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

Good morning, everyone. On behalf of ICICI Securities, I welcome you all to quarter 1 FY '21 results conference call of Aster DM Healthcare. We have the team with us today, represented by Dr. Moopen, Chairman and Managing Director; Ms. Alisha Moopen, Deputy Managing Director; Mr. Sreenath Reddy, Group CFO; Dr. Harish Pillai, CEO, Aster India; and Mr. Sumanta Bajpayee, Head of Investor Relations and M&A. So I'll hand over the call to the management. Over to you, Dr. Azad Moopen.

Good morning, everyone, and thank you for joining today on our quarter 1 earnings call. As you are aware, we are in the midst of the greatest pandemic mankind has ever witnessed in lifetime. The peaking of the pandemic is over in GCC countries where we have significant operations and we sincerely hope that there won't be another wave. Most of the GCC countries have lifted the lockdown restriction and life is coming back to normal. Our businesses also are limbering back to normal after significant impacts in the month of April, continuing to extend to May also. However, the situation is still alarming in India, which saw its continuing in the whole country and the large number of cases being reported as we speak. Overall, the business was significantly affected because of the reluctance of the patients to come to health care facilities. There has been a change in this in GCC countries with more people approaching the hospitals for elective procedures. In the beginning of quarter 2, it has further picked up and we see a positive momentum and hope that the worst is behind us. In India, however, due to the record number of cases being reported, the patient footfalls in hospitals have come down, and many of our facilities are -- and many of our facilities are accepting COVID patients, both from general population as well as referred by the government. Due to obvious reasons, medical tourism business has come to a standstill, affecting the overall revenue. We hope and pray that this surge shall soon be over and there will be a normalcy in the country's population in the mortality and morbidity with business returning to normalcy. There has been a gradual recovery in the business towards the end of quarter 1, which we are seeing continuing into quarter 2 in the GCC. We know that this is unpredictable, but hope that we are over the hill. During the quarter 1 for year 2021, we posted a revenue of INR 1,761 crores with a decrease of 13% compared with the same quarter of last financial year. The revenue from GCC was INR 1,462 crore and for India, INR 299 crores. We have made an EBITDA of INR 133 crores, with a decrease of 36% compared to the quarter 1 of previous year. Our group CFO, Sreenath Reddy, will take you through the details of the financial performance for the quarter and the financial year. We have continued to give highest focus on controlling the operating expenditure which is one of the most important levers under our control. There have been several steps adopted to reduce the number of employees as well as HR costs, which has resulted in a positive trend regarding the manpower optimization. During quarter 1, we have significantly reduced the HR cost by around 15% compared to last financial year. Even though we are focusing on material cost also, with increase in requirements of PPE and various disposable, it was not possible to bring it down in the quarter, but we hope that we shall be able to control the overall material consumption during the financial year. Aster Labs in India has been established serving the population, especially in the area of PCR testing for COVID, conducting more than 14,000 tests during the period. Two of our labs in Bangalore and Calicut have been accredited by ICMR for doing the RT-PCR test. Aster Labs team is concentrating in B2B business by entering into MOUs with hospitals and corporate. We hope to roll out B2C business in a potent fashion once the COVID pandemic subsides. We also have been focusing on telehealth platform with 587 of our consultants enrolling on the portal for departments like the aforementioned gastroenterology, endocrinology, dermatology, neurology, cardiology, et cetera. Another important area where we are focusing to provide service and the additional revenue streams is Aster@Home, which is the home care division, which is already very active in Kerala. Despite the uncertainties, we are continually monitoring the situation and taking initiatives to address the clinical and business assets created by COVID-19. We have been able to tide over the impact of COVID-19 in quarter 1 without adding any cash flow issue because of the proactive approach, along with prudent financial management. Let me take this opportunity to appreciate the doctors, nurses, paramedics and support staff who are the frontline soldiers in the battle against COVID. I also recognize the business leaders and other staff who have made it possible to have a sustainable business through their hard work and commitment. I now request the group CFO to walk you through the financial numbers. Thank you.

Thank you, doctor. Good morning, everyone. During the first quarter of the current financial year, we had a growth significant impact across our different business segments in all the geographies we have presented. The initial 2 months was impacted revenue by COVID but there was a recovery from June onwards. And in terms of liquidity position, we are adequately funded and are repaying a long-term loan in the GCC, as per the existing schedule. In India, we have taken the benefit of deferring the [indiscernible] per our guideline. Also, we have sufficient cash and working capital limits to support our existing operations. In July, we have witnessed positive momentum in our business, primarily driven by offsetting segment in GCC region. Also, we have taken some additional hotels on short-term basis to accommodate and cater to the needs of COVID patients which generated additional revenue for us during this quarter. Now let me share the financial numbers for Q1 of the FY '21. In Q1 FY '21, we have registered revenue from operations of INR 1,761 crore, which is a 13% drop on year-on-year basis and corresponding constant currency drop is 19%. This reduction of business is due to the negative impact of COVID and the lockdown import during this year. As Chairman briefed in his opening comments, we have managed to reduce our manpower cost, rent, traveling expenses, and advertisement and promotional expenses, which helped us minimize the impact. However, material costs have gone up due to short supply of medical and purchase of PPE. We have reported EBITDA of INR 143 crores, which is a 36% reduction on year-on-year basis and corresponding constant currency reduction is 41%. EBITDA margin in Q1 FY '21 was 8.1% as against 7% in Q1 FY '20. We recorded a loss after tax of INR 83 crores for Q1 FY '21 mainly due to lower revenues during the quarter. On the basis of geographical performance, the revenue in GCC has dropped by 12% on year-on-year basis to INR 1,452 crores in Q1 FY '21. The revenue in India has reduced by 19% on year-on-year basis to INR 299 in Q1 FY '21. The EBITDA and GCC has reduced from INR 191 crore in Q1 FY '20 to INR 130 crores in Q1 FY '21, a drop of 32%. The EBITDA in media has reduced from INR 33 crores in Q1 FY '20 to INR 13 crores, a reduction of 61%. Coming to the segmented performance, the revenue in GCC Hospitals remained constant in the quarter when compared to the same quarter of previous year. EBITDA decreased by 5% on year-on-year to INR 502 crores in Q1 FY '21. The EBITDA margin decreased from 15.6% in Q1 FY '20 to roughly 0.9% in Q1 FY '21. The revenue in GCC units was at INR 356 crore in INR Q1 FY '21 a reduction of 26%. The EBITDA margin dropped to 4.3% compared to 15.1% in the same period in the previous financial year. For pharmaceutical GCC, revenue has dropped by 11% to INR 482 crore, and the EBITDA margin at 9.8% in Q1 FY '21 compared to 7.5% in Q1 FY '20. The revenue in India offset a continued drop by 19% to INR 289 crore in Q1 FY '21, and the EBITDA margin has also dropped from 10.3% in Q1 FY '20 to 5.9% in Q1 FY '21. One point that I would like to point out is that we have returned whatever we are discussing earlier is for [ 3 ] years, 1 and 6 impact. Coming to the balance sheet. The group's net debt stands at INR 2,505 crore after 30 June 2020 which is a reduction of 268 crores when compared to March 2020. The break up of debt stands in India at INR 338 crore compared to INR 338 crore as of 31 March 2020, and the GCC net debt stands at USD 290 million compared to USD 324 million as of 31 March 2020. On that note, I conclude my opening remarks. We would be happy to give you our perspective on any question that you may have. I would request the operator on this call to open the question-and-answer session.

[Operator Instructions] Our first question is from the line of Shyam Srinivasan from Goldman Sachs.

My first question is on the GCC specifically. Like Sreenath was saying, hospitals have -- revenue have remained flat. But clinics and pharmacy seems to have brought the brand of -- there is any outpatient link, whatever slowdown. So how are things now improving in July, August for the clinics and the pharmacies, specialty? Especially the clinics, I think we've been going through this restructuring for the last couple of quarters based on the customer segmentation. So if you can give us an update on that as well.

Sure. So Dr. Moopen here. So this is one area which naturally got affected because of people's reluctance to come for anything into the clinic. So even pharmacy, for that matter, was slightly affected, but not to that level. So we have been going through, like what you said, the significant restructuring in the area, where we have now reduced the HR costs significantly. We are putting a new HIA system for making the insurance and related matters much more quicker. As well as was in leadership change also, which is happening now. So now, the clinics and the pharmacies were managed together by one of our business set. Now we have changed that. Clinics are now directly aligned with the hospitals and the hospital CEO in the UAE is taking care of the clinics also. So there will be a significant dip alignment happening due to that. And we thought that this will help our situation movement as well as the movement of the staff, which we have realized of late. So answering your question, we hope that the clinic in the third and fourth quarter should be looking much lighter when compared to the first, second quarter or even the last year.

So doctor, just following up on this. So last year, we had about 16% margins in clinic city. Those kind of margins can be arrived at over time, obviously, but we think the bulk of -- how much of the restructuring is still pending? And I remember there was this issue where, because of insurance-led, that Aster patients were actually coming into the higher-end clinics, right? So there was that issue of branding as well. So if you can have that thing sorted out as well?

So there is a struggle in the market regarding the clinics, especially in the mid and lower segment. If you look at the population movement also, during this period, what has happened is that there has been a movement of people in the mid and lower segment of the economic segment going back to their countries because of the COVID. So we don't think that we'll be able to go through that level, but we definitely hope that it will be much better than what was in the first quarter and second quarter. And we hope to have a double digit -- I mean EBITDA margin in the financial year.

Got it. And my second question is on -- yes, go ahead.

Shyam? Yes, so also adding to what doctor said, during the COVID period, the impact on clinic was much higher. So due to the lockdowns and other things, people didn't go to the clinic. But however, what changed in the hospital is because they got admitted into the hospital, some of the COVID patients, and so is that even the elective cases, which were not done in the past couple of months, the pent-up demand came back into the hospitals. So having said that, the restructuring, like what we were talking last year, in terms of moving the -- moving out the low-paying insurance. So that has already been computed. But however, the next couple of quarters should show the results. This quarter and next quarter may not be appropriate to measure, mainly because of the COVID-related stuff.

So my second question is on the India hospitals business. And you have this unique thing of Kerala versus non Kerala, where I think the lockdowns have impacted the occupancy differently. So if you can kind of update us on post the unlock or whatever unlock we've had, how the occupancy has trended in the July/August kind of a timeframe. And how is the Indian Hospital, that segment actually starting to begin now?

Okay. Harish, if you can take that question, please?

Yes. So if you look at the India pie, we are across 5 states. So clearly, the Kerala cluster contributes about roughly 57% of the revenue for quarter 1. 21% would be Bangalore cluster and everyone -- everything else will be about 22%. It is quite interesting. When you look at the pandemic surge in India, like we have seen all the metros and Tier 1 cities were badly impacted. So it includes places like Hyderabad, Bangalore, of course, similar to Bombay or Delhi or Chennai. Whereas Kerala, because of its advanced public health system, I would say was the last state to have been impacted. Clearly, April when -- right from March 21, when the Prime Minister announced a lockdown for the entire country, that significantly impacted everything, all numbers, whether it's OP throughput as well as IP throughput and it continued in April. But with the freeze -- withdrawal of the lockdown, we did find that the Kerala clusters performance was far better compared to rest of India, mainly because the case numbers were not much. But now when we look at beginning of quarter 2, we find that the trends in Kerala are also changing because neighboring states such as Karnataka and Tamil Nadu, the COVID numbers are quite significant. And the movement of people from GCC countries, from other parts of the world and from other states after the lockdown was lifted, has also contributed to the rise in COVID numbers in Kerala. But overall, when you look at quarter 1 performance in the Kerala cluster, because of lesser number of COVID cases which contributed towards India's performance compared to other geographies.

Got it. Just following up. We think this will sustain Q2, Q3, that Kerala will still be the biggest driver, 57% you said? But is there a risk that the lockdowns have kind of -- would stay there, sorry.

Yes. So I wouldn't like to speculate. I'm just praying that Kerala numbers will not get as worse as what we are seeing in other parts of the country. But clearly, there is a trend of increased number of COVID cases even in Kerala. So we are -- we have to be very careful in what we say. We have to wait and see.

[Operator Instructions] We'll take our next question from the line of Sriraam Rathi from ICICI Securities.

Firstly, I mean, what is the breakup of long-term and short-term debt, if you can provide? And what is the outlook going forward? Because in Q1, we have definitely reduced it. So how should we look at in the current year going forward?

Sreenath, if you can take that question, please?

Yes. So just give me a minute. So I'll just come back to you on that. Because right now, the way we are looking at [indiscernible], including both long-term and short term. So let me just give a breakup of -- the -- between the long-term and short term. Maybe the next person can follow. And in the meantime, I'll [indiscernible] and give you the answer.

Okay, sir. Secondly, the costs that we have seen, particularly on the SG&A expenses this quarter or -- and their staff cost. So I mean, how should we look at here going forward? Is a part of it sustainable that we can expect that it can be sales in the long-term a part of it? I mean of course, I mean, it will increase in the coming quarters, but what are the measures that we have taken? I mean, how much of that can be sustainable?

Yes. So we think that a part of whatever is achieved is sustainable, but not to this level because there has been a reduction in the number of people enrolled. But we hope that when compared to last year, we'll have a [ substitution ]. We are on an initiative to reduce HR cost by various means, manpower optimization, various initiatives are there. So I'll first give you the Deputy Managing Director, Alisha, to give a brief on the initiatives that will help us to have better manpower cost control this year.

Thanks for the question. Can you hear me?

Yes, yes. I can hear you, yes.

So like Chairman mentioned, we have done a lot of initiatives, some which were short term, specifically during the COVID period whilst there was a shortfall in terms of the revenue. We had to make some short-term adjustments on the basis of what the revenue shortfall was. But in terms of a longer-term perspective and what you were asking about the sustainability, there has been various measures which have been put in place. We have revisited one of our numbers, the manpower numbers. We have revisited sort of the salary ranges and doctors structures and in-progress contracts in [indiscernible]. So there has been a lot of reworking on the models of the operating cost of manpower itself that has been done. So we do assume this combined with -- I think one of the biggest learnings of COVID also has been how much work can be done remotely. So we know in the last couple of calls, we had mentioned about how we had an opportunity about shifting a large part of our back-office work to a shared service center in India. So that's something which is getting fast-tracked now, so we do see a reasonably significant opportunity from moving a fair amount of our admin staff out to the shared service center which should happen towards the end of the year or early next year. So we -- while there were some immediate measures taken to control, and we believe we were very fortunate, we have a very sort of connected workforce. So we -- so as an organization, we all took a hit because organization has taken a hit. It sort of cascaded down to pretty much everyone within the organization. But from a sustainable and long-term perspective, there are all these measures which have been taken, where we expect a good improvement in terms of our manpower cost to come through by the year-end. Does that answer your question?

Yes. Yes, it answers.

Sriraam? Yes, answering your question, Sriraam, the [indiscernible] was that as of July, end of July, our long-term bonus to USD [ 26 ] million in [indiscernible] And short term, that includes even working capital, that is USD 68 million. And in India, long term, it's INR 292 crores; and short term, which is also includes working capital, is INR 132 crore.

Okay, INR 132 crore. That's helpful, sir. And just lastly, one thing. Sir, drop in [indiscernible] in GCC would have been primarily because of the COVID treatments?

That is true.

Okay. I mean India, it has marginally increased. So I assume probably the proportion of COVID patients would not have been significant in India?

Yes, so COVID patients, [ at least ] in India in quarter 1, the number of cases there are low. In fact, because of the lockdowns and other things, COVID patients [indiscernible] very nimble. And in fact, the number of COVID patients was minimal. Actually, the number initiatives started increasing in quarter 2 from India. But however, in GCC, the impact of COVID was maximum in quarter 1 in the past 2 months.

Our next question is from the line of Harith Mohammed from Spark Capital.

So I think last quarter, you talked about deferring certain CapEx projects. Could you provide some more color on that? Any updates on that front? And if you could also provide your revised CapEx guidance based on these references? And from a slightly more long-term perspective, is there a change in our investment and better addition plans with respect to what has happened in recent quarters?

So Sreenath, can you take that?

Yes, yes, yes. So answering your question. See, some of the projects, we have either put on temporary hold or we have permitted to come or [indiscernible] growth products. For example, what we have put on temporary hold is the upcoming projects at Oman, the hospital we have upcoming. Then the Riyadh, Saudi Hospital had an expansion as well but that is put on temporary hold. And what we have put on -- in India, on hold is [ primary ] hospital and also another upcoming in early December, that the -- another hospital which we had entered into an agreement, that is [indiscernible] hospital in Bangalore. That's also been put on hold. But one hospital, one we have terminated, the contract is in International City, Dubai. So that is something we terminated. The reason why we have put some of the offsets on hold or why we are permitted, permitted mainly because we wanted to reduce the CapEx. So because we have got sufficient capacity, and therefore, we thought that we should not add more facilities in the region. But however, projects where we are already almost 70%, 80% complete. Those projects we are going hard. In fact, those projects 2 projects which we are continuing to go ahead even in the current quarter with 1 hospital at Sharjah; Aster Hospital Sharjah. And another hospital, which we completed in quarter 1, that is the [indiscernible] hospital in Dubai. Because these projects, even though there was COVID, the completion of these projects was close to 80%. So we thought it's appropriate that we complete with the remaining 20%. Now coming to the remaining projects which have been put on hold, these are in various stages of completion, anywhere from 40% to 50%. And therefore, projects which are not started, we can always take decision whether to go ahead or not. But projects, for example, Aster Oman, that already we are midway through. That is something we would like to complete, but we are just conserving cash at this point of time and we will take a call the end of quarter 2 and then decide on these projects. So broadly answering your question. So our whole focus is now to reduce CapEx and also reduce the debt because the focus is more on reducing the debt. So we don't want to go ahead with new projects in the GCC region. India is something which we would like to because revising projects in India once it has been approved that we would like to go ahead and complete. So in terms of CapEx in the current year, so we will take a call after quarter 2. But at this point of time, for the first half of the year, we don't see a CapEx more than INR 150 crores. And even in quarter 2, the whole CapEx should not drop 150. So for quarter 1, 150; and quarter 2, 150. And that quarter 2, 150 per area. Second half of the year, 150. We are going to only spend toward a stability. So in all, in the current year, i.e. is [ if everything is fine ], then we are not looking at the CapEx of more than INR 300 crores.

Harith, to add to what Sreenath said, what we have decided on all these areas, including our utilization as well as manpower optimization. It's more with less. So we want to have less number of people, less number of debt and utilize its maximum and set it out. And that is the whole principle that we are following. So that hospital beds are there, which have not being utilized in our existing hospital. Occupancy can go up and so the whole slogan now is more with less.

Okay. And on the debt reduction front, we reduced net debt by around INR 270 crores this quarter. Is this driven by a reduction of receivables? And is the current level of receivable date sustainable? Any comments on that?

Yes. So it's a combination. One is that the collection on the receivables. Second thing is that we continue to repay the debt we are receiving in the quarter itself. We are not taking any deferment and we continue to reap it because our whole idea to reduce the debt. So therefore, we are not taking any benefit of any deferment. We would like to kind of repay the debt. The third thing reflects there are certain payables, which have also been put on hold, mainly to conserve the cash. So because of this reduction, whatever money is coming, we look at it for the reduction of the debt. But in quarter 2, we'll have to pay out some of these payables. But having said that, the focus will continue to remain on reducing the debt.

And last one from my side is related to this unfortunate fire incident at Vijayawada, that one of the COVID care facilities managed by Ramesh Hospital. Any thoughts around the impact or the potential liability that could rise due to this unfortunate incident?

Yes. So it's most unfortunate and we really feel so sad and sorry for the people who lost their lives, their family as well as those who are having [indiscernible] So this was a facility where we had a financial interest, but there was no management control of involvement. So this was a clear situation where the management of the local hospital there. We have more than 1 hospital. They were taking care of this. So now I think the inquiries is going on and they are trying to find out what was the actual cost. As we understand, this has been associated by the requirement for COVID patients to be admitted, but whether there were any gaps in the local administration and management to do that, we are also trying to find out. So regarding actions after this happened, we informed the stock exchange about the matter. And the materiality to Aster from this [ material ] asset is very negligible because it's only 2% of our profit revenues and of [indiscernible] So I think materially, nothing was impacted. But definitely, it's most unfortunate thing to happen. And we are looking at ways in which such things can be prevented wherever we are involved, either the [indiscernible] managing or involved in areas where others are managing. In fact, we have very strict protocols regarding all the safeties and all, but this is something which happens, and we really regret -- we regret about that.

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

My first question is on the COVID patient mix at GCC and India. Could you give some breakup on that?

Sreenath, could you answer there?

Yes. So like I mean, there was a question, I think from Sriraam earlier, he asked about India had gone up in quarter 1. But however, the [indiscernible] has gone down in quarter 1. So like what is coming with that in GCC, it was mainly because the fact 2 months got impacted by COVID and there is COVID patients. So therefore, the revenue that we got some COVID was low. In India, in quarter 1, the dipping revenue was mainly because of the hospital. The occupancy went down significantly because of the lockdowns. And within the hospital, the number of COVID patients were regular. So therefore, the ARPOB -- in India was higher, even though the occupancy in India was lower, the revenues were lower in India, but ARPOB was higher, mainly because of the COVID patients being low in number during quarter 1. But however, better change in India. Right now, in India, if you look at, there are significant number of COVID patients which Dr. Harish can answer. In GCC, during the first 2 months, the ratio of the COVID patients to the non-COVID patients would have been somewhere around 60 to 40, 60% would have been COVID patients and 40% would have been non-COVID patients during the past 2 months. And once we came back to the third month, that is the June month, almost 90% was -- of the total occupancy, was the regular patients. So there are hardly any COVID patients, maybe 10%. And while we are speaking now, there are no COVID patients in the UAE region. And outside the UAE, because significant part of our business is in the UAE, so there are no COVID patients at this point of time in our facility. So more or less, it has completely reduced. Dr. Harish, you can answer for India.

Yes. Thank you, Sreenath. So like Sreenath has mentioned in quarter 1, we didn't have any patient at all because India, overall, where -- at least where we were located, it was the public health facilities which we were managing the centers. And even in quarter 2, we can see differences between the 2. Like in some of our facilities, there are government-referred patients. But overall, when we look at Q2 until now, it's just 11% of COVID patients. The protocols, which various state governments follows, that if you are -- in some states, you have -- you can do self-quarantine at home. In the some other states, you have these COVID care centers whether you're asymptomatic or mild cases, you could be there. And it's really the sick patients who are referred by the government who come to private hospitals. So it's mostly coordinated by district administration in various parts of India where we are located. So at this point of time, in quarter 2, it's 11%. In quarter 1, we didn't have any COVID cases.

Okay, and when you're considering these health care centers or hotels where these patients are better managed by experts, are these -- are all these accounted in your numbers?

Yes. So that is medical-related. It is [ good experience here in the hospital ] Hospital segment because the hospital need to continuously provide support to that.

Okay, but the occupancy, the...

So just typically, the way we are only responsible for the medical care of it. Again, the various state governments have issued their own specific guidelines for COVID care centers where it's basically nursing care monitoring and the doctor consult. So that's already booked into the revenue part. That's how you account for the revenue from the COVID care centers.

Okay. So there's less patients in GCC, not really what was expected in GCC patients -- hospitals, sorry.

That is right.

Yes. Okay. And my second question is on Slide 22, the ARPOBs that you mentioned. So the GCC ARPOB is mainly down 22% whereas the India ARPOB up 7%. But the overall consolidated ARPOB is going up by 5%. So I was not able to reconcile this. So the GCC piece is a bigger component. So this overall ARPOB...

So let me answer that. See, that is because of the number of beds, right? In India, the number of beds, got to be significantly high. In GCC, the number of beds was lower.

We'll take our next question from the line of Shankar K.P. from HSBC.

I have 2 questions. One is, we have come across some articles in newspapers in Dubai saying that there is some pressure from insurers on hospitals to reduce the tariffs. Have you come across anything like that? Are you seeing some pressure from insurers? Second question is regarding Aster Labs in India. What is the level of revenue that you are seeing from that entity? And what are the kind of margins that you are looking at?

Yes, I'll answer the first question. Dr. Moopen here. So there is no pressure from the insurance companies to reduce the tariff. It is not there. But there are challenges in the insurance sector. There are small players who are disappearing due to many reasons, including the COVID. So that challenge is there. But asset, we haven't found any request for reduction in tariffs or change because we have long-term contracts with them. So that's actually not an issue here. Regarding the second part, Dr. Harish, if you could answer regarding the revenues from India.

Yes. So the Aster Lab, it's actually early days. We have just -- operationally, we have just started in April. So this quarter 1, we have just started and the team is settling down in the reference lab. In the fourth month of operations, the unit is actually broken even. Other than that, it's very early to comment upon the margins. And as Chairman mentioned before, currently, we are looking at B2B. And of course the COVID. The number of COVID tests, like Chairman mentioned, has been around 14,000 at this point in time. And we'll have to wait for the pandemic to be over to focus on B2C. So it's very early days for the lab.

[Operator Instructions] We'll take our next question from [ Rahul Soni ] from [ Smith ] Limited.

Yes. I am audible?

Yes. Yes, this is all right.

One -- 2 questions from my side. One is, again, regarding your 2 KPIs, average length of stay and average revenue per occupied bed. So your ALOS has increased from last year from 1.9 to 2.5. However, your average revenue per bed has declined. And also, your in-patient number, they have also decreased. So I want to understand, is the decline in the revenue per bed is -- how this is connected with the average length of stay, which has increased?

Yes. So average length of stay generally, normally when COVID patient are [indiscernible] especially in the GCC region, because the COVID patients tend to stay longer. And that is then where you have seen that increase in average length of stay. But the increase in days, in terms of the revenue that we get from that, is low compared to the normal cases. And that is the reason you see a reduction in the average revenues per hospital bed per day. Does that answer your question?

Yes. Okay. And a second question. Sir, due to COVID impact, how do you see the UAE health care sector shaping up in next 2 to 3 years in terms of the competition from smaller players and also due to the slowdown in the GCC. There is a -- the expat population is also going down and there are job losses also. So what kind of impact that would have been -- that would be in the GCC health care sector going forward?

Yes. So this is a health care sector where we are mostly in UAE and of course, in Oman, Qatar and Saudi Arabia to a lesser extent. So one good thing which we have seen is that in quarter 2, once the pandemic started subsiding, we found that the business is coming back to almost normal. And if you look at -- when compared to last financial year, during this month of August and all, we have almost reached there when compared to -- I mean, in revenues as well as in other parameters. So we, as a large organization, have gone to sustainability, which is some of the important things why we are there. But then compared to that, the smaller players who are catering to the -- especially to the -- only to the lower income segment, I think they will have challenge. So answering your question, overall, like any business, there will be an impact even on-site there. But for us, we see that being a large player and that we have seen in the second quarter, there is actually a coming back to normal or even going up from that.

So will there be any further cost reduction exercise going forward in terms of your direct cost and indirect cost, means the manpower cost from the medical, manpower and the...

Definitely, that's an ongoing thing. And we hope that there will be -- on an annual basis, there will be a reduction in our manpower cost when compared to last year, when we were -- and we are hoping that there will be a reduction. And the goods cost, both at the material side as well as at the staff side, it is an ongoing activity, like what Alisha mentioned. We are taking various measures, like the shared services and all, which should definitely bring down the overall staff cost. Because we have a good arbitrage when you look at the cost in GCC and India. When we do a shared services, there should be some benefits coming to us, definitely in the staff costs.

We'll take our next question from the line of Shashank Krishnakumar from JM Financial Institutional Securities.

So occupancy ramp up facilities stood at around 60%. This is what you -- so can you discuss if these have moved in 2Q and also some commentary on occupancy of some of your facilities in India?

Sreenath?

Yes. Sorry, could you repeat the question? It was not clearly audible.

Yes. So occupancies and ramp-up facilities in India stood at around 60%. So can you just comment on whether it's sustainable in 2Q and also some commentary on the mature facility occupancy in India in 2Q?

Yes, yes. So that is -- actually, see, the occupancy would have been more or less the same like that of a mature facility with lower occupancy. But here what has happened, I mean, it has been also 3 years. There is one hospital of ours, if you remember, in Kerala, we started 1 hospital at [indiscernible] right? So that particular hospital, which is just 1 year, 4 months old. This hospital is fully occupied. It is at peak level. So there are only 2 hospitals in this budget. One is Aster [indiscernible] Hospital; and the other thing is in the [indiscernible] hospital over there. So [indiscernible] hospital is doing extremely well, and the occupancy, that is to the highest [indiscernible]. So because of which, there you see higher occupancy rate in that bucket.

Any commentary on the -- on 2Q?

Sorry. Mr. Krishnakumar, we are not able to hear you that clearly. So...

Yes. Have those trends been sustainable in 2Q?

Q2, like what Dr. Harish was saying, as in India, we need to wait and see because we don't know -- because the COVID continues. So really, it becomes difficult to comment on Q2 assisting India, how it is going to happen because majority of our hospitals are in Kerala and we need to see that kind of an impact for us in Kerala. But however, due to whatever results, if the situation of COVID worsens in that particular state, then that would be a negative impact on us.

In GCC, anyway, I've already told you that UAE is not that significant part of our business in the GCC region. And we are out of COVID, our facilities are out of COVID. So therefore -- and because it's out of COVID, I can say that we are back to normalcy. But however, with the caveat that there is no second wave of COVID.

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

Yes. So I would say, in difficult times, good numbers. I would want you to give some color on the clinics business. So I joined the call a little late, apologies for that. But have you started seeing the patients already? And what is the outlook on the clinics business? As I understand, these are the stepping stone for the in-patients. So what is the outlook there and what are you actually seeing in July and August?

Dr. Moopen here. So I just wanted -- I have already mentioned this, so I just wanted to repeat that. So clinics has been a restructuring as well as realignment with the clinics and the hospital. So we hope that like what you said, that these are the funnels through the patients come into the hospitals also. So that should do much better with that alignment. And there has been a lot of restructuring happening there in various areas, and we have reduced the manpower cost significantly, and we also have put in a new HIA system, which should improve the overall functionality. And we hope that by the third quarter, we'll be able to see these results coming in. And now during the first and second quarter, all the clients in the UAE, if you look at them, they have done badly because of the COVID impact. And we were no exception. But as we go forward, and once the COVID moves on, we hope that it will go to much better situation than what it was in the first quarter, definitely.

But just some more color. I mean, the restructuring would help us in cost side. But what about patients coming in clinics? And on the top line side, are we already started to see some kind of improvement or it is at similar levels?

So there are few things happening like the early consultation, home care services and all, which should bring in additional revenue. But if you ask me whether there is a crowd which can cater through like what we had last year, there's a reduction in the number of people. But we have been lucky to have a good market share and people have the confidence in the brand. So while smaller players will have definitely issues due to that, we hope that we'll be able to do this because of the connectivity with the hospitals as well as the overall size of the operation. So we don't think that there will be too much of an impact on the revenues. I mean, there will be a huge increase in the revenue. But we hope that there will be a decent increase over the year.

Okay. And would it be fair that by 3Q, we would come back to double-digit margins in the clinics business?

Q2 or Q3?

Q3, sir.

Yes. We hope that we we'll be into double digits by Q3.

Okay. And lastly, any broad color we are giving on the overall EBITDA, given the fact that you talked about the staff costs, other expenses would be under control. And Q1, Q2 are normally a little softer quarters versus Q3, Q4. So assuming everything constant, how would you look EBITDA to be for the year, very broadly?

Sreenath?

Yes. So we generally don't give guidance. But however, to answer your question, we are actually likely [indiscernible] were a significant part of our businesses. And we had that impact in quarter 1 in the GCC. Now coming to quarter 2, we are more or less into the normal stage. So based on that, you can assume what revenue would end up. But this is again subject to there being no second wave of COVID. So our thing is that if you are bothered, we would like to maintain. But for the first quarter one, we would like to have the profitability of what we had last year in quarter 2, quarter 3 and quarter 4. That is not what we are aiming for. But only we need to see as to how we plan for it.

Our next question is from the line of Sriraam Rathi from ICICI Securities.

Yes. And just one question, particularly, I think last quarter, we acquired Wahat Homecare. So has there been fully integrated in this quarter? And what would have been the revenue contribution of the same? And also, if you can provide the Y-o-Y comparison of that revenue for that particular entity?

So Alisha, you would like to take that question?

Sure. So Wahat actually has been doing relatively well. I think with the COVID situation, especially people being reluctant to go into the hospital, there has been a lot more momentum that has happened in the home care section. So that's something which is integrated now into our system. We have we sort of closely monitor and watch it. In terms of the revenue contribution, Sreenath you would have to help me. You want to understand how big is it relative to our group, is it?

Yes. Right.

Yes, so it is about INR 34 crores per quarter business. So this is something that is open and this has not been impacted by COVID and we are doing well on that.

Okay. So -- and that particular entity would have been like more stable on Y-o-Y in terms of revenue?

No. Y-o-Y here is not [ revenue ] [indiscernible] this year would be on 31st December 2019. So this is the second quarter for us from a [indiscernible]

As there are no further questions from the participants, I now hand the floor back to the management for closing comments.

Yes. Thank you very much. Thanks a lot for being with us in this call and we hope that all of us will be out of this -- get out of COVID. And we wish you all safety and security. And let us hope that things will improve by this quarter as well as in next quarter. Thank you very much for joining the call.

Thank you, members of the management. Ladies and gentlemen, on behalf of ICICI Securities, this concludes this conference. Thank you for joining us and you may now disconnect your lines.