Aster DM Healthcare Limited (ASTERDM.NS) Q3 FY2026 Earnings Call Transcript & Summary

Good morning, everyone. I welcome you to the Aster DM Healthcare Earnings Conference Call for the Third Quarter of FY '26. Today with us, we have the 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; 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 the 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 the opening remarks by management, followed by an 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 Ms. Alisha Moopen to start with opening remarks. Over to you, Ms. Alisha.

Thank you, Puneet. Good morning, everyone. Thank you for joining us. As this is our first call in 2026, wishing everyone a happy new year. As we move through the final phase of the regulatory process of the proposed merger with Quality Care, we believe it is increasingly becoming useful to discuss our performance through the lens of the combined platform we are in the process of building. At the same time, we remain fully mindful that the transaction is still subject to shareholder and NCLT approvals. While the merger process is yet to be consummated, combined performance of the platform reflects how the 2 organizations are already operating at scale with complementary footprints, similar clinical philosophies and consistent operating disciplines and provides a clearer view of the earnings capacity and capital efficiency of the platform for the coming years. Over the coming few months, wherever relevant, we intend to continue providing this combined pro forma perspective to help investors better assess the underlying economics of this platform. With that context and keeping the medium- to long-term lens in mind, I will begin by discussing the combined pro forma performance of Aster and Quality Care before moving to Aster's results. We are very encouraged by the operating performance of the combined entity this quarter, which demonstrates consistent and broad-based growth, driven by continued focus on clinical excellence and improving case mix and efficient cost management. On a combined pro forma basis, the platform delivered revenue growth of 15% year-on-year to INR 2,366 crores, supported by 9% growth in total patient volumes and 8% growth in inpatient ARPP. This was also accompanied by the CONGO mix increase by approximately 150 basis points to 54.4% in Q3 FY '26. Operating EBITDA grew faster than revenue, increasing 22% year-on-year to INR 503 crores, translating into an operating EBITDA margin of 21% and a ROCE of 21%. This performance is not limited to a single quarter. The combined pro forma performance of Aster and QCIL has demonstrated strong performance across the first 3 quarters of FY '26, supported by steady patient volume growth in the 8% to 9% range and sequential improvement in patient realizations with inpatient ARPP increasing in the range of 8% to 10% year-on-year each quarter over the same period. This reflects not just top line growth, but continued investments in operating quality, driven by higher clinical complexity and improving case mix and sustained cost discipline across the combined platform. As a result, revenues and operating EBITDA have grown at healthy double-digit rates across all 3 quarters, while operating margins have remained stable above 20%, despite ongoing capacity additions and business seasonality. Supporting this momentum, we continue to pursue measured capacity expansion aligned with long-term demand. Over the past year, we have added 560 beds, taking combined capacity to 10,620-plus beds across 28 cities. Our pipeline includes over 4,000 additional beds, which will take the total capacity to 14,710 beds, through a balanced mix of greenfield and brownfield expansion. This disciplined and balanced approach allows us to scale capacity while preserving capital efficiency and returns. Both Aster and Quality Care have independently demonstrated strong execution across cost management and clinical productivity. Initiatives such as procurement centralization, in-sourcing of key services and strengthening of clinical talent have again supported operating efficiencies as well as margin delivery. This provides confidence in operating alignment and execution discipline ahead of integration as we continue to progress through the merger process. Coming to the update on the merger, a notable development during the quarter was the continued and structured progress on the proposed merger with Quality Care India Limited. The transaction has advanced through the key regulatory and procedural steps to date. Following the receipt of the CCI approval and no objection letters from the NSE and BSE with no adverse observations, the company has filed a merger application with the NCLT on December 11, 2025. As directed by the NCLT, the shareholders' meeting is -- to consider and approve the merger scheme, is expected to be conveyed between February 27, 2026, and March 13, 2026. Subject to shareholder approval, the NCLT will thereafter review the application and upon receipt of its sanction, the merger will become effective. Based on the current process time lines, the merger is expected to be completed in Q1 FY '27. Now having reviewed the trajectory of the combined platform, let's turn into Aster's performance for the quarter. During the quarter, Aster delivered steady and broad-based growth, supported by improving case mix, disciplined execution and continued momentum across its core clusters. A key development during the period was the commissioning of the Kasaragod Hospital, which marked an important expansion milestone and contributed to overall revenue growth. Aster's revenue from operations stood at INR 1,186 crores, representing a 13% year-on-year increase, driven by 10% growth in total patient volumes and a 9% improvement in inpatient ARPP. This improvement was supported by a richer specialty mix, with the CONGO mix increasing meaningfully during the quarter, alongside continued focus on operational efficiency. This performance reflects our continued shift towards complex, high-value care. Oncology revenues grew by 27% year-on-year, with contribution increasing to 11% in Q3 FY '26, which is up from 10% same time last year. The Medical Value Travel segment grew 41% year-on-year, led by higher international patient footfall in Kerala, where MVT revenues grew 64% year-on-year. In our ancillary businesses, the lab revenues increased by 17% year-on-year to INR 39 crores, reflecting continued scale up. At the operating level, performance remained stable despite the addition of new capacity. Operating EBITDA stood at INR 224 crores, up 11% year-on-year, with the margin at 18.9%. Core hospitals and clinics delivered 12% growth in operating EBITDA, with margin of 21.4%, reflecting steady execution across established assets. While reported margins reflect the impact of recently commissioned capacity, the core operating performance of the mature network continued to demonstrate strong operating leverage. If you exclude the newly commissioned Kasaragod Hospital, revenue and operating EBITDA grew by 12% and 17% year-on-year, respectively, with operating EBITDA margins expanding by 90 basis points to 20.2%. This like-for-like comparison and performance reinforces the strength of the established hospital portfolio and the predictability of the maturity curve across the network. Core hospitals and clinics delivered 18% growth in operating EBITDA with margins improving to 22.8%. Excluding Kasaragod, the normalized PAT grew 22% year-on-year, reflecting improved profitability. Normalized PAT excludes impact of provisions related to the recently revised labor code. Sunil will explain more about this later in the call. Within this overall performance, the Kerala cluster continues to anchor stability and profitability, reflecting the maturity and the depth of the network following its turnaround. Inpatient volumes grew 11% year-on-year and 8% excluding Kasaragod, indicating healthy underlying demand. Revenues grew nearly 20% year-on-year, while operating EBITDA margins remained strong at 25.4%, led by cost efficiencies as well as operational leverage. Kerala remains a key earnings and cash generation anchor for the platform, absorbing growth investments elsewhere, while maintaining high operating discipline. The Karnataka and Maharashtra cluster saw a relatively softer performance during the quarter, primarily due to a temporary volume moderation from seasonality, some scheme rationalization that was done and a few clinician movements. Proactive hiring and retention initiatives are underway to strengthen the clinical depth and execution capabilities. With these measures in place, the Karnataka and Maharashtra cluster is well positioned to deliver improved performance and accelerated growth in the coming quarters. Overall, Aster continues to deliver consistent earnings quality and operating discipline, reinforcing its role as a key engine within the combined platform. Moving to CapEx and expansion. Our growth strategy continues to balance near-term operating performance with long-term capacity creation with a clear focus on disciplined expansion and return-led deployment. Over the past year, we added more than 320 beds, taking Aster's total capacity to 5,451 beds as of December 31, 2025. This includes the recent commissioning of new capacity, including Kasaragod, which expanded our India network to now 20 hospitals. Since commissioning, the Kasaragod Hospital has demonstrated a steady and encouraging ramp-up, with outpatient footfall averaging around 400 patients per day, rising inpatient admissions and over 120 doctors onboarded, establishing a strong clinical and operational foundation right from the onset. Beyond Kasaragod, Aster plans to add over 2,300 beds over the coming years through a balanced mix of brownfield expansion and greenfield projects, taking our total capacity to over 7,800 beds. This pipeline is phased and aligned with demand visibility, ensuring growth remains disciplined and capital efficient. We also increased our stake in Aster Aadhar Hospital by 12%, taking our total ownership now to 99%, and we are in advanced stages of acquiring full ownership, further strengthening the operational control and integration within the platform. During the quarter, Aster continued to receive strong external recognition across leadership, clinical excellence and innovation, reinforcing the depth and quality of this platform that we are building. Dr. Azad Moopen, our Founder, Chairman, was honored with the Lifetime Achievement Award by Mount Judi Ventures and recognized as a Visionary Leader in Healthcare at the Elets Healthcare Innovation Summit. At the same summit, Aster DM Healthcare was awarded the Best Hospital Chain of the Year, with Aster RV recognized as the Best Multi-Specialty Hospital and Aster Whitefield receiving awards for excellence in cardiology, pulmonology as well as urology. Aster Hospitals also received top rankings at THE WEEK India Health Summit 2025, with Aster MIMS, Calicut ranked as the #1 Multi-Specialty Hospital, Aster Medcity, Kochi ranked second among Multi-Specialty Hospital and Aster CMI, Bangalore recognized as the Second Best Emerging Multi-Specialty Hospital. In addition, the group was recognized amongst India's Top 100 Value -- Top 500 Value Creators by Dun & Bradstreet, and Aster Digital India received the Innovation, New Initiatives Award at the 24th Data Center Summit and Awards. To conclude, Aster has delivered a resilient and well-balanced performance during this quarter supported by steady growth across the core hospitals and improving case mix, disciplined cost management and continued strengthening of clinical talent and leadership depth across the network. Our consistent approach to operating execution, steady progress on capacity expansion and focused investments in people and systems have further reinforced the stability and scalability of our regional platforms. As we move towards the final stages of the regulatory process for the proposed merger with Quality Care, our focus remains firmly on execution excellence, capital efficiency and building a clinically strong and scalable organization while continuing to deliver consistent operating performance. By deepening leadership capabilities and attracting high-quality medical talent, we believe we are well positioned to deliver accessible, high-quality healthcare at scale and create sustainable long-term value for all our stakeholders. I will now invite Mr. Varun Khanna to take you through the Quality Care performance. Thank you.

Thank you, Alisha. Good morning, and wish you all a very happy 2026. This quarter demonstrates continued growth momentum and value creation from disciplined execution of initiatives launched earlier. During the quarter, we've strengthened our micro market leadership through focused investments in clinical capabilities and infrastructure while maintaining rigor in our approach to bed capacity expansion. Overall performance in Q3 was strong, with revenue rising 17.3% Y-o-Y to INR 1,181 crores and post-Ind AS EBITDA increased 32% Y-o-Y to INR 279 crores. The post-Ind AS EBITDA margin expanded 265 basis points Y-o-Y to 23.7% in Q3 FY '26. The revenue growth during the quarter was driven by increase in IP and OP volume, 8% Y-o-Y for both, improvement in specialty mix with CONGO-T share increasing by 60 bps to 57.6% and a very favorable shift in the payer mix as the share of cash and insurance business rose further by 100 basis points to 80.1%. Total ARPOB increased 12.2% year-on-year to INR 47,000 in this quarter from INR 42,000 in the same quarter previous year, driven by improvements in specialty mix, payer mix and a 3.4% reduction in ALOS to 3.9 days. EBITDA growth also reflects the early success of key synergy initiatives, including procurement, new clinical talent hiring implemented in the first half of FY '26, continued focus on clinical talent recruitment and management, along with the strong ramp-up of the Nagercoil unit launched in October '24, which has already started contributing very profitably in this quarter. During the quarter, the mature units, which is approximately 60% of our revenue, delivered a 12.9% Y-o-Y revenue growth and 18.8% Y-o-Y EBITDA growth, achieving a margin of 32.8%, an expansion of 160 bps over last year. Emerging units, which is about 7% of the revenue, continued to scale up well, recording a 15.6% quarter on trailing quarter EBITDA growth and a margin of 13.3%, reflecting 140 bps quarter on trailing quarter expansion. EBITDA improved Y-o-Y, increasing from a loss of INR 1 crore last year to a profit of INR 10 crores this year for this category. Focus units, which is 29% of the total revenue, delivered a robust 19.1% Y-o-Y growth and 68.1% Y-o-Y EBITDA growth and achieved a margin of 17.8%, representing 520 bps Y-o-Y expansion, driven by sustained emphasis on operating excellence across the business. We continue to draw top-tier talent from across the healthcare ecosystem. And over the past few months, we have built out a strong leadership, bringing a wealth of experience from across the industry. Given our leaders' experience and expertise, we feel well placed as we enter our next phase of growth and excellence in care. We have continuously been advancing our doctor-hiring models in a very structured way. We've onboarded over 100 clinicians across the network during this year. While these initiatives were launched a few quarters ago, this quarter has shown significant progress with the monthly recurring revenue from the newly hired clinician cohorts reaching INR 24 crores in this quarter. Moreover, these new hires have been instrumental in driving a shift towards higher acuity care with our CONGO-T share increasing by 60 basis points to 57.6%. Our commitment to advancing clinical excellence has driven several notable milestones. We performed the first matched unrelated donor, MUD, transplant at KIMS and carried out the first cadaveric transplant in Aurangabad, earning recognition as an authorized cadaveric transplant center. Additionally, our surgical oncology and urology teams at Nagercoil successfully executed a very rare and complex laparoscopic resection of a large retroperitoneal tumor in an 11-year-old boy, demonstrating our commitment to bringing the highest quality of care in Tier 2 and Tier 3 markets. We also reduced our ALOS loss by 3.4% to 3.9 days Y-o-Y. To further enhance our clinical programs, we've committed to invest in advanced future-ready technologies to enhance clinical outcomes and expand the access to specialized care. Through our partnership with Elekta, we are deploying 5 linear accelerators across our network along with the network's first advanced central planning system in oncology. This strengthens clinical decision-making, standardizes care delivery and enables technology-driven collaboration with expert clinicians. In parallel, we are strategically scaling our robotic program through a newly established partnership with Intuitive Surgical. With the planned acquisition of 5 robotic systems, we are the first organization to implement robotic surgery at this scale across the Tier 2 markets. This initiative is our effort to democratize access to cutting-edge surgical care, ensuring patients benefit from the latest advancements in gastro, general surgery and gynae. Expansion continues to be a key strategic priority. We remain committed to strengthening our presence in existing markets and entering new ones through brownfield expansions, strategic M&A and greenfield developments. Our enhanced near- to medium-term growth plan includes investment of around INR 2,000 crores to add over 1,700 beds in the next 3 to 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. Our efforts continue to get recognized in the industry. Some key accolades we received during the quarter include the Visionary Healthcare Leadership Award at the AHPI Annual Conference, KIMSHEALTH, Trivandrum received the Kerala Health and Medical Tourism Award from CII, AHPI conferred the Best Emerging Hospital to KIMS Hospital, Nagercoil. Thank you yet again, and I'll pass it to Ramesh. Thank you.

Thank you. Thank you, Mr. Varun, and good morning, everyone. So I'll take a few minutes to walk you through the performance of each of our cluster, I think, this quarter, and share an update on our operational priorities and team strengthening processes. Let me begin with Kerala, which was a clear standout cluster this quarter and continues to anchor the company's performance. The cluster delivered a strong year-on-year performance quarter 3 FY '26 with the revenue of INR 629 crores, growing 20% year-on-year. Excluding Kasaragod, the revenue increased 19% year-on-year to INR 619 crores, highlighting the sustained strength of the core hospitals and the ability to grow on an elevated base established earlier in the year. Performance during the quarter reflected the continued momentum post recovery with the underlying demand remaining stable. Revenue growth was also driven by a strong growth in MVT revenue growing 64% year-on-year, led by a higher international patient footfall from Maldives, Oman and other Middle East markets. This was complemented by a sustained growth in oncology revenue and the initial ramp-up of the newly operationalized Kasaragod Hospital. Inpatient grew by 11% year-on-year, while the ARPP IP increased 7%, supported by an improved case mix, led by higher share of complex procedures, particularly in oncology. From a profitability standpoint of view, operating EBITDA increased 18% year-on-year, INR 144 crores. Excluding Kasaragod, operating EBITDA grew 28% year-on-year to INR 157 crores, with the margins expanding by 190 basis points to 25.4% margin expansion. This is purely driven by operating leverages across mature assets, continued reduction of ALOS and disciplined cost management across manpower and overheads even as oncology-led growth resulted in a higher material intensity. With the close to 3,000 capacity of beds, a stable leadership structure and a clear expansion runway, the Kerala cluster remains well poised to sustain momentum, compound growth over the medium term and deliver the best-in-class profitability. Turning to the K&M cluster. The revenue grew by 7% year-on-year to INR 383 crores in quarter 3 FY '26, supported by a strong 17% increase in inpatient. ARPP, despite a 9% year-on-year decline inpatient volume, volume softness was largely due to the discontinuation of the state scheme at Aster Aadhar. And a few clinician movements due to the heightened competitive intensity in Bengaluru micro markets, the operating EBITDA grew by 55% year-on-year with a margin of 21.9% despite higher material costs linked to oncology. Furthermore, proactive hiring and retention initiatives are being implemented to strengthen the depth and execution capabilities. With these measures in place, the K&M cluster is well positioned to drive improved performance and accelerated growth in the coming quarter. Turning to A&T cluster, revenue grew by 13% year-on-year to INR 137 crores in quarter 3 FY '26, driven by 4% increase inpatient volume at a 10% improvement in ARPP IP, reflecting a better case mix and a pricing discipline from a profitability perspective. Operating EBITDA increased 7% year-on-year with margins at 13.2% despite increase in clinical manpower cost. However, there have been a sequential margin improvement from 7.9% in quarter 1 FY '26 to 13.2% in quarter 3 FY '26. Overall, the quarter reflects a steady execution across clusters with Kerala continuing to anchor growth and profitability and K&M and A&T making progress on revenue quality and operational discipline. With focused intervention underway and a balanced growth strategy, the platform remains well positioned to sustain momentum and deliver consistent performance in the coming quarter. Thank you. And I will now hand it over to Sunil for a detailed review of the financial performance.

Thank you, Mr. Ramesh. Good morning, everyone. For the quarter ended 31st December '25, excluding our newly launched Kasaragod Hospital, revenues increased to INR 1,176 crores, up by 12 percentage in quarter 3 FY '25. And operating EBITDA has increased to INR 237 crores with a margin of 20.2 percentage compared to INR 202 crores in quarter 3 FY '25 with a growth of 17 percentage. Normalized PAT, normalizing the recent changes in the labor code and post NCI, for the quarter 3 FY '26, is at INR 98 crores compared to INR 81 crores in quarter 3 FY '25, with a growth of 22% Y-o-Y. Similarly, for the 9 months ended 31st December '25, India revenues have increased to INR 3,451 crores, up by 10 percentage from 9 months FY '25. And operating EBITDA has increased to INR 715 crores with a margin of 20.7 percentage compared to INR 613 crores in 9 months FY '25 with a growth of 17 percentage. Normalized PAT post NCI and also the labor code changes, which recently happened, for 9 months FY '26, is INR 298 crores compared to INR 251 crores in 9 months FY '25 and a growth of 19 percentage Y-o-Y. Our PAT for the quarter was impacted by onetime exceptional expenses related to implementation of new labor code amounting to INR 27.9 crores. This includes a provision of INR 26.3 crores towards gratuity and INR 1.6 crores towards compensated absences. Moving to segmental performance. Our hospital segment continued to deliver consistent and strong performance during the quarter. Excluding Kasaragod, revenues grew by healthy 14 percentage Y-o-Y, while the EBITDA grew by 18 percentage, leading to an 80 bps improvement in margins. Importantly, performance was consistent across hospitals at different stages of maturity. Our mature hospitals, above 7 years, delivered 14% growth and 17% EBITDA growth, operating at a robust ROCE of 36.2%. Hospitals in 3- to 7-year maturity bracket recorded 10% revenue growth and strong 28% growth in EBITDA, with ROCE improving by 470 bps points to 25.7 percentage. Our newer assets, which are less than 3 year old, saw a revenue growth of 19 percentage. Turning to our diagnostics business. I'm pleased to share that Aster Labs has successfully delivered a turnaround since the start of FY '25. EBITDA margins have expanded from negative 7.6% in FY '24 to positive 7.6% in FY '25 to 12.2 percentage in YTD FY '26, driven by robust 35% year-on-year growth in external business, enhanced operating leverage and improved material cost efficiencies. This turnaround has translated to a healthy ROCE of 27 percentage, a remarkable recovery from a negative levels a year ago. On the wholesale pharmacy front, we took a strategic call last year to outsource the loss-making part of the segment. While this decision led to a reduction in reported revenues, it has materially improved profitability. For the first 9 months, EBITDA margins improved to 1.8 percentage compared to negative margins in the same period last year. Importantly, this improvement is sustaining with the segment delivering EBITDA margins of 2.2% in the most recent quarter and moving to positive ROCE for the first time. As of 9 months FY '26, our total capital expenditures stood at INR 406 crores with nearly 50% allocated towards expansion projects. We continue to maintain a robust liquidity position with cash and cash equivalents of INR 1,255 crores, while our gross debt remains moderate at INR 631 crores. Additionally, we have given significant improvement -- we have seen significant improvement in ROCE, which has increased by 260 bps from 19.5% last year same time to 22.1%. 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 and hand it over to Puneet to begin the Q&A session. Thank you.

Thanks, Sunil. [Operator Instructions] I would also like to request to all the participants, if you have -- if you can introduce yourself with your name and company that you are associated with before asking the question. If you are not associated with any company and you're an individual investor, you can highlight that as well. Moving on to the Q&A session now. The first question is from Mr. Tausif.

I'm audible?

Yes, you're audible.

This is Tausif from BNP Paribas. My first question is to Ramesh on the performance of Kerala flagship hospital Aster Medcity. We have seen a 20% -- more than 20% growth this quarter. Can you give us more color on this performance and especially how much delta has been driven by the MVT volumes and whether this growth in the MVT is sustainable or not? And the overall Kerala business, are you seeing the volume increase for the overall MVT, or is it just about Aster DM Healthcare?

Thank you, Tausif, for that question. And I'm sure you rightly highlighted about the flagship of Aster. It has really grown well. If you really look at the performance of some -- few months back, we always had the issue of -- sometimes the leadership issue and the MVT growth. So you have rightly pointed out. All this has been taken care. We have a solid leadership there at the ground level. We are able to build on -- add more clinicians to the system. That has also brought in a lot of the top line revenue. And we could -- certain programs, like the robotic program, have taken off very well. In fact, there are months that around 80 to 90 surgeries of robotic program has been done. So the overall performance, consistently, it has been doing around INR 90 crores and above for the last 5 to 6 months. So that's been the performance of the flagship. And since you touched upon the MVT. MVT, it's grown by 64%. So that clearly shows that we are back on MVT. And especially from Maldives and Oman, is what -- our patients are flowing in. I think this is definitely sustainable because there was a temporary setback for these patients not coming back, and I think we have started driving them back, and we have a proper engagement with both Maldives and Omani patients as well. So that's where it stands. And I'm sure it will continue. Flagship will definitely contribute. And other units of Kerala has also started doing exceedingly well, including MIMS, Calicut. And the new unit added is also performing very well, Kasaragod. So entire Kerala cluster will sustain, and you can see a significant growth and with very good margins. It has given 25.5% margin -- operating margins as well.

That's helpful. My second question is on Kerala - Karnataka cluster. This quarter, we have seen occupancy dip to 55% from 60%. Earlier, while you have highlighted there is some movement of clinicians, but can you give us more color in which segment the clinicians have moved out? Have you able to fill in the gaps? And when we can expect a normalized business?

Great. So K&M cluster, as we look at -- let me tell the good news is that the ARPP IP has grown by 17%. That clearly says that we are in a strong footing in Karnataka, especially when it comes to the CONGO-T mix and especially in that, oncology and neurosciences have been contributing very well. And of course, our facility, Whitefield facility continued to contribute 14% of the growth. So it clearly says that we are on a strong footing. Yes, coming to the other 2 units, Aster RV and the 2 micro markets, one is South and one is the other -- Aster CMI in North. Yes, here, as you rightly mentioned, there is -- and now we have been performing with the CONGO-T. Again, I'm talking on oncology, has been doing very well across all the 3 units and of course, transplant as well, in these 2 units. So the market is -- I mean, even though there have been a lot of competition in the market and there is some attrition of clinicians, we are able to replace all those clinicians. And most of them are either intensivist-anesthetist or even for that matter, revenue-generating doctors as well. But if I say, for example, as a CMI, if you have -- if I would have had the pediatric team moving out, we have onboarded some of the best clinicians, best, well-renowned pediatric team on board. So the replacement has also been happening in a fashion that we hire the best of the clinicians on board. So that's where I think we'll be not only replacing, we'll also be adding new clinicians. Way forward, we are -- and the good news is there are some clinicians who have already left us, those also rejoining as well. That clearly shows that we have our mantra, which we said, that we will treat you well. And most of the clinicians happy rejoining as well. That's very good news. So way forward, our plans are to hire more clinicians and to ensure that we have the right clinicians and well-renowned clinicians on board to contribute and have steady growth happening for Bangalore.

Ramesh, just last one on the ARPOB levels for Bengaluru clusters, means have we reached the optimal level of case mix in Bengaluru? And what is the sustainable level of ARPOB level one could see? Whether one can assume INR 75,000 and from there, whatever the industry is, growth of 6% to 7%?

Yes, there is a headroom for growth, as I rightly said, now we -- once we start progressing well with our CONGO-T, which will be our focus for Bangalore as well, the ARPOB would also -- which should move to -- from whatever -- INR 77,000 to furthermore. It can add another 6% to 7% more, is what I foresee in the coming days.

But for a mature hospital, Bengaluru, INR 75,000 to INR 80,000 would be the current level, right, to look out for?

Sorry, I didn't get you.

For most of the mature hospitals in Bangalore, the level would be INR 75,000 to INR 80,000, right?

Yes, yes. It should be INR 70,000, INR 75,000.

Thanks, Tausif. The next question who is asking from Mr. Amey.

Yes. Am I audible?

Yes, Amey, you are audible.

Yes. Congrats to the management for good numbers. So the first question I have on the QCIL front. We have shown really good improvement this quarter on the margin front. Is it driven solely by the QCIL efforts on each of these assets or is there also an impact of synergies which we have started seeing in QCIL?

So, Amey, first of all, thank you. Yes, the numbers look good. Amey, I think the question, as I understand, we do have synergies, I told you previously as well. We do have synergies, but that's not the QCIL-Aster synergies. Those synergies will only play out post the merger, post the regulatory approvals come in. We had -- even in QCIL, we had synergies that played out between KIMS and CARE and Evercare. Those synergies are playing out. We started working on them about a year back, and that's led to a significant upside. We've also had significant business improvements. I touched upon it, but let me emphasize them again. Our payer mix is getting better. We've actually moved to 80-plus percent payer mix now. And just to give you a sense, I think a few years back, this was 76%, 77%. So there's a very significant shift that is happening. Our CONGO-T continues to get -- significantly improved. I alluded to the fact that we've been hiring a lot of clinicians, almost 100-odd clinicians have been hired in the last 3 quarters. The monthly impact of these new clinicians coming on board is about INR 24 crores, which is sizable. And we've been able to restrict any consultant leaving. So the good part is that anything that we are hiring today is accretive. I also gave you a sense by various categories. As you know, that we've always emphasized the 4 different categories that we work on: mature, emerging, underperforming and focus. Our mature continues to grow very well, and we've seen about 18%, 19% kind of EBITDA growth rate on that. The other categories of hiring as well. So wherever we had some challenges, wherever EBITDA wasn't looking good, for instance, we had the focus units where our EBITDA wasn't looking very good and which is why they got categorized in focus unit. And that was a reasonable number, 28%, 29% of the value of our business was coming from that. There, we've seen a 19% growth on the top line, and the bottom line has grown about 70%, which also means it translates into 550 bps of improvement on the EBITDA percentage. And that is largely led by the value growth of the top line growth and the initiatives that we've taken. So I hope that answers your question.

Sure. So basically, the synergies led by the combined procurement or pharmacies, et cetera, that is likely to play out only post merger, is what you mean to say?

Absolutely. So if you are -- again, if you are alluding to synergies between QCIL and Aster, those synergies will only play out post-completion. So there are no synergy impacts of the proposed merger in the QCIL results.

Sure. And what could be the quantum for these synergies? The reason I'm asking this because the next year, if you look at for the combined entity, we are adding almost 900 beds, of which 700 beds are greenfield, where QCIL is only adding 200 beds, which I suppose are brownfield. This number has cut down sizably from last quarter. So the next year seems to be a high greenfield year where there would be losses to recoup. So will these synergies will be able to recoup these losses?

Well, let me take a part of it and pass on the part to Sunil to handle. So we will see some bed growth which is coming in. And the bed growth that we are looking at essentially may not be margin dilutive because a large part of these beds are coming in Bhubaneswar, which is a facility for us that does very well. Bhubaneswar along -- we are maxed for capacity. So we can really take more patients. It's a highly profitable asset for us. And we are also adding to the acuity. We are adding oncology there. So I don't think these will be dilutive on margins, is one part of it. Some of the beds that are getting added in Raipur will also not be margin dilutive. We will be able to enhance, again, acuity there because one of our linear accelerator is coming there. So that too doesn't seem to be a concern, if that's the question. On the margin piece for the blended or the merged entity, I'm going to pass this question to Sunil.

Thank you, Varun. Amey, see, with respect to next year, what we are expecting is that because one of the things which has changed is the Sarjapur Road hospital, right? So what has happened is that it took us some time to get the drawing approvals and all, and construction has just started, basically the interiors and everything. So it should come mostly the back end of FY '27. That's why we moved it to beginning of FY '28. That is to say we'll have only 2 greenfield projects next year. And also, if you have seen the merger date also, right, we are expecting sometime in quarter 1. So for sure, you can be very sure on the -- how -- when the operations will happen of these 2 greenfield because the -- out of the Hyderabad and the Trivandrum, Trivandrum is expected to operationalized first and sometime in the beginning of H2, right? I'm hoping that, before that, the merger should happen. And second is that, is related to the Hyderabad hospital, which is Women & Children Care, and that should happen sometime in the second half of the H2 of next year. So keeping that in mind, the time line, I don't think so it will have a very considerable impact for the financial year. It will be very similar to Kasaragod. It'll be starting only in the second half, and you'll see it's not going to impact you on the full year margins. And also, it's very, very important, Amey, to note that both in Trivandrum and -- like, in Trivandrum or Hyderabad, we have the QCIL assets already there, right? We can get the network benefit, which is a very, very important thing. And Trivandrum, we have called out previously also, it's very, very underpenetrated from a corporate -- private quality beds per se. KIMS has been the leader there, and we're expecting to get the network benefit in Trivandrum, to have a very, very good launch, attract the good clinicians locally, and we are able to drive the ramp. And that's what we've shown -- in a city, which is only 1.5 million, we are talking about ramping up to, within 3 months, 400 patients, OP patients per day, 50 to 60 occupancy of beds in a day. And same thing in Hyderabad also. Hyderabad has got very CARE, has got good assets. And our asset Women & Children is very much strategically situated in the IT geography, and we expect it to do really, really well.

So I just want to add here that as you saw the combined number, more than 50% of the beds are actually coming [ behind ] in nature, right? Plus the synergy element that we have guided that we expect 10% to 15% of EBITDA coming in the form of synergies over the next 2 to 3 years. Putting all of that in perspective, we don't want to guide you on every quarter. I think for us, what's important is do we reach to those 24%, 25% margin threshold in 3 years? Yes. And the answer is probably yes, that, we intend to do that. And I think we see that moving forward. I mean there will be a few quarters that you will see -- because of new capacities coming in, you'll see that excluding those projects, the momentum continues, but there will be some impact because of those new projects coming in, right? But I think it's important to have clarity on that we are looking for a 24%, 25% margin with a sizable expansion in capacity, volumes as well as top line as we move forward.

Sure, sure. Just last question, if I can squeeze in, on Bangladesh, because there has been a lot of concerns from the investor side, how this unit/cluster is performing for QCIL over the last 9 months since there have been a lot of social issues there? And any thoughts on the minority stake as well in that entity?

Thank you, Amey. So Bangladesh has also done well away for us and is in line with our overall performance. So the top line growth for Bangladesh for the year, and I think that is the question that you had, you didn't ask for a quarter, you actually asked for YTD, is at about 21-odd percent. And I've said this earlier, Bangladesh does get influenced by certain external factors, but the fact of the matter is that we happen to be the best place for patients in Bangladesh. And therefore, we spring back our volumes very, very quickly. So yes, that's -- the strength of Bangladesh continues.

Sure. And any thoughts on the minority interest? Are we going to buy back this minority interest, or how is it going to stay?

Amey, thanks for the question. But I think we don't want to give a very leading comment on this. We will keep you posted as and when we have a decision on this.

Thanks, Amey. The next participant who is asking question is Mr. Damayanti.

I hope I'm audible.

Yes, you are.

So my first question is on your Kasaragod unit, which just started. So how do you see the trajectory for scale up of this unit? And when we should be expecting unit to turn cost neutral? So that's my first point. And then I have some other questions on the new units. I'll come back.

Sunil, do you want to...

Yes, Damayanti. So I think I called out on the Kasargod unit. It has done really, really well. As I said, in the third month, because ARPOBs are quite lower being a Tier 3 city, right, so ARPOB was only at 31,000. With that, we are able to ramp up to 50, 55 beds only in the third month with more than 400 patients, right? So losses are drastically reduced to only around INR 2 crores, INR 2.5 crores per month. So if the trend continues the growth what we had in the first 3 months, so I think within the next 1 quarter, I think we should be able to breakeven.

Okay. So you're comfortable about covering up all the cost in short term, right?

Yes, because we already added all the key clinicians. We added more than 100-plus clinicians with more than 40 to 50 RGDs. And also look at the CONGO-T mix there. Already CONGO-T mix for new hospital is more than 46 percentage. That's really good.

Okay. That's, I think, helpful. My second question is on your Women & Child hospital in Hyderabad, where I believe we had seen some shift in the time line, and now you're indicating that to start in the second half. So if you can just update, is like 2Aster time when you are confident about launching the unit? And in preparation of entering that space, what kind of hiring or other preparations are currently underway?

Ramesh, would you?

Yes. So as you see that it's a woman and child project, broad specialty. What I mean to say it is -- sorry, it is a multi-specialty of women and child. Multi-specialty means we are going to have all specialty of women, especially to start with oncology, not only maternity cases, gynic cases. We are also looking at other super-specialization of women alone and also the children, the all subspecialties of children as well. So as far as -- that's the concept of the hospital. So we have -- actually, we wanted to add a bunker now in between. So that's where the time line got shifted a little bit. But nevertheless, as projected time lines, we will be commissioning. And side by side, we are looking into the talent pool as well. And since the concept is all there, we are also looking at which talent can be hired and how to kickstart. So all the plans are in place and sure-shot, we will be coming up at a given time line.

So Ms. Damayanti, just to add to what Ramesh is saying, we've had other women and children at Kottakkal before as well as within Whitefield Hospital that is a women and children block. So we have done this before. The delay has been slightly because we wanted to change the configuration of how many beds are for women compared to how many for children and also work with sort of the QCIL team on we kind of leverage this network that Quality Care has in Hyderabad. And exactly like you said, there's a lot of review happening in terms of onboarding of the right clinical talent for the specialized care for the women's hospital largely in Hyderabad, so the preparation...

Sure. So just want to understand, of the total capacity which you are planning for this facility, how much will be for the pediatrician part and how much will be for women care?

So more than the majority will be for women. So I don't want to give exactly the number because we still have some flexibility, but sort of more than 60% will be for women's care.

Okay. My last question is on the talent movement in Karnataka cluster, which we already discussed. And you mentioned you are preparing some strategy to retain the best doctors in your team, et cetera. So if you can highlight a bit about how the competition is shaping up in terms of getting the best talent as we see more competitors coming into this market, especially Bengaluru? And what are your key strategies to retain your core doctor team there?

Yes. So I think I have again called out, but still, I would like to repeat the same. One, we are as rightly -- we are looking at how to retain our existing clinicians, so that is -- of course, many of them are quite happy and contented with Aster itself. They don't want to because as we go by our, what you call, the tag line, "We will treat you well," they're quite happy with the culture of Aster. So many of the senior clinicians are quite happy to be with us only. So -- and those who have -- and I did mention about some of them, a few of them who are left, they would like to come back. So that is also one good thing what we see. Now further, we are looking at what is the best talent available in Bangalore. We look into the top 1, 2, 3, for example, in the CONGO-T mix we want to see who are the top 1, 2, 3 clinicians and we would like to onboard them, engage them. We are putting all the efforts and shortly, you'll hear some -- that some of the very big, what you call, names would also be associated with us. So that's the way-forward plan. We are trying to get the best of the clinicians on board.

Thanks, Damayanti. [Operator Instructions] With this now, we have next participant, Mr. Kunal Randeria.

So my question is around the expansion plans. And just I would like a few clarifications. So in Kasargod, for example, you have 264-bed expansion, but those are bed capacity, right? So how many beds will be operational? Because you have 80 census beds for now. So when will the remaining come? And how much could -- should be the total operational beds there?

So thanks, Kunal, for the question. See, we said that 264 beds is the total capacity of beds, out of that census beds is approximately 183 to 185 census beds, and balance around 80 beds is noncensus bed, okay? That's a broad break on it. When you talk about the operationals, usually noncensus beds gets operational very quickly because there, we're talking about emergency, daycare and few other pre-op, post-op beds, right? So that's mostly usually get operated in the -- operational in the first year. But mainly, it takes time for the census beds to get operational. As I've said, currently, we are at 80 beds. Now question is that how fast we can ramp up to 180 beds. So what we've always seen is that even when you looked at Kannur previously, because that was the first hospital is in that micro market, we were able to ramp up very, very quickly. If the current trend of quarter 1 does -- and I think within -- very quickly, we should be able to ramp it up, the 180 beds.

Right. So -- fair enough. And for the remaining 750 beds that you're going to add in '27 in Hyderabad and Trivandrum, will the ratio be approximately the same?

See, usually 75% to 80% -- around 75% is the census beds and 25% is the noncensus beds. That's the mix you should keep in mind whenever you're doing your modeling.

Sure. But then, just for a modeling purpose, how many beds would be the census beds coming on stream in FY '27?

See, usually, always we start between 75 to 80 beds. That's the usual start like what we did in Kasargod also. It all depends on the ramp up. Whenever you -- on the operationalized beds, you hit between 60% to 65% occupancy, you start adding 30 beds, right? So usually, what we have seen is that wherever the micro market is very strong, like a Tier 2 city, right, we have seen the ramp up to happen to a complete capacity between -- again, if it's a 500-bed hospital, you're looking at 5 to 6 years. But if it's a micro market as strong as Bangalore, it may take another 2 to 3 years longer. That's a broad guidance, what I can give you.

That's very helpful. And my second question is on Kerala. Now obviously, since the last 1 year, there has been, I think, a massive change in how this has panned out. Earlier, the occupancy used to be very high, ARPOB used to be depressed. So I understand the discounting and all would have come off. But now we are seeing very sharp ARPOB growth. So what is it that's changed? Have you added a lot of specialties in your hospital that's driving your growth? Because for an asset that's been mature and there's been a sea of change in 1 year itself. So I just want to kind of understand how much of this is sustainable?

I'll ask Ramesh to come in after I add a very on a technical part of it. So if you -- Kunal, if you look at ARPOB [indiscernible] growth in Kerala, but the majority of that is coming because of ALOS, right, ALOS of almost 7 percentage. If you remove that ARPP level, A-R-P-P level, it's around 8 to 9 percentage. But when you go to the ARPP IP, that's around 7 to 7.5 percentage. So I don't think so 7% to 7.5% is a very mature growth for a -- so with a 2,500 beds or 2,800 beds what we have today. So even that's what I think -- previously, so we've given that understanding that. Very important to know in Kerala is that Kerala almost north of Kerala, 75% to 80% is a cash patients. Still the insurance penetration is quite less. But as compared to a central Kerala where we have the flagship hospital in Kochi, still the cash patient is almost 60%. Keeping that in mind, you can continue to expect the ARPP -- better not to track here ARPOB because there'll be always a movement on the -- because of the case mix on the procedure mix or the specialty mix changing, we always see ALOS going up and down, better, that's more of a misnomer, better to control on the ARPP. ARPP, I think, in the future, between 6% to 8% is a growth in the midterm. I'm talking about around 3 to 4 years is something you can expect in Kerala, for sure. And the most important thing, why it will also drive is that I told you about the payer mix; in addition to that, you've also seen the competition coming in, right, with competition coming in, a lot of these changes will happen and that will expect you to drive the ARPOB growth. In addition to this, I think Mr. Ramesh called out, we added more than -- across Kerala itself, we added more than 20, 25 clinicians in the CONGO-T plus broad specialties, that's also expecting basically elevating our ARPP growth over a period of time.

Thanks, Kunal. We would like to highlight that we'll be giving preferences to attendees who have not asked a question before. So in that line, the next question is from Mr. [ Vivek Setia ].

So I have a couple of questions with regards to QCIL. So firstly, just wanted to understand the breakdown of your expansion plan for QCIL, right, in terms of greenfield and brownfield expansion year-wise? I see that you've provided for the merged entity, can you provide same for QCIL and along with the CapEx earmarked on a year-on-year basis?

So [ Vivek ], we've given some color, but let me give you the image and numbers. So we're adding Bhubaneshwar, Raipur and Kottayam for FY '27. And that will be 155 and about 190 beds, which is coming in FY '27. Now all of these are existing facilities. So there's a ramp-up of beds that is happening, all of these are census beds. So that is one piece I can tell you. We're looking at FY '28 at about 780 beds. And again, a large part of this is -- actually all of it is brownfield, right? So it's addition happening to our existing properties, and therefore, capacity expansion is how I'm going to put these beds as. FY '29 and beyond is another 750-odd beds. So if that answers your question.

Just to add. In all the expansion that Varun mentioned in QCIL, almost 89%, 90% of the expansion is brownfield in nature that QCIL is having.

Sure. Sure. That helps. Secondly, I just wanted to understand like we've seen the CONGO mix for both Aster and QCIL sort of improving on a quarterly basis. Going forward, on a steady-state basis, where do you see the case mix for Aster as well as for the merged entity going?

So let me take the QCIL side of it. Is that okay, if I answer for QCIL? So QCIL is currently sitting and is able to see 57.6-odd percent. I think the endeavor is to continue doing this. I told you that our investments, so a large part of our investments for QCIL is going to oncology. Oncology is still underdialed when it comes to QCIL. So the fact that we are investing into linear accelerators, the fact that we are adding onco blocks in 5 different facilities over the next 2 years, needless to say that this will enhance the contribution of onco team as we go forward. So I don't think 57.6 is going to be where it is from a mature number standpoint. It's continued to grow. I don't know, I can't really put a number to where it will end up. But my sense is that you'll be mid-60s over a period of time. So I don't want to draw when. But the how is known to us, I don't think when is a fair answer. Is that okay? Maybe I can pass on to Sunil [indiscernible] Aster side of it.

Yes. So just to add to that, Aster side, somewhere mid-50s is what we are having CONGO-T mix. I think it will steadily start growing, as rightly mentioned. Even the new units have started doing exceedingly well in the CONGO-T like the Kasargod one. So we are also looking, I mean, a steady growth. And the focus, as we rightly said, especially in Tier 1 city in Bangalore. And of course, all the Tier 2 and Tier 3 cities also are focused. We are looking at the dedicated cancer care centers. Rightly said, onco can give us a real growth. We are looking at having LINACs and make it as a complete comprehensive set. So oncology would be one major contribution, followed by cardiology. We have started doing a lot of transplants for -- heart transplants as well. Even the new [indiscernible] unit has opened account at Medcity we are focusing. Bangalore is doing exceedingly well in the transplants for heart transplants. So I think the way forward focus would be -- anyway, as rightly mentioned by Mr. Varun, we would be -- we would look at 60-plus, somewhere around 60 to 65 is what we are looking at to achieve the numbers.

And [ Vivek ], one of the other things I have to tell you, maybe I'm just adding to what Ramesh has said, and this is less to do with our network, this is more to generalize our comment. As we get into Tier 2, Tier 3 hospitals, the need for complexity there is very high. Currently -- or given the fact that this is how health care has developed in the country, people have moved to various cities, but the need to travel can be limited if the capability is available, which is where getting more LINACs, which is why getting robotic systems into various cities, expansion of talent that I spoke about earlier, I think all of this is helping us grow our CONGO-T mix. I spoke about the complexity that we are enhancing. I think, adding transplants into Tier 2, 3 cities today is becoming a norm. So all of that will continue to enhance the group's focus and performance on CONGO-T.

That helps. Just one last question with regards to the pharmacy business. It's a 2-part question. Firstly, just wanted to understand what is the size of the pharmacy business for QCIL and its margins? The second part is, in the previous couple of calls, you had mentioned that we are making sort of a strategic exit from loss-making units in the pharmacy business, I guess this was more pertaining to Aster. So I just wanted you to shed some light as to how that's panning out for the merged entity as a whole?

So [ Vivek ], it's very important to know that QCIL doesn't have any pharmacy business. Whatever pharmacy, it's more of IP and OP pharmacy within the hospitals. What we have is 2 parts: One is the wholesale pharmacy. We have wholesale pharmacy, which gets consolidated. Then there is a retail pharmacy, where we have 49% investment where the share of equity gets adjusted at the PAT level, right? That's 2 different parts. Now the wholesale pharmacy level, what used to happen is that -- is the asset which we bought in the local Bangalore market. And in addition to that, we added the second business unit to supply to a retail pharmacy, which didn't work out clearly well due to logistics and reverse logistics and the fill rates and a lot of other things. That is the reason, I think a year back, we tried to move out of that and ensure that we come back to the one which we acquired. And that's where we were able to bring out of the negative margin a year back to a positive margin in the wholesale pharmacy. And going forward also, wholesale pharmacy, we don't expect to do major growth because it's -- you can't expect more than 3 to 3.5 percentage margin considering it's a low-margin business. So we will try to keep at that level. In terms of retail pharmacy, where I said we only own 49% and balance is owned by resident individuals. Here, we have around 203 pharmacies where we have lent our brand to drive the business, right? That's where we have -- brand licensing has been arrangement has been done here. And there, I think it's 203 pharmacies. It's spread over Telangana, Karnataka and Kerala. That's doing well. That's expected to breakeven in another year or 2.

[Operator Instructions] We have next, Mr. [ Harith ].

On QCIL EBITDA that you've disclosed, which is the operating EBITDA, it's around INR 800 crores for the 9-month FY '26 period. So is there a minority share out of this INR 800-odd crores that you can share a rough number is what I'm looking at? Because there are quite a few units of ours where there's a decent minority shareholding like networks as the QCIL's part of it. So any approximate number that you can share?

So approximate minority for QCIL is roughly 20%. You can use that as a base, and we can probably send the exact number separately.

All right. That's helpful. And between the operating EBITDA and the reported post-Ind AS EBITDA for QCIL, is there a major difference? Like we have in Aster a few ESOP items and the fair value movements, et cetera. So for QCIL as well, is there a similar adjustment between operating EBITDA and reported EBITDA?

Well, there will be, but we will share that number with you. I think it's about INR 15 crores to INR 17 crores is what I remember offhand.

Okay. And for the new units that we are expecting in FY '27-'28, which are mainly Trivandrum, Hyderabad and Sarjapur at Aster, and I'm referring only to the greenfield units, what's the kind of EBITDA losses in the first 12 months that we should be penciling in? All these are in different markets and we should be looking at different numbers, but any ballpark guidance will be helpful.

[ Harith ], yes, I think previously I called out, it's very difficult to give you the number because it's all in different micro market, right? Sarjapur anyways it's going to come in the beginning of FY '28. But the next year, we are only talking about in the second half, the first one should be of Trivandrum and second should be the Hyderabad Women & Children. But the good thing is that in both the cases, I called out saying that it's not a new geography. Hyderabad, we're already present, CARE is present, that should help us in driving the growth and attracting the key clinicians. Same is the case in the Trivandrum. But usually, what we've always seen on average, right, again, this is something very broadly for your modeling I'm talking about, it could be anywhere on a monthly average, right, and again, I'm talking about the first 6 months could be within INR 2.5 crores to INR 4 crores per month. Usually, that's a broad burn, which we expect.

And the last one, more of an observation. When I look at the total operational beds at the Aster level, excluding QCIL, the breakup between census and noncensus, the 24% share of noncensus beds seems to be a bit higher than what we typically see at your peers. And then even at QCIL, I think this is a lower number around 15% or 16% of beds being noncensus. So is there a reason -- is there something different about our model or network that's leading to this higher number of noncensus beds because some of our units are smaller and...

Thank you, [ Harith ]. So see, in the industry, there is no confusion when you get to the census beds. We all know that any bed which you try to occupy for the patient on the midnight basis, you take it a census bed. In case of noncensus bed, there's no industry-wide agreed standard. Everyone takes it very, very differently. In our case, it's higher because we count everything. And also see, for example, usually it includes your emergency beds where there is no admission happens over night or say, daycare beds, right? That's one part of it. Third one is also your pre-op, post-op beds. Or we also look at dialysis beds, there are a lot of these things where some of the institutions may count in the noncensus and we institutions like us -- and we have been very consistent over a period of time last 10, 12 years, we've been including it, and we've not changed any formula. But also it's important to note that we're also looking at now going forward because there are a lot of short-stay procedures on the daycare, specifically oncology. In case of oncology, you are more than 50% to 60% of the revenue comes from chemo. And it's a daycare, right? You don't see a patient staying overnight. And we have been converting most of the time, sometimes from census to noncensus beds. So as long as going forward, we are -- and that's also one of the reasons why our ALOS is also going down drastically. You've seen from 1 year back, we've been reducing. Last 4 quarters or 5 quarters, we are going down by more than 5 to 6 percentage. So it's more to do with the short-stay procedures and more daycare patients, which we are using. Otherwise, there is nothing much to talk about that.

[Operator Instructions] The next question is from Ms. [ Nancy ].

Congrats on a strong [indiscernible]. I'm just trying to piece a few things together and trying to understand. So we see that there's a margin dip from the previous quarter. And while I understand that Q3 is generally a slightly weaker quarter for entirety of health care. And some of the margin drag is also coming from the Kasargod hospital that we've started. But still, there's about 200 bps despite the Kasargod hospital adjustment that's lesser from the previous quarter. So I'm just trying to understand that, is this totally accountable to seasonality or are there any other factors that are also playing out here?

Yes. Thank you, [ Nancy ]. See, there are 2, 3 things we need to look into it. So year-on-year, if you remove the Kasargod, right, then you're talking about 22 going down to 20.2 percentage, and when you look at the revenue and all, you're talking about INR 21 crores, INR 22 crores revenue dip from quarter-on-quarter, wherein EBITDA it's impacting almost INR 26 crores, right, if that's the right number, yes. And if you look at the dip, almost 60% to 65% is impacting to the revenue, right? When INR 22 crores revenue comes down naturally [indiscernible] impacts on this one. Second thing, which is really happening is more of investment, which we're doing in the clinical talent, which Ramesh talked about, right? And I also spoke about saying that Kerala itself, if you look at year-on-year, quarter 2, quarter 3, it's the same revenue, right? INR 619 crores, excluding Kasargod, but still the margin, you can see a slight dip. It's because of investment what we're doing. And it's very, very important that an organization like us, which we talked about, again, Ramesh, the CONGO-T mix and growth. We are looking at -- because we got -- we can get a major leverage in how CONGO-T mix we can improve. Year-on-year, we already improved by more than 240 bps, and we expect to go beyond 60. So we are very, very clear that we want to add more and more clinical talent. And that's exactly what's happening. So it's important to note that this is an investment we need to think it as investment so that once the new doctors will come on board, start ramping up over 3 to 4 quarters, you will see the benefits in the volume, benefits in the margin, right? That's one thing. That's the first important thing. Second, also, one thing which has happened between the quarter-to-quarter is that I also told in the last quarter -- in the similar earnings call, the year-on-year, the medical specialties, basically the vector-borne diseases is reduced by almost 70 percentage. And when you look at -- because of which last quarter 2, we have seen a dip of almost 12% in the internal medicine pulmo and children specialty. Same thing has happened in quarter 3 also. In this quarter 3, when you compare to last quarter 3, we have seen a dip of almost 12 percentage in internal medicine, pulmonology and children cases. So that's also another reason why it is impacted. At the same time, what's also happening is that irrespective of this, our oncology's growth is great. For example, when we talk about oncology in this is only in quarter 3, both our cardiology has grown by more than 22 percentage and oncology grew by 27 percentage. Both these specialties carry a high material cost, unlike other broad specialties. That's one of the reason our material cost has gone up from year-on-year, this one, and that is also impacting our margins. But as I said, this is not a structural issue. You have always seen quarter 2, quarter 3, it always slows down. But again, with the investment that we made, you can expect a good ramp-up and steady ramp-up in our volumes going forward.

Thank you, [ Nancy ]. The next question is from Mr. [ Kashish ].

So just 2 questions on the ancillary business. One is on the Aster Labs. So we have seen the margins improve sharply to 12%. So at what scale do we see these margins stabilize and what can we expect going forward? And secondly is towards the wholesale pharma business [Technical Difficulty].

Sorry, [ Kashish ], we didn't get your second part of the question.

Actually, you can just answer...

Let me answer the first one, on the labs. Labs, I think even I've been called out in my speech, how from a negative EBITDA, it is going to positive EBITDA in FY '25. And in FY '26, on a YTD basis, we've already gone to 12.2% margins. And here, the most important thing for the margins to further drive up is important that our noncaptive business, which is currently at 30 to 31 percentage of our Aster Labs revenue, how to drive it more than 50 percentage. So that's exactly the sales strategy, which we are internally working it. And also, you'll see very soon there will be a dedicated labs app we'll be launching, not linked to our hospitals, but dedicated retail app we'd be launching. That's going to really help us in driving the noncaptive business. Once we're able to get an noncaptive business up from 30% to more than 50 percentage, that's when you will see our gross margin improvement in a very drastic way. And if that happens, then you can look at more than 20%-plus margins. And again, the question is all about how fast we move in this one. And again, you've seen the year-on-year growth of more than 20% or 30% in the -- on the external business what we are talking about. I think next 2 to 3 years, you can see more than 20% margin in Aster Labs. And also as I mentioned, labs is always a high-margin business, and we expect to do really well.

Understood. And second question was after outsourcing the wholesale pharma business, how much margin drag has been removed?

Sorry, how much margin?

Drag, drag, drag. Margin losses has been removed from...

Here, what we're talking about is that on a monthly basis, around INR 1 crores to INR 2 crores every month, that's a number which we've removed. Because you know, right, [ Kashish ], in the wholesale, it's a distribution business, actual margin what you get is 8%, but with so much of discounts being given to the retailers and the other trade business, the gross margin further from 8% dips to around 5% to 6 percentage. And with other manpower and overheads put together, the max, you can hit is around 3%, 3.5 percentage, not more than that. And also, do you need a scale to drive this margin. And currently, as I said, on the quarter 3 already, we moved to 2.2 percentage, and we're consistent to continue to keep it positive and try to drive up beyond 3 percentage there. But I think, again, [ Kashish ], I called very clearly we are not looking at increasing this business in a very drastic manner. We want -- because you can always drive this business, but you'll not get the quality business. We want to ensure that what business is that -- it's a high-margin business, what we're getting it, and we don't want to drive the top line at the cost of our margin. So the main idea is to -- even though my revenue dips year-on-year, I want to keep it consistent and drive the margins up.

Understood, sir. And just completing the loop. Do we [Technical Difficulty].

Sorry, [ Kashish ], we're not able to hear you properly. I would request you to please come in the queue. [Operator Instructions] The next question is from Mr. [ Siddhart ].

On the ALOS, one sees a significant difference between the ALOS at QCIL versus Aster. Aster is among the lowest in the industry. Given what you mentioned on onco being largely daycare and that being a focus area for you, should we expect this to stay at this level or even drop further? That was question one. Question 2 was in terms of AI initiatives or technology initiatives, given that a large part of the network is in Tier 2 and Tier 3 cities, right, are there any remote diagnostics or AI initiatives that you've been taking that could possibly keep availability of challenge being a -- availability of talent being a lower challenge in those centers?

Mr. Ramesh, do you want to pick up the ALOS question?

So as far as, as rightly mentioned, it is all about oncology daycare more of a targeted therapies being has been done. So daycare has been improving day by day. Chemo daycare is -- more number of patients have been there in chemo daycare. So that's one impact. Second is we have also not many of chemo procedures, and we have been using a lot of -- I mean, sorry, soft tissue robo also for various other procedures. As sometime back I mentioned places like Medcity we have, we do around 80, 85 to 90 Da Vinci -- sorry, robotic procedures. And of course, LAP surgeries have gone up. So there's a significant reduction in average length of stay. If you ask me, will there be a further reduction? I mean, it's very, very difficult to say, but I'm sure this is the best what we are in. This is that shift which has been happening to a lot of procedural -- different procedures, which we have taken up. I'm sure this is what ALOS will be the best. And the length of stay also to do with your quality parameters like infection control practices and thereby the length of stay is high. So we have one of the best quality parameters closely monitoring by all the chief of medical services. So all these factors have contributed to a reduce ALOS.

Right. And Mr. Khanna, if you could just give us a sense on whether from where you are at 3.9 given post the merger, learnings and synergies, do you expect there to be a reduction?

So [ Siddhart ], thanks for the question. So let me add to this, [ Siddhart ]. I think the reason you see the differential is also the mix of specialties. So what QCIL does in terms of enhanced revenues, enhanced revenue mix is a higher mix on account of orthopedics, cardiothoracic, neurosciences. So when you do a complex work around neuro, orthopedics and cardiothoracic, you will then tend to get a higher ALOS. Our ALOS currently is sub-4 and largely driven by the mix part of it. We will continue to see improvement in this as well as we go robotic and oncology because that will bring in a lower ALOS patient into the system, which is a high-yielding patient as well. So we'll have a favorable impact to ARPOB on account of value and also ALOS reduction, which is inversely proportional to the ARPOB as well, if that answers your question. I think the second part that you touched upon is more on the AI. Is that -- could you be more specific, what kind of response are you seeking?

Okay. So what I want to understand is, given that both at QCIL and Aster, you are essentially looking at a lot more of your capacity being in nonmetro towns, where talent availability, I'm assuming, will be a relatively higher challenge. And in that context, is there any technology initiatives that you're taking where certain operations can be done remotely or what you may in order to reduce your talent dependence. That's really the question? Or any other initiatives in which technology helps sort of improve the ability to service patients in those towns better?

Yes, fair question, [ Siddhart ]. There's a lot happening on tech and AI in our industry. So let me, first, start with responding to your first part of the question in terms of dearth of talent. So I don't think we are seeing dearth of talent at least on the QCIL side and having heard what Alisha and Sunil mentioned around Kasargod. I don't think we're seeing dearth of talent. So these are Tier 2, Tier 3 cities. And I just heard Alisha talk about 120 clinicians in Kasargod and I just told you about the complexity work that we are doing in Aurangabad and Nagercoil. I don't see that dearth of talent, so even for the complex work. And the second part that I alluded to, I mean, today, you can do transplants in 100-odd cities in the country. So it's not limited to the 5, 6 metros that we know of. So that's one. Two, AI, essentially, we are looking at. We are looking at a lot of AI, but not certainly emanating from a need because of dearth of talent. So let me rule that out clearly. We are seeing -- in fact, I spoke about EOP, which is the first centralized solution that our group is looking at on radiation. And that will be AI-enabled, that will be tech-enabled. And the idea to do that is not really again talent deficiency in some of these markets, but how is it that you can scale up the decision-making, make it more speedier, make it more robust, make it more consultative. I think some of those are playing out. The third and the most important part that's playing out for some of these investments is efficiency. We are getting significant efficiency through some of the work that we are doing through AI. For instance, getting centralized call centers, getting prerecorded voice calls now with the consumer before they come into the hospital so that the EMR is enabled with the input parameters and the time between the OPD time can actually be reduced or the consultation time can be reduced. So some of that is being played out. And by the way, these initiatives also help the consumer because the consumer is able to iterate a lot more to a chatbot or a chat or a -- they can choose their medium of communication. So all of that will certainly play out, and that will be to drive efficiency. I hope that answers your question.

Yes. And the last question was on the AP cluster in terms of inpatient volumes, that's sort of been flat for the 9 months. If you could just throw some light on how one should think about that?

This question is -- I'm assuming is directed to Sunil.

Aster. Yes.

Ramesh?

So if you can elaborate a bit here, you would like to know about AP, Telangana performance. Is that correct?

Sir, AP, Telangana, if I just look at the inpatient volume, right? And maybe I will tell you the specific slide that maybe I may have been not looked at it correctly. I'm looking at Slide 40 of your presentation, where in Q3, you're continuing to see the inpatient volume even in AP, Telangana being flat, right, I mean 400 inpatient visits extra. So that's the one that I wanted some understanding on. If one looks at it on a 9-month basis, which I'm seeing, right, there also, it's sort of been slower growth, so...

Yes. So we have especially when it comes to Telangana -- sorry, AP. AP part, we have Vijayawada, Guntur and Ongole as the 3 units, what we have, whereas -- and Tirupati also, we have. Tirupati is doing exceedingly well. If you really look at -- that is 1 unit, which has consistently performed very well and averaged around 130% or 140% of the budget achievement. And whereas in Vijayawada, the -- Vijayawada is a major center for -- especially the case mix is cardiology and some of the clinicians are there. We had attrition as far as Vijayawada and Guntur is concerned. Now we have replaced these clinicians, thereby, the volumes are picking up. Guntur also volumes have started picking up. So you'll find a steady growth coming in the next few months. We have replaced all the clinicians wherever attrition was there. Ongole had certain several -- Ongole also had the competition where a few of the doctor -- clinicians have left the competition. But all have been replaced and Ongole has also bounced back in the last 2 months, achieving their budgets, and volumes are also there has been a significant growth. So it was a temporary setback, and I think we have taken action on that, and you can see a steady growth in coming days.

In the interest of the time, we'd like to take the final question for the management. Mr. [ Shri Narayan ], can you please ask the question.

So my first question was on the material cost. So if we see year-on-year adjusted for wholesale pharmacies, it's up 50 bps. Now how much of it can be attributed to higher material costs coming from oncology and cardiology?

So yes, [ Shri Narayan ], thanks for the question. So on the 50% -- 50 bps what you've seen, I would say, a 60 percentage of that should be attributed to oncology and another 20% is due to neuro because we've been a good amount of DBS cases also. Our DBS cases actually have doubled year-on-year. And mostly on balance, another 20% you should attribute to the robotic procedures also. So we've been doing almost now 300 robotic procedures every month. It's 100% growth Y-o-Y. Out of that, more than 60% of the robotics procedures are the soft issue and balance 40% is ortho. So I think the -- we have been doing a lot of -- because see, we've been treated more like a quaternary care, and we have been a referral center in all our key hospitals like CMI, Medcity and Calicut, where you get a lot of high-end referral patients. That's where we do TAVI, DBS, robotic procedures and specifically oncology. On oncology, 60% of it's med-onc, wherein the material cost usually, it's around 45 percentage. In that, 40% to 50% is my immunotherapy and targeted therapy. Their margins [indiscernible] literally, there's no margins for my -- the materials. And usually for every patient, the average yield goes between 4 lakhs to 7 lakhs. And out of that, as I said, 70% is your material cost there. So the question, what we are now looking is that, again, as I said, whatever the material cost -- because already whatever -- you looked at last 3 years, we have been able to drive the material cost from 25.5 to below 21 last year closing at 20.9. And that has changed a little bit in the current year because of the case mix. But what we are also seeing is that as Mr. Ramesh called out, we have been adding more the clinicians in the other CONGO mix also. So that's going to help us to drive the overall CONGO mix and also ensure that there is a good growth equivalent to what we are seeing in onco. As I said, in CONGO, we've grown by more than 240 bps Y-o-Y. But out of that, when I look at all the CONGO specialty breakup, the highest has been the oncology at 27% only in quarter 3. That is the highest. And second highest would be our cardio and third would be neuro, right? So I expect once we're able to, I would say, neutralize more or less the growth, then I think we will be able to get it down below 21 going forward.

Okay. But then as a target mix of revenue, where do we see oncology in medium term, 2, 3 years? And how would that impact our material costs lower?

So yes, that's another good question, [ Shri Narayan ]. And I think we've been calling out saying that we have been doing very heavy investment in oncology. And oncology has been the fastest grower in all our specialties. Two years back, we used to be around 8%, 9 percentage, now we have moved to 11% of contribution on revenue. And the way it's going, I don't know, another 4 to 5 years, we expect it to be in high-teens, right? That's a growth engine, which we are looking at. But at the same time, that's also been part of our CONGO growth, right? Because on a blended, we would be around 53, 54. And with that, as Varun called out, we are looking at more than 60%-plus, and oncology will be the major driver growth. But I think material costs, we should not get too much worried on the material cost because oncology also gives you a good EBITDA per bed growth, that is something which we need to always watch out for.

If I may ask one last question?

Okay. Please.

Yes. So on Slide 48 of the presentation, there are a few synergies that we have highlighted. So which of these is more sensitive to delivering the EBITDA upside potential of 10% to 15%? So which is your top priority after the merger? Say you want to get this done in 6 to 12 months, first thing which you want to do? And which is, if it is not done, has the highest impact on your EBITDA margin expansion?

If I want to jump in, [ Shri Narayan ], the quick answer will be the material, right? Today, I have INR 1,000 crores purchase as an Aster and QCIL has got another INR 1,000 crores. Imagine bringing the 2 things together and negotiating a INR 2,000 crore procurement and also getting the best of the both worlds on the formula mix. And I think that's a no-brainer. That's going to be the first target, and I think we should be able to do really well on that.

Thank you, everyone. Thanks to the management. There is no more question to the management now. This concludes the earnings call for this quarter of Aster DM Healthcare. I thank the management and all the attendees for joining us today. If you have any other further questions or queries, please do get in touch with us. Thank you, everyone.