HealthCare Global Enterprises Limited (HCG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to HealthCare Global Enterprises Limited Q4 FY '20 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Niraj Didwania, Head of Corporate Development and Investor Relations. Thank you, and over to you, sir.

Thank you. Good afternoon, and a very warm welcome to all participants to HealthCare Global Enterprises Limited's Q4 and FY '20 Earnings Conference Call. Today, we have with us Dr. B.S. Ajai Kumar, Chairman and CEO of HCG, along with the management team, to share highlights of our business and financials. We have uploaded an earnings update presentation to the stock exchanges and also shared the same to our mailers. Without further ado, I hand over the call to Dr. B.S. Ajai Kumar.

Thanks, Niraj, and a warm welcome to all the participants. And thank you for being here. We are pleased to report Q4 and FY '20 earnings with strong resilience amidst a very challenging environment as you are all well aware of it. At the start of the fiscal FY '20, we had an unexpected margin cap on oncology, which not only impacted our revenues and margins negatively, but also affected our ability to offer cross subsidy for making patients affordable to economically-challenged patients. Our initiatives focused towards recovering from this impact had yielded positive results starting Q3 FY '20 and are still ongoing. Now with the world witnessing one of the biggest medical and economic crisis in recent history in the form of COVID-19 pandemic, HCG's business has also been disrupted in the form of reduction in footfalls and procedures across our hospitals, what I call as the collateral damage we have witnessed. However, our focus on oncology, along with graded cost reduction, with support of our employees who have risen beyond their call of duty, has -- not only employees, but also consultant doctors, who have relentlessly worked at frontline in this war on epidemic, helped in minimizing the adversities and maintaining continuing care at the highest level extent possible. And this is a testament of the dedication and commitment of HCG towards cancer patients, even in the most challenging circumstances. As you may all -- some of you may know that we were rated as #1 in India in private enterprise by Times of India. Not only #1, which was our Bangalore Center of Excellence, but also #3 got Borivali Cancer Center in Mumbai as well as our Cuttack center got #6. So we got 3 positions out of 6 even in this challenging environment. While we cannot foresee how things will normalize completely, we continue to maintain focus towards our inflection point and generating returns from the substantial expansion in investments, which should drive strong growth for the next few years. Talking about investments, most of you, as investors, are quite aware, the investment we got from CDC, and people have told me that it was remarkable that we were able to achieve this even in these difficult times. We are very happy to have CDC as our partner. And as you will see, as we come to the Q1 results and all, some of the approach we have taken in various aspects to make HCG a very strong and robust company as we move forward. The uniqueness and inherent strength of our model is being recognized and reinforced, given that in toughest of times, we have completed a large fund raise, as was stated, with a marquee long-term investor. This will not only deleverage the balance sheet substantially, but also can potentially transform the company towards a much stronger and better future with literally being debt free. Overall, we are thankful to our shareholders who continue who believe in us and support us. And not only shareholders, but we are thankful to all our stakeholders, which include our patients, our employees and public at large. And we remain excited about HCG's scale, performance in -- platform in oncology with pan-India presence and are committed on driving value creation for all our stakeholders. Now I will move on to business update for Q4 FY '20. Focus on leadership in cancer care in Mumbai region continues. Borivali center ramping up with 29% Y-o-Y revenue growth and substantial reduction in losses. Patients adopting advanced radiosurgery procedure through CyberKnife at South Mumbai center. Oncology operations addition at Bhavnagar center in Gujarat delivered 200% EBITDA growth with margin improvement of 800 basis points for this center in FY '20 on Y-o-Y basis. Andhra Pradesh region demonstrates strong all-round performance. Existing centers revenue grew 29% in Q4 and 16% in FY '20 on Y-o-Y basis. Vizag center launched advanced head and neck cancer program through Oral Integrative Oncology Conference. New centers in Kolkata showed strong ramp-up with specialized offering, including bone marrow transplant procedures. I request now our CFO, Srini Raghavan, to share the financial highlights. Srini?

Okay. Thanks, Dr. Ajai, and welcome to everyone. As you know, effective April 1, 2019, the company adopted Ind AS 116 lease standards applied to lease contracts existing on 1st April, 2019. The effect of this adoption has not been retrospectively adjusted for the year ended 31st March, 2019, and previous period financials are not comparable. Highlights for quarter ended March 31, 2020. Consolidated income from operations was INR 2,704 million as compared to INR 2,579 million in the corresponding quarter of the previous year, reflecting a Y-o-Y increase of 4.8%. Consolidated EBITDA was INR 377 million, INR 233 million, excluding Ind AS 116 adjustment, as compared to INR 354 million in the previous year in the corresponding quarter. Highlights for March ended -- year ended 31st March, 2020. Consolidated revenue was INR 10,956 million as compared to INR 9,787 million in the previous year, reflecting a Y-o-Y increase of 12%. Consolidated EBITDA was INR 1,722 million, INR 1,145 million excluding Ind AS 116 adjustment, as compared to INR 1,252 million in the previous year. Operating EBITDA for existing centers was INR 1,599 million, excluding Ind AS 116 adjustments, reflecting an operating EBITDA margin of 17.2%. Operating EBITDA loss from new centers was INR 455 million, excluding Ind AS 116 adjustment as compared to a loss of INR 295 million in the previous year. Consolidated PAT was a loss of INR 1,067 million, loss of INR 718 million, excluding Ind AS 116 adjustment as compared to a loss of INR 248 million in the previous year. I now request your attention to Slide #9, please. Q4 '20 revenue grew 4.8% year-over-year. HCG centers grew by 5.2%. Milann centers degrew by 1.2%. Q4 '20 operating EBITDA, existing centers, INR 369 million, 16.1% margin versus 17.4% margin in Q4 FY '19. New centers, a loss of INR 153 million compared to a loss of INR 70 million in Q4 FY '19. Moving to Slide #10, please. FY '20 grew 12% year-over-year. HCG centers grew by 12.2 percentage. Milann centers grew by 9 percentage. Full year '20 operating EBITDA, existing centers, INR 1,599 million, 17.2% margin versus 17.6% margin in FY '19. Our new centers, loss of INR 455 million compared to a loss of INR 295 million in FY '19. I now request Dr. Ajai Kumar to share the operating highlights.

Thank you, Srini. I would like to draw your attention to Slide 11 of the presentation. Revenue split for our business is 94% contribution by HCG centers and 6% by Milann fertility centers. Within HCG centers, Western India comprising of Gujarat and Maharashtra contribute 44% of the total revenues, followed by Karnataka at 35%, East India and Andhra Pradesh at 8% each. Tamil Nadu contributes 3% and North India 2%, FY '20. I would like to draw your attention to Slide 12 of the presentation. Strong growth continues at several existing and new centers in Q4 FY '20. Vizag, 33.4% Y-o-Y; Borivali, 29% Y-o-Y; Gulbarga, 23% Y-o-Y; and Cuttack, 8.8% Y-o-Y. Revenues from new centers was INR 368 million in Q4 FY '20 versus INR 305 million in Q4 FY '19, INR 1,490 million in FY '20 versus INR 956 million in FY '19. Existing center revenue growth, 3% in Q4 FY '20 Y-o-Y, and 7% in FY '20 Y-o-Y. I would like to draw your attention to Slide 13 of the presentation. The ARPOB for existing centers at INR 33,225 against INR 31,171 in FY '19. ALOS at 2.27 on account of trend towards day care procedures and changing patient profile. Operating EBITDA margin impacted with scale up and losses of new centers. Looking at key geographies in Slide 14. And another thing is existing centers operating EBITDA margin declined by 73 bps to 21.1% in FY '20 from 21.8% in FY '19. Now looking at key geographies in Slide 14. Karnataka region continues to do well. The Center of Excellence ARPOB of INR 56,900, with 27.1% operating EBITDA margin. The FY '20 Center of Excellence ROCE improved from 25.8% to 27.1%. Focus on margin and returns optimization across region. With respect to Gujarat region, Bhavnagar oncology ramps up 25% revenue growth and 800 bps EBITDA margin expansion Y-o-Y. EBITDA margin of existing centers at 17% for FY '20. In Maharashtra, Nashik center absorbing expansion cost is returning to original levels of profitability with 22% EBITDA margin in Q4 FY '20. Borivali and Nagpur new centers continue to ramp up with reduction in losses. CyberKnife procedures commenced at South Mumbai center. In Andhra Pradesh, Vijayawada maintains consistent profitability with EBITDA margin of 25.7% for FY '20. Center in Vizag continues to ramp up well. Focus on improving revenue mix through corporate tie-ups. In East India, existing center EBITDA margin of 26.8%, driving improvements in patients and procedure mix. Kolkata center offers advanced bone marrow transplant procedure and ramping up well. Coming to Slide 15, covering key highlights for Milann fertility business. For FY '20, Milann demonstrates growth in IVF cycles of 7.3% and revenue of 9%, with improving profitability on Y-o-Y basis. Whitefield center continues to ramp up well. Leadership in attracting -- attractive Bangalore market. I request Srini now to explain the CapEx and debt highlights. Srini?

Yes, Thanks, Dr. Ajai. I'd now like to draw your attention to Slide #16, please. With respect to the CapEx table, we have implemented judicious control measures with respect to both routine and growth CapEx with most of our expansions completed. Total capital expenditure was INR 147 million, which was largely with respect to HCG centers. With respect to net debt, we closed the financial year at net debt of INR 7,075 million, which includes ForEx reinstatement of INR 64 crores (sic) [ INR 68 million ]. If you exclude that, the debt was flat to marginal degrowth on a quarter-on-quarter basis on account of clear focus on cash conservation. I'd now like to draw your attention to Slide #17. We're not expecting any new centers for next few quarters. We do not have any more committed new centers for Milann. I'd now like to hand over the call back to Niraj, please.

Thanks, Dr. Ajai and Srini for sharing the financial and business highlights. We continue to be in our filing period, and hence, restrain from providing any specific financial or operating guidance regarding the business. The comments from the management are intended to share qualitative perspective and should not be considered as material disclosures or guidance. We would like to now open the call to take questions from the participants.

[Operator Instructions] We have our first question from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.

Sir, my question is, if I look at our oncology business, I mean as a specialty player, as opposed to a generalist or a multi-specialty player. One, I would assume that the risk of COVID for a patient is much lesser as he comes to our center. And cancer patient who is needing chemotherapy or even who needs to do surgery cannot postpone it for a long period of time, as the risk of deterioration would be far higher than that of COVID. So from your -- the way the business has been moving in the last few months post COVID, can you give some color on what kind of footfalls that we have seen? And to combat that, what is the kind of cost initiatives that you have also taken to basically minimize the impact on EBITDA?

Yes. Sudarshan, thanks for that question. As you all know, when the COVID situation hit in March, and you are absolutely right, I call it the collateral damage. See when the announcement was made and entire country was locked down, there were no transportation, travel and fear was gripping the entire country, which included even cities like Bangalore, Delhi, Mumbai. So this complete lockdown, hardly any movement, people who require treatment, who are on actual treatment also stopped coming because there were no mode of transportation. And unfortunately, till the message came, even the police and the system was not allowing people to travel. In fact, at HCG, even in all our centers, we had to arrange our own cars and vans to bring patients. Obviously, people coming from distance did not come. And so that created a significant drop in the footfall of not only new patients, but existing patients. But what happens with the new patients is there is a ripple effect, because when a patient, let us say, identifies a lump in the breast or a pain in abdomen, they tend to postpone because how can they go to hospital. They usually go to multi-specialty hospital. They think it is, okay, it may be COVID patient, I don't want to get COVID, so I don't want to go to hospital. So they don't -- they even postpone. This has been written up not only in India, but this kind of collateral damage has been written up across the globe. So even New York Times recently had a large article about it. There was a big news channel which talked about it. So it's a global problem in terms of collateral damage. But we have seen that in our HCG group, in the month of April, we saw that -- we will be giving out some details during the Q1 earnings but suffice to say at this time, the month of April, we saw a significant drop. It started picking up by June. And now it is somewhere around 70% to 80% we are reaching. But our international, as you know, part of HCG group and several other multi-specialty hospitals outside are dependent on international quite a bit. That has completely dried up with no international travel or no transportation also. So we have to look for normalcy to come back. It will take several months. We don't have visibility on COVID itself. As we know, COVID number of cases are reaching a very peak. Maybe they are peaking out. But when is it, it will become normal? When will people start traveling? It's not just the government allowing travel. People fear coming down and arriving is another issue. In answer to your question, whether COVID hospitals, we being a non-COVID in most of our oncology centers, yes, but still, cancer patients are more susceptible because of the immunocompromised status. Fortunately, HCG being in the forefront has taken extraordinary precautions, not only with our doctors and nurses, but with all the patients. So it has worked fairly well, even though we have had cases. But what other hospitals are seeing where the personnel are not coming, we are not seeing, fortunately, knock on wood, and our doctors and nurses are coming, and we have taken care of them. So this is a positive step. And hopefully, in the next 2 to 3 months, this will become history, and we'll see some definite back to normal situation.

And sir, on the cost side, I had asked. I mean now we understood this from the footfall side, it is down. So to combat or offset that, what have we taken?

No, you will see in the report when it comes in the first quarter, we have taken lot of measures which was directly related to our revenue. When the revenue is down, obviously, we have to do a lot of belt-tightening. We have done, so that our model has been not to go into a negative field. We have not gone. So when we give out the details, you see that we are -- we stayed positive and we'll continue to be so. And so we have managed, I think, one of the -- very effectively, I would say, we have managed the situation, considering what kind of a mammoth problem we are facing as a global epidemic.

Sir, my second question is, now that the Board has approved this fundraising through issue of shares through the investors. I mean now what is the process? How long does it take in terms of getting the money into our book urging the debt? And if I'm correct, it should also trigger an open offer. So where are we on that side, sir?

Yes. We are waiting for the -- actually, all the Board meeting and all has happened. So we are -- things are on track. And the only -- for us to use the funds may take another 2 weeks depending on the SEBI giving okay for the open offer. Once the SEBI is in the final stage, so if they give the open offer, we will automatically be able to have access to the money. So it should take another 15 days or so. That is what we have been told. But of course, we've been told. So sometime in August, all of this will fall in place.

We have next question from the line of Chandramouli from Goldman Sachs.

So the first question is, now that the transaction has been announced and in the near term you're expected to get capital in your books. I just want to understand, like how should we look at the put option exercised by Dr. Kamini Rao? At what point do we think that does not become an issue anymore? And how are we looking at forward CapEx in the context that you said that there's not too many new facilities planned over the next few quarters?

Yes. Chandramouli, as you know, regarding the put option, we have time till October. We have discussed this with our new partner, which you're well aware of. So once they come on board, the discussion will take place with Dr. Kamini and a resolution will happen about the put option. And we have -- if the funding is coming in, I think we should be able to address this issue effectively. There should not be a problem. Regarding the CapEx, yes, we have set an unfinished project, particularly Gurgaon project and some small project in Kochi. We have appraised our new investors of that. So we intend to complete those projects in a time line. Apart from that, there may be some small replacement CapEx. We have also worked out, and the details will follow possibly as the first Q1 results are announced, worked out some details about pay-for-use model, where our CapEx spending may be less. So with all these models coming in, going forward, as you know, you saw in the Q4 itself, we controlled our CapEx significantly, in fact, very little or no CapEx. We feel very confident, with the oncology knowledge we have, with the way we have structured and innovated the environments, we will be able to control significantly our CapEx in the future. And our goal is very clear. It is -- debt reduction is our main goal. Substantial debt reduction will happen, as our CFO also indicated. And with that debt reduction, we intend to have positive free cash flow post-COVID period. With that is where we will make any CapEx or any new investments. So we are very clear going forward, we will have a very low debt. Personally, I will feel it will be good if it is debt-free. I don't know whether we can 100% achieve that. It may not be a good business idea also. But we want to really reach a level where debt is not an issue for us anymore. Even perception of that is not there. As you know, in the past, the market perception about the debt is because of the change in the macro environment caused lot of issues. Even though we were very well servicing the debt internally, we did not have any problem. It's a perception always which created lot of issues. And people started predicting a lot of things, which were not true. But anyway, past is past. But looking at future, we have a bright future. We are leaders in oncology. As I said, we are #1 rated. And we intend to grow across India and outside. And we -- and CDC being a partner is very much committed to working with us in this growth story of our HCG. And we are also innovators. We are into immunotherapy. We have recently did plasma therapy in -- for -- which helped lot of COVID patients. So we continue with that academics and research. So the opportunity for us are huge. But it's a question of how much we want to do, how much we want to grow without taking any debt on the book. That is what we intend to do using the free cash flow for further growth -- for future growth.

Got it, got it. That's helpful. Just as a follow-up to that, I think in FY '20, we had about slightly less than INR 110 crores in CapEx. So in FY '21, could you just give us some qualitative commentary on where you think the CapEx plan to be?

Yes. We had budgeted a certain amount, around INR 70 crores, INR 80 crores, but because of new projects, but we are at this point because of the COVID situation, there is uncertainty, Chandramouli, and we have not committed any amount as of now. We are taking it on a month-by-month or a quarter-by-quarter basis. So certainly, we'll update depending on what happens to the COVID situation, how we want to invest in new CapEx or replacement. So we will take it on a quarter-by-quarter basis and update you. Right now, I can't give a definite number because of this macro environment.

Got it, got it. That's helpful. My second question is just a follow-up to something you said on the most recent investor call. So you said that post COVID, the new patient consultation, which is a pretty important metric to track for future patient cycle revenues, that was sort of a little lower post COVID broke out in late March, early April. So now 3 months down the line, in late July, like how do those new patient consultations and those footfalls look? Because, as I understand, that's a pretty important part of your revenue...

Yes, I think we are at about 75% to 80% level. It is also very much dependent on the region. For example, in certain regions, it is better. In certain regions, it is less. And certain -- like, for example, in oncology, as mentioned by Sudarshan also, the patients will have to eventually come. So we are seeing an upside. And in fact, in Karnataka, we are seeing upside in Bangalore until last week's lockdown. So if there is no more lockdown, that is what they've predicted, we should see nearly, in the coming month of August, close to 80% of recovery should happen. And beyond that, of course, it depends on the international patients and others. As far as Milann is concerned, being fertility by elective, obviously, the footfall has decreased dramatically, more than 50%. It may continue to be 50%, 60% for a while till the macro situation improves quite a bit, almost to normalcy, because patients of fertility can always postpone the procedure by a few months. So -- and also there is a fear of COVID, baby getting COVID and all that. Even though we are very clear those sort of things will not happen, but the number of people able to come and get this done has decreased. But we are monitoring it. I think things are improving even there. So we expect that to reach 60% or so in the coming months.

All right. And the 70% to 80% number that you're talking about is on patient volumes? Or is it on top line basis?

It pretty much tracks both. I'm mostly talking about the revenue. The patient volume is also very much close to that.

We have next question from the line of Rishabh Parekh from Sunidhi Securities.

Just 2, 3 questions. One is on, while I appreciate you cannot give guidance, but I wanted to understand how you all are thinking about new center losses going forward in FY '21? Q4 saw a run rate of about -- Q4 saw a higher run rate, obviously. Where do you think that this can end up at in FY '21, considering the current scenario? Second question is -- yes, sure, sure, sure.

No, briefly I will tell and ask our CFO also to answer. We expect, as you know, there is uncertainty in the first quarter. And after the first quarter, if things are going to improve, as we feel, we think we should start most of the centers like Borivali and South Mumbai as well as Nagpur to breakeven sometime in the end of second quarter or towards the third quarter that should happen, that the postponement is why because of this COVID situation. Our Kolkata center is likely to take a little bit more time, maybe towards the last quarter or first quarter of next year, it can breakeven because it's relatively new center. Srini, you want to add anything to this?

Yes. Just one point. Before COVID, these new centers, especially what Dr. Ajai articulated, in terms of South Mumbai and Borivali and Nagpur, they were nearing breakeven, and which was very visible. Once COVID happened, it kind of took a backseat. But as you rightly said, in third, fourth quarter, we should start seeing the improvement provided the COVID situation settles. And then once the breakeven stops, from next year onwards, you should start seeing an upward trend as far as the new centers are concerned barring Kolkata, which might take a slightly longer time.

Yes. Got it. That's very helpful. And Srini, I just had one bookkeeping question for you. Would it be able to -- would it be possible to give us the depreciation and interest number, excluding Ind AS for FY '20?

We can send that out to you. We can send that out to you.

We have next question from the line of Arun Malhotra from CapGrow Capital Advisors.

Sir, I just wanted to understand, you are replacing debt with fresh equity at the cost of the existing shareholders because the IPO was at a much higher price. So basically, it's a value decremental for the existing shareholders. My question to you is what would this new private equity be adding? Is he a financial partner or a strategic partner? How will bringing in equity change the scenario for us going forward, other than paying off the debt?

So I think, first of all, I want to say that this was approved by 99% of the shareholders, okay? So obviously, shareholders who have approved this plan, they feel good about it. And so the dilution is very well understood. I also understand as I'm a major shareholder, over 20%. But for me, the interest of the company comes first. And in this regard, the launch, as to HCG if you know, you are right, we are below the IPO price. In fact, our stock price at one time for the IPO price of INR 200, INR 210 or so had gone down to INR 62, because of the perception and fear that the debt is quite high and particularly the COVID period uncertainty, all the things have added. For us, the important thing was not only the perception, but uncertainty of COVID period. So many things were going on. And we -- and as you know very well, the government, what they have done is only the moratorium they have given. But they have not waived anything. And unlike other industries where they have given some stimulus package and all, particularly for hospitals and health care, they have not given any stimulus. They have not allotted any grants or any funds. And even the employment, everything we have to manage. So for us, the funding gives us a lot of security and reducing the debt is the first thing, which helps us a lot. And going forward, like I said, it puts us in a very strong position because we will be generating free cash flow, which will be used for further growth because without funding, where is the free cash flow? Where are we? What is the situation we're facing, particularly with COVID uncertainty? As you know, lot of centers, lot of private hospitals and part of the association are suffering like crazy and were going through significant issues and some of them, I don't know how many of them will even survive. Because -- but unfortunately, we are in a very good position. We are in a strong position to even grow now because we will be generating free cash flow, and that puts us in a significant growth pattern. And I am sure, in the coming years, the shareholders will be benefited, even though that is not a guarantee in this business, as you know.

Yes. My question was for the private equity. Would they be adding any strategic direction or they are just a financial partner?

No. I think -- yes, private equity, CDC, is a pure financial partner, and they will -- they are a financial partner with a substantial hold -- shareholding. And at some point, obviously, like a private thing, because it's a listed company, they will also be looking at a listing. But it may be after 4 or 5 years.

Sure. So my second question is, when do you think our business model will become self-sustainable? You mentioned that you want to grow without the addition of debt. Now we have already a very substantial equity. If the centers do not generate an ROE of more than 15%, we would again land with -- land up with a problem, either 0 growth or we will have to add on debt to fund the growth. So when do you think -- at what stage this business model will become self-sustainable?

In fact, we have pretty much been self-sufficient. As you know, we have been able to -- even before the COVID period, we were reaching significant -- beyond the self-sufficient model. The only issues we were facing was the Mumbai center and the negative EBITDA from the Nagpur and South Mumbai and Kolkata. But if you look at our centers, which are mature centers, 3 years plus, they generate an EBITDA of -- without corporate expense, close to 200 plus they were, with corporate expense generating an EBITDA of 160 plus. So we were in a strong position, including our EBITDA margins being in the high teens to 20%, mature centers beyond 20%. Our Center of Excellence, best in the industry, 27%. So we have all the ducks lined up. These centers were in the process of lining up and giving us the same returns -- same margins and same returns. But unfortunately, we got hit with this because our model -- our plan was that in the next year or 2, certainly, we would have significant free cash flow, particularly with the funding coming, we will certainly now move the processes. So even before that, we had planned it, but there was uncertainty with the COVID and other issues. That is the reason that the funding was done. But with funding, the way I look at it is, there is no sword hanging over your head in terms of even going forward because of the uncertainty. With oncology being -- oncology cancer patients being cancer, they will obviously have to come to our centers, particularly we being very high, and we are also across. One of the great advantage we see is people when they look at accessibility, it's huge with HCG. Even if you go to a small center in Ongole or Gulbarga or Hubli, you can go and get treatment under HCG, or in Cuttack or Ranchi. So this kind of spread out is not there in any other center, any other groups. So we are in a strong position to really grow and use our free cash flow for growth if we want to. That is a decision we'll be taking along with our new partners.

Sure. And lastly, sir, do we [Technical Difficulty] intentions of expand on the infertility centers or just concentrate more on oncology?

Our concentration is certainly more on oncology.

We have next question from the line of Aditya Khemka from DSP Mutual Funds.

A couple of questions. Firstly, if I see your project update, I'm referring to Slide 17 on the investor deck. And if I look at the various capacities you had for FY '20, Jaipur, 50 beds for INR 41 crores, Nashik, 92 beds for INR 62 crores. If I just do a simple calculation as to how much did each bed cost us for each of these capacities, Mumbai comes to a very high number of about INR 2 crores a bed, Kolkata comes to about INR 60 lakhs a bed. So a few questions regarding this differential in cost for each of these facilities. So Rajkot, I can understand, Rajkot probably would be a more satellite center than a Center of Excellence. But when you compare South Mumbai and Kolkata, or for that matter, Jaipur, very big divergences in cost per bed. So is it that South Mumbai is a Center of Excellence, and Kolkata and Jaipur are not? Or is it that we are owning the land and the building in some of these centers? What is creating this difference in project cost?

So I think, as you know, in Mumbai, particularly, the cost is quite high, operational cost, the project cost, because of the location and the type of infrastructure we put in. And also, when you measure the cost per bed in a center like South Mumbai, which is a small 25, it's loaded with technology, like CyberKnife, TomoTherapy, so a lot of -- and PET scan, a lot of the costs would have gone towards -- weighted towards the technology. But unfortunately, when you calculate per bed, it will show up very high because of that reason, because the number of beds are not that high -- that huge. So that is one explanation as far as I know. I can see whether our CFO also has any other. In Kolkata, obviously, we could -- we have a partner. We were able to get that at a lower cost and the CapEx, what we have done is 1 TomoTherapy only. We don't have any CyberKnife, and we have a PET scan. So that is why you see a difference mainly because of the type of center. And you're right, in partially, it is like a Center of Excellence only, particularly South Mumbai and Borivali are, and that is the reason the cost would have gone up. Srini, you want to add anything to this?

Yes, you said is therefore correct. The -- typically, we don't look at the bed cost per se because depending on the center, Tier 1, Tier 2 centers, cost will vary, that's point number one. And as Dr. Ajai rightly pointed out, the type of machine that we put in kind of differ, kind of dictates the overall cost as well. So different centers have different type of machines, different line of machines, which kind of adds up to the overall cost. I think that's the point which Dr. Ajai made and which I agree with.

So just a follow-up on this. We don't own the land in any of these facilities?

We don't. We don't own the land. We don't own the land. We operate on a long-term lease, yes.

Understood. Sir, second question on one of the initiatives that Dr. Ajai also mentioned before in your opening remarks, we are expanding outside India as well, specifically in Africa, in partnership with CDC U.K. It's slightly difficult for me to comprehend as to why are you venturing outside India when the opportunity within India seems to be very large, and we have lot of cost advantage compared to other geographies in India. And most of your competitors entertain patients from Africa as medical tourists in India itself. So what does CDC U.K. bring to the table? And why are we partnering with them? And why are we spending money in Africa?

Yes, we are -- and this is an issue which we've discussed even at our investor conference multiple times, but I'd be very happy to elaborate again. See the -- our -- when we started seeing patients from Africa in 2014/'15, as you know, it is not like a joint replacement or doing a onetime surgery. Cancer patients require long-term therapy and care and follow-up. So when we started seeing patients from Africa coming, because a lot of them were going to South Africa, Egypt and Europe, they started coming towards India in around 2010/'11. And when they saw that actually our cost of operations was actually less than even Africa, 2.5x less, so they obviously saw an advantage with the care. One of the things they always said, even the Finance Minister of Tanzania said that the type of care we get here is not possible to get even in London. He went to London and New York and decided to come -- he saw Indian doctors there, and he said, why should I go anywhere, but come to the land of Indian doctors. That is why they came to India. But they see it as a very good area for getting the treatments and therapy. But what was lacking was follow-up and recurrent tumors follow-up, how do you do? So it should not be financial only. It should be what is the compassion part of here. You can't treat somebody and tell them go home and whatever happens to you next issue. So that is when CDC came along and said they're interested in doing something in Africa. So they gave some premium. We thought it's a good idea to at least test out on a pilot project. We have not spent significant amount of money, maybe a few million dollars. But with that, we were able to acquire a center in Nairobi, created the radiation center there which was already there, upgraded it. And together, we not only service patients there, in Africa, but people who come there, it is becoming -- but people who come to India feel refuge there. They can go back and we can attend to their follow up, even do video conferencing. So they feel very good, well. That is why we are leaders in oncology in India. Nobody else in India comes close to the type of patients we see, the type of service we provide and the revenue we generate. And oncology is a subspecialty alone. So because we -- and also one point I want to say, which is very important for me, we don't use any intermediaries. We don't use, so-called [indiscernible] or agents or health care services team in Africa. We don't. We don't believe that is the right model. And we want to make sure the patients -- the right patients should come and we should do the right treatment, and it should not become a reason purely for financial. Whereas financially -- and that is why even we don't even charge these patients much more. We just charge them a few percentage points more because there are some administrative costs. And they are very happy because we pretty much treat them at the same cost of our Indian patients.

Yes. That makes a lot of sense. Just one last question. And again, I'm referring to Slide 14 of the investor presentation. So if I look at Karnataka, at INR 36,400 ARPOB, operating EBITDA of 24%, and this ARPOB was up 4.7% for the full year of FY '20. Whereas in Gujarat, I see ARPOB of INR 35,400. One, why was the ARPOB down 1% versus for Karnataka being up 5%? And second, why is Gujarat at a lower operating margin despite a very similar ARPOB to Karnataka?

Srini, you want to answer that?

Yes, Gujarat includes the multi-speciality as well.

[Technical Difficulty] Bharat to also answer. Bharat, are you still there?

Yes, I'll let Bharat answer. It includes multi-specialty as well. Bharat, over to you.