Aster DM Healthcare Limited (ASTERDM.NS) Q1 FY2026 Earnings Call Transcript & Summary

[Audio Gap] Mr. T. J. Wilson, Non-Executive Director; Mr. Anoop Moopen, Non-Executive Director; Dr. Zeba Moopen, Non-Executive Director; Mr. Ramesh Kumar, Chief Operating Officer; Mr. Sunil Kumar, Chief Financial Officer; and Mr. Hitesh Dhaddha, Chief Investor Relations and M&A Officer. We are also delighted to have Mr. Varun Khanna, Group MD of Quality Care. Mr. Khanna is here solely in the capacity of a representative of Quality Care to give insights into the business and future plans of Quality Care. The entity which is in process to get merged with Aster DM Healthcare. It is to be noted that the merger is subject to further regulatory approvals. [Operator Instructions] We will start the call with opening remarks by management, followed by an interactive Q&A session. Certain forward-looking statements may be discussed in this meeting are subject to certain risks and uncertainties like government actions, local, political or economic developments, technological risks and many other factors that could cause actual results to differ materially. Aster DM Healthcare Limited will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. With this, I will now request Ms. Alisha Moopen to start with opening remarks. Over to you, Ms. Alisha.

Thank you, Puneet. Good morning, and thank you for joining us today. I'm pleased to report that in the first quarter of FY '26, Aster DM Healthcare has delivered a market improvement over the softer performance we saw in the last quarter. Revenue grew 8% year-on-year, operating EBITDA expanded by 21% and PAT rose 22%, a set of results that clearly show our momentum is back and our operating model remains, both resilient and agile. With this strong start to the year, we are confident about sustaining growth and further enhancing profitability going forward. Before I move to the detailed performance, I'd like to start with an area that has been closely focused by both us and our investors, which is our Kerala cluster performance. After a couple of challenging quarters, Kerala's revenue grew 5% year-on-year, a sharp improvement from the 4% decline in Q4 FY '25, driven by a 6% sequential increase in patient volumes. This has been a combination of stabilized leadership, a sharper operational efficiencies and improvement in our Medical Value Travel business, which has enabled us to deliver this growth. In fact, MVT revenues in Kerala has jumped 12% sequentially, reinforcing Kerala's standing as a preferred destination for international patients. Taking a step back, our performance this quarter builds up on a solid multiyear trajectory. Over the past 5 years, leading up to FY '25, revenues have grown at a 20% CAGR, while operating EBITDA has expanded at an even stronger 38% CAGR. This long-term growth has been covered by strategic capacity expansion, consistent ARPOB improvement and sustained operational efficiencies, proof that we are scaling, not just in size, but also in quality and profitability. In Q1 FY '26, we achieved INR 1,078 crores in revenue, up 8% year-on-year. This was driven by our strategic shift towards high-value businesses supported by 2 key factors. There's been a 14% increase in ARPOB crossing INR 50,000 per bed for the first time, a reflection of our specialty mix enhancement and focus on clinical excellence and a 4% reduction in ALOS, which is the average length of stay, improving CARE efficiency and capacity utilization. ARPOB growth has been led by our continued push into higher-value specialties like oncology and neurosciences. Oncology share of revenue is now 11%, up from the 9% in Q1 FY '24, showing our progress in building it into a key pillar of our clinical strategy. ALOS improvement comes from investments in advanced equipment, growth in minimally invasive procedure, better admission planning and faster TPA discharges, all of which helps us deliver better patient outcomes while using our capacity much more efficiently. Together, these levers, specialty mix, the ALOS optimization and the pricing discipline form a sustainable growth framework that is helping us move further up the value chain. Now moving to the bottom line performance. Our operating EBITDA grew 21% year-on-year to INR 215 crores with margins expanding to 20% from 17.7% last year. This reflects the combined impact of Kerala's recovery, the ARPOB gains, manpower cost optimization and steady lab business improvement. The normalized PAT rose 22% to INR 90 crores, excluding onetime merger-related costs, highlighting the underlying strength of our core operations. Moving to our core segment. The hospital and clinics continue to perform well with EBITDA margins improving to 22.6% from 20.8% a year ago. The mature hospitals, those operational for more than 7 years, delivered an EBITDA margins of 24.5% and an exceptional ROCE of 35%. Our lab margins have improved from -- have improved to 7.6% from 3.4%, supported again by efficiency gains. And in pharmacy, our strategic exit from certain loss-making wholesale segments have helped the business achieve EBITDA breakeven as well this quarter. Moving to our CapEx and expansion. Our growth story isn't just about performance, and it is also about preparing for the future. Over the past year, we have added more than 300 beds, bringing our total capacity to 5,197 beds as of June 30, 2025. In the coming years, we plan to add another 2,600 beds, both greenfield and brownfield projects, taking our capacity beyond 7,800 beds. Bengaluru is a prime example of this strategy in action. We're adding 1,439 beds in the city, including a newly announced 500-bed hospital in Yeshwanthpur. Once complete, our total capacity in Bengaluru will exceed 2,580 beds, firmly positioning us among the top 3 health care providers in this very high-growth market. Moving to the update on the merger with QCIL. One of the most transformative steps in our journey is the proposed merger with Blackstone-backed Quality Care India Ltd, QCIL. This is much more than just a transaction. It is truly a strategic leap towards creating one of the most comprehensive integrated health care networks in India. We have already achieved some significant milestones towards the merger. Shareholders have approved the preferential share issuance. The Competition Commission of India has granted its approval. We have completed a strategic share swap acquiring 5% stake in QCIL in exchange for a 3.6% preferential allotment in Aster. These shares are now listed on the stock exchanges. The combined entity with a scale of over 10,350 beds across 38 hospitals in 27 cities delivered a 12% growth in pro forma revenues to INR 2,157 crores and 20% growth in operating EBITDA to INR 442 crores for this quarter, delivering a healthy EBITDA margin and ROCE of over 20%, a very solid indicator of the strength and the potential of the merged platform. Both QCIL and Aster delivered strong complementary results this quarter, giving us confidence in the ease of integration and the value creation potential up ahead. The merged platform will significantly expand our geographic footprint, deepen our clinical capabilities and broaden our patient reach. As we move towards operational integration, our focus is clear: unlock synergies, optimize resources and deliver consistent high-quality care at scale. Moving to our digital initiatives. While physical expansion is critical, the future of health care will also be shaped by digital integration. And here, we are making strong strides. The Aster Health app has now crossed 100,000 downloads. With the launch of its Malayalam version, we have become Kerala's first regional language health care super app. Our Aster CARE platform designed to personalize patient journeys is delivering 79% engagement at our flagship hospitals. The next step is even more exciting, integrating diagnostics, pharmacy and home care services into the app, creating a seamless end-to-end ecosystem. This will, not only elevate the patient experience, but also deepen loyalty to our Aster brand. We're also proud to share that Q1 FY '26 has been a quarter of notable recognition for both our leadership and our institutions. Our Founder, Chairman, Dr. Alisha Moopen, was named Healthcare Leader of the Year at the Financial Express Awards 2025, recognizing his visionary leadership and lifelong commitment to accessible health care. I was also humbled to receive the Women Entrepreneur of the Year Award at the same event. On the institutional front, Aster Medcity, Aster CMI and Aster MIMS Calicut ranked among the India's top 10 hospitals by Times of India, Outlook and Fortune India, while RV and Aster Prime joined them in Newsweek's Global Hospital rankings. As we move forward, Aster DM Healthcare stands at an inflection point. Our core markets are performing strongly. Our Kerala's cluster has delivered healthy growth and our specialty mix is moving us higher up the value chain. The merger with QCIL is a transformational milestone, one that will create an unmatched health care network in India and will drive operational synergies, expand our clinical depth and significantly extend our patient reach. We are investing in scalable integrated care, combining physical infrastructure, digital platforms and specialty depth with an unwavering commitment to excellence. With these strategic levers in place, we're not just poised for sustained growth and market leadership, we're truly reshaping the future of health care delivery in India. I will now invite our Chief Operating Officer, Mr. Ramesh Kumar, to elaborate on our cluster-wise performance. Thank you.

Thank you. Thank you, Ms. Alisha, and a very good morning to everyone. So I'm pleased to provide an update on our cluster performance for quarter 1 FY '26. We have seen sustained growth and improvements in operational efficiency across all our regions. Let me walk you through the key highlights, starting with the Karnataka and Maharashtra cluster with a total bed capacity of 1,497 beds and 1,027 operational census beds, the cluster has demonstrated continued growth. Revenue grew by 13% year-on-year, reaching INR 372 crores in quarter 1 FY '26, up from INR 329 crores in quarter 1 FY '25. Operating EBITDA has surged by 23%, amounting to almost INR 86 crores in quarter 1 FY '26, resulting operating EBITDA margin expanded to 23.2% in quarter 1 FY '26 from 21.2% in quarter (sic) [ quarter 1 ] FY '25. The performance was driven primarily by ramp-up at Aster Whitefield and also exit of some low-margin businesses and improved operational efficiencies. Moving on to the Kerala cluster with a bed capacity of 2,653 beds and 2,014 operational census beds, we are encouraged to see an early sign of growth, recording a 5% year-on-year revenue growth this quarter and 11% quarter-on-quarter growth, regaining earlier revenue levels. This improvement reflects the positive impact of leadership enhancement and operational measures initiated over the past few months. While the domestic volumes are stabilizing, we remain optimistic about the growth in the Medical Value Travel through enhanced digital outreach and targeted enhancement in high potential market. Now moving to Andhra and Telangana cluster, which comprises a total of 1,047 beds with 791 currently operational beds. This region saw a revenue growth of 7% year-on-year, reaching INR 218 crores in quarter 1 FY '26. Operating EBITDA stood at INR 9 crores in quarter 1 FY '26 with a margin at 7.9%. Looking ahead, we are confident on our ability to accelerate the growth momentum, our commitment to operational excellence, expanding our reach and delivering exceptional care, our position, as well as continue to build on this positive trajectory. I will now hand it over to CFO, Mr. Sunil, who will provide further insights into our financial performance. Thank you.

Thank you, Ramesh. Good morning, everyone. For the quarter ended 30 June 2025, revenues have increased to INR 1,017 crores, up by 8% from last year quarter 1 FY '25. And operating EBITDA has increased to INR 215 crores with a margin of 20% compared to INR 177 crores in quarter 1 FY '25 with a growth of 21%. Normalized PAT post NCI for quarter 1 FY '26 is at INR 90 crores compared to INR 74 crores in quarter 1 FY '25 with growth of 24% year-on-year. For the quarter ending 30 June 2025, our operating EBITDA margin expanded over 230 basis points, increasing from 17.7% to 20% year-on-year. The significant improvement has been driven by a combination of strategic initiatives, disciplined resource management and operating leverage across the business. In quarter 1 FY '26, the ARPOB registered a strong 14% year-on-year growth, sustaining the double-digit momentum from FY '24 and FY '25. This performance was driven by a mix of strategic initiatives, including a reduction in average length of stay from 3.2 to 3.1 days, contributing a 4% uplift in ARPOB. Aster Whitefield played a key role with a 31% increase in total revenue and 21% rise in ARPP, fueled by higher contribution from oncology and neurosciences. The discontinuation of low scheme business in one of our hospitals also improved our overall ARPOB by eliminating the drag on averages. Additionally, oncology grew by 16% across the group, further enhancing ARPOB due to its high ticket size. Price revision in both cash and TPA segments and favorable case mix further contributed to the ARPOB growth. Aster Labs has delivered a turnaround since the beginning of FY '25 with EBITDA margins improving from 3.4% in quarter 1 FY '25 to 7.6% in quarter 1 FY '26. The margin expansion has been driven by robust 46% Y-o-Y growth in external business alongside enhanced operating leverage and significant material cost efficiencies, reflecting in strengthened financial performance. Aster Labs now operates at a healthy ROCE of 13.7%, a notable recovery from a negative ROCE a year ago. As part of a focused strategic shift, we exited loss-making unit within the wholesale pharmacy business, effectively eliminating a key drag on the overall performance. This move has resulted in a successful turnaround with the segment now delivering positive margin of 1.7% in quarter 1 FY '26. With the foundation reset, margins in this segment are expected to expand further in the coming quarters, reflecting a more sustainable and profitable growth trajectory. We have optimized our manpower cost by approximately 100 basis points across key function areas by enhancing span of control, enabling leaner team structure and reducing supervisor layers. In parallel, we undertook targeted initiatives to rationalize overhead expenses, including the central price procurement of services on nonmedical consumables and adoption of renewable energy. Combined with the benefits of operating leverage, these efforts have resulted in additional 110 basis point reduction in overhead costs, reinforcing our commitment to operational excellence and margin expansion. As of quarter 1 FY '26, we maintained a strong liquidity position with cash and cash equivalents totaling INR 1,455 crores, while our gross debt remains lower at INR 643 crores. Additionally, we are pleased to report a significant improvement in ROCE, which has increased by over 400 bps from 16.5% to 20.7%, demonstrating enhanced capital efficiency and disciplined financial management. With this, we have laid a solid foundation for future growth. As we move into the future, we are confident of building on this momentum with the same discipline and focus. On that note, I conclude my remarks. Now I request Mr. Varun Khanna to take you through performance of QCIL. Thank you.

Good morning, and thank you, Sunil. As you're all aware, we began this journey together a few months ago, united by a shared vision to transform the Indian health care ecosystem. In my previous address, I outlined how QCIL is evolving, touching upon our vision, leadership, performance and strategic initiatives. I'm excited to share that strategic interventions we implemented last year are now yielding outstanding results, driving a significant turnaround across several of our units. This momentum has positioned us among the top quartile performers in the industry this quarter. Most importantly, these initiatives are being embedded as long-term performance enablers, further strengthening our confidence for the quarters ahead. So let me give you a sense of what the quarter 1 financial performance is like. In Q1 FY '26, QCIL reported a revenue of INR 1,079 crores, reflecting a strong Y-o-Y growth of 16%. This performance was driven by both ARPOB and volume-led growth, further supported by an improved payer mix. Our payer mix actually moved almost 2 percentage points or 200 basis points to about 80%. So cash and insurance is now 80% of the total business. ARPOB rose by 15% year-on-year, reaching approximately INR 45,000 in Q1 FY '26. QCIL recorded a 4.2% Y-o-Y increase in inpatient volume and a 12% increase in OPD volumes. EBITDA post Ind AS stood at INR 227 crores, reflecting a 19% Y-o-Y growth. And the margin profile improved from 20.5% to 21.1%. We continue to witness strong momentum in our mature units. And mind you, these mature units contribute more than 60% of our business, which delivered 16% Y-o-Y growth and a healthy EBITDA margin of 31%. Our cash conversion cycle remained healthy at 10 days as end of June -- as of end June, while strong cash generation in Q1 drove a significant reduction in net debt from [ INR 410 crores to INR 308 crores ]. Our ramp-up of initiatives in emerging units also showed encouraging results with revenue growing by an impressive 87.5% Y-o-Y. Notably, Nagarcoil operational since October 2024, has already achieved EBITDA breakeven and is showing strong growth potential. Further, emerging units recorded a 24% revenue increase over the previous quarter, underscoring the effectiveness of our expansion and operational strategies. In parallel, our focus units posted 10.3% revenue increase compared to Q4 FY '26 (sic) [ Q4 FY '25 ], reaffirming the positive trajectory and potential of these assets. Let me give you a quick update of some of the key changes that have driven this turnaround. Foremost is leadership hiring. Our ability to attract diverse leadership was clearly demonstrated last year with the successful hiring of 10 CXO level leaders, each bringing unique and complementary skills to the table. Building on this momentum, this quarter, we welcomed our group CHRO, further strengthening our leadership team. To enhance our execution capabilities, we introduced a regional structure aimed at ensuring effective strategy deployment down to the last mile. As a part of this initiative, we have appointed 2 regional chief executives to oversee operations outside of Hyderabad and outside of Trivandrum, bringing sharper focus and stability to our emerging growth regions. Clinical augmentation, while last year, our clinical talent in key markets faced some challenges, our doctor hiring efforts over the past 2 quarters have delivered strong turnaround in quarter 1, resulting in a positive net revenue contribution of around INR 10 crores in monthly run rate for Q1. The newly onboarded doctors have driven a significant shift towards high acuity care with our CONGO share increasing 210 basis points to 58.4% for this quarter. Key specialties include ortho, neuro, cardiac sciences. Additionally, our average length of stay improved by 3%, decreasing from 4.0% to 3.9%. With the launch of new clinical programs, we've also invested in advanced technologies. This quarter, we added 2 robots, 2 cath labs and 3 MRIs. A lot of initiatives to accelerate growth. We've launched the first phase of [ our ] call center operations, partnering with Tech Mahindra to lead this transformation. As a complementary initiative, we have also introduced a new CRM-based patient enrollment system, currently in its beta launch phase. This combined effort is projected to generate INR 18 crores in incremental revenue over the current fiscal. Our broader objective is to establish a centralized workflow-driven call center to manage the entire patient life cycle, ultimately enhancing our ability to influence patient lifetime value. As a part of our sales transformation, we onboarded 11,800 doctors to our CRM system. We revamped our MVT organization structure and Q1 has already shown a revenue growth of 80%, indicating early success of these efforts. To drive operational excellence, let me give you a couple of initiatives that are scored very well. Our initiative to drive sustainable procurement savings through formulary compliance and platform-led operations has delivered INR 20 crores of savings in quarter 1. We've also launched a new company focused on food services. This venture contributed to INR 2.1 crores in net revenue and INR 0.6 crores in incremental EBITDA for this quarter. In addition, we have initiated revenue cycle management, which will be instrumental in driving operational efficiencies in the coming quarters. As Alisha mentioned, there are a lot of awards that we've received this quarter, and let me mention a few. Firstly, QCIL brands were honored by Economic Times as the Best Healthcare Brand in the country. In recognition of our ongoing dedication to sustainability, we were awarded the Best Sustainable Initiative of the Year by UBS Forums at the 2025 Green Sustainability Summits and Awards. Thank you, and it's a pleasure to be here. Sunil, I'll pass it on back to you.

Thanks, Varun. [Operator Instructions] Now moving on to the Q&A session. The first question is from Mr. Tausif. Can you please introduce yourself and company as well.

[indiscernible] Exane Research. My first question is to Ramesh sir, on the Kerala business. Can you provide some qualitative color on the business such as what are the changes we have seen on medical tourism on a quarter-to-quarter basis? And what's the directional trend for Q2?

Thank you, Tausif. I think overall, the -- as you see, the Kerala cluster has grown pretty well. The way -- the growth has been around 5% year-on-year in the revenue and volume growth has been 6% overall, the performance of Kerala. I think as we mentioned about the change in leadership has made the whole difference there. The team is stabilized. They are able to deliver. We are focused on -- we have hired some of the good able marketing team, leadership team there. And they are able to also deliver as far as the go-to-market strategy, what we have laid out. So some of these strategies has really helped us to really increase the volume quarter-on-quarter as well. So coming to MVT, back to the business, we have focused back again on Oman business as well as Maldives cases. It is really doing well now. I think most of the patients in between, again, it was the leadership concern. Now I think we have, again, a good leader there to take care of the MVT. So overall, it has been -- and you can be rest assured second quarter performance is going to be much better than compared to the quarter 1 FY '26.

Ramesh, anything on the margin front? I think we have delivered a healthy 25% EBITDA margin for this quarter. Do we expect this trend to continue?

Can you come again, sorry?

For the Kerala business, we have reported a healthy EBITDA margin. So do we expect this trend to continue? I think we have done some cost saving during this quarter.

Yes, yes. So this is definitely going to continue the way, especially operational efficiency is brought in. There is manpower optimization, which has happened. And overall, there is even the -- as far as the cost of -- the admin costs have also been under control. So I think overall, this efficiency will continue in the second quarter also.

I think my next question is to Alisha ma'am. Ma'am, recently, we have seen exit of one of the CEO who has been with Aster for several years. How one should look at this exit, means whether it's a part of restructuring, which is ongoing before the merger and whether Aster is looking for the replacement of the CEO?

So thank you, Tausif. Thanks for that. So, of course, as I had mentioned, the end state organization is going to be a very significant and very large organization. So we are looking at it very holistically on what would be the right structure, how should we be doing the cluster-wise CEOs. I mean, we had Kerala as 1 cluster. We had Andhra, Telangana as another cluster, Karnataka, Maharashtra as 1 cluster for Aster until now. Varun, obviously, alluded to a structure that he's putting in place at Quality Care as well. But, of course, once the NCLT approval comes, we do have some thoughts around what that structure will look like eventually. So we are being very mindful and conscious of how we are hiring on account of that end state of the organization. So I hope that answers. So we are definitely adding a lot of bandwidth across organization. And as Ramesh also spoke about, there's been extensive leadership hiring that has happened at different units and very key resources who have come on board in the last 3 months and a few more who are coming on board this quarter. So the whole idea is to strengthen Aster as a whole for a combined strength of this 10,000-bed entity that we are going with.

The next question is coming from Mr. Amey. [Audio Gap] Amey, can you hear me?

Maybe you can move to the next...

So the first question I have is on the low volumes. I believe you explained the part on the Kerala side. But, I guess, during this quarter, even the Karnataka volume seems to be on the lower side. I guess, you mentioned in the opening remarks that there was some discontinuation of the contract. Is it the only reason for the lower volumes in the Karnataka or something else also we should look at?

Sunil, would you...

Yes. Thanks, Amey. Yes, in case of Karnataka, I think we had posted around 5% negative volume. That's basically driven by our Aster Aadhar in the Maharashtra we discontinue the schemes. So this is a 240-bedded hospital census beds wherein occupancy was a little higher. And the scheme business was occupying more than 20% of our beds. So we had to cut down that to make space for the other patients. So accordingly, that has also resulted in a good ARPOB growth in the unit and also giving a good ARPOB drive in the Karnataka and Maharashtra cluster also. So you can see that in the Q4, we had an ARPOB of approximately 15%. It has moved to almost 17% in the current quarter. At least 3% upside has come because of this discontinuance. And I think we already -- we have seen that we had a -- once we had discontinued sometime in April, we saw a dip of approximately INR 1 crores or so, but we were able to bring it back through walk-in and TPA patients in May and June.

So we should consider this occupancy as a base going ahead for next 3 quarters as well?

See, I won't give a guidance on the occupied -- occupancy percentage because the occupancy percentage has got multiple impacts. For example, you look at the ALOS reduction. If ALOS gets reduced, occupancy percentage is reduced and even the occupied beds also reduce. If I add more beds, right, then also the impacts occupancy percentage. I would suggest better to look at the volume growth.

Sure, sure. Second question I have on the Bangalore hospital strategy. This is the fifth hospital we have announced in Yeshwanthpur. How are we going to think about this particular Bangalore city? Like is it because of the aggressive competition, which is expected in future? That's how -- that's the reason why we are becoming more Bangalore focused? Or like what -- how are we thinking about Bangalore as a city? And how -- and also considering Bangalore already has a good bed density, if you can elaborate more on the Yeshwanthpur locality as well? How does it fare in terms of bed density versus the city?

So yes, Amey, see, what is -- at Yeshwanthpur, this is definitely one of the right locality to come up with a multi-specialty hospital of 450-, 500-bedded hospital. The reason being is this is 1 micro market, which is not catered to -- especially it is an affluent market, and there is a requirement. If you know the geography of Bangalore very well, Malleshwaram, Vijayanagar, Rajajinagar is towards that side. And there are not many bigger hospitals of this size. So one, we would like to serve to that class of population. Second, on NH4, we have a good traction coming in, especially from the interior markets like Tumkur and the entire belt till Ballari. There is a whole lot of -- not many big hospitals. So, again, those patients would drain into this hospital. So there is a huge potential out there despite all of the smaller hospitals, the largest hospital competition is having is just a 200-bedded hospital. So looking into that, we will be able to serve to that class of population. hen strategy-wise, we are looking at a different concept altogether. We wanted to create a center of excellence for our transplant program. We want to create a neurosciences center. And also oncology would be a key strategy in this hospital. Not many holistic approach to oncologies. I mean, I'm talking of the radiation and bunkers and others, not many in that micro market. So we definitely would like to have this and there's a huge potential there.

Add to what Ramesh was talking, of course, this is just in the last 10 years that we've kind of started in the Bangalore market. We've been seeing very good traction for Aster brand in Bangalore. And with the traffic in Bangalore, care is becoming extremely localized, right? People don't want to go beyond 1 hour to access care. And like Ramesh said, most of the hospitals in this area are 150, 200, max 250 beds, and there are limitations on the provision of services when you are at that size. So for us, when we strategically look at the Bangalore map, it was to make sure that we are pretty much covering the entire city as the city is expanding. So to your point on, yes, there are a lot more -- a lot of beds coming up, a lot of competition. But even then when we did the supply-demand scenario, we saw that there is a gap. And as the city is expanding and as the population is increasing and with the connectivity that Ramesh was talking about with Mysore and the adjoining states and stuff, we think that this would be a great asset to kind of complete our story for the next at least 3, 4 years in Bangalore.

Just last question I have on the Ramesh acquisition, the stake which we have increased. This increase in stake is going to increase our control over the asset. That's how should we look at it? Or we would need a 100% controlling stake to -- for us to see visible changes in these particular assets?

Sunil, you want to go or...

You go ahead, Alisha.

So, Amey, I mean, Ramesh, we don't go into operating control with this. This was part of the initial agreement with the group and with Dr. Ramesh on having a put option over the course of the 3, 4 years. So we are honoring that commitment. There is a larger discussion on how we want to look at Vijayawada, Guntur, and Ongole in the market. And those discussions are going along quite healthily, and we hope that we'll have an update on how we think about the market in the next 3 to 6 months.

The next question is from [ Mr. Parth Agarwal ].

So I just wanted to take an update on the contingent consideration that was attached with GCC divestment. Any update on that?

Parth, can you give a more clarification on this?

So at the time of divestment of our GCC entity. I think we did not receive the entire consideration, right? There was some consideration contingent on the performance of FY '24 or '25 for the GCC unit, if I remember correctly.

Hitesh, you want to comment?

So, Parth, thanks for the question. That one already got closed. That was dependent on FY '24 performance, I believe, and that got closed with a certain portion of that deferred consideration we got and that got closed probably a couple of quarters back. I would say we got roughly $30 million overall on the deferred consideration and overall number that got closed at that point of time. It was during the period when we finally announced the closure of the transaction is when that EBITDA was to be looked at and closed upon.

Sure. And also, considering, say, we are going for a greenfield expansion in the next few years. So how do you see your occupancy numbers and entire ROIC and margins shaping up in the next few years? And also on the same point, when you do a greenfield expansion versus a brownfield expansion, what does the payback period look like?

Yes, Parth, thanks for the question. Let me answer the first -- the second question, what you have. See, payback period, see, if you ask me, if you going to do an own hospital in a metro like a Bangalore, it will cost you somewhere between INR 2 crores to INR 2.5 crores per bed. And in our case, if you look at the numbers, we are doing between INR 1 crores to INR 1.1 crores per bed if it's an asset -- leased asset. In this case, what happens is that, I'm not investing on the land. I'm also not investing on the warm shell. It's not just a cold shell with the warm shell, including the high-end MEP and everything. I'm only investing on the interiors and medical equipment, right? So the question is that -- and also the thing is that, another way, it gets evened out because in my case, I'll have the cash flow to be paid out in terms of rent, right? So if you ask me on a lease basis, on a cash, the payback period, it's approximately between 9 to 10 years. And going back to your other question -- sorry, the first question was with respect to the EBITDA margins, right?

Yes, margins in general, blended occupancy when you go for the greenfield takes a longer time to get ramped up.

Yes. See, with respect to the occupancy, I would not like to give occupancy percentage guidance because I informed in the previous answer also is that, because always occupancy percentage gets diluted because when you add more beds, it gets diluted. And also, we are also being very efficient in reducing ALOS. So I don't think so that's a great parameter to look at. Better to look at the IP volumes. That's a better way to look at and see the growth. And what we always say, I think in the previous sessions I called out is that, on a midterm period, basically between 3- to 4-year horizon, we have to look at a growth of between mid-teen growth. In mid-teen growth, approximately volume should give a driving force of approximately 7% to 8% and balance 7% to 8% should come from ARPOB. I think that's a broad thing. In terms of EBITDA margin dilution, see, maybe 3, 4 years back, when used to add beds, the dilution used to be major because the capacity or the initial size was lower. But in the current case, we are more than 5,000 beds. So -- and also, you see that whatever the capacity which you are operationalizing is less than between 5% to 10% every year. We will have some basis points impact, but there will be no material impact on the EBITDA margins.

Got it. Just one thing. I understood the payback period for greenfield is 9 to 10 years. What about brownfield? Is it 4, 5 years or it's less?

See, in case of brownfield, what happens is that, for example, we have 2 examples in Kerala, we added 100 beds in Aster Medcity and 100 beds in Kannur. I think initially, you had someone had asked Mr. Ramesh about the EBITDA margin expansion in Kerala cluster, why it has gone to 25%. See, there is no -- literally no drag in brownfield expansion. For example, in Kannur, we used to have occupancy of more than 90% to 95%. So when you added 100 beds, the capacity got expanded, and we are able to basically operationalize the additional beds with our existing resources. So literally, there is no negative EBITDA impact. It's more of an EBITDA accretive, right? So immediately, it starts flowing in, you'll have a positive EBITDA growth also as an absolute number and also EBITDA margin will expand. So same thing happened in Aster Medcity also. You can see that the EBITDA in the growth what we talked about in Kerala overall. Last quarter, we had shown a negative 4% growth. Now we have moved to more than 5% positive. That's almost a 9% movement quarter 4 to quarter 1, right? That has happened because of the capacity expansion. So in brownfield, I don't like to say it's all about payback period because you have to look at asset as a whole. So what I'm trying to say in brownfield expansion, it is EBITDA accretive and margin accretive.

The next question is from Mr. [ Bino ].

A couple of questions on the QCIL side. I believe most of the growth seem to have come from the Kerala cluster. What is driving this growth? And on the other hand, what's holding back growth in the Hyderabad area?

[ Bino ], thanks for the questions. Okay. So the way we look at our business, I think geography is one aspect and the maturity of assets is the other, right? And we gave this color last time as well in terms of how we categorize because each of our geographies will have different kind of units. And instead of getting into just the geography, I think I want to give you the color. So first, if you look at quarter-on-trailing quarter, even our hospitals in Hyderabad have done extremely well. It's a very competitive market. But even in that market, we've seen a growth rate which is nearly double-digit over the trailing quarter. So volumes have really picked up. In fact, if I was to give you some highlights, one of our units, which used to do in the third quarter last year, INR 14 crores, INR 15 crores, has started to delivered in excess of INR 20 crores on the top line on a monthly basis. So there is a significant ramp-up that's happening there as well. If I look at the 4 categories that I defined earlier, let me give you some color on Y-o-Y as well as quarter-on-trailing quarter. So our mature units, which is a bulk of our business, grew 16% and 27%, 16% on the top and 27% on the bottom for this quarter. And what's interesting is that, these units actually grew 5.5% on the top quarter-on-trailing quarter as well. And while sometimes we see the impact of seasonality, and this is a quarter where we haven't seen any seasonality, which is where our complexity of work has gone up, our CONGO mix has gone up, and that's reflecting in our ARPOB as well. So the other categories that we've put together is the emerging units, which is Vizag, which is Chattogram, which is Nagarcoil, the new hospital that we opened. I mentioned in my talk, that's grown 87.5% over last year. And because these are new units, you should always look at quarter-on-trailing quarter as well. It's got a 25% top line growth quarter-on- trailing quarter. So that means the ramp-up that we are building up is phenomenal. In fact, now that you asked me this question, our Nagarcoil facility has grown up from almost -- I think it started in October last year, and we are now doing positive EBITDA and the run rate of EBITDA seems to be double-digit. So that's the level that we've been able to achieve so quickly. I know the previous question was about payback, et cetera, et cetera. So some of these markets really turn around very fast and Nagarcoil has been one such example. The third category is where I think there's a little bit of which is where, I would say, focus units, which is where Banjara comes in, [ Hitech ] comes in. Now what's interesting is that, these units have also shown significant growth over the last quarter. So quarter-on-trailing quarter, 7% growth on the top and 60% on the bottom. So essentially, the way I look at our performance is, it's not skewed only by 1 cluster, while we may have seen volume growth coming from 1 cluster, value growth coming from another. So if you look at the performance, it's quite blended across our network. I hope that answers your question.

Great. Just a couple of quick questions. In Bangladesh operations, are you seeing any difficulty managing the operation here given the geopolitical situation?

While I shared a story last time, I'm happy to repeat it again. Even during the worst times at Bangladesh, there was one -- our assets were not impacted at all. In fact, the patience around us ensured that we were working pretty fine, and that's not changed. Bangladesh continues to grow, do exceptionally well. In fact, the Dhaka facility is continuing to get better every passing quarter.

Got it. And sir, one last small question. At the consolidated level, is there any debt on the QCIL books? If I could get the quantum, that would be great.

Well, our debt is -- we generally -- I don't know the exact number, but the way I see it is our debt is significantly lower than our current EBITDA, if that's your question.

Yes. Let me add to that. The numbers that we had reported, [ Bino ], for FY '24 when we announced the merger, we, on the combined level, had almost 0 net debt for Aster plus QCIL. So I don't expect the numbers to materially move from that direction. And then that kind of also supports what Varun mentioned around the number should be lower than the EBITDA.

Next question is from Mr. Harith.

Yes. So the beds that you've guided for commissioning in the first half FY '26, I see Kasargod, which is a greenfield expansion and then the brownfield expansions at Ongole and Whitefield. What's the status of these expansions? Are these already commissioned? Or should we expect these in this quarter?

Ramesh?

So yes, see, the -- first, let me start with Whitefield. Whitefield, it is 159 beds we'll be adding. That is the Tower 4, we call it as the D Tower. So this will be another 2 months' time, we should be able to commission this. And then it will be moving the women and children, which is in Tower C into Tower D. So that's our strategy, adding a few more clinicians there. So -- yes, by another 2 or maximum 3 months' time, we should be able to commission this tower, additional 159 beds. And then moving on to Kasargod, we are already there, and it's a matter of another 2 months' time to fully function the hospital. I mean, already we have onboarded the clinicians, the staff and everything, and we'll be -- we'll kickstart the hospital in another 2 months' time -- 2 to 3 months' time. And, of course, Ongole is getting ready, and we are yet to fix a time line for that. And slowly, we will be tracking it very closely, and then we should be able to tell you the exact time line, it might be another 2 quarters down the line.

Okay. And the pipeline that we've shown for Aster around 2,600 beds over the next few years. Is there a similar number that you can share for QCIL? Or any color on what QCIL's pipeline looks like?

Harith, I'll take it. So, Harith, from a pipeline standpoint, we're looking about 1,200 beds. We've added a couple of hundred already and 1,200 beds across various projects or expansions within the hospitals. We've laid out earlier, and that number has not changed.

Yes. So, Harith, at the group level, the goal was -- I mean, we expect at least 14,000 beds in the next 2 to 3 years. So like what Varun was saying, the combination of that 1,200 plus the 2,600 that we're talking from Aster will get us to that.

Harith, wherever we are mature and we're doing well, we identified that we need more bed capacity and all of those projects are underway. There is a significant capacity addition in our existing hospitals, which means the scale-up will also be fast will come in over the next 6 to 8 quarters.

All right. And then last one with your permission. On ARPOB growth, we've seen very strong momentum for the last few quarters. And this quarter as well, we saw a very strong Y-o-Y growth there. And you talked about a few reasons on what's driving this growth. But how -- what is the sustainable level that we should look at? Because we've seen some moderation when we look at some of your peers. So is that something that we should bake in a moderation in ARPOB growth?

So, Harith, no, I think we feel the trends are likely to continue. I think it's more the specialty mix, right? So right now, on oncology, we're still only at 11%. We do think that there is an opportunity for us to go further up and take it to sort of higher teens, which will definitely help sort of increase the ARPOB. We also -- so I think overall, when we look at the specialty mix, the acuity mix, there is a tendency -- we don't see any moderation. And the mix of the -- where our beds are coming as well. So when we're talking about almost 1,000 beds coming in from Bangalore, that will actually be at a higher ARPOB, which is why Whitefield coming up has sort of enhanced the ARPOB levels for us. And then also the way we are kind of looking at scheme patients where we need to reduce it, how to sort of optimize as capacity is increasing in units, we feel pretty confident that we should be consistently be able to see growth on the ARPOBs.

Harith, just to add to what Alisha called out, there is a onetime impact in the ARPOB currently, 14%, where 4% is coming from ALOS. And ALOS, we are already efficient at 3.1%, right? So we don't see much of a change in the ALOS, at least it should be between 3% to 3.1%, keeping in that mind, and I think previously called out, on a long-term basis, it's a 3- to 4-year term, you're looking at a 7% to 8%. And that could get only tweaked, as Alisha called out, because of oncology. If oncology has been driving the growth, that should yield more better ARPOB. But on a neutral apple-to-apple comparison, we are looking at around 7% to 8% over a period of 3 to 4 years.

[Operator Instructions] The next question is from Mr. Nikhil Mathur.

My couple of questions are on QCIL side. Sorry, I have a bad tone, I hope I'm able to put across my question. I'm trying to understand the INR 20 crores EBITDA uplift that QCIL has reported this quarter. I mean, it's a pretty material number, almost 10% of your operating EBITDA. So what was happening incorrectly? I mean, how -- what was the procurement strategy previously? And what is getting changed now? I mean, it's a big number. Why was the procurement so inefficient in the past? And why is it so easy to change that you're able to deliver this kind of EBITDA uplift?

So, Nikhil, first of all, thank you. You've been very ably to put forward your question. I should also tell you that our Medical Director's name is Nikhil Mathur. And the moment we saw your name up there, we were thinking as to why he's asking a question. So first of all, INR 20 crores in the quarter has not been easy. So let me -- it's taken us a lot of external help, et cetera, et cetera. So, Nikhil, there are 3 things that we try and do when it comes to material cost optimization. One is scale. And this is the first time the 3 entities that we currently have, which is CARE, which is schemes and Evercare has come together. And the procurement has got centralized across the board. So the 3 entities are no longer operating independently from a procurement standpoint. It's a single source, which is now procuring. And when scale comes in and you're able to vendor optimize, you're able to bring down the cost quite significantly. Half of our -- maybe more than half of our savings are coming in just from the efficiency on procurement optimization. The second part is formulary. And formulary compliance is a huge thing, right? There are various parts of our business, our scheme business, cash business, insurance business. And when you optimize formulary, you're able to bring down your vendors from 10 different vendors for the same molecule to 2 vendors for the same molecule and molecules, it doesn't matter. So optimization on demand also helps this in a very big way. Third, margins do vary from one pharma company to the other. And sometimes when you do this in a scientific manner, you're able to move to margin optimization as well. The good part about all of this is, this is sustainable. So, Nikhil, you'll see it not only in this quarter. This is something that you will continue to see quarter-on-quarter. I hope that answers your question.

Yes. So basically, these initiatives still continue. And like you mentioned, F&B in sourcing, clinical talent and some other levers as well. So this number can continue to improve and foreseeable 1, 2 years?

Well, absolutely. So again, these are premerger synergies. And while when we did the merger conversation, we told you that there are synergies that will be built on top of this. So we have a synergy wheel, which takes care of our 10 to 15 initiatives, which either get impacted by scale or get impacted by efficiency. All of these will continue to be at play. And I did mention in my comment earlier, we've currently in-sourced food, and that's already started to bring us savings. The savings will continue to grow. We are doing a lot more on revenue cycle management, which is a very focused exercise, which will continue to bring us more. And from a procurement standpoint, as we close the merger, the group level synergies will also come into play.

Understood. I have 1 more question on the OPD business, not specific to QCIL or Aster. But what is the level of OPD business in overall hospital mix today? And what is the outlook on the OPD business over a 2, 3 years period? I mean, the reason I'm asking about the outlook is that, if OPD were to grow faster than inpatient business, then that obviously is ARPOB accretive, right, if my understanding is correct. So any thoughts on the OPD business over a 2-, 3-year period? Is it a very faster-growing space that most of the hospitals, not just Aster and QCIL, but pan-India hospitals are kind of recognizing?

Okay. So I'll take a part of the question. So OP business has grown pretty well for QCIL, Nikhil. We've -- one, we've grown the volumes about 12%. It's been a very focused thing that we are trying to drive. And OP volume impacts the ARPOB favorably. One of the questions that previously was asked, and I think Sunil addressed it on the ARPOB. So we see continued growth in this network on OP. If there's anything specific around OP that you want to know, certainly. So OPD, OP diagnostics, OP radiology, the more numbers you bring in. So I told you we grew 12% on OP. So that will have a traction on pharmacy, that will have a traction on radiology, et cetera, et cetera, and diagnostics, which is a good business to get.

So basically, what I'm trying to understand is that, obviously, we are slightly confused with the level of ARPOB growth that continues to come in across hospitals, not just Aster and QCIL, but across other hospitals as well. So just trying to understand that can OP volumes sustainably outgrow the IP volumes and that itself leads to some bit of ARPOB accretion?

All right, Nikhil. So let me add to what Sunil has already said. I think -- and I'll take the QCIL view around ARPOB. So ARPOB growth is happening on around 4 factors, and let me break all 4 factors for you. One is price. And I think ARPOB should not be confused with price. A 2%, 3% increase in price over the year can also lead to a double-digit growth in terms of ARPOB because of the other factors. Now, in our case, we've been very conscious of how can we enhance our CONGO mix, right? Alisha alluded to the oncology mix, and I'm going to use CONGO because largely CONGO does impact ARPOB very favorably. We are -- I think we moved 200 basis points on the CONGO mix this quarter. We moved from 56% to 58%. Now the question you may want to ask is what's the best-in-class? Who's the current leader in CONGO across the country? And that number sits in excess of 70%. So can we get from 58% to 70%? Absolutely. As the network starts to mature, as the clinical hiring gets better, as the investments in technology get better, you'll certainly see that number growing. And that number will continue to grow, and therefore, ARPOB will get favorably impacted. Second, oncology does play a very significant role when it comes to ARPOB expansion. right? And there, the focus of the group is quite strong. Now, the other element that's impacting for us favorably, our cash and insurance mix is also moving northwards, which means we were -- again, 210 basis points is the quarterly improvement. We moved from 77% change to 80-odd percent now. And that has a very significant upside, very, very significant upside because the scheme business comes at 40% of the cash tariff, sometimes not more than that, right? So as you move the needle towards cash and insurance and as the brand gets stronger, people want to -- the paying propensity of people and people who can pay start to get to a hospital and therefore, making it stronger. So we are about 80% there. ALOS, and you've seen Alisha and Sunil report the ALOS for Aster at 3.0% or something. QCIL is at 4%. We've got down to 3.9%. So we have a significant enhancement that will continue to happen over the next 6 to 8 quarters again on ALOS. And as you make the ALOS better, that's inversely proportional to the ARPOB as well. And lastly, I must also say that we are nowhere close to what the benchmark today has been set for ARPOB. So I think we have a journey to grow is the way I'll see it. OP mix does play a role. And I think if you have the right level of diagnostics and services at play and you're able to manage footfalls well, that revenue will also continue to grow. But that will not become so significant. I mean, at some point in time, the level to that is about 35% to 65%. So OP revenues generally don't go beyond the 35%, 36% contribution to the total business. So that's where the level will be. Nikhil, I'm sorry, it's a bit longer…

The next question is from Mr. Sumit Gupta.

Yes. Sir, a few questions on the Bangalore market. So first is with the new hospital which is planned in Yeshwanthpur. So just to know how do you plan to fund it? [indiscernible].

We can't hear you, Sumit. Sorry, you're not clear.

Yes. So a few questions on the Bangalore market. So first is on the new hospital, which is coming in the Yeshwanthpur. So how do you plan to fund it? And second is on the overall Bangalore market. How -- so can we expect this Karnataka and Maharashtra cluster over the next 2 to 3 years to contribute more towards the overall business and Bangalore market in particular to the overall business?

Sunil, you want to give some more of that?

Yes, yes. Thanks, Sumit. So on the funding bit of it, it will be a mix of internal and external funds. And we don't get into -- because we have a very good cash flow from operations conversion from the pre-Ind AS. Today, we are running at more than 80% to 85%. So I think we should be able to do with the internal accruals itself. And also, you know that this is a greenfield project, the CapEx funding will record over a period of year. And also in our case, because we're only doing the interiors and the medical equipment, it should be more in the fag end of around 20 months on the project. That's how it is going to be. On the -- what was your second question, Sumit?

So basically, your outlook on the Bangalore market. So how do you see...

So Bangalore market -- yes, see, in Bangalore market, if you look at the quality beds today, right, I'm not talking about the other beds where there are 50 beds and 25 beds. I'm talking about the quality beds, right, more than 100-, 150-bed hospitals. It's approximately between 8,000 to 9,000 beds. And that if you look at the population or the quality, I would say, the patient density, it comes around 0.6 to 0.7 per 1,000 population. And very specifically in the micro market, which we are talking about, that's the Central to Northwest zone. There, you see almost a 4 million-plus population, but only the -- if you look at the bed density, it's only 0.5 on the quality beds bit of it. That is also -- I think Alisha also very clearly called out. There is no oncology in the extreme Northwest zone. It's only 100- to 200-bed hospital. That's where we want to make a difference by adding the hospital there and with the complete oncology and super specialty, including the transplants. And also, this particular hospital is situated exactly on the [ A7 ] or NH4, and that is where it links to the upcountry in Karnataka and complete referral channels can be built into this.

Understood. So with regards to the profitability, so let's say, on the EBITDA per bed side, so Bangalore would be how much? Like what kind of growth can we expect on the profitability side per bed?

What can we…

What can we expect on the EBITDA per bed growth over the next 3 to 4 years, considering Bangalore market in particular?

Yes, you can calculate. We know -- you know the ALOS is around 30 -- sorry, 3% in Bangalore. Overall, K&M cluster ARPOB is approximately at INR 70,000. But when you look at the Bangalore market alone, it's between INR 80,000 to INR 85,000 per bed, the revenue ARPOB. And margins are approximately around 25% to 27% only in Bangalore.

Next follow-up question is from Tausif.

I just wanted to understand your thoughts on the diagnostic business post the completion of merger. Since the rest of the large hospital chain has got into this business very aggressively and becoming a pan-India play, what's your thought on this business going ahead?

So, Tausif, the diagnostic business for us is much more to make it a full ecosystem play in the markets that we operate. So as Sunil was talking about the lab business, it has become positive, and you've seen a good improvement in the margins as well. So at this point in time, we're not talking about becoming a pan-India player. For us, it is about an extension of what our patients in our key clusters will need. So we'll continue to focus on building that in Kerala, Karnataka. And if we think that the business model is working well, we'll, of course, look at expanding to the other regions that we have now got as part of the merger. But at this point, it's more about stabilizing the model that we have built, and we're seeing it at least moving in the right direction right now.

The next question is from Mr. Amrish.

The first question is relating to ARPP. You've been reporting this now for a couple of quarters. And I'm just trying to understand what information we get from ARPP beyond what is there in ARPOB, assuming -- I mean, I can understand if ALOS changes, we get some additional information. And some specific questions on the ARPP. We've got Bangalore increasing 19%. Is this just, again, back to what you earlier explained about the numerator and denominator changing?

So, Amrish, 2 parts. ARPP, we are trying to give because in case of ARPOB, ARPOB growth always have a linkage to ALOS and that whatever the plus or minus the growth or degrowth, which happens in the ALOS, that doesn't get reflected immediately, right? It's always skewed. For example, in our case, 14% ARPOB growth that has already built a 4% ALOS efficiency. But you look at the ARPP, that doesn't have the ALOS impact. So it's very clear. So you can always look at the volume and the ARPP. That's one of the reasons why we are trying to give an understanding there. Second -- what was your second question, sorry, Amrish?

Yes. So the number -- ARPP number for Bangalore has jumped 19%. And I'm just trying to see was this just the same...

Yes, 19%, there are 2 parts. The ARPP is for both Karnataka and Maharashtra cluster. It has 2 basically impact. One is the impact for the Aster Aadhar I called out, where we had the scheme because of the capacity bottleneck to drive more walk-in and TPA patients. That has helped at least 2% into the growth here. And second biggest, I would say, at least 4% to 5% growth is coming in the ARPP only because of the Whitefield. And you know that Whitefield started only in the, I would say, 1.5 years back. And only in the last quarter, it was just a ramp-up stages. And after that, we have seen a very good growth in the oncology and also in the neurosciences. And specifically Whitefield, I very clearly called out it's grown year-on-year for the quarter 1 at 31% and ARPP itself has grown more than 20%.

Just a side comment on that. I think there's some discrepancy between the ARPP reported in Q4 and the ones reported in this quarter. It's nearly a 20%, 30% difference. I'm not sure what the reason is for the same quarter. The second question is a broader question just relating to robotics. I mean, we've been calling out robotics, the robotic surgeries. And again, last 2 quarters, we've now put a whole separate page in the annexure showing our improvements in modernization and automation and there's a lot of robotic equipment. I think Mr. Khanna also called out a little bit about robotics. Is there something structural we need to be thinking about over here? Or is it just like a feel-good that we are up to date and technology advanced and so on?

So, Amrish, I'm trying to understand your point. I mean, there's obviously the associated benefits in terms of ALOS reduction as well that comes from robotics apart from the early -- so early discharge, better outcomes, precision. So I think it's much more than feel-good now. I think it's really -- it's gotten to a point where patients are coming in asking some of the surgeries for specific departments if robot is available. So with -- so there is a preference where patients are leaning towards this as options for specific modalities, for specific procedures. And that's why we are seeing increased adoption, as well as increasing sort of the installation of robots within our network as well.

And it doesn't change the dynamics of the number of doctors we need to run hospitals and run surgeries. It is still supervised. So it's just a…

Yes, exactly.

If I may just add to what Alisha mentioned. So it's a good trend to track and an important one because it actually impacts ALOS, which has already alluded -- already been alluded by Alisha. It actually impacts your realization as well. So the consumer is willing to pay more because there is a consumer preference around it. And in this market, outcomes also get significantly better with robotics because you're able to get back home faster, the scars lesser. So there is a preference that is at play. And most importantly, I think doctors also prefer to have an establishment which can actually bring them all of these tools so that they can enable the level of care that is desired of the brand. And that's how we are able to move large teams from hospitals that can't make it to that level of investment to our kind of networks.

The next question is from Mr. Mohammed Patel.

Can you hear me?

Yes. Could you please introduce yourself and ask the question?

Yes. So I'm Mohammed Patel from Edelweiss Public Alts. So I have 2 questions. So we are guiding for 7% to 8% volume and 7% to 8% ARPOB. But currently, volumes are flat and ARPOB is growing at 14%. So when do you expect this to transition to equal contribution from volume and ARPOB?

So, Mohammed, if you recall, you look at the FY '24 and FY '25 growth in the first half, right, we were giving more than -- and also look at the CAGR of more than 5 years of Aster. Revenue has been growing at a 20% CAGR for 5 years. What has happened is that, only in the last 3 to 4 quarters, I would say, very specifically from quarter 3 of FY '25, you've seen the, I would say, subdued performance in terms of volumes because of multiple reasons, right? And we have -- I think we alluded to it very specifically towards the leadership change, which has happened. And in quarter 4, very specifically to the Ramadan impact, which has come through. And also certain very specific, I would say, decisions which were taken in the MVT also, for example, Maldives-related payments, we used to get the revenue, but we will not get the payments, right? We have to ensure that the -- whatever the revenue booking, we need to collect that also. To ensure that our DSO is better, we have taken certain interventions. And you can see that from quarter 2, 2% growth, we've gone to 8% growth in the quarter 1 this financial year. And I see that in a couple of quarters, we'll start getting back into the double-digit growth what we are talking about.

Okay. My second question is what is the CapEx number that we should look at for Aster and QCIL in the next 2, 3 years?

Quickly on the Aster, we are adding almost 2,600 beds. That entails to approximately INR 2,500 crores of project CapEx, what we require. Out of INR 2,500 crores, around INR 400 crores to INR 500 crores is what we already incurred as on 30 June. And balance INR 2,000 crores approximately will be spent over the next 3 to 4 years.

And for QCIL?

So let me add to that, Mr. Patel. So essentially, you look at about 5-odd percent of the top line, which is the CapEx required each year, and it's got to be no different this year. And outside of that is the project CapEx, which we -- which is not in one particular year, so it will get spanned over the beds that we open is about INR 1,100 crores. This year, the cumulative CapEx outlay, including the projects that we are coming out with is about INR 800 crores to INR 900 crores.

Next question is from Mr. Harsh Bhatia.

Just 2 quick follow-ups. One on the ARPOB side. You mentioned 4% from the ALOS part. I missed the initial comments. Was there anything linked to the insurance pricing as well? And for the entire year as well for FY '26, could we see some incremental insurance benefit coming through?

Yes, Harsh. So broadly, I had put across saying that out of 14%, 4% from ALOS and price increase from the cash patients and the TPA should be between 2.5% to 3%. And specifically in case of TPA, we across India, our percentage contribution approximately 31% from the insurance patients. And these contracts are basically for each unit, right? So we don't have a central contract for these TPAs. And every month, there's one or the other TPA renewals, which comes in, in one of the other geographies. So you'll see that renewal happening across the year. And we see that at least in the second half coming in, that's at least in H2, there's a major contract which is going to get renewed very specifically for the GIPSA in Bangalore. That's going to give us a considerable increase. But overall, as a price increase guidance, what we always give is that, including the cash patients increase and the TPA renewals, which happens once in 2 years, we are looking at somewhere between 3% to 3.5% contribution to the ARPOB.

Sure. Just one bit in terms of the scheme business, you highlighted rationalization of some asset in Maharashtra, some scheme business was discontinued. Going forward for the next few quarters, is there anything incremental in the pipeline that is something related to the scheme business rationalization?

Nothing very specific, Harsh. It all depends on the dynamics of each unit. What we always put across is that, we will try to ensure that the scheme business is in single-digit. And even currently, if you put across both the ESI, ECHS and the CGHS and the state and central government schemes, we're approximately at 6%. So it all depends whenever we add the brownfield expansion, immediate requirement is there to fill in the capacity. And also, we are not open up all departments in the schemes. We are very much -- very clear about very specific departments where the yields are better, right? So that at least at the contribution level, we are not negative. So that's the broad understanding here.

Just one last quick. FY '27, your Aster additions close to 1,000 beds, Trivandrum, Sarjapur, Hyderabad, largely greenfield. Broader breakeven time line for these assets or if you will be able to call out the drag for the first 12 months, if possible? I understand it's a little bit more forward-looking, but anything.

So, Harsh, what we always say is that, for example, I'm just giving an example here. It all depends on the mid to micro market, this is the first entry or we have already been there and we are expanding. For example, Aster CMI when we entered almost 8 years back, that was the first hospital and the Aster brand was not known. We took almost 18 months to break even. And when it came to Aster RV, which is our second hospital in Bangalore, it happened almost 3 to 4 years after the Aster CMI. The brand recall was better. We were able to get -- attract better doctors, and that ensured that we were able to break even within 12 months. And for example, in Whitefield, which is a third hospital, the ramp-up was so quick, we were able to break even in the third month, right? It all depends on that. So I won't try to give you the -- an exact guidance. It's all about the micro market we get in and the feedback from the doctors and the patients.

We would like to highlight that we'll be giving preferences to attendees who have not asked the question before. So in that line, next question is from Ms. Nancy.

I'm Nancy, and I'm from [ Electro Advisors ]. So I just wanted to get some color on the EBITDA dip in the Andhra and Telangana cluster in this quarter. So there is ALOS optimization, the ARPOB has also improved. And even then there's a very small increase in the revenue and there's a dip in the EBITDA. So I just wanted to understand the reason for this.

Nancy, it's very much straightforward. Two reasons. One is that, because of the case mix changes, we have seen a material cost going up by at least 1%. So that's taken away 100 bps in our EBITDA margin. Second is that, both in our Hyderabad and Andhra region, we had certain attrition in the clinical talent, and we have brought that new clinical talent into these hospitals. That has ensured that our revenue growth has come in at the same time, the cost has been initially at the higher stage. But as we've always seen that in Andhra and Telangana cluster, 2, 3 years back, which was 8%, we have slowly, I would say, optimized it to more than 12% to 13%, and we expect it to go back to the similar numbers in the coming quarters.

[Operator Instructions] Okay. So there is no more question to the management. Thank you all. This concludes the earnings call for this quarter for Aster DM Healthcare. I thank the management and all the attendees for joining us today. If you have any further questions and queries, please do get in touch with us. Thank you.

Thank you. Thanks, everyone.