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

Good evening, everyone. I welcome you to the Aster DM Healthcare Investor Conference Call. With us, we have the senior management of Aster DM Healthcare, namely Ms. Alisha Moopen, Deputy Managing Director; Mr. T.J. Wilson, Non-Executive Director; Dr. Zeba Moopen, Non-Executive Director; Mr. Sunil Kumar, Chief Financial Officer; and Mr. Hitesh Dhaddha, Chief of Investor Relations and M&A. We are delighted to introduce Mr. Varun Khanna, Group Managing Director of Quality Care. Mr. Varun is here solely in the capacity of a representative of quality care to give insights into the business and future plans of quality care. The entity with which we propose to merge with, for our investor benefit, it is to be noted that proposed merger is subject to further regulatory approach. I would like to inform everyone that we have uploaded an investor presentation outlining the details of the merger. Now we'll inform you about how we will conduct this call. [Operator Instructions] We will start the call with opening remarks by management, following by an interactive Q&A session. [Operator Instructions]. Certain forward-looking statements may be discussed in this meeting and such statements are subject to certain risks and uncertainties like government actions, local, political or economic developments, technological risks and many other factors that could cause actual results to differ materially. Aster DM Healthcare Limited will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. With this, now I will request Ms. Alisha Moopen to start with opening remarks. Over to you, Ms. Alisha.

Thank you, Puneet. Good evening, everyone. Today marks a significant milestone for Aster DM Healthcare as we announced the proposed merger of Quality Care India Limited, QCIL, with Aster DM Healthcare. Together, we will be creating 1 of the top 3 hospital chains in India, and our alliance will strengthen our mission to elevate health care standards and accessibility across the country. This merger will align 2 organizations that have demonstrated robust growth and resilience. With Quality Care's renowned network of CARE hospitals, KIMSHEALTH and Evercare, we are excited to add Aster's presence and expertise with a combined portfolio of 38 hospitals and 10,150-plus beds. Our combined presence will now span 9 Indian states, extending our footprint across South and Central India to serve patients at every stage of their health care journey. Our unified goal will bring world-class health care to the communities we serve. Today, as we join forces with Quality Care, we reaffirm our commitment to this purpose. This merger offers immense opportunity for growth and expansion, whether through upgrading existing facilities or entering new geographies through greenfield projects. By combining our strengths, we will be well positioned to deliver enhanced outcome for patients and set new benchmarks for excellence in health care sector. This merger will not only enhance our operational capabilities, but also strengthen our corporate governance. I'm proud to announce that in the combined entity, Dr. Azad Moopen will continue as the Executive Chairman. The listed entity will be named Aster DM Quality Care Limited with Aster promoters, along with Blackstone voting equal representation on the Board. Independent directors will have a 50% representation in the Board. Together with our Board and management, we will continue to uphold Aster's foundational values and create long-term value for our stakeholders. Now coming to the transaction details and the transaction contour. This transaction values QCIL at 25.2x FY '24 adjusted post IndAS EV EBITDA, and Aster at 36.6x FY '24 adjusted post-IndAS EV EBITDA, which is 45% higher than the relative multiple ascribed to QCIL. Aster promoters and Blackstone will hold 24% and 30.7%, respectively, in the merged entity, with the remaining shares being held by Aster Public and other shareholders of QCIL. The merger is cash neutral and is expected to be EPS accretive from the first full year of operations. Going into the steps of the transaction. First one, acquisition overview and upfront share issuance. Ahead of this merger, Aster will purchase a 5% stake in QCIL from Blackstone and TPG in consideration of primary care issuance by Aster for 3.6%, which is the initial share acquisition. The proposed merger, QCIL will then merge into Aster by way of scheme of amalgamation with NCLT approval. Shareholder issuance. The shareholders of Quality Care will be issued shares of Aster in the agreed swap ratio at the completion of the merger process. The expected time line, we expect the merger to take about 12 to 14 months. This merger is much more than a sum of 2 organization. It really is a strategic alignment that builds a stronger and a much more resilient health care ecosystem for India as a whole. Some of the key benefits we believe with this merger are the scale and the market leadership, with 38 hospitals and a capacity of 10,150 beds, we will be among the top 3 hospital chains in India. Through this merger, we will expand into 4 additional states, namely Madhya Pradesh, Chhattisgarh, Odisha and Tamil Nadu, and strengthen our market presence, especially in South and Central India. Our portfolio on merger will consist of 4 key brands. Aster DM, Care Hospitals, KIMSHEALTH and Evercare, with presence in 27 cities across India and Bangladesh. This scale is crucial. It will really enable us and allow us to serve a much broader range of patients, while setting new benchmarks in the quality and accessibility of health care across the nation. Enhanced service delivery, Aster and Quality Care bring distinct strengths to the table. Aster's diverse services across primary to quarternary care combined with quality care's established reach in non-metro regions means we will be better positioned than ever to bridge the gaps in health care cities and health care access across the different cities. On specialties fronts, both Aster and Quality Care has -- we have a good congo mix of over 50% currently. The larger and diversified platform will also give us a greater ability to attract and retain medical talent with state-of-the-art medical facilities. The combined platform will be well placed to enhance the capabilities of each other and provide high-quality health care services. Synergistic network of hospitals. The idea is how do we build more synergies with this merger. Aster and Quality Care have presence in different cities with no real material overlap of hospitals. Near-term expansion plans of also both the groups has very limited overlap with each other. When we look at the synergies of the combined entity through this union, we anticipate substantial near-term synergies, resulting in an EBITDA upside potential of 10% to 15%. Together, we will be able to optimize resources from supply chain efficiencies to shared best practices, both in our clinical as well as in our administrative protocols. These improvements will not only help streamline our operations, but will also allow us to deliver enhanced value for our patients and our stakeholders. Looking at the growth opportunities through expansion, the merged entity will be uniquely positioned to pursue both brownfield and greenfield expansion project, with plans to reach 13,300 bed capacity beds by FY '27. Along with that, with an extensive ecosystem of labs, pharmacies and outpatient centers, we have the capability to strengthen our reach across India, accelerating our expansion and upgrading facilities to meet the rising demand. Now strengthening our management as well as the governance for the entity. This merged entity will operate under a very robust governance framework with independent directors to have a 50% representation on the Board. This will enable the key stakeholders to participate in strategic decision-making and ensure that the highest standards of accountability guide our actions. Subject to necessary approvals, Aster Promoters and Blackstone will hold equal representation on the Board. Dr. Moopen will continue as the Executive Chairman of the merged entity; Mr. Varun Khanna, Group MD of QCIL; and Mr. Sunil Kumar will be the CFO of Aster, will be promoted to the position of Managing Director and Group CEO and Group Financial Chief Officer of the merged entity, respectively. This dedicated leadership team will propel us forward with a steadfast commitment to patient-centered care. Finally, this merger is a pathway to long-term value creation. Together, we are well equipped to drive growth, realize efficiencies and deliver sustainable returns for our shareholders. We are uniting to create a health care entity that will not only meet India's growing needs, but will continue to lead the way in quality, innovation and impact. Just to give some color and light on the process that was followed. We have followed the highest levels of corporate governance standards for this merger with several market-leading firms helping us on the due diligence across legal, financial, tax, technical, ESG, commercial and IT. We were advised by PwC on the swap ratio and ICICI Securities provided the fairness opinion. Our independent directors were also advised by a separate reputed law firm. As we move forward, it is important to recognize the milestones that remain to be achieved to complete this transformative merger. The journey ahead involves critical regulatory approvals, including the receipt of no objection letters from the stock exchange, approvals from the CCI, Competition Commission of India, and the NCLT. Shareholder and creditor meetings will play a key role in advancing the merger scheme along with the listing and trading of new shares upon completion. These steps, which are expected to unfold in the next 12 to 14 months, require our collective diligence, focus and unwavering commitment to ensure a seamless integration and realization of the long-term benefits and vision from this merger. As we embark on this significant new chapter for Aster, expanding our footprint across India, I extend my deepest gratitude to all our stakeholders. Your support have been fundamental to our journey so far, and we look forward to renewed vision. We ask for your continued partnership. This merger marks a transformative step in our growth trajectory, strengthening our capacity to create a lasting impact on the health care landscape and improve the lives of those who we serve. Together, we are positioned to make quality health care more accessible and affordable for communities across our combined footprint. With this merger, we are excited to establish our new partnership with Blackstone, the world's largest alternative asset management with solid experience in investing and creating value in the Indian listed space, reinforcing our commitment to innovation and excellence in health care. With their support and shared vision, we will be well positioned to enhance our impact and further strengthen our status as one of the top health care providers in the country. We envision immense value unlocking opportunities in the combination of professional talent and health care infrastructure of Aster and Quality Care. Thank you all for your ongoing trust and support as we bring this vision to life. I'd like to say that we stand on the brink of a very exciting future, a future with the strength of Aster DM Healthcare and Quality Care come together really to redefine health care delivery in India, driven by a vision that values excellence, accessibility and resilience. I would like to now hand over to Mr. Varun Khanna, Managing Director of QCIL for his remarks.

Good evening, everyone. And Alisha, thank you. It's indeed a pleasure being here and being invited today. So let me take a couple of minutes to kind of introduce Quality Care India Limited. We are one of the largest health care companies focused on emerging cities in India. And as you know, the gap actually increases as we go down the emerging cities in India. So that's been the strategy that we've adopted. We operate 19 hospitals today across 14 cities, with 5,150 beds. We are proud that 2,500 doctors are associated with this network, who help us deliver care to 3.5 million lives every year. Majority of the markets that we operate in, we have a micro market leadership. And therefore, I should tell you of the history that we have of the 3 brands that we operate: CARE Hospitals, KIMSHEALTH and Evercare. Most of our hospitals are either JCI or NABH, and that shows our significant focus on quality, patient care and guest services. A quick glimpse of our last year metrics. We delivered a top line of INR 3,615 crores, with an EBITDA margin of 21% and a blended ARPOB of 38,000 per day. We deliver a very vast spectrum of clinical services, almost 32 specialties, with a congo mix at 55-odd percent. The network does about 16,000 cardiac procedures every year, 18,000 neurosurgeries, 8,200 onco procedures and about 650 transplants every year. From a tech standpoint, we have 20 cath labs, 6 linear accelerators, 15-odd full-fledged radiotherapy centers, 15 MRIs, 10 robots. And I think what I've said a lot about financials, tech, et cetera, most importantly, 2,500 doctors, 12,400 employees have a singular purpose: To ensure that our patients and guests go back home smiling. So thank you so much for the invite, and I pass it back to you.

Thank you. Thank you, Varun.

[Operator Instructions] The first question is from Mr. Aditya Khemka. The next question is from Mr. Binu.

Just a question on this transaction before the merger of buying 5% from the investors of Quality Care. Can you please explain the rationale behind that?

Sure, Binu. So I think we're having the share swap, we believe that it's very insignificant, it's only a 5% swap that we are talking about, but it gives us the ability to also oversee the business of QCIL before the merger becomes effective. It also gives us a lot more access to getting the periodic information as a shareholder of QCIL. We also think it's a nice stepping stone for us to help in the integration of the business once merger becomes effective. So the share swap transaction in our lens, it will just help to strengthen the commitment of both sites towards the proposed merger. And to be honest, the share swaps is -- the initial share swap and then the eventual merger is all at the same ratios. So there is no difference in the valuation for both these transactions. It doesn't have any...

Understood. Just as a follow-up, post this initial share buyout of 5%. As I understand, Aster will hold 5% in Quality Care. And when the merger happens, what will happen to this 5%, will it be extinguished or will it result into treasury shares? What will happen exactly?

Yes. Hitesh, you want to come in here?

Yes. Sure. So what has happened is with the merger, the number of shares that has gone up will continue to remain like that, but the interest save will continue to also remain the same because the share swap is also happening, as Alisha mentioned, on the same valuation. So it's just the merger is happening in 2 step as we should see. The first 5% is happening in the step 1 and the balance, 95% is actually happening later. So that is how we should see this, Binu.

Okay. But from a technical perspective, QCIL will cease to be as an entity, so those shares of Aster will extinguish, is that what I should understand?

Yes, that's right.

The next question is from Mr. Harith.

This is Harith from Spark. So you shared the transaction valuations at roughly 36x EBITDA for Aster and 25x for QCIL, and these are on FY '24 basis. So given Aster has recorded a very strong growth in FY '25 in the first half, I think the valuations on FY '25 EBITDA will be more relevant for us. And in that context, will you be able to share the same multiples on FY '25 estimated numbers or at least on first half 25% annualized basis?

Go ahead, Hitesh.

Yes. See, the deal has been valued at on FY '24 basis. The deal -- actually, the term sheet got signed in early July. And post that, we have gone through a rigorous diligence process. So the deal has been focused on FY '24 numbers and that is how we value the deal. And looking at the numbers, that if you can see we have a premium of 45% between basically the difference between Aster valuation and QCIL valuation is to the extent of 45%. So clearly, there is a significant gap in the valuation between both the entities, and that is where we believe that potential to create value for all the stakeholders. We would not prefer to get into the estimates and project the valuation-based on estimates, we would rather continue to be on how we value the transaction.

Yes. But Hitesh, there's a very strong growth for Aster in the first half FY '25 numbers that you've disclosed. So that's the reason for the question. And if you don't -- if you prefer not giving to estimates, but at least on the basis of the first half FY '25 numbers annualized, that would be really helpful. Because we don't have those numbers for CARE. And this 45%, 40-odd percent premium that you've shared on the base FY '24 is not so relevant given that we're almost towards the end of the third quarter in FY '25.

So I would request Mr. Varun Khanna to just let you know the performance of QCIL for the first 6 months and probably that will help you, because Aster's numbers are already available, and you should be able to calculate the ratios. Because we have been focused on FY '24, and that's how the deal has been structured and executed.

Thank you. So let me share a little bit in terms of our top line CAGR. Over the last 3 years, we've maintained a CAGR of about 18-odd percent on the top and about 28% on the bottom. First 2 quarters have been in line with the industry growth kind of double-digit growth rate. So I think I'll -- I think that's what I can add at this point in time, Hitesh.

Thank you, Varun.

And my second question is on the role of the Aster Promoter family post this transaction. I understand that Dr. Moopen continues as the Executive Chairperson. But is there a time line that you have in mind by which there will be a transition, where there will be more involvement from the QCIL side or more executive or professional led management sort of taking over the operations?

So thank you, Harith. Like you mentioned, Dr. Moopen will continue to be the Chairman for the next few years. I think he will continue to be operationally involved and working alongside with Varun, who will be the Managing Director for the merged entity. So we have not specifically defined when he would -- any other arrangement. We believe that we have to further strengthen the professional management team that is there. It's going to be a very large enterprise. And we believe that having the combination of the Aster management team so far plus the QCIL team is the way for us to make this partnership and this merged entity very, very successful and distinguished.

The next question is from Mr. Param Jain.

So my first question is, post the merger, what could be our peak revenue and peak capacity utilization per se?

Yes. Let me start, then Varun can add to that. Param, see, there is nothing called as a peak capacity. So whatever capacity you have, you can always go up to 80%, 85% occupancy utilization. But we will never hit peak capacity because you are always in a continuous growth stage, right? In Aster, you know that we are in at least -- we have 5,000 beds, 1,800 beds is in pipeline. That is only up to FY '27. And you know recently also we added CM Hospital also, with expansion of 350 beds on a 300-bed hospital in Hyderabad also. So the expansion will keep continuing. But the good thing to note is that with the continuous growth coming in, Aster has been growing at 30% plus -- around 25% to 30% of revenue top line and more than 35% to 40% of bottom line, right, at least last 3 to 4 years. And you've seen the H1 growth over what we achieved concerned. Even with that, we are still at 68% occupancy that shows that we've got a further room to grow, right? So keeping that in mind, I think even previously, I have given certain assumptions to say that next 2 to 3 years, we should be able to reach currently with the 19.6% consolidated EBITDA, we should go to 2023. And I think somewhere in the mid- to high teens, our growth will continue to drive.

Got it. Got it.

Merger is bringing significant expansion in EBITDA margin. As you can see, while Aster has been growing very rapidly. But Aster's margin has been mid-teens. As we see the numbers which has been reported in the presentation that you can see the QCIL's margin have been north of 20%. So clearly, there is a synergy that we see here between both the organization. On an immediate basis, improve the margin profile. The transaction is EPS accretive. And also there is potential to grow further margins on both the sides with the synergies that we can generate, whether it would be the cost synergies or revenue synergies. And so combinedly, I think we expect to go to around 25% margin soon as a combined entity.

Correct, sir. And my question was, what peak revenue could you guys achieve post the scheme?

Param, why don't you take the growth credit, right, with the continuous expansion happening. As I said, we are growing at 25% plus. QCIL is growing at top line of somewhere between 18% to 20%. And I think Varun also believes that, that is a growth which we could put together continue. I think that should give you the assumptions for next 3 to 5 years. But also both hospitals put together, we are growing at -- we are adding approximately 3,300 beds in the next 3 years. We are adding 1,800 beds and QCIL is adding approximately 1,300 beds.

The next question is from Mr. Kunal Randeria.

Sir, my first question is on the operational leadership structure. So in Aster, I believe you are following a cluster based approach, where you add heads for Kerala, Karnataka clusters and so on, right? But now the fact is that some of the quality care hospitals will also be overlapping the same state. So I'm just wondering how you intend to kind of lead the company going forward from an operational leadership perspective?

Kunal, that's a great question. I think what we believe is we do have very little overlap, to be honest, other than in Hyderabad and some in Kerala. How we were looking at the operational leadership is really kind of going back to the drawing board and working with the Board, the NRC with Blackstone, with Varun, along with Chairman, and saying what would be the most efficient and effective operational structure that we should put in place. So there is an implementation committee that will be in play for the next 1 year, so that we can look at some of these and come up with the right structure. I don't think we're in a position yet to say, whether we think about how we define a cluster or a region yet. I think we'll have more information on that over the next couple of quarters for you.

Sure, Alisha, but I hear you here. But the thing is your model has been very successful, right, at least in the last couple of years. Even QCIL's biggest city is, I think, Trivandrum, which falls under, let's say, Kerala cluster. So I'm just wondering whether I should maybe pencil in that your structure would be certain that you could be carrying it forward?

Yes. So whatever we believe is best. But you're right, our structure has definitely worked for us. QCIL structure has worked for them. So we will have to look at what would be most efficient as a combined entity, right, Kunal? So we're thinking more as micro marketplace. So when you say Kerala it becomes very broad. Trivandrum Aster is only coming up with the hospital in the next 18 months. So we will have to really go to each micro market and talk about what is the right structure for that micro market. I think that's how our initial conversations with QCIL and Varun has been. But you're right, I mean, whatever the structure we had has been working for us. So we will try and see -- replicate a similar or even better structure in the future.

Just one more question for Sunil and Hitesh. Now I hear you when you said you valued it on FY '24, right? But Aster's growing at more than 20%, 25%, as Sunil himself mentioned. QCIL's growth rate has been 10% and the margins have been flat for the last couple of years, right? So I want to kind of extrapolate this for the next 2 to 3 years, it seems that this premium will entirely vanish. Is my understating correct? Or is it too simplistic?

I think it's too simplistic, Kunal, and I think there is a need for you as well as others to also understand what's the plan for QCIL growth on a stand-alone level. It's a platform, which has been created in form of combined with KIMS as well as kind of CARE and combined by Blackstone, with Varun coming on board recently. And Varun has a lot of experience in driving large hospital chains in India as well as internationally. And I would request Varun to kind of talk a little bit more about the plan at the QCIL level stand-alone on how you should expect the projections or you should expect enough performance to continue to move forward on the QCIL level. And probably, once you are able to do that, you'll be able to appreciate that actually discount will continue to be -- remain similar or basically the difference in valuation over the next few years as well. Varun, if we can throw some light as well on this.

Thank you. Kunal. So first of all, Kunal, I think we can choose to look at different periods when we look at this question as to what the growth rate has been. As I mentioned a while ago, the growth rate has been 18 on the top, about 28, 29 on the bottom, when I look at a 3-year period, and which comes on the back of COVID as well. So I think the growth numbers have been pretty good. Also, as Hitesh alluded to, I think to be able to do much more, build a strategy around it, it's something that we've been doing over the last 2 to 3 quarters. We've also been looking at margin-accretive stuff, which is, as you amalgamate, integrate a few companies, there's always the synergy which is sitting there. So at the QCIL level, within CARE, Evercare and KIMS, we'll also be able to drive synergies. But again, from a number standpoint, I'm refraining from any leading comments at this point of time.

Fair enough. Just one more question. CARE will be adding around 1,700 beds, right? Can you tell us in which cities would you be adding?

Varun, would you please?

Yes, sure. So allow me a little bit. So I think to start with, we've just added almost 250 beds in a new state in a new city, which is Nagercoil. So that's something that we're celebrating at this point in time. So we are looking at approximately 1,200 to 1,300 beds up until FY '27, which plans across various cities, both a mix of brownfield as well as greenfield. So we're looking at Vizag. We're looking at Hyderabad. We're looking at Chattogram. We're looking at bringing in a new hospital in indoor, which makes us stronger. We are looking at adding in our flagship hospitals like Banjara. We're looking at adding beds in Trivandrum, where our occupancies look pretty good. The fact that we run about 880-odd beds, we will go up. And we've already made plans around it. We're adding beds in Bhubaneswar. Along with adding beds, we're also adding a lot of capabilities. So I think that's more important. Sometimes adding beds does not give the real picture. So one of the things that I think we've been talking about in terms of our strategic forums is how do we enhance all elements of it. One is talent. So we are now looking out and bringing in more talent. And as you get stronger with better backing, you also realize that your ability to recruit talent is significantly better, and that's something that we are experiencing in the marketplace. Second, I think our business is not just about capacity. It's about what kind of capacity we create. As I told you, we're today at about 38,000 blended ARPOB. But if you look at the spectrum of ARPOB across our network, there will be a hospital at 20, and there'll be a hospital at close to 70. So our endeavor is to be able to bring the right clinical mix, supported by technology and therefore raise that ARPOB, which will of course yield better profitability numbers as well. As a network, QCIL has been very focused on what it does extremely well, which is cardiology. And there are things that we don't do as well or at least the revenue numbers don't show, which is oncology. And we've been very focused on adding onco, as the specialty at the group level. In fact, we -- just yesterday, we inaugurated a state-of-the-art linac in Trivandrum, which is our second linear accelerator because the first one was like overflowing. So there are things where we are doing to -- through technology, trying to build a better ARPOB as well. And I think one of the other things that I'd argue that CARE needed was a little bit of a spruce up. So there are hospitals that haven't been invested in for a while. If you ever get to Hyderabad, please go and see what we've been able to do to Banjara, our flagship hospital. It now looks better than any other building that exist in the city. So I'm assuming all this will help you think through our numbers and what we can achieve over a period of time. Thank you.

The next question is from Mr. Sumit Gupta.

I'm Sumit Gupta from Centrum Broking. Sir, I want to know about the QCIL. So first of all, how many census beds are there?

Varun, do you want to come back to...

Our census bed would be close to about 4,500. Sumit.

4,000?

4,500 give or take. But yes, around that number.

Okay. And if I talk from FY '22, '24, the CAGR has been around 6%. So how do you see it expanding? So like are you highlighted it or you are adding -- you plan to add oncology. So I just want to understand your thoughts on the growing the ARPOB?

Sumit, again, I am not someone who would like to give at this point, leading comments. I think I've given you a sense of how we are thinking, right? And in the last 2 quarters or ever since Blackstone invested into the business, we've been very cognizant of how this business needs to be done right. And a combination of talent, technology, infrastructure, is being looked at. And when you look at a combination like this, I mean, I would say that we'll be able to grow better than what we've grown in the past.

Okay. And on the, sir, combined entity, basically, like you highlighted, you expect to reach a 25% margin. So I just want to understand how much time over the next 3 to 4 years?

See, this takes us to nearly 20% margin as we are talking. Aster was at 17% margin for FY '24. QCIL is already over 20%, 21%, 22% margin. So we are almost at 19%, 20% margin already. We are expecting synergies to start coming in. And as Alisha talked about, we were expecting 10% to 15% of EBITDA going up with the synergies that we expect across all the areas. Because if you see, as Varun was mentioning, the KIMS acquisition that they had done within the QCIL platform is also a few months or a few quarters back, so I think there are synergies that are coming in right now from there as well. And plus, we expect a lot of synergies coming in through this transaction in terms of material cost optimization, in terms of revenue enhancement, in terms of the kind of manpower cost optimization and various other aspects. So combinely, with this synergy, we naturally move towards 22%, 23%. 22%, you can say, around margin with the synergy itself. And then with the scale going up as well as ARPOB moving forward, I think we expect that in next 2 years or so, or maybe 3 years, we should be around that margin at the combined level. And I would require Sunil to kind of give some more color around this.

No, no, Hitesh here. That should be fine actually. Yeah. You called it out very clearly, 3 to 4 years, we should be able to reach 24% to 25% percentage. And yes, synergies are going to kick in really well. And I can also see both sides, we've got a lot of brownfield expansion. All brownfield expansions are really EBITDA accretive. That is going to really yield us benefit. And also both places, we see further scope. In their case, metal margins are going to be a real booster for their EBITDA margin growth, so that is something which we are going to work on. I think with all these cost levers and the revenue ARPOB levers with us, I think we should be able to achieve in next 3 to 4 years.

Okay. So just one last question on like how do you see -- like what is the plan for -- to grow the QCIL business?

Sorry, Sumit, you were talking about growing the QCIL business apart from the organic expansion that Varun was...

Yes, apart from the expansion.

Apart from the expansion. Varun, you want to...

Sumit, simplify your question.

Apart from the bed, that are going to bed, it's like how do you plan to expand the let's say, medium term of ARPOB or medium terms of occupancy and the kind of scalability? Or how do you plan to attract more patient volume just on that?

So all right, so let me restate that. So I think our business fundamentally, we need to understand, is growing the beds and being able to grow the occupancy. I think Sunil alluded that from the context of Aster. And I think things are no different when it comes to QCIL. The way we think is we continue to add beds and the occupancy even if it is retained, we will see significant growth in our business from a volume standpoint. The quality of delivery that we do today, which is what defines the ARPOB. ARPOB is essentially -- I think the way we look at it, ARPOB is clearly defined by the clinical mix that we have. And I've very clearly alluded to the fact that complexity is something that we're working on. And as we work on complexity, it will yield better ARPOBs. Second piece is we're very focused on payer mix. If you look at our payer mix, 80% of our payer mix is between insurance and cash, dominated by cash. So it's a very -- about 20% or so is the balance. And we are still focused on doing better in the mix than what we have today. So all of these investments that we're making into infrastructure and technology are to be able -- to be able to get the mix better. And this also then allows us pricing leverage. Because as you create value for patients, patients are willing to pay more. So all of that will -- is a mix that we will play. So I think our growth will be both price -- sorry, ARPOB and volume led. And that's how historically it's been otherwise to be able to do the kind of numbers that I just alluded to are difficult. So yes, so I think we are -- I must say, we have a very 360-degree view of how this business need to be run and how we can deliver better, more complex work for our patients and deliver most care.

Just to add to what Varun also mentioned, both the platforms are bringing their own strengths on the table, right? If you look at Aster, Aster has really high-quality facilities, many of the facilities and you've been seeing our communication around those that many of the Aster's facilities gets rated among top 10, 15 facilities across the country. So the kind of quality of service that we provide, the kind of infrastructure that we build across there's a lot of medical strength that can be leveraged as well. And as Varun was mentioning, right, that, I mean, QCIL is extremely strong and is having a significant presence in cardio. Versus if you look at from our side, we are strong in multiple other areas, including building strong presence in oncology as well. So I think there is an opportunity lying for us in future on how we can cross synergize and leverage these opportunities across both the sides of platform, both the platform learns from each other and how they can kind of improve the performance across the board.

Mr Binu has joined back to the queue.

Just most questions answered, but Puneet and Hitesh just to [Technical Difficulty] just to certainly a year hence from now. In the interim, would you be providing any pro forma consolidated numbers? Or do we have to wait for a year before we get the actual consolidated numbers?

So we know we will definitely evaluate and we do understand that market would like to understand the combined financial at certain point of time. I think having said, we also want to make sure that we don't jump the gun on some of these areas before we get adequate and appropriate regulatory approvals. So as of now, I think the companies will continue to operate the way they've been operating and obviously, both have their own management teams to drive their own performance. But at a certain point of time, once we get some of the key approvals, including CCI approval and others, we would start evaluating on how we can start disclosing the combined numbers as well.

The next question is from Mr. Nikhil Botany.

Congratulations on the merger. So my first set of question is for QCIL like what is the expansion plan for QCIL? Is it targeting Tier 1 cities, Tier 2 cities? And while expansion of both Aster and QCIL, so is there any overlap of the geographies? So that is my first question.

Request Varun to please take it.

Nikhil, to be honest, I'm going to take one part of this question. And that part is that I think I mentioned one of the previous questions as well, we've just got a new facility in Nagercoil, it's a state-of-art building, extremely beautiful that adds about 250 beds to our network, can be scaled up to 310. And outside of that, we continue to evolve. We continue to explore more. But we've got firm plans laid out to add about 1,250 beds until FY '27. I also mentioned earlier that this is across various geographies. And the idea is to strengthen our presence where we are. So very clearly, we've articulated our strategy to say, wherever we are, and I mentioned in my opening remarks around QCIL as well. We like to be -- we like to lead the micro market that we are in. And therefore, to be able to do more in the same micro market has so far kept us in good stead.

And sir, my second question is for Aster specifically. Like last time when we are in the con call, you mentioned that we were looking at an inorganic expansion with the cash balance that is left from the GCC? So have we like -- have we moved on from that idea? Or do we have another strategic overview after this merger?

So Nikhil, see, we were exploring various options over the last 1 year, right? Now with the bed capacities that we are getting as a combination with -- we said, we will be opportunistic. We do have cash from the GCC transaction that is still there in the business. We are not very leveraged as an organization. So I don't think it's -- we can keep it off the cards. We just said we'll be opportunistic as assets come. We will review it and evaluate it accordingly. Sunil, do you want to come in as well?

Yes, yes. Yes, Alisha. So Nikhil, it's not only inorganic expansions, right? For example, in the last, I would say, after the GCC sale, we added 2 assets, right? Almost 650 beds we added, both in Hyderabad and this one. This will also both put together require more than INR 400 crores to INR 450 crores of cash required, right? So we are looking at both organic and inorganic expansion, right? So we are not shying away from that. And whenever we get the right opportunity, we would like to take that.

The next question is from Damayanti Kerai.

My question is for Mr. Khanna. So it appears QCIL has significant presence in non-metro market and a lot of expansion you're planning is coming up in non-metro market. So I just want to understand your experience in these markets in terms of scaling up units and what is your right to win?

Interesting question, you're asking for the entire thought that we have in our network. So first of all, I think I generally go back and try and answer this question from a need and demand standpoint. We are significantly underpenetrated as a country. In the metros, when you look at the bed density per thousand, that is 3x more than the bed density per thousand in what I call Tier 2 or the emerging market. And the fact that today with the rising insurance penetration with rising government coverages, there is the need converging into demand in the Tier 2, Tier 3 markets as well. And that model has been fantastic for us because if you are a quality focused, if you are patient focused, if you are able to make the right investments in terms of talent and technology, and you're able to deliver care in what you may today, quality to order an emerging market, why would anybody travel? And that strategy, I think it's not only us. This is something that the country needs, if you look at from a macro standpoint. So I think it's a clear win strategy that we've adopted, and we've been able to keep well with the same thing.

Sure. That's helpful. And my second question is again on QCIL's existing portfolio. So if I understand, most of the assets in your current network are mature assets, right, mostly, I guess, in existing for more than 10 years or so. So I just want to understand, in that, you mentioned about adding oncology, which will be a key driver. But with the presence in markets like Hyderabad, and then you are operating at say 20%, 21% EBITDA margin. Do you think mix could have been much better? Because if you look at some of your competitors, I guess, in the similar market, they are operating at say a much better EBITDA margins somewhere in mid-20s. So was it more of mix difference, which led to such EBITDA margins? Or do you think it was more to do with other operating costs?

Well, yes, interesting question. So first of all, I think, Damayanti, I'll go back and tell you little history about QCIL. So when you look at QCIL, these are 3 different entities operating, right? They only converge together, got amalgamated, I guess, about 8, 9 months back. And to be fair, I came into the company about 6, 7 months back, and that's where the strategy of integrating them, doing what is right came in and so there is a capital. So we've been utilizing our resources to actually make the hospitals better. Now let me take your question in 3 parts, because there are 3 different questions that you're asking. So first question is more around expansion. So while you're right, we have a mature network, which has been operating for a pretty long time. And therefore, these brands have immense recognition in the marketplace. So our brand share today in the markets that we operate is #1 in most cases. But I think from an expansion standpoint, I'm going to say that again, I just said that, we are growing in the markets that we are present. So it's not that we can't expand. All our 1,200, 1,300 beds that we spoke about, which are going to come in, in the next -- until FY '27, are in markets that we operate. And most of them are actually additional capacity that is coming in the hospitals that we own. So when you mature and if you have the ability to grow the same network, nothing better than that because that is [ a bit ] accretive. So I alluded to, so we'll be adding, let's say, 150-odd beds in Trivandrum. Now Trivandrum is already an 800-bed center, and we have the ability today to take it to 1,000-plus pets. And that because the fixed costs are going to be quite static. Those beds or the incremental capacity will only come in the variable costs. And this is the play that we have almost everywhere. So for instance, in Bangladesh, we're adding beds because we were occupied at about 78%, 79%. So we needed some beds. So we're getting beds there. In Raipur, we're adding beds because we are kind of occupied. In Banjara, where we need more space for OPD because we are well beyond our OPD capacity. We are adding OPD. And needless to say, across the spectrum, we are adding clinical capability as well to be able to take a higher complexity patient load than we have currently. And all of this is going to be margin accretive. Now the second part is, I think [indiscernible] margin vis-a-vis competitors. So I think Hyderabad -- so outside of Hyderabad, margins are better than any competitor, I would see in those micro markets. Hyderabad has been a challenging market. This is one of the only markets that I see today in the country where the capacity outweighs the way we calculate demand. But that's also a reality that in this market, whatever beds have come in and got consumed over a period of time. So that gives me the opportunity flavor. I mentioned that some of our assets needed some investment, and that is currently underway. Over the last 6 months, we've invested significantly on the infrastructure in Hyderabad, adding more on tech, adding more on talent. And I think that will raise the bar on profitability as well.

The next question is from Mr. Amrish.

Congratulations to everyone all around. It's a much awaited final decision. So my first question is, you've talked a lot about the opportunities and the synergies, and I think they're quite clear from your presentation. From your -- from what you've seen currently of each other, what would you say are some of the risks in post-merger integration, so the differences that you may see across the 2 entities?

Thanks, Amrish. Thanks for the compliment. I think in general, integration is tough. And when you're bringing huge scale assets, like we're talking about 38 hospitals together, we are not minimizing in our head what that entails, right? So that is, I think, 1 of the biggest challenges we foresee with the transaction, but we believe that it would -- the pain will be worth it. So whether it is integration of IT and like what Varun was mentioning earlier, he's already been trying to do that from at a QCIL level as they are integrating the 3 brands that's come together. Now to add Aster as a mix, now the benefit in some ways Aster as a whole, we are fully integrated between all our hospitals, 1 HIS system, one Oracle system, back-end systems, ERP, all of those are integrated, IT. So now we need to kind of make that same effort to integrate this to be able to leverage the benefits. So we believe that's worth it, but that is obviously something which will be a bit of a process that will be painful.

No, and it's already good to see that from a leadership position, we've got both Varun and Sunil, one from each entity, and that should go a long way...

Absolutely. Yes, that will help in making sure that you're building those bridges, right? People who understand each of the systems. Agree.

The second question is I'm not sure you can comment, but I'm just trying to understand a little bit more from a shareholders' perspective. And we've got now the Aster Promoters at 24%, Blackstone at 30.7%. How does 1 think about this entity going forward? Does this become like a fully private entity at some point in time? Does the private equity person exit and it remains an Aster entity? Is there any sense you can provide at this point in time? I know it's very early days, but anything you might have on top of your mind.

Yes, sure. Amrish, I mean, see, we've been talking with Blackstone over the last 1 year on this transaction as we understand. And the reason we joined hands with them was to try and build this platform to become 1 of India's best and biggest platform. So definitely want to build this out further. Of course, we've got 13,000 beds in the pipeline that we have visibility on. But scaling that up is a joint goal that we have set. Of course, they are private entity and the -- I mean, their end goal even in this would be definitely to exit. As far as the family is concerned, we are here for the very, very long term. But we don't consider this going into becoming quasi private in any way as that would not be the situation. So we'll see more and more public shareholding coming up.

The next question is from Mr. Michel.

Just one question on what would the expanded equity be post merger? And what would your debt levels on a consolidated basis be? How is the balance sheet of the QCIL looking right now? And the second question is, I think that's been answered actually. On QCIL, how many of the hospitals have -- are new so that there is a potential for margin expansion? So those were the 2 questions.

Sunil, do you want to comment on the first one?

Yes. Thanks, Nitin, for the question. On the Aster, you are already aware that debt-to-EBIT ratio is somewhere around 1.9% negative, right, because I have the INR 1,500 crores of retained cash, which is sitting with me. Even if we exclude that, we are at 1.1%, right? When you look at QCIL, I think they also delivered a 1.1%. And both the entities put together, you are generating a cash of more than INR 1,400 crores. We see that with the next 3 years with the -- even the growth plan of 3,300 beds in pipeline for the next 3 years. I don't see -- we should be any problem in either delivering more or with respect to generating more internal [ press ] for the growth bit of it. I would say, with the such a growth coming across because if you look at the Aster loan, we just require INR 1,200 crores, INR 1,300 crores. And in this case, or their case maybe INR 1,500 crores. So we don't expect a major leverage at least as of now, right? But still, yes, we should look out what are the inorganic expansions each of us are looking into. But as of now, from the growth and what we put across, we don't see much of a stress on the balance sheet.

Yes. Expanded diluted equity number post merger from the INR 50 crores shares that you have now?

Hitesh, you want to take it up?

Can you please repeat the question? Sorry.

Your expanded equity post merger from 50 crore shares outstanding now, what would that go to?

Okay. Yes. If that's the question, then we -- actually the swap ratio is 977 Aster shares for 1,000 QCIL shares. And we are looking at expanding to from 50 crores shares to 87.16 crores shares.

Okay. And that includes that 5% acquisition and all that, right?

See this 5% acquisition will involve approximately INR 1.8 crores odd shares, which we'll be issuing it. And as I told you, and we'll be acquiring approximately INR 1.9 crores shares. Their capital is approximately INR 38 crores shares. So once the merger happens, that will get canceled out. But overall, we will be at from INR 50 crores to a moving to INR 87 crore shares.

Got it. And one question for the QCIL team was, obviously, on the Aster front, we had a number of hospitals which were ramping up, and that's why we started seeing improvement in margins. I think the last participants mentioned that QCIL's hospitals are kind of mature. But I just wanted a date from their management to understand what percentage of their hospitals are maybe 2, 3 years old, where there's a ramp-up and potential of improvement?

So great question, Mitul. I think I'll go back and start with the commentary that I gave earlier, and then get to a little bit of a city specific number for you. See, one thing that I said earlier was that we are investing even the growth that we will do or the organic expansion that will come in is actually going to come in, in the same city, if not in the same facility, right? So I'm going to break my answer into 2. We generally look at potential for organic expansion within the same city on premise. And the other one is, of course, your question, which is the ramping facility. So let me go across our network and give you a sense of how we have stacked up. In indoor, it's a mature facility. So as I mentioned, we have a brownfield expansion plan, which takes care of expansion for that city or that micro market. Aurangabad, we have potential for organic expansion. We are already working on it. Hyderabad, we have facilities which -- where we're going to add organically as well as which are ramping up. So again, Hyderabad. And both of these, our blended profitability number is going to get better. South Kerala, where, again, we have potential for organic expansion. Trivandrum, I alluded to. While it's a mature facility but we'll be able to add more beds to the facility. Raipur again, is a little bit of a mature facility, but we have the potential for organic expansion within the facility. [ Chatto ] we have actually potential to grow organically as well as ramp up the facility. Bhuvneshwar, we're ramping up the facility. Vizag, we are ramping up the facility. And Nagercoil, of course, as I alluded to, is a hospital we've just opened, so that too will get ramped up. So that should give you a number -- sense that we've been pretty mindful of the fact that we need to be able to grow the bed capacity across the network.

Just one last one. On for QCIL. On the hospitals that you have, you mentioned that you need to spruce them up. That was 1 comment you made. Just wanted to understand where in that process of sprucing up are you? Because you may have with these hospitals and they needed a makeover. So I think you mentioned the Banjara one is through. Amongst the others, where are we and what is the cost for doing that, that you think, where we would be kind of up and running properly?

Let me clarify that not every hospital needs to be spruced up. So a large part of this network today has the flow. I alluded to the number we take care of more than 3 million patients, so they come to a happy place. Yes, there are certain assets that needed some investment, that's underway, by the way. And majority of the work that we started over the last 7, 8 months is actually looking at completion as we speak. So there's nothing much that we will look at doing going forward. By this year, we should be finished with whatever sprucing work or makeover that we need to do.

The reason I ask you this is, as a brand at least I'm based, Aster has kind of a premium kind of quality, you know what to expect from that brand. So I just want to understand that is something that I think maybe QCIL will get because of this merger. So I'm just trying to understand, going forward, till that merger happens, how are you going to maybe change the brand and things like that? I don't know. There will be a kind of a time gap, right, between the announcement and when it actually happened. So...

So I'm not sure if I'm equipped to answer any of that at this point in time. We operate 3 brands and we will continue to operate those 3 brands in the foreseeable future. And most of your question, I think, is subject to the regulator. And I would refrain from taking that question at this point in time.

[Operator Instructions] The next question is from Mr. Rahul Salvi.

Yes. So this is Rahul from Franklin Templeton. First of all, congrats on bringing such a scale merger and congratulations to our teams on both the sides. My question firstly is on QCIL. So QCIL [Technical Difficulty] which we have shown here, INR 3,600 crores of revenue, do they include KIMS revenue? Or is it for the last 3 months?

Sorry, Rahul, your voice broke off. But you're asking if the INR 3,600 crores of revenue is including KIMS?

Yes. That's my question. Because the acquisition happened somewhere in last December or November.

Yes. But this is the combined.

And then the -- from FY '22 to '24, does all the -- do all the 3 years include KIMS?

That's right, Rahul. It's normalized for it because then only you can -- they will be able to put a probable comparison. For example, in FY '24, there is a pre-acquisition of revenue and EBITDA is also included. That's when you'll be able to see the growth area.

Got it. Highlight numbers, Rahul, so that it helps you all to build your facial models in a much better manner.

Right. And in terms of revenue breakup for QCIL, I saw the revenue breakup in terms of geographies or clusters. What is the EBITDA breakup in similar terms? Or do any 2 or 3 geographies contribute majorly to the EBITDA?

Varun, would you come in on the breakup for the EBITDA, please?

Give me a second...

Trivandrum, Hyderabad is 45%. So is the EBITDA contribution similar or it's very skewed towards Trivandrum, Hyderabad and Dwarka?

So I think let me give you an answer, not city or city-specific or property specific. I think from a network standpoint, CARE network contributes to -- and don't hold me again to the decimal because I'm coming from my memory, contributes about 45% to 48%, 49% of the EBITDA. Then the 30-odd-percent, 35% actually comes in from KIMS and balance probably comes in from Bangladesh.

No, but in the combined entity, what is the -- yes.

Yes, that's where I was coming. But yes, I think you're asking the same question.

Sorry, in the combined entity, which is...

So in the graph which you have shared on Page 20 of the PPT, we have shown that 23% comes from Trivandrum, 22% from Hyderabad and 17% from Dwarka. So similarly, what is the EBITDA breakup of these entities, of these geographies? So is it that most of the EBITDA comes from the top 2 geographies or top 3 geographies? Or how is the split?

Well, the break -- so on the combined basis, and Varun maybe we would like to take up the combined question. On the combined basis, Rahul, the margin split will be kind of largely similar. It will be diversified across different cities. And because Aster also have large assets and, similarly, you can see the KIMS also have and the number of assets that you can see almost like 38 hospitals we are talking about, we're talking about 25, 26 cities, we're talking about 8 states. If that is a kind of presence, the numbers for us are quite diversified. At some of the states might be larger, but I think what we see is the micro market level and especially at the city level. And if -- because I think it's almost not possible to attract patients from 1 large city to another. And I'm talking regions like Kerala and all. So I think if you look at from that perspective, it's fairly well diversified.

Okay. And what is the Bangladesh contribution to EBITDA for QCIL?

On a combined basis, the Bangladesh EBITDA would be less than 10%.

Okay. So taking that question ahead, so considering the situation in Bangladesh, are we able to operate the hospital in a proper manner? Or -- and in the future, is there any plan to divest those assets?

Yes. So Rahul, it's an unfortunate what's happening in Bangladesh. But having said that, our doctors and nurses have been attending hospital every single day. There isn't a day that's gone by in the last 6, 7 months that I've been around that we've had an impaired hospital functioning. Having said that, I think during the crisis, in fact, our hospital has been seen as the go-to place, because a lot of Bangladeshi who prefer to travel outside of the country did not have an option to fly out. And that brought the patients into the finest quality network that exists in a fragmented country, and that's ours. So having said that, if that was the case, I can sure the numbers look good. They have met the budget and they have kept to the growth expectations that we had from the business.

So in FY '25, do you see any hit because of Bangladesh on EBITDA of QCIL?

No.

The next question is from Mr. Rahul [indiscernible].

Very excited with this large-scale merger given that Dr. Moopen are -- Padma Shri Dr. Somaraju built CARE platform, Sahadulla, TPG-led Vishal Bali, and Blackstone's legacy along with Varun Khanna's experience coming together to. So I'm very much confident with regard to EBITDA improvement, given the scale and the talent around. So I have 2 questions with regard to the revenue growth as well as operational structure. So if you look at Aster, they have currently multiple models, including O&M, multi-brand like Aster Prime in Hyderabad, Narayanagiri in Tirupati and Ramesh in Andra. So -- and you guys work more on the cluster approach, while QCIL doesn't. So will the arrangement get rearranged and the hospitals will work on a cluster approach? And will the CARE brand, which is stronger in this market, will that brand will be used? That's one question. And the second thing, on the QCIL front, QCIL has a strong brand in Nagpur, Bhubaneswar and Raipur. And especially in Nagpur and Bhubaneswar there is a requirement of larger facilities. So -- and at the same time, the competition is catching up. So how soon the larger facilities in Nagpur and Bhubaneswar will be up?

I think, Rahul, thank you. I'll just take the first part of the question. So on the -- thank you, first of all, for the kind words. You're right, we've got the legends that have build the brand and the goal is to make it even better. On the cluster part of things, I think I alluded to it in an earlier question as well. We haven't defined what the operational structure would look like. I think that will require some more time for us to really look at management bandwidth on both sides and then discuss what might be the best cluster approach or a region approach. Even on the brand as well, we don't want to jump the gun. Like you said, there are strong brands on both all sites, whether it's Aster, whether it's CARE, whether it's KIMS in each of the micro markets, there is -- you mentioned some of the other cities as well where there is a great brand image that CARE has built up. So we will have to do a much more detailed review to decide, which brand will stand, whether they'll be co-branding and all of those. I think those are things which we'll have to iron out over the course of the next year. Varun, would you like to comment on the other question on the markets.

Sure. Alisha, thank you. So Rahul, thanks for the question, and again thanks for the compliment as well. Your voice tells me that you are a well wisher, who we know well. Rahul, you're right. We've been thinking about additions to the 2 markets that we alluded to, one is Bhubaneshwar and Nagpur and I think strategy hasn't moved much. Bhubaneshwar is doing well. As a property, it's got a 21% odd CAGR, and it's got best-in-class margins as well. And needless to say, again, based on our strategy when we have a property like that, we try and invest in the same property and make it better. And that's exactly how we are growing Bhubaneshwar. On Nagpur, we have our growth plans assessed, but not currently executed. So we will come back as we execute our plans there.

Mr. Harith has joined back to the queue again.

For the existing QCIL assets, the 3 assets, CARE, KIMS and Evercare, I understand there's minority shareholding in some of these. So will you be able to share the minority shareholding in each of these?

Sunil, are we sharing that information now or...

Alisha. We don't have it right away. We will be able to share it offline to them. Not an issue. Harith, we will send it across to you.

But is there a minority shareholding in CARE or Evercare?

No Harith, the minority in KIMS is very small. I think more than 80% to 85% is owned by Blackstone. In Bangladesh, it is almost more than -- around 60% to 70% owned. But yes, there are around 30% minority there. There are some other assets which have small minorities. So yes, combinedly, that's where the numbers may look like, and we will give you the more clearer or exact numbers in due course of time.

Okay. And last one, on the existing QCIL network in India, can you comment a bit about the ownership of the assets, the land and building? Just trying to understand the asset-light versus asset-heavy nature of the network. And in that context, the 70-odd crores of EBITDA that you've shared for FY '24, this on a post-IndAS basis. Will you have the EBITDA on a pre-IndAS basis? And that will be helpful if you can share.

Sunil, would you like to please take that?

No, the first part, Varun, you would like to take up, the asset light on the owned assets bit of it in QCIL.

So we have properties -- a few properties where the properties are leased. But I think details can be sent off-line, is the way I see it. One important part of our network is that we are the operational people for every single hospital that we have. So there's no franchise of any sorts that we currently have in our network. So when I say this, there's no O&M that we have. All of the network is essentially what we've done.

So if you have the a pre-IndAS number?

This is for the QCIL?

Yes.

Approximately INR 43 crores to INR 44 crores per annum. You can reverse that, that's the pre-Ind...

The next question from Mr. Prateek [indiscernible].

Sorry, yes, I just want to check if I'm audible?

Yes.

I have 2 questions. One is, Alisha, you mentioned about integration. I just wanted to check with you, how do you think about cultures of the 2 organizations and the merger of the same? And how should we think about, if at all, there is attrition in the next 1 year when the merger happens? That's question one. And the second question was -- again, I'm trying my luck look, I think if I see the margins of QCIL, they are at 21%. How much would be a drag from, let's say, hospitals which are not mature, the data for which we have in Aster DM? I just wanted to have a same number for QCIL, how much of the numbers would be a drag?

Sure, Pradeek. I'll comment on the first one. I think you have touched upon 1 of the most important aspects, right, on the amalgamation the culture part of it. So we have spent a lot of time speaking to the partners, of course, to Varun and meeting the management teams, and we do believe that the core philosophy is the same, right? We want to do good quality health care. Focus is on Tier 2, Tier 3. Accessible, affordable, but quality health care. So in that sense, there is a lot of alignment in terms of the goals, the value systems. Culture is so much more softer. Now of course, each -- when you have an acquisition-led strategy like what QCIL is now, and you've got CARE has its own culture probably, it's -- you've got KIMS, which has been recently acquired, you've got Evercare, so that will be a process. I think there will be a lot of intense work done to make sure that we are aligned on the people practices. I think it kind of relates to the earlier question somebody asked about that integration. Definitely, system is one, but probably, even more importantly, it would be the people practices and which is where having Varun on one side, Sunil and this integrated management team, led by Chairman, will enable us to build that common culture of care. Varun, if you can comment on the hospitals, which you believe are -- I don't know, if you got that information handy, or if you want to come back to.

I have a little bit to add. So let me give some color to Prateek. Thank you, Alisa. So, Pradeek, I don't have the calculated number, the way you were asking for it, but I can give you a sense of -- and I alluded to this earlier. Of course, we have ramping up hospitals as well. And when you have a network which is ramping up as well, there are 2 things that will happen. One, for the current year, they'll have a drain. And for every subsequent year, they'll have to profitability. So Nagercoil is something that we just opened. Chattogram is something that we are still considering as ramp-up. We've got ramp-up facilities in Vizag and Hyderabad. So these 2 hospitals are scaling up very quickly. They're growing fast and they should start to contribute quite significantly to the EBITDA. And but you have a network of 19 hospitals, you'll always have hospital do better as well. So I think there is, of course, the middle as well, and there is a top which is doing extremely well.

What's the ratio of the lowest one, the ones which are really dragging you down?

To the...

To the reported EBITDA margins of 21%, there would be a certain drag, right? Like they would be low single digits. I don't know understand why...

There are a few. Again, I don't have the calculated number, but there are a few which are currently not contributing and taking away and there are a few which are lower than the blended number.

In the interest of the time, we would like to take the last question. Mr. Sumit, if you can ask the question.

Sir, 2 questions, question. First of all on the QCIL part only. So basically, the ROE over the last 2 to 3 years, has it been upwards of 20%?

ROC? What is it, sorry?

Basically for QCIL only, so the return on equity for over the last 2 to 3 years has been north of 20%.

Hitesh, do you have this number offhand.

Normalized number could be recent, but they also have gone through some of these acquisitions. So for the last few years, whether the numbers will be fully compared from that perspective, we'll have to kind of go back and just get the right information for you on how the normalized numbers can be seen, Sumit.

Okay, okay. And lastly on the free cash flow, like what -- can you give a ballpark number how the free cash flow has been over the last 3 to 4 years on a cumulative basis or on annual basis?

So there should not be so much gap between EBITDA and free cash flow. So I think broadly, you can kind of consider similar numbers for both.

Thank you, everyone. So thank you all. This concludes the call for the Aster DM Healthcare. I thank the management and the attendees for joining us today. If you have any further queries or questions, please do get in touch with us. Thank you.

Thank you. Thanks, everyone.