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

Ladies and gentlemen, good day, and welcome to Aster DM Healthcare Limited Q4 FY '21 Results Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shashank Krishnakumar from JM Financial Institutional Securities Limited. Thank you, and over to you, sir.

Yes. Good morning, everyone. On behalf of JM Financial Institutional Securities, we are happy to host the Aster DM management for their 4Q FY '21 and full year earnings conference call. From the management side, we have Dr. Azad Moopen, Chairman and Managing Director; Ms. Alisha Moopen, Deputy Managing Director; Mr. Sreenath Reddy, Group CFO; Dr. Harish Pillai, CEO, India business; and Mr. Amitabh Johri, CFO, GCC business. I'll now hand over the call to the management for their opening remarks, and I look forward to an engaging session. Thank you, Aster DM management, and over to you.

Yes. Good morning, everyone. Thank you for joining our '21 quarter 4 earnings call today. The year gone by has brought in unprecedented times, challenges and opportunities to prove our resilience as healthcare operators. The multiple waves of COVID posed various challenges that our doctors, nurses and support staff, along with the enabling services, have stood strongly and provided life-saving services for the patients. However, there are many challenges regarding the management of the pandemic as there are changes in the presentation and the mode of the cases happening. The positive news, however, is that vaccination drive is continuing at an aggressive pace in UAE where we have majority of our operations. Here, most of the population are now vaccinated, which gives significant protection but does not rule out infection. In India, however, the vaccination efforts are going on at a slower pace due to the lack of availability of vaccine and other factors, the population size, the geographical spread, et cetera. And this could be a major challenge as we go ahead and regarding further waves. The quarter 4 financial year '21 saw the second wave of COVID in the GCC region. So that's the highlight of the whole presentation. We had the quarter 4 -- in the quarter 4, the second wave, which came in the GCC region. The international borders were closed. Travel restrictions were brought in, night curfews and lockdowns impacted the hospitals and pharmacies of our business and locally in the GCC countries, mainly in UAE. Restrictions on elective surgeries were imposed on some of the locations. And in some other places, even workforce were taken over by the state bodies to [ beat ] the pandemic. However, in India, the quarter 4 '21, which witnessed first wave of pandemic, [ recede ]. Our hospitals saw an increase in occupancy and patient visits, which is reflected in our revenues and profitability in India. During this period, we started the Aster Whitefield Women & Children Hospital in Bengaluru in [indiscernible] during this time. It's a boutique hospital catering to the unique health care needs of the children and women. The hospital specializes in obstetric care, including normal and high-risk pregnancies; comprehensive gynecology care, starting from birth, motherhood to menopause and the yonder years; and complete neonatal and pediatric care, including pediatric surgery. The hospital also provides 24/7 pediatric and maternal emergency services. The 49-bed specialized hospital is strategically located in Whitefield Bengaluru, and it's designed to provide personalized medical care in a calm, soothing, nature-inspired environment. The hospital has the most advanced technology, and it's well equipped with birthing suites, labor delivery room, modular operation theaters, single and deluxe suites for comfort of the mother and babies. It's our specialty hospital in Bengaluru, which shall be further developed, adding 2 more blocks as we go forward. We continue to be committed to our expansion in India and see a strong potential for growth. In order to widen our health care offerings for our patient base, we are actively expanding Aster Labs and the pharmacy distribution network in India. This is in line with the strategy to have wider presence with an asset-light model. Also, digital transformation initiatives creating various revenue streams shall be our focus in the coming years. Aster Volunteers, our solution, which helps people who are in need, has signed an MoU with Al Shifa hospital, a multispecialty hospital in New Delhi to help set up a 50-bed field hospital to meet the increasing shortage of hospital beds during the COVID-19 pandemic. The initiative is aimed at supporting patients who are financially disadvantaged, yet in need of critical care. As part of the MoU, Aster will be supporting the development of the medical facilities and ensure that the necessary infrastructure is in place, while Al Shifa will be responsible for operating the hospital. We have started such measures later also in other places, that's in Kerala, in Kochi, Calicut, et cetera. We are actively working towards creating our global tie-ups and leveraging the same across the group. Recently, we have signed an MoU with the Roche Middle East, the world leader in biotechnology as a strategic partner across United Arab Emirates, the Kingdom of Saudi Arabia, Qatar and Oman. The partnership will enable Aster DM Healthcare hospitals, clinics and laboratories across the region to adopt the latest diagnostic innovation and solutions to support doctors in providing optimal treatment solution to their patients. This is part of our core strategy to introduce smart systems and encourage early and accurate detection that can facilitate timely medical intervention essential to prevent unwanted disease outcome. We continue to be committed to our healthcare heroes who relentlessly work to save lives and often have risked their own lives in the line of duty. We have announced a 10-year salary support for families of employees who died of COVID-19. This will be applicable to all employees of Aster in India and GCC who lost their lives due to COVID-19 or those who may succumb, God forbid, to the disease in the future. Around 5,000 employees of Aster have been infected with the virus since the start of the pandemic. While most of the infected are back to work to continue the battle, 4 of them have succumbed to the virus. They have sadly left behind young families with wives, children and aging parents. The Asterians are irreplaceable, and they will always remain close to our hearts. We are focused on guarding our employees against the COVID-19. And I'm happy to say that we have ensured that 84% of our employees across the globe are now fully vaccinated. During the fourth quarter, we posted a revenue of INR 2,391 crores, which is an increase of 7% from -- compared to previous quarter and an increase of 5% when compared to the same period last financial year. The EBITDA in quarter 4 was INR 336 crores, an increase of 2% when compared to previous quarter and a decrease of 17% compared to the same period last financial year. The profit after tax post NCI for Q4 was INR 105 crores, an increase of 14% when compared to previous quarter and a decrease of 20% compared with the same period last financial year. I now request our Deputy Managing Director, who also heads the digital transformation, to take you through the initiatives being taken by the company, after which Sreenath Reddy, our CFO, shall be briefing you and giving you more details regarding the financial. Thank you very much.

Thank you, Chairman. Good morning, everyone. At Aster, we do recognize the fact that digital is really the way to further our mission of health care and wellness. Our outreach for patient care is restricted right now to the hospital clinic labs and pharmacies we have. We want to break these barriers and create an omnipresent model of clicks and bricks. We are working actively towards creating digital assets, which are foundational, efficient and can help us expand quickly in an asset-light model. We're investing in creating an app, One Aster, which will be our unified mode of engagement with our patient base for their wellness. It shall have teleconsult, e-pharmacy, chronic disease management and creating various streams to support patient wellness and well-being. Organizationally, we are committed to drive this across the board, and we have taken initial few steps over the last 6 months. We also saw expenses of approximately INR 11.5 crores in our P&L during the quarter, which is our investment for a better future. We are hopeful that we shall be doing the soft launch of this app in GCC in Q2 of FY '22, and by the end of the financial year, we shall have this rolled across India as well. I now request our group CFO, Sreenath Reddy, to take you through the details of the financial and segmental performance for the quarter and the financial year. Thank you.

Thank you, Alisha. Good morning, everyone. As doctor mentioned, the threat from COVID is not over, but the vaccination rollout all over the world is happening at a record pace. This gives hope to everyone that we shall soon have this threat behind us. During Q4, there was a second wave in GCC, which had an impact on our business. During the same period, India did fairly well. In spite of the second wave of COVID in GCC, we were able to perform better in Q4 compared to quarter 3. For Q4 -- sorry, I have to request people to put their mics on mute. Yes. Thank you. for Q4 FY '21, our revenue from operations have increased to INR 2,391 crores compared to FY '21 Q3 revenue of INR 2,228 crores. On a year-on-year basis, revenue increased by 5%, and corresponding constant currency increase is 4%. The revenue in GCC has increased by 2%, and in India, the revenues have increased by 20% year-on-year. Our India operations saw increase in both in inpatient and outpatient visits. In Q4 FY '21, we have reported EBITDA of INR 336 crores, which is 2% higher than the previous quarter of INR 328 crores but a 17% decline on a year-on-year basis. In constant currency terms, the decline was 18%. EBITDA margin in Q4 FY '21 was 14% against 17.7% in Q4 FY '20, a reduction of around 370 basis points. PAT post NCI decreased by 20% to INR 105 crores as compared to INR 131 crore in quarter 4 FY '20. The reduction in EBITDA numbers in quarter 4 FY '21 is largely on account of revenue mix changes in GCC. Our pharmacy vertical saw revenue shrinkage over last year, owing to lesser footfalls in UAE and lockdowns in Oman, Qatar and Saudi, including frequent travel bans imposed by these states. Coming to 12 months' performance for the year ended March '21. Revenue from operations for FY '21 decreased by 0.5% year-on-year to INR 8,608 crores from INR 8,652 crores. This is largely emanating from a weak first quarter of the financial year on account of COVID and, for the following quarters, recurring COVID impact in terms between GCC and India. The EBITDA decreased by 14% from INR 1,258 crores in FY '20 to INR 1,077 crores in FY '21. PAT post NCI decreased by 47% from INR 277 crores in FY '20 to INR 148 crores in FY '21. The constant currency decline for revenue, EBITDA and PAT for 12 months is 4%, 18% and 50%, respectively. Coming to the segmental performance for the quarter. The GCC hospital revenue has increased by 5% from INR 785 crores in quarter 4 FY '20 to INR 826 crores in quarter 4 FY '21. EBITDA decreased by 6% on a year-on-year basis to INR 156 crores in Q4 FY '21. The EBITDA margin decreased from 21.3% in Q4 FY '20 to 18.9% in Q4 FY '21 on account of change in case mix and increased material costs. Revenue in GCC clinics is at INR 587 crores in quarter 4 FY '21 compared to INR 521 crores in quarter 4 FY '20, an increase of 13%. This is also better over last quarter by 9.5%. EBITDA was at INR 115 crores in quarter 4 FY '21 compared to INR 121 crores in quarter 4 FY '20. The EBITDA margin decreased to 19.6% compared to 23.2% in the previous financial year. The reason for the decrease in margin is due to the reduction of the regular clinical activity with a corresponding higher cost on account of the fixed expenses and outsourced lab expenses. For pharmacies in GCC, revenue is at INR 559 crores in quarter 4 FY '21 compared to INR 644 crore in quarter 4 FY '20. The EBITDA has decreased from INR 126 crores in quarter 4 FY '20 to INR 67 crore in quarter 4 FY '21, and the EBITDA margin decreased from 19.6% in quarter 4 FY '20 to 11.9% in quarter 4 of FY '21. The drop in margins is mainly due to the reduction in footfall and underachievement of revenues, resulting in lower [ rebates ]. Coming to the balance sheet. The group net debt stands at INR 2,004 crores as at 31st March 2021 compared to INR 2,783 crores as at 31st March 2020, which is a reduction of INR 779 crores. We have been reducing our debt exposure steadily. The breakup of net debt, India stands at INR 306 crores compared to INR 358 crores as at 31st March 2020, and GCC net debt stands at USD 231 million compared to USD 324 million as at 31st March 2020. CapEx during the 12-month period was INR 374 crores. Considering that in the GCC, significant part of the population have been vaccinated, and our facilities in India are approaching a mature state, we have a positive outlook for the next financial year. On that note, I conclude my opening remarks. We would be happy to give you our perspective on any questions that you may have. I now request the operator on this call to open the question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Sriraam Rathi from ICICI Securities.

Yes. Firstly, this laboratory outsourcing charges seems to be significantly higher this quarter, I mean, versus of course Y-o-Y and also Q-o-Q it has doubled. I mean, what has led to this? If you can just give some more idea about this particular item.

Yes. So Sriraam, like what we said in quarter 4, we had wave 2, right? So whenever the COVID number increases, there is an increase in the -- sorry, RT-PCR testing, right? So these testings are directly linked to the number of COVID infection. So therefore, we had significant numbers of RT-PCR testing done and for which there was an associated cost. We do have in house, but that is not sufficient for us to cater to the demand of the testing requirement. So we had to outsource and which we are doing outsourcing in the past as well. But this quarter being wave 2, the numbers are significant.

Okay. Got it. Got it, sir. So this is, going forward, as the cases go down and -- I mean cases from COVID go down, so this amount should have normalized?

That's right. So now if you look at -- Sriraam, extending my explanation, the thing is that now COVID wave 2, right, has decreased. It's not -- it's very, very minimal in most of the GCC regions. But however, we are seeing increased numbers in India. No doubt, during the last couple of weeks, even India have seen reduced numbers. So when this reduces, the regular business comes back, to some extent, and the COVID testing goes down.

Okay. Okay. And last part of this will be for the GCC region, right, this quarter?

Yes. This is mainly for the GCC region. In India, we have got our own lab testing facility. And in fact, that is a separate line of activity and which was established during the last financial year. And this financial year, so we will scale up the lab business in India.

Okay. Got it. Got it. And secondly, on the vaccination, I mean, are we participating in this opportunity of vaccinating patients, and, I mean, any indication you can provide in terms of if there can be some upside on the numbers.

Yes. So regarding vaccination, we are very actively participating in this opportunity. Unfortunately, in India, there are a lot of restrictions for getting the vaccine for the private sector company. In GCC also -- in GCC, there is no revenues involved. This is being given free of cost. So we have to provide this to the patients free of costs. It's provided by the government in the UAE, whereas in India, you can charge the administration fee. But there are a lot of restrictions. So even though we are very actively involved and want to do it more and more, there are restrictions in getting the supply. But we are trying very hard to get more and more stock and provide it to as many people as possible, not even Aster business. If it's more like it is very important that we control this pandemic through doing the vaccination to the maximum number of people.

Okay. Got it. That's helpful, sir. And lastly, I mean if you can just provide some details in terms of our expansion plan now because I think in FY '21, we have not done much. In FY '22, how should we look at in India and GCC? And also, any update on the Cayman Islands or the multispecialty hospital plan that we had?

Yes. So regarding the expansion, we have 2 hospitals which are getting ready in UAE, which was slowed down, but we have now -- maybe in the next 2 quarters, we should be able to start both these hospitals. One is in Sharjah, which is a greenfield hospital, 80-bed hospital, which we hope that in the quarter 2 of financial year '22, we'll be able to start. And in Muscat, Oman, we have another greenfield hospital, which is 145-bed hospital, which is, again, we hope that in quarter 4 of financial year, we'll be able to start that. Both these are leased facilities, whereas we have an own facility in Sanad Hospital in Riyadh, a 69-bed hospital. This is put on temporary hold, and we have not proceeded with that. And that is -- these are the GCC projects. In India, the Aster Aadhar Hospital, which is in Kolhapur, Maharashtra, there is an expansion going on. It's a 60-bed hospital, which we will have -- the construction is going on. And we hope that by quarter 2 of financial year, we should be able to complete that. This our own facility. And we have actually another construction going on, the one which I mentioned in my speech, the Phase 2 of the Aster Whitefield Women & Children Hospital. Not only women and children, it is actually other specialty. This is going on. And we hope that by Q2 or Q3 in the next financial year, we'll be able to complete that. So these are the projects which are -- which were in pipeline, which we had to put on hold, and now we have -- we haven't started anything new. In fact, the hospital which we announced earlier in Chennai and Bangalore, another hospital in Bangalore, we have put this on hold.

So in terms of numbers, CapEx for the current year was INR 374 crores, right? And for FY '22, we are looking at INR 580 crores of CapEx. During the COVID year, we went a little bit slow. Our focus was not to take up new projects. But in the current year, the uncompleted projects, we are moving very fast. And that will increase our CapEx because like what doctor said, we have got projects coming up in Bangalore, Kolhapur, similarly at Oman and at Dubai, Sharjah. So therefore, the total CapEx outlay estimated is INR 580 crores for the coming financial year.

Okay. You will notice there is significant reduction in our debt, which has come down by some INR 780 crores for GCC and India together. So part of this has been because we have put some of the projects on hold but also because of the prudent financial management that has been done. So there is a significant reduction in the debt, which has happened during the financial year.

Right, right, right. And any update on Cayman Islands?

Yes. Alisha, you would like to mention about Cayman Islands?

Chairman, Alisha is offline right now. Her phone got disconnected.

Okay. So I can speak about that. So Cayman Island, we have got the approval from the adopters there, the PAD approval, which is the planned area development approval for the hospital building. The land is now getting ready for that filling, which will take about 3 months. Meanwhile, we are negotiating with the contractors for getting onboarded. So we hope that in 2 years' time, we should be able to start the hospital. So that's the status. And we are quite, I mean, excited because it's not only the Cayman, which is a small country, but there is opportunity to get a business from the surrounding areas. That's the whole plan from the Caribbean as well as from the U.S. and others.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just the first one on the outlook. You said you have a positive outlook for fiscal '22. So I just want to understand, from a 1Q perspective, how is the GCC in terms of occupancies? Has it improved from the 49% or so, given that the COVID base has kind of eased there? And also the outbound restrictions you also talked about, which impacted in 4Q, maybe in 3Q as well, just want to see how that is panning out and how things are improving in the GCC.

Yes. So see, GCC, generally, it's looking up because the vaccination has definitely given a lot of confidence to people and to the authorities. And we hope that with 70% of the people being covered in UAE. And even in other GCC countries, we will be seeing opening up as well as most of the restrictions being lifted. So this will help in the people coming back as well as the existing people. I mean the people who are already here are taking up many of the things which they have postponed as well as even though there are other opportunities in the country where we are mostly having this UAE, we have the Expo 2020 coming up, and it is only 3 months away. So overall, there is a positive feeling. But we can't say, see, there has been unpredictable -- COVID always a bit unpredictable. But we feel it's a little more better than what it was last year. And one good thing which has happened is that even when we look at the first wave which happened and the way in which we managed that in India as well as GCC, so that's been slightly better from the financial point of view as well as from the point of view of the overall operations that we look at the second wave, which we addressed. So we think that we are also learning and we'll be able to do it better as we go forward.

Yes. Shyam, also, yes, occupancy is improving. So that is something which is good. Only at this point of concern is on the retail side, but we expect -- the retail partnership side, but we expect that also to improve. But it could take some couple of quarters to see an improvement on the pharmacy front. Coming to India, India is something we are positive. The reason is that many of our facilities now are reaching a matured state. So therefore, both from the top line as well as the EBITDA contribution, India should be doing significantly well compared to last year. Dr. Harish, would you like to add something there?

Yes. Thank you, Shyam. So like Dr. Azad has mentioned, a lot of lessons, what we learned with our experience in 2020, the first wave, the clinical teams are now fairly equipped. The infrastructure has always been robust because all the hospitals in India of ours has been NABH accredited. We also have a good control over the supply chain situation, which we had some challenges last year. Over and all, we also feel that, see, one big thing about the India hospitals, which Dr. Azad also mentioned this, the extensive coverage of vaccination of health care workers, and that has been really good. And it has given the team a lot of confidence. And when we looked at the second wave in our hospitals, even though the COVID numbers were quite significant, in terms of business footfalls, it has been very positive when you compare the same time last year when we had the impact of the lockdown. And we are expecting a rebound of elective non-COVID cases as the lockdown has eased in all the states that we operate. So we are bullish for this year.

Got it. Just Sreenath, just one on -- trying to get clarity on the GCC pharmacy margins. You mentioned 2 reasons: reduction in footfall and lower rebates. Can you explain the second one, please?

Yes. So see, there are certain targets of revenues. When we achieve, we are entitled for certain rebate, right? If and when the footfall drops, revenues get impacted. And in turn, we get a reduction in the rebates. Now these rebates, whatever we get, these are incentives, right? So whatever we get, that 100% of that generally flows into the bottom line. So when the revenue doesn't meet up, so we get hit a little bit higher at the bottom line, mainly because these rebates get reduced, which otherwise would have flown completely to the bottom line.

And I just wanted to add here. So there has been a change in the mix of the disease profile also. What is happening is that as people are mostly staying home and people don't have -- it's a good thing, but they don't have much of infections at all. So the mix of the medicine and all is more towards chronic medication, which has got much lower margin when compared to antibiotics and other things which are required for acute infections and all. So even that might have played a role in reduction of the margins.

Got it. Helpful. And my last question is on the EBITDA margin profile, how we should look at it going forward. We have multiple hospitals starting up. So is there a worry or concern that there could be dilution in margins as these new hospitals, both in GCC and the mother and child in Bangalore actually ramp up? How should we think about margins of fiscal '22?

Yes. So the margins, even though the new facilities are starting, right, both in India as well as in the GCC, but these facilities will be a little bit later during the year. So one of the facilities is expected at the last quarter of this year, that is the Oman facility, which will not have much of an impact on the financial. Similarly, the hospital at Sharjah is expected somewhere to start in the month of August or September. And the impact of that will be very minimal, no doubt. It will -- initial period, there will be losses. But we don't see that impacting the overall hospital margins because we are bringing in efficiencies in other places. And therefore, for the current year, we will be looking at similar margins on the hospital side. Similarly on India, even though that's a new facility which is coming up, that will not have any dent in the margins. In fact, on India as a whole, the margins will improve significantly, mainly for the reason, like what I said, many of these hospitals are now getting into that matured state.

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

Yes. Can you throw some light on your plans in Cayman Islands?

Yes. So see, in Cayman Islands, which is a 150-bed hospital, which is being started. It's a multispecialty hospital with focus on 3 or 4 specialties. So we have taken a concession agreement from the government and have bought 40 acres of land there. And this plan has been prepared, and it has been approved by the government. So the plan is to have, of course, the local population to require hospital facilities. There is a good hospital by an Indian player there already. But there is a gap. They are not providing all the areas which are required. So we'll be filling that gap as well as we are expecting, more importantly, patients coming from the U.S. as well as other Caribbean countries that is the surrounding areas. Now the advantage that a player like us has when compared to any player in U.S. or in that region is that we are allowed as per the agreement to bring in doctors and staff from countries like India, so that the cost of our -- HR costs will be much lower when compared to hospitals there. So even if we do it at double the price of what we are doing here, it will be much less when compared to what is available to the people there. So our costs will be lower, and this will attract patients from the U.S. and all to this facility for medical value travel. So we hope that we will be able to do well. And we are looking at areas where we can get situations like for elective surgeries, for cosmetic procedures as well as, of course, the mainstream area.

Okay. What is the kind of treatment focus that you will have?

The treatment focus, yes, so apart from the mainstream facilities like the cardiology, neurology, orthopedics and all, which any hospital should have, we also are looking very actively on oncology. We are having an oncology -- comprehensive oncology plan in the new hospital, which is built into that as well as a major plan into the area of wellness, all wellness-related cosmetic surgeries as well as other dermatological and cosmetic procedures. So that will be another area where we can get large number of patients from the other countries around.

Yes. And by when will this hospital be commissioned?

We hope that we'll be able to start it in 2 years' time.

In 2 years, okay. So FY '24.

Yes. Yes. Maybe around '23 -- end of '23 or '24.

The next question is from the line of Shashank Krishnakumar from JM Financial.

So this is on the India hospital's EBITDA margin, it has declined sequentially. Is it because of Aster Labs, or is there something specific that you'd like to call out?

So Dr. Harish, you want to just take that question?

Shashank, can you repeat that?

Yes. Yes. So there's only -- India hospital's EBITDA margin which has declined sequentially. So is it because of Aster Labs, or is that something specific?

No. No. I'll explain that. So when you look at quarter 3 to quarter 4, the main thing is like -- it was already explained by the speaker before, we had commissioned the Aster Women & Child Hospital in quarter 4 in Whitefield, Bangalore. So that is the primary reason for the dilution of EBITDA margin in quarter 4. And there has been also slight increase in facility maintenance elsewhere too. These are the 2 main factors.

Okay, okay, got it. And secondly, on the home health care and the pharmacy business in India, you earlier talked about brand licensing agreements or the acquisition of [indiscernible]. So any update on that front?

You're asking with regards to India?

Yes. India pharmacy.

Yes. So I'll answer that. Yes. So the thing is that like what was mentioned a bit earlier by doctor, so these 2 businesses, one is the lab, which we will be scaling up, which is well established now. Now is the time for us to scale it up aggressively, which we would do in the current year. And the other line of business activity is the pharmacy distribution network. So that is something which already, I think, there are certain units which have been started and which we have got an arrangement. And we would like to expand this distribution network, which will be another business activity catering mainly to the customers. At this point of time, we are not getting into online, but in future, there is a possibility that we will also get into online. Dr. Harish, you would like to add on, on the pharmacy distribution network?

Yes. So like already mentioned, right, we are focusing on the geographies where we are. And we have a brand licensing agreement. So the brand obviously is Aster Pharmacy. But it's -- we are the main entities looking at -- we are basically looking at the distribution end. We feel that it will bring in a lot of synergies, both at the distribution and also for the hospital procurement side. So as of right now, we are focusing on clusters. Cluster A is Karnataka. Cluster B would be the state of Kerala. We will slowly enter Telangana. So that's going as per our plans. And like rightly mentioned, we need to have some sufficient base in terms of brick-and-mortar before we leverage an omnichannel network.

The next question is from the line of Ayush Pansari from Allegro Capital.

You had mentioned the CapEx for FY '21 is INR 320 crores and INR 580 crores. Would you be able to guide us on the India numbers, please?

So just a second. India numbers, yes, we are looking at around INR 280 crores in India.

INR 280 crores. And what would be your capital employed for the India business?

See. Out of the total capital employed, the 40% of the total capital employed is India and 60% is in GCC.

Okay. Understood. And just one more question. What would -- I know you have reclassified your material cost in GCC from revenue to material cost. What would be the like-to-like number as you had stated in historicals for Q4 number, for the Q4 period?

So after the reclassification, it is like-to-like, right?

No. My question was, let's say, it could be higher in Q4 because of the reclassification, right, because earlier, you had the discounts. You had reduced discounts from revenue. So if you still continue doing that, what would be the number? That was the question.

So that would have been -- it would have been an increase of INR 50 crores.

The next question is from the line of Mehul Sheth from Axis Capital.

First question is related to your GCC business. Can you highlight on your performance related to your home care business of Wahat? What was the performance of Wahat let's say since its acquisition? And also in -- same in GCC, part 2 question, your new hospital, EBITDA margin has improved significantly, even on a sequential basis. So what is driving this growth of the [ company ]?

So Amitabh, do you want to take that question on Wahat? Amitabh, you are there?

Sure, Mr. Chairman. Yes, I'm here, Mr. Chairman. So yes, in the case of the Wahat acquisition, we have seen a significant increase in terms of the volumes and revenue. This acquisition of ours has turned to be -- turned out to be a good acquisition. We have seen gross margin buffer of almost 28%, 30% on this, and the revenues have been steadily growing on this one.

And the drivers for the new hospital margins improved significantly.

So in the case of the new hospital margins, we have [ Tradas Hospital ] that was commissioned last year. We will see that -- we've seen better occupancy on that between Q3, Q4, at least as the electives were allowed to be opened. We saw better occupancy as well as in the case of Al Mankhool Hospital, which is the other hospital we have. We have seen better margins there.

Yes. So let me comment here. So in the case of new hospitals, one of the hospitals over there is the Qusais Hospital, which is in Dubai, right? So that hospital, being within Dubai, has done extremely well. So therefore, over there, the margins are higher. But during the quarter, in other places, the other places, if you look at the existing hospitals, some of them will do that very well, mainly because of the COVID. But over here in the GCC, especially in the Dubai, the hospitals which are less than 3 years, mainly the Qusais Hospital, have done very well. So that is the reason why the margins there are higher.

So basically relate with the vaccination that you're maybe giving through these hospitals, the margin driver?

No. It's not vaccination. It's not because of the vaccination because vaccination is free in GCC. So this is not because of the vaccination.

And one question related to your working capital cycle that has improved in, say, in FY '21. This is largely because there is a reduction in the receivable days for you. So how do you see this going forward? I mean, it is sustainable or once the Saudi business will again get into normalized space, then again, there is an increase in receivable, and there will be a stretch in the working capital cycle?

Yes. So in terms of days, there will be a slight increase because this time, you're seeing a small reduction, that is mainly because in terms of business that we had due to COVID, mainly on the RT-PCR testing, it is cash business. But once things normalize, these numbers will slightly go up, but we are trying to keep it around those numbers.

Okay. And one question related to your contribution from your COVID-related patients, means COVID-related revenue in your overall, say, in GCC in India. How COVID has contributed to you revenue?

Yes. So at least in terms of -- in the GCC, mainly COVID revenue comes from the clinic. No doubt, it is there even in the hospitals when government refers the patients. So coming to the clinic for around 30% during the COVID time, it all depends on how long that business is there in the sense that the COVID lasts. So roughly in terms of clinics, around close to 30% of the revenue comes from COVID-related activity. And in the hospital, that is -- it all depends upon how long the government restricts our elective cases. And generally, during the quarter, GCC hospitals had around, say, it could be around 10% to 15% of revenue. Dr. Harish, you would like to answer? I mean India, it is slightly higher, right?

Yes. So it was quite interesting because quarter 1, we had no COVID at all. It was 0. Quarter 2 was the highest exposure to COVID. That's about 14.6%. Quarter 3, again, the case load came down. And quarter 4 was the least. If you look at consol for the whole fiscal, it was about 8%, roughly.

I see. In the Q1 FY '21, the starting of this early 2 months, there will be a -- again, there will be increase in the COVID revenue because of this increasing number, especially in India?

Yes. Yes. That is quite -- we had a pretty severe second wave. So all our hospitals in India were affected. So that is quite expected. And we're just coming out of that right now. So the worst-hit month was May. June is obviously much better. And with this lockdown being phased out, we think that July, things will be far better. So even on year-on-year, in spite of these COVID challenges, the business performance has been very good for India hospitals.

So let me -- so if you look at on a consolidated basis for the quarter, that includes even clinics, hospitals and everything, both across the geographies, 20% of the business is from COVID. Like what I said, clinics will have 30%. Our hospitals will have lesser. On a consolidated basis for the quarter, 20% is from COVID.

And just one last question related to CapEx, that INR 5.8 billion guidance, a lot deployed towards Cayman Island from this INR 580 crore. It will be in [ phased mode ].

Yes. So we are looking at around INR 150 crores during this year because this year will be minimal on Cayman. Because being already one quarter has gone, so we have got another 3 quarters. So the activity will be a little bit slow in the current year, but it will start picking up momentum in the next year.

Yes. So your CapEx breakup largely is like INR 580 crore, of which INR 280 crore is for India, INR 150 crore is for your Cayman, and remaining is for GCC -- largely GCC.

Yes. That's correct.

[Operator Instructions] We'll take the next question from the line of Shashank Krishnakumar.

Sorry if this was clarified earlier, but can you update on the offshoring of back-end operations? You talked about shared service center in India. Any update on that?

Amitabh?

Yes. Can you repeat the question, please?

Yes. Regarding the offshoring of back-end operations that we had earlier talked about establishing a shared service center in India. So any updates on that front?

Yes. So we have done a soft launch for our shared service center out of Bangalore. We already had a presence in Calicut. So we have integrated the Calicut and the Bangalore office. Presently, we have close to 230 people working between Calicut and Bangalore. And we have created a COE model wherein the operations of finance, procurement, revenue cycle management have been front-ended in GCC, but back-end work is happening out of the Bangalore site.

Okay. Okay. And just the last one on the home healthcare business in India. So how is that progressing, particularly in the Kerala and Bangalore clusters? Any update on that?

Dr. Harish, you like to say about that, home healthcare in India?

Yes. Am I audible, Shashank? Can you hear me?

Yes, yes, yes.

Yes. So Shashank, the home -- entire home healthcare business was started in pre-COVID because we already had a model of continuum of care. But COVID has really given it a big push. And we saw strong growth in the home care business, starting off with the Malabar cluster, where we have 3 hospitals [indiscernible] Kottakkal and Kannur. And currently, we are spread across the geographies, in Kochi, in Bangalore, Andhra cluster, Hyderabad, Kolhapur. So it's across the network, and it's done fairly well. We also have an interesting model that we leverage skilled personnel, our own personnel, within the hospital for extending of care to our own patients. So it has done steady growth over the past few quarters.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Yes. Just one question on the landscape for the hospitals in UAE. We have seen the news of the -- one of your competitors. The lenders have actually now swapped for equity exposure, and they're looking to turn around. So just want to understand from an M&A, are there parts in that business, which is interesting for us. How should we look at the landscape in the UAE?

Yes. So see, we always look at opportunities. And we were also wanting to make sure that we don't increase our debt. So while there were opportunities which were coming, including some of the recent ones, we are now looking at only those where -- which are strategically aligned to our activities in UAE and which will be coming in, not as a whole, but as individual hospitals. So that thought process is there. If something comes, which is fitting into our present chain of hospitals, we will be looking at that. But then we will make sure that it's not going to have a huge impact on our debt position.

Sir, if one is not looking at a whole operation and looking piecemeal, what about us being greenfield in, say, Dubai? Is that an option as well?

I didn't get that question, Shyam.

Well, I'm saying, can we open our own hospitals in Dubai now that the competitor is having its own issues? Earlier, there was this -- understand -- I meant Abu Dhabi, my bad. But the point is earlier, there was this understanding that the terms are different. I'm just putting out stuff. But now that there is other issues at...

Yes. There are opportunities. Yes, even now, there are opportunities for greenfield hospitals, and we continuously explore that. But because of COVID and all, we didn't want to increase our exposure and bring in more of the greenfield hospitals. Of course, it also takes time for us to go into breakeven, and that will have a drag on our margins and all. So we are looking at like what you also mentioned. Maybe there is an operations and management if there is an opportunity, that is something without investing further funding, we can look at that. Even a very good EBITDA multiple if something is available, if the prices are very attractive, maybe we can look at even buying out individual hospital. Constructing something new yes, that is there. And we should have a pipeline because we have now 13 hospitals in GCC. We have to -- for further growth in the future, we have to have that. We already have 2 hospitals which are coming up. And beyond that, for the year 3, 4 and all, we must be looking at greenfield also as an opportunity. So answering your question, yes, we have some amount which is allocated for growth, which can be utilized for -- usually, we do greenfield, but it can even be used for small acquisition if that is available.

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

My question pertains to CapEx for the full year, for FY '22 and '23.

Yes. For FY '22, I already mentioned that it will be around INR 580 crore. And the year after that, because Cayman is something which is going to pick up. So we are looking at various other options as well to see as to whether it can be funded through other means. But at least in terms of CapEx, we are looking at a similar number the year after that.

Okay. And this -- can you give us a breakup of INR 580 crore? They're all [indiscernible].

Yes. I had already given the breakup a few minutes back. I'll repeat, for India, we are looking at INR 280 crores; Cayman, we are looking at INR 150 crores; and in the GCC, we are looking at INR 150 crores.

Okay. Okay, fine. And will you be taking debt?

Yes. So no, I think that many of these things can be funded internally. The CapEx can be funded through internal accrual. But there could be, during certain intervals when there are cash flow mismatches, maybe for some time, there could be a borrowing. But broadly, the way we are looking at it is to fund it through internal accrual.

Okay. Okay. And when can the India EBITDA contribute more to -- by then -- by your -- do you see that kind of level?

Sorry. I didn't get the question. So let me -- to your earlier question, there would be borrowings in certain geographies. For example, India, there could be some additional borrowing. But GCC, there will be a reduction in the borrowing. So on a consolidated basis, at least we don't see the debt going up. And because most of these projects can be -- will be funded through the internal accrual. That is the first. The second question what you asked, if you could clarify that a little bit so that I'll be able to answer.

Like currently, India contributes 15% of EBITDA. By then -- whereas India contributes 19% to sales and 15% to EBITDA. So by what timeframe do you see that EBITDA growth will be higher than the sales growth?

Yes. So at least in the coming year, we are looking at India contributing more towards the EBITDA in terms of the percentage. So we are looking at anywhere around 24% of the total EBITDA coming from India. So that is in the FY '22. So that is our estimate. But we'll have to wait and watch because it also depends upon how the COVID plays out in various geographies. But it was what our expectations are. And this number, over a period of time, will continue to keep increasing.

Okay. Okay. What are the challenges that you see apart from COVID?

Yes. So in terms of -- yes, go ahead.

No, no, no. I was just trying to find out, is it a generic question about the overall group or specific to India? Or what is that question, challenges on what? Is it on the India business, GCC business? Is it India on hospital? Yes.

Yes, in terms of profitability, challenges -- India, GCC -- yes.

Yes. Sreenath, you can add that it's a small number. You can answer.

Yes. So yes, the thing is that in terms of profitability, the challenges, other than COVID, COVID be a major challenge. No one can predict as to what is likely to happen. But the only thing is that because we've already seen COVID earlier, and we know that we are able to do better and better over a period of time. So therefore, the challenge of COVID also is green emissions. The other challenge in terms of a financial-related thing could be in terms of the economic situation in the GCC. In India, we don't see that as a challenge, at least for us. but in the GCC, if the economic situation turns out to be bad and if there are significant job losses, then there is a degrowth in the population. So that could have an impact on our business. But we feel that, like what doctor was saying earlier, so there has been a decline in terms of population in some of the geographies in the GCC. But the current year, there is a pickup in the economic activity. So therefore, along with the pickup of economic activity, especially in the UAE, we evolved this 2020, which is now 2021, this is a major event which is going to happen. So therefore, we could see an upswing in the economic activities. But having said this -- said that, there is always that risk involved.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Shashank Krishnakumar from JM Financial Institutional Securities for closing comments.

Thank you, Aster DM management, for joining us and giving us the opportunity to host the call. I wish you all the best, and have a good day.

Thank you very much. Thanks a lot, Shashank and the whole team. Thank you very much. Thanks a lot.

Thank you.

Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of JM Financial Institutional Securities Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.