Aster DM Healthcare Limited (ASTERDM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the conference call with the management of Aster DM Healthcare for an update on impact of COVID-19 call hosted by ICICI Securities. [Operator Instructions] I now hand the conference over to Mr. Sriraam Rathi from ICICI Securities. Thank you, and over to you.

Yes. Thank you. On behalf of ICICI Securities, I welcome you all to the conference call with the Aster DM Healthcare's management. We have the senior management with us today to discuss the impact of COVID-19 on the industry and the company's business. We have with us Dr. Azad Moopen, CMD; Ms. Alisha Moopen, Deputy Managing Director; Dr. Harish Pillai, CEO, Aster India; Mr. Sreenath Reddy, Group CFO; and Mr. Sumanta Bajpayee, Head, Investor Relations and M&A. With this, I'll hand over the call to the management. Over to you, sir.

Yes. Good day, everyone, and I welcome you all for joining this call to discuss the impact of COVID-19 on our business. I'm Dr. Azad Moopen, Chairman and Managing Director. All of us are aware and worried about the havoc caused by COVID-19 pandemic across the globe. This contagion now reported from more than 150 countries. Governments and policymakers are making considerable efforts towards combating this, and I hope and pray we'll witness some positive outcome from this initiative with minimal mortality, morbidity and economic impacts. It is extremely important that all of us follow suggested protocols to reduce the threat on social distancing, hand washing using sanitizers, et cetera, along with self-induced quarantine if there is a slightest suspicion of a respiratory infection or history of travel outside the same country. Experts unanimously agree that there'll be impact on world economy and various businesses will be differently affected -- essentially affected. Let me give you a status report on Aster DM Healthcare preparedness and plan. Our business was usual -- was as usual until 15th March 2020, but there was minimal impact in the last 1 week. Footfalls in our primary care business, which includes clinics and pharmacies, have remained stable but there has been a decrease in the IP and OP counts in the hospitals. There has been a reduction in the number of elective procedures and surgeries being carried out, by both in India -- carried out both in GCC and in India. There is also an impact on medical tourism in India due to curb on international travel even though we have not seen material impact in our business so far. As the situation is evolving, we are unable to comment on the future impact on the business if the present situation turns worse. One of the positive points for us is that UAE has about 85% expat population who are between the age of 25 to 60 years. The mortality and morbidity of the COVID-19 is maximum beyond the age of 60 for severe cases requiring hospitalization. This provides little comfort as we believe that the impact on health system in UAE will be lower with -- comparatively in that population. As we have more than 50% of our business coming from Dubai alone, this will have a significant mitigation for us. In order to monitor and guide the frontline soldiers consisting of doctors, nurses and support staff, the Executive Committee, which has all the direct reports is to me, along with business heads for the hospitals and clinics, meet twice a week to take stock and provide protocols and procedures. Apart from this, each vertical and institution has their own COVID-19 task force who do the operational duty and implementation every day. We are giving utmost importance for the safety of our staff and have advised those who are in back office to work from home. We also had kept 1/3 of our staff out of regular duty on rotation so as to address any eventuality of the front-line staff getting affected by the disease. Our procurement division has adopted measures to make sure that there is no disruption in the supply chain. Though not connected with COVID-19, there were concerns arising from declining oil prices and its impact on our business. As you may be aware, around 80% of our business is from GCC and only 20% comes from India. Of the overall growth business, more than 60% is from Dubai. As more than 95% of Dubai's GDP is nonoil-based with little dependency on oil, a chance of any major impact on our business is low. However, the overall impact by low oil prices in other GCC countries may have some direct -- indirect effects. We had found that when the oil prices dipped significantly in 2008 and 2015, we continued to have good business and CAGR growth maintained. We hope the same trend to continue during this dip in the oil price as [ origin ]. Another concern is our CapEx cycle and free cash flow. To reiterate, I would like to state that we have placed highest importance on CapEx in our budget for the next financial year. This has become even more critical in this new environment with possible business impact due to COVID-19. Though, initially, we have estimated INR 480 crores of CapEx for financial year '21, given the current scenario, we are reviewing existing projects as well as those in pipeline to reduce the CapEx further by keeping on hold or deferring some of our projects. We are concentrating our efforts to bring efficiency even in our maintenance CapEx, and we'll consider only those expenditures which are absolutely necessary. Our focus now will be to conserve cash as much as possible and reduce debt. To give comfort to the investors, we would like to state that our liquidity position is sufficient to service our existing debts and meet our present commitment. However, as a proactive measure, we are in touch with our bankers to relax some of the covenants in future in case of a worst-case scenario, with significant impact due to the COVID-19 in the next financial year. Our key focus is to become more efficient in our operations by reducing our HR and material costs, strengthen our balance sheet by reducing the receivables and create value for all our stakeholders by having free cash flow and dividend. Thank you for the time. We would now respond to any questions you may have. I will now hand it over to the moderator to open the floor for the Q&A question. Thank you.

[Operator Instructions] The first question is from the line of Jigar Shah from Maybank.

My question is more general in nature about the COVID-19 situation. Can you give us some idea in terms of the testing situation currently in India and what you think would be a more ideal level of testing? And what kind of costs are there for the testing, and are you participating in that?

Sure. Dr. Harish, you would like to answer that?

Right, thank you. Thank you for the question. So many of us from the private sector are part of a national task force, which is called the COVID partnership task force, which is -- which in fact is led by Preeti Sudan, the Principal Secretary of Health, Government of India and senior officers of NITI Aayog, and it has got the entire sectoral leaders from public and private sector involved. And one of our key requests to the Government of India was to liberalize the current testing norms prevalent, which only allows the government-certified centers in the public sector. Thankfully, the government has listened to it and now they have ICMR, which is a nodal agency for this, has issued revised guidelines which also involves private sector. The current guidelines talked about institutions, which are NABL-certified laboratories and which have got molecular diagnostic services available, they may do so. So currently, the regulation says that the logistics of collection of samples and testing is being done, but the final reporting will be still done by a government agency. So this is what is happening. We are anticipating that this specific regulation will possibly be liberalized in the near future as the scenario changes. Thank you.

Yes. Just to add to that, India has about 129 testing centers, mostly in the government and the health centers and all. And the private, for example, we have the 2 places which have got molecular diagnosis. And it's very, very, I mean, minimal when compared to countries like Singapore or South Korea or even China, which had much more testing happening. And so the number of tests have to be definitely increased if you have to know what is in the iceberg phenomena, what is submerged and what is not seen outside. So that is the requirement there.

Sir, just one small follow-up on this. Any idea on the pricing of the test?

Dr. Harish, you have the pricing?

The government has already put a max price range of INR 4,500. And -- in which they have specified test for the -- the initial screening test is INR 1,300, and the balance is for the confirmation tests. That's the current status.

And you are also at that price, I mean, making profit? Or it is at cost?

At this stage, right now, this INR 4,500 is almost at cost price. But there is an opportunity that in the coming 2 weeks the government might supply the kits free of cost. So there is a discussion on those lines, in which there will be a large-scale screening of the population possible.

[Operator Instructions] The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just first one on the quantification of the occupancy, the kind of drop in terms of IP/OP that was alluded in the opening remarks, if you could quantify. For the 9 months in GCC, we were at 55%, 63% for India hospital. Where are you tracking now in the month of March and most of say, Jan, Feb?

Yes. So Sreenath, you would like to take that question?

Yes. Shyam, if you look at like what the doctor said, until March 15, it was more or less normal, except for in India that we had this medical value travel, that was not happening because that formed 5.2% of the total revenues. So that had an impact. But other than that, until 15th, it was more or less normal. But from 15th onwards, not at all. The clinics and pharmacies still -- the numbers were stable or slightly higher. But however, in the hospitals, the OPD and the in-patient both we are seeing a dip. But this dip was very negligible. But during the last 2 to 3 days, we are seeing a drop of close to around 20% on the occupancy level -- on the present occupancy level, we are seeing a drop of close to 20%.

Sreenath, you mean 20% admission, is that occupancy won't -- you're not talking percentage points here. I mean you're saying IP volumes out of the [indiscernible]?

From 55% to what was 55% on an average, that we'll see a drop of close to around -- anywhere around 15% to 20%. It's what we are seeing for the next few days based on the investment next -- yes, next few weeks or whatever, based on the current trends. But that was not the case until March 15. So until March 15, whatever levels we've had, that 55% to 60% growth levels were maintained, but the drop is happening during the last few days.

And Sreenath, this is across both GCC and India, is it?

Yes, it is across both GCC and India.

Got it. Got it. And what explains it apart from the whole medical tourism, you said 5%. Elective procedures are being pushed out. But still, like everything else should still come in, right? Or is it because we are having a higher percentage of elective procedures that's why we're seeing this kind of drop?

Yes. So the thing is that if you see, like what we said, see pharmacies and clinics, the primary care is almost forms 50% of our business. Now over that, we have been seeing, especially on the outpatient side and as well as on the pharmacy side, we have seen an increase. But however, over there, also now it has stabilized. The numbers from yesterday have stabilized, gone back to the normal. But however, in the hospital, that this is mainly because of the fear, because the electric cases, people are trying to postpone their cases. So unless and otherwise required, people are not -- do not want to visit the hospital, so many of the elective cases are getting postponed. And added to that, now what has happened in India because of this lockdown kind of a situation, so people are also not able to -- from other places, they're not able to come to the hospitals freely. So all this is adding to the drop.

So Shyam, just to add to that, this is Alisha. If you look at -- especially in the GCC, a lot of the emergency and trauma have to go to the government. So if you look at the GCC hospitals, almost 85%, 90% of the cases are elective. So when you combine it with sort of general anxiety for the people to come to the hospitals, there is that lowering of numbers, both on the OPD as well as the IP, which is happening in hospital. In the primary care and clinics, what we are seeing is some surge in numbers, but that's mainly because anyone with a cold or cough or fever, they do want to go and try and see if they are eligible for testing. So they do have strict sort of eligibility criteria. Because kits are limited in number, they have to make sure if they're eligible, if they've had any history with anyone who's positive, and then only you can test. So that's why we are seeing increasing number in primary care. But that, too, on specific specialities. So some of these internal medicine and GP departments are seeing a spike, whereas you look at some other department, there is a gap as well coming through.

All right. Very helpful. The second question is on from historical context, Dr. Moopen, Alisha, if you can tell us MERS and SARS, maybe MERS was more in the Middle East. So how did you -- what did you see in terms of the time taken for you to come back to normalcy? Is it 3 months, 6 months, 9 months? Trying to come back to a more normalized state of affairs from a hospital perspective or from your healthcare clinics pharmacy perspective, is there something that you can share to help us navigate this challenging time?

Yes. So MERS and SARS, both these -- even though severity of the -- both these influenza viruses, which belongs to the coronavirus group, were much more, the spread was much slower and there was no pandemic or even like an epidemic. It was very limited. One was in the Middle East, a few countries, as well as the other one was in the South Asia. So -- I mean, Southeast Asia. So the fear of this was very limited. So there was no plant down, there was no lockdown. There was nothing like quarantine, self-quarantine or none of these things you had. So that was much more smaller in the overall -- I mean that fear complex which was created, as well as actually the spread also. But the mortality and morbidity was much more higher for people who were affected. So answering your question, it didn't have a major impact on the businesses at that point of time, which is not something like now, which we felt that there is an impact produced by SARS or MERS. It was not there, actually. So we haven't felt that it has produced any significant impact. So the recovery assets was -- it was business as usual, very limited impact only on businesses in India and GCC. Even though one is the Middle East syndrome, but still it was very limited.

Got it. Last question is on -- I mean you talked a little bit in your opening remarks of nonessential CapEx. Is there certain cost levers? I know a large part of the hospital business cost is fixed, but would there be anything that you could actually, during the interim, kind of tweak down so that you can try and make head margins? I don't think that, that would be the case and I don't think you expected to maintain margins. But the idea, is there something that management is thinking about other than nonessential CapEx, about other operating proceeds?

Yes. So this is -- anyway, this was a work in progress. The 2 levers, which we are definitely looking at is the HR, which is about 50% of our cost and then about 20% of our cost is towards the materials. So this is very actively pursued. And this is something which was the most important levers, which we are trying to address during this next financial year, to bring down the HR cost significantly as well as to reduce the material cost to some extent. So that will be further looked at, and we are looking at ways in which this can be further addressed apart from other areas. Now there are certain departments, for example, which wanted expansion and the CapEx was required in the existing hospitals. So those things, we thought that we could push on that CapEx, apart from the maintenance cap, which is also small amounts which have to go to the CapEx. Even though it's not new hospital, in fact, those things we want to reduce apart from the major CapEx expenditures.

The next question is from the line of Apurva Kumar from Samena Capital.

Two parts here. First, could you tell us a little bit more about within the GCC itself, how has been the reaction for different locations and different hospitals? And second, how would you see -- in the GCC region, are you seeing any slowdown in number of cases, et cetera?

Yes. What was the second question? I didn't hear it clearly.

COVID cost [ question ].

Sorry. In the GCC region...

The second part of the question, I didn't hear it clearly.

Yes. So the question was, in the GCC region, have you started seeing any decline in the number of patients coming in for COVID-19 related test, et cetera?

Okay. So see, overall, when you look at the GCC, even though it is not uniform in all the countries, in most countries, there is the expat population and there is like a population coming from multiple countries. So they all have put on severe restrictions on travel, and they don't want people to come in or go out. So that has been there like in many of the other countries. The -- looking at the impact or the number of cases now, the increase is -- largest increases in Saudi Arabia, and Qatar also is significantly affected. UAE is affected, but not to the level of the numbers which are being published, they are lower when compared to the other country. So we think that this is a phase where it will be now slightly going up before it comes down. The numbers which are being published will be increasing and -- before it comes down, like what I said in the opening remarks or initially in that statement. There is slight protection for the UAE, especially, because of the population. This may not be there in Saudi Arabia or in Oman, where the indigenous population or the locals are much more when compared to the expats. The rest -- this will be more in countries like UAE or in Qatar, where there is a healthy population or the young, healthy adult population who have not been severely affected by COVID-19. So we hope that the impact, even though it may spread and it may go to communities present, ultimately, it can go into that in the Phase III, but the impact on health care systems. See, the whole issue is that how can you flatten the curve? It's very important that it doesn't go into a peak and the health care system is completely submerged in that. You have to flatten the curve so that the number of cases, it is -- over a period of time, if it is spread, then we can take care. The government as well as the private sector together can take care. We hope that we will have that advantage in these countries.

The next question is from the line of [ Ruji Seb ] from [ El Capital ].

I just wanted to understand what is the supply situation of testing kits in India in terms of what are the sources of supply, what is the lead time from supply to delivery? And is there like a demand-supply mismatch in India right now?

Dr. Harish?

Yes, could you -- I couldn't hear the question clearly. Could you just repeat it, please?

Sure. I wanted to understand the supply situation of testing kits in India. What are the sources of supply? What is the lead time between supply and delivery? And is there a demand-supply mismatch given the demand from the 129 diagnostic centers right now?

Yes. So one of the most important suppliers right now in the market for COVID-19 testing is from Roche, which is FDA-approved. And there is a challenge right now because of the demand from various centers. We feel that at this point of time, we are able to manage the situation. But in the coming weeks, it can be challenging. So the government has been notified about it to look at -- to how do we mitigate this supply chain challenge is a big question mark in front of all of us right now.

The next question is from the line of Prakash Agarwal from Axis Capital.

Yes. Just getting things right, what you mentioned was Jan, Feb was more or less as usual. And also until 15th March, it is -- some footfall. Then the business has been affected from 15th March. So more or less, by end of this year or the quarter is marginally softer, but if things continue, it will be more so the Q1 will be more impacted. Would that understanding be correct?

Yes. That is right. Because in the March quarter, you may not -- because the impact of it, what we are seeing is in the last 15 days. And if you are expecting the trend and hope that it doesn't get worse from here on, we don't know next 1 week how it is going to pan out. So yes, so I think -- at least, the way it looks like that quarter 1 could be impacted.

Yes. And just to split the business, so 20% is India business, which is largely out-of-pocket and some insurance. 80% of the business is GCC. And how much would be insurance and government funded, largely mostly, right?

So here it is largely -- if you look at almost 90% of the business, it's insurance. So it is largely insurance. And most of the countries over here also cover the COVID-19 patients under the insurance.

So do you expect something similar to what happened in Saudi where we saw some write-off? Or do you expect some delay in payment given the issues can continue for longer? What is our current assessment there?

See, if you look at -- in Saudi, no doubt that Saudi hospital we have got, of the total business, 40% of the business comes from the government. But this pricing is more or less similar to the insurance companies. Unlike in the past where the government was paying more because of which there was the write-off. So we don't expect any write-off. But if you look at the government business, our government business as such, if you look at GCC, mainly on the GCC side, it only forms 3.6% of the total group business. But if you compare it to the GCC business alone, so that is around 4.4%. So other than Saudi, we don't have much of an exposure in the rest of the geographies. We have got very, very minimal exposure. And we don't see any write-offs from the government because government who would like to take care of the people, and they will continue to pay. There is a possibility there could be some small delay. That possibility is always there. But however, we don't see any write-offs from the government.

And Prakash, just to add to that. I think the delay also, we are estimating, just because now people are working from home, there is reduced work hours. So just processing of claims, we expect that to take a little bit more time than it used to. But otherwise, normal course of business, but just because people have scaled down operations marginally.

Okay. And similar -- do we think similar things for insurance payouts or...

Yes. In insurance also, there is a possibility. Like what Alisha was saying that because even most of them are now working from home, so there could be some small delays. But we are in constant touch with the insurance companies because the need of the hour is that all the hospitals are taken care of because it is very important that the hospitals function to their full capacity to take care of the situation. So therefore, the government is also involved into it to see that there is sufficient liquidity for the hospitals as well. And we have made such request both to the government as well as insurance companies, and they all understand it. And I don't see -- considering all this, I don't see any significant delays from the insurance companies. Yes, for the processing and other things, there might be a few small delays. But what we are also telling them is that instead of processing all the payments and other things, if they can also pay a cut off and the recalculation could be done at a later date because they're also part of manpower and other issues. So therefore, considering all this, we could see some small delays, but not significant delays.

Just to add on to that. I just wanted to just tell you that in Dubai, where we have most of our business, GCC business, it's very broad-based. It's not that it is just 5 or 10 insurance companies. Even for 80% business coming from about 10 insurance companies, there are about 20, 25 insurance companies. Whereas Abu Dhabi is different. There, it is -- a large part of the business is the insurance company. So the risk of the payment getting delayed, for a large amount of payments getting delayed, I don't think we are not anticipating that.

Okay. Got it. And lastly, you mentioned about in the last 1 week or so, we are seeing some decline in footfall, 15% to 20%. So it would mean, this segment, the Medcare, Aster or the Access, which part of the business is getting more impacted?

So this will be more in the area of the hospital, which means the Aster clinics and the Aster pharmacies, it won't be that much impacted because it's an outpatient business, and people are coming because they are worried and they want to get treatment from docs and to buy medicine. So that part is not too much impacted. Whereas, in the hospital, both in the Aster as well as Medcare, but more so in the Medcare, there is a reduction in the number of procedures and IP and all. So the impact will be a little more on the Medcare and a little more on the hospitals rather than the clinics and pharmacies.

Can we invite the next question, please?

Hello? Are we connected, Sumanta? Or... [Technical Difficulty]

Yes, we are connected. We are connected. Sanford? I think Shankar's line is slightly difficult to get to. Let's take the next question from possibly, Apurva or Harith.

The next question is from Shankar from HSBC.

Yes. I have just one question. Is it the health authority that have asked you to certify the beds for COVID, either in India or in GCC, that's what I was curious?

Yes. Can you please repeat the question? I didn't hear it clearly. If you can just repeat, please.

Have the health authorities asked Aster to certify beds for ICU for COVID-19 in case it increases, in case the infection rates increase in either India or GCC?

Yes. Yes. So this is something which the authorities have requested us. It's not that there is a mandated number of beds to be earmarked for this. But we also have said that we'll cooperate when there is a requirement. Initially, there was a decision by the Dubai health authorities that all elective procedures have to be stopped. In fact, we got a notice. But beyond that, we represented and they immediately lifted that ban or -- I mean, they allowed us to do the elective procedures, install something else to do that. So at that point, it was mentioned that we have to reserve some beds in case of requirement, which will be, say, 15%, 20% is what they have roughly indicated, even though they haven't given compensation for patients who are coming with COVID to be transferred from the government sector to the private sector, so which we are doing. In fact, we have got some cases which are transferred to our hospitals in GCC. In India, again, what is being discussed, even though there has been no directive is that the government hospitals, including the medical colleges and all will be the COVID centers in Kerala and Karnataka. And there will be -- the private hospitals will be asked to take the cases from the government at a reduced rate or whatever rate basis, which may be something like a CGHS or whatever, they haven't disclosed that, for taking those cases for treatment, that is a non-COVID case. This is what has been unofficially told, but not officially indicated.

The next question is from the line of Apurva Kumar from Samena Capital.

Just a follow-up. How -- what has been the impact of the crisis at NMC on your businesses, or generally the health care businesses in Middle East?

Yes. So the NMC is a very unfortunate thing to happen, and there is -- actually, it doesn't directly impact us. We were having some of our supplies coming from the NMC, their trading division, that is a direct contact request, which is continuing, and we are continuing that relationship. But from the point of view of the other businesses, there is no connect with that. But there has been a perception about the GCC about something going wrong and all, which some of our investors have asked us. But we luckily have been having everything very transparent, our debt level of our promoter funding, which we don't have. There is no promoter funding actually. So these were the 2 major issues, which we have clarified. But apart from that, there is actually a lot of doctors from the NMC who want to, I mean, go to places which are more stable, which case-to-case basis, we are looking at because we also require doctors for our hospitals and that maybe something which will happen as we go forward.

Is there also a possibility of you considering taking over some of the hospitals that NMC has here?

This is not something which has come so far. The NMC hasn't decided what to do with their assets and all. But as we go forward and if there is a model which we can adopt where the funding also is required, or if it is something like an operation management and all. This is something, which we can't decide, but that is something which may have an opportunity come in the next financial year, and we will be addressing it as it happen there.

The next question is from the line of Agraj Shah from Tata AIA Life Insurance.

I would like to know what is the status of private testing in Dubai and GCC overall. So is the private sector involved in conducting COVID tests over there? Or it's largely limited to the government hospitals?

Yes. So the testing is limited to the government sector now. The government is doing that, and some of the private labs have been allowed to do that, but not the hospital centers. So it is mostly concentrated and the last part of it is done by the government.

The next question is from the line of Harith Ahamed from Spark Capital.

You mentioned in India, and most likely the GCC, will see around, obviously currently around 15 or 20 percentage point decline in occupancy. Can you give some sense of what kind of impact we'll see on the ARPOBs, especially given medical value travel comes at higher ARPOBs, and we're seeing a complete hit there. So should we be expecting a significant decline in India -- in their hospitals' ARPOB if the current situation continues?

Yes. Dr. Harish, you would like to take that question?

Yes. Since this situation we are only seeing from the 15th of March, I don't think there will be a significant difference in ARPOBs because most of our network hospitals are large corporate care centers where the ARPOBs are any way high. It's just a marginal difference, all that what we expect. Things could change over the next few weeks, so we have to wait and watch the space.

Okay. And can you help us understand what is the role of private hospitals such as yourselves in the testing area, testing part in India? Are you allowed to collect samples? And there's been some revised protocols over the weekend, so...

So as we mentioned before, the government, through ICMR, has revised its guidelines to permit NABL-accredited private labs who have molecular diagnostic infrastructure to commence testing. We are not allowed to report. The logistics are put in place where if we can receive samples, we can test it, but the final confirmation will have to come from a government-approved center. So that's the current process. But almost every day, there's change in regulation. So I expect this will also change as we speak.

So it's not just the list of labs that was published around 65 NABL-accredited labs, 5 in Kerala...

If the total number of COVID-positive cases increases dramatically, which is what most people are fearful of, then they will have to make further change the guidelines to increase, even non-NABL-accredited labs who have molecular testing infrastructure to start the process.

Okay. But that's not the situation now? Or are you like you are expecting it to get there? Or in case the number of cases drop, or even the labs outside this list of 65 will be allowed testing there?

Correct.

And then one question on GCC business. I think Dr. Azad mentioned in the opening remarks that, given the economy, is not very directly dependent, but there's a lot of indirect correlation with other oil-dependent economies. So based on your experience from previous cycles, when oil prices corrected sharply, how has been the impact in Dubai, both in terms of volumes as well as receivables, specifically with respect to Dubai?

Yes. In fact, we have faced this issue in Dubai where we feel that there is -- this must be growth or there is receivables impact or anything. The only place where we face this was in Saudi Arabia, where we had a significant impact to government. Obviously, government's income went down in 2015, 2016 time. There has been this -- I mean, the government cutting the cost and the -- overall, we have to take our cut on that. So that is the only place where we received government exposure and we -- last December we had there, which we have incurred in fact, we have bought that business. So that's the only place. But in Dubai, assets, we don't -- we haven't found, and it's unlikely that it will happen with us dependent on oil. Directly it's almost nil. And indirectly, it's there, but still we think that it is more of -- I mean, a lot of other businesses, which will have an impact there.

Right. And then on patient volumes, do you typically see a lesser inflow of patients that come from other GCC countries, which are directly dependent on oil inventory cycle...

The impact -- the thing that here, we don't get too many patients coming from other GCC countries or other Eastern countries. The amount of medical value travel happening into Dubai, even though Dubai is a good destination for developing that, is very low because of the high cost. Because the cost here will be as much as they going into a Western country and people don't travel into Dubai for having medical value travel, except in some of the situations like cosmetic treatments and all. So it is very minimal that we will have an impact like people coming from other countries, not coming here and the business going down. That's not really there, correct. I mean this is an impact. But here, I don't think that's going to be an impact.

The next question is from the line of Tushar Manudhane from Motilal Oswal.

Just on the diagnostic part, firstly, like if you can let us know the number of tests you can do per day and the number of kit that are available currently for the India hospitals.

So I don't have an objective number at hand. But for example, our Calicut hospital, which is an NABL-accredited lab, and it has a full-fledged molecular diagnostics, in the past, H1N1, the swine flu epidemic, we did manage quite well. So we have adequate kits right now to do the required testing. So that should not be an issue. We are also trying to expand molecular diagnostics to our Kochi facility, which is anyway an NABL-accredited lab. We're also upgrading the molecular diagnostic services there. So that process is on right now.

Good. Anyway -- because of this lockdown, are you seeing any disruption in terms of availability of equipments or medicines?

Actually, not, at least where India is concerned, because of the proactive measures of the government of India to ban exports of essential supplies, there is enough stock available within the country. But there are some feedbacks from manufacturers that some input material costs have gone up, mainly for this, what we call a 3-ply mask and sanitizers. So this is something which we have also in the task force, which we have national task force. We have also sensitized the government towards challenges being faced by the manufacturers. At this point of time, we don't have any short supply for anything.

Got it. And just with -- so both on India as well as GCC business, with the reduction in OPDs and to some extent, IPDs as well, would that have impact on the pharmacy business as well?

Yes. So the pharmacy business, in fact, what we have found is that it has not been impacted too much. If you look at in the last -- even in the weeks where we had an impact on the hospital business, the pharmacy and clinic business has increased because -- or at least it is neutral or slightly more when compared to the previous week. So I think that is not a concern because people -- pharmacy is the only thing which is kept open, along with some provision stores and all in some of the countries. So that's not going to have a major impact because it is coming from the outpatient department. So major impact is going to be the elective procedures in the hospitals, which people will try to pursue.

Got it. So this would be due to the stockpiling of the medicines, the initial higher offtake of the medicines from the labs. But with this patient low itself reducing, and if that continues for another 15, 20 days, then will that have any impact on the pharmacy?

Not really. We don't keep too much of our stock. Our revolving stock is not a very high volume. There'll be some items which are stored for -- specifically for this purpose. But I don't think that's going to have an impact on our inventory or on our overall working capital. I think it is manageable, and it is not something of a concern.

So Tushar, to add to what doctor says, we don't see any major block unlike the provision items where people are hoarding. So at least on the pharmacy side, we are not seeing such kind of hoarding. So what is required is not what people are buying because they're anxious and other things, they are buying something more. Maybe what would happen is that in the coming days that will taper down, which is already which we are seeing that tapering down happening. But however, the occupancies where we are concerned, we don't know which way it's going to go. Whether the occupancy levels in the inpatient, whether it is going to increase substantially because of the COVID patients, or whether the elective cases are going to fall from here drastically further. So these are some certain questions which we are not able to answer. Because every day, it is changing. So what we are talking today about a 20% drop in the occupancy could be anything maybe tomorrow, day after tomorrow. So we don't know whether there'll be a surge of patients or whether there'll be a drop of patients.

But just also to add to that, I think one of the things we're seeing in the pharmacy is there is increased sales for things like vitamin and so just immune boosters and things like that. So some shifts. So while maybe because the OPD has come down, there's a reduction as far as the pharma sales is concerned. But then there is an increase on other items such as multivitamins as well as sanitizers and all the other things that people are kind of hoarding on.

Are there any more questions? Two more? Okay.

Sanford, are you there? [Technical Difficulty]

So I think there are 2 more questions.

Two more questions are there, that's why we are not discontinuing the call. He's connecting. He's reconnecting, sir.

The next question is from the line of Apurva Kumar from Samena Capital.

There is recent news that the Indian government has allowed 100% initiating health care businesses. And there was a follow-up saying that Aster is in process of obtaining approval for getting 100% stake. Could you just update us on the status of this process?

Yes. So we have almost completed that and there is positive over for Dubai for both our -- I mean both our hospital, clinics as well as the pharmacy business. So large part of the business is already completed. And even in geographies like Oman and all where we had this opportunity, we are in the process of getting it done. Saudi anyway was 100%. Bahrain was 100%. The only place where it may not happen is in Qatar. So that process, as we promised, we thought that we'll be able to complete it by end of this financial year. To a great extent, it is done and dusted. There will be something which is left like in some of the Emirates of UAE, where the process is going on.

So right now, what is pending is Medcare vertical that is pending and pharmacy vertical is pending. That is mainly for the reason is that some of the government offices are -- they have not been working. So if they start working, I think by the year-end, we should be in a position to complete even week 2.

The next question is from the line of Chirag Dagli from HDFC Asset Management.

Sreenath, anyway, Q4 is a very strong -- is the strongest of the 4 quarters for us. You're saying business has been as usual since 15th of March. There shouldn't be too much of a change to our full year outlook, right?

See, that is what we are expecting. But this 15 days, if you look at -- there has been -- right now, we are seeing a drop. Now how is this going to pan out in the next week also matters. If this drop is going to become much higher, then definitely, there could be an impact, but it will not be a material impact if you look at the full quarter. So definitely, there will be a drop because to what has been happening around because we had an impact of [ MVT ] in India for the full month. And last -- from 15th onwards, we have been seeing that impact. So definitely, there'll be an impact, but it may not be a significant impact.

And in the summer months, when things would probably aggravate a little more, anyway, you are not expecting a lot of business. Is that understanding right?

Yes. So the summer months, at least in the GCC, for us, quarter 1 and quarter 2 is low. So we don't know how that is going to pan out this time around because generally, quarter 1, the expatriate used to go out to their home countries, mainly for the summer vacation. In case they are staying back, then there is a possibility that we may do better. But we also don't know. Once things be locked down and other things are listed, there might also be a situation where many of them would like to go back home. That possibility is also there, keeping our fingers crossed. We'll need to see how it's going to pan out. But generally, quarter 1 and quarter 2, for us, these 2 quarters are low quarters.

Understood. Understood. And how is the Saudi hospital down in the fourth quarter, sir?

So Sanad -- I mean, it's doing better than it was in the summer months. I think we're seeing some recovery, still in single-digit margins. That's how we expect it to close this year. So last year, it was just around breakeven. So we expect some single-digit margins for the year-end close. But there's been at least positive traction in terms of the feedback from patients. I think one of the biggest issues we had with that unit was there was a lot of negative feedback in the initial years, because it used to be just a long-term care facility and service levels were not really up to the mark. So we're seeing a positive movement as far as service levels, and that patient feedbacks are becoming much more positive. So hopefully, over the next 1 or 2 quarters, we will start seeing that impact on the business with increased footfalls as well.

Q4 should be stronger margins than even the high single digits, right, Alisha, given that -- I mean, it should be the strongest of sales?

For Sanad? Yes. I mean in all the GCC countries, your quarter 4 is going to be, yes, the strongest one. So Sanad including.

The margin will also be better in the fourth quarter?

Yes, yes. It should be.

Understood. Understood. And the last point, sir, if you can just throw some light on Dubai, there is an understanding that the virus sort of does not survive high temperatures. How -- do you subscribe to that view? And what is it that you've seen in Dubai or in other GCC countries?

Yes. So there has been this theory or postulation that this virus survival is less on hot weather. And this is, to some extent, it's also evidence-based because if you look at -- this has come in the 30- to 50-degree latitude countries mostly, even though there has been exceptions like in Singapore and South Korea and places like that, where -- but the impact has been maybe due to the management by those countries or by the weather also supporting them. Anyway, it has been more in the temperate countries. And it has been much less when we look at the Indian subcontinent or in the Africa, or for that matter, in the Middle East. So the -- except Japan for -- that's, again, a little colder when compared to the Middle Eastern countries where we are operating. So there is some amount of -- some circumstantial evidences that this survives more in the winter. And if you look at I mean colder weather. If you look at the -- traditionally, if you look at the influenza, which has come even earlier years, traditionally, this was coming during the fall of winter, which means that this is surviving more in the colder weather. So as the temperature increases in the Middle East as well as in India and all, there will be some partial protection is what we are seeing, which will have a positive or it will at least, it will not go into a stage where other countries have something now. We hope that this will be some amount of protection.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

Sir, in India, do you expect any impact because of COVID? And to what extent?

Like I mentioned before, it's only from 15th of May, and specifically from the Prime Minister's address to the nation, where he had asked people not to crowd hospitals and also requested citizens of the country to postpone elective procedures. So that has -- we can see that impact in Indian hospitals, both in OP as well as in elective surgery. At this point of time, our hospitals -- we have 13 hospitals, they are all in touch with district administration and following guidelines of the respective governments. The lockdown itself is having an impact because naturally, movement in and around cities have been totally blocked out. So that also impacts business. But at the same time, we can see there are ICU admissions because emergency patients still have to come. So things like an acute MI coming for cardiac procedures, trauma cases, other ICU admissions, those are continuing as before. We don't find any changes in that. We can't predict what will happen in the next few days, so we just have to wait patiently and see the evolving situation.

Thank you. Ladies and gentlemen, that was the last question. I hand the conference over to Mr. Sriraam Rathi for closing comments.

Yes, thank you. I thank the management of Aster DM Healthcare to provide us this opportunity to hold this call. And I hope the call was useful for all the joiners. Thank you so much.

Thank you very much, sir. Ladies and gentlemen --

Thank you. Thank you very much. Thanks a lot.

Thank you.

Thank you.

Thank you.

Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. Thank you for joining, and then you may now disconnect your lines.