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

Ladies and gentlemen, good day, and welcome to the HealthCare Global Enterprises Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Niraj Didwania, Head of Corporate Development and Investor Relations from HealthCare Global Enterprises. Thank you, and over to you, Mr. Didwania.

Thank you. Good evening and a very warm welcome to all participants to HealthCare Global Enterprises Limited Q4 and FY '21 Earnings Conference Call. Today, we have with us Dr. B.S. Ajaikumar, Executive Chairman; Mr. Raj Gore, CEO; Mr. Srinivasa Raghavan, CFO; along with the management team to share highlights of our business and financials. We have uploaded an earnings update presentation to stock exchanges and also shared the same through our mailers. Without further ado, I hand over the call to Dr. B.S. Ajaikumar.

Thank you, Niraj, and a warm welcome to all the participants. We hope all of you are doing good in this pandemic year and families are safe, taking the necessary precautions, including the vaccination. I know it has been a difficult year and a challenging environment for our Q4 FY '21 performance gives us a lot of confidence as we enter the new financial year on a positive note. This has been a remarkable year for all of us, including HCG, which has not only weathered multiple storms, internal debt issues, macro environmental challenges, but also emerged as a strong -- stronger, focused and sustainable leader in the oncology domain. We are actively contributing to India's fight against COVID with several initiatives and also conducting vaccination drives across our hospitals as well as third-party on-site programs in a massive scale and look forward to normalization in the coming months. With CVC as long-term financial partners, a highly competent dedicated management team and strength of HCG's brand and balance sheet, we are dedicated to the vision of delivering advanced and high-quality cancer care and outcomes to our patients at scale on pan-India basis. We also continue to drive several initiatives across the organization in areas of social and environmental responsibility towards all stakeholders and society at large. I will now request Raj Gore to share -- our CEO, to share comments from his side. Raj?

Thank you, Dr. Ajai. A very warm welcome to all the participants, and I look forward to interacting with all of you in the near future. We are pleased to report Q4 and FY '21 results in line with our operational plan. While the quarter ended cautiously in some regions due to the spike in cases in March as India entered second wave of COVID, we were much better prepared and were actually able to deliver growth across all regions, both on sequential as well as year-on-year basis. This is primarily due to explicit pan-India network focused model and regional leadership in oncology, which we have established over the past several years that provides us downside protection during challenging times while leaving significant scope to benefit from upside opportunities. Most of our new centers have demonstrated strong ramp-up and several existing centers have delivered robust performance simultaneously. While clocking all-time high numbers across multiple segments is in itself a significant achievement. We believe with focus on improving efficiency, margin and driving free cash flow generation, our best is yet to come. We are determined to continue our focus on dominant leadership in oncology, fertility and precision diagnostics, and we remain committed to driving long-term value creation for all our stakeholders. I would now like to hand over the call back to Dr. Ajai. Thank you.

Thank you, Raj. Business updates for Q4 FY '21. Existing centers revenue grew 11.7% Y-o-Y, with a good momentum across existing centers. Revenue grew 5.9% Y-o-Y for existing centers in spite of degrowth in international patients. Bengaluru Center of Excellence delivered a revenue growth of 21.5% Q-o-Q and 6.6% Y-o-Y. Revenue at HCG Cancer Center in Ahmedabad grew by 24.5% Y-o-Y. Nashik Center delivered revenue growth of 13.8% on Y-o-Y basis. HCG new centers demonstrated consistent ramp-up across regions in spite of COVID-led disruption. Revenue grew 46% Y-o-Y for quarter and 22% Y-o-Y on full year basis. Operating EBITDA loss from new centers reduced by 36% Y-o-Y on full year basis. Milann delivered positive growth on Q-o-Q basis across new registrations, revenue and IVF cycles of 20.1%, 8.1% and 2.8%, respectively, and achieved operational breakeven for the quarter. Strand Life Sciences, the pioneer in bioinformatics and genomics precision diagnostics in India, where HCG owns 38.2% stake, turned profitable at EBITDA and PAT level for the quarter on a full year basis. I now request our CFO, Mr. Srinivasa Raghavan, to share the financial highlights. Srini?

Thank you, Dr. Ajai, and good evening to everybody. Effective April 1, 2019, the company has adopted Ind AS 116 lease standards applied to lease contracts existing on April 1, 2019, and all financials are as per Ind AS 116. Highlights for quarter-ended March 31, 2021. Consolidated revenue was INR 2,981 million as compared to INR 2,704 million in the corresponding quarter of the previous year, reflecting a Y-o-Y growth of 10.2%. Consolidated EBITDA was INR 438 million as compared to INR 377 million in the corresponding quarter of the previous year, a growth of 16% Y-o-Y. Consolidated operating EBITDA was INR 394 million as compared to INR 360 million in the corresponding quarter of the previous year, a growth of 9.2% Y-o-Y. Highlights for year ended March 31, 2021. Consolidated revenue was INR 10,134 million as compared to INR 10,956 million in the previous year, reflecting a Y-o-Y decline of 7.5%. Operating EBITDA for existing centers was INR 1,423 million, a decline of 6% Y-o-Y, reflecting an operating EBITDA margin of 17.4%. Operating EBITDA loss for the new center was INR 157 million as compared to a loss of INR 247 million in the previous year. Consolidated PAT was a loss of INR 1,947 million as compared to a loss of INR 1,067 million in the previous year, including current year exceptional items of INR 847 million. With respect to impairments, I would like to highlight the following for the benefit of everyone. As part of annual investment evaluation process, the company has been consistently doing testing of all its investments and has followed a conservative approach to represent financials correctly. Fundamentally, majority of our business has weathered the COVID impact well, but there are some parts of our business which have seen significant challenges, and broadly, they are Gurgaon, which was work in process project and Milann due to IVF being an elective procedure. Since a large part of the impact was COVID here, we have prudently taken the impairments in current year to be more conservative, although the inherent value in some of these may not be completely impaired and could be recoverable over a period of time. I now request your attention to Slide #9, please. Q4 '21 revenue grew by 10.2% Y-o-Y, HCG centers by 11.7% and Milann centers degrew by 12.4%. Q4 '21 operating EBITDA, existing centers INR 440 million, 18.3% margin versus 20% margin in Q4 FY '20. New centers, loss of INR 46 million versus loss of INR 99 million in Q4 FY '20. I now request your attention to Slide #10, please. FY '21, revenue declined 7.5% Y-o-Y. HCG centers degrew by 5.5% and Milann centers by 36.7%. FY '21 operating EBITDA, existing centers, INR 1,423 million, 17.4% margin versus 21.2% margin in FY '20. New centers, loss of INR 157 million versus loss of INR 247 million in FY '20. I now request Dr. Ajaikumar to share the operating highlights. Dr. Ajai?

Thank you, Srini. Thank you very much. I would like to draw your attention to Slide 11 of our presentation. The revenue split is 95% contributed by HCG centers and 5% by Milann Fertility Centers. Within HCG centers, Karnataka's contribution to revenue is 34%, followed by Western India comprising of Gujarat, 29%; Maharashtra, 16%; jointly contributing a total of 45% of the total revenue; followed by East India and Andhra Pradesh at 9% and 8%, respectively. Tamil Nadu and North India contributing 2% each. I would now like to draw your attention to Slide 12 of the presentation. Strong resilience in revenue across centers located in Tier 2, Tier 3 towns in Q4 FY '21. Ongole, plus 50.3% Y-o-Y; Suchirayu, plus 50.1% Y-o-Y; Hubli, plus 34.6% Y-o-Y; Vizag, plus 28% Y-o-Y. New centers contributed revenue of INR 535 million in Q4 FY '21 versus INR 367 million in Q4 FY '20 and INR 1,831 million in FY '21 versus INR 1,490 million in FY '20. Revenue from existing HCG centers grew by 5.9% in Q4 FY '21 and declined by 10.3% in FY '21 Y-o-Y. I would like to draw your attention to Slide 13 of the presentation. Increase in average occupancy rate in Q4 FY '21, 45.2% versus 41.1% consolidated; 50.7% versus 45.6% existing centers. The increase in ARPOB in Q4 FY '21 Y-o-Y, INR 34,788 versus INR 32,805. ALOS at 2.28 days in Q4 FY '21 showed marginal improvement. Existing centers operating EBITDA margin declined by 60 bps to 23.8% in Q4 FY '21 from 24.5% in Q4 FY '20. Looking at [Technical Difficulty] Slide 14. In Karnataka region, the Center of Excellence performance in Q4 FY '21, revenue growth of 21.5% Q-o-Q versus 6.6% Y-o-Y. ARPOB of INR 54,000 versus INR 57,000 Q4 FY '20, and 23.8% operating EBITDA margin. Revenue from international patients impacted on account of COVID restrictions. With respect to Gujarat region, HCC grew -- revenue grew by 24.1% in Q4 FY '21 on Y-o-Y basis. Oncology revenues for the region grew by 17.5% in Q4 FY '21 on Y-o-Y basis. Revenue from COVID treatment contributed to 13.1% for the region in FY '21. With respect to Maharashtra region, strong revenue growth across the region, 37.3% in Q4 FY '21 Y-o-Y, 15.6% in FY '21 Y-o-Y. Existing center in Nashik revenue grew by 13.8% in Q4 FY '21 Y-o-Y. Mumbai revenue impacted by COVID onset. In Andhra Pradesh, revenue growth of 18.1% in Q4 FY '21 across the region Y-o-Y basis. Regulatory delays for scheme patients led to higher occupancies and dilution of ARPOB. Focus on improving revenue mix through a reduction of scheme work. In East India, strong operating EBITDA margins for existing centers, 25.7% in Q4 FY '21 and 24.8% in FY '21. Improvement in quality of business in FY '21. Reduction in schemes and occupancies, increase in high-end procedures and ARPOB. Coming to Slide 15, covering key highlights of Milann Fertility Center. Good recovery demonstrated in Q4 FY '21 in all metrics. New registrations grew by 20.1% Q-o-Q. Revenue grew by 8.1% Q-o-Q. IVF cycles grew by 2.5% (sic) [ 2.8% ] Q-on-Q. Looking to consolidate and focus on Bangalore, North India region in the near future. I want to conclude this part by highlighting few things. I would like to highlight that March '21 revenue was the highest ever in HCG's history over INR 100 crores. And also, our fourth quarter revenue was the highest at INR 298 crores. We believe we are on the right path. The initial -- even though we do not give numbers, the initial indications are also good for the first quarter, and we are confident we will sustain and grow over the coming months in the coming year. Thank you. Now I would like to hand over to Srini to explain the CapEx and debt highlights. Srini?

Thanks, Dr. Ajai. I would now like to draw your attention to Slide 16, please. With respect to CapEx table, we have implemented judicious control measures with respect to both ROTE and growth CapEx, with most of our expansion completed. Total capital expenditure for Q4 FY '21 was INR 99 million, which was largely with respect to HCG center. If we look at the year numbers also, the full year number on CapEx was INR 353 million as compared to INR 1,200 million in the last year same time. With respect to net debt, as on 31st March, net debt was INR 2,882 million, a reduction of INR 72 million quarter-on-quarter on account of improved operating cash flow. With a substantial deleveraging of the balance sheet and strong recovery towards the end of Q4 FY '21, we expect to maintain debt levels in this range or lower in near term and look forward to focusing on free cash flow generation. We reassessed our lease terms for certain leases and reinitiated our lease liabilities and right to use assets with a reduction of INR 1,230 million on account of this adjustment as reflected in capital leases section in the net debt table. I would now like to draw your attention to Slide #17, please. We are not expecting any new centers for FY '22 financial year. We do not have any committed new centers for Milann. I would now like to hand over the call back to Niraj, please.

Thank you, Dr. Ajai, Raj and Srini, for the financial and business highlights. Please note the comments from the management are intended to share qualitative perspectives and insights. These should not be considered as financial or operating guidance regarding the business. We would now like to open the call to take questions from the participants.

[Operator Instructions] The first question is from the line of Aditya Khemka from InCred AMC.

Question one for Raj. And Raj, I know you're new to the company, but still I would like to pick your brains on the strategy. You've worked for companies like Apollo, Fortis and you've have worked in the NCR, you've worked in South India. When you -- and now you have been with HCG, I think, for the last 4, 5 months. What is the strategy going forward? We heard a very brief sort of opening remarks from you, but what are the low-hanging fruits that you are identifying in the company? How can you improve return on capital, free cash flow, things that you spoke of? What do you need to do operationally or strategically to achieve the objective of better cash flows and better return on capital? What are the low-hanging fruits? And what are the more sort of distant dreams in that regard?

Thank you, Aditya, for that question. I think, number one, we, right now, will focus on consolidation. We only have 1 new project in Gurgaon, which will be coming up in FY '23. Right now, our focus would be on driving revenue growth. I feel that there are 3 main big levers for that. First is better execution of our go-to-market strategy for our new center location. Second, I think there is a huge upside for us on digital performance marketing which will help us to expand reach and better targeting. And third is I truly believe, after being in the multi-specialty space for a long period, that we definitely have a superior clinical product in oncology space, and we would like to create more brand awareness about that clinical product. So that's number two, driving revenue growth. Third is, I think, general operational discipline to drive utilization, drive cost efficiencies, to improve our profitability. And fourth would be improving cash flows and managing net debt. I think for last couple of quarters, we are doing a pretty good job on it. So those are the 4 broad points in terms of strategy going forward.

Great. So that's -- one of my follow-up question is actually a part of your first -- answer of your first question, where you said -- you have worked for multi-specialties, and HCG is a super specialty. So now the super specialty business in itself enjoys the ability to be superior in terms of clinical product, but then it has a disadvantage in terms of attracting the patients and the doctors also because you are restricted to a certain therapy area, not really Life Strand. How do you tackle this challenge in an organization?

I think being focused actually gives us advantage in attracting talent. Most clinicians would like to get better at their art and science of medicine. And we provide them a comprehensive platform to practice that with a support system with all other specific verticals under the oncology. Second, we spend lot of efforts in driving research and academics. And you know that oncology, of all the specialties, is still evolving at a very rapid pace. Being focused on oncology gives us ability to try new things, experiment with new things and, therefore, helps our clinicians to be at the cutting-edge of practicing oncology medicine. I feel that being focused actually is an advantage in oncology space.

But that's what...

I just want to add -- I just want to add that being an oncologist and doing this over a few decades, when you have a patient with cancer, ideally -- I trained in MD Anderson, ideally, people would like to go to an oncology center. The diagnosis may happen in a small hospital, multi-speciality, but every hospital cannot be expert in oncology. So I always compare it to a multi-cuisine restaurant, you go there and you can't have somebody making pizza and making some North Indian dish and South Indian dish, Dhokla everything, you can't be expert. So we believe we are experts in this, and that is what has been recognized with the number of patients. We see nearly 100,000 new patients and growing. So what is happening is we attract doctors because of this empowerment and they have -- they are super specialized in oncology. And where would anybody like to be in a super specialty which has over 400 oncologists. So we conduct this multidisciplinary clinic, tumor boards on Tuesdays, where all the doctor join and brainstorm. So we have become leaders not only in patient care. What is the HCG differential when somebody looks at it, we not only are service provider to the patient with multidisciplinary clinics, we also do like very precision medicine, we do research and publications highest in India we do today. So these are the hallmarks what attracts the doctors, even the paramedical people, of course, the patients to come to us, and it is only increasing. So this is how we have sustained and we continue -- we will continue to grow by being more and more focused in oncology only.

Got it. No, that answers my question. I have one more, if you allow me. On the occupancy side, so our existing center occupancy was 51% in FY '20. And that has come down to 46%, and that is obviously attributed to COVID. But at a unit level, which unit, probably the Bangalore unit, but what is the occupancy at your most mature unit?

Yes. Occupancy has always been a discussion in oncology because when we built in our Bangalore center, in early 2000, we built it for 250 beds. But over the years, the requirement has come down for inpatient. As you see, the ALOS is around 2 days. So we do most of -- unlike in the past where we do medical oncology, people were admitted to the hospital, now we are all day care centers. And also, our radiation is entirely daycare. Even surgery now has come -- the ALOS has come down with targeted surgery, with robotic surgery. Now you can do a major liver surgery and send them home in 4 days. So with all this happening, the requirement for actually beds -- overnight bed requirement has come down for multiple days. So only critical patients come in and admitted. So that is the reason, in Bangalore, which is our major center, you see occupancy remaining around 50-ish percent consistently. But one good thing is, as we get international patients come back to us and things start growing, we expect we don't have to do any more brick-and-mortar work. There is already place for them, so we don't have to spend. So that is how, I think, we will grow. Okay?

Fair enough. Just 1 follow-up on the answer that you gave Dr. Ajai. In the same breath, if I ask you, your company's consolidated ARPOB is around INR 32,000, INR 33,000 a day, whereas the Karnataka cluster ARPOB is about INR 54,000 a day. I think the ARPOB for the other clusters, which is your Gujarat, Maharashtra, Andhra Pradesh, East India, they all must be around in the 20,000 levels to bring the average to 34, right, around 20,000 to 30,000 range. So what would it take to get the other clusters' ARPOB to 54,000? And why are they today between 20,000 and 30,000?

See, for new centers, I will also ask Srini to add to this. New centers will take time, and we expect Mumbai, Kolkata centers and also Ahmedabad is already up there to grow up to that level. Where we will feel it's a challenge is obviously in Tier 2, Tier 3 cities, where you are doing a mixture of some scale basis between 20% and all. So that is what is going to keep the ARPOB at a little bit lower level compared to what a Center of Excellence, because in Center of Excellence, obviously, we do high-end work. So as Mumbai and Kolkata and all start doing and as the revenue picks up, we will see the ARPOB going up there. But Tier 2, Tier 3 cities may sustain and remain at this. So we expect 34 to become 42, 45 as the centers mature, but it may not reach the level of Bangalore of 54 overall in average because of our way we are spread out in Tier 2, Tier 3 cities. Srini, you want to add anything to that?

You said it rightly, Doctor. As far as KR is concerned, it is the technology and the CyberKnife therapy, I think that's kind -- those are the things which are very critical. Second aspect is multispecialties also play a role in overall ARPOB numbers, especially in places like Gujarat. But as Dr. Ajai rightly pointed out, over a period of time, it should kind of stabilize, and we should see the increased levels in the future.

Raj, do you want to add anything?

No, doctor, nothing from my side.

Aditya, this is Niraj. So one other thing is we have been reporting our occupancies on total capacity beds. So we are also relooking at whether we should move to the industry standard of operational beds. We will be able to guide you on that in the coming quarters. So occupancy looks a little bit lower because they are on capacity beds.

Correct. So capacity is 2,000-odd beds, right? What is the number of operational beds today?

It will be somewhere lower by about 10%, 15%. The newer centers are where we have a larger non-operational bed capacity. So it would be about 10% to 15% lower.

Mr. Khemka, may we request that you return to the question queue for follow-up questions? The next question is from the line of Chandramouli Muthiah from Goldman Sachs.

First question is on the extent of impact that we should expect from the business from wave 2 of COVID in India. South and West India has been disproportionately impacted, strict lockdowns still in place. So how do you think about this dynamic given that these 2 regions are fairly critical for us? Any color there would be really helpful.

What is the question again? There was some double voice. I couldn't hear well. I think it's Chennai -- Chennai and Kolkata, you talked about, Chandramouli, am I right?

I can repeat the question if it wasn't clear. Just on the extent of impact that we should expect from business from wave 2 of COVID. The South and West India has been disproportionately impacted with the strict lockdowns still in place. Both these regions are pretty critical for our business mix. So just trying to understand how you think about wave 2 of COVID, and how you think about impact on the business from this phenomenon going forward.

Okay. Srini, you want to?

Yes, sure, sure, sure. You're asking about South and East India being critical and how is it going to look like in the future given the current COVID wave 2 impact? Did I hear you correctly, Chandramouli?

Yes, yes, South and West -- South and West India, that's right.

Yes. See, let's put it in 2 parts. East India, while it has -- it did get affected due to COVID second wave, it also had an impact due to international patients not coming. We were expecting originally from -- patients from Bangladesh and nearby locations, so that has kind of impacted. But hopefully, the COVID 2 settling down, I'm not too sure on the international business, but it should kind of revive. As far as West is concerned, Nashik and Nagpur has been doing very well. The Mumbai centers have to pick up because the second wave impacted Mumbai first in the month of -- towards the end of February, early March, and that kind of got impacted by kind of settling down and hopefully -- and we are already seeing signs of the business getting improved in the current quarter. So subject to wave 3, I think the trajectory should be fine as far as West is concerned. So overall, the way we are looking at, in current quarter, I think the indications are good. I think, as Dr. Ajai said, the momentum is good. We are able to sustain some of the momentum that we gained in March. But once the international business is back into business and some of our radiation business, if that picks up, I think things should settle. But of course, wave 3, the uncertainty is always there. But as things stand today, the trajectory is good.

Chandramouli, I just want to add that, as you very well know, we have announced in the past, our international revenue for our Bangalore center is about 15% to 18%, and it is going up significantly. But that has been severely impacted, obviously, because of the airline and traveling difficulties. But I think once we have lot of indications that will significantly come back to normal in the few months once the lockdown is over. So even without the international, one of the positive things we feel is we have delivered the highest revenue, which is a clear indicator of what can happen in the future. So we do expect the year to be growing revenues and profitability because of the coming back of international and also in the South Bangalore center, as you saw the revenue at a significant growth compared to last year in spite of the COVID. So we are seeing some good positive signs for the growth for this coming year.

Got it. Got it. That's helpful. My second question is just on the sequential trends. So I think we have seen top line pickup in the March quarter by about 9% versus the December quarter, but the EBITDA growth seems to be slightly lower. I mean I would have thought that given the high fixed costs in the hospital business model, there would be some operating leverage and EBITDA will probably grow faster in our top line growth environment. So just trying to understand, is this because maybe some of the cost cuts that we had taken earlier on in FY '21 are sort of being reversed now? Are they fully reversed now? Just trying to understand if the cost cuts that we booked earlier in FY '21 are fully reversed or is there still some of costs that are yet to come back?

Can I take that, Dr. Ajai?

Yes.

Yes, yes, Q4 is full cost, and all of the cost has come back. And one of the reason for a decline in the EBITDA margin slightly in Q4 is due to the onetime investment in marketing and business development. I think more from the point of view of future revenue, given that the things have started to open up. So answer to your question, yes, it's a fully loaded cost in Q4. And two, we also did one-time investment in marketing and business development in Q4.

Got it. And my last question is on forward-looking comments. So I think there were a few brief comments you made at the start of the call in the opening remarks on both debt as well as expectations for the first part of FY '22. So if you could just elaborate on that. If you could just give us a little more color on how you see FY '22 panning out for the company and this -- company's view on whether we should expect wave 3 of COVID or not just based on data and the trends that you are seeing?

See, is your question specifically on the debt on the overall company in FY '22?

No, Srini, I will first answer the first part, and then I'll give you on the debt. I think, Chandramouli, as I said in my concluding remarks, we are seeing very good signs of good growth in the first quarter. Normally, we don't give the numbers. But what I can say here is, like I said, without the international patients also, we are beginning to do good, not only in our main centers, but also in Tier 2, Tier 3 cities. And one of the things we focus on has been in our new centers reaching up to profitability and beyond profitability and high revenue. That is beginning to happen, and there was a little bit setback for particularly Mumbai centers because of the severe COVID restrictions, the second wave. But I think once that is getting better, once everything gets better, obviously, there's a lag time because the patient has to come for surgery, undergo surgery, then undergo radiation. One of the reasons we saw even the margin lower is possibly radiation being less because the contribution from radiation is high. So all of that is now correcting itself. Obviously cancer patients are cancer patients, they will come. They would have just postponed. As we have reported in the past, also the postponement is not good. But we have encouraged patients to come and they are beginning to come. And we were actually, before the second wave, beginning to see a good footfall and increase, and that is why we have this high revenue in March without COVID, without any COVID contribution. So this is going to even increase. And as we go forward, so now like what Raj said, we are looking at consolidation, bringing the existing centers to capacity utilization. With these things, we will definitely see an uptick in the revenue and the profitability and the EBITDA margins to improve. On top of that, Srini will comment on how we have deleveraged and how we have become very cash flow positive. Srini, can you please comment on that?

Yes. Yes. I think, Chandramouli, our focus, as I mentioned earlier, continues to be on reducing our debt. While we don't give any forward looking, specific numbers, overall, our outlook is to be in the range of debt-to-EBITDA of 2:1 at pre Ind AS levels basically. I think that's the goal we have, and that's the trajectory we are moving towards.

Sorry, you said 3:1 or 2:1, sorry?

2. 2. 2.

2:1, got it.

The next question is from the line of Kunal Randeria from Edelweiss.

Sir, last time you had discussed how different levers of our business, mainly in medical oncology, surgery and radiation were picking up after the first wave. But now since we have a very serious second wave after the last quarter, can you share how these businesses are doing and what your expectations are for the rest of the year, assuming there's no third wave?

Yes. As I said just now, one of the things we are seeing is a little bit of deorganization in the geographical approach. HCG is in a very unique position because of the fact that we are in Tier 2, Tier 3 cities. So maybe even though we don't have -- we don't manage COVID cases except in our multi specialty, the reason I think we have done much better, and we are doing better, I believe, compared to even the first wave is because people are now accessing our Tier 2, Tier 3 centers rather than traveling long distance. And that has helped us to sustain and do good. Even last year, I know in our report and our investment call, we indicated that we never had any EBITDA negative year -- quarter. So that was primarily because we managed it with patients coming in accessing, but only question is for radiation coming every day and all was very difficult. But now it is correcting. So going forward, we expect our mature centers to continue to grow at 10% to 12%, as we have indicated. We don't see any issues there once this COVID is over. We hope it is coming to an end, particularly with the vaccination happening on a massive scale, it should. And the second thing is the new centers, who are -- like in Mumbai and all, for example, Nagpur is doing extremely well. So similarly, we expect Mumbai centers, we have got some very good doctors coming now. And with those kind of star doctors coming, Dr. Shyam Shrivastava has joined us, who was heading the Tata Group for radiation. So all of this and international patients coming in, because Mumbai is somewhat dependent on international. We do expect things to get back to normal and grow as per the original plans. So this kind of growth will definitely happen during the period of consolidation, and we should have a good -- definitely, post this, our radiation revenue should return to normal so also our surgery and medical oncology, along with that international. So we should be back to being normal and have the growth pattern which we have projected. Raj, would you like to add anything, please, here?

No, doctor. I think, as you mentioned earlier, I think we've had a highest quarter or the highest month in the month of May. I think the momentum continues. And if revenue momentum continues, the EBITDA and profitability will follow.

That was helpful. Sir, just one more question. In the last quarter results also shared that Andhra margins were impacted because of some structural changes made by the government. So I'm just wondering, is there sort of a risk that margins in other states could possibly be hit because of government intervention? Or that was more like a one-off kind of a case?

It was definitely more of a one-off kind. And as of now, we are not seeing any government intervention. Also all the issues with pharmacy, the issues which we had in the past, have settled, of course, to a lower level, but we have now managed. In spite of that, we have delivered a very good margin for the mature centers. So I don't think this will be an issue going forward as far as we see it. But of course, our visibility is there, but we never know what the government can do from there. But during the COVID period, I think nothing has happened. They have been accommodative. So we don't see this as an issue going forward at this point.

The next question is from the line of Shantanu Basu from SMIFS Limited.

My first question is with regard to your vaccine doses. So what would be the number of doses that you are administering per month on an overall basis? And what would be the administration charge for those that you charge from the customers?

Raj, you want to take this question?

Yes. Yes. Look, I think Prime Minister of India has given a call to everyone to help get -- get the entire population of India vaccinated. So we are playing our role in that at each of our center. Vaccine availability has been an issue, but hopefully that will get better towards the end of this month and starting next month. We have also additional interest that our oncology patients are immunocompromised and we want to make sure that all of them, as well as their family members, get vaccinated. So right now, our focus is on them and our business partners. As a good partner, we want to help their staff getting vaccinated. In terms of surcharges, I think we comply completely with whatever government regulations are there. And as they evolve, we'll continue to comply with the government regulation.

So what would be the number of doses per month, vaccine doses per month that you are administering? Would it be in the range of 6 to 7 lakhs or less than that, 3 to 4 lakhs?

I think what is important to know that the -- in the entire month of May, the availability was an issue, vaccines were only available towards the end. It's not still a consistent supply. So I don't think we can use that information to forecast anything going forward. So I'm not sure that until the supply of vaccine gets consistent, that would give any indication for the future.

Yes, I think being oncology focused, we are focused on vaccinating most of our employees, patients, relatives. So our focus has been more on that. Even some general hospital of ours, multi specialty have done a little bit more, but our focus will be more on this.

Okay. Fine. So it wouldn't be -- I mean, the number of doses per month wouldn't be very high, that is what you're trying to say, compared to other hospitals?

No, no, number of doses, I don't know that number, and other hospitals, I don't think we can [indiscernible] And I think we just need to -- at this point, I can't compare it. I think it may not be that high also. Okay?

Okay. Okay. Fine sir. My second question is with regard to your Africa venture. So now that you have taken an impairment in your book, how do you see the African operations shaping up in the future? I mean, what is your growth plan for that continent as a whole? How do you see the Africa thing shaping up, now that CDC has also exercised the put option. So what's your take on that?

So we are in the middle of closing the issue with CDC. I think we will have a lot of clarity because once the CDC exits and all the work is done, when we become nearly 90%, 95% owners of this, we will -- we are trying to restrategize Africa. The only thing is we need to really do a few things to keep our Kenya center in order. First focus will be to consolidate our main center in Kenya, in the Nairobi, in the CCK. Once we do that and get to the capacity utilization, we are looking at our small centers, clinics in Kenya itself or outside. But all of that, we have not taken any strategic decision now because we want to see and close this issue with CDC before we proceed. Possibly, by next quarter, we may be able to in this investment give more details about it. Okay?

Okay. So CDC is completely exiting from the partnership, right?

At this point, it is not 100% done. They've exercised to put, we are -- work is in progress.

Okay, sir. And sir, another question is with regard to your outlook for Q1 per se, maybe I've missed it. So just want to clarify from you, would Q1 be another growth quarter? Or would it suffer because of the second wave?

No, we expect the Q1 to be definitely a growth quarter at this point.

Okay. Okay, sir. And what would be your consolidated...

In spite of COVID and in spite of not having international patients.

Mr. Basu, may we request that you return to the question queue for follow-up questions? The next question is from the line of Nitin Agarwal from DAM Capital.

Doctor, just two quick questions. In your experience with the sort of oncology care over the last 5 or 6 years, the timing -- or even longer, I mean have you seen any notable changes in the way -- in the way patients are approaching oncology care versus in the past, which probably makes either positive or negative case for our business -- standalone business model? I mean, on a structural basis going forward?

You are talking about with COVID or without COVID in general?

Without COVID. COVID is something which has come and gone, it'll probably...

No, in oncology, as you know, like I always say in my talks and all, oncology is a rapidly changing field. And today, we have oncology patients living for a long time. It is an lifestyle disease. There is no -- in my advanced clinic, I have patients with lung cancer which has spread to liver, bones, brain, leaving for 5, 7, 8 years. So it is almost like a chronic disease. So we don't call the -- use the terms now like terminal or stage 4s and all. So definitely, the changing pattern has happened. Has it had an impact on the new cancer patients? Yes, it's beginning to have because the dropout rates are definitely less. And one of the reasons the dropout rates are less is because the side effects are less. We call it now the precision, I can go on for 24 hours talking on this. but I will try to limit it because this is a passion for me. How in my 45 years of oncology, if somebody says are you an expert? Now, I say I'm not because every day we learn. And every 75 days oncology is changing. So that is the beauty of oncology. Today, we talk about precision medicine, radiosurgery where we can deliver radiation without affecting the normal tissue, where we can give targeted therapy without killing the normal cells, we treat the tumor cells only, where we can give the checkpoint inhibitors, where we can treat with immunotherapy, make your own body fight, and that is a phenomenal growth happening within. Immunotherapy, rad immune therapy, which is of great interest to us. We're publishing so many papers and HCG itself on that and created protocols because this is a changing pattern. And it will take, for example, certain difficult cancers like head and neck cancer, tongue cancer. The work we have done and published, and we are seeing globally, it is -- 50% used to recover (sic) [ recur. ] Now we think with this new protocol, only 20% will recover (sic) [ recur. ] So amazing changes are taking place. No, if you had a vision to look at future in oncology, patients, yes, will be there for a longer period of time with you. The mortality rate from oncology will definitely decrease. But oncology patients will increase. In the West, it is 1 in 4 patients, and sometimes 1 in 3, if you take out the skin cancer. So in India also, it is going to increase. India and China will be the leaders. But I think we are at least, in major cities, we are well prepared with the technology and the way we have done IT. IT has been used extensively. Key is to use IT so that patients in distance -- one of the things we have done in COVID period is to do really tumor boards where you visit the patient. Last Tuesday, we did the tumor board, 18 patients visited home and gave them the advice. They were sitting in all parts of the world. So this is the beauty of how Teams, everything, can really help. We are working with Microsoft. And we are also excited about Microsoft Augmented Reality, mixed reality, Microsoft Mesh. And all of this will come into play. So the technology itself will play a major role in how we manage oncology and how the patients will come to us. Sorry, I went on a little bit longer, I think.

Which is very helpful, doctor. And secondly, while we're undergoing, for example, a phase of consolidation, which is justifiable, two questions on that. One is a, we've taken impairment in the Gurgaon center. So does that have any implications on how we're viewing the opportunity for the Gurgaon center going forward?

No, it will not have any major implications. We are looking at what should be the initial scope, phase 1, phase 2. So we are working on that. That way, the way we manage, because of the impairment and the delay, we don't want this to delay. Like what Raj said, we want to get it going in '23. So with that in mind, we have started in full swing. We hope we can deliver. And we have some very good doctors who have shown interest and will be with us. All of this will be only positive. I think we are very positive in Gurgaon, it is in a very prime area. So unfortunately, the natural calamities have come in the way. But hopefully, we will overcome that.

And lastly, just new -- the group of newer centers, which are there for us. Is it a fair expectation or assuming COVID sort of normalizes during the year that this entire group, per se, would be EBITDA positive by the time we finish the year?

Yes, we are expecting that, except only Kolkata is rather new with the COVID effect and all we are reviewing it. I think by -- probably by last quarter, we should turn positive. I don't know. Ashutosh, am I right in that? Ashutosh is there?

Doctor, currently, we are expecting either the last quarter or the first half of '23 to be net positive on the entire contribution from new centers.

Okay. And one last one, if I can squeeze in. And you -- doctor, once we sort of look at our expansion, currently, we are in a freeze mode, rather consolidation mode, which is extremely good. I mean, when you're looking at that opportunity, subsequently at whatever stage you begin to -- sort of begin to grow all over again, are there any specific areas that you would want to target whenever we resume our expansion? Are there any -- I mean, is there again -- if you want to probably do more work in metros, Tier 1s? Or do you see more opportunities in the smaller towns? I mean how are we looking at maybe some medium-term growth or possibilities which are there for us?

Yes. I will say a few words, then maybe Raj can add to this. I just want to say, strategically, we have done a small group. We have committed to working for the future after consolidation. But let me tell you one thing, we will not do any future growth by increasing our debt. I think enough is enough for us. So we are going to be cash positive. And we are consolidating. And we will have a large chest of liquidity cash. Using that, we will look at possible growth. And also, we are internally discussing whether we should really not do any greenfield, but more of brown or merger acquisition type. And these are all in the works. I think with the COVID period, obviously, we were not focusing on that. Going forward, with Raj particularly coming on board as CEO and taking on helm of lot of these things, we are looking at how we can work on this and develop a model for the future. Opportunities are there, I think, plenty of opportunities, but being in a strong financial position, I think, will definitely put us in a leadership role. And we know oncology like nobody else. So I think that is a model we'll take forward, but I don't think we will do a lot more implant model, more and more of stand-alone model like that we will look at. So we have some other ideas, as and when that evolves, we will certainly share with you all. Okay? Raj, you want to add?

Yes. Thank you, Doctor. So Nitin, I think we -- as pointed out earlier, I think we still have enough capacity in our existing centers to grow organically. That's number one. Number two, we also have opportunities to grow vertical-wise, with diagnostics, our high-end surgeries or verticals. While we are focusing on consolidation, I think we are also refining our capital allocation strategy going forward because at some point we do want to grow inorganically. And what has helped so far to us is we've been -- we have a deeper penetration in some of the mature markets that we exist, whether it's Karnataka or Gujarat. And that's something that I think has helped us. But will -- it really depends on opportunities. If we get good opportunities which fits our business model and there are synergies and it has a good valuation, we'll consider it in future once we feel comfortable with the consolidation effort.

Mr. Agarwal, may we request that you return to the question queue for follow-up questions? The next question is from the line of Harith Ahamed from Spark Capital Advisors.

So I'm looking at the consolidated cash flow statement for the year, and I'm seeing a line which proceeds from bill discounting. And there is a line which follows that, which is bills discounted settle. There's a net cash inflow from INR 40 crores there. Can you explain what exactly this is about, because I don't see this for the previous year.

Srini, can you, please?

You are talking about bill discounting, that is part of our working capital limits that we have set. This has come for the first time. As part of our CC line, this has been carved out. So that's the reason you are seeing it for the first time. It's basically done for interest arbitrage.

But correspondingly, there is what would have expected a decrease in our debtor base or overall debtor position, but that hasn't happened. So is it that our overall debtors went up during the year and we have -- we did this to kind of offset that?

Srini?

Yes, yes, I'm coming. I'm coming to that. Let's understand this. Basically, these are working capital allocations without recourse. So it cannot be deducted from the debtors per se. That is point number one.

Okay. Understood that. And the share of profits or losses from associates, this year, this kind of had almost a breakeven there versus a INR 12 crore loss last year. So what is on this line item?

Yes. It's Strand basically, which is our -- where we have this equity pickup. So that turned profitable in the current year. So that's why you see a positive move on that.

The next question is from the line of Ankit Agrawal from Yellowstone Equity.

My question is on Strand. Can you provide some quantitative insight into like what has been the growth and profitability over the last couple of years? And second is more long term, like what is the vision going forward for Strand? It seems the business on a stand-alone basis itself has a lot of potential. But right now, it's more of an ancillary business with lot of synergies, of course. But like what -- how large is the ambition there? And if it is large, what kind of things are we doing to realize that potential?

Yes. Nitin, as far as Strand is concerned, as you know, Strand has been through quite a bit of ups and downs like a roller coaster in the last few years. And when we decided to merge Triesta, our lab with Strand, it was a cashless merger, and Quadria came as a partner there with investing. So with that, we resurrected Strands. And Strands has mainly 2 divisions, which are somewhat related. One is the [ RIX ] division, which does work in software development and also in bioinformatics, which is very globally known for that. And second is the wet lab, the genomics and which we were also doing in HCG, we've merged with that to enhance that effect. So essentially, combination of the 2 became a powerful tool in terms of precision medicine for patients, genomic sequencing. Obviously, the cost has come down significantly, the reagent cost and all, but not to the level where everybody can afford. So that is the one question mark we have to park it aside for future discussion. The growth of this can happen overnight significantly, but the cost, how much is the cost? How can the patient afford is the problem. Right now, the cost to complete TSO500 genomic sequence, maybe INR 130,000, whereas how many can afford that. And it's -- if you can do it at INR 25,000, INR 30,000, obviously. So we expect, at some point, the cost to come up -- come down, and that will give exponential growth. Regarding the other aspect of it, HCG, like we said, for Strands, we made a mistake acquiring Quest, which we have said in the last thing. Now we have disengaged [indiscernible] it over. With that, we have turned immediately positive, profitable. And it doesn't have really the significant debt on the books. With that, we see -- with the cash flow, we think we can internally generate growth. There may be some primary equity required, which we will see as non required. There are a lot of things we are looking at for the future of Strands, how we can align and grow, how HCG can also grow, because HCG partnering with Strands, we have created biorepository, lot of issues for the future in terms of genomic study, research and which could be attractive data collection to the big companies. All of this is in the works. Primarily, we now got over the negative EBITDA, made it profitable, good growth of revenue. And that -- with this now, we will be in a stronger position to go forward. And this is where the discussion is taking place. Obviously, with CVC coming on board, new investor, they have to bring up the scale, up-to-date on what is happening with Strand. It has also taken us a few months to do that. So all the things, once they align, we will definitely keep you informed.

Got it. Just one quick follow-up. You mentioned there are 2 divisions. So I understand the second part, the [ wet lab ] is dependent on the cost for it to scale up. But the software and the bioinformatics division, that seems like a pretty capital-light business and with a lot of potential to scale up, right? So -- and probably it has global plan, so...

That business is -- that business is international business, so mainly it is outside India, most of it. For that, we need to spend a lot of -- on marketing, business activity, developing it, so strategically and also acquiring acquisition of new clients is also expensive. That is where some of the primary money could come in. So that is the plans we are looking at. We have actually hired a group head for international based out of U.S. business. So all of these are happening in stages. So that, what we need to do there is acquire some big businesses. So far, we have multiple small businesses. And the sustainability is issue. Can they sustain with us? And we have quite a few multiple, the long-term contract will be the benefit for us. So those are the things we're looking at. Okay?

As there are no further questions from the participants, I now hand the conference over to Mr. Niraj Didwania for closing comments.

Thank you, everyone, for the active participation on the call. We are available to have discussions offline if required. With this, we conclude Q4 FY '21 earnings conference call.

Thank you very much, everyone.

Thank you. Thank you very much, everyone.

Thank you. Ladies and gentlemen, on behalf of HealthCare Global Enterprises, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.