Shalby Limited: A Rising Star?

“With all key strategies in place, our team is extremely committed to flawless execution of these strategies. Shalby is very well poised to further improve occupancies and deliver double-digit growth in the hospital business with sustainable profitability, deepen and increase our Shalby footprint by adding several orthopedic units under the SOCE umbrella and to hit the coveted milestone of INR 100 crores sales and be EBITDA positive in our Implant business in the fiscal year. All in turn, I’m confident it will help create sustainable value for all stakeholders at Shalby.”

– Mr. Sushobhan Dasgupta, Vice Chairman & Global President (Q2FY23 Earnings Concall)

Stock Data
Ticker	SHALBY
Exchange	NSE & BSE
Industry	HEALTHCARE

Price Performance
Last 5 Days	+6.92%
YTD	+6.92%
Last 12 Months	+8.28%

Company Description:

Shalby Ltd. is a leading chain of multispecialty hospitals and tertiary care centers in India. In the Hospital business, the company possesses 11 multispeciality hospitals with close to 2060+ beds. The company also operates in the knee and hip implant manufacturing business which is located in California, USA. Additionally, the company has forayed into the home care services segment to provide healthcare services to patients at the comfort of their own home.

Dominance in Arthroplasty & Implant Business:

Arthroplasty is an orthopedic surgical procedure to restore the function of a joint. The common type of Arthroplasty is hip, knee and shoulder replacement. Shalby Ltd. is the largest private player in the Arthroplasty segment in India with about 15% of the total market share. 

To further increase the firm’s dominance in this segment, the company acquired an implant manufacturing business. Other than the fact that this move allows backwards integration of the Arthroplasty segment, the company majorly sells these manufactured goods in the USA where the margins for the goods are significantly higher than the Southeast asian markets. 

“Locking revenues of INR 24.1 crores, of which sales in the US and India contributed around 60% and 40%, respectively. We are placing considerable efforts to modify our customer mix in the US to improve profitability and have now reached the ratio of 61% to 39% sales between retail and wholesale, respectively. and we soon expect to hit the $1 million monthly sales consistently with new surgeons, hospitals and distributors coming on Board in the US.”

– Mr. Sushobhan Dasgupta, Vice Chairman & Global President (Q2FY23 Earnings Concall)

In the implants business, the company is looking to directly reach retailers rather than wholesalers to earn a higher margin. As operations in this segment increases, economies of scale would result in steady profitability in the business. Additionally, the backwards integration would benefit the hospital business as well.  

Asset Light Model (Strategy):

Shalby Ltd. has always followed an asset light model. In the hospital business, 4 of its 11 multispeciality hospitals are leased properties. This asset light strategy allows the company to diversify swiftly and expand aggressively.

In the Franchise business, the company is extending its management control over the franchised hospitals. By managing the hospitals, Shalby Ltd. will take a larger portion of the revenues for itself.

Steady & Profitable Hospital Business:

A major profitability driver for the firm is its hospital business. This quarter, the average revenue per occupied bed (ARPOB) decreased but the occupancy rate as a whole has gone up to 50% in Q2FY23 from 43% in Q2FY22. The management estimated that by the end of this fiscal  year (FY23), the occupancy will increase to 53% – 54% levels. This increasing trend in the occupancy rate will result in increasing revenues for Shalby Ltd.

High Upside Potential with the Home Care Division:

The Shalby Homecare Services represents a small portion of the Shalby Ltd. group. However, it comes with great potential. Post the COVID 19 pandemic, there has been an increasing trend of homecare services. A key benefit of homecare services is that patients prefer to keep on working with the same entity if the need arises. So, the customer of the homecare services of Shalby Homecare Services is likely to use the Shalby Multispeciality Hospital for their additional medical needs. This characteristic might also stand as an obstacle for the firms in this segment to snatch market share from each other. Shalby Homecare Services has planned an impressive service offering which it wants to roll out eventually in the future.