Rainbow Children’s Medicare Ltd (RAINBOW) Q3 FY23 Earnings Concall Transcript

Rainbow Children’s Medicare Ltd (NSE:RAINBOW) Q3 FY23 Earnings Concall dated Feb. 10, 2023.

Corporate Participants:

Ramesh Kancharla — Chairman and Managing Director

R. Gowrisankar — Chief Financial Officer

Analysts:

Amit Shah — CDR India — Analyst

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Bansi Desai — JP Morgan — Analyst

Tushar Manudhane — Motilal Oswal Financial Services Ltd — Analyst

Mayank Hyanki — Axis AMC — Analyst

Vinayak Mohta — Stallion Asset — Analyst

Karthik Narayan — SCP — Analyst

Naman Bhansali — Perpetuity Ventures, LLP — Analyst

Arpit Shah — Stallion Asset — Analyst

Aneesh Deora — Nomura — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Rainbow Children’s Medicare Limited Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Amit Shah from CDR India. Thank you and over to you sir.

Amit Shah — CDR India — Analyst

Thank you, Aman. Welcome everyone to the earnings conference call of Rainbow Children’s Medicare Limited to discuss the financial performance for the third quarter and nine months ended December 31st, 2022. We have with us Dr. Ramesh Kancharla, Chairman and Managing Director; Mr. R Gowrisankar, Chief Financial Officer; and Mr. Saurabh Bhandari, Group Business Analyst.

Before we begin, I’d like to point out that certain statements made on today’s call could be forward-looking in nature and may involve certain risks and uncertainties. So detailed statement in this regard is available in the Q3 FY resuts presentations just posted in the company’s website and also available on the stock exchanges.

I’d like to invite Dr. Ramesh to make his opening remarks. Thank you and over to you sir.

Ramesh Kancharla — Chairman and Managing Director

Good morning, everyone. I extend New Year greetings to all of you. Wish you all a healthy and prosperous New Year. It gives me immense pleasure to welcome you all to the earnings call for the third quarter and first nine months of the current financial year. Rainbow was the first Stock Exchange listed pediatric chain in the English-speaking world. Consequently, there was no peer comparison for the analysts and investors in the listed universe. So even after we had — we had to studiously engage investors, both in India and overseas and explain the various business — building blocks of the Rainbow business model, its key differentiators and the significant market opportunity. Our efforts are bearing-fruit and there is a perceptibly better comprehension of our business model among the investor and analyst community today.

Before building on results, I would like to highlight the salient aspects of our operating model given that we have recently listed company for the benefit of new listeners and we go through results. Rainbow is currently country’s largest pediatric hospital chain with the 15 hospitals, 1,550 beds across six cities. Our pediatric services under Rainbow brand includes newborn and pediatric intensive care services, pediatric multi-specialty, pediatric quaternary care, including organ transplantation. BirthRight by Rainbow is an integral part of Rainbow hospital, is a perinatal center offering normal and complex obstetric care, multi-disciplinary fetal care, perinatal genetics and fertility in addition to gynecological services.

Rainbow Children’s hospital built on a strong fundamentals of multidisciplinary approach with a full-time 24/7 consultant-led service in a child-centric environment. Children’s hospitals across the world have been built on these core fundamentals. We follow a hub-and-spoke model where the hub hospital provides comprehensive multi-specialty pediatric services with an advanced tertiary and quaternary care services, while the spoke provides 24/7 emergency care large outpatient as well as inpatient services for the wider coverage of the cities. We run the country’s largest academic training program for pediatrics and pediatric super specialties in the private healthcare sector offering postgraduate training in the residential DNB program as well as fellowship programs.

First, performance for the quarter, historically, the strong momentum of the second quarter continues into the third quarter, that is high occupancy, large patient footfalls and relatively robust financial performance. We experienced a similar trend from the second quarter into the third quarter across all key operating metrics like occupancy, outpatients, inpatients and delivery volumes across all our hospitals. The occupancy for the current quarter was 57.06 compared to the 51.55% in the corresponding year of last financial year. The occupancy was lower compared to the previous quarter as a result of a significant — the seasonal volume witnessed in the second quarter. The ARPOB for the current quarter was — stands at INR48,700 rupees, which is a growth of 7% compared to the INR45,600 in the corresponding quarter of the last financial year and the growth of 4% compared to the previous quarter of ARPOB of INR47,000. I’m pleased to inform you that the company has delivered robust quarterly performance led by high patient footfalls across all hospitals in every geography. The revenues for Q3 stood at INR366.4 crores, the growth of 23.17% EBITDA of INR106.7 crores, which is a — stands at 19.59% compared to the previous year. The PAT Q3 of FY ’23 is INR58.2 crores, which is a growth of 28.87% compared to the previous year. Further, we have concluded our negotiations with the insurance companies for the heavy work cluster and the new insurance tariff will be applicable from the next month. With this, we have renewed all our major insurance contracts across the group.

In terms of expansion, the spoke hospital in way OMR Road in Chennai have commenced operations in 2022 and this is going as per the expectations. The new hospital in Hyderabad Financial District is 100 beds is close to completion. It’s going to be operational in few weeks time. This is a strategically located in the rapidly-growing Financial District of Hyderabad with a lot of fine population. We are adding another 50-beds to our Hydernagar branch, which is a having a difficulty in accommodation — accommodate new volumes. So this is a block which is building — getting built adjacent to the Hydernagar for that demand, which is expected to come in over the next six months time. So the other branch in Hyderabad city, which is in the Central Hyderabad, is progressing well, which is expected to commence in the next financial year.

So we will deepen our presence in Chennai City with another 80 beds hospital, which is currently being — currently in-construction phase. It’s going to come into operations by next financial year. The work commenced for 60 beds spoke in Bangalore on the 100 beds regional spoke in Rajahmundry in Andhra Pradesh are expected to be completed in 18 — 18 months and 24 months, respectively.

I got to a bit of clinical excellence. From the clinical side, I’m pleased to inform you that we have surpassed outpatient volumes of last full-year and the current nine months and close to inpatient volumes of the last full-year. As the current year being normal with the rigorous schools, we have witnessed a significant increase in the outpatient and the inpatient volumes with the pronounced with seasonal invoices. And some of them were actually very seek requiring intensive — requiring incentive care services. Our doctors and paramedics have been extremely busy all through the nine months and the trend seems to be continuing. I am pleased to share that our outcomes of obstetric care have been very good. The liver transplant survival for last nine months been over 90%, which is very close to the standard. And pediatric cardiac surgical mortality is less than 2%, which is close to international standards with the 50% being the complex congenital heart conditions. So I take this opportunity to thank all my doctor colleagues and paramedical staff for putting an untiring efforts to deal with such a large volumes yet achieving excellent outcomes. The CDC Exit — during this quarter, our long-term investors for nine years British International Investment Plc formerly known as CDC Group Plc divested the balance produce shareholding of 14.545% stake in the company, which was subscribed with a marquee long-term investors. I welcome all the new investors to the company.

In conclusion, to summarize the current quarter, the first nine months of the year largely been as per the expectations, the business has returned to back to normalcy with our operating parameters demonstrating the strong growth. With that, I conclude and hope to continue our conversation in the subsequent quarter.

Over to our CFO, Mr. Gowrisankar to present the financial numbers.

R. Gowrisankar — Chief Financial Officer

Thank you very much sir. Good morning to you all and wishing you all a very happy and healthy New Year. I would like to thank you all for joining and — taking out your time and joining this earnings update call. So I would like to share some few insights on our financial performance during the period under review. First, I will go with the quarterly performance.

So moving on to the quarterly performance, revenue stood at INR306.4 crores, growing by 23% over the corresponding quarter three FY ’22. EBITDA margin for Q3 FY ’23 stood at 34.84%, which is at INR106.76 crores. EBITDA has grown by 20% over the corresponding quarter last financial year. PAT for Q3 FY ’23 stood at INR58.24 crores, PAT margin for the quarter stands at 18.5%, and PAT margin for the current quarter Q3 grew by 29% over corresponding quarter of last year. OP and IP volumes for the current quarter have grown by 37% and 16% over the corresponding period of FY ’22. We have recorded an impressive 57% occupancy during the quarter, matured hospitals have witnessed a 63% occupancy, and new hospitals have witnessed 42% occupancy during Q3 of FY ’23. Our return on capital employed and return on equity stands at 8.23% and 5.96% for the Q3 of FY’ 22, which are not annualized. Our payer mix for the quarter stands at 49% credit and 51% cash. And with respect to nine months performance, so on the basis of consolidated financials for nine months FY ’23, we have delivered a revenue of INR857 crores as against INR761 crores in the corresponding period of last year. The top-line has grown by 12.5% over last year, and if we exclude the COVID vaccination impact of INR92 crores, which is one-time, so the revenue — the normalized revenue has grown by 28% over the last year’s actual revenue.

EBITDA margin stood at 35%, growing by 16% over for the nine months period of FY’ 22 and stands at INR298 crores. Profit after tax for nine months FY ’23 stood at INR158 crores as against INR126 crores for the nine months FY ’22. PAT margin — PAT grew by 25% over nine months FY ’22. OP volume grew 47% and IP volume grew by 24% and delivery numbers have grown by 12% over the corresponding period of FY ’22. ARPOB for nine months ended FY — December FY ’23 has grown — has shown a growth of 7% over corresponding periods ARPOB, this excluding the vaccination — the one-time core vaccination impact. Occupancy stood at 54% for nine months period in FY ’23 compared to 46% of the corresponding period of FY ’22. So during this nine months we have incurred a CapEx of about INR88 crores and for the quarter Q3 we have incurred about iNR29 crores of CapEx. This is towards our OMR financial district, Karnataka and Marathahalli projects, and our regular CapEx. So, we have utilized INR60.9 crores from the IPO profits towards repayment of NCD and for project CapEx as stated in our prospectus.

With this, I conclude my remarks. Once again, I would like to thank you all for joining this call. We can open for question-and-answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Madangopal from Sundaram Mutual Fund. Please go ahead.

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

Good morning, Mr. Ramesh.

Ramesh Kancharla — Chairman and Managing Director

Good morning.

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

Congrats on the good set of numbers. I have just one question, from an occupancy point of view, sequential decline in new hospitals, but in the same period matured hospitals occupancy has improved sequentially, how do we read this and from next say one or two years perspective, how do you see the new hospitals improving the occupancy levels, if you can comment on it?

Ramesh Kancharla — Chairman and Managing Director

Yeah, thank you, Mr. Madanagopal. Generally, the occupancy which we’re talking about is quarte- wise, right. So, when we look at the quarter-wise, even in the matured hospitals we have seen some decline, 67% to 63%. In the maturing hospitals 47% to 42%, this is because of — what we do is, generally second and third quarters are the peak seasons for the pediatric business, however, this changed a little bit. What we’ve witnessed is — in the second quarter is, there is — the significant illness which required admissions, more of a short term admissions that gave viral illness, I mean people coming into hospital for a day or two that pushes up the occupancy, so that is seen in both of matured and maturing hospitals. When we look at that moving into the kind of third quarter, what we’ve seen is, though there is a decline of an average about 3.5%, but we don’t see that significant revenue to it has. So that quality comes into play. So, at some point, sometimes it moves to the third quarter sometimes from the second quarter, it all depends on the monsoon seasons and various other factors.

R. Gowrisankar — Chief Financial Officer

And also, Madan, to add to Dr. Ramesh, the OMR facility which was there in Q2 only for a month, had a full impact in this quarter, it’s a very recent facility, maybe occupancy tends to be lower, hence you see that impact of occupancy on a sequential quarter being poor.

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

So how do we see this new hospital’s occupancy improving say in two years, should we look at from a yearly perspective, them touching around 50%-55% levels, is it — 55% looks possible in the new hospitals?

R. Gowrisankar — Chief Financial Officer

Yeah, obviously, some new hospitals are coming up now also. I’m talking about the ones which are already operational and categorized as New Hospitals.

Ramesh Kancharla — Chairman and Managing Director

I think, well, we have discussed this in the past as well, so what happens is the Pediatric hospitals, the business is very, very organic unlike multi-specialties, where you have — we don’t do much of government, it is more of an organic business, so it takes its own time, but at the same time, when you look at it — our — where we breakeven easily — breakeven in our hospitals is 30% compared to multi-specialty to breakeven of close to 40%. So, therefore, I think the growth for us is kind of pretty steady, it takes its own time to — the capacity building is always very, very important because that’s what we see today in Hyderabad is setting up. We are — we are having a difficulty in accommodating patients that we are kind of expanding in Hyderabad significantly.

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

So, you’re saying it’s a steady improvement from the current that should be expected. One more question on the new facility that you have added in OMR in Chennai. Typically, in last two years, what sort of occupancy do you really target compared to the overall, be the other hospitals are coming up?

Ramesh Kancharla — Chairman and Managing Director

I think, see, we rather than targeting it, what we look at is, our projection is always been like how do we kind of capture the market to see in terms of OPD footfalls, then it comes to the of other metrics like our — the ICUs are filling up, how the deliveries, the numbers are increasing, that’s how we look at it. In terms of occupancy per se is something, it’s kind of — it moves to kind of end-of-the-year 30%, these are pretty impressive for us. Whenever you see our occupancy clocking at 30% at the end-of-the-year is a success story for us, because we breakeven at that point.

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

Okay.

Ramesh Kancharla — Chairman and Managing Director

I would expect OMR to go that way in Chennai.

Madanagopal Ramu — Sundaram Mutual Funds — Analyst

Great, sir, thank you, and wish you all the best.

Ramesh Kancharla — Chairman and Managing Director

Thank you, Mr. Madan. Thank you.

Operator

Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah, sir. Sir, I have three questions. To the previous participant, how much time does it take to reach the 30% occupancy once the hospital is open? That’s my first question. My second question is on the insurance price hike that we received at the beginning of the year, has that slowed down your revenue number or is it yet to slowdown your revenue and margin? And my third question is, I just wanted to understand the count of beds that are going to get added, have been added in FY ’23 or supposed to be added in FY ’23 and Fy ’24?

Ramesh Kancharla — Chairman and Managing Director

So, the first question is that now we typically breakeven at 30%, 31% as occupancy, which normally we guide, we expect that our breakeven — cash breakeven comes about 18 months in the existing cities where we are already present, so from there it keeps moving on. The second question is about.

Pritesh Chheda — Lucky Investment Managers — Analyst

Insurance price hike.

Ramesh Kancharla — Chairman and Managing Director

Price hike? So, we now — currently, we have already had a price hike of insurance in Chennai, Bangalore, and Delhi of 25% hike that we did, and currently, we matured that with — I think the price hike is about — around 9% to 10% price hike what we got in Hyderabad.

Pritesh Chheda — Lucky Investment Managers — Analyst

And that’s about more than 50% of our business, right?

Ramesh Kancharla — Chairman and Managing Director

Yeah, that’s right.

R. Gowrisankar — Chief Financial Officer

Only on the inpatient business, Pritesh, just to confirm, the outpatient business is separate, whatever insurance tariff hikes that we’re talking is only on the inpatient business.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, can you quantify what portion of the total business, 50% in Hyderabad and inpatient is how much percent of that?

R. Gowrisankar — Chief Financial Officer

So, inpatient is generally about 72% — between 70% to 72% of our business and about 28% to 30% of our business is outpatient business.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, 40% of our — so, which means 40% of our business and then there will be a payer mix of insurance, which is another, let’s say 40%, so, let’s say, one-fourth of our business has had 10% price hike?

Ramesh Kancharla — Chairman and Managing Director

Correct, you are right.

R. Gowrisankar — Chief Financial Officer

You are right, yes.

Pritesh Chheda — Lucky Investment Managers — Analyst

And that should start reflecting from next quarter, right?

R. Gowrisankar — Chief Financial Officer

No, so far Bangalore, Chennai, and New Delhi, it was done in last year, so you have already seen that being reflected in the ARPOB and the revenues over the period. It’s the Hyderabad, only that we have done now and this tariff hike would be there from next month onwards, so you will see the impact coming in from the Q4 — half of Q4 and Q1 onwards, particularly in Hyderabad market, rest is already priced.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah, so we calculated Hyderabad, after all calculations has one-fourth, right? More than 50% business is Hyderabad in which inpatient is 60%, 70%, in which payer mix is about 40% via insurance, so that’s how we calculate it, right?

Ramesh Kancharla — Chairman and Managing Director

Yes, yeah. Yes, sir, you’re right.

Pritesh Chheda — Lucky Investment Managers — Analyst

And, sir, the bed count, if you could tell us what is the bed count addition in FY ’23 and FY ’24? Incremental beds I want to know.

Ramesh Kancharla — Chairman and Managing Director

Okay, so we had earlier guided, I think about 150 beds per annum, where are we on that?

R. Gowrisankar — Chief Financial Officer

I think we’re right on-track, actually the — currently, we have done 55 beds in Chennai and 100 beds to be inaugurated in the last quarter of the current financial year. Moving on to the next financial year, we have about 80 beds coming in Chennai city, in Anna Nagar and also we have 60 beds coming in Hyderabad, at Central Hyderabad, other 50 beds coming in the addition to one of the spokes in Hyderabad, cumulatively there about 200 beds are going to come next year.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, you mentioned 55 has already come in Chennai plus 90 at the year-end plus another 50 next year, that is Chennai, right? Then you mentioned Hyderabad as next year only all the beds, how many you said?

Ramesh Kancharla — Chairman and Managing Director

Hyderabad is going to be added — we are going to add 200 beds from now to the next 10 months time, so the current year we will have about 100 beds addition, the next year we will have about 80 plus 60, 140 beds.

Pritesh Chheda — Lucky Investment Managers — Analyst

This is what — this is Hyderabad?

Ramesh Kancharla — Chairman and Managing Director

Hyderabad, yeah.

Pritesh Chheda — Lucky Investment Managers — Analyst

80 plus 140?

Ramesh Kancharla — Chairman and Managing Director

80 plus 50, 130 beds.

Pritesh Chheda — Lucky Investment Managers — Analyst

80 plus 50, okay, okay. done, sir, Thank you.

Ramesh Kancharla — Chairman and Managing Director

Thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Bansi Desai from JP Morgan. Please go ahead.

Bansi Desai — JP Morgan — Analyst

Yeah, hi, thank you for taking my question. Sir, I have two questions. So, firstly, on the mature hospitals, we’ve done good occupancy of 63% and I’m assuming Hyderabad cluster would have done better than this, so my question is, how are the other hospitals, especially in the Bangalore cluster doing for us, Marathahalli, BG Road, I guess, these two had lot of scope of improvement in terms of occupancy margins, so if you can just comment on how are the trends here, what are you seeing and what’s ‘ the outlook to NIMS especially.

Ramesh Kancharla — Chairman and Managing Director

Ms. Desai, Bangalore is doing well and we had a occupancy of — we don’t — we have done as a matured and maturing hospital, so in Bangalore, we had one maturing hospital, one or two maturing hospitals, together occupancy is a about 40% to 42% — 42% in Bangalore Trust.

R. Gowrisankar — Chief Financial Officer

All put together, which was 30% in last quarter together.

Ramesh Kancharla — Chairman and Managing Director

So, what we have seen in Bangalore is a significant outpatient buildup in the last one year, and also there is — occupancies have increased in both primarily our main hub hospital as well as Bannerghatta Road Hospital. So, when you look at these two hospitals together, they have gone past 50% occupancy.

Bansi Desai — JP Morgan — Analyst

You’ve got — 50% is what you said?

Ramesh Kancharla — Chairman and Managing Director

Yes, 48.8%, yeah, close to.

Bansi Desai — JP Morgan — Analyst

Okay, that’s nice to hear. And, sir, my second question is on the New Delhi cluster, so, your — I remember last time you had mentioned in the previous quarter, Delhi was seen good traction, so if you can comment on how it has done in this quarter and then what are you, I mean, where are you in terms of your expansion plans you in Delhi, you’ve spoken about adding 200 beds in the next two, three years, so any update on that?

Ramesh Kancharla — Chairman and Managing Director

Yes, So, Delhi is actually tracking well. This current year, there is no — one is our Madhukar Rainbow Children’s Hospital, that’s one, other one is Rosewalk. Rosewalk is only the boutique center. The main hospital in Delhi is seeing — it’s a positive EBITDA this time and we are talking about 40% occupancy this year, and deliveries have picked very well from Delhi. I think we do largest number of deliveries in South Delhi today. Intensive cares are getting busier, so we see positive traction at Delhi, Madhukar Rainbow. The Rosewalk, which was kind of a loss-making last year, and it’s come to the EBITDA neutral today, so we have changed our model to Rainbow model, earlier it used to be kind of a luxury birthing center. So we changed the model to more like our are birthright services, so ever since that things are changing in a positive direction. So, we hope to kind of do well in the coming year.

Bansi Desai — JP Morgan — Analyst

Okay, sir. And any update on the expansion?

Ramesh Kancharla — Chairman and Managing Director

Expansions, I think that work is in-progress, probably I think I’ll be able to give a better update in the next quarters.

Bansi Desai — JP Morgan — Analyst

Sure, sir, thank you. I have more questions, I’ll join back the queue.

Ramesh Kancharla — Chairman and Managing Director

Thank you. Thanks a lot.

Operator

Hello, Tushar, please unmute your line and proceed with your question.

Tushar Manudhane — Motilal Oswal Financial Services Ltd — Analyst

Is it my turn?

Operator

Yes, Tushar Manudhane from Motilal Oswal. Please go ahead.

Tushar Manudhane — Motilal Oswal Financial Services Ltd — Analyst

Okay, thanks, thanks for the opportunity. Sir, just on the OP side, on the existing hospitals, what is the further scope to increase the OP volumes? Because if I say the current volume and let’s say number of hospitals is only 15, so it roughly comes out to be 3,000 [Technical Issues] OP volumes. So how much is the further scope to switch?

Ramesh Kancharla — Chairman and Managing Director

There is a significant scope to increase further volumes because we have almost 40% of the hospitals are new. We keep adding the new hospitals, so that’s where the OP volumes keep building it up. And also the — even the existing hospitals also continue to grow because there is lot of services are there, like specialty services, so they keep growing. So, our — when you look at it up, this is the first year coming back from the pandemic, what we’ve seen is almost 45% growth, 47% [Speech Overlap] 47% growth from the last year, our outpatient volumes and we expect to see that significant growth year-on-year. As we grow the number of hospitals, the OP volumes keep growing further.

Tushar Manudhane — Motilal Oswal Financial Services Ltd — Analyst

And sir, what’s been your experience in terms of any seasonality related to OP volumes?

R. Gowrisankar — Chief Financial Officer

Seasonality is related to.

Ramesh Kancharla — Chairman and Managing Director

Yeah, of course, seasonality plays a big role in the Pediatric business. Almost — seasonality variation is almost 25% to 30% volumes, which we see for — second and third quarter volumes are almost — to be almost 20% different from that first and fourth quarter, so that’s been the season.

Tushar Manudhane — Motilal Oswal Financial Services Ltd — Analyst

So, fourth quarter would be better off, right, compared to third quarter?

Ramesh Kancharla — Chairman and Managing Director

Yeah.

Tushar Manudhane — Motilal Oswal Financial Services Ltd — Analyst

Okay, sir, thanks. That’s it from me. Thank you.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Mayank Hyanki from Axis AMC. Please go ahead. Mayank, your line is on mute, so I request you to please unmute yourself and proceed with your question.

Mayank Hyanki — Axis AMC — Analyst

Yes, hi, thank you. Yeah, good morning. My question is on Madhukar Trust Hospital, basically. So it sounds like you mentioned the profitability levels in the Rosewalk, if you could highlight the profitability of Madhukar Hospital, how is that trending? And on the ICDs part, is the hospital now able to service it’s ICDs interest rates payments to the parent company?

Ramesh Kancharla — Chairman and Managing Director

So, yes, this year, I think the Madhukar Hospital has done about 10% EBITDA. It is a positive trend and is picking-up well. And with respect to the serviceability of that ICD, yes, that could — in the last quarter, we got back about INR2.5 crores of ICD money back from that hospital. And we are not inclusing any funds. So it is sustaining — as per that, it starts to be paying the money as well.

Mayank Hyanki — Axis AMC — Analyst

So this year, basically, we see the overall outstanding amount of ICD plus interest coming off for the period.

Ramesh Kancharla — Chairman and Managing Director

I — see, not in one year, maybe — it may take two years, but we can get it. So they’re — coming year as well as next year, we will do it actually. We can get back the money.

Mayank Hyanki — Axis AMC — Analyst

So I’m just saying it will start coming off. The number will start coming off this year itself.

Ramesh Kancharla — Chairman and Managing Director

Yes, yes. You are right. It will come down. Yes.

Mayank Hyanki — Axis AMC — Analyst

Got it. Secondly, on the doctor consultancy charges, has there been any change in the model that will this number is moving much ahead of the top-line? And, I mean, bearing FY ’21, where their top-line got impacted, we have seen this ratio as a percentage of sales was also quite lower, not quite lower, but few percentage points lower than what it is in this quarter, per se. So is it just because of the new hospitals, where the cost is upfront or has there been any change in the way the remuneration is paid out or — or any changes of the structure completely?

R. Gowrisankar — Chief Financial Officer

So generally in a growing stage of hospitals will always been a growing stage. And our — the professional charges, which is to doctors, about — normally we guide about 24%, so it varies between 23% to 24%, maybe a little over the 24% depending on the number of new beds handed. So when we kind of have new hospitals because Rainbow always hires doctors and full-time basis and also on the retainer basis, definitely going to have new beds — more new beds. It would probably go up by half percent or so under consolidated level.

Mayank Hyanki — Axis AMC — Analyst

Okay. Got it. Yes, one more question, which I had was on the attrition side. So while the attrition for the industry is pretty large, we have seen that even at the time of IPO, attrition was pretty high. For FY ’21, it was blocking at about 45% or so. So how is the attrition now? And is there any steps that you are taking to address this issue?

Ramesh Kancharla — Chairman and Managing Director

There are two things, one is the attrition at the doctor level, is very minimal for us, the attrition at the staff and nursing level and those things. So during the pandemic turn, we have witnessed quite a significant number because even pandemic has negatively played on children’s Hospital. So — those — these, we were actually kind of a not too concerned to kind of to lower the numbers because we were not doing a great occupancies because of pandemic had no impact on children’s healthcare. So now the currently what — we’ve actually got back to the industry standards and we took erosion 20%, 22%. That’s well within the industry standards.

Mayank Hyanki — Axis AMC — Analyst

So 22% is for the non-doctor staff or for the company altogether on doctors?

Ramesh Kancharla — Chairman and Managing Director

Yeah. Non doctors.

Mayank Hyanki — Axis AMC — Analyst

Okay. Okay. Great. Thank you. That’s all from my side.

Ramesh Kancharla — Chairman and Managing Director

Thank you. Thank you.

Operator

Thank you. The next question is from the line of Vinayak Mohta from Stallion Asset. Please go ahead.

Vinayak Mohta — Stallion Asset — Analyst

Hello. Yeah. Good morning, sir. Am I audible?

Operator

Sorry Vinay. Please use the handset. Your speaker not very clear.

Vinayak Mohta — Stallion Asset — Analyst

Sure. Is this better?

Operator

Much better. Thank you.

Vinayak Mohta — Stallion Asset — Analyst

Yeah. So, sir the first question I wanted to ask is two-fold. I just wanted to understand what is the potential that you see in an existing south location. Like, what is the potential number of beds or hospitals that you could have added over — the next five years, seven years, whatever potential you see? The second question was, in general, when you move into a new location like Delhi or you will be moving forward into new locations, how long does it take to breakeven or to generate that traction there? Because from what I understand is being for — as a children’s hospital, every region or a sub location within that region as well has a certain hospital, which people prefer going towards, which they have seen their parents or some relatives go to. So people don’t generally — people are not generally very — they are very thoughtful about going to a certain hospital that they know when it comes to a child. So, how do you build that transaction and how long does it take to?

Ramesh Kancharla — Chairman and Managing Director

Yeah. Excellent. Very good question. The reason one is that, how large we can get to. So I never imagined that we could get to this large and Hyderabad City. So we are marching towards 1,000 beds, probably in a year down the line in — in a year down the line in Hyderabad City. So that’s the phase, which we will almost come to a closer to the multi-specialty trade in Hyderabad City. So when we look at going to Bangalore and Chennai since we’re adding more and more spokes on getting larger and larger. What I — so when you typically go into the new city, so this is something what we typically do is when you go into new city, we are going to — we normally we look at building a hub hospital. So what is a shortage in children’s healthcare for in each city is that a multi-specialty children’s Hospital. That’s what we shortage. There are many small, small mom-and-pop stores are there everywhere. So they have to cater for seasonal, minor illnesses, seasonal illnesses of things. So we go into the city with the concept of a children’s hospital, which is a multi-specialty, where there is a children, who could be treated with the further complex conditions are particularly unbuilt children. So that is our drive. That’s always been our drive. That’s how we went in Bangalore, we went in Chennai, we went in Delhi now, we went in Vijayawada. So there is — this is a — then once you kind of establish our hub hospital, which typically takes any like multi-specialty, going into new city, we’ll definitely take three years to four years time tp kind of get into the game. Then — then you start building the spokes — spokes in the area, which is a rapidly-growing parts of the city, and — to kind of one is to achieved wider coverage of the city. Second thing is to kind of — by then you brand would have built more than people wants to come to you because the cities are all large and the distances are also kind of a travel time is met significant. So therefore, we try to work around the spokes. This is a typical model, which actually we have seen is the most, probably a kind of a way forward for children’s healthcare is hub-and-spoke model to cover the wider part of the cities of Indian cities.

So we’re talking about two different things, one is that small children’s hospitals, women and children hospital also, five beds, 10 beds, they are nothing on level what is model setups. So, Rainbow looks at kind of very different spectrum, where we don’t compete with those even individual pediatricians, who are doing smaller, perhaps most of them actually are eventually kind of becomes network — smaller hospitals are network doctors to differ complexities — complexities and specialty hospitals towards our side, towards Rainbow. That has happened in Hyderabad, that’s tracking in Bangalore and Chennai. So this is what we expect to do, whichever the city we enter in.

Vinayak Mohta — Stallion Asset — Analyst

Understood. So it is sense to assume that you will — because you are reaching that majority stages in Hyderabad, Chennai and now, eventually you will Delhi after low couple of yours. So, then you’ll have scope to move 1,000 — closer to 1,000 beds in these cities. And eventually you will move to a new city then like you did in Delhi will be to build your three year, four year of gestation period before which you can start expanding into the spokes and eventually towards the 1,000 potential beds that come in those cities, right?

Ramesh Kancharla — Chairman and Managing Director

Yeah. It keeps happening parallelly, the new city as well as the spokes in the existing city.

Vinayak Mohta — Stallion Asset — Analyst

Understood. And sir, what — generally, what is your CapEx for bed in general in the spokes and the hub hospital? And what kind of ROICs do you see that generally, for example, would be coming off in Hyderabad? And how long does it take a new hospital to reach — to that kind of ROIC?

Ramesh Kancharla — Chairman and Managing Director

See, typically what happens is, in places where we are already present, for example, we are up — in Hyderabad, we’re a super matured hospital. So if we do a hospital in Hyderabad, it’s very unlikely to have any EBITDA negativity for the — even at the end of the first year. So it will EBITDA breakeven offers some positive EBITDA, because that’s — that is brand recall and image what Rainbow enjoys in Hyderabad. So, places like in Bangalore and Chennai, now, I think we would do a positive EBITDA, probably in 15 to 18 months time. So there also that brand recall is high, people knows about Rainbow model. So we are now working in Delhi that because Rainbow is kind of started doing well in Delhi that now we look at the Delhi differently to start looking at more of a NCR rather than Delhi alone. So we — in terms of cost per bed, it’s — when you go for brownfield project, it depends on building to building and also location wise. Normally, we expect it to be about INR60 lakh per bed. And if we do a kind of a greenfield project, I don’t think will be any different from the multi-specialty because today’s standards are pretty same for children’s hospital or multispecialty hospital to build to the standards of national building — to the other statutories and regulatories.

Vinayak Mohta — Stallion Asset — Analyst

Understood. Understood. And one last question. So we have around 1,555 beds Capacity and 1,171 Operational Beds. Where do you see this like GAAP moving towards in the next three years? What kind of Operational Beds do you see in the next two to three years? And how much does it cost you to move and — move a normally Capacity Bed to an Operational Bed? Like is there some incremental costs that you incur or? Yeah.

Ramesh Kancharla — Chairman and Managing Director

No, basically — we are — we are going to add another — this year, we are going to add another 100 beds actually. So next year we are going to add about 200 beds. So in the coming year, after that also another 200 beds we get added. So if you see, we will — we’ll be adding about 500 beds actually, so which will cost us almost about INR300 crores. And that is — and then moreover, these are all new beds. And with respect to the existing one, we don’t have much of capacity. There is — always we are explaining that the Capacity Beds and that Operational Beds and what are — we have — we have that non-consist beds actually. So we have lot of triage beds and all there, which will not be taken into account for occupancy count actually. So there we may not be incurring much for adding the capacity. The capacity — the capacity addition will be towards again the CapEx will be towards the new facilities.

Vinayak Mohta — Stallion Asset — Analyst

Understood. Understood. Great. Thank you so much, sir, and all the best.

Ramesh Kancharla — Chairman and Managing Director

Thank you. Thanks. Thanks.

Operator

Thank you. The next question is from the line of Karthik Narayan from SCP. Please go ahead.

Karthik Narayan — SCP — Analyst

Hey, thank you. Again, congratulations on a fantastic set of numbers, and thanks for all that you do. Both my questions are follow-up questions to earlier questions. I think the first one was with respect to the insurance hike. So you’ve mentioned around 8% to 10% in Hyderabad, which will be reflected in the future on the coming quarters. What was the hike you received in the other cities, which has already been reflected if the numbers? I think that’s the first question.

Ramesh Kancharla — Chairman and Managing Director

Yeah. I think what we had — because Hyderabad is sequentially — we’ve been kind of going on the hikes. So the Chennai, Bangalore and Delhi, the hikes have happened after a long time, post-COVID, first time, which is why we had a fairly a decent correction to the 25% what most of the — all the three geographies. That’s already reflected from the second quarter.

Karthik Narayan — SCP — Analyst

Understood. Understood, sir.

Ramesh Kancharla — Chairman and Managing Director

Hyderabad is about 9%. That’s because we’re kind of what we’ve got — we enjoy fairly our premium rates in Hyderabad.

Karthik Narayan — SCP — Analyst

Understood. And so the — that’s helpful. My second question sir, again, was related to your — the doctor costs. I think a gentleman had asked about the change — there is a change in business model, where you mentioned that it is with respect to new hospitals coming on stream versus the 20 — 24% or 25% revenue growth, we have close to 40% doctor cost increase. So is that — is it fair to assume that will likely be the increase going forward as well, given our expansion plans of 100, 150 beds every year?

Ramesh Kancharla — Chairman and Managing Director

I think we — I expect it to be around 24%, if you ask me that so this is how it is unless. We kick up completely different tangent and hiring doctors differently. But as Rainbow model, we always bank on full-time doctor engagement model. So we’ve given the retainers significantly. We also look for the talent, rather than practices of doctors. See what happens in the children’s healthcare scenario, here doctor with 100 patients will not transfer the business to Rainbow because he is only a primary care doctor. So we look at the doctors who are qualified, who are intensive care doctors, who are — been trained very well from Central Institutes or outside the country. So obviously we need to give them retainers for them to be comfortable to work with you for longer periods. So there’s investments which we were made, which we make. So, as a good number of expansions going on, we recruit more number of this retainer doctors. That’s what pushes up. At the same time, the doctors, who are — the hospitals, which have kind of been in full-fledged — full capacity running hospitals, so it moderates the overall doctor costs? So blended, what we look at it, if you ask me where I wanted to be? I wanted to between 23 to 24. One, I wanted to achieve me being a doctor promoter, being a medical hospital and our doctors have got a very different responsibilities also. They got to cover the hospitals in the middle of the night as well. Almost all the hospitals are manned by a senior consultant. So compared with the combination of all those things, I think that’s very fair that what we do to the doctors is very good under– and — which is why very popular. We are very popular among doctors. So second important thing is where we get optimization when you look at the peer groups of adults, where there is — there is some moderation, I mean advantage for us in the — in consumables. There were 5%, 6% difference is there. We can optimize other costs. So we don’t have so much of our marketing costs like adults. So there are a lot of other areas, which we optimize it and trying to see that doctors are paid well and work well also. This is understood. These are primary goals of our children’s hospital.

Karthik Narayan — SCP — Analyst

Understood. No, so, thanks. Thank you. Thank you for the clarification and again congratulations on a fantastic set of numbers.

Ramesh Kancharla — Chairman and Managing Director

Thank you much Karthik.

Operator

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

Naman Bhansali — Perpetuity Ventures, LLP — Analyst

All right, sir. I have just one question. And — what would be pre Ind-AS margins for the quarter?

Ramesh Kancharla — Chairman and Managing Director

So pre Ind margin for the quarter is to — the pre Ind-AS EBITDA INR91 crores. In terms of percentage, it will be about 29%. Yeah.

Naman Bhansali — Perpetuity Ventures, LLP — Analyst

Okay. And during the — I think during the pre-IPO meeting, I think we have mentioned about the post-IPO, the first con-call we had mentioned about the sustainable margins to be around 24% to 25% pre Ind-AS basis. So what is the gap we are seeing on the 29% to 25%? And how would you go forward in the going-forward — how would you look at it going forward when new hospitals are coming in?

Ramesh Kancharla — Chairman and Managing Director

Well, actually, we have upright to grow in future. And we’d like to keep — if we can keep about 25% guidance, I think, this is pretty good for me, achieving our goals as an organization along our term. I will say we could be ambitious to what — I think we post now today is our numbers pre IND AS 29, post IND AS 25, probably the — how this industry act. So I can’t be ambitious to continue to do well growing — building a Children’s Healthcare for the country. So I think, it’s still — I think our optimism — optimism is about growth of 20%. That’s what we have been saying 18% to 20% growth year-on-year is something which we can expect it. We plan our expansions also keeping that in the mind.

Naman Bhansali — Perpetuity Ventures, LLP — Analyst

Okay. So I was just coming from the point that what would be the gap which we have seen between the 25% to 29% that initially, we had a plan of sustaining around 25%. What has been the change which you’ve seen between the 400 beds?

Ramesh Kancharla — Chairman and Managing Director

I’ll tell you the reason. The last two years, if you look at it, our number of beds been added is much. Most of the beds have reached a mature stage. And Hyderabad in super matured and also the Bangalore and Chennai joined the party. Chennai, perhaps joined the party quite early. So Vijayawada broke-even in the second year itself. So these are all the things made us kind of accelerate our profitability. Hyderabad being super matured and not having many — many beds been added in the last one of year time. And Chennai and Bangalore kind — there is no hospital, which is eating away money at the moment. So at this — which is why this is a pickup — we are under pickup for performing very well.

R. Gowrisankar — Chief Financial Officer

Basically it’s the leverage — advantage of leverage, the fixed-cost — when we added the new beds, we’ll be adding — additional fixed-cost will be incurring. So since our expansion is less than the last two years, so we are enjoying the leverage actually, so that where that margin has gone to 29% and we are saying we are going to add 1,000 beds in the next five years actually, so considering that we think we will move optimistically to 25% EBITDA.

Naman Bhansali — Perpetuity Ventures, LLP — Analyst

Got it, got it. Thank you.

R. Gowrisankar — Chief Financial Officer

Thanks, sir.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Arpit Shah from Stallion Asset. Please go ahead.

Arpit Shah — Stallion Asset — Analyst

Hello.

Operator

Yes, please go ahead with the question.

Ramesh Kancharla — Chairman and Managing Director

Yeah, please.

Arpit Shah — Stallion Asset — Analyst

Yeah, just wanted to understand the peak occupancy a mature hospital can have. Right now, we are at around 63% occupancy levels for our matured hospital, that is my first question. My second question is, I just wanted to — could you just identify which are the hub hospital and the spoke hospital in your portfolio? And even the previous participant had asked that our operational capacity is around 1,171 and a total capacity is 1,555 beds. So typically what will be the ratio from operational to total capacity? Typically what it should look like? And my fourth question would be around the reinvestment side. So, we are broadly going to be generating about INR250 crores to INR300 crores of cash from operations almost every year, the next three years or so, and will be spending about INR300 crores INR400 crores on CapEx, so what would be the rest of the capital would be doing on your balance sheet, would it be — would it be dividend payout or would you be looking to buy, like go for some greenfield expansion, let’s say, in Noida or Gurgaon, so anything on that if you can highlight?

Ramesh Kancharla — Chairman and Managing Director

Yeah, I think one is our occupancy levels, I think we have reached 70% — 70% occupancy in Hyderabad city, and what we’re talking about is blend these occupancies to a consolidated level. So when you look at Hyderabad and Vijayawada, they have reached to the 70% occupancies, but it’s very difficult to achieve occupancy of 80 plus occupancy, we provide differential areas of beds. For example, we have 18% of the beds in the Newborn Intensive Care. Newborn Intensive Care is all incubators, so we can’t keep any other patient there, and also some isolation wards and some pediatric intensive care. So, this was a very — differential areas are there within the hospitals, which is why whatever we see in Hyderabad is probably the biggest, which can happen anywhere in the world in the Children’s Hospital. So, in terms of operational beds to other triage beds from AC, usually, if you can achieve to the 80, 20 — 80, 20 is very good. So, I think that’s where we are — somewhere range. Moving forward, in future, we were trying to work on that, how can we reduce that to 15%, so this is an exercise, which we are in the progress now to especially existing hospitals, we are working on that, how to make them at least partially revenue-generating beds, like a daycare bed and those things, so does our exercise on cots out. So, next is that [Speech Overlap] we have — currently also we have about INR500 plus crores of cash balance, and during the IPO process, so what — we have 1,000 beds in our expansion plan actually, so that will about INR600 crores to INR700 crores we have to invest on that. And the balance money — definitely the directors will consider based on the situation they can consider dividend actually. And we — other than that, we have — we will be consistently looking for good opportunities for acquisitions, so right now it is not on the cards, we will be looking for it.

Arpit Shah — Stallion Asset — Analyst

Got it. Can you just identify which are the hub hospitals and spoke hospitals in your network?

Ramesh Kancharla — Chairman and Managing Director

Yeah, Hyderabad is — Hyderabad, Banjara Hills is a hub. In Bangalore, there is — in Outer Ring Road, close to Marathahalli is a hub. Chennai is a hub and Delhi, Malviya Nagar is a hub. And Vijayawada, [Indecipherable] is fairly big, about 135 beds. Vishakhapatnam, we have a building capacity of almost like 175. We operate only 110 beds at the moment, that could go up also because these are all Regional spokes. What we plan with our experience of the past, when we look at the regions and we go into the cities, like two type of cities, like Coimbatore, Vijayawada, Vizag, these are the cities definitely requires about 125 to 150 beds because they won’t be a spoke model, they will be a one hub model. So places like Hyderabad, now where we are, probably we require one more hub in future, that’s what we — initially our thought process is. Delhi, what we are kind of — we are doing — we’ve been in discussions and doing diligence to probably do a large hub in Delhi, probably next financial results I will try to kind of cover those aspects of it.

Arpit Shah — Stallion Asset — Analyst

So, do you see the top eight cities has potential for hubs, that is what you see for the next decade because you have already been in Hyderabad, Bangalore, Chennai, now Delhi, would you see Bombay, maybe in Gujarat, maybe in the East also, where is potential for creating new hubs in the next decade?

Ramesh Kancharla — Chairman and Managing Director

Yeah, absolutely, because we are only one operator now at the moment, we can only do what, I mean, you can just — the problem with the children’s healthcare is that it is very, very organic, it’s very, very demanding because you deal with the digital native population and most of the sickness is critically ill, unpredictable response, so a lot of emotional, lot of these things, so you need to have a very, very robust operating model, as well as a very strong doctor model, it’s not something — doctors coming and going out, is not acceptable. We need to have full time doctor engagement model. So, when you look at the developing — developed world, there is a — you asked me about 250 children’s hospitals are there, still there is shortage — the country like ours which is prospering in every possible way, I mean, every of our cities, almost — whichever has go 40 lakh to 50 lakh population, definitely requires about 200 beds hospital to cater for the serious element and critical care and specialties, but it takes time to build it.

Arpit Shah — Stallion Asset — Analyst

So the kind of competition will be facing from all these cities will be very high, right, something in Bangalore, where you have a couple of chain operating, let’s say in Bombay or a couple of chains operating, and then Delhi, in which we have a good amount of competition, how would you be fighting on those competition?

Ramesh Kancharla — Chairman and Managing Director

Honestly, there is no competition or competition a very minute scale. The competition is there only from small segments where there is birth and those things. Our driving in children’s healthcare not birthing. Birthing comes along with us because we believe that the best place to have a child birth is Children’s Hospital because anyone is anticipating of high-risk pregnancy they should deliver in Children’s Hospital, this is our slogan. This is how we go about it. We are not at moment top stores or we are not a small Children’s — I’m not going to say — I would like a small children’s hospital to be there because to cater for the close by needs, but what we are expecting to do in the country is to cover the city for the sickness, particularly in children or complex problem or specialty problems. These are the things which — when you say Children’s Hospital that is where it cuts across, it doesn’t cut across the kind of the small — the dentist is five beds, 10 beds, 15 beds, so that’s why I see that there is no — I mean, lot of things — I still believe that we are a pilot project in the country and still, I mean, there’s lot more to explore and do it.

Arpit Shah — Stallion Asset — Analyst

Got it. So would you be looking to expand higher-growth rates because the kind of opportunity which presents you and probably one of the only players doing what we’re doing right now, so would you be targeting, let’s say more than 18% to 20% kind of growth because that kind of opportunity is present, and you’ve already set the model, how you want to operate in terms of margins, in terms of execution, so would you be looking at high-growth rates?

Ramesh Kancharla — Chairman and Managing Director

Certainly, that — whatever we have been growing, I think pretty aggressive in the healthcare segment so far, but at the same time, what’s more important is that we need to be disciplined and what we are offering to people and what’s the breadth and depth we are building it and see Indian healthcare is not only for Indian healthcare, it’s for the pan-India and also for the — the Indian neighborhood is again kind of a huge opportunity, where people can come in like a multi-specialty is doing a lot of international business, similarly, that — probably in the years to come that we will be looking at a huge opportunity coming — International business coming into that Pediatric segment in this country.

Arpit Shah — Stallion Asset — Analyst

Got it. Thank you so much. Best of luck.

Ramesh Kancharla — Chairman and Managing Director

Thank you. Thanks a lot. Thank you.

Operator

Thank you. The next question is from the line of Aneesh Deora from Nomura. Please go ahead.

Aneesh Deora — Nomura — Analyst

Yeah, thanks. Just one question from my end. I just wanted to know what is the frequency of the price hikes that we take on insurance contracts like the 8% to 10% that we took now, again, when would the revision happen?

Ramesh Kancharla — Chairman and Managing Director

Well, ideally, it is two years cycle, so — ideally, it is two years cycle, but it keeps going a little kind of a 2.5 to 3 years sometimes, so incidents have got their own way of calculating things.

Aneesh Deora — Nomura — Analyst

Understood. And on the normal cash patient data, what are the average price hikes annually that we see?

Ramesh Kancharla — Chairman and Managing Director

Depending on the city and depending on what offering we are doing and also the positioning of the — suppose within the same city and we have differential prices, because we have a market which is kind of a high paying Vijayawada market, which is a little moderately — it depends on the payer mix, which we look at it. So, definitely there is yearly — year-on-year, we definitely — we need to kind of look at the inflation correction, that definitely we do it. And secondly what we look at it, we do the price benchmarking once in two years time, which is to see what is the opportunity, based on that we work on it.

Aneesh Deora — Nomura — Analyst

Okay. Got it. Thanks.

Operator

Thank you. The next question is from the line of Mayank Hyanki from Axis AMC. Please go ahead.

Mayank Hyanki — Axis AMC — Analyst

Hi, sorry. I had a clarification on the Madhukar Hospital again. So the 10% margin, which you mentioned is post-IND AS margin or this is after accommodating the rent-out payments, that’s one? And did you say that the occupancy there we’re running currently is about 40%?

Ramesh Kancharla — Chairman and Managing Director

Yeah. We are doing about 40% occupancy, that society will not have IND AS adjustment actually, so its 10% margins are pre-Ind AS only.

Mayank Hyanki — Axis AMC — Analyst

Okay, pre-Ind AS only, okay, got it. So on the hospital itself, the occupancy is still running lower to what our group level occupancies and the run-rate is still low versus other hospitals that have that kind of age profile, so and it’s been — we are now in a post-COVID scenario, I think you were also talking about at some point of time, there we had doctors issues in terms of we do not have a full-fledged team of doctors at some point of time, so from this perspective, do we now have a full offering, full range of care across all the departments? That’s one. And secondly, any specific issue, which is resulting in lower occupancy of the hospital versus other hospitals?

Ramesh Kancharla — Chairman and Managing Director

Now with — the full set of doctors are there actually, so the business is picking-up, plus post-COVID, we have seen lot of change and definitely another center is doing well.

R. Gowrisankar — Chief Financial Officer

I think we need to add more specialties to Delhi now, see the thing is, we have seen — this is the — let me give a little brief about it, it’s of all the hospitals, this is one which have a low CapEx model and very high rental model, so as an investor is about INR40 crores for 140 beds, so that’s the low CapEx when I look at it. The second important thing is that it has a — it is in the South of — South Delhi, and it is not in the kind of what I realize now is that it’s not in the most children rich areas, the population is more of the aged populations, still we kind of when we look at the doctor engagement there, Rainbow has certain — definitely a different way of doctor engagement model, which we had initially difficulties because most of the doctors doesn’t believe in full-time engagement doctor, so over a period of time we have done hybrid — we’ve done to the more towards our model now. So now when you look at it our numbers, we had a huge impact of COVID because the Delhi government made — because this is the trust hospital, so government has faith. The government has made this as a Children’s COVID Hospital for one and a half year time. So that means the kind of for the full four and a half years, so one and a half years has gone out-of-the-block. So, we have come back now and from the losses, we have come back to the recovery phase. Our occupancy is that blending comes across the year to 50% [Indecipherable].

Second important thing is that the number of specialties what we have is, mainly the focus is the intensive care services, obviously, some gynecology and pediatric surgery, and couple of specialties. As we move forward, we need to increase the number of specialties in Delhi, that’s the plan which need to be executed, but having said that, specialties don’t grow like multi-specialty, adult-specialties, it takes time to grow, so Delhi story will definitely take some time to grow. But what — my optimism is that, yeah, we are in the right part of the city. It’s an important area to be in. Second important thing is, we are tracking a good name now, that’s most important for me in Delhi. Thirdly is that it’s EBITDA-positive now and it’s going to pay back its money, and I have not blend lot of money in this overall, running the Delhi Hospital. Given the entry door, now I know Delhi. I think when I look at my business plan for Delhi, I’m absolutely bang on now. I know what to take back to Delhi, how do I operate myself. Probably, I think in next coming earning calls I will present my business plan for Delhi. So, I just to kind of request all of you to wait for some time.

Mayank Hyanki — Axis AMC — Analyst

Got it, got it. We look forward to your Delhi plan being unfolded, but just from business and financial perspective, even as we await addition of more specialty in this hospital, the performance of this hospital from — in terms of ARPOB and occupancy or profitability in the meantime until you announce your plan should keep on improving from hereon, despite whatever challenges you mentioned around the hospital and the area, right.

Ramesh Kancharla — Chairman and Managing Director

Yeah, yes.

Mayank Hyanki — Axis AMC — Analyst

Okay. Great. Thank you. That’s all.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

Operator

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

Ramesh Kancharla — Chairman and Managing Director

Thank you very much. Thank you. Thanks, everyone, to be very patient to listen to us. Thank you very much. Once again, we will meet you in the next earnings call about the last quarter. So, I wish you have a great day and a great year ahead. Thanks a lot. Thank you very much.

R. Gowrisankar — Chief Financial Officer

Yeah, and should you have any questions, please write it to us at investors at rainbowhospitals.in, we would be happy to engage further with all of you. Thank you so much.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

Operator

[Operator Closing Remarks]