performance, both outpatient and inpatient volumes witnessed a growth of 12% each when compared to the corresponding period in the last financial year. Our payer mix continued to remain robust and balanced with 51.3% of the revenue coming from the insurance and the balance 48.7% coming from the cash patients. F
Or the first-nine months, the payer mix stands at 48% cash and 52% insurance. Furthermore, international business constitutes now approximately 2% of our total business for the 3rd-quarter. As highlighted earlier by our Chairman, we are facing some headwinds in the international business and we are working to mitigate the impact. I’m pleased to inform that our company’s balance sheet remains very robust with a net cash position of INR667 crores as of December 31st of the last year, 31st December of last year and will support our ongoing capital expenditure plan. Given our current cash and anticipated internal accruals in the coming quarters and the years, we remain confident in our ability to complete all planned capital expenditures through internal accruals without any debt financing. During the quarter, the company has invested approximately INR22 crores in the capital expenditure.
With these insights, I conclude my financial updates. I now invite questions and physicians from the participants. Thank you very much.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of R. Sen [Phonetic] from MAS Capital [Phonetic]. Please go-ahead.
Unidentified Participant
Yeah. Thank you for the opportunity. Happy to see the good set of numbers that you’ve kind of reported. So just wanted to understand, we spoke about the largest pediatric training program. If you can just share some light about the opportunity size and what kind of market do we see this kind of turning out to be yeah.
Ramesh Kancharla
So we train up, we have about total DMV seats of about 200 across the group to train. This is the training for the — for the perio fix and it’s competitively selected through the need examination and the rainbow being the premium institute and the get over in the substance itself in well within about ranking. So we also do a lot of super specialty training for the neurontology and pediatric intensive care, pediatric, counter-oncology and cardiology. So we have a neurology. So we do a lot of — it’s a large training centers today and to train people.
Unidentified Participant
Okay, okay sure. Sir just drawing parallel with some of the other hospital chains not in the pediatric region, I mean space, but especially in the ice space I see, there is a ultra asset-light model that they have kind of used and especially for penetration into Tier-2 cities. Now the question was, is there a school of thought with the management to kind of explore this model to enter Tier-2 cities with the ultra asset-light model, which acts as a catchment area and feeds into the Tier-1 branches that we have.
Ramesh Kancharla
For a rainbow operating middle — operating model, so ultra-light may not suit, whether we go to the main cities or even the spook hospitals or even the districts also, that’s because we are a complete healthcare model. We are not a kind of a part of segmental healthcare model. So especially children’s healthcare and also when you combine with, we require a spaces required for the women as well as children with emergency services and outpatients department, you do surgical, you do intensive care works, we do both things. So it’s a large. So how much ever we kind of concise we do that the 50-50 beds is the lowest, about 35,000, INR40,000 kind of the lowest kind of the space which we require. That’s what actually what we look at it always. Going ultra — ultra-small, you’re actually compromising it some of your the offerings to the patients. As an emergency hospital, this is a — this is going to be difficult for us to operate and satisfy the people and gain the traction.
Unidentified Participant
Got it. Got it. So if I may I just ask one last question. This is at a macro-level, 1,935 beds as on 2025. Can you share your aspirations till 2030, where do we see how many beds and at a long-term goal?
Ramesh Kancharla
So we have a trajectory, which has already been discussed about 1,000 beds in the next 3.5 years this one. About 400 beds are going to be in the NCR, which is already planned in, two hospitals and the 600 beds are going to be in the regional spokes as well as the spoke hospitals in the south and some region spokes are new like and the Tur and those are the near.
Unidentified Participant
Thank you so much and all the best for the next quarter. Thank you.
Ramesh Kancharla
Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Damayanti Kerai from HSBC. Please go-ahead.
Damayanti Kerai
Hi, good morning and thank you for the opportunity. Sir, my first question is on your side. So can you update us like what are the pending approvals? And as you said, like some work has already started, but when are you expecting to start the construction work? And now like what should be the timeline for completion for the program site?
Ramesh Kancharla
So we are almost there actually. The permissions one of the sites have come and we heard that the other — the site permission is just on its way about couple of weeks time and we are we are actively engaged kind of with our — we have built our projects team. They are all busy in tendering process and we’re trying to the kind of floor the tenders, inviting people to kind of for the base building construction. So we’re quite active now, probably a kind of a — we start the site construction in about four to six-weeks times.
Damayanti Kerai
Four to six-weeks?
Ramesh Kancharla
Yeah. Yeah.
Damayanti Kerai
And you mentioned approval for sector 44 is a few weeks away. What about the other site?
Ramesh Kancharla
Other one is already there. We have got — we have received the permission for sector 56.
Damayanti Kerai
Okay, okay. So very broadly say you start on the construction, etc., in another four to six-weeks. So reasonably, we should be looking at FY ’28 as a launch timeline for this program that’s?
Ramesh Kancharla
Yes. We are also taking some kind of the steps to kind of how to speed-up the construction and also going more with the steel structures and those things. There are lot of things which we are trying to see that how to speed-up the process to construct the base building. Then once we have the base building constructed within a year — any year time, then we can set our base more aggressive to complete it. So we expect about 2.5 years from now to start.
Damayanti Kerai
Okay. That’s helpful. My second question is on your international business. So right now it’s small like 2% of your total business. But what are your aspirations here and especially in light of what we heard about this Heal in India program for promoting medical tourism. So just want to hear your thoughts on this part of the business.
Ramesh Kancharla
So we started our international business as a post COVID actually. It was going pretty well. Perhaps we budgeted about 4% of our top-line to come from the international business about this year. Last year, we clocked about INR44 crores. We were quite ambitious about it. Unfortunately, that geopolitical situations and also the Bangladesh and some other areas like Oumon is also a problem and you know the Somalia, which is our largest contributor and which has got up Sudan, they are all into kind of a serious internal — political — internal problems. So that’s why there is a significant reduction in the healthcare vehicles for all these business. I’m not sure about other groups, but we have seen almost a reduction 40%, right?
Vikas Maheshwari
Yes.
Ramesh Kancharla
40% business from the last year.
Damayanti Kerai
So you said you earlier budgeted for 4% of revenue from this segment, but due to macro uncertainties, there has been some 40% reduction from your initial anticipation. So where should we end for FY ’25 in terms of contribution?
Ramesh Kancharla
Yeah. I think the end of this one, I think it’s probably about INR34 crores or something we are expecting it to close it now. Last year, we did about INR44 and waiting for actually things to opened up. See, it’s a — our international journey is very early phase, which is why kind of is a building story. And once things have opened up, we are also exploring other countries’ opportunities at the moment actually, things like Philippines, Mauritas and Rwanda and other areas,. So we are kind of hoping that it’s an early phase of building story. We also wanted to kind of have a closer connect with the doctors in those African and also Indian neighborhood in those countries to have a better relationship with them and try to kind of engage to have a better referral system.
Damayanti Kerai
Okay, sir. And my last question is, in this quarter, the staff cost, we have seen around 8% sequential decline. I understand there is bit of seasonality related factor as well. But in your staff cost, like what percentage will be variable in nature and which can just be adjusted according to the top-line sort of performance?
Vikas Maheshwari
So is a good question. This is a good observation. If you go back to quarter first, our staff cost was also at around INR49 crores in the quarter’s second, which is seasonally very strong. So we hire nurses, paramedic staff extra — on the contractual basis, cleaning, etc. So the cost slightly goes up and there will be some OT payment because nurses, etc, has to work little harder on the patients handling, etc. So I think this is a normalized one which has come back to the normal level. So that should be the cost on the current debt capacity which we are operating.
Damayanti Kerai
Around INR490 crore kind of staff cost.
Vikas Maheshwari
INR450 crores is what it should be. In the quarter-four, obviously, there will be some slight adjustment on the graduity, etc., but will not impact much of the things.
Damayanti Kerai
Okay, that’s helpful. Thank you.
Vikas Maheshwari
Thank you very much.
Operator
Thank you. Ladies and gentlemen, to ask a question, you may press star and one now. The next question is from the line of Sumit Gupta from Centrum Broking. Please go-ahead.
Sumit Gupta
Hi, thanks for the opportunity. Am I audible?
Vikas Maheshwari
Yes.
Sumit Gupta
Hi, sir, just now — so on the capex part, like now that this Delhi NCI project Hospital has now moved to. So I just want to understand on that overall capex that you plan for the next two years? Is same like INR50 crores that you guided for?
Vikas Maheshwari
So see, we have already listed out our capex plan in our presentation. So in FY ’25, ’26, we are coming with 250 of the beds. And these are all asset-light means is a lease assets. And similarly on FY ’26, ’27 is 130 beds. So roughly 380 beds or close to 400 beds which will come in next two years. Since these are on the leased assets, roughly INR60 laks INR65 lakh rupees per bed, you should assume on that as a capex. As far as the Gurugaon is concerned, we have already spent around close to INR180 crore to INR190 crores on the land acquisitions and related registration and permissions, etc.
Now you should budget at around another INR400 crore in the next three years’ time starting from FY ’25, ’26 to FY ’27, ’28. But most of this capex will happen post one year because right now once we have the approval, the groundbreaking and then foundations, etc., will not take much of the cost. So the most of the cost will come after one year. So that is what is the trajectory. The exact trajectory of Gurgaon, once we start the project, we will come to now, but that is the more or less INR400 crore in the next three years for the Gurga.
Sumit Gupta
Understood, sir. Thank you for the detailed explanation. And sir, lastly on the — like how the overall new centers which were opened in the last two to 3/4, they are trending in terms of occupancy and profitability, like what has been the trend that we’re seeing?
Vikas Maheshwari
So then for the nine months, if you look at — because we have opened our units sometime in the March last year, right, nine months before. So if you look at nine months, our new hospitals occupancy at around 37%, I think that is a good — in the blended basis, which is few units, which was opened two years back and so on and so forth. If you look at, I think the occupancy level is at a good level. The new units are doing well. It is on the given trajectory. We have already guided our — for the Hyderabad, we breakeven in 12 months’ time. For the Bangalore, it takes 15 months time and Chennai takes some 18 months time. I think these are all on the same trajectory. There is no change on that.
Sumit Gupta
Okay. Okay. Thank you, sir.
Vikas Maheshwari
Thank you.
Operator
Thank you. The next question is from the line of Alankar Garude from Kotak Institutional Equities. Please go-ahead.
Alankar Garude
Hi. Thank you for the opportunity. Sir, at the beginning of the fiscal — hi, sir. Sir, at the beginning of the fiscal, you had alluded to focusing more on volume growth in FY ’25, especially with all the new hospitals which became operational in 2024. Now given that we are seeing decent volume growth across both these newer centers as well as the existing centers, how should we look at growth in FY ’26?
Vikas Maheshwari
Okay, Alankar, a good question. See, always we have kept on guiding for the last — at least for the last two, 3/4. So ARPUB is little bit is a different complex subject because there is a two variability. One is the seasonality, second is allos. If the allos goes up, your ARPOB gets suppressed, right, though the occupancy goes up. So what we are guiding or are requesting all the analysts and investors to look at what is our ARPP growth? I think ARPP growth has been consistently between 5% to 8% depending upon the quarter-on-quarter.
So, I think this trajectory will continue because of two things. One is that the new centers, which is getting matured, we have get little bit of the pricing power plus the matured centers start operating the more complex cases and a more clinical difficult work where the ARPP, etc., is high. So I think if you look at ARPP, I think you should look at something like that 5% to 9% growth on ARPP, which is — this is the real growth because that eliminates at least one portion which is easy, which is ALOS. In our this case, the has gone up by 12%, right, which has got impacted. ARPU, that would not have been — the ARPU would have been higher.
Alankar Garude
Actually that was my other question. I mean, ALOS both in new and existing has increased meaningfully in nine months. So…
Ramesh Kancharla
Correct.
Alankar Garude
Can you let us know the reasons at least for the mature hospitals, what is the reason for the sharp increase?
Vikas Maheshwari
It is because of the operational issues, sometimes as the insurance business is 50% for us, sometimes the insurance approval comes late, it automatically gets late four, five hours. So these are most of the things are operational efficiency-related, plus if the more complex cases the patients are staying longer at the hospital. So it’s a combination of both. But the operational related whatever is there, obviously, we can improve ourselves.
Alankar Garude
So how should we look at ALOYS then going-forward? Should it come back to that 2.6, 2.7 number?
Vikas Maheshwari
Nine months median is the good average to take-up. So I think it is at 2.8, 2.9 and nine months average should be good. We should improve from here, but you should take that average.
Ramesh Kancharla
Yeah, traditionally, Anankar, our ARAS will be kind of anywhere between 2.6 to 2.8 can. So depending on actually the how the seasonal, if there is a lot more seasonal, lot more side, then will come down. This is more of a little more of under complexity, more of specialties, more of a NICU admissions, the ALS get treat to more towards them a little longer are going to stay. So this is the dynamic keeps going on. So typically in the Q2, Q3, the ALRs usually will be low, but this quarter the seasonal business is not that higher. So therefore, the ALRs was kind of little more. I will definitely look into that. Now are there any other factors that ALS have increased? So even then, I think the ALS of 2.7, 2.8%, that’s what is generally will settle down to a matured periodic cost. That’s what my thought process is.
Alankar Garude
Got it, sir. And one last question, you had spoken about evaluating certain M&A opportunities in the past. Can you update us on the progress on that front?
Ramesh Kancharla
We — Anka, we continue to look at this one and I mean, we will continue to work on these opportunities and I’m sure we’ll let you know once it comes to some degree of kind of a conclusion.
Alankar Garude
Got it, sir. That’s it from my side. Thank you.
Ramesh Kancharla
Thank you.
Operator
Thank you. The next question is from the line of Nitesh Dutt from Burman Capital. Please go-ahead.
Nitesh Dutt
Hi, thanks for the opportunity. My question is related to the new hospitals that we added in Q4 of last year and Q1 this year, I think we have added close to 230 new operational beds. So what was the EBITDA drag because of these new beds this quarter?
Vikas Maheshwari
Yeah. Yeah, it’s a good question. It is a single-digit high number of EBITDA drag. So it is close to INR8 crore to INR9 crores for the three hospitals together for the first-nine months.
Nitesh Dutt
Understood. Got it. Second question, the delays in three hospitals that you have mentioned, just wanted to understand the reasons for the delays. 1, I think you mentioned due to approvals, but for the remaining ones and also any chances of further delay or the stated timelines by those timelines, so hospitals should become active.
Ramesh Kancharla
I think there’s a very — a couple of months delay in, not much of delay. It is just basically going slow. It’s a tied to city and obviously, the challenges always will be there because our teams are all located in the city, so our project teams and also the vendors. So that is a couple of months delay in. So in Chennai, there was a kind of a redesign of plans that happened because that’s what there is some change in the government rules and the regulations on the offsets and those things. So that’s why we had to resubmit the plans and then get a reapproval process. So being in, all the process runs — runs in Chennai City. So that was some degree of delay. So otherwise, they’re all ready to construction doing things. Now exhibition is going on. I think we want to kind of a fast basic now.
Nitesh Dutt
Okay. Understood. Great. One more question. Can you just give some sort of outlook FY ’24 for FY ’26, both on occupancies and ARPO.
Ramesh Kancharla
I think it’s a bit early to kind of look at it. Still we are in the current financial year financial year. So probably we’ll kind of discuss in the next earnings call.
Nitesh Dutt
Sure, sure. Thank you. I’ll get back-in the queue.
Ramesh Kancharla
Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Nitin Subramanian [Phonetic], an Individual Investor. Please go-ahead.
Nitin Subramanian
Yeah, good morning, everyone, everyone. First of all, wishes for your excellent performance. Okay. I just want to know, I’m a new investor. I just want to know-how do you differentiate your new hospital and mature hospital? And that means how many months after you consider any hospital as a matured hospital? And my second question is, what are the likely growth drivers?
Vikas Maheshwari
Okay. So how we classify the matured hospital and the new hospital is based on the tenure from the date of we start the operation. So the new hospital we categorized which is less than 60 months, which is five years and the matured hospital is, which is commenced the operations more than five years. So this is how do we differentiate on this? The growth drivers will be three. One is that our matured hospitals will keep on adding the doctors and the new specialties. So the growth will come from one vehicle of that.
The second growth is our new hospitals or the non-matured hospital, which is less than five years. They will keep on growing at the faster pace than the matured hospitals. That growth will come from there. The third growth will come from the new hospitals which we are adding. Next year, we are adding FY ’25, ’26 three hospitals we are adding and we are adding close to 12.5%, 13% of our capacity are close to 250 beds in the next financial year. So that will also drive the growth in the coming quarters and the year.
Nitin Subramanian
Okay. Thank you. Thank you very much.
Vikas Maheshwari
Thank you very much.
Operator
Thank you. The next question is from the line of Anshul Agrawal from Emkay Global. Please go-ahead.
Anshul Agrawal
Hi, thank you for the opportunity. Am I audible? Great. Sir, any reason that you would want to call-out for the dip in gross margins in the current quarter? I believe this quarter would have lower surgical mix?
Vikas Maheshwari
Yeah. So Anshul, if you come — if you are comparing it with quarter second, yes, the mix will be slightly better in case of quarter three because the quarter second is seasonally strong quarter and there will be a lot of low-ticket normal businesses, which comes due to the season. So the quarter three compared to the quarter second will be more of a surgical or the clinical mix better.
Anshul Agrawal
No, I was trying to look at it, sir, on a Y-on-Y basis as well, we’ve seen a gross margin decline of almost 80 bps. And I thought considering that there are more medical cases in this, there should not be any reason for gross margins to sort of dip.
Vikas Maheshwari
So on year-on-year basis, what has happened is, I’m sure that last quarter, March, we have added three facilities. And those three facilities, the drag has come into the P&L. This is one. And second, as I have informed during our opening remarks that close to INR7 crore is the one-off item which we have spent for our 2050 years of the anniversary. If you knock-off these two, probably we are better-off on the same EBITDA margins.
Anshul Agrawal
Got it. Got it. Thank you for that answer. My second question, sir, is on EBITDA margins going ahead. Now I believe we’ll about start to see breakeven on certain new facilities that we added in Q4. And at the same time, these new facilities should also start coming up in, etc. So would our margins sort of remain stable or do you see that — do you — do you feel that it will dip for probably about two, 3/4 in FY ’26 as well?
Vikas Maheshwari
So as a business in the hospital, whenever the new hospital gets opened, there will be always some drag. This is the question how much is the drag and how much is the capacity is being opened, right? So if you look at the last year March, we have opened three hospitals means from April to December, the three hospital drags are coming, but it’s still our EBITDA margin has been stood at 32% 33% or for the nine months, it is 32.7%. I think going-forward, three hospitals which we are adding, obviously, there will be some drag, but our effort is that we keep the range plus-minus 1% from there, whatever we are at nine months, the range should be plus-minus 1% because what will happen as we progress, the new hospital which we opened, they will also start contributing on the EBITDA side though on the lower side, but it will — from the negative, they will move to the positive and the new hospitals will be slightly drag will be there. So more or less we should be able to balance it between plus-minus 1%. This is a good percentage to maintain 32.7%, I think is a good margin to maintain?
Anshul Agrawal
Got it. Just one last question, sir. So once the Gurgaon facility comes online or in the run-up to that, I believe our return profile would sort of get hit because of the asset-heavy nature of this facility. Any insights around how do we see this? Do we intend to get back to our 30% plus ROCE profile post say one or two years of this facility commencing or any thoughts around this, sir?
Vikas Maheshwari
See any capacity which is large one gets opened by nature, by arithmetical matter, the ROCE will have the impact, right? Now it is a question how much is the impact. So I’m giving the perspective, the exact numbers will work it around or you can also work it around, right. Right now, we have a 200 beds. And by the time we hit the Gurugaon starting, we should be of the size of whatever the beds we have told it is getting added. We’ll be at around somewhere 2,500 2,600 beds because some new other opportunity, acquisition opportunities will get integrated with us.
We’ll be at the size of from where we are stands from we should be 25% 30% higher than the current pace and those should be EBITDA generating and contributing whatever the capital we have invested. So that will offset to some extent of the Gurgaon. But obviously, as the Gurgaon starts, there will be some drag of the ROCE, but that is the nature of the business. We have to keep on seeding the capital for the future growth and drive the efficiencies, make sure that the facility matures early and then it starts contributing. So that is what is our effort.
Anshul Agrawal
Great. Thank you, sir. Thank you for a detailed answer.
Vikas Maheshwari
Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Pritesh from Lucky Securities. Please go-ahead.
Pritesh Chheda
Thank you for the opportunity. I have two questions. One on these matured hospital at 60% over in nine months, you know what is the further room in this occupancy ratio?
Ramesh Kancharla
Yeah, we can actually clock up towards 68% to 70% on our matured side. We still have a room to grow further in these matured hospitals. So they — within the matured hospital bucket, you still have a kind of a — some of them are kind of as a — how occupancy is about 50% 55%, some of them are kind of doing about 68% to 70% occupancies. We still have a room in the matured bunch of hospitals and lot of headroom in the new hospitals.
Pritesh Chheda
Okay. And wasn’t this that versus a typical multi-specialty tertiary hospital and children’s hospital, in your earlier calls you had always mentioned hospitals would have a lower occupancy. So am I confusing something here or there is some revision in this over number?
Ramesh Kancharla
No, sir, let’s not confuse ourselves with comparing with multi-special gas portal because is a different game. It is is a hospel which treats rare and care problems, right, off a life. Children’s hospital is a hospital which is for the medical hospital which treat the children who requires hospitalization, admissions and acute illnesses, majority of them. Some of them are chronic illnesses. The proportion is inverse compared to. So therefore, you have a seasonal impact, you have a differential areas in the hospitals and you — and on-top of it, we do not have a fixed to government business coming and occupying our bids. So it is a 50% insurance, 50% of the parking.
Pritesh Chheda
Yeah. So sir, then by that logic versus 70% occupancy of multi of the of the adult hospital, shouldn’t the children’s hospital be a lower occupancy?
Ramesh Kancharla
Yeah, definitely. We are clocking a lower occupancy because even if you look at the matured bucket, we are having about 60% occupancy and very unlikely that we cross 70% occupancy because of the differential areas of the beds and as well as the seasonality combining — combining these two factors without having a government fixed business. So, we will always have a kind of a percentage occupancy about — so let me put it this way, if we do occupancy of blended occupancy of about 60%, we’ll deliver. So that is how we kind of positioned it. Do we kind of look-forward to increase the kind of occupancy? We always would like to do that, but the — because of this factors, the traditionally will have a much lower occupancies compared to our hospitals. So that’s why we don’t say that, no, let’s compare ourselves with a different domain yeah.
Pritesh Chheda
So is the — so then that number is still 70 or the number is not — it will be less than 70 for a matural?
Ramesh Kancharla
Sir, it is going — it is only a first children’s hospital in this other country which is operating at that level. A learning story. I think if you ask me what at what level we can do it maybe about 65%, 68% of basis. Beyond that, it’s going to be difficult to clock it because of these factors.
Pritesh Chheda
Okay. And my second question is on the Gurugram CapEx. So did you mentioned that INR180 crore is spent on land plus INR1 crore per bed incremental, that’s how it is?
Ramesh Kancharla
Yes, that’s correct. Yeah. Another INR400.
Pritesh Chheda
Okay. So then it becomes. So then your capex is INR14 yeah, it’s INR145 lakh per bed, right?
Ramesh Kancharla
Yeah, close to INR1.5 crores per bed. That’s correct.
Pritesh Chheda
So then the ROCE in this hospital will be less than 20%. So any observation there? The ROCE profile will be really different here.
Ramesh Kancharla
So it will be little different because it is a heavy asset. It is a large facility which is coming up. So when we are looking at ROCE, we should look at for the long-term, how does it spans it out and it is going to be something state-of-the art which is being built-in India to cater to the whole India, particularly for the North India international businesses and everything. So if you look at all other multi-specialties who are putting up the hospitals at that reason, their cost is also similar, INR1.5 crores to INR1.75 crore.
Since its land and building belongs to us is a little heavy assets, it will cost the same, but from the zero day we will start as a super specialty hospital with all the equipments, whatever is required and the doctors facilities. The capital are going to be more like a multi-specialty because we are positioning this as a kind of a pediatric multi-specialty hospital of the highest planets in the country. So which is why this the — as a greenfield project, which is being built for future of the country and the cost per bed is going to be the same, including the medical equipment is going to be kind of almost pass with any multi-specialty aspect today standard.
Pritesh Chheda
So how is it different from your Hyderabad cluster where you have these large hospitals there, so you must be having a multi-specialty hospital even in Hyderabad cluster, right?
Ramesh Kancharla
That’s true, sir.
Pritesh Chheda
How different yeah, so how different is it via capex, let’s say you have a Banjara hub will how different it will be from that hub?
Ramesh Kancharla
So we have spent about 75, 80 lakh per bed by Bajara Hill about seven years ago. Today we…
Pritesh Chheda
Concluding land building or excluding?
Ramesh Kancharla
Excluding a base building on land. Here this building with the land and building is our own and we’re going to turn the capex on-top of it. So obviously that seven years to today, the cost escalation is almost 30% to 40%. If you calculate that way and INR1.5 crores is kind of what has been coming.
Pritesh Chheda
Okay. So excluding land building, Manjara was INR65 lakh. Today that same INR65 lakh is about INR1 crore per bed for a hub and over and above that in Gurugram, you have the land and building also coming in. That’s how we should interpret it.
Ramesh Kancharla
Yes.
Pritesh Chheda
Okay, sir. Thank you very much.
Ramesh Kancharla
Thank you.
Operator
Thank you. The next question is from the line of Sumit Gupta from Centrum Broking. Please go-ahead.
Sumit Gupta
Hi, thanks for the opportunity again. Sir, I have two questions. First is on the. So how do you plan to increase optimize the ARPU over the near and the medium-term? And secondly, on the Gold facility, like once the facility gets opened, I hope I expect that international patient mix will change for the better. So how do you expect that to improve the overall case-mix as well as improvement of overall APO. Thank you.
Ramesh Kancharla
Yeah, it’s a pretty long-shot about. See, obviously, this is going to be in a different class of hospitals. It will have a definitely a better price point and also it is ability to treat patients are more complex and we would definitely be positioning in very differently hospital. So closer to that, we can discuss about how the, how the revenues are going to play-out. It’s too early to talk about it. So overall, our ARPAP trajectory is certain as earlier in the call, Mr. Vikas mentioned about it. Is that so many other variants to influence. So therefore, I think the ARPP is something which is actually — we’ve been working on internal purposes, we look at ARPP more as a significant factor than. You have seen in the last eight, nine quarters, our ARPs are growing about the last to 7%. So this is how we track it because can be completely very variable based on the ALS and based on the seasonality.
These two factors keep changing in periodic healthcare because the seasonality is always there, the Q2 and Q3 and also that business we can’t anticipate the business mix how it’s going to be. So it’s not consistently that this is how the business will do it 360 degrees, 360 days. So therefore, we need to see — I mean, when we look at the ARPOP and we actually again look at the ARPP. As long as ARP is growing, we know that the revenue utilization is the — we know that it is pricing overall your business is improving in quality.
Sumit Gupta
Okay. So sir, just on the ARPP point only. So like your insurance has been consistently around 52% around nearly 52%. So how — like regarding the — like price hike, what kind of — what is the time frequency in which you take a price hike and we will do the ARPP and what are the overall drivers driving it?
Ramesh Kancharla
One is the price hikes. Number two is the case-mix. These are the two things drive ARPPs provided consistence in the similar set of patients. Let’s put it that way. Then you can fix the — you will have a — you will have a ALS to be more or less a kind of a not much of variation. So pricing is always be done everywhere, so you will just innovate to the kind of inflation and also the quality, every hospital looks at the kind of being a better-quality year-on-year and adding more-and-more complexities to the businesses.
Sumit Gupta
What is the magnitude of the price hike that we have taken over the last two to three years?
Ramesh Kancharla
See, the price hike was at around on the two fronts is a blended basis we have to do. On the gas side, last year we have not taken price hike, we have just corrected. But to the extent the competition was higher, we have just adjusted ourselves. This year, we will take some price hikes. So the working is going on, we are benchmarking also to the competitions, etc., looking at this one. So probably by March once we are finishing our budgets, we’ll take a call and then inform whatever price budget has been taken. As far as the insurance is concerned, they take a two years price and then fix it.
But generally, they keep dragging and it takes sometimes three years also, maybe more also sometimes. But on an average, once we do, it’s — we consider that it is going to be two, three years price hike. So the adjustment should happen at around 12% to 15%. So roughly 4% to 5% price hike from the insurance and cash we have to work it around because we are in the competitive landscape. And at the same time, we should not charge more with our patients. We have to be in healthcare. So we will balance ourselves, including the cost inflation, whatever is coming and balance ourselves to protect our EBITDA margin.
Sumit Gupta
Understood. And sir, lastly, so in the nine months FY ’25, so just — so your ARPU growth has been like it has been a decline of 6%. So what was the major reason? Like did you take any price hike or was it not taken and subsequently, there was an interior case-mix. So what really happened in that?
Ramesh Kancharla
What has fallen 6%, sorry, I could not understand.
Sumit Gupta
ARPOB 6% those.
Ramesh Kancharla
If you adjust the LOS, you will not get it because the LOS has gone up, right? Of LOS, your ARPU would have gone up. Or if you look at ARPP, it has gone by 7%, 8% basically.
Sumit Gupta
Right. So we should look at you are saying ARPP and then adjust through ALOS.
Ramesh Kancharla
Yeah, yeah. So we are disclosing ARPUB and LOS. If you multiply, you will get the ARP, we have seen year-on-year basis seasonal adjustments leaving upon. So you have to see the year-on-year basis. We have seen the ARPP growing actually.
Sumit Gupta
Understood, sir. Thank you.
Ramesh Kancharla
Thank you.
Operator
Thank you. The next question is from the line of Deveen from Marcellus Investment Managers. Please go-ahead.
Deven Kulkarni
Yeah, hi. So what’s the extent of price correction that we have taken? You just referred to refer to it while answering the previous question.
Ramesh Kancharla
So the price corrections, okay. So the last three years for the cash patients, we have not taken across-the-board price hike. We have just taken-up wherever we have benchmarked ourselves with the competition and increased it. The net impact may not be more than 1% or 2% basically if you look at. As far as the insurance is concerned, every year some cluster, et-cetera will keep coming for the renewal. And the impact of that, as we have just informed you, once we take-up one cluster or one hospital when we started, it should be 12% to 15% price hike and generally it is for two to three years’ times. So it is blended basis, it should be 4% to 5% basically. This year, since the budget is going on, we will review with our management and what the other hospitals are doing based on that and what are the cost inflation is expected to come? Because in our case, 40% is the manpower cost, right, including doctors and the other paramedic staff and the corporate staff. Considering that whatever the cost inflation is that we’ll adjust it and take a call on that.
Deven Kulkarni
Got it. And this 1% to 2% price correction that you have taken in which cities or which cohort of hospitals have you done it?
Ramesh Kancharla
This is across once we take, we take across cluster, sometimes somewhere higher, somewhere lower. So that way. Okay.
Deven Kulkarni
So like this is, let’s say, even in Hyderabad, Bangalore, which are your, let’s say, core or old markets as well as new markets across-the-board, you have taken a price correction.
Ramesh Kancharla
Correct, correct.
Deven Kulkarni
And it’s mainly OPD or IPD or both.
Ramesh Kancharla
Portbook across all?
Deven Kulkarni
Okay, got it. And my second question, so while answering an earlier question, you said that mature hospital can do around, 65% 68% occupancy. I remember that when we used to discuss this a year-ago, you used to say that a mature hospital can do 60% occupancy at peak. Now today that number seems to have gone up to, 65% 68. So has anything changed in the last one year that we have increased the occupancy cap. Earlier we used to expect 60 now 65.
Ramesh Kancharla
So it’s the overall trajectory you see as we kind of hospitals maturing, you know, the more-and-more hospitals coming into a matural stage. And also some of them are becoming a kind of a very the almost decades businesses. They will clock the higher occupancy definitely. So if you look at the blended — I mean, what I’ve said is that it could go up to up to 68%, but we cannot work more than 68%. I — for example, I have a few hospitals in Hyderabad. They do about that much occupancy. But those are the hospitals which I have a parental problem with the, okay. So that’s why basis on that I’ve told, but it will never come to a 60% of occupancy at a group level. It’s a possibility, but it can never come to because we always have a hospitals adding into the mature growth.
So the blended occupancies will come out to the kind of around 60%, maybe around 62%, 60%. What is the maximum possibility a hospital can clock is that 68%? That’s what I’m saying. At a group level, would that be possible? I don’t think it’s positive because see, I mean, what’s important is that it’s not checking the patient scenes. Children’s health-care is a different ballgame. Nobody would like to stay few hours extra in a hospital than required. That’s all drives the children’s healthcare. So because young parents and the children, nobody wants to stay-in a hospital, even fewers required compared to other hospitals where people are happy to stay-in few days extra. So therefore, that’s why we never compare ourselves to altered hospitals. It is an evolving story. We are still a pilot project. We are discovering the new path, new benchmarks all the times.
So the answer to the question what I’ve told you is how much it could go up to ease up to 68%. But at a group level, the matured hospital will it goes 68% means as you know, it is a year — at a yearly or quarter level is going to be a very difficult task. But anyway, what is a throughput is something which is required to look at it. If you are doing about your 60 plus percent of occupancies in mature, a blended occupancy of about 55%. You delivered your results. What does you want, you want our results, right? You, 56% of the blended, you will deliver it. If you do it 60% blended, you will do fantastic. So that’s how it is the dynamics of the children’s hospital. So we can’t keep people for — in the hospital more than few hours required.
Deven Kulkarni
I understood. Understood. And finally, so when I’m looking at your mature hospitals performance for Q3, it seems like the IP volume growth is 0%. In Q2, this number was 8% positive. So it has like slowed down from 8% to zero. Any reasons behind it?
Vikas Maheshwari
Mature? And sir, on the matured sides, the occupancy must-have seen gone up by right, on the sequential — sequential basis, it has come down, right, right sequentially, right, 68.6% to 60% occupancy. Obviously, quarter second is a seasonally strong quarter and we feel you see the influx of patients on that quarter. And if we have maintained the same trajectory in the quarter three, I think we have done a good job basically.
Deven Kulkarni
No, so I’m actually looking at year-on-year. So let’s say, the occupancy has increased from last year, sir. It was — no, just Q3 to Q3.
Ramesh Kancharla
Okay.
Deven Kulkarni
Yeah. So last year it was 56.5% occupancy and this year it’s 60%, but at the same time, ALOS has gone up from 2.6% to 2.9%. So net-net, inpatient volume seems to be flattish.
Ramesh Kancharla
That’s true. That’s true. That’s correct.
Deven Kulkarni
Yeah. So this exact number, if you look at Q2, that number had grown at around 8% Y-o-Y and Q3 is robust growth. So what has happened that the growth has come off.
Ramesh Kancharla
There is not a very particular, you know time. What happens is that you keep moving from the mature — non-matured hospital to matured hospitals. So that trajectory, whatever you’re looking at is a moving trajectory, right? So if you look at on like-to-like basis, if you are comparing probably we have seen the IB number growth of roughly two or by roughly 9% basically.
Deven Kulkarni
Okay. Okay. Yeah. Okay, good.
Ramesh Kancharla
So there is a movement of the bets which keeps happening. So that is where you are looking at. But on the standalone basis, if you look at matured hospitals growth only, it is roughly 9% basically. It’s a little confusing data because we are looking at the moving data and looking at the aesthetic data. So of the last quarter. So that is the difference.
Operator
Thank you. The next question is from the line of Nilesh Dat from Berman Capital. Please go-ahead.
Nitesh Dutt
Hi, just a quick clarification. The INR7 crore one-time impact that you mentioned, was it for Q3 of this year or was it during previous quarter?
Vikas Maheshwari
So quarter second and quarter three is evenly distributed, you can say almost evenly. So INR3.5 crore roughly in this quarter and the last quarter is a similar amount. So total INR7 crores in two quarters.
Nitesh Dutt
Understood. Thanks.
Ramesh Kancharla
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Ramesh Kancharla
Thank you. Yeah. Thank you. We appreciate your participation in today’s conference call and the insightful questions. Your support plays a vital role in our strategic progress and we truly value the time each of you has taken to understand our business and the future plans. For the further information, if any, please reach-out to Mr. Bandari, our Investor Relationship Head at Investor Relations at the Raterainbow. With this, I close the conference. Thank you for participation. Thank you.
Vikas Maheshwari
Thank you.
Saurabh Bhandari
Thank you.
Operator
Thank you. On behalf of IIFL Capital, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.