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

[Audio Gap] Chief Executive Officer; and Mr. Srinivasa Raghavan, Chief Financial Officer of HCG Enterprises, along with the top management members to share the highlights of our business and financials. Please note that we have uploaded the earnings update presentation to the stock exchanges and also shared the same through our mailers. In case anyone has not received it, please reach out to us, and we'll be happy to send the presentation over to you. Without further ado, I'll now hand over the call to Dr. B.S. Ajaikumar. Doctor?

Thank you, [ Diwakar ], and good morning to everyone, and a warm welcome to all the participants. I'm glad to note that the specter of COVID is behind us as of now, and we can now move ahead with a greater sense of optimism. And at HCG, we believe in patient-centric care and focus on accessible oncological services, advanced treatments and high-quality care and outcomes. Over the years, we have emerged as a responsible brand, earning the trust of thousands of patients and admiration of the community. Our focus on advanced technology, our ability to deliver exceptional clinical outcomes and team of dedicated specialists equipped us capabilities of further oncology care continuum while emerging as the pioneer and leader in oncology. The company has turned in industry-leading revenue growth this quarter, which is also backed by improving profitability, especially among the new centers that have not yet reached the mature stage of operations. The growth opportunities ahead of us in the domestic business is quite strong, and we are also seeing turnaround in number of international patients visiting our center with easing of the travel restrictions. As mentioned about Milann, our fertility center, which has performed very well with a growth of 57% on the Y-o-Y basis on the back of new leadership team under Shailesh Guntu, aided by our focus on digital outreach, which is delivering us the desired results. Overall, HCG, under the dynamic leadership of Raj Gore, our CEO, is positioned very uniquely with strong pipeline as well as delever its balance sheet to deliver superior growth and profitability but with a clear focus on tangible outcome for all our stakeholders, most important of which are our patients for whom positive outcomes in the disease is the best result. I would now like to hand over the call to Mr. Raj Gore for his prepared remarks. Raj?

Thank you, Dr. Ajai, for being the inspiration and guide to all of us at HCG. A very warm welcome to all the participants, and good to be speaking to you again. We continued with the momentum that we had built up in the first quarter of this fiscal with a strong performance across all operating metrics in the current quarter. We delivered our highest revenue and EBITDA for any quarter ever in our history. I would like to highlight that over the last 3 quarters, we have consistently reported our highest-ever revenue. What is heartening is that the Q2 core revenue, excluding COVID and vaccination business, is also the highest ever recorded in our history. The growth in revenue has also been matched by corresponding growth in profitability margins. We closed the second quarter with our highest-ever EBITDA at [ INR 65 crore ] with 1.6% margin expansion over the previous quarter. This is also the first quarter after 13 quarters where our PAT is back in positive territory. A direct impact of the improving financials has been the generation of free cash flow over the last 2 quarters. The result showcases our entire team's focus on driving growth and operational efficiencies, which we are confident of continuing in the quarters to come. I would like -- I would now like Srini, our CFO, to go over the key financial highlights.

Thank you very much, Raj, and very good morning, everyone. The highlights for quarter ended September 30, 2021. Consolidated revenue was INR 3,520 million as compared to INR 2,479 million in the corresponding quarter of the previous year, reflecting a Y-o-Y growth of 42%. Consolidated EBITDA was INR 650 million as compared to INR 340 million in the corresponding quarter of the previous year, a growth of 91% year-on-year and 19% quarter-on-quarter. Consolidated operating EBITDA was INR 617 million as compared to INR 300 million in the corresponding quarter of the previous year, a growth of 106% year-on-year and 20% quarter-on-quarter. Operating EBITDA for existing centers was INR 598 million, a growth of 109% year-on-year and 13% quarter-on-quarter, reflecting an operating EBITDA margin of 21.9%. Operating EBITDA profit for new centers was INR 19 million as compared to a loss of INR 29 million in the corresponding quarter of the previous year and a loss of INR 19 million in the previous quarter. Consolidated PAT was a gain of INR 1,018 million as compared to loss of INR 223 million in the corresponding quarter of the previous year. I now request your attention to Slide #32. Q2 revenue grew by 42% quarter -- year-on-year. HCG centers grew by 41% and Milann Centers by 57%. Q2 operating EBITDA, existing centers, INR 598 million, 21.9% margin versus 16.7% margin in Q2 FY '21. New centers witnessed a profit of INR 19 million versus loss of INR 29 million in Q2 FY '21. I would like to draw your attention to Slide #33 of the presentation. The revenue split for our business is 95% contribution by HCG centers and 5% by Milann fertility centers. Within HCG centers, Karnataka contribution to the revenue was 34%, followed by Western India comprising of Gujarat at 26% and Maharashtra at 19%; followed by East India, 9%; Andhra Pradesh, 8%; and Tamil Nadu, 8%; and North India contributing to 2%. I would now like to draw your attention to Slide #34 of the presentation. Strong growth in revenue continues across centers in second quarter of FY '22. South Mumbai delivered 286% year-on-year growth, Nagpur delivered 118% year-on-year growth, Borivali delivered 105% year-on-year growth and Jaipur delivered 77% year-on-year growth. Revenue from new centers of INR 750 million in quarter 2 full year '22 versus INR 478 million in quarter 1 in FY '21, which is a growth of 56.7% year-on-year basis. Existing centers revenue growth of 37.3% in quarter 2 of FY '22 on a Y-o-Y basis. I would now like to draw your attention to Slide #35 of the presentation. Increase in average occupancy rate in quarter 2 FY '22 Y-o-Y basis of 53.3% versus 49.8% at a consolidated level. For existing centers, occupancy rate was 50.3% versus 46.9% corresponding quarter of last year. Increase in existing center ARPOB in quarter 2 FY '22 was INR 38,345 versus INR 30,904 (sic) [ INR 30,984 ], which is a 23.8% growth. Existing centers operating EBITDA margin increased by 370 bps to 20.3% in Q2 FY '22 from 16.5% EBITDA margin in Q2 FY '21. Looking at key geographies in Slide #36. In Karnataka region, our Centers of Excellence performance in Q2 with revenue growth of 51.9% year-on-year, ARPOB of INR 58,000 versus INR 45,000 in the corresponding quarter last year and 26.3% operating EBITDA margin. With respect to Gujarat region, we had a strong revenue growth in Q2 FY '22 on a Y-o-Y basis with oncology revenue growing by 38.2%, and the multispecialty revenue was almost flat. With respect to Maharashtra region, new centers grew by 128.6% Y-o-Y and 56.8% Q-o-Q. South Mumbai continues to grow, primarily driven by CK revenue. Borivali Radiation and Surgical revenue grew by 30% and 39%, respectively, year-on-year. For East India, existing center revenue grew by 53.6% year-on-year and expansion of revenue at new centers by 25.4% year-on-year. Cuttack is nearing the regional revenue growth, driven by radiation and PET cases. In Andhra Pradesh, we witnessed strong revenue growth across the region. Vizag delivered revenue growth of 47.5% year-over-year. Coming to Slide #37, covering key highlights of Milann fertility business. Milann demonstrated good recovery in Q2 FY '22 across all metrics. New centers revenue grew by 77.8% Y-o-Y. There is a big improvement in digital traction as a result of continued efforts on our digital campaigns and with continued focus on strengthening clinical talent across Milann, looking to consolidate and focus on market leadership in Bangalore and scaling up North India centers in near term for Milann going forward. I would now like to draw your attention to Slide #38. With respect to the CapEx table, we have implemented judicious control measures with respect to both routine and growth CapEx with most of our expansion completed. Total CapEx for H1 FY '22 was INR 183 million, which was largely with respect to the HCG centers. With regard to net debt as of September 30, net debt was INR 2,268 million, which is a reduction compared to the previous quarter. I would now like to hand over the call back to [ Diwakar ], please.

Thank you, Srini. Lisa, now we can open the question for Q&A, please.

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

A question on the net debt. So as per Slide 38, our net debt has come down from June '21 to September '21 from INR 63 crores now to INR 37 crores. So I just wanted to check with you, does this imply that our free cash flow for the quarter was around INR 26 crores? Is that the right way of looking at it?

No. If you see the net debt, if I go back to the net debt slide, our net debt has come down -- if you go -- it has come down from 290 -- INR 294 crores to INR 226 crores, which is -- you are looking at the net debt from a new center perspective, which is 374 to 632. So to answer your question, the net debt has come down by close to about INR 70 crores, contributed by 2 things. One is, yes, we have generated free cash flow in the quarter; and two, because of the Strand transaction that had happened, we have got some cash flow in, which has contributed to the net debt reduction.

Yes. Exactly. So out of the INR 70 crores of total free cash flow, how much came from Strand? And how much came from operations?

Yes. To give a broad perspective, free cash flow will be to the tune of about INR 8 crores to INR 10 crores, and the balance would be from the Strand transaction.

On the Strand transaction. Understood. Makes sense. Secondly, on the Milann, now that the procedures are back and discretionary operations are happening, where are we on the utilization of our Milann facilities?

The Milann utilization has significantly improved, as we know. Shailesh, you want to add to that, please?

Certainly.

Go ahead. I'll let Shailesh talk.

Yes. Currently, we are at a utilization of close to 55% to 60%. And I think there is a potential upside by Q3 and Q4.

Understood. Understood. And in terms of the new centers overall for HCG, all your regional new centers combined, what is our EBITDA of the new centers in terms of margins?

So if you go back to the slides -- I draw reference to the slide for that. Yes. So as far as the -- you refer to Slide #32, there, we have very clearly called out new centers.

So it's breakeven. New center, [ INR 0 million ]...

New centers -- I'll tell you, new centers have delivered [ INR 1.9 crores] of profitability as far as Q2 -- on a Q2 basis compared to a loss in the previous quarter. So that trajectory will continue in the future as well. And that is the answer to your question.

Understood. Understood. And a question for Dr. Ajai. Dr. Ajai, understanding with the Strand divestment that we retain some of the capabilities. Are those agreements now in place with Strand as to how we operate without them in our labs? How do we operate our labs? Yes.

Aditya, what has happened is, as I said before, we had given our -- in the [ cashless ] transaction, we had given our labs and our clinical trial to the Strand 4 years ago -- 3.5 years ago. And all of it has come back to us. And now one of the good things is our wet lab capability is also quite enhanced. And the way we -- and our biorepository has also come back to us. The only thing is we collaborate with them in the biorepository. The wet lab part, we collaborate with them in bioinformatics, okay, for which [ they are known as ] Strand. So it is a collaborative effect, but essentially, all of our labs, all our capability in an enhanced way will come back to us. So we believe genomic, as we know, is driven -- is the future. So we are driving that very significantly, and we see significant growth opportunity in our lab itself as we move forward.

Got it. One last question, gentlemen. On the current quarter's revenue of INR 335 crores at a consol level, how much was driven by vaccination? So what is the vaccination revenue this quarter? And what is the outlook on that? I know vaccinations are going down as most of the population gets vaccinated. So just wanted your perspective on that.

Yes. So Aditya, it's Raj here. The vaccination revenue was about 7% of our top line in Q2, which is about INR 25 crores.

And going forward, we don't see much revenue from the vaccination, which will dwindle significantly. Am I right, Raj?

Yes. Yes.

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

Yes. Just the first one is on Center of Excellence and the Karnataka geography. We have seen ARPOB, at least in the COE, has reached INR 58,000, right? This was INR 51,000 I remember last quarter. So I just want to understand some of the drivers of this. Is international patients back in that facility? I remember historically, it used to be 20% contribution. But if you can help us understand what are the drivers of this ARPOB increase.

Yes. The main driver has been -- I know as we have made a statement, in spite of international not being there, we have grown, particularly our domestic market has grown significantly in the last quarter. And one of the most important things for the ARPOB to grow has been the fact that our high-end work has increased, like robotic surgery hit all-time high for us, as well as our CyberKnife. So these are the contributors for our ARPOB. And as our international picks up going forward, this can even increase. But one of the things, Shyam, we are known for is we take care of the advanced and recurrent tumors. Because of that, we see a lot of complicated cases will require complicated procedures. And that is the reason we are seeing enhanced CyberKnife and robotic surgeries, and this is likely to continue as we move forward.

Dr. Ajai, just following up here. Is there an element of pent-up demand? Or you think -- you just made a statement that it could sustain. So I'm just trying to disaggregate what could be multiple procedures coming together this quarter but may not recur, right, the volume of some of these complicated procedures.

See, this is a question we have internally discussed also. But what we have found is the internal work we have done shows this is probably a sustainable model. In the first few months, we thought it could be pent-up post-COVID, but we don't think so now because it has sustained month-on-month. It has grown. One of the things is we have now a very high-end worker -- high-end caliber doctors. For example, you take head and neck, we have a large team, and we draw head and neck patients now across from India because it's a large team, and we are now doing like robotic surgery in head and neck, which is sustainable. Similarly, for certain liver cancer, we are now doing significant robotic work and high-end work. Also, of course, in urological cancers, we hit large numbers in the last few. And so this model, based on our internal assessment, it looks like it is a sustainable model. And particularly, the international patients coming in, in the next quarter or 2, it can only increase.

So Dr. Ajai, fair to assume like...

Another thing I forgot, sorry, is our bone marrow transplant is increasing significantly month-on-month. That is also going to add to the ARPOB.

Dr. Ajai, the data point on international contribution in Karnataka or COE, whichever you disclose it this quarter, is it like less than 5%?

Yes. Right now, it is about less than...

So far, yes.

Much less than 5%, maybe even 2%.

Yes.

So we're still below 50% of pre-COVID level in terms of international business. So we see as things get normalized going forward, that's the additional upside we are expecting.

Got it. The second question is on the margins then, 26% in COE. We have seen your existing centers reach 22%. So if Dr. Ajai, Srini, Raj, anybody, if you can give us some outlook on how should we look at the margin trajectory going forward.

Yes. So, look, I mean the spread that you see is about 12.5% to 23%. Our existing new centers have just broken even. As new centers ramp up, we feel that our aggregate margins will continue to grow. In addition, I think international business, as I just mentioned, is just to -- less than 50% of our prepandemic level. As -- I think as we strengthen our go-to-market efforts in new centers as well as existing centers, we feel that we will continue to maintain and increase our margins. If you see last 2, 3 quarters, on all accounts, we've expanded our margin, at aggregate level, at existing center level, at new center level. And we just feel that we'll continue that momentum going forward.

Last follow-up from me, and I'll stop there after that. Just to understand, the -- when we have these new centers, maybe we may not reach the same margin profile like existing centers. Or you think -- is there some outlook on new centers? What is the target margin profile that this could reach?

So I mean we just reported that new center, as a bucket, we've just broken even and just gotten to -- first time into a positive territory. So you can see the upside in existing centers that are about 22-odd percent and a COE at a 26-plus percent. There's no -- I think the model is same. The potential is same. So we feel that with strong fundamentals, there's no reason why we shouldn't be able to drive the margin expansion in new centers to a similar level.

[Operator Instructions] The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.

Yes. Congrats for a good set of numbers. I have a couple of questions. First, on your Andhra Pradesh region, the occupancy are down on Y-o-Y. Is it because of the new centers coming on? Any understanding on that, sir?

Sorry. Can you repeat your question?

I have a question on the Andhra Pradesh region. The occupancies are down on a year-on-year basis. Any particular reason for this?

Sir, if you look at the footnote #6, we are excluding occupancy of government-sponsored radiation patients. Radiation patients usually are daycare patients. But with our scheme agreement, we're supposed to provide them dormitory facilities, which is not really a usual patient bed occupancy. So we've excluded that, and that's the drop in Andhra Pradesh. Yes, I think previously, last year, we were reporting including those dormitory patients. I think from next year onwards, it will get normalized on a year-on-year comparison.

Sure. Sure, sir. And on your COVID revenues, as you said that this quarter, the revenue contribution from vaccination was 7%. So excluding that, like for like -- on like-for-like basis, what could be your revenue growth?

I think without the business as usual, I don't have -- 1 minute. I think without this INR 25 crores of vaccination, also, this is our highest-ever business-as-usual revenue. And so...

It should be in the range of 15% growth compared to last time same time.

Okay, okay, okay. Got your point, sir. Got your point. And you said that the international business would recover in the coming quarters. So vaccination, obviously, it will reduce over the period of time, the revenue contribution. But since international business is coming, so will that mitigate the impact or the revenue at quarter 3 would be better than what it was in quarter 2, considering the fact that international revenues will be coming back?

Once the international business comes back, our revenue should only improve. There are 2 ways of looking at it. One, it should more than compensate the vaccination revenue. And not only that, it should also help us in terms of improving our margins also.

I just would like to share the data point. Your question -- previous question about business-as-usual year-on-year growth in Q2, that's about 31%.

Not 15%. 31%.

Yes. Yes. 15% is on a sequential quarter.

Yes.

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

So I have a few questions. So firstly, I would like to understand with respect to your Gujarat and Maharashtra clusters. The occupancies have dropped from 61% to 51%, and ARPOB has increased significantly. So is the increase in ARPOB due to the decreased occupancy? Is that the case? And the second question relating to this with respect to Andhra Pradesh. I don't see much drop in the occupancy rate, but the ARPOB has improved significantly. So what has been the driver for Andhra Pradesh? So that's my first question. My second question would be on your plans on Africa, post your buyout -- post your CDC buyouts. And my last question will be on the lab business. So I missed on the collaboration part, which doctor talked about. So I want to know your plans on the lab business, how do you plan to understand how do you strategize to take it forward and what would be those collaborative arrangements.

So let me take the Gujarat question first. As you know, most of our multi-specialty presence is in Gujarat. And second quarter last year was a COVID quarter. And as you know, COVID patients, the length of stay is more than a week up to 2 weeks. That's the difference this year that we've not had a similar number of COVID patients, and therefore, the drop occupancy and increase in ARPOB.

No. I'm talking sequentially. If I see your Gujarat occupancy now, it's 50.8%, whereas last quarter, it was 60.6%.

So it's the same issue. Q1 this year was also COVID wave 2. And therefore, we had non-COVID patients admitted in our multi-specialty hospital in Gujarat.

In Gujarat, we have 3 nearly multispecialty hospital. Two of them were full with COVID cases, and we are not seeing that. So that is why it has come -- it has kind of normalized. Our normal occupancy is in the 50s, okay? Now coming to your next question of Africa. Can I go to the next slide...

But what about Maharashtra? Yes. I asked about Maharashtra as well and also so the new ARPOB level and the new occupancy level for Gujarat, shall I take this as a sustainable thing going forward?

Yes. Yes.

Okay. And what about Maharashtra?

Yes. So Maharashtra ARPOB increase is led by Nagpur, where we've had higher realization and subspecialties in oncology. And therefore, the Maharashtra ARPOB has gone up this quarter.

And Andhra Pradesh -- you had a question on Andhra?

And Andhra?

Andhra is -- as I explained, we have reclassified our occupancy, excluding government scheme patients who, as per the agreement, are supposed to stay where they don't need it. So they're not really -- otherwise, we wouldn't admit radiation patients overnight. So this year, we're just normalizing that, reclassifying that. And therefore, year-on-year, it looks dropped, but it's not really a drop. And therefore, the ARPOB is also going up. It's also baseline correction. Last year was a COVID year. And some of the numbers like radiation and all which are high realization, lower length of stay were lesser. Now that business is coming back, and therefore, that's a baseline correction of just getting the mix to a prepandemic level.

Okay. Now with regard to the Africa question, please?

Regarding Africa, as you know, that we had a partnership with CDC. Now we are complete owners of Africa. We have now -- in Nairobi, we have expanded our department with new installation of linear accelerator. We have also got -- preliminary agreement was done in the past for a PET scan, which we may install. Certain funding has already been done in the past for that. With this, we are looking at our Nairobi cancer center to become a state-of-the-art center. And along with that, we have peripheral clinics in several East African countries like Dar es Salaam. And these things will only be there, and it will enhance our presence in Africa once the COVID situation improves. So long-term plan, we are strategizing now how are we going to look at East Africa as the primary area as well as Nigeria. So with the CDC now no longer being partnered, we will restrategize on our own to see where we should move forward. So this -- and once this plan becomes fortified, of course, we will share with the investor community, okay? Any questions on that?

Okay. And lastly, on the lab business. I mean now -- I mean what's your plan going forward? And what about the full acquisition arrangement with Strand?

Yes. The lab business, as you know, that we got back our entire CRO with all the very well-trained human resources as well as our lab -- basic lab and the wet lab. So this was -- so it was a great 3-year experience. And we not only got some money, which is about INR 780 crores, but we also got all the human resources who are well trained and also got equipment back. With this being now, we will be oncology-focused only. So our future growth in oncology will be very good and particularly since the future of oncology is in molecular diagnostics and in genomics. And we are very well positioned. But -- for example, we are the only ones in India -- with Illumina, we have partnered to do TSO500, which is even better than the foundation medicine. So we are expanding this. And going forward, just to talk on the medical side, in the future, we won't be talking about breast cancer or lung cancer. We'll be talking about genomic-specific cancer, so -- which is not organ-specific, genomic-specific. So if you fast forward next 5 to 8 years. So HCG is very well positioned for the future. If somebody says the future, we say future is here now in HCG. So that is how we are very well positioned. In fact, our clinics are now more and more genomic-driven clinic, and that is why we get good outcomes, very personalized medicine. So this is a great opportunity, the lab coming back to us in a way for us to drive this, and the biorepository we have will only enhance. But we still collaborate with Strand in the bioinformatics division. There are various developments. Obviously, artificial intelligence is playing a major role. So we are looking at that, so that we may be able to use artificial intelligence for bioinformatic information. So this is how their technology is merging with us to enhance how we can deliver better care to the patients.

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

Yes. Dr. Ajai, Raj, can you guys talk a bit about the new innovations happening in cancer care? I know Dr. Ajai speaks of genomics frequently, and that is the new-age diagnostic coming in. Also, personalized medicine in cancer seems to be picking up very, very fast in the Western world. So how are you positioned on that side? And lastly, in terms of the technology you use, which is CyberKnife, how does that compare to, let's say, a proton therapy and other new kinds of innovations happening in the medical sector on the oncology care side?

Yes. It's a good question, Aditya, thanks. And yes, definitely, the technology is moving fast in oncology. There are several ways. One is what we call as the metaverse, the new terminology, which is virtual. All our tumor boards now, even pre-COVID and particularly post-COVID have become virtual where we are able to conduct patient for patient virtual tumor boards with specialists in radiology, pathology, and we have mastered the technique of teleradiology, digital pathology and molecular diagnostics, as I said. With all this, what is going to happen and which is already happening, in a matter of an hour, I will be able to deliver the advice to the patient. It used to take weeks, if not months, in the past. So this is one of the major development which has happened in technology. Going forward, the world has become smaller. The patient could be in Nairobi or in Mumbai or Bangalore. So we can -- we'll get them the advice very quickly, and this is going to enhance the presence of HCG globally. This is one and which is already in the works. And all this digital pathology, very specific advice by true pathologists signing off will become a norm. The second thing is in terms of delivery, you asked about CyberKnife. CyberKnife has been around, it has been around for a while. When you compare it to proton, why did we -- this is my pet project, so I'll explain to you. Proton therapy has been around since '75 because it is like a huge football team where proton is delivered, very expensive. Over a period of time, the proton has come down, the size of the proton. So it became appealing but still costing like $30 million, $40 million. But when a technology like CyberKnife came and we started accepting, it does intra-fractional correction. Because of that, it is equally precise. And what is good about proton, it doesn't treat normal tissue. So CyberKnife is also delivering that but in a shorter period of time, what we call as radio surgery, which is more effective. So because of this, in a way, CyberKnife has become more -- usage is better, indications are better, whereas proton indicators in the past have been only for mainly children to prevent second malignancies because we want to avoid exposure to normal tissue, and CyberKnife, in a way, is achieving this. Now there is a MR-Linac, which is coming into the field. We are also looking at that. And in future, what proton therapy may be looking at is the FLASH therapy, which we feel will be the -- could be the future. It may take another 5 to 8 years, where a patient is in treatment only for seconds, and the treatment is given -- you want to give a mega dose in seconds without patient moving. So that could be the future also. That is what everybody is working on that, even linear accelerators or proton are working on FLASH therapy. So that is where the technology headed. Of course, robotic surgery has become more precise. That is another area of technology. And medical oncology, the technology is where we have moved in the research, where -- from chemotherapy, no longer chemotherapy is being discovered, invented because in the past 5 years because we're into targeted therapy. We use target therapy for lung cancer. If you take -- people used to live 9 months, 1 year. Today, they are living 6 to 8 years with advanced disease because of the targeted therapy. So this is where all things are moving. And augmented reality, where we have difficulty saying Tier 2 cities, we can't perform surgery. The patient has to come or our expert has to go there. Recently, we had a case where a patient had a big tumor in the neck, Tier 2 city, attached to the blood vessels. It only required expertise. So our doctor from Bangalore, head and neck surgeon, his avatar was there helping the doctor in Tier 2 city to perform the surgery successfully. So that is going to be a future where patients don't have to come. So this will make it accessible and bring the cost down also for the patient and the family. And we can perform in all kinds of surgery, even in Tier 2 cities and help the surgeons even in deciding what should be the course of action, either for surgery or radiation. So the future is more and more becoming what we call as metaverse. That is where we are headed.

Right. And secondly, talent has become a big issue in our industry -- medical industry. And post-COVID, I understand retaining talent has been a challenge, and compensation has been a challenge for many, many employees. Can you talk about how that is playing out for your industry and your company? How are you ensuring retaining talent and hiring fresh better talent? And how is it playing out for you?

We have a model for a while, which is really mature. Our doctor attrition is one of the lowest in the industry, particularly the expert oncologists. And also we train. See, I took the model from MD Anderson [ med train ] long time ago. MD Anderson never worried which doctors leave because they were a training school, and that is what HCG is becoming. In fact, recently for something close to 20 fellowship programs, we had 400 applicants, not only in general oncology, but in very highly specialized fields like radiology, intervention radiology. For 2 posts, we had 40 applicants. So we are becoming known not only as a care provider, as I say, training research, academics. So attracting a lot of talent. So that is why even in physics, for example, we have a training program, so we don't have [ dearth of ] physics going into Tier 2 cities. So one of the ways we have overcome in doctor population is through these training programs where our own trainees will come highly trained, and we retain them. If they want to go elsewhere, they become our ambassadors. Similarly, we are doing a nurse training program, nurse leadership program, oncology certified program. So the 2 pillars, apart from the administration and all in any institute, particularly in oncology, are really the medical doctors and the paramedical, including nurses. So we are well positioned for the next decade or so with this kind of ongoing training program and certificate program. We are also starting in hospital administration, very specific to oncology. So going forward and forward, we will be doing more and more oncology-specific training. So they become well-trained, and hopefully, a lot of them will stay with us as the need requires. Even in Tier 2, Tier 3 cities, they can go.

Fantastic. So can you talk a little bit more about the outsourcing of health care services to other geographies? You spoke about this briefly about the virtual reality, augmented reality, using those technologies for your doctor to be present everywhere at the same point in time. India is the low-cost destination for health care, and we see medical tourism today as evidence of that. Now with augmented reality, virtual reality becoming more of an exercisable tool and the more robotic becoming more and more relevant, how is that really -- is there a platform that the company is developing inside? How do you in-licensing technology software that you can leverage to use augmented reality, virtual reality, robotics to your advantage and to outsource health care services to other countries where similar procedures are much more expensive?

Certainly, right now, it is in the very early stage. Once we perfect this augmented reality -- we are actually working very closely with Microsoft on this. And if we do that -- and that is the interest of Microsoft also. Suppose we partnered with them and do that, I think this will be a big blockbuster to say, even go to the other emerging markets, what you suggested, to see, "Hey, if you don't have trained people, our people can actually be avatar, can be there." Now the avatar was in the past a cartoon form. Now it is changing to the real human form of the people in the next few months. That will be a big addition. So if you say Dr. [ Vishal Ramesh ] to go actual, Dr. [ Vishal's ] avatar will be there in Nairobi. So this will help us a lot not only saying how HCG is a leader. And because of this, we already have a big leadership position, and it will only enhance that. And certainly, we can help this -- most of these countries to develop this in a short period of time. As you know, the leapfrogging happens very fast in technology. Once we start doing it, it will leapfrog very fast. So this will happen. And another area, Aditya, is we have a great interest technologies, data collection. We are doing -- we are working with our other group where we are collecting humongous amount of data in oncology for our patients, whether it is head and neck or breast cancer. And with this, I think, we will be able to offer a platform for pharma companies and others to participate with that in future. In the past, as you know, India has been a laggard in data because we didn't have a proper follow-up technology to do the follow-up. Today, we have. So this will only help us. We are in the beginning of this big revolution, I can say, in oncology, where things will change rapidly in the next 5 to 10 years. Raj, you want to add something?

No. No. I think you covered everything.

Yes. I hope I answered all of your questions.

Yes. It's good. It's good. But I just needed a couple of more details on the partnership with Microsoft. So while we are partnering with Microsoft, are we in-licensing sort of a software with them? Is it like a joint venture partnership where, eventually, you will share profits with them? Or is it like you pay a fee for their software? And is there like a term sheet signed between you 2 as to how long that partnership will last and what other terms? I mean I'm just trying to understand the controls of the partnership and how interested is Microsoft in helping you with this project.

So as far as we know, this was like a pilot project for them also. When they did the study, it was first time they said really globally, they have done. And we have an agreement where we'll work with them in oncology. So -- but we are going to obviously reiterate it more and make sure we work with them in a collaborative way as we move forward, and they have expressed interest. And so far in writing, we have not done anything. We will certainly work with them. They see interest in us, and we see -- because Microsoft, from what I know, is spending significant amount of funds for health care in this point of vertical. So if that is the case, definitely, their interest is there because of our volume of oncology we have, and they can showcase. This is where we are headed. And once we do something, definitely, we'll, of course, inform the investor community on that, okay? And we do see a bright future.

Yes. Aditya, we are -- we have an existing partnership, whether it's cloud, whether it's application. And we are evaluating certain more areas, whether it's CRM, et cetera. So we have an existing relationship. But I think what technology firms look forward to is how do they take these technologies and do a proof of concept with health care players. And in oncology space, that's where [indiscernible] comes in. So a lot of it is taking a concept, taking a technology and find real-world applications to it. That's where I think this partnership potential is. And we'll see how it goes. I think -- we feel there is a big potential, and we would love to partner with technology firms to lead on the innovation front.

But there is no exclusivity here, right, Raj? For -- as in Microsoft's software is not going to be exclusive for you as an oncology player. They're free to go to other oncology players, and you are to go to other software providers other than Microsoft?

Yes. Yes. I think that comes when you really have something that can be commercialized, right? That will come into place, right? Now we are open to partnering with anyone and everyone to push the boundaries.

And how far are we from a potential commercialization of such a platform in terms of time line? Are we months, weeks or years?

I think in a 1 year. Commercialization means -- we have to define commercialization correctly. For us to use it...

Earning the first penny out of such a venture [ is how are we looking ]?

If we go and do a procedure, we are more looking at a health care patient-centric approach. When we go and do a surgery, let us say, in Cuttack with our experts, Bangalore avatar being there, that is how we see. We have to measure the success rate, how it is playing out. So it will take us a year to know how it is playing out. Only after that we can say how are we going to commercialize it, okay? Because it's like a pilot project. We have to do a pilot project first.

I understand. I understand. I appreciate that. And in terms of the big data that you spoke to, obviously, pharma companies will be very, very interested in oncology data, targeting specific genes and creating personalized medicine, as I said. I recall you guys had some sort of a clinical research going inside when COVID was at its peak, right? You had a clinical research program at your hospital. How has that vertical worked out for you? And any plans you have on that vertical in terms of helping with clinical research? Can you talk a bit more about that?

Yes. Clinical research is -- there are 2 types of clinical research. One is investing -- one is pharma company-sponsored CRO. And we are now centralizing the CRO, working with some pharma companies, which, obviously, in due time, we will give out the names is to see how we can expand clinical trial program in a joint way. That is, I think, going to go very well in the future because of the centralization, using our EMR and other things. Second is in terms of investigator-initiated trials. There is a lot of openness among the various companies, sponsors to do that and our own doctors' capabilities. There also, we are going forward, investigator-initiated trials. A lot of interest has been taken by our doctors, and the publications themselves indicate that. We are one of the largest oncology publishers in India today. The third area is collecting the data. We are working with the group exclusively oncology with them, like you asked about exclusivity. This is exclusive, where the data is oncology with us only their work, and sharing that data and working on that, we will look at how we can expand research on very patient-centric based on this data to create new molecules or understand the disease, and based on that new trials, new treatment trials could happen. All of this, Aditya, is exciting, but it is going to take the next 4 to 5 years before we kind of really exactly get an upper hand on this and able to produce some significant revenue from this. Some revenue is coming in terms of grants, working with companies like big manufacturer companies. We are getting, but it's a very small amount. In the future, I think this will expand significantly.

The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.

Yes. My question is on the CapEx spend. The first half, you did a CapEx of around INR 18 crores. If you can go through your presentation FY '21, the CapEx was around INR 35 crores. So should we expect a similar kind of CapEx for FY '22, around INR 35 crores to INR 40 crores? Or is there anything add-on to it?

See, we normally do not guide as far as these numbers are concerned. But we will do what is right from a business serviceability point of view and a patient care point of view. We will invest in the right CapEx.

Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

Yes. Thank you very much, and thanks for all the investors for being here. And we look forward to interacting with you in the near future as and when we have information as well as our next quarter earnings report. Thanks again for nice questions, and I hope we move forward. HCG is very well positioned to move forward. I'm sure you'll be hearing a lot about HCG in the future. Thank you very much. Raj, you want to end?

Thank you.

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