Global Health Limited (MEDANTA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Global Health Limited, also known as Medanta Q3 and FY '25 Conference Call hosted by Centrum Broking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumit Gupta from Centrum Broking. Thank you, and over to you, sir.

Thank you. Good afternoon, and a very warm welcome to all the participants on the Global Health Limited Q3 FY '25 Earnings Call, hosted by Centrum Broking. Joining us today from the management team, we have Dr. Naresh Trehan, Chairman and Managing Director; Mr. Pankaj Sahni, Group CEO and Director; Mr. Yogesh Kumar Gupta, CFO; and Mr. Ravi Gothwal, Head, IR. I will now hand over the call to Dr. Trehan for his opening remarks. Thank you, and over to you, doctor.

[Audio Gap] '25 earnings conference call. I hope all of you had the chance to review the results and presentations that were released yesterday. I will begin by highlighting some of the key clinical achievements of the quarter, following which I will hand over the call to our Group CEO, Mr. Pankaj Sahni, who will provide an overview of our financial and operational performance for Q3 and the 9 months ended FY '25. Medanta continues to advance its mission of delivering world-class health care with Q3 marking another quarter of steady progress and growth. Our focus on clinical excellence, operational efficiency and patient-centric care remains at the core of our success. In Lucknow, we commissioned the Da Vinci Xi robot last quarter, and our clinical teams have set a new benchmark by performing 50 robotic surgeries within the first 90 days, showcasing both the rapid adoption of advanced technology and expertise of our surgeons. At Medanta, Gurugram, our multi-specialty team successfully performed neuro intervention on a newborn diagnosed with choroidal vein of Galen malformation, an extremely rare condition requiring a highly specialized procedure available at only a few centers globally. Additionally, our vascular team at Gurugram effectively managed a complex case of peripheral arterial case using the Stealth Orbital, which is another 360 atherectomy system, establishing a new standard of care with no metal behind approach. That emphasizing long-term vascular health and minimizing the need for future intervention. We are proud to share that our 4 Medanta doctors have been recognized as among the world's top 2% scientists in the prestigious Stanford University Global ranking, a testament to their dedication to advancing medical sciences and delivering exceptional patient care. These recognitions reflect Medanta's continued commitment to setting new benchmarks in clinical excellence and expanding access to advanced health care. Furthermore, our Board has approved a long-term lease agreement for a newly built 110-bedded hospital in Ranchi, strengthening Medanta's presence in the region and enhancing access to high-end tertiary care. Our Noida hospital construction shall be operational within the next 3 to 6 months. And then we have 1,500 beds of greenfield capacity coming up at Delhi-Mumbai market in the next 3 years. With this, I will now hand over the call to our Group CEO, Mr. Pankaj Sahni, to share the financials and operational highlights for the quarter and overall 9-month FY '25 results. Thank you for your indulgence. And Pankaj, can I hand it over to you now, please.

Thank you, Dr. Trehan. Good afternoon, everyone, and welcome to our Q3 and 9 months FY '25 earnings call. Let me begin with the financial performance for Q3 FY 2025. During the quarter, Medanta delivered income -- total income of INR 9,595 million compared to INR 8,545 million same quarter last year, registering a growth of 12%. EBITDA for the quarter was INR 2,538 million, an increase of 8% year-on-year with improved EBITDA margin of 26.5%. Profit after tax for the period was INR 1,429 million, marking a strong year-on-year growth of 16%. PAT margins for the quarter improved to 14.9% compared to 14.5% in the same quarter last year. Overall, our growth during the quarter was primarily driven by a combination of factors, including consistent volumes growth and strong contribution from developing hospitals. Our inpatient volumes during the quarter increased by 13% year-on-year to 44,856 and the outpatient volumes increased by 9% year-on-year. During the quarter, we have added 34 beds and 219 beds were added in the 9-month period FY '25. Our average occupied bed days for the quarter increased by 10.5% year-on-year with strong occupancy of approximately 64% on increased bed capacity. Average revenue per occupied bed for the quarter was INR 61,307 compared to INR 60,571 in the same quarter last year, a marginal increase of 1.3%, largely due to a change in case mix. During the quarter, revenue from international patients was INR 541 million compared to INR 473 million in the same quarter last year, an increase of 14%. Coming to the matured and developing hospital performance update. During the quarter, revenue from our matured hospitals was INR 6,466 million compared to INR 5,875 million in the same quarter last year, registering a year-on-year growth of 10%. The EBITDA of matured hospitals stood at INR 1,617 million, reflecting a growth of 9% year-on-year with a margin of 25%. Average occupied bed days increased by 6.8%, representing an occupancy of 63%. ARPOB grew by 3.3% to INR 67,303 in Q3 FY '25 due to a change in case mix. Developing hospitals. Our developing hospitals, which includes Lucknow and Patna, continue to show year-on-year growth and sequential growth momentum. The revenue from operations during the quarter was INR 3,004 million compared to INR 2,742 million in the same quarter last year, registering a growth of 9.5%. EBITDA from these hospitals during the quarter was INR 1,015 million compared to INR 968 million in Q3 FY '24. Average occupied bed days during the quarter increased by 16.8% year-over-year, representing an occupancy of 64% on increased bed capacity. ARPOB for the quarter was INR 52,502. I would like to share some highlights on the Lucknow unit. We are pleased with the performance of our Lucknow unit over the last few months, marked by a notable increase in patient volumes and revenue growth. Our ongoing efforts to expand market outreach and strengthen engagement with the Lucknow community continue to yield positive results. In line with our stated objectives of serving all sections of the community in Eastern UP, we obtained empanelment with Ayushman, CGHS, Railways as well as various corporates and public sector undertakings. We are proud to serve the patients covered by these schemes and are encouraged by the positive response from the community. Medanta Lucknow continues to be a preferred choice for the highest quality clinical talent. We are continuing our recruitment efforts to enhance our medical teams to fill in any specialty gaps that remain as well as deepen our expertise within existing departments. We continue to invest in infrastructure and advanced technologies to support sustained growth. We remain watchful on our growth in Lucknow and continue to obtain feedback from the community and remain committed to optimizing our operations to manage seasonal variations. Now with respect to Medanta Patna. Medanta Patna has consistently delivered strong performance across key metrics. During the quarter, we expanded our capacity by adding 28 ICU beds, bringing the total bed additions to 112 in the 9-month period ended December 2024. In parallel, we strengthened our clinical capabilities by onboarding over 20 new doctors during this fiscal year. This combination of experienced clinical teams and enhanced infrastructure, coupled with our unwavering commitment to patient-centric care has driven higher inpatient volumes, increased occupancy and an improved case mix, particularly in complex specialties. These factors have collectively supported sustained growth and reinforce Medanta Patna's position as a leading destination for complex medical care in this region. With respect to various projects, in the last 9 months, Medanta has added over 200 beds across matured and developing hospitals. This includes approximately 50 beds in Gurugram, 112 beds in Patna and 58 beds in Lucknow. The construction of our 550-bed hospital in Noida is in full swing, and we are expecting to commence business operations within the next 6 months. Yesterday, I'm pleased to report our Board has approved a long-term lease for a newly built 110-bed hospital strategically located just 1.2 kilometers from our existing facility in Ranchi. This expansion reinforces Medanta's commitment to delivering world-class health care in Jharkhand and the Ranchi region. Spanning 1.33 acres with a built-up area of 108,000 square feet, this state-of-the-art facility is equipped with advanced operation theaters, high-end medical technology. Designed to enable the highest level of tertiary medical care, this new hospital will bridge critical gaps in the region's health care services. It will expand our medical capabilities, which have been constrained by the existing infrastructure in our existing Ranchi hospital. As we operationalize the new hospital, we will optimize specialties and services across both sites and introduce key missing medical specialties and treatments to enhance patient care. Overall, we have roughly 1,000 bed additions planned over the next 2 years, including Noida and the remaining expansion, which is happening in our existing hospitals in Lucknow, Patna and now Ranchi. We also have 3 major greenfield projects underway, comprising approximately 1,600 beds. These include Mumbai, Oshiwara 500-plus beds, Pitampura 700-plus beds in Delhi and our South Delhi project in Greater Kailash, which is about 400 beds. These projects are in various stages of approval and construction and will take 3 to 4 years to commence. With this, I request the operator to open the line for questions. Thank you.

[Operator Instructions] we have our first question from the line of Amey Chalke from JM Financial.

Congrats to the management on a good set of numbers. I have first question on the performance which we have shown in developing hospital that the occupancy has gone up to 64% during this quarter. Should we consider this occupancy as a base case going ahead? Or is it sustainable? Or you expect this occupancy to normalize in coming quarters?

So I think the question was related to the occupancy percentage in Lucknow and Patna. Am I right?

Yes.

Yes. So I think that 2 points, as we may have mentioned in the past, and I mentioned also on the notes, we do continue to add beds in both Lucknow as well as in Patna. In fact, in Patna, we do anticipate additional beds coming on board in the next couple of months as well. So occupancy as a percentage may be a little inappropriate to just look at as a single metric just because of the fact that the denominator keeps changing with respect to the bed additions. However, if you look at the actual occupied bed days, you can see that the actual occupied bed days are also increasing. In fact, we have seen an increase of about 16.8% in the occupied bed days or the inpatient volumes, whichever way you want to look at it, more or less, they transfer to the same thing. And that has actually gone up from about 48,026 in Q3 FY '24 to about 56,089 in Q3 FY '25 and even sequentially, it is up. So we do believe that the volumes and the occupied bed days will continue to increase. I guess the absolute percentage is a little bit a function of how the denominator changes. So my only caution would be don't look at the percentage number in absolute terms. Keep in mind, as the bed additions are there, the percentage numbers may vary a little bit. But yes, we are very bullish on both the units. And we actually see a fairly strong demand in terms of our Patna unit as well, which is just now coming into about 3 years of operations. In fact, we are kind of really pushing to get additional beds there because the hospital is quite full on both the ICU as well as in the ward.

Just to summarize, it's fine to assume that the occupied bed will continue to increase in coming quarters?

I mean, I don't want to tell you what assumptions you should take. But of course, we are very strong believers in the fact that, that will increase.

Sure. The second question I have, we have onboarded 49 doctors in 3Q. Is it possible to give breakup of this doctors in what all facility units they have been added? And is the cost fully baked in during this quarter?

So I mean, I don't have that off the top of my head. What I can tell you is that the bulk of the doctors have come in, in this particular quarter in Lucknow and in Patna, obviously, because those are still the more growing hospitals. However, if you look over a 9-month period, you will notice that even our Gurugram facility, which is a 15-year-old facility, has added in 50 beds. And I believe I forget exactly which quarter it was now. But even in a couple of the prior quarters, we have also been hiring in talent. I can also tell you that our plans for -- as we move forward, not only in the next quarter, but also in the next full fiscal year, will include hiring in all the units, including our Gurugram unit. And this is done for 3, 4 reasons. The first, of course, is that in some cases, we have to fill in the gaps like adding in specialties, which may be missing. In certain other cases, you are adding very niche or expert capabilities. So for example, you may be having a particular department, but you may not have a robotic surgeon in that department. So you may add a robotic surgery capabilities. And then, of course, you are also adding because we have huge capacity, so we are able to occupy this or there is good talent that is available in the market, and we always like to keep our eye on talent. So what I would say to you is that doctor recruitment and clinical talent additions will continue in all the hospitals. Obviously, the cost of that depends on the kind of talent you're bringing in, the specialty, the nature of the market, et cetera. But for the most part, if you look at our manpower cost to revenue ratios, you see that they are doing quite well in terms of the overall cost. Our -- I think we are -- across the industry, we performed quite well on the manpower cost to revenue ratios. And when you look at Noida, of course, which will come on board in the coming months, there we will definitely see a much higher cost of hiring because that will be a new unit. So we'll bring in all the clinical talent and not only clinical, we'll be bringing in all the talent. So next maybe 6, 9 months, you will definitely see an increase in hiring in the group, and a lot of that will be because of Noida starting.

We have our next question from the line of Prithvi Raj from Unifi Capital.

Yes. So my first question is on the new hospitals, I mean, business. We continue to see a sharp turnaround here. Was there any seasonality factor that pushed up the numbers in this quarter? Or is it all due to the various corrective measures that you have been taking in the last few months, and it is all organic growth that we witnessed?

So the only thing that I would caution before just blanketly using this word seasonality is that it means different things in different cities, and it means different things for different natures of hospitals. So to give an example, we had during Q2, a significant amount of patients in some of our units with respect to dengue and some of the seasonal diseases, but that did not necessarily happen in the other units. So it varies across the board. So each unit has to be looked at slightly differently and seasonality plays a different role in each unit depending on the nature of the case mix, et cetera, over there. So that's just one word of caution in general. The second thing is that you see the way in which we look at it is that there's a bunch of activities that we had mentioned now on the last couple of earnings calls that we had taken to arrest some of the concerns that had been highlighted specifically in Lucknow. And those included, as I had mentioned, outreach to the community, clinical talent, additional growth, investing in infrastructure and technology, et cetera. All those activities, obviously -- we continue to do, in fact. But all those activities actually, we started to see taking shape towards the middle half of the calendar last year. And what you're seeing is just simply a reflection of that in the numbers that get reported out on a particular quarter, but it's not like all those activities started only on October 1 and ended on 31st of December. Obviously, they continue over the period of time. So I don't think that there is only a seasonality impact. We have definitely taken very active measures across the Lucknow unit. At the same time, there is, of course, seasonality in all the various quarters depending on what you look at. That's with respect to Lucknow. Now when it comes with respect to Patna. Patna, yes, there are, again, some seasonality factors in the Q2 with dengue and some of those types of things. But I think in Patna, the real thing is capacity enhancement. So as and when we've been able to add in beds, we've seen that the volumes have grown and some of that is because we are actually quite fully choked up in Patna. So Patna, a lot of the growth has come from clinical talent, from infrastructure and capacity enhancements. We are about 470 beds there now. We are adding in another 30, 50 beds over the course of the next few months. And then we actually will have the second tower also getting built out. So that should add another 150, 200 beds hopefully. So a lot of the growth, I would say, in Patna is very typical of newer hospital growth. As and when we are providing the capacity and bringing in the talent and technology, we are seeing growth. So that's a little difference between both the units is how I would look at it.

Okay. That's quite helpful. And my second question, could you give us the number on scheme patients for the Lucknow facility? And how will this number evolve going forward?

So I don't have off the top of my head the exact number for the scheme patients for Lucknow. What I can tell you is that our overall sales mix has a pretty low percentage. I think just about around 10% of our patients are towards the scheme business. And by far, the largest base of scheme is in Gurugram because we've been doing it for many years. So I would assume that Lucknow would be even below 10% of the scheme business on an overall basis. I'm told by Yogesh and the team that it's probably around 4%, 5%.

And can we expect eve this to move towards 10% kind of number in the next 1 year?

I'm sorry. So just one more point before I answer that question because I think it's a little important, especially in context of what we're seeing in Patna. There is an implicit assumption that the scheme business may not necessarily be high realization business. And what we have seen in Patna with our PPP business is that there is actually a pretty healthy realization of that business. So I think this idea that all scheme business is low realization business is not necessarily true. I think that -- again, it's different for different types of hospitals. Obviously, we do very high-end complex care. And it is also different in each specialty. So realizations, for example, for scheme business in certain departments like, say, cancer or cardiac may actually be pretty healthy, whereas in some of the maybe more secondary care-oriented specialties like ENT or plastic surgery may not be that good. So it really depends on the sales mix of this scheme business with respect to the specialty. And that's an important point. The only thing that we have seen on this business is the length of stay tends to be a little bit longer, and that may affect ARPOB as opposed to ARPP because of length of stay. And the fact that to the extent that the scheme business is credit business, that may be reflected in the debtors on the balance sheet as opposed to the realizations in the P&L. So I think these are the 2, 3 things that we said. In fact, last couple of months, we worked quite actively to reduce the length of stay of our scheme business, especially in Patna, and we've had some good success in that. But other than that, just one word of caution so that we don't assume everything is lower. Tariffs are lower, but realization is not always the case. Sorry, you had another question. I interrupted you.

Yes. Understood. So my final question is on the international piece. Medanta didn't focus actively on the international patients in the last couple of years, and it's almost at 6% of your volumes. So do we see any further improvement there or the focus continues to be on the domestic patients?

So I don't think it's necessarily correct that we don't focus on international business. We do very much focus on international business. I think that the reality is that given the physical locations of our hospitals, international business is really restricted only to our Gurugram facility. We don't really get international business in Lucknow, Patna, et cetera. We do expect that when Noida comes on board, that will also become a potential facility for international business, and we will, of course, be focusing on that. If you look at the international business, specifically only for Gurugram, I think it would be significantly higher than 6% of the top line, maybe closer to 10% to 12%, which seems to be more or less in line with the industry. So I don't think that's not that we don't focus on it. I think that it's a question of the nature of where our facilities are and where international patients are. 6% is what you're looking at is basis the overall group revenue, not the individual unit revenue, so that's one. The second thing is that I did mention in the call, we have actually seen growth of international business about 14% when you look at year-on-year over the quarter. So we do see growth in international business. One of the challenges, I think, on international business, not just for us, but for the industry is that Bangladesh was always one of the leading countries sending patients for international medical care to India. That, of course, given the challenges that we see and what's happening in Bangladesh, has taken a little bit of a hit over the course of the last several months, maybe half a year or 9 months. And to the extent that we do assume that, that will eventually stabilize, we should see that also coming back. The good part for Medanta specifically is that we're seeing a lot of flow coming in now from countries that weren't always necessarily that popular for sending patients to India, countries from Africa, countries -- from CIS countries. So historically, the biggest drainage has been from countries like Bangladesh, Afghanistan and Iraq. Obviously, Afghanistan is closed. Bangladesh is under a little bit of turmoil right now. So we are seeing this pick up in other countries, which is good news, not only for us, but for the country and for the industry as a whole.

That's all from my side, and congrats for the phenomenal turnaround of Lucknow business.

We have our next question from the line of Tushar Manudhane from Motilal Oswal Financial Services.

And congrats for the good set of numbers. Sir, while there has been interestingly good pickup in terms of, say, occupancy or even in terms of revenue and profitability for developing hospitals, the ARPOB is sort of witnessing a bit of downtrend probably due to higher patient flow from Patna. So where do you think this ARPOB will settle maybe in FY '26 as the proportion of Patna continues to increase further? That's my first question.

Yes. So if you look, Tushar, at the ARPOB for the developing hospitals, you are right, it is, I would say, a little bit down from same quarter last year, about 2% down, hovering in the INR 53,000 -- INR 52,000 range. This is, to some extent, linked to the PPP business in Patna and may also be a little bit linked to the scheme business, which if you look last year, we didn't really have Ayushman, CGHS, et cetera. One of the bigger things is really less around ARPOB and more around length of stay. So if you look at some of the challenges which we have with the length of stay for some of the scheme patients, it tends to be significantly higher than cash patients. And that actually, because of the basic math, ends up being a little dilutive towards ARPOB, although we may not have seen actually a reduction in average realization per patient. So our average realization per patient actually continues to grow, and that is not so affected with the scheme business. It's really around managing the ALOS, which then drives up or down the ARPOB. So that's one important point to note. That being said, we see that the PPP business still is not at the 25%, which we had said would be kind of the -- as per our agreement in Patna. It's still significantly lower than that. I think it's somewhere around 13% to 14%, if I'm not mistaken. But that will -- that may grow depending on whether the government sends. And we may also see some increases in the scheme business in Lucknow as we continue to add in the scheme business there, which we had always said that we would start this financial year. We are not, frankly speaking, overly concerned about the ARPOB as long as the realizations are healthy from an ARPP point of view. So as we continue to work on ALOS reduction, ARPOBs will grow. And then the other thing that I just wanted to mention is that we have been now operational in Lucknow for 5 years. We have not taken a single tariff increase in Lucknow. This January, we would have been operational in Patna for 3 years. We have not taken a single tariff increase in Patna. So a lot of our insurance contracts, a lot of our cash patients, a lot of our other corporate contracts are still running on 5-year old tariffs in case of Lucknow and 3-year-old tariffs in case of Patna. So we do have these opportunities available with us. But like we've always maintained, we try to drive as much growth as possible through volume. But we'll, of course, keep in mind what -- how the market dynamics play out to look at what we should be doing on tariffs and realizations.

Got you, sir. Sir, secondly, on Noida, it seems just a bit of delay in terms of commencement of outpatients. Any particular reason you would like to call out?

No, I don't think there's any delay. If you look at the hospital, we started construction in September 2022. So we hope to be live by the summer of this calendar year 2025. So if you really take it, it's less than 3 years, which is pretty fast time for construction. We were hopeful to get it operational by March. It looks like that may be a little bit more towards the June, July time frame. But I don't think there's a very significant delay. Broadly, we are on track. Obviously, we all want it done faster so that we can ensure that we're able to serve the patients as soon as possible. Very strong demand for the patient community there as well as very positive feedback from the clinician community to join us there. So we're all quite excited about Noida, come along quite well. Of course, the sooner it opens the better for everybody.

Got it, sir. And thirdly, just on Ranchi, where we already have our existing hospital, if you could just share in terms of the industry perspective at Ranchi, which sort of gave you this or compelled you to get into tie-up for another hospital at Ranchi.

Sure. So we have a hospital in Ranchi. It's approximately 200 beds. The infrastructure of this hospital is very, very old. And in fact, what we realized was that over the last couple of months, almost maybe a year, we found that there has been a very strong demand for certain services in Ranchi. We've struggled a little bit with the existing infrastructure in terms of scaling up, especially scaling up some of the kind of work which we do. Like we wanted to add another 20, 30 ICU beds. We wanted to add the capabilities of more advanced procedural work. Currently in Ranchi, we don't do any cancer work. So we don't have space actually to put up a medical oncology unit. We don't really have surgical oncology. Our dialysis is running full in all the shifts. So we were actually quite constrained in the physical infrastructure of the facility. And also given the age of the actual infrastructure, quite a bit of renovation needs to be done. Now in a running hospital, which is quite busy, doing some of these changes is hard. We were fortunate to be able to find an existing hospital fully baked. I think we had some pictures in the investor deck as well, state-of-the-art operation theaters, which can do all the complex work we do, state-of-the-art cath lab, MRI, et cetera. So all of this is ready-made for us. So we thought that it's a great opportunity to kind of create a little bit more of a campus connection and scale up from 200 beds to maybe hopefully 300, 350 even if possible. And what this allows us to do is it gives us some time to actually take shutdown of a couple of floors, renovate the old building properly and then revitalize that as well. I think the biggest thing is that we will be able to start oncology, which we have not been able to offer to the people of Ranchi so far. And given that it was so close to the existing hospital, I don't want to use the word hub and spoke because that also may be too far, I think it's really 2 sites, same campus kind of feeling. And we've had a very phenomenal response in the last couple of years post-COVID in Ranchi. And these are the kind of places which need the kind of quality of care that we can give. So I think it fits very nicely with the idea of expanding in beyond 200, to make it around a 300, 350-bed campus across 2 locations that are, frankly speaking, very close. So we'll be able to get all the operating synergies. It will be run by the same team, et cetera. So it made complete sense for us to do, and we were lucky to get a very nice ready-made facility, which we hope to operationalize very soon.

Got you, sir. Just one last one this. So how much investment you would be requiring on this and like what kind of sort of rent or revenue share you would have with the existing partner -- existing partners.

So it's a straight rental agreement. There is no revenue share. Obviously, it's -- we are lucky that we believe that we've got it at fairly good commercial terms. It's a 15-year lease, extendable for 2 more additional periods of 15 years. So that makes it a 45-year lease. What we've decided to do just because we believe that we may be better suited to manage it, we've decided to buy over the existing equipment from the landlord that had already been put in there so that we can kind of integrate that with our own balance sheet and our own management system. So we will be spending somewhere around maybe INR 20 crores to INR 30 crores to buy over all this equipment. And then we've kept a buffer for maybe another INR 20 crores of additional equipment investment, et cetera, that we may want to do as and when we get -- move forward. So I would say, overall, the complete investment should be under INR 50 crores.

We have our next question from the line of Nancy Yadav from Allegro Capital Advisors.

Congratulations to the management for a great set of numbers. I -- most of my questions are clear. I just wanted to get 2 numbers. Sir, could you firstly tell me the net debt or cash position of the company currently?

Yes. Let me just quickly hand over to Yogesh. I think he'll have those numbers with him.

Overall cash position of the company is INR 1,085 crores and the debt -- gross debt is INR 321 crores.

Sorry, sir, could you please come again?

I'm saying that cash in hand -- position -- cash position is INR 1,085 crores. And then debt is INR 321 crores.

Okay. Sure. And also, sir, could you help me out with the Ind AS 116 adjustment number?

Ind AS 116 adjustment, I think it's not very different from the last year. I don't have the number right now ready with me. You can get that from the last year financials.

We have our next question from the line of Madhav from Fidelity.

I just had a couple of questions. The first one was last year in quarter 3, Lucknow had obviously seen very strong seasonality related to dengue cases, if I remember correctly. Could you give some qualitative sense in terms of whether that intensity of those cases this year was similar, higher or lower, just to get a sense in terms of how that played out?

Yes. So as we have mentioned many times, obviously, disease doesn't follow the neat quarterly reporting that our financial community forces us to get into. So actually, dengue typically starts depending on the -- or it's not only dengue, right, dengue, chikungunya, sometimes it's some of the other seasonal diseases with respect to the summer like gastroenterology, et cetera. These typically start sometime in the summer depending on as and when how the rains and what the environment is. And they continue on. So that could be sometimes July, sometimes August, sometimes September. And that continues on depending on how that season goes away and we get the winter season come in, whether it is October, November. And frankly speaking, it's also affected basis when Diwali and some of the other festivals are. I think in last year, the impact of dengue in Lucknow was significantly higher than what we saw this last year -- last 9 months. But the impact is typically not Q3, it's spread out over Q2 and Q3. So I think that a little bit lower impact this time around compared to last year, but I just want to caution, you're not -- you should not only look at Q2 and Q3, but maybe if you combine Q2, Q3, that could be more appropriate to look at it.

Got it. And in the developing hospitals, in terms of seasonality, last year, quarter 4 occupied bed days have come down a bit versus quarter 3. So giving you that seasonality plays out differently for our different facilities, is usually quarter 4 for our sort of developing the 2 key facilities, is it usually a softer seasonality versus quarter 3? Or how should we look at it?

We mentioned this, I think, last year. And if you look at Lucknow -- of course, Patna is a little different story last year because it was really growing from 200 beds to 400 beds. So I don't think Patna is in a stable enough state to make a fair assessment. But Lucknow, a little bit more stable, although we did grow from about 430 beds to about 700 beds in Lucknow as well. Last couple of years, we have seen Q4 being a little bit softer than Q3 in Lucknow. In fact, in the case of January, February, March 2024 significantly softer, but I don't think all of that was seasonality. Some of that we clearly now know was some of the challenges that we had in the unit. But even if I go back to January, February, March 2023, we did see that as a little bit softer than the previous 2 quarters. So whether this is a clear trend in Lucknow that Q4 is softer or not, I think still we need to wait it out and see because it's been a couple of years where we've been adding in beds and then I think this will get a greater sense. What I can tell you is that it, a little bit, depends also on how the winter season plays out, is it very cold. One thing that my assumption is -- and again, it's still -- it's an assumption which we are still testing, is that I think that the quarter 4 plays out a little differently in places like maybe Delhi, Bombay, Bangalore than it does in places like Lucknow, Patna and some of the other Tier 2 cities. But I think this will -- we will figure out over time, and we will also see the performance of various players who have now ventured into some of these places, maybe following us into these kind of cities. And we'll see whether that makes sense. I know many people don't report out unit-by-unit numbers. But my hypothesis is that the metros may perform a little bit differently with the sales mix, as compared to some of the other areas. And depending on the demographics, the disease patterns in those cities, you may find some changes. Today, you don't really see too much seasonal diseases in places like Delhi, Bombay, Bangalore. It's a lot more the non-communicable diseases. So I think it depends on the city to city and how the medical disease pattern changes over time, as those cities develop.

And if I can ask one last question. The Noida facility, which starts in 6 months, would you be able to hazard a guess in terms of what could be the EBITDA breakeven time line for this facility given it's a greenfield one? I know it's early days, but any sort of broad sense in terms of how year 1, year 2 could play out, that would be helpful.

So I -- you may have noticed on some of my previous calls or statements, I tried to make a point never to hazard a guess and especially never to hazard a guess on what the EBITDA will be. I think our focus has always been let's try to deliver the best quality of care that we can and let the numbers kind of speak for themselves from that point of view. So I don't have any guidance for you, I'm sorry, on what the EBITDA would be in Noida. What I can only tell you is that we do intend to look at operationalizing and running our Noida facility with the same dedication and focus towards delivering exceptionally high-quality and high-end tertiary care. Now this means 2, 3 things. The first thing that it means is that, obviously, we will be looking at very highly capable and highly talented clinicians, bringing in a workforce that allows us to do that. Obviously, that workforce has a cost. Like with any new facility, there is a certain time that it takes to get ramped up. If you look at our history in Patna and Lucknow and even frankly, if you go back many years in Gurugram, we have been very, very fortunate that we've been able to obtain breakeven or even profitability on an EBITDA basis in a very short period of time. But I don't think that, that is -- it is a reasonable thing for any management to plan for EBITDA breakeven in 6 months or 1 year or even 18 months. So our models continue to assume that it takes a couple of years to break even in any facility. And if you can do better than that, then that's great. But I don't want to take a chance to guess that, yes, we will be EBITDA breakeven in X months or y months.

[Operator Instructions] The next question is from the line of Bansi Desai from JPMorgan.

My first question is on Gurugram facility. So we've seen a decent improvement in occupancy here year-over-year for last couple of years. We've added 50 beds here. How should we think about optimal occupancy for this particular unit? I understand our infrastructure layout for Gurugram hospital and for that matter, all our hospitals is quite different compared to peers. So how should we think about optimal occupancy levels? Will it be difficult for us to reach 70%, 75% occupancy levels? Or do you think that's achievable with our specialties or exposure to specialties that we have?

So I think let me answer that question in 2, 3 ways. First, if you look at -- and I'll step back from the occupancy percentage number just for a minute. If you look at our overall inpatient volumes over the course of the last 4 years or so, you see that we have been able to get a CAGR of double-digit growth, I think, somewhere around 10% plus volume growth just on inpatient volumes in our Gurugram facility over the last 4 years. Now I also may have mentioned in some of the earlier calls that we didn't even take tariff increases. So a lot of the revenue growth, which you've seen up until maybe the last couple of quarters, was fully driven by volume and then some amount of sales mix and realization improvements. And it's only really last year that we took some tariff increases. So you are seeing some amount of the revenue growth driven by tariff, but still a lot of it coming from volume growth. So we do intend to continue to drive the growth as much as possible through volume additions. Now the reason that I say that occupancy is not necessarily a stand-alone metric is -- I forget now whether it was Q2 or whether it was Q1. In the last 9 months, we have operationalized a 60-bed chemotherapy ward in our Gurugram facility. And that actually took our existing census beds, which were night stay beds, and we shut them down and renovated them and reconverted them to daycare. So what happens with daycare is that there's no patient at night, so the occupancy statistics look different because you don't consider them at midnight occupancy. So we won't actually be overly worried about what the percentage number is as long as the volumes continue to grow. In fact, there's a lot of demand to reduce length of stay, to move more and more work to day care, to look at the network of clinics. As you're aware, we've operationalized the clinic -- another clinic in our Gurugram area. We may be looking at more of that. So we will look at various means to use the infrastructure and talent we have to deliver care, not only occupancy percentage. We will continue to ensure that we are doing the cohorting and the quality and the specialty management that we would like to try to do without compromising on that to the extent that we can grow the occupancy grade. But frankly, for us, it's much more around volumes -- absolute volumes than percentage.

Got it. So the reason I asked is that in the last 2, 3 years, if I see our average length of stay has remained pretty much same. So what probably has allowed us to -- so to that an extent, the inpatient volume growth is probably reflected in the occupancy increase, except for the fact that you mentioned that some of the chemotherapy beds, et cetera, are not included in our occupancy numbers.

No. So unfortunately, not that straightforward at the macro level. You have to take down specialty by specialty. So I'll give you an example. If you look at our sales mix across specialties, you'll find that oncology business is growing. A lot of oncology business tends to be potentially shorter stays than, say, some of the other specialties. So you will find some changes across specialties in how that plays out. So day care having some amounts of preferences. At the same time, you may find that a lot of the work which we are doing, say, in cardiac or in some of the other specialties are actually quite complex and the length of stay there is sometimes even increasing. So when you get into this, you have to actually look at length of stay specialty by specialty. Now is there an opportunity for Medanta to increase a couple of basis points of occupancy percentage? Of course, there is. Do I say that the hospital is full? No, it's not. But I think that we still keep this kind of cohorting and the kind of way in which we fill up the beds as largely sacrosanct, as long as we are not compromising on that, yes, I think that there is opportunities to increase the occupancy percentage. But again, we do that through volume driving, right? If a patient can go home and not stay at night, that's a good thing. So we don't optimize for occupancy percentage and keep the patient in the hospital just because that looks good on numbers. We'd much rather drive volumes. And if the occupancy grows, it grows, but higher volumes with lower length of stay is always better.

Got it. This is helpful. And just extending previous participant's question on seasonality, especially in Lucknow, you mentioned complete trends are like -- you'll monitor those trends. Just if you could comment on how Jan has played out for you? Is it any different from past years in your opinion?

So you are asking me things that will get me into trouble with the regulator if I give you data beyond 31st of December? What I can tell you is that there is definitely a very visible and very strong growth and positive momentum that we have seen in Lucknow and continue to see in Lucknow vis-a-vis where we were, let's say, maybe 9 to 12 months ago. And I think that a lot of that is -- a lot of the efforts that have been put in by the team. And we see that in the response from the community, in the clinical work which we are doing, in the kind of complex work which we are doing, like I think Dr. Trehan also mentioned, amongst really, really fast growth in our robotic program in Lucknow. So all indications are in the positive way. But this is a business which you can't be looking at it only quarter-to-quarter. And you have to keep -- as we learned rightly so, you have to keep connected to the community and you have to keep continuing to serve the community. So when I say that we keep a close trend on -- watch on all of these things, I think that we should not assume that work is over by any means, lots more to be done. And it's also important to understand, we are currently a 750-bed hospital in Lucknow, which is still not complete. Our aspiration is to go to about 950, 1000 beds. We still look at adding in additional clinical talent, still some investment to be done in new medical equipment and medical technology, some of that already underway. You will hear about it in coming months. And we will continue to scale up our beds. We'll continue to add in a complete new floor of outpatient clinics as well. So Lucknow hospital is not complete. It's very big, but it's still not complete. So lots to be done there.

We have our next question from the line of Aman Goyal from Axis Securities.

Sir, my question is related to margin, difference between matured hospital and developing hospital. So if we look at in last quarter, developing hospital reported margin somewhere around 30%, now 33%, where our matured hospital reporting margin at 25%. So what is the key difference between 700, 800 basis points between these 2 hospitals and over the longer term, like in the next 2 years, where we could see the developing margin -- developing hospital could report a margin on an average basis?

So as I mentioned earlier, I try to avoid giving predictions on what EBITDA margins would be. I think that's never a healthy thing to do. But what I can tell you is that our complete corporate costs, our complete overhead costs are currently booked in our Gurugram facility. So what you see reported out may not be reflective of the true operating margins of an individual unit. Our developing hospitals also is not a single unit. It actually comprises 2 units. So -- sorry, 3 units, which is Indore, Ranchi and -- not sorry, developing. Developed hospitals comprises Indore, Ranchi and Gurugram. And our developing hospitals is Patna and Lucknow. So there is some amount of averaging out across the ecosystem. But I think one major point which you look at is that the -- what you see as the developed mature hospital margin is sometimes wrongly assumed to be the Gurugram unit margin. That's not necessarily the case because of the fact that certain costs are booked here that may not be actually completely Gurugram centric.

Sir, another question is on the -- I mean, Max has also entered in Noida with Jaypee acquisition. Could you see any competitive landscape on that part?

See, I think that if you reflect back on what is happening in Indian health care since the COVID pandemic went away, is that the broad perception of actual competitive intensity, depending on which way you look at it, is increasing across the board because there's been far more focus on health care, there has been far more investment in health care, and there's been a lot of excitement with the private equity and the capital markets around health care. So a lot more capital flowing into this industry. So definitely, we do see increased amount of infrastructure additions. We see increased amount of hospitals opening up. And our belief as Medanta is that this is always a good thing. We still have a very, very long way to go with respect to the absolute amount of beds that we have to serve our population and to serve the population in need and that's able to afford. If you look back now several years, there was nothing in Gurugram when Medanta opened. And now people reference Medanta as a medical hub. So what ends up happening -- and the same story is in Lucknow, we started in Lucknow 2 years ago, people asked us that have you gone crazy, why are you in Lucknow and everybody seems to be chasing us into that market. So we do believe that we are trendsetters in this place, in this way. We go where the need is the most. If people follow us into that market, it's very good. It elevates the quality of care for the community. It elevates the accessibility of talent. It creates a draw for both patients as well as doctors in terms of creating these so-called medical hubs. So our belief is actually slightly contrary to what you're seeing. The more people that come to a particular market and create an ecosystem of health care, the better it ends up being for everybody, for the patients, for the doctors, for the accessibility of talent in terms of nurses, doctors as well as, frankly speaking, for the hospitals that kind of do well. Now along with this one word of caution is that in the last 15 years in Gurugram, we have seen many hospitals open and close and some have been sold more than once over. So it's not that easy to run a hospital. It's easy to build a hospital. It just requires some capital. But running a hospital is a hard business and running it with the right values at the right quality is even harder. So we welcome the increase in beds across the system. I don't see any concern whatsoever. And if that adds to the quality of care of the community and expand the base, it's good for everyone.

We have our next question from the line of Alankar Garude from Kotak Institutional Equities.

Sir, first question, you had earlier spoken about starting construction in one half of the land parcel at the South Delhi hospital due to certain legal issues. Now with the soil testing started, should we assume that all the legal issues as well as the pollution-related stoppages have been resolved?

So on the parcel, which we talked about, yes, legal issues -- no legal issues as far as building out. On the pollution, it keeps starting and stopping. So we have started and stopped at least 6, 7 times already. And given to understand right now, there is no pollution-related stoppages, but it depends on how the government changes that. I am hopeful now that we are -- the worst of the air pollution is behind us in the Delhi area. So we should be able to continue on that. So I think if the question is that is the construction moving ahead? Yes, it is. Are there pollution or other related stoppages that may come? That is hard for me to tell. But from our side, the intention is very clear that we will build this out, and that is actually what will happen.

Understood. And similarly, Pankaj, if you can talk about the time lines for the Indore hospital as well?

Indore, as I mentioned in the -- I think -- I don't know which one, it was the last or even before that earnings call, we had some challenges with respect to the legal issues there. That is on hold. It is status quo because the matter is subjudice. I mentioned in the last call that we are exploring other options. Those are actually already underway as well. So I don't actually have a complete clarity on what will happen in Indore. It is definitely a delayed project, which is not great for anyone involved, but we also don't want to do anything, which is not appropriate. So Indore, we are exploring all options. We haven't yet pulled the plug on the deal that we have because we feel might as well keep it open if it's possible to get done. We remain committed to Indore and seeing what we can do there. But yes, this particular site, unfortunate that it's gone into a little bit of delay and potentially, I don't know whether it will come out of this delay or not or we have to look at an alternative. That's what we're looking at it right now.

Understood. So basically, Pankaj, the broader question is, how should we look at the time lines for these 1,950 beds planned to be added post FY '27? So should we assume Mumbai and Pithampur would be more towards end of FY '28 and possibly South Delhi being after FY '28, very broad time lines?

So the 3 hospitals, which is your Delhi -- your South Delhi, your Pitampura and your Mumbai are all broadly on the same time frame in terms of the construction activity, the drawings, the digging of the sites, et cetera. So they all more or less will move simultaneously from our point of view. Now obviously, construction has its own challenges. So maybe one of them gets built faster than the other. But I would say that broadly speaking, see, it takes around 3 years or so. I mean, we hope to get Noida done before that. But it normally takes about 3 to 4 years to build up any hospital. Now which one will come 6 months before the other, that I'm not in a position to tell you today. But I would assume safely that these hospitals are about 3 years or so out.

We have our next question from the line of Anshul Agrawal from Emkay Global.

So sir, my question is on Lucknow facility, given the good ramp-up that we are seeing here, would we be sort of opening new beds here in the next 6 months itself? Would we be reaching peak capacity in the next 6 months in Lucknow?

So I don't think we'll be reaching peak capacity in the next 6 months. Peak capacity will be somewhere around 950 to 1,000 beds. We are currently at about 750. We do hope to add in beds over the next 6 months that you're talking about. Whether it will be exactly 6 months, whether it will be 9 months, whether it will be 50 beds or 100 beds, that I'm not sure. But there are 2 considerations that go into this. One of the considerations, as we start to get towards the closure of the absolute capacity, is whether or not we want to keep any beds in the back pocket for potential future options for new specialties. And the example that I will give you, if you are not familiar with it, is our last floor in Gurugram got completed in April of last year, I believe, which is almost 14 years after the hospital started. Now if we did not have that floor, we would not have been able to start mother and child services in Gurugram. So sometimes you do keep 1 or 2 things in your back pocket basis the specialty and how things are planning out. But I think that the broader point around the fact that we'll continue to build out and finish up the hospital and build out the beds? The answer is yes. We will keep as much flexibility as possible to allow us to plan for future specialties and new kinds of services that we may like to add. Like we don't have a dedicated pediatrics floor in Lucknow, right? Now that is something that we may decide to add in today. If that comes in, then it may change the basic construct and layout. But other than that, I don't think there's any desire to delay any build out.

Great. That answers. The second question I had was for Yogesh sir. Probably if you could just help me out with the CapEx guidance for the next couple of years?

If you see the Slide 25 of our investor presentation, we have already given the guidance. So total CapEx for the next 3 to 4 years is somewhere around INR 3,600 crores and the breakup by project has been given there.

[Operator Instructions] We have our next question from the line of [ Anubhav Sahu from Macro ] Research.

So coming again on Lucknow thing, I think it's a pretty good quarter for us. And I can see you have indicated for 200 beds addition for -- in 6 to 9 months with the flexibility you just talked about. At this point, from a strategy perspective, are you looking for something else other than the unit which you have in Lucknow, whether for this city or maybe in the nearby city like Kanpur?

Okay. Let me just clarify the question. Is your question, are you looking at a second site in Lucknow or looking at Kanpur? Is that the question?

Exactly. Exactly.

So I don't know whether we would be looking at a second full hospital site right now in Lucknow. We will definitely be looking at how to increase our coverage in Lucknow, whether that is through hospital or whether that is through alternative means. We have, in the past, talked about the fact that there are many ways to kind of cover the community, not all of them translate to building a hospital, especially not possibly 1,000-bed hospital. But we will look at increasing the coverage of care that we can provide in the Lucknow city area specifically. As far as Kanpur goes or for that matter, even some of the other bigger or well-known cities in the eastern part of UP, which could include Varanasi, Allahabad, Gorakhpur, et cetera, I've mentioned before, these are definitely on the radar for us. All cities, including Kanpur, including Varanasi, Ayodhya, Allahabad, Gorakhpur, all these cities are of interest to us, given just such a huge demand of health care and an absence of high-quality care in these areas. At this point in time, there is nothing definitive that I can tell you that, yes, we will be opening in this particular city. But all the cities are in play, and we have a very strong commitment to the state of UP and in general to that part of the country. And we will be looking at opportunities to ensure that we are able to deliver our services in all of these various places.

That was the last question for today. And I now hand the conference over to the management for closing comments.

So thank you all for taking the time and for joining us today for our Q3 FY 2025 earnings and results call. Thank you for your insightful questions and for joining us today. If you have any other questions or if you have any other specific information and questions remain unanswered, please feel free to reach out to our Investor Relations team. And we look forward to speaking with you and seeing you all soon. Thank you very much.

Thank you. On behalf of Centrum Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.