Rainbow Children’s Medicare Ltd (RAINBOW) Q4 FY23 Earnings Concall Transcript

Rainbow Children’s Medicare Ltd (NSE: RAINBOW) Q4 FY23 earnings concall dated May. 15, 2023

Corporate Participants:

Ramesh Kancharla — Chairman and Managing Director

Sanjeev Sukumaran — Chief Operating Officer

R. Gowrisankar — Chief Financial Officer

Analysts:

Siddharth Rangnekar — CDR India — Analyst

Damayanti Kerai — HSBC — Analyst

Bansi Desai — JP Morgan — Analyst

Pritesh Chheda — Lucky Investments — Analyst

Arpit Shah — Stallion Asset — Analyst

Alankar Garude — Kotak Securities — Analyst

Prashant Kutty — Sundaram Mutual Fund — Analyst

Dhavan Shah — AlfAccurate Advisors — Analyst

Neha Manpuria — Bank of America — Analyst

Aditya Khandelwal — SIMPL — Analyst

Aneesh Deora — Nomura — Analyst

Kartik Narayan — SVB India Advisors — Analyst

Yogesh Tiwari — Arihant Capital — 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 the listen-only mode. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, Siddharth.

Siddharth Rangnekar — CDR India — Analyst

Thank you, Tanvi. Welcome, everyone, to the earnings conference call of Rainbow Children’s Medicare Limited to discuss the financial performance for the fourth quarter and full year ended March 31, 2023.

We have with us Dr. Ramesh Kancharla, Chairman and Managing Director; Mr. Sanjeev Sukumaran, Chief Operating Officer; Mr. R. Gowrisankar, Chief Financial Officer; and Mr. Saurabh Bhandari, Group Business Analyst.

Before we commence, I would like to share that some of the statements made on today’s call could be forward-looking in nature and may involve certain risks and uncertainties. Our detailed statement in this regard is available in the quarter four FY 2023 results presentation that is posted on the company’s website, and also uploaded on the stock exchange sites.

I would now like to invite Dr. Ramesh to make his opening comments. Over to you, sir.

Ramesh Kancharla — Chairman and Managing Director

Thanks, Siddharth. Good morning, everyone. It gives me immense pleasure to welcome you all to the earnings call for the fourth quarter and for the full year FY 2023.

It’s been one full year since we had our IPO, and when I look back at the last year’s journey, the few things stand out. Rainbow remains the only listed pediatric hospital chain in the English-speaking world. Consequently, the listed universe has no peer comparison for the financial analysts as well as investors. Therefore, ever since the IPO in May 2022, we had to seriously engage with the investors, both in India and overseas, and explain the various building blocks of our business model, our key differentiators and the significant growth opportunity in our business model and its potential.

Our efforts are bearing fruit and there is a — perceptibly a better comprehension of our business model among the investor and analyst community. I must say that, I have really enjoyed this journey of evangelizing children’s healthcare and its business potential.

Once again, to reiterate our clinical model, pediatric services under Rainbow brand includes newborn and pediatric intensive care services, pediatric multispecialty care, pediatric quaternary care, organ transplantation. Birthright by Rainbow is an integrated obstetric model vertical, which includes normal and complex obstetric care, multi-disciplinary fetal care, perinatal genetics and fertility care, along with gynecological services.

Rainbow Children’s Hospital is built on a strong fundamentals of multidisciplinary approach with a full-time consultant engagement model with a commitment of 24/7 service in a child-centric environment. We run India’s largest academic training program for the pediatrics and the pediatrics super specialties in the private healthcare sector, offering training in DNB post-career training program as well as the fellowship programs in various specialties, including intensive care services as well as pediatrics super specialties.

Historically, the strong momentum of the second quarter and third quarter will tapers down in the fourth quarter with the examination season and beginning of the summer holiday vacations. However, this time, the strong momentum witnessed in the second and third quarters continued into the fourth quarter across all the key operating metrics, including outpatient footfalls, inpatient volumes and occupancy.

I’m pleased to inform you that the company has delivered robust quarterly performance led by high patient footfalls across all hospitals. The revenues for the Q4 FY 2023 was INR360 crores — INR316 crores, which is a growth of 49.2% compared to the INR212 crores, which is — in Q4 FY 2022. The EBITDA for Q4, FY 2023 was INR98 crores, which is a growth of a 103% compared to INR48.1 crores in Q4 FY 2022. And the PAT for Q4 FY 2023 was INR53.8 crores, which is a growth of 339% compared to the INR12.2 crores in Q4 FY 2022. The occupancy for the quarter was 58.8%, which is significantly higher compared to the 39.6% in the corresponding quarter of last year.

The occupancy was higher compared to the previous quarter occupancy of 57.1%. This is as a result of continued momentum of Q3 and Q4 with the various illnesses, especially viral illnesses in the community, which is leading to a — kind of an increased footfall as well as in patient admissions. In particular, adenovirus was the most common cause of pneumonia during the season, where the children required admissions for the longer period — periods of time.

So, coming to our addition of beds and expansion, and we have recently added 100-bed hospital in financial district Hyderabad, commenced its operations on March 1, 2023, and already we are seeing a good traction of outpatients as well as inpatients. So, we are going to add 270 beds in the current financial year in the various geographies in Hyderabad and Bangalore and Chennai. The Central City Hyderabad, which is CMS Nagar, we are coming out with a 60-bed spoke hospital and a new block of hospital will be close to — adjacent to the Hydernagar existing hospital is being built for the growth opportunities, because we have been extremely busy in that hospital, so that requires more beds. So, that’s going to come very soon.

Anna Nagar, Chennai, is — we’re coming up with 80 beds. A brownfield 80-bed spoke hospital is coming in Bangalore in Sarjapur area, so an additional block with an outpatient department and an IVF facility at the Rainbow Children’s Hospital LB Nagar spoke where to enhance the patient facilities at the existing hospital and also cater to the future growth at this hospital, we’re adding additional space in this hospital to — and also to yield some more beds to that demand — for the demand. These hospitals are expected to commence operations during the second half of the current financial year.

And, also, there is another — 160 beds are going to come in 18 to 20 months’ time, which are mainly a 100-bed facility in Rajahmundry, which is one of the — an important city in Andhra Pradesh. And a spoke hospital in a Hennur Cross road in Bangalore City of 60 beds, so these are likely to come in about 18 to 20 months’ time. So work is in progress.

So, recently, the company participated in e-auction held by HSVP, Haryana Shehri Vikas Pradhikaran, which is the government site for hospitals. So, we won the two bids, one is in Sector 44, 2.32 acres of land, and another one is in Sector 56 up 1.25 acres of land. So, this both are kind of land parcels. We’re going to build a greenfield hospital. Then Sector 44, which is very close to HUDA City Centre and close to FMRI. We’re going to kind of build a 300-bed facility, which is mainly a kind of a referral Children’s Hospital with the tertiary quarter kid services for children. So, this hospital will be kind of a referral center for multi-specialty pediatrics and perinatal care across Gurugram and also Northern states as well as international patients.

The spoke hospital of 100 beds, which will be built in Sector 56, which is very close to the Golf Course Road, and this is for the — kind of rapidly growing affluent population for Gurugram in the Golf Course Road as well as Golf Course Extension Road. So, this hospital will be primarily kind of providing 24/7 emergency for children and as well as women with large outpatient obstetrics and pediatric inpatient services and the Level 3 and ICU.

With this expansion plan highlighted now, the Rainbow Group is comfortably placed to add 1,000 beds as envisioned in the business plan, as outlined during the IPO and Investor Meetings earlier. We are focusing now on execution of these projects in a timely manner.

Coming to clinical excellence, so we have crossed an important milestone of 1 million outpatients across the group, perhaps were clear than 1.2 million footfalls of outpatients in the last financial year. Dr. Nageswara Rao Koneti is a Director of Rainbow Children’s Heart Institute is a leading cardiologist. He received a patent for a device named KONAR-MF. This device is to close the heart holes for children with cardiac defects. This is being used across 60 countries. We’re very proud of him to come up with such a cost-effective device.

Despite large patient inflows, our doctors had published 100 papers, research papers, in the last one year. It gives me immense satisfaction to see such a [Technical Issues] interest among our doctors. We have successfully completed 20 liver transplant and 5 kidney transplants with excellent results. And out of 20 liver transplants, we have only lost 1 child and 19 of them actually gone home with a successful liver transplant. All five of them with the renal transplants have done very well and they have got discharged.

I take this opportunity to thank all my doctor colleagues and the paramedical staff who have put in an untiring effort to deal with such a large volumes and achieving excellent outcomes. So, with a well-made out business, our priorities are now to try harder to deliver robust clinical outcomes with an excellent patient care, strengthen our — the hubs with a multi-specialty and quaternary care, and also expand our hub-and-spoke model in Bangalore and Chennai are the main priorities.

Before I pass on the mic to our CFO for a business update, I would like to take this opportunity to welcome Mr. Sanjeev Sukumaran, who has joined us as a Chief — Group Chief Operating Officer effective from April 15, 2023. Sanjeev has come — has more than 25 of experience doing various senior management roles across various industries. So, we are very glad to have him with us.

I now request Mr. Sanjeev Sukumaran to introduce himself to the audience.

Sanjeev Sukumaran — Chief Operating Officer

Thank you, Dr. Ramesh. Good afternoon, everyone. I’m extremely pleased to have been given this opportunity by the Chairperson and the Board, and I really look forward to contribute to the success of this organization as we move forward in this ever-exciting journey. I wish to bring in the 25 years of experience that I have in various industries and work closely with the Board and the Chairperson and the senior leadership team over here to continue to grow the business as well as to continue to bring in excellence in clinical as well as operations. And I look forward to your continued support too. Thank you.

And I hand it over to Mr. Gowrisankar now.

R. Gowrisankar — Chief Financial Officer

Thank you. Sanjay. Good afternoon. So, I would like to thank you all for taking your time and joining our earning call — earning update call. I’ll now share some insights on our financial performance during the period under review.

Our quarterly performance. So, revenue for Q4 stood at INR316 crore and has grown by 49.2% compared to the corresponding quarter of the last financial year. EBITDA for Q4 FY 2023 stood at INR98 crore and has grown by 103.62% compared to the corresponding quarter of the last financial year. EBITDA margins are at 30.91% in the current quarter as against 22.66% in the corresponding quarter last year. Expansion in EBITDA margin is on account of improved business and better operating leverage. PAT for Q4 FY 2023 stood at INR53.86 crores and has grown by 339.34% compared to the corresponding quarter of the last financial year. PAT margins are 17% in the current quarter as against 6% in the corresponding quarter last year.

Our OP and IP volume for the current quarter has grown by 48% and 57% over the corresponding period of FY 2022. We have recorded 59% occupancy during the quarter. Our matured hospital has witnessed 67% occupancy. The new hospitals has witnessed a 41% occupancy during fourth quarter.

Our return on capital employed and return on liquidity stands at 24.61% and 25.36% on full year basis for FY 2023. And our payer mix between cash and insurance stands at 52% and 48%, 52% is cash and 48% is credit. During the Q4, the company has incurred about INR35 crores as capital expenditures toward new projects, medical equipment and other fixed assets.

With this, I conclude my remarks. We can now open the call for your valuable questions and suggestions. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai — HSBC — Analyst

Hi. Good afternoon, and thank you for the opportunity. My first question is on your occupancy. So, fourth quarter obviously was very strong, as Dr. Ramesh mentioned, the momentum from viral fever, et cetera, continued. So, going ahead, how should we look at occupancy, especially for the mature hospitals, say like don’t see such exceptional cases coming due to some seasonal virus fevers, et cetera?

Ramesh Kancharla — Chairman and Managing Director

Yeah. Matured hospitals will continue to clock the similar occupancies. And what happened for us is, as you know, we have — usually the quarter one is generally muted, in the sense — occupancies wise because of children on holidays, the summer season and we do kind of more of surgical work in summer season. As we move into the second and third quarters, occupancies really picks up. So, I think, our matured hospitals shouldn’t be a big problem for occupancy, because they are already kind of well established. They will have good traction of patient across the specialties as well as the pediatrics and obstetrics well.

Damayanti Kerai — HSBC — Analyst

So, mature should be sustaining 60% plus occupancy rate? Obviously, it could be better, but 60% plus is something we can definitely look at?

Ramesh Kancharla — Chairman and Managing Director

Yes. Of course, we’ve clocked about 67% of occupancy on matured hospitals in the last financial year, I think, which is a very good. I mean, Rainbow is something we do not do a much from in the other business, so they’re purely private insurance and also the cash patients, the payer mix is very different from — it’s very difficult to kind of look at cover occupancies comparing to adult hospitals.

Damayanti Kerai — HSBC — Analyst

Sure. My second question is, your average revenue per operating bed, so in FY 2023, ARPOB grew around 4% year-on-year after adjusting for COVID vaccine benefit in the previous year. So, this looks a bit lesser than — I think, earlier we talked about sustaining growth in high single digits, so how should we look at this number ahead? And also if I look at your press release, ARPOB for new hospitals looks better than matured hospitals in fourth quarter and full year, so can you please explain this?

Ramesh Kancharla — Chairman and Managing Director

We discount the COVID vaccines from the previous year of 2022, that we have clocked about INR48,000 plus, actually we achieved that. There was 4% growth. So that’s what actually we have guided about, 4% to 5% growth of ARPOB year-on-year. So, when you look at the new hospital, which is — our ARPOBs are both INR49,000 extra. Because what happens in new hospitals is that, they’re kind of — are focused on very small areas of business with more of deliveries and more of ICUs, less occupancies, but choose more towards the higher ARPOB. When you get occupancy levels increased as hospital matures, that gets moderated.

Damayanti Kerai — HSBC — Analyst

Okay. My last question is on your FCF yield. So, obviously, on the EBITDA level, you have been — like, you have been delivering one of the best margins across listed hospitals. But if I look at the FCF yield, my calculation suggest that it should be around 1%. So that looks like very mess for the kind of margin which you make on your business. So, can you explain it? And how should we looked at FCF yield going ahead as some of your key units reach maturity?

Ramesh Kancharla — Chairman and Managing Director

I’m very sorry, I did not understand the question.

R. Gowrisankar — Chief Financial Officer

It’s about what yield on — you’re taking the free cash flow or?

Damayanti Kerai — HSBC — Analyst

Yeah. Free cash flow, yeah. So, yield is coming around 1% for FY 2023 despite having such healthy margins, so if you can explain like why it should be so low and how should we look at in coming future — in coming periods?

Ramesh Kancharla — Chairman and Managing Director

I think, you are — we will take this question later, Damayanti, if you don’t mine?

Damayanti Kerai — HSBC — Analyst

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

Ramesh Kancharla — Chairman and Managing Director

We need enough — a little more understanding on this. We will look at it. Thank you.

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. Good afternoon, everyone. Thank you for taking my questions, and congratulations on good set of numbers again. Sir, my question is on the Gurugram acquisition that we have announced. So, this is a greenfield expansion. So, this is very different from our previous strategy where we have expanded on a very asset-light manner. So, what are your thoughts in terms of acquiring these lands out there? And did you evaluate having leasehold properties instead of going for outright acquisition?

Ramesh Kancharla — Chairman and Managing Director

Yeah, Bansi. We have actually been evaluated for a fairly long period and there it’s probably a — in Gurugram, it’s rental costs what’s there. And, also, the effective utilization of the space what we’ve rented is very low, because almost 40% of the rental space will be invisible, because of loading. So, therefore, kind of when we’ve worked out, it’s probably better to kind of buy the land and build a greenfield project. So, we have a cash on the balance sheet, so we’ve kind of taken that as an advantage.

So, we got the land parcels in the key areas, which we wanted. We will be kind of — it may take a year and a year and a half extra to do the greenfield project, but that actually positions us better to build a modern hospitals in places like Gurugram, where we envisage to build a truly a referral hospital for — multispecialty referral hospital for children in Gurugram of 300 beds and also spoke hospital in a rapidly growing Golf Course and Golf Course Extension Road.

Again, I’m quite happy with what had panned out, quite — kind of — of course, it takes some time to do this project. I’m quite happy about the way things are focusing.

Bansi Desai — JP Morgan — Analyst

Okay. And given this is from Haryana government, do we need to reserve beds here for economically weaker sections, or are there any such terms of agreement with the government?

Ramesh Kancharla — Chairman and Managing Director

See, most of the hospitals in Gurugram have got the similar clause. If it’s a specialty hospitals, there where — 10% of the beds are allocated for the economically — or on the CGHS rates for super specialty. And general hospitals, see, they will have kind of 20%. Since I’m going to build a super specialty children’s hospital, I think, I can negotiate on that.

R. Gowrisankar — Chief Financial Officer

It’s not a totally free beds, Bansi. They will pay you on our tariff. There is a discount to tariff. They get about some 20% discount. On the trade, they’ll pay for the super specialty hospital.

Bansi Desai — JP Morgan — Analyst

Okay. And on those states, are we still able to recover some of your fixed costs?

R. Gowrisankar — Chief Financial Officer

We can do that. So, it’s — unlike the Delhi DDA, where you have to give totally free the 25% and 10% of IP and 25% of OP totally free, here it does not so, actually. So, we can definitely — we can get a better rate. So, the super specialty hospitals are given a better rate by the Haryana government.

Bansi Desai — JP Morgan — Analyst

Okay. And the funding for this project will be largely met through internal accruals?

R. Gowrisankar — Chief Financial Officer

In fact, we have taken — we have allocated some money from IPO as well, but we can meet everything through internal accruals.

Bansi Desai — JP Morgan — Analyst

Okay. So, you highlighted actually INR450 crores of investments for this asset over the next 3, 3.5 years. I’m assuming INR160 odd crores out of this would be purely for the land, so the balance amount would be — it basically translates into a capex per bed of INR70 lakh or so, is that correct?

Ramesh Kancharla — Chairman and Managing Director

I think, it’s probably that. We need to see the — how — I mean, probably once we kind of have a design and those things, we will probably have a better idea about capex of the bed. I think, I would see it as probably closer to the kind of INR90 lakhs to INR1 crore per bed, because if we are building beds for the future as a greenfield project, obviously Gurugram has to be high-end hospital.

Bansi Desai — JP Morgan — Analyst

Yeah. So, this INR90 lakhs is basically inclusive of land cost, are you saying?

Ramesh Kancharla — Chairman and Managing Director

Exclusive of land cost. Probably, it’s going to be about INR1.2 crores to INR1.25 crores, that’s what I am envisaging.

R. Gowrisankar — Chief Financial Officer

Including land.

Ramesh Kancharla — Chairman and Managing Director

Including land, I’m envisaging it.

Bansi Desai — JP Morgan — Analyst

Okay. So, sir, in that case, how should we view the breakeven timelines? I understand Gurugram, as a market, is definitely better paying market, so ARPOBs also will be equally good compared to the rest of the regions, but just in terms of breakeven timelines should that differ given this is the capex?

Ramesh Kancharla — Chairman and Managing Director

I think, what we need to. We would be working on it. How are we positioning this hospital and what is the kind of a construct of this hospital in terms of — if it’s a normal children’s hospital with intensive care services, so you don’t need 300 beds, okay. So, what I am envisaging is to see that this is a super specialty children’s hospital with all the specialties, large intensive care services, and quaternary care services to start in Gurugram. So, there is a good — significant international opportunity for children to treat in this hospital as well.

So, when you look around, look at that opportunity — and when we are building the hospital for today, probably we need to kind of establish a hospital as a super specialty, it’s almost like a multi-specialty hospital. capex, it won’t differ. If I’m doing children’s hospital or spoke hospital, yeah, definitely it will come down — capex up significantly. When I’m looking at the hospital of that stature, capex is almost like a multi-specialty hospital. Obviously, that now — it all depends on the kind of themes, which I’m going to bring in, kind of facilities what I’m going to provide, and also what kind of treatment offers what I’m going to offer. So, that’s how it’s going to pan out.

Obviously, with our — my experience of 20 years of building children’s healthcare, what I — what we have in Hyderabad today, if I position myself at Gurugram referral center, yeah, obviously that’s — we required to build a 300-bed hospital in Gurugram. So, this is what background statistics have done. So other hospital which is about 100-bed hospital, which is going to be like a children’s hospital with the maternity, ICU, some of those things.

R. Gowrisankar — Chief Financial Officer

Hello, Bansi.

Operator

Bansi, do you have any further questions?

Bansi Desai — JP Morgan — Analyst

No, no. This is clear. This is very helpful, sir. Thank you.

Operator

Thank you.

Ramesh Kancharla — Chairman and Managing Director

Thanks, Bansi.

R. Gowrisankar — Chief Financial Officer

Thanks, Bansi.

Operator

The next question is from the line of Pritesh Chheda from Lucky Investments. Please go ahead.

Pritesh Chheda — Lucky Investments — Analyst

Sir, we quite didn’t understand this business model change. Earlier, we used to have INR50 lakh a bed as the capex and we have a combination of specialty and spoke hospitals today in our targeted regions or core regions of Chennai, Bangalore and Hyderabad, how will this Gurugram investment be different from it? And why is it different? And what are the — how — also, how will the ARPOB and the OR change in this kind of an investment?

Ramesh Kancharla — Chairman and Managing Director

So, what — obviously, what I’m looking at is that, in Gurugram, is — I see Gurugram as — not as a micro market. I see, Gurugram as a kind of a hub for the NCR plus north. So when I’m presenting myself with 20 years of experience in children’s healthcare, we do need to build something which is of that reputation and credibility of providing a comprehensive care for children. So, therefore, it is definitely a — differs from our routine children’s hospital, which we have a capex as a brownfield project. It’s a greenfield project and it’s going to be a high capex project, it’s going to be a multispecialty hospitals, which is almost like — your capex is going to be like a super specialty adult hospitals. So that’s why it’s going to be. Definitely ARPOBs will definitely be a closer to the multispecialty and also the surgical work and specialty work is going to be closer to multispecialty hospital. This is what I envisage to — in Gurugram hub hospital.

Pritesh Chheda — Lucky Investments — Analyst

You have a Hyderabad hub hospital also, right?

Ramesh Kancharla — Chairman and Managing Director

Yeah.

Pritesh Chheda — Lucky Investments — Analyst

Right. And you would have Bangalore hub hospital as well, so there what has been your capex per bed?

Ramesh Kancharla — Chairman and Managing Director

Our Hyderabad hub hospital is about — my capex was about INR70 lakh per bed, which is a brownfield project, which has been a kind of a semi-warm shell. So, my Chennai or Bangalore hospital was kind of a hub hospital, but we continue to put a capex as we kind of adding more specialties in Bangalore. So, in Gurugram, I’m going to do everything at one go, which is why it is a different hospital.

Pritesh Chheda — Lucky Investments — Analyst

Everything at one go? So, if you have to put a greenfield today, let’s say, in Bangalore or Chennai or Hyderabad, what we would have come up to, and for a greenfield like — or for specialty centers like 300-bed of Gurugram, how many spokes can you put then surrounding that hospital.

Ramesh Kancharla — Chairman and Managing Director

You mean to say that with that money, how many spokes can be done?

Pritesh Chheda — Lucky Investments — Analyst

No, not with that money. That 300-bed hospital can support how many spokes?

Ramesh Kancharla — Chairman and Managing Director

At Gurugram, we don’t — see, is a small area as a — kind of say — this is where we are going to be in — right next to HUDA City Centre, that’s a central point. From there, we can drive anywhere about in 15 minutes time. The spoke, which is going to come in closer to the Golf Course Extension Road in the Golf Course Road. So that will cater for the rapidly growing Golf Course Extension Road and Golf Course Road area. So, we will have a sufficient number of beds in Gurugram for a longer period of time.

R. Gowrisankar — Chief Financial Officer

Yeah.

Pritesh Chheda — Lucky Investments — Analyst

And how much those super specialty now cost if you had to set up a greenfield in, let’s say, Hyderabad or Bangalore, if you had to set up?

Ramesh Kancharla — Chairman and Managing Director

If we have to set up, the two investments will cost the same. Probably, it may cost a little more because the land cost here, if I had to buy a private land, it will be a kind of — probably it will cost INR20 lakhs more.

R. Gowrisankar — Chief Financial Officer

So, excluding land, it will cost about, say, INR80 Lakhs. So the current Hyderabad as well as Bangalore hub hospital, we have set up five years and seven years back actually. So that time it has costed us a INR70 Lakhs, INR60 Lakhs, and then you add upon that inflation also and then this hospital, it will come in next one or two years, because you just take permission everything in construction. So, obviously, you will end up somewhere about close to INR80 lakhs, INR90 lakhs per bed actually excluding land.

Pritesh Chheda — Lucky Investments — Analyst

Okay. Sir, on the ARPOB side, you didn’t answer whether the specialty hospital in Gurugram will have a ARPOB? You said it would be closer to a normal specialty hospital [Speech Overlap]

Ramesh Kancharla — Chairman and Managing Director

[Speech Overlap] Yeah.

Pritesh Chheda — Lucky Investments — Analyst

[Speech Overlap] where we have range for — Max Healthcare is at INR60,000 ARPOB, but someone like KIMS is at INR25,000, INR30,000 ARPOB, so which one we should take? We should take INR60,000 ARPOB for you?

Ramesh Kancharla — Chairman and Managing Director

Right now, we are on INR48,000 ARPOB. So, we are not very low-end hospital, we are a high-end hospital. We are like KIMS and Narayana. We are more sort of Apollo’s and Max, Apollo, towards that. Max is kind of a dominantly under NCR hospital in the city-based hospital. So, lot of surgical work being done, so which is why their ARPOBs are so high. So, as a children’s hospital, which we like to position ourselves to be. Not only the ARPOBs, we want to kind of offer for children what adult is getting in a multi-specialty hospital for a child. This is a — as a children’s hospital group, what we would like to embark in NCR.

Pritesh Chheda — Lucky Investments — Analyst

So, it will be higher than your current ARPOB of INR48,000?

Ramesh Kancharla — Chairman and Managing Director

Yeah. [Speech Overlap] It’s too early to — for me to guess that far.

Pritesh Chheda — Lucky Investments — Analyst

And, lastly, sir, this ARPOB and OR, which you have reported in FY 2023, based on the capacity that we have, how much OR increase can you see further on your existing setup of 16 [Technical Issues] that you have? It was rather a bit seasonal, so there are two quarters in a season where it’s very high, so you have higher OR and a couple of quarters with lower occupancy, so what is the blended annual number that we should focus?

Ramesh Kancharla — Chairman and Managing Director

I’ll tell you to — see, I mean, we are — I mean, last year, as guided, that we would do a kind of 18% to 20% of topline, operating revenue, and I will still up — we’ll still be at high-teens across those this current year also. But I would like to also emphasize on one fact that we are adding almost 270 beds, plus we recently added 100 plus 50, 150, total of 430 new beds are going to be there. Of course, there are going to be in existing areas where our reputation is at the highest level; Hyderabad, Bangalore and Chennai. But still when you have too many of new beds, your growth, topline growth will refine, there’ll be some degree of moderation on the margins. So, still, we will see that we are in a kind of an area which is not a new geography…

Pritesh Chheda — Lucky Investments — Analyst

Sir, my question was that on the 16 50-bed occupancy at 55%, right, for FY 2023, this 55 can go to what number, can you reach 60 plus percent?

Ramesh Kancharla — Chairman and Managing Director

Well, if we stop expanding, then it could go to 65% also.

Pritesh Chheda — Lucky Investments — Analyst

Yeah.

Ramesh Kancharla — Chairman and Managing Director

But we continue to add beds for opportunity and also to build our business and footprint.

Pritesh Chheda — Lucky Investments — Analyst

Okay. And what is the risk of a price cap, if any, by government on pediatrics hospital? We have seen that happening in non-pediatrics on certain elective procedures, but do you ever think of a regulation by any chance?

Ramesh Kancharla — Chairman and Managing Director

So, a bit unlikely, because pediatrics is an emergency-based hospital and it is not a packages hospital, where you’ve got a cardiac, renals and those things. Our packaging is very, very small, which is why we are probably better off in that. But the government is doing all the times. DPCO drugs, still this year also they’ve won quite a significant number of drugs. So, government is doing in its own way and insurance companies are doing their own way, while still we continue to have [Indecipherable]

Pritesh Chheda — Lucky Investments — Analyst

Thank you very much, and all the best to you, sir. Thank you.

Ramesh Kancharla — Chairman and Managing Director

Thank you. Thank you so much.

Operator

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

Arpit Shah — Stallion Asset — Analyst

Yeah. Just wanted to understand the sequential jump in other expenses this quarter, this [Indecipherable]? Hello?

Ramesh Kancharla — Chairman and Managing Director

Yes. The other expenses between the two quarter, December to March, so it has increased by INR16 crores. So, this is due to that we have taken — due to expanded business we have taken a little more of ECL provision of about INR2 crores and then there is kind of bad debts and the written-off, which we have not done in other quarter. There is a INR1 crore of write-off this year, plus we have incurred some expenses for our JCI repair and maintenance. We — our Banjara Hills flagship hospital, we’re going for JCI accreditation. And then we have done, because always we do a lot of repair and maintenance in the Q4, because we will just prepare our hospital for managing the season. And there are a couple of other promotion — business promotions also we have incurred. So, that’s where it’s about INR16 crores.

Arpit Shah — Stallion Asset — Analyst

In Q4, already we’re having a higher other expense number on a regulatory basis?

R. Gowrisankar — Chief Financial Officer

Yeah. So, we do a little more of R&M in this Q4.

Ramesh Kancharla — Chairman and Managing Director

So that is the time we get a little bit of free time normally, or it’s kind of a push for us to kind of get ready for hospitals for the next year.

R. Gowrisankar — Chief Financial Officer

Also, we’ve opened a couple of hospitals in the last quarter. So, like, Sholinganallur as well as financial district. So, some of the expenses are there actually on the running and maintaining the hospitals, hospital maintenance and we do a little bit of marketing for those hospitals that has come in.

Arpit Shah — Stallion Asset — Analyst

Got it. And if you can break up the number of beds addition every year, let’s say, for FY 2024, 2025, 2026, what’s the number of bed additions?

Ramesh Kancharla — Chairman and Managing Director

I’ve already explained to you in the presentation. So, what’s going to come is that, there will be about 270 beds are going to come in this current financial year. So, we already added about 150 beds in the last financial year. So, this is what — another 150 beds…

R. Gowrisankar — Chief Financial Officer

160.

Ramesh Kancharla — Chairman and Managing Director

160 are going to come in the next 18 months’ time. These are all going to come — most of the hospitals are going to come in the southern part of India. Our — the 400 beds, which probably will take about 3 to 3.5 years’ time maybe fast in the execution, but I think we’d have to take that kind of time for a greenfield in Gurugram in 3 to 3.5 years’ time. That’s the landscape at the moment, but we always try to identify some — the spokes and brownfield areas. We are negotiating some of the cities also in the neighborhood like regional spokes, like Nellore and Coimbatore. But when it come to kind of a reality, 150.

Arpit Shah — Stallion Asset — Analyst

Got it. And the insurance price hikes, which were — was supposed to be factor Q4 for Hyderabad, they were a factor for how many months this quarter?

R. Gowrisankar — Chief Financial Officer

So, they’ve been effective only for last 15 days of last quarter, the entire price hike will be there in this current year.

Arpit Shah — Stallion Asset — Analyst

Yes. Can you just quantify that number for everyone, the price hike, which would come for FY 2024?

Ramesh Kancharla — Chairman and Managing Director

So — yeah, so far, next year, if we look at our Hyderabad, the insurance business should contribute about INR15 crores to INR20 crores between — INR15 crores, close to that.

Arpit Shah — Stallion Asset — Analyst

Got it. And for the Gurugram project, where we are targeting about INR450 crores in an investment, and it will be ready by FY 2026, or what kind of ROC or what kind of payback you’re targeting over there, or is it a very different kind of investment that we are making other than what we have done for. So, what kind of payback, because if you see our ROC, they have been closer to 25% or so, but what kind of ROC you’re targeting in this greenfield project?

Ramesh Kancharla — Chairman and Managing Director

I think the payback of such a high capex hospital in industry works about seven to eight years.

Arpit Shah — Stallion Asset — Analyst

And that is what you’re targeting? Is that something…

R. Gowrisankar — Chief Financial Officer

See, we — yes, it may take — because, it’s a capex in the project and definitely, so we may do it — in about eight years’ time, we should do it. We should have get it.

Ramesh Kancharla — Chairman and Managing Director

Yeah. Seven, eight years.

Arpit Shah — Stallion Asset — Analyst

Got it. Any guidance on the revenue and the margin front for FY 2024?

Ramesh Kancharla — Chairman and Managing Director

Sorry, I don’t think any greenfield project will be of five years plus, it is impossible, because, in multispecialty, I’ve been talking to my peer groups and those things, about seven, eight years is a — performance for the payback for greenfield projects of 200 to — more than 200-bed hospitals. The smaller hospitals maybe different, but the larger hospitals still take some time.

Arpit Shah — Stallion Asset — Analyst

Got it. Any revenue or margin guidance for FY 2024?

Ramesh Kancharla — Chairman and Managing Director

I think, as I earlier told you, see, we have guided to — being the first year, I was very clear that I needed to give a guidance. We kind of guided markets kind of INR350 crores of EBITDA, INR1,100 crores of topline, which we have kind of done very well and we exceeded that. So, the current financial year, I think, there’s already been valuable investors. We did actually — put it as business plan in the IPO time and in the initial investor calls for about INR420 crores of EBITDA for the 2023-2024.

So, I think, with the — what’s important is, the toplines are not going to be a big problem, because we would achieve it. Our growth will be kind of 5-teens to 20, and the — we’ll have to look at how the margins are going to be, because we have — this is the first time, we’re going to have almost like a 400 plus beds, new hospitals, new beds coming into the city. But my — I’m little optimistic, because there are quite a few number of beds are built for the demand sake rather than kind of a future opportunity. So, let’s see how it goes. It’s going to be difficult for me to do a quarter-on-quarter guidance, because it doesn’t work that way. As I previously told you, I don’t want to year-on-year. It’s a multi-year business honestly. It’s a multiyear business and it’s a growing story, it’s a huge opportunity as a children’s hospital to build in this country. I mean, when you look at the developed countries to us, where we are, we are nowhere. So, I mean, Rainbow is one, which has been building it. I think, an opportunity for me is to build this model strong, it’s a multi-year, and definitely our people are going to be happy with their returns on a longer-term basis.

Arpit Shah — Stallion Asset — Analyst

Good. Got it. Thank you so much.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Alankar Garude from Kotak Securities. Please go ahead.

Alankar Garude — Kotak Securities — Analyst

Hi. Good afternoon, everyone. Sir, would you agree that incidents of viral infections in the pediatric segment was a bit higher than usual in FY 2023?

Ramesh Kancharla — Chairman and Managing Director

Definitely, Mr. Alankar. What has happened was that, children have been almost like homebound for nearly two years’ time. What has happened was, when they come out, COVID has never been a big problem for children. COVID perhaps didn’t really a touch too much for complications, except few children who had some cardiac and issues and other problems. Majority of them not gone through complications like adults, including death and those things. Because the longer periods their women kept in the houses and routine seasonal illnesses have not been kind of occurred to them, so they have not built immunity sufficiently to deal with the routine viral infections.

Normally, adenovirus is something as simple trivial seasonal infection, so this comes as a kind of a surprise across the globe, it’s kind of — we do see adenoviral infection every season. It’s a kind of — it’s probably a kind of — in the Western world, what they have seen is about 5 times increase in adenovirus infections, leading to admissions, sickness. I would think that in India, it’s much bigger. Now, there is no statistical data on that. It is a much more manyfold increase in the adenoviral infections, which children have been very sick actually with some of them requiring intensive care and they are present with pneumonia, so — which is why you see in the third quarter, we really struggled for beds and also outpatients have been troubled a lot with not only adenovirus virus, various other virus. Most of them, all of them, normally they are trivial, but the presentation was very pronounced, because of the staying at homes for longer periods and they have not acquired a normal immunity what they’re supposed to get year-on-year.

Alankar Garude — Kotak Securities — Analyst

Understood, sir. So, in that case, what is giving us confidence that we will be able to grow over the 61% occupancy reported in FY 2023 in the matured hospitals?

Ramesh Kancharla — Chairman and Managing Director

Yes, of course.

Alankar Garude — Kotak Securities — Analyst

So just wanted to understand the reason, sir. So, on that relatively elevated base of higher footfalls in FY 2023 due to acute infections, viral infections, what is giving us that confidence, sir, that we will continue to grow occupancies in the mature hospitals?

Ramesh Kancharla — Chairman and Managing Director

I mean, at 60% — 61%, let me be honest with you that we struggled for the bed, we really struggled for the bed. What annoys me is that now when patients come, I won’t be able to give a bed and that’s not good, because in children’s hospital, it’s very emotional state. If somebody needs an admission and I’m not able to accommodate that, it’s not [Technical Issues]. So, therefore, this is business one has to accept it. I mean, if I can clock occupancies of 65% in a steady state in a matured Hospitals, 65%. I would do the revenue, EBITDA as much as adult hospitals do it on paper, because I don’t have a government business. I don’t have a people sitting in the hospital for longer period. Our ALS are low. The moment a child gets better, moment someone delivers, they are ready to go home anytime soon moment they recover. So, this is a different business model and we do need to build the capacity for the opportunity and also to have a more number of patients to check. This is how I look at a children’s hospital. So, please don’t ever compare children’s hospital occupancies with adult hospitals.

Alankar Garude — Kotak Securities — Analyst

Okay. Sir, second question is, if you look at our experience of lease versus greenfield, till now except Vizag all our hospitals have been leased. Given the upcoming greenfield one in Gurugram, can you take us through your experience in Vizag over the past three, four years, and how would you compare it to your expansions across the other leased facilities?

Ramesh Kancharla — Chairman and Managing Director

Vizag is a small city. I don’t think — I’m not looking at Gurugram as a Gurugram city of 50, 60 lakh population or 30 lakh population or whatever it is. I’m looking at Gurugram as a kind of hub, medical hub, for the Northern India and also for international. This is how I’m trying to position this hospital for children’s healthcare. So, if we look at the number of bed’s in Gurugram is huge already and they’re going to have many more beds, many more thousands of beds are going to come into Gurugram, because in the landscape of NCR, it’s — Gurugram is probably a place for health — huge healthcare destination, that’s what every healthcare leader thinks about it. The Max, the Apollo’s or Medanta’s or Fortis thinks about it. So, I think I completely agree to that, because the proximity of Gurugram to the many North Indian states. And still, unlike Southern India, even today the NCR focused completely after to seek, care and advanced care for North. So people don’t come from Bangalore to Hyderabad, Hyderabad to Chennai for any treatment, because they’re well developed. Still people come from all over the Northern states’, capital cities or rest of the cities to Delhi only for the all advanced treatments. So, therefore, we need to look at our Delhi opportunity, NCR opportunity as an Northern India opportunity of six, seven states, plus international. So, this is how I conceptualize this thought process to say that if we are going to be — we need to be there in a place where it’s a largest healthcare hub is Gurugram. So, therefore, we need to be there to kind of a differential in healthcare.

Alankar Garude — Kotak Securities — Analyst

And would it be fair to assume that we would continue to actively scout for facilities in Delhi and Noida?

Ramesh Kancharla — Chairman and Managing Director

Sorry, I didn’t understand.

Alankar Garude — Kotak Securities — Analyst

Would it be fair to assume that despite this Gurugram announcement, we will continue to actively scout for facilities in Delhi city and Noida?

Ramesh Kancharla — Chairman and Managing Director

I think, Delhi proper, I probably won’t be kind of looking at any greenfield, very unlikely. And Noida, of course, if there is a — it won’t be as big as this one. I think, Noida doesn’t — would probably require about 100, 125-bed children’s hospital and this will be the hub hospital for entire Delhi NCR.

Alankar Garude — Kotak Securities — Analyst

Fair enough, sir. And, sir, sorry, just one last question with your permission. Is there any change in seasonality patterns over the years? I mean, we have data only for the last three years, but if you look at the drop in quarter four margins for the previous two fiscals versus FY 2023, clearly fourth quarter FY 2023 has been a bit of an outlier and you explained the reasons for the same. But just, I mean, from a longer trend standpoint, wanted to understand, have you seen over the years any change in seasonality across quarters for our business?

Ramesh Kancharla — Chairman and Managing Director

I think, right from 2002, we have been seeing it. We have seen the variations of seasonalities of — particularly when we had our dengue outbreaks in the 2002 to 2007, 2009 and we have — seasonality got tweaked. Again, we have seen swine flus going up to the summer and seasonality got shifted, so it all depends on that nature and rains and various other factors, which actually influences that the abnormal pattern of the viruses and also the infections prevails in the community.

Alankar Garude — Kotak Securities — Analyst

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

Ramesh Kancharla — Chairman and Managing Director

That’s, Alankar.

Operator

Thank you. The next question is from the line of Prashant Kutty from Sundaram Mutual Fund. Please go ahead.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Yeah. Thank you for the opportunity, and congrats on a good set of numbers. Sir, first question is regard to the occupancy part of it, where you highlighted that on the matured beds you would be doing about 60% 65%. Even — please correct me if I’m wrong, but even in a relatively, let’s say, a muted quarter, as typically Q4 is, we still have managed to deliver a very good occupancy numbers. You highlighted that there would be some one-offs, because of viral infection high and all, but incrementally can you actually assume 65% to 70% — 65% to 67% being a norm for the matured hospitals?

Ramesh Kancharla — Chairman and Managing Director

So, you would like to know the 67% for the matured hospitals without being any season, right?

Prashant Kutty — Sundaram Mutual Fund — Analyst

Yeah. Because — yeah, exactly, yeah, without being the season, yeah.

Ramesh Kancharla — Chairman and Managing Director

Okay. Well, I see things as — clocking over 60% occupancy is more important, whether it is 4%, 5% delta is always going to be a — debatable. Question is, what kind of case mix you have in the hospital is more important. Sometimes, we had about 55% occupancies. We have done a bigger revenues than actually a 65% occupancy. What is the — see, sometimes, we may have a huge season and your occupancies are very high, but some — when your beds are not occupied with intensive care services, then the revenue is very, very, very minuscule. So, it all depends on the case mix and also sickness and these are the things determines the overall your revenue generation in a children’s hospital.

Prashant Kutty — Sundaram Mutual Fund — Analyst

But suffice to say that, when you’re talking about — at least — you’re looking for at least above 60% plus kind of a number for the matured hospitals?

Ramesh Kancharla — Chairman and Managing Director

Yeah.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Be it at any point of time, be it a season or a non-season point of time?

Ramesh Kancharla — Chairman and Managing Director

Yeah. Matured hospital will clock 60%.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Understood.

Ramesh Kancharla — Chairman and Managing Director

[Speech Overlap]

Prashant Kutty — Sundaram Mutual Fund — Analyst

Sure. Got it. Sir, another point was that, again, the reference point was, typically, the fourth quarter of the year usually used to be slightly more muted compared to the second and the third quarter, this however — this quarter however seems to be a bit of an aberration, you have done really good numbers on both topline as well as on EBITDA front. Should one take this as a more — a bit of a norm in terms of — from a reference point, or, again, is there — are there any one-off elements over here? Because compared to our Q4 2021 or Q4 2022 — I understand those had some impact of COVID and all, but — because this is a quarter where there was no such thing, is that a far more normalized quarter for us?

Ramesh Kancharla — Chairman and Managing Director

Yeah. Well, I won’t take any quarter as a reference point. I would take, overall, the year as a reference point. The reason is, year-to-year is — I can fairly talk about it, because it’s going to be impossible in an emergency-based hospital to pay — talk about consistency of quarter-on-quarter. They can keep shifting to one quarter to other quarter. But, overall, in a year, we can kind of envisage and to say that this is what we can do. As I — earlier gentleman who has asked me a question, this is what I said, I mean, we — our growth trajectory will continue to be high-teens towards 18%, 19% and the revenue and we will have to kind of see which quarters are going to be higher, which quarters are going to be moderated, it’s almost like a guessing. I’m sorry, I wouldn’t like to do it. I’m a doctor.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Sure. Sure, I get the point. But the reason for asking this was, sir, typically if you look at it, overall, the EBITDA numbers look to be far more superior and obviously it’s a function of the mature hospitals doing well, but again a point to that, is the newer hospitals — you’re not seeing too much of change in the occupancy over there. I understand that those are relatively new and will take their time. But are we seeing acceleration in that happening when the occupancy could kind of jump up faster over there? I mean, has the payback for these spokes, which you have told — which you’ve recently added or which you are going to add, have they been kind of coming off?

Ramesh Kancharla — Chairman and Managing Director

Definitely. See, what happens, see, in our business. For example, in Hyderabad. So, Hyderabad is kind of a — it’s a matured market for us. I am doing more and more beds in Hyderabad for a demand. So, I won’t have any problems. I mean, for me, if I start a hospital in Hyderabad, I wouldn’t worry about even what is that — if we’re going to take — burn any cash, it will definitely not burn the cash first year itself. So when I do a kind of in geographies with a newer or still we’re building our reputation like Chennai and those things, it may take a year, when second spoke to third spoke will get better. Fourth to fifth spoke will get even better. So that is overall reputation of your hospital or brand or how strong your clinical, these are all things going to matter.

So, today, we are sitting in Hyderabad. We — I mean, I have no concern to add. We’re almost getting closer to 1,000 beds in Hyderabad by end of the year, almost 940 or 950 beds. So, I never imagine that we are going to do so many beds, but I continue to do it, because there is a need and there’s a demand. So, we’re going to Bangalore. Yeah. We’re going to get to the 500 beds and there’s — still opportunity is there. So, there is a lot of beds are there to build the business in those — in Bangalore. Chennai we clocked very well with the hub hospital, second, third year, we’ve done extremely well and we — that’s why we added kind of a one more spoke — one more spoke is going to come this year, so it all depends on how we are placed ourselves to do business. What is the reputation of the hospital, what is the — medical doctors whom we have. These are all the determining factors of a hospital to do well and then the payback period will reduce significantly. The brownfield projects, naturally, you will take much less of a period than greenfield projects. So, this is how I look at our business. So, when we have kind of such a strong business in South, so obviously Delhi when I am going there, places like Gurugram, where everyone is bullish about being a healthcare hub or healthcare capital, definitely I need to be there because as a pioneer in children’s healthcare.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Sure. Which means that in the next year or so, even the newer hospitals — or in the next two years, should see an increase or should see an acceleration in the occupancy numbers?

Ramesh Kancharla — Chairman and Managing Director

Yeah, that’s what I expect to do.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Sure, sure. Definitely. And one last point, sir, in terms of margin, it’s been a very good year in terms of margins as well. You did highlight that you are putting up almost about 400 odd beds between one maturity 150 and then another 250 in next year. Given what you spoke about on the occupancy front, should one assume that margins really shouldn’t correct much compared to what you would have earlier thought?

Ramesh Kancharla — Chairman and Managing Director

I think, when you have so many beds as we added, there will be some degree of margin pressure will be there.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Sure. Fair point, sir. Fair point. But I’m just asking, earlier you were probably working from a 30%, 31% kind of number, you already clocked in about 34%, so I’m asking from that perspective?

Ramesh Kancharla — Chairman and Managing Director

Yeah. Yes. I’m sure there will be some.

R. Gowrisankar — Chief Financial Officer

We always say, the pre-Ind-AS of 25%, because whenever we expanded — earlier, also, we have seen that not clocking at that rate. So, the last two years, yeah, bed addition was, let’s just say, has gone to that 34%, 35%. So, we are paying. It will be 30% post-Ind-AS, it’s doable considering that you have a bucket good number of matured hospitals and then you are adding a new addition, so 30% is doable.

Prashant Kutty — Sundaram Mutual Fund — Analyst

Understood. Sure. Thank you so much, sir. And all the very best to you.

Ramesh Kancharla — Chairman and Managing Director

Thank you. Thanks a lot.

Operator

Thank you. The next question is from the line of Dhavan Shah from AlfAccurate Advisors. Please go ahead.

Dhavan Shah — AlfAccurate Advisors — Analyst

Yeah. Thanks for the opportunity, sir. So my question is related to the cost of medical consumable. If I look at on the Y-o-Y basis, it’s been down by around 21% percent. And what is the other cost — it’s more or less, up by 25%, so just wanted to understand your thoughts on this part, because our — I think, the inpatient volume growth was roughly 25% odd, so how should we calculate these two heads, if you can help on this thing?

R. Gowrisankar — Chief Financial Officer

The consumable is always about 14%, 15% actually. So, last year, we have done as COVID vaccination, which is a less margin business compared to the hospital business. So, let’s say, it was about 20%, now it has come to normal, because of normal hospital business it has come down. So you can take going forward — in the normal circumstances, it will be — even you see the earlier trend also, it’s about 14%,15%.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay. And what about the other cost?

R. Gowrisankar — Chief Financial Officer

Other cost is not — it ranges about around 7%, 7% to 8%, it will not be more than that actually. We have see — again, what is there — because of — the professional fee is grouped separately, so obviously it’s about 7% — 6%, 7% and then including the bed addition everything and it gives us an opportunity for a better operating leverage also, it can come down. If you don’t add, it will come down, otherwise it remains the standard care.

Dhavan Shah — AlfAccurate Advisors — Analyst

No. But — if I — even the professional fee to the doctors, they are already excluded in the financial statement, but still if I do the math of 7%, 8% percentage on the INR1,174 crore, it comes to around INR82 odd crores, so it’s more than that, around INR200 crores will be the cost for the year?

R. Gowrisankar — Chief Financial Officer

[Technical Issues] 20%, 22%.

Ramesh Kancharla — Chairman and Managing Director

22%.

R. Gowrisankar — Chief Financial Officer

You’ve got clarification, or?

Dhavan Shah — AlfAccurate Advisors — Analyst

No. So, basically, as you mentioned that the other cost should be 7% to 8% of sales, excluding the professional fee, so the professional fee line item is already apart from other expenditure. So, if I do the math, other cost comes to around 17% odd percent for FY 2023 as against 7% to 8% you are highlighting, so is there anything I’m missing over here?

R. Gowrisankar — Chief Financial Officer

No, no, you are not missing anything actually, it’s about I think INR202 crores. Yeah. It’s about 17%. I think, that’s right only. Certainly.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay. So how should we assume, because I think the other cost for the year has been increased, so any fixed cost into this part or any [Speech Overlap]

Ramesh Kancharla — Chairman and Managing Director

We have added two more hospitals in this financial year late in the last quarter and there is an increase in marketing expenses as well as the repair and maintenance. So, that’s fair. You will see, compared to FY 2022-2023 on a full-year basis, there is an increase actually.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay. So, on a yearly basis, I think the advertisement and the repair and maintenance cost should be how much, if we compare —

R. Gowrisankar — Chief Financial Officer

So, on an average, we spent about — between 2% to 3% we spend on the marketing and business promotion expenses on the topline.

Dhavan Shah — AlfAccurate Advisors — Analyst

And the repair and maintenance costs?

Ramesh Kancharla — Chairman and Managing Director

So, that will be about 2.5%.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay. And the second question is about the breakeven timing. So, I would like to understand about the new hospital that we are adding roughly 400 beds in the next two to three years, so what is the normal breakeven timing for new ones? And any EBITDA per bed number for the mature versus the new hospital that you can give? And how do you see the mix going forward in the next two to three years, because right now around 70% of the overall bed is from the matured one and given that we are adding 400, 500 beds, so how do you see the overall mix going forward?

Ramesh Kancharla — Chairman and Managing Director

I think, it will become 50%, 50%, because we are adding a significant number of beds this year. So it will kind of a — become a 50%, 50%, matured and maturing. I need to see that how many are going and joining mature group also, some of the hospitals may join. So the — because of the bed additions and those things, mature — maturing hospitals will a little bit change to — last two years, in the COVID years, we’ve not expanded much and last year there is only 50 beds been added. So, therefore, we have — we don’t see much of — in the maturing beds. I think this year will change significantly to the maturing hospital number.

Sanjeev Sukumaran — Chief Operating Officer

Only one hospitals.

Ramesh Kancharla — Chairman and Managing Director

Only one —

Sanjeev Sukumaran — Chief Operating Officer

Only Fortis in children’s hospital will [Speech Overlap]

Ramesh Kancharla — Chairman and Managing Director

Only one hospital. So —

Sanjeev Sukumaran — Chief Operating Officer

There will be more.

Ramesh Kancharla — Chairman and Managing Director

So, there will be more on the —

Sanjeev Sukumaran — Chief Operating Officer

New hospital.

Ramesh Kancharla — Chairman and Managing Director

New hospitals group. In terms of — you asked other thing, it’s about breakeven point and those things. Hyderabad, we do kind of a breakeven in the first year itself. It’s not a problem for us. Even in Chennai and Bangalore, we’ll take 1.5 year, 12 to 18 months’ time is a breakeven. It depends on the location, size of the hospitals and those things. That’s how we’ll look at it, our breakeven.

Dhavan Shah — AlfAccurate Advisors — Analyst

And the EBITDA made for matured versus new hospital?

R. Gowrisankar — Chief Financial Officer

No, we don’t calculate — we don’t add the EBITDA per bed level.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay. So, given that the mix would be —

Operator

Sorry to interrupt here. Sir, I would request you to please join the queue for further questions.

Dhavan Shah — AlfAccurate Advisors — Analyst

Sure.

Operator

Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.

Neha Manpuria — Bank of America — Analyst

Yeah. My questions have been answered. Thank you.

Operator

Thank you. The next question is from the line of Aditya Khandelwal from SIMPL. Please go ahead.

Aditya Khandelwal — SIMPL — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Sir, in your matured assets, if we look at occupancy in the Hyderabad cluster, we were at around 65% based on the DRHP. But for Bangalore or Chennai, we were at around 50%. So, I just wanted to know how — has the occupancy ratio of Bangalore and Chennai improve?

Ramesh Kancharla — Chairman and Managing Director

They have improved overall, and we don’t do actually the city wise cluster. We look at the matured and maturing hospitals. So hospital-to-hospital we don’t really do the — city-to-city — it becomes too complex for us to do. Therefore, they have definitely increased, otherwise we wouldn’t have clocked about 67% occupancy.

Aditya Khandelwal — SIMPL — Analyst

Right. And in our matured hospital, you said our occupancy is around 60% to 65%, so just wanted to understand that the future revenue growth for the company would come only from setting up new centers, there is scope for growth to come from the matured centers as well?

Ramesh Kancharla — Chairman and Managing Director

No, it’s come from both, because matured hospitals will continue to grow in terms of some occupancy and also price mix and also case mix, definitely they will continue to grow. What — our experience is that, no, we continue to grow in the matured hospital also in terms of revenue sides.

Aditya Khandelwal — SIMPL — Analyst

Okay. And as for my calculation, our inpatient volume for our new centers, which was in the range of 3,800 to 3,900 in the last few quarters has increased to 4,300 to 4,400 this quarter. So has this increase majorly come from our new centers, including Chennai and Hyderabad, or our existing centers have also seen an increase?

Ramesh Kancharla — Chairman and Managing Director

No. Across all the new centers, because of this — the viral epidemic is global, actually it’s not city to city. We have seen across the country and across the globe, we have seen these viral infections in children.

Aditya Khandelwal — SIMPL — Analyst

Right. And our inpatient yield, we’ve seen, increase will primarily come from two factors, inflation and patient mix. So, I just wanted to understand what kind of increase can we expect from both of these factors going forward?

Ramesh Kancharla — Chairman and Managing Director

Sorry, I didn’t get it. The price increase, we are saying, on an average, our ARPOB will increase by about 7% to 8% year-on-year. So, you can take about —

R. Gowrisankar — Chief Financial Officer

So, put together 7% to 8%.

Ramesh Kancharla — Chairman and Managing Director

Yeah. Put together 7% to 8%. This includes the case mix and inflation.

Aditya Khandelwal — SIMPL — Analyst

Okay. 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. Sir, for the Gurugram facility, I mean it’s a completely — it’s a newer geography than South India, where you are currently dominant. So do you foresee any change in the doctor engagement model that you would have for the Gurugram facility? So, in South India, you have the doctors in a full-time basis, 24/7 availability kind of a thing, so do you think that would be possible in the Gurugram region, or do you — are you looking at any other doctor engagement model for that geography?

Ramesh Kancharla — Chairman and Managing Director

Children’s hospitals, if you want to drive across the goal, it will be an institutional model, what I’ve told the fundamentals. So, you may actually have a different engagement model, but it has to be a full-time commitment doctors. So, that is a gold standard for children’s hospitals. So, I think, that we would work towards that. I think the major price points may be different from doctor payment, about expectations, but the children’s hospital demands full-time doctors to deliver quality and to deliver results.

Aneesh Deora — Nomura — Analyst

Understood, sir. So, probably you are indicating that the doctor payments in the Gurugram region could be higher than what the average to be in South India currently?

Ramesh Kancharla — Chairman and Managing Director

Yeah. The price points will be higher. Doctor points will be higher. We need to be, kind of, clear on that.

Aneesh Deora — Nomura — Analyst

Okay. Understood, sir. Thanks.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Kartik Narayan from SVB India Advisors. Please go ahead

Kartik Narayan — SVB India Advisors — Analyst

Firstly, congratulations not just on the numbers, but also on the clinical results. I think it’s fantastic. Most of my questions were answered. I have a couple of follow-ups. One is with respect to the 48% growth that you have seen this quarter, if you had to break that down into price increase and volume increase, how much of that came from prices either through insurance or cash price increases, and how much from volume? That would be helpful.

Ramesh Kancharla — Chairman and Managing Director

I have not done the calculations. But definitely it’s more of a — the volume, volume-driven as well as kind of the case mix. Yeah. So, I can broadly tell you that we’ve done a lot of intensive care work and a lot of sick children, so more of volume and also the case mix than price.

Kartik Narayan — SVB India Advisors — Analyst

Understood. And if I were to look at the full year, I mean, since you’ve mentioned earlier, it’s better to look at the full year, the 20% year-on-year growth, would you say it’s similar? Is it mostly related to volume versus price?

Ramesh Kancharla — Chairman and Managing Director

Yeah. I think we have always delivered, even in the pre-IPO over the last 10 years’ time we delivered it. I hope to do that. So, yeah, of course, that’s been our — we have done it. Still, we’ve always been saying that is, high-teens to 20, so the growth. I wouldn’t think that it will be any problem for that.

R. Gowrisankar — Chief Financial Officer

Just to add, if you look at ex of COVID, our ARPOB has increased on an annual basis by 4%. If you break down the 20% growth, 4% has come from tariffs and the case mix, and the rest has come from volume mix.

Kartik Narayan — SVB India Advisors — Analyst

Understood. That’s helpful. And one question related to the full year numbers. So, if I look at FY 2022 versus 2023, rather a strong 20% year-on-year growth, but the doctor costs have — professional fees to doctors was around 34, so has there been any change in terms of the way we have engaged with the doctors in the past year?

Ramesh Kancharla — Chairman and Managing Director

I think, there’s — a lot of new doctors has been added to the pool, new doctors and new centers have come as a new — because our doctor engagement model is full time. So, when you start a new center, then our doctor costs goes significantly higher.

Kartik Narayan — SVB India Advisors — Analyst

Understood.

Ramesh Kancharla — Chairman and Managing Director

So, therefore, the doctor cost goes up. What we always see is that, doctor costs hovers between 22% to 24%, rarely it goes up to 25% also.

Kartik Narayan — SVB India Advisors — Analyst

Understood. So, 25% is perhaps the benchmark that you aspire to maintain even as you —

Ramesh Kancharla — Chairman and Managing Director

I would get worried beyond that.

Kartik Narayan — SVB India Advisors — Analyst

Understood. And, no, I think — that’s all I have again. Congratulations on the results, both clinical and the numbers.

Ramesh Kancharla — Chairman and Managing Director

Thank you.

R. Gowrisankar — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Yogesh Tiwari from Arihant Capital. Please go ahead.

Yogesh Tiwari — Arihant Capital — Analyst

Thank you, sir, for taking my question. I had certain questions on the balance sheet. So, last year, we had this goodwill of about INR30 million, which we do not have now. So, if you can share some details on the same?

Ramesh Kancharla — Chairman and Managing Director

On the consol, the good invest created long back when we merged one of our subsidiaries and paid back in 2014-2015, so that, as a prudence, call for the writing-off and the goodwill, so we have taken it and it’s — so it’s not a very material amount, about INR2 crores actually [Technical Issues]

Yogesh Tiwari — Arihant Capital — Analyst

So, sir, going forward, there will not be — we can assume there will be no — nothing in terms of goodwill going forward?

Ramesh Kancharla — Chairman and Managing Director

No, there is nothing. No intendable deductible in the books.

Yogesh Tiwari — Arihant Capital — Analyst

Sure, sir. And, sir, other thing on the intangibles. So, we have some intangible assets jumped from like INR1 crore to INR4 crore, and there are some under development from INR1 crore to INR2 crore. So how do we look at this? Like, what would be under-development and other intangible assets and the jump in the same?

R. Gowrisankar — Chief Financial Officer

It’s a — see, we are implementing new HIS actually. So, it’s all likely related. Some of the softwares what we are implementing and those are all — we are kind of upgrading our HIS after seven years, so related to that we bought some of the assets actually.

Yogesh Tiwari — Arihant Capital — Analyst

Sure, sir. So, just for modeling purpose, would it remain in the same range for FY 2024?

R. Gowrisankar — Chief Financial Officer

So, in FY 2024, we may incur another about INR2 crores, INR3 crores towards this actually, to complete that entire implementation and the new software, whatever approved, BA tool and all those things, another INR2 crores to INR3 crores we will spend on this.

Yogesh Tiwari — Arihant Capital — Analyst

So, like INR2 crores, INR3 crores more under asset — intangible asset under development, it might include, right?

R. Gowrisankar — Chief Financial Officer

Yeah. Yes. Current FY, you will see the addition of INR2 crores to INR3 crores.

Yogesh Tiwari — Arihant Capital — Analyst

Okay. Thank you very much. Sir, just last one question. On the other financial assets, it has increased by about INR55 crores to INR234 crores, so if you can share the spike in the other financial assets?

Ramesh Kancharla — Chairman and Managing Director

No, it’s actually the fixed deposits what we have, so it’s based on the reclassification we have done. So as per that, any deposit, which is having a maturity of more than 12 months has to go to other financial asset, that has gone actually.

Yogesh Tiwari — Arihant Capital — Analyst

Okay. Got it. Okay. Thank you, sir. Thank you very much.

Operator

Thank you.

R. Gowrisankar — Chief Financial Officer

Thank you.

Operator

As there are no further questions, I would now like to hand the conference over to management for closing comments.

Ramesh Kancharla — Chairman and Managing Director

So, thank you very much for all the analyst and investor community for patiently listening, and we continue to engage. Of course, are there any questions, you may reach out to our Investor Relations team. Thank you very much, CDR, and all the analysts and investors. Thank you.

R. Gowrisankar — Chief Financial Officer

Thank you very much.

Operator

Thank you.

Sanjeev Sukumaran — Chief Operating Officer

Thank you very much.

Operator

[Operator Closing Remarks]