Aster DM Healthcare Limited (ASTERDM.NS) Q2 FY2026 Earnings Call Transcript & Summary

Good afternoon, everyone. I welcome you to stadium Healthcare Earnings Conference Call for the Second Quarter of FY '26. Today with us, we have senior management of Aster DM Healthcare, namely Ms. Alisha Moopen, Deputy Managing Director; Mr. T.J. Wilson, Non-Executive Director; Mr. Ramesh Kumar, Chief Operating Officer; Mr. Sunil Kumar, Chief Financial Officer; 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 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 Australian [indiscernible]. It is to be noted that the merger is subject to further regulatory approvals. [Operator Instructions]. We will start the call with the opening remarks by the management, followed by interactive Q&A session. Certain forward-looking statements in this meeting involve risks and uncertainties. Aster DM assumes no responsibility for actions based on these statements and undertakes no obligation to update them for future events. With this, I will now request Mr. Alisha Moopen, to start with opening remarks. Over to you, Ms. Alisha.

Thank you, Puneet. Good afternoon, everyone, and thank you for joining us today. Let me begin with a brief look at the broader environment. The Indian economy continues to show remarkable resilience amid global uncertainties underpinned by strong domestic demand and prudent fiscal management. Within this macro environment, the hospital sector stands out as a key beneficiary. The Indian hospital services market is poised for healthy growth driven by higher insurance penetration expanding medical infrastructure and growing demand for specialty and acute care services. The government's recent GST rate reduction on select and health care, consumables and diagnostics, is a constructive step towards making quality health care more affordable while simultaneously improving cost efficiency for providers. This environment creates strong tailwinds for organized private sector -- private hospital networks such as Aster. With a well-balanced presence across Tier 1 metros and Tier 2 growth markets, we are uniquely positioned to serve both mature urban centers, where demand is shifting towards high equity and complex care and emerging regional cities, which are witnessing faster volume growth and expanding catchment potential. This dual market footprint provides stability, scalability and a long runway for sustainable expansion. Amid this backdrop, has been a period of meaningful progress for Aster, marked by steady financial performance, recovery in a key market, which is Kerala and the continued advancement of our long-term strategic priorities. Taking a step back, our performance this quarter builds on a solid multiyear trajectory for the last 20 consecutive quarters, Aster has delivered a year-on-year revenue growth, a reflection of our strategic foresight, disciplined execution and enduring resilience through varying market conditions. This consistent upward trend has translated into a 20% revenue CAGR and a 38% CAGR in operating EBITDA over the last 5 years demonstrating our ability to grow both scale and profitability in tandem. As we are making progress towards the completion of merger, both Aster and CSL have demonstrated consistent and complementary growth across clusters driven by efficient cost management, improved case mix and continued focus on clinical excellence. The combined platform on a pro forma basis delivered a healthy performance this quarter with a 10% growth in ARPP and revenue is growing organically at 13% year-on-year to INR 2,390 crores in on back of 8% growth in the total patient volumes and the 10% growth in the ARPP of IP, with the operating EBITDA growing at 17% to INR 550 crores in and normalized PAT growing at 22% to INR 258 crores, translating into a robust 23% operating EBITDA margin and a ROCE exceeding 22%. This consistent strong performance reflects the underlying strength and scalability of the combined entity. As we move forward, our focus will be on unlocking the full synergy potential of this integration through clinical collaborations, shared technology platforms, optimize procurement, network rationalization and talent mobility. These efforts will further enhance profitability and capital efficiency while enabling us to deliver consistent, high-quality and affordable care at scale across India. Coming to the Kerala cluster which is really a story of recovery and momentum. The Kerala clusters journey over the last -- over the past year has been one of transformation and resilience. After a face of softness in Q3 and Q4 FY '25 resulting from some leadership transitions, seasonal factors such as the Ramadan and a different international patient volumes. We have entered FY '26 with a clear focus on rebuilding momentum. The team responded decisively strengthening leadership, tightening operational processes and reengaging with key MBT partners and referral networks. These interventions began to bear fruit in Q1 FY '26 with sequential growth in inpatient volumes in Q2 FY '26 and confidence gradually returning across hospitals. The true inflection came in Q2 FY '26 when Kerala delivered its highest-ever quarterly revenue of INR 620 crores, growing 24% increase over INR 499 crores in Q4 FY '25. This was supported by a 13% sequential increase in inpatient volumes and a strong rebound in MT, which grew 67% Q-o-Q and 49% year-on-year. Occupancy improved to 69% in Q2 FY '21 from 64% last quarter, reflecting sustained recovery in electives and high equity admissions. ARPP has grown 5% year-on-year, supported by a stronger specialty mix, increased share of complex procedures and disciplined pricing. Profitability improved sharply with operating EBITDA margins expanding now to 26.8% from 22.3% in Q4 FY '25, supported by a stronger specialty mix as well as cost discipline. Overall, Kerala has not only recovered from last year's softness, but has reestablished itself as a key growth engine for our India business, combining scale, profitability and operational excellence with renewed momentum. Now coming to the consolidated performance for the quarter. In Q2 FY '26, we continue to build on the strong foundation late in the first quarter. reinforcing both the growth and efficiency across our core performance metrics. Despite softer seasonal infections this year, the business has delivered a very resilient growth across clusters and sustained improvement in profitability drivers. Revenue has grown by 10% year-on-year to INR 1,197 crores. Adjusting for temporary seasonal effect, our underlying revenue growth stood at a healthy mid-teens at 13%, demonstrating the strength of our underlying business momentum. The ARPP for IP has increased by 10% year-on-year by a richer specialty mix with stronger contributions from oncology and also the discontinuation of low-yield schemes. Our focus on complex, high-value care continues to deliver results with oncology revenue growing 26% year-on-year and its share of total revenue increasing to 11% compared to 9% just a year ago. Given that we are in a pace of recovery post key leadership changes, it is also important to focus on the quarter-on-quarter changes in the performance for this quarter. On a sequential basis, our total patient volume grew by 15% Q-o-Q with inpatient volume growing by 12% Q-o-Q and outpatient volume growing by 15% in Q2 FY '26. Kerala total patient volume increased by 17% quarter-on-quarter with in patients by 1% quarter-on-quarter and outpatient by 17% quarter-on-quarter. Andra and Telangana had 16% quarter-on-quarter in both in patients as well as the operation volume. Coming to occupancy. Occupancy has grown to 64% in Q2 FY '26 from 59% in Q1 FY '26. We with Kerala at 69% in Q2 versus 64% in Q1 FY '26. Karnataka and Maharashtra cluster at 62% in Q2 versus 56% in Q1 FY '26 and under and Telangana at 55% in Q2 versus 50% in Q1 FY '26. The MET segment has also shown strong momentum, growing at 60% Q-o-Q and 26% Y-o-Y growth, led by higher international patient footfall in Kerala with its MVT business growing by 67%, particularly from Maldives, Middle East as well as the North African countries. Now moving over to the bottom line performance. Our operating EBITDA margin has expanded 200 basis points to 22% in Q2 FY '26 compared with 20% in Q1 FY '26, reflecting the combined impact of careless recovery, enhanced cost control, better specialty makes clinical efficiency across the network and steady improvement in the labs and pharmacy business. Kerala Clusters operating EBITDA grew 19% Y-o-Y with margins expanding to 26.8% in Q2 from 25.3% in Q1 FY '26. Under a Telengana operating EBITDA nearly doubled Q-on-Q, with margins expanding significantly to 13.2% in Q2 FY '26 from 7.9% in Q1 FY '26. The last operating margins has significantly improved to 17.8% in Q2 FY '26 as compared to 7.6% in Q1 FY '20. On a normalized basis, PAT has rose 23% sequentially to INR 110 crores. Collectively, these trends reflect the tangible impact of the strategic and operational measures implemented earlier in the year, reinforcing our focus on sustainable, high-quality growth while enhancing efficiency across the network. Moving over to our CapEx and expansion. Our growth story isn't just about performance. It's also about preparing for the future. Over the past year, we have added more than 200 beds taking our total capacity to 5,199 beds as of September 30, 2025. The Kerala cluster is also set for expanding its footprint in Q3 FY '26 with the commissioning of our new 264 bed hospital and Casegood on October 2, 2025, taking our network to 20 hospitals across India, including 2,900 beds in Kerala. This addition enhances access to quality care in Northern Kerala and reinforces our focus on deepening regional presence and patient reach. The hospital has made a very promising start with daily OPDs are already exceeding 150 and a steady increase in the inpatient admissions. We have also ensured a very strong clinical backbone from day 1 with 50-plus doctors already on board. Apart from [ Casacord ]in the coming years, we plan to add another 2,300 beds both through greenfield and brownfield projects, taking our capacity beyond 7,800 beds. During the quarter, we further strengthened our presence in other beta by acquiring an additional 13% taken as Ramesh Hospital, bringing Aster's stake to over 70%. This strategic move consolidate our regional network and deepens our footprint in Southern India. Now moving over to the merger. A notable development in the quarter was the continued progress in a merger process with Quality Care India Limited. The merger has now received a no objection letter with no adverse observations from both BSE and NSE following earlier approvals. Over the last month, the transaction has advanced smoothly through key regulatory milestones a quick snapshot of the progress on the merger process includes shareholders have approved the preferential share issuance. The Competition Commission of India has granted its approval. We completed a strategic share swap, acquiring our 5% stake in QSI in exchange for a 3.6% preferential allotment in Aster. These shares are now listed on the stock exchanges. Most recently, BSE and NSE no objection have further advanced the merger process, paving the way for the next phase of integration. The company will now approach the NCLT to initiate the final approval phase both application at shareholders meeting will be held to approve the merger following which the NCLT sanction will make the merger effective leading to the issuance of the new shares upon completion. The merged platform will have 38 hospitals across 27 cities with a combined capacity of 10,360 beds positioning us among the leading health care providers in the country. Q2 FY '26 has been a quarter of very notable recognitions for both our leadership and institution our Founder, Chairman and Managing Director, Dr. Moopen, was honored across multiple national platforms being named health care icon of the Year at Economic Times Healthcare Awards 202 legend in the Indian health care industry at the FikiHeel2025 and which receiving the lifetime achievement of board from Entrepreneur India, celebrating his veterinary leadership and lifelong contribution to healthcare. He was also featured amongst Forbes Middle East top 5 health care leaders 2025 and also recognized as 1 of Forbes Middle East Sustainability Awards for championing Aster's journey towards an equitable and sustainable health care future. At the institution levels, many of our hospitals were recognized at ET Healthcare Awards 2025 for their leadership positioning across complex specialties and procedures. Also, as the Whitefield hospital received the technology transformation initiative of the year award at [indiscernible] 2025 for its pioneering walk-in CT imaging services, reaffirming our commitment to advancing patient outcomes through technology and innovation. As we closed the quarter, our performance underscores the strength of Astra's diversified health care model and disciplined execution across markets. Despite the softer seasonal trends, we've delivered healthy growth across clusters and expand margins through operational efficiency and a sharper focus on high-value care. Our continued investments in capacity expansion, digital transformation and clinical talent of building a future-ready platform designed both for scale as well as sustainability. The upcoming merger with Q will further reinforce this foundation, creating one of India's most comprehensive and efficient health care networks. This consistency, agility to bounce back and a strategic foresight reflects a resilient growth trajectory, marked by steady earnings expansion, improving returns and long-term value creation. With strong fundamentals and expanding footprint and a clear pathway to integration and innovation as well positioned to deliver sustainable and profitable growth in the quarters ahead. Together, these developments, market inflection point in Astra's journey, we are poised to deepen our clinical excellence and deliver greater value to patients, partners and shareholders in the years ahead. I will now invite our Chief Operating Officer, Mr. Ramesh Kumar, to take you through the detailed cluster wide's performance.

Thank you, Ms. Alisha and a very good afternoon to everyone. So I'll take a few minutes to share how each of our trust or performed during the quarter and how our operational and expansion priorities are shaping up. Actually, this quarter, results once again -- those highlight that the strength of our customer model and our disciplined execution across markets. Kerala, let me begin with Kerala because the cluster delivered a solid year-on-year performance with a revenue increasing 11% year-on-year to around INR 620 crores. The improvement was driven primarily by richer specialities mix and a 5% year-on-year increase in ARPU IP, supported by a higher contribution from complex procedures and NBT business growth. With a lower incident of seasonals illness this year, which kept absolute volume growth moderated the cluster maintain a strong throughput in elective and specialty-led admissions. Operational EBITDA increased 19% year-on-year INR 266 crores, with margins improving to 26.8% from 25% last year. The improvement in profitability was driven by disciplined cost controls stabilization of leadership team and a more balanced to pay of case mix. This reflects a meaningful recovery from the softness seen in the second half of FY '25. Karnataka and Maharashtra cluster has reported around 10% year on revenue growth, supported by a continued ramp-up in [indiscernible] and a strong especially inpatient area improvement led to a high-value programs, including oncology, neurosciences and other contract surgical care. However, it's important to note that the shift towards a medical oncology has also led to a higher material cost driven by monotherapy and targeted therapy services. As a result, operating EBITDA grew 6% year-on-year during the quarter. Altra and Telangana revenue grew by 8% year-on-year supported by a 4% growth in inpatient flow and a 4% growth in RPI IP driven by a better case mix. Year-on-year, our operating EBITDA growth also grew by reflecting the higher replacement of cost of the clinical talent. However, the quarter-on-quarter basis, operating EBITDA has almost doubled. These investments were necessary to enhance the long-term clinical capability of the cluster. In summary, this has been a strong quarter of execution and growth across cluster, Kerala delivered a record high performance. Karnataka and Maharashtra maintained steady double-digit growth, and Andra Telengana continued its upward trajectory despite the impact of the lower seasonal incidents. With approximately 2,300 additional beds planned across these regions over the years, we are we are acting a phase of accelerated scale, deep penetration at a strong operating leverage. Thank you, and I'll now hand it over to Sunil for a detailed review of the financial performance.

Thank you so much. Good morning, everyone. I'm Sunil, I'm pleased to share Aster's financial performance for quarter 2 FY '26. For the quarter ended 30th September 2025, revenues have increased to INR 1,197 crores, up by 10 percentage from quarter to FY '25. And operating EBITDA has increased to INR 263 crores with a margin of 22% compared to FY '25 quarter 2 with a growth of 13 percentage Normalized PAT post-sor quarter FY 2016 is INR 110 crores compared to quarter 2 FY '25 with a growth of 14% Y-o-Y. For the half year ended 30th September 2025. India revenues have increased to INR 2,275 crores, up by 9 percentage from H1 FY '25. And operating EBITDA has increased to INR 478 crores with a margin of 21% compared to INR 10 crores in H1 FY with a growth of 13 percentage. Despite lower incidence of [indiscernible] decisions, which typically carry higher margins, I'm pleased to share that our EBITDA margin improved 13% Y-o-Y. It's important to note that quarter at unusually high base driven by elevated seasonal medical admissions. In contrast, for quarter 2 FY '26 saw softer medical case mix. Yet even against this backdrop, we achieved an EBITDA margin improvement of year-on-year. This margin expansion is driven by multiple key levers. In line with our focus on driving sustainable profitability, we have continued to execute on our cost optimization and operational efficiencies. During the quarter, we made meaningful progress through initiatives such as centralized procurement of services or nonmedical consumables as well as adoption of renewable energy across our hospitals. These actions supported by benefits of operating leverage delivered nearly 100 basis points reduction in our over rates. Our renewable energy program is already delivering tangible results. We have commissioned project across 3 hospitals in Kerala and Karnataka with visible savings flowing through to our overhead costs. We are on track to go live with an additional 21-megawatt across 7 more hospitals during the second half of this year. and early next year. We also achieved 30 basis points efficiency in Manor cost. These gains, the overhead cost gains and the manpower gains were partially offset by increase in metal cost, primarily due to strong growth in Congo specialties, particularly oncology, which grew 26% year-on-year and lower incidence of retro decides. Turning to our diagnostic business. I'm pleased to share that Astra Labs has achieved a strong turnaround since the start of FY '25. EBITDA margins have been expanded sharply from 11 percentage in quarter 2 FY '25 to 17.8 percentage in quarter FY '26, driven by a robust 31% year-on-year growth in external business, and hence the operating large and improved metal cost efficiencies. This around also translated a healthy ROC for Asia lapse at 23 percentage a remarkable recovery from a negative level a year ago. As of H1 FY '26, our total CapEx stood at INR 32 crores, nearly 50% allocated towards expansion projects. We continue to maintain a robust liquidity position with cash and cash equivalents of INR 1,276 crores with our gross debt moderate at INR 69 crores. Additionally, we have seen a significant improvement in ROC, which has increased by 290 bps year-on-year from 18 to 21 percentage. With this, we have laid a 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 the performance of QC.

Thank you. Thank you, Sunil. Good afternoon, and thank you for joining us today. This quarter reaffirmed our unwavering commitment to our patients and excellence and care. Our focus on the fundamentals has enabled us to deliver strong clinical and financial outcomes in quarter 2, demonstrating our resilience and reduced dependence on seasonality. During the quarter, we witnessed several of our key initiatives, not only delivering strong outcomes but also being institutionalized within our operations. These initiatives are now getting up a scale, reflecting the strength of our strategic direction and execution capabilities. This progress gives us added confidence in sustaining growth and driving long-term value creation as we look ahead to the upcoming quarters. On the Q2 financial performance, overall performance in Q2 has been strong, with revenue growing 15.1% Y-o-Y to INR INR 1,193 crores, while [indiscernible] EBITDA rose 21.6% Y-o-Y to INR 287 crores. The EBITDA margin post [indiscernible] improved by 130 bps Y-o-Y to reach 24.1% in Q2 FY '26. This strong performance was primarily driven by growth in ARPP and volume expansion. RPP grew by 10% Y-o-Y to approximately 125,000 in Q2 FY '26, supported by an improved specialty mix with [indiscernible] share rising 8 bps to 58.5%. And a very favorable shift in pair mix as the share of cash and insurance business rose by 240 bps to 81%. And mind you, this is us has been done. The EBITDA growth further reflects the early success of key synergy initiatives across procurement centralization and F&B insourcing implemented in the second half of FY '25. Our clinical efforts, talent recruitment and management and the strong ramp-up of [indiscernible] unit launched in October '24, also contributed meaningfully to our EBITDA growth. Our mature units, which account for 60% of revenue, delivered a 14.4% Y-o-Y revenue growth and at 27.4% Y-o-Y EBITA, achieving a margin of 33.2%. Meanwhile, our emerging units, which is 6% of the revenue, continue to scale effectively, reporting a 16.3% quarter-on trailing quarter revenue growth and a 9.1% quarter-on-quarter EBITDA. Our focus units, which is 29% of our revenue also recorded a robust 30.4% quarter-on-quarter EBITDA growth. reflecting our continued emphasis on operational excellence and disciplined execution across all -- across all facets of our business. Another important aspect is leadership. We continue to attract exceptional talent from across the industry. Dr. Pavan Kumar recently joined us as the leader of Care Hospital. He is designated as the CEO of Care Hospitals. He is a graduate from Jim and PGI tend with an MBA from ISP. Dr. Pavan brings extensive leadership experience from his previous roles at MAX, Cloudline and Devassa. With this, we have onboarded over 10 CXO-level leaders. To our team over the last few months, each bringing unique and complementary expertise, enabling us to drive our next phase of growth and excellence in care. On the clinical side, we've been continuously advancing our doctor hiring models in a structured manner and have onboarded over 100 clinicians across the network during this quarter. While these initiatives were launched a few quarters ago, this quarter has shown significant progress. With the monthly recurring run rate or revenue run rate coming from the newly hired cohort of clinicians reaching INR 20 crores. Moreover, these new hires have been instrumental in driving a shift towards higher acuity with our converted share increasing 80 basis points to 58.5%. Our drive to advance clinical excellence has led to several milestones. The first robotic-assisted CABG and Pradesh, the first cardiac transplant in Vizag, the first TAVI with real-time CP integration at Kims await beating hard CABG on a high-risk 71-year-old patient with triple vessel disease and chronic total occlusions. We continue to place unwavering focus and improve our ability to manage clinical complexity so we can create the best outcomes for our patients. Our continued focus on clinical protocols has also enabled us to reduce our loss by 6%, decreasing from 4.8 to 3 .85. With the launch of new clinical programs, we've also invested in advanced technologies, including one linear accelerator to support our oncology ramp-up in agri coil as well as commissioning two cath labs, two OCTs to MRI in various micro markets. Additionally, we continue to strengthen our robotic program with a new installation in Hyderabad. To accelerate growth, expansion continues to be a key strategic priority for us. We remain committed to strengthening our presence in existing markets and entering new ones through greenfield development, brownfield expansions and strategic M&A. Our enhanced near- to medium-term growth plan includes an investment of about INR 2,000 crores to add over 1,700 beds in the next 3, 4 years. In line with our mission to improve accessibility to high-quality care, 1,300 of these 1,700 beds will be added in non-metro Tier 2 markets. We also remain steadfast in our focus on improving access to state of our clinical infrastructure. This is reinforced by our investments in setting up 5 to 7 Linac systems across Tier 2 markets. strengthening our oncology capabilities in these regions. To enhance outcomes and support loss reduction, we are also expanding our robotic programs. In the last quarter, we rolled out a series of operational initiatives driving growth. including the first phase of our call center modernization in partnership with Tech Mahindra and the beta launch of a CRM-based patient enrollment system to enhance engagement and service efficiency. I'm actually very pleased to share that we are already 100% on track to achieve the target. For the group, we plan to extend this initiative to the entire [indiscernible] network in the coming quarter. We've been recognized and about it. Quality Care India Limited, received the Visionary Healthcare Leadership Award from the Honorable Governor of Telangana at the HBI Annual Conference. India held Summit otewards recognized us as the best hospital network by the Times Group. [indiscernible] earn platinum green OT certification for all operational theaters, meeting global standards in energy efficiency, patient safety and sustainability. With that, I'll pass it on back to Ritesh. Thank you so much for joining us this afternoon.

[Operator Instructions] The first question is from Mr. Tausif.

This is Tausif from BNP Pariba. Thanks a good set of numbers. My first question is to Ramesh. Can you give us some qualitative update on the Kerala business, especially in when GM has focused on last year in the initial program. And also this quarter were the growth which you have seen catalog business, whether it pertains to your traction hospital med city or the growth was broad-based.

Thank you, Tausif, for that very good question. I mean, in fact, this -- as I mentioned about the Keller has been performing very well. And in fact, it is not only Medcity alone, it is across the board. Now just to give a highlight to some highlights as far as the -- overall business has been very good as far as the case mix is concerned, you'll find that it is all high end and converting mix is really doing very -- and including -- and you see the MVC business grown by 49% growth has come in there. So we have all iron procedures happening, especially in MedCity you will find that robotic procedures, which has been doing exceedingly well. And in fact, some months, we have crossed even 80 numbers per month. So that is the kind of high-end procedures what we have started doing. Oncology has been doing exceedingly well across the board and especially in MidCity. The leadership, you will see well, who I mean Hoobi we have hired especially in VT and the unit-wise leadership has stabilized. You will find efficiency in her especially when it comes to manpower optimization, cost optimization as far as the material consumption is concerned. I think overall, [indiscernible] has been steadily doing exceedingly well and it will continue to do well. Unlike FY '25, we had some Vectron disease at that time. The volumes were very high as far as pulmonology, internal medicine and pediatric is concerned. But FY '20 -- quarter 2 FY '26, you'll find that quality elective surgical numbers have really gone up. So that's where the specialty mix have changed and the performance is really good.

Ramesh, anything on the BT patient footfall missed the growth of 26%, which you have seen Y-o-Y?

Yes. So BT, especially there are 2, as we said, Middle East, especially from Oman, we had a significant growth so that is that is one area. Mild have also refocused on margins, brought a lot of attraction of patients. So overall, we have a pan India. We have taken a leadership for MBT now. More focus on each of these clusterized focus has been happening. So thereby, even African countries have been our one of the -- a good number of patients that have been coming from the African belt as well. So overall BT business, you will find a good growth across 23% growth across the board across India.

My second question is to Varun. Just wanted to understand your expansion plan beyond FY '28 for the merged entity. whether we plan pursue aggressive M&A in areas like Western India and Northern India, where we don't have much presence.

Thanks for the question. Tausif, I just highbred that -- we're very clear in terms of brownfield and greenfield expansion. I think that's been laid out very clearly. Strategic M&A that you can't really make plans, but we'll always be open for it.

The next question is from Mr. Amey. Amey, can you please hand me to line and ask the question?

Thank you for giving unfortunately and congrats on a good set of numbers. So first question I have on the Karnataka Maharashtra cluster, which is showing around 10% growth. I believe the white field you have written in the PPT that is doing well, delivering 25% plus crore during the quarter. So which is the hospital, which is overall affecting the performance here and the reason for the same.

Yes. Thank you for the question. So I think the main unit, which is giving us the growth in Karnataka right now is still white field because it's obviously a newer unit. So when you look at the growth on white field there's a significant. I think it's almost 27% growth that we are seeing. Harith, do you want to expand more on that.

Yes, rightly said, so there is a good growth as far as Whitfield is concerned with 27% growth happening there. especially oncology has grown very well. The contribution from oncology is almost 17% towards the total revenue of Karnataka. So you find that overall performance has done very good asset as we feed and asset reason CMI has slightly -- we are having a single-digit growth, but definitely, there's also growing as for the market, what you call, the traction has been very good in and around not part of Bangalore. So we can see a better growth, definitely, there should be a better growth as the CMI as well. But if you compare with FY '25, again, I did mention about the [indiscernible] disease. We had a higher volume there in last year, FY '25 second quarter. So that is the reason you will find a moderate growth happening this year over FY '25 in FY '26. Just to add to that -- just to give you a number, so that can be so basically a seasonal impact. Overall, India, the in medicine, Palma and speed side. So there, we have got 12% growth across India. And Kerala impact is a little lower than complete Kerala. Kerala 6%, but Karnataka very specific the Bangalore impact is almost '26. So that's a huge impact. That's where on year-on-year, we used to go to the mid-teens or higher teen growth that is not visible because of that, just giving the numbers on that.

Got it. Got it. And the second question I have is on the FY '27 guidance on the expansion side. We have 3 greenfield units coming up Obviously, on a long-term basis is quite positive. But specifically for '27 modeling, on the margin side, what EBITDA impact should we take into account? And is there a possibility of brownfield expansion, helping these margins to have a lower impact, if you can give some clarity on FY '27.

So yes, if I can take up this question, I mean, see, I think we are not giving the guidance just for one year right? So I think even in the last call also or even the previous meetings, we have already sold that as a combined entity, we are now at 23% for the quarter. On a YTD basis, we have somewhere around 15 and going post merger, right? So we are looking at it in 2 to 3 years, to be near 24 to 25 percentage. Now very specifically with respect to the greenfield, you will see that, see, both the greenfield or major benefit itaas, which is coming, which is more of reman children. But the important one is our [indiscernible], which is coming quite in the end of the year because a brownfield just commenced the work there. So it'll take at least in somewhere in the end of the H2 and the capital should come our own middle of the year. That's why we put our process to FY '27. And we have seen that wherever we have a strong cluster, we tend to do well. So we expect not to have a too much drag on the EBITDA margin. And also, it's very, very important by then, I think, with merger on the way. We should also have synergies also coming. That should also help in a very big way in addressing any loss of initial losses there.

Should we assume that combined entity margin should be well maintained with account accounting for the synergies during that year?

Yes. As I said, I don't want to give a guidance exactly on that particular year. [indiscernible].

Yes. Maybe we haven't -- we might not be able to say exactly how much the margin would be maintained or if there's any dilution. But I think what's really helpful to note is how complementary this is, right? The Trivandrum asset, which is coming 500 beds, it's almost going to be now with the presence that Kim's has in Trivandrum, it's going to really help us expand that capacity and create that cluster in Trivandrum, again, building on the leadership that Kim has building on the brand that Aster has. I think that's a really powerful story for us to kind of double down on. And even in Hyderabad, now with woman and child again, with the network that care has an Hyderabad the merger is complete, you will be able to see that network effect coming through. So we do see that both of these are positives from a merger standpoint. So to the point you're making. We see this should definitely help us accelerate the performance of both these units on account of the merger as well.

Sure. I just have a last question to LNG. He mentioned that there is a 700-bed expansion for the QCI asset, 300 beds are in Tier 2. So I just wanted to understand the thought was us here. When we have to choose the expansion between metros and Tier 2. What is generally your thought process? Because I believe the metros typically, although it has competition, it has weaker turnaround time lines as well as higher EBITDA for that. But Tier 2 typically have a longer time lines as well as lower EBITDA or it. So ROCs might be better, but it takes time for you to achieve those ROCs. But how should one think about it when it comes to expansion? What -- how should the balance sheet going ahead? What's your thought process?

So thanks for the question again. I think there are 2, 3 ways to see this. One, the numbers are 1,700, 1,300. So we're looking at those many bad ads over the next 3 to 4 years. I think -- on the point that Tier 2 markets take longer, I want to quote an example. We opened [indiscernible], our hospital in Tamela in October '24. We were profitable from an EBITDA standpoint in the third month. And I think our 1 year into the hospital, our current margins are in excess of 20%. So Tier 2 markets is done right. the opportunity to scale them up fast is, in my opinion, better than many turbine markets. But again, it depends on how you roll out a hospital, right? If you are able to bring the cental team, the infrastructure, open it right and the market is something that knows the brand, like Alisha mentioned on Trivandrum, the scale-up will be significantly positive. So that's one way to look at it. Does that -- and when it comes to our expansion also, I think one of the -- one of the good things about expansion is that we're expanding where we are already present. If you see, we are adding indoor, we are adding beds in [indiscernible], which is where we are concerned for capacity. So any better addition will get occupied sooner than later. Then we are adding oncology capabilities across Raipur in [indiscernible] and I just wonder about [indiscernible]. So we had initially planned that we'll expand beds in [indiscernible] probably in FY '28, but the way we've grown in magical, the sense is that we will be adding beds in FY '27. So I think all of that will play well for our expansion as well as margin story.

The next question is from Mr. Harith.

So [indiscernible], the margin profile that we are at currently around 20%, 23%, if I look at on a basis. So one, if you could talk about some of the additional levers that we have to take this further up, keeping the synergies side? And what were the levels before you took over at the beginning of FY '25 or towards the end of FY '24, what was the margin level that we were operating at on a pro forma basis for all the 3 platforms within CIL put together?

So the margins in a good story, Harith. I think we've done a lot of work on this. I just announced that we were at 24.1% for the last quarter. At some point in time, we had given that as guidance as well a few quarters back. So what's impacting? I told you that we have a synergy deal. Of course, we don't talk about the entire meal, but there are 10 initiatives that we focus on. And I can't put synergy outside because this is a constant endeavor that will continue to happen. Synergy is generally not when you only merge companies if there's a synergy that we point to play from one hospital to the other. But from a margin expansion standpoint, there are 3, 4 things that have really helped us. One is the procurement side of it. We've been able to create efficiency and that efficiency is outside of what the planned efficiencies are post the merger as well. We've also done things that [indiscernible] as a network had F&B in-sourced. And we knew that, that was the right thing to do because there are 2 elements around it. Patient complaints around food in Indian health care sector are number one. And if you're able to enhance that quality, it all goes very well for the patient experience. And it also does go to the -- so that's another piece that we've rolled out in QC across the network. So we've started to in-source F&B. Outside of that, there are multiple things we are working on CapEx procurement on enhancing our working on group strength on the AMCs, et cetera, et cetera. One of the other things, the second part, outside of procurement and the synergy wheel is really the parmix. That is one thing that is -- I mentioned in my commentary as well as easier had been done. But the fact that we've been able to move the payer mix by 280 basis points, is phenomenal. I think there is business focus and operating focus. And when we do things right, you're able to grow the right there pretty well. So our cash and insurance player is doing extremely well, which is a very healthy sign for the business from a long-term standpoint as well. And needless to say, that is [indiscernible] and so we are today at about 81%. So I see this continue to grow absolutely. I think the third part is that we've always broken our business into the 4 categories that we spoke about. And we've been very focused on that. We know that there is a maturity part of our mature part of our network, which is about 60% of our business. There, what we try and do is we try and enhance the performance metrics there. So there should be growth, and that part of our network is growing about 15% currently from a top standpoint with a very significant EBITDA side. We've started to see turnaround in most of our focus units as well. And that's a large component, 25%, 27% of our business comes in from there. we've seen significant upside there. So our Hyderabad assets are now performing much better and then mature units, which are underperforming, start to do better the translation to EBITDA is quite significant. So I think all of that is giving us the traction and will continue to in the fertile future. Also the fact that we've been able to launch our new hospitals well and we are able to get to 25% profitability in the third, fourth quarter. The question that was asked sedan earlier, I think we know how to scale up fast. And that will keep us in good stead even when we add capacity going forward. So yes, that's that.

Got it. Got it. By keeping synergies aside segment, the net faster [indiscernible]. On Aster stand-alone, Sunil, I understand this question has come up in the previous quarters, but looking at the ARPOB growth, that's quite strong. And when I think of FY '27, some of the drivers like the white field ramp-up or the loss reduction, the payer mix optimization, we might not be as relevant or significant as we have seen in FY '26. So is there a guidance or some indication directionally that you could give for FY '27 for our growth.

Thanks, Harith. If you know, I have always never given 1 year or 1 quarter growth. I always given an extra 2 to 3 years where it could be. And also, we want to see ARPU also is very came a project with a lot of things making that particular KPI move, right? For example, loss also, right? [indiscernible] for example, our loss being efficient. I think this is our third quarter where from 3.2, 3.3, we have come down to 3.1%, right? So even in the 5% loss reduction and that 5% directly moves to the ARPU. So I think we should start moving out of our POP and move to be more of a RPI even in RPP also, right, ARPP for IP patients, they're also seeing a movement even the current, I would say, quarter or the first at ton also. There are important things. One is that specifically in [indiscernible], team is very, very important. Wherein our other [indiscernible] is there. We stopped the scheme because we already reached on standard person occupancy. We didn't have the space to occupy for our cash and TPO patients, right? So on the 1,500 patients, right, for the quarter, 1,600 patients for the quarter was a reduction, right? And that has really moved the ERP up. Second, Whitefield, see, Whitefield just a second year. Oncology is still driving the growth. Neuro is doing really, really well. Cardiac is doing well there. So that is also driving the ARPOB and also specifically because oncology is driving our 60% of our oncology comes from mid dog. And today, in Maddon, 40% to 50% of that revenue is derived by immunotherapy and targeted therapies. And there middle cost is quite high and also ticket size side. And that's where you're seeing that year will be up. Second, I would say, third or fourth quarter, which is season, I think I called it in another question. That even the overall season impact for the basically these 3 specialties is 12% degrowth, what we have seen. In Kerala impact is quite high, right, year-on-year, it's percentage. We had too much on the last year and that's where the word growth has come only from combo dispecialties. That is one of the reasons why it looks very, very high. So I think these are the factors which are at food anyway, once it gets normal, it's been normalized in just one more year. So other things he will always help. But my future thing will be is that look at ARPP growth somewhere between 78 percentage from a long-term point of view, like 2 to 3 years.

[Operator Instructions]. The next question is from Mr. Binu. Mr. Binu, can you please ask for question?

Good afternoon all of you. And congratulations on a great set of numbers and the recovery in Catalog cluster. Just one question remaining was around GST. In your opening remarks, you mentioned that the production in GST augurs well for the cost of service. Have you tried to quantify the benefit to margins that this can accrue?

Binu, thanks for the question. If I'm trying to get that question right, we are talking about the GST impact. See GST impact -- there's no impact in the OP services because we always use to take the input and pay output to the department. So there's no impact on whether it's on the top line or in the cost from the OP. Only in case of IP, very specifically open cases, where you have also seen the benefit also because with the amount going down, there is a GST is coming down in the -- both in sales and the cost right? So the both way impact is there. From an Aster point of view, the top line impact, overall top line impact on a monthly basis around 1.1 percentage. And out of that 35 to 40 bps impact -- but at the same time, it's very important we know that recently, I think sometime in October. We've also seen the CGS price increase rate after more than a decade, more than 2,000 procedures pricings happened. And there, we usually do ESI, ECHS where they follow the CH rates and also other PSU corporates, what we do. We do approximately INR 20 crores of revenue every month. There, we see a positive INR 2 crore impact in the revenue and EBITDA out of that impact in the incremental revenue around 70%, 50%, 80% should flow to EBITDA. So with that, whatever the negative impact of what we are seeing in the GST should get compensated by the CST increase?

Sorry, just a clarification. So why would there be a negative impact from the GST? I would assume that your costs will come down and it would positively benefit EBITDA.

So I can always share the mathematics later, but what also happens is that if I want to give you an example, right, say, for example, if you're -- say specifically in the open building, what's happening is that on the MRP is what we used to sell, right? So the MRP, for example, male medicines used to be approximately 12%. Now it has come down to 5 percentage, right? So what is on the MRP, the car reviews has come down by 12 percentage. And we used to have a margin of approximately 50% in the coleseically. So there, it has come down by 50 percentage we've got my point, right? So whatever the revenue or loss what we are seeing on the MRP, only the 50% has come down. The balance 50% is going to hit our P&. -- it's very natural. And also, if you want, we can offline give you the mathematics to explain to you how it's impacting our EBITDA.

Understood. Understood. That's fine. And one question about what is the thought behind shifting of the headquarters from Bangalore to Hyderabad to [indiscernible].

So thanks, Pia, for the question. As part of the merger, we just felt it's better to have the NCLT application for approval going from one state so that the process time lines can be better. And that was the key reason why we just thought that then because the head offices currently are in 2 different states, we just felt it's better to have happening so that the efficient process will be more efficient. That was the reason why we did this.

[Operator Instructions]. Moving on to the next. The next question is from Damayanti. Can you please ask a question?

Most of the questions have been answered. I have 2 questions. First, now you have majority stake in Dr. Ames hospitals. So with that, is there any change in the broader strategy for the Andra and Telangana cluster because although it's a small cluster, but it's pne of the least profitable in your network. So any comment will be helpful.

Damai. So we are working with Dr. Rami to kind of build a strategy for Andre. I think probably a bit too early to say. We are doing some of the market studies on the potential. So there are a few proposals under review. So we will see how -- I mean, there is potential for the cluster because it's all about prioritizing where we want to put the capital, right? So we will come back maybe in the next couple of quarters to you on that.

Sure. But it's, I think, logical to assume that the margin profile could significantly improve from here because against like other 2 clusters, it's in low double digits. So maybe like the more room to improve on this cluster?

So I think we have seen some growth recently. There has been investments made in the doctors as well. Of course, there is potential. We're trying to see there's also a lot of competition that's coming in the market. So we are making sure that we keep improving in each of the clusters as much as possible. So yes, so let us come back to you. I think we are seeing improvements in the cluster anyway, I think, over the last year.

Sure. My second question is actually, how do you see your medium-term EBITDA margin in view of a very strong performance in your core clusters like KLA and then having a great visibility on drivers [indiscernible], et cetera. So where do you see your margins say, index 3 to 5 years from now?

So then again, we would like to resist on the cluster-wise EBITDA margins, but we already given broad guidance on margin [indiscernible] post-merger, we're looking at 24 to 25 percentage. But still, you understand that margins are indirectly linked to the ARPB for the IP patients, right? So the higher the APP because the metal cost is going where we get the leverage. But at the same time, you have seen the Kerala cluster has done really well because of the capacity, which we added almost the [indiscernible] expansions happened both in [indiscernible]. And we have seen that [indiscernible] has gone beyond 20% with margins and our Medcity where it was around 50 bps. We added another 100 beds There, the margins have gone beyond 30 percentage. And also it's a very big hospital we're inching towards more than INR 90 crores to INR 100 crores of revenue per month. With all this, I think it's all about the brownfield expansion and how we can bring the efficiency. But as I said, yes, I understand we are coming from -- with oncology happening, yes, with the metal cost being higher, there could be some stress, but also we're looking at not specifically trying to grow only one specialty. We are also interested to grow across the [indiscernible]. Right? So with that, I think we will be able to manage the EBITDA much better.

SP1 Yes. Actually, I was wondering like if it could be higher because oncology, although there is high material costs, but the realization, I understand it's better than many specialties. So I was just thinking like more than 24%, 25%, if you can.

[indiscernible] this statement, right? Like even if you look at just the last quarter, with the GST change with the CGHS price change. So many things keep happening in the sector, right? And rightfully so. So I think our commitment is to always kind of like what [indiscernible] was saying earlier, looking at each lever constantly dynamically seeing what can be optimized, what can -- what -- what are the options that we have. And of course, even with the merger, there will be a lot of synergies that comes in. but we maintain this balance of which clinical programs to run what makes sense for the different clusters for each unit detailing out what clinical programs to kind of focus on. And then also making sure at the same time, we are able to improve the efficiency and the margins as well. So I think it's really hard to then say, specifically, this would improve by 100 basis points or 200 basis points, but obviously, the commitment is to always kind of beat the peers and be at par with the peers as well.

[Operator Instructions]. With this, the next question is from Sumit. Sumit, can you please ask a question?

My question is [indiscernible]. So what was the [indiscernible] of 2Q?

If I could hear it probably ask that what is the IPO of QCI.

Sumit, all right. So again, I think sometimes ARPOBs mentioned about it. We've released the number, which is the ARPP number. The ARPP growth is 10 -- 10% for this quarter. The ARPOB number would be about 40 that's the number in specific you're looking at for Q2 for TCR.

Understood. And what are the performance of the [indiscernible].

Sumit, we're finding it very difficult to understand what you're saying. It seems to be your mic I guess we can take it offline with you because I think we're having some communication challenges for it a little while, you want to move to the next one.

Yes, sure. Thanks, Yes. So we have the next question again joining back to the queue, Mr. Tausif. Tausif, can you please ask the question?

Rajesh, can you share some color on the recently commercialized Casa Board Hospital, how the early trends are? And does this hospital stops current patient in [indiscernible] to [indiscernible] for treatment?

So start we had -- on October 2, we had launched the hospital. We -- it is a 264 bedded hospital. And right now, we have opened 100 beds. The other 2 would be shortly commissioned as well. And the OPD numbers are anywhere between 200 -- 150 to 200 on any given day. So that's a head start what we had. If you look at the inpatient, we are talking around of 40, 35 to 40 in patients. IP admissions, we are around 72 anywhere between 10 admissions are happening. [indiscernible] also on the same. We have the best of the clinicians onboarded. So it's a higher tertiary cap center. So Castle board, I don't think so in and around case board, you have such a higher touch cat center, which even oncology where Medan, they get surgical oncology, we have started there. Right now all patients are accessing the Casebord Hospital. I don't think so the patient now. Once the awareness pretty high. We have started a good mode of campaign, a good amount of public, what you call, awareness programs. So I'm sure patients have started flowing into the hospital. I don't think so that cutting across Karnataka now because this is one of the state of our center, what we have come up

We have Sumit joining back to the queue. Sumit, now you can ask that question.

So my question is to [indiscernible] sir, what was the performance of the mature and the focus units in this quarter? And have you witnessed any margin improvement in the focus units?

Yes. Sumit, first, it's good to be able to hear you out properly. So Sumit, I gave some numbers earlier. So our mature units are actually, from a top standpoint, grew 14.5% Y-o-Y. Our emerging units grew 85% Y-o-Y. And our focus units grew 9% [indiscernible].

And how should we look at it, look at the units over the next 3 to 4 years? And is there a kind of margin improvement in the at least the focus and the mature units?

Of course. So in the emerging and the focus is margin expansion is the reason why they are in that category and that certainly will happen. And I don't see question around it. As I mentioned earlier, a couple of units are actually more in our focus group has started extremely well. Our Hyderabad units were a bit challenged last year, if you recall. And that's where we start to see. In fact, the last month of the second quarter, our numbers were mid-double-digit growth rate for our Hyderabad assets. So I think that's looking good. So there's a significant turnaround underway in the focus units. And emerging, of course, the newer units will do well. also another hospital in [indiscernible], where we had challenges around it. It was a part of the focus and it is doing extremely well now. We are in fact -- we are now looking at adding complexity there. One of the leader accelerators that I spoke about is getting into parent. We've just ordered a robot for [indiscernible]. So again, this strategy continues to be the same, bringing more complexity, more modalities ensure that anything and everything that the patients want are delivered in our centers. And with that said, you will continue to see patient retention in a significant way, and therefore, complexity there mix, et cetera, growing leading to an evolved margin condition.

[Operator Instructions]. The next question is from Mr. [indiscernible] can you please ask a question?

My question is to Mr. Varun. So [indiscernible] has in particular on the parameters are comparable. In fact, quite better. But if you look at the loss, as 1.2% and as 2 or 3.9%. Just wanted to understand why this data there? Is it because of the case mix or something like -- how low can this go? And how is that help our capacity in the future.

Well, if I start defining us to buy the 3.9%, I think may not be fair. So it's still about multiple factors. It's driven by the specialties that we focus on, it's driven by what kind of surgical mix you have, et cetera, et cetera, how much of the medical big, if you're able to do. Sometimes medicine can stay longer et cetera. So I think 1 of the way I'd look at it is not really compared to. The second part of your question, the way I read it is, is there a scope to enhance it. Yes. Our focus will be to continue enhancing that. We've bettered over the last year by 6%. As I told you that we were in excess of 4%. We've come down to about 3.85%. Can that -- will this continue to improve? My sense is yes, if that answers your question.

[Operator Instructions]. Okay. That's been the last question. So there is no more question to the management. Thank you all. This concludes the earnings call for this quarter for Aster DM. 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. Thanks, everyone.