Max Healthcare Institute Limited (543220) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Max Healthcare Institute Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Suraj from CDR India for opening remarks. Thank you, and over to you.

Thank you, Ryan. Good morning, everyone, and thank you for joining us on Max Healthcare's Q4 and FY '25 Earnings Conference Call. We have with us Mr. Abhay Soi, Chairman and Managing Director; Mr. Yogesh Sareen, Senior Director and Chief Financial Officer; and Mr. Keshav Gupta, Senior Director, Growth, M&A and Business Planning. We will begin the call with opening remarks from the management following which, we will have the forum open for an interactive Q&A session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Abhay to make his opening remarks. Thank you, and over to you, Abhay.

Good morning, everyone, and thank you for joining us on Max Healthcare's Fourth Quarter and Full Year FY '25 Earnings Call. This year has been a pivotal one for us, fueled by focused strategic decisions, disciplined execution on ground and significant milestones that have set new benchmarks. After acquiring hospitals in Nagpur and Lucknow in the last quarter of previous year FY 2024, we acquired the 500-bed marquee Jaypee Hospital in Delhi NCR this year. As part of our asset-light expansion strategy, we commissioned Max Dwarka and signed up contracts for build-to-suit hospitals to be set up by our partners in Mohali, Thane and Pitampura, Delhi. During the year, in what could have been a year of moderate growth, otherwise, we initiated multiple long-term growth plans, including the announcement made last week regarding acquisition of approximately 1 acre land parcel adjoining a fully occupied 400-bed hospital in Vaishali. Our recent acquisitions, Max Lucknow, Max Nagpur and Max Noida played a key role in accelerating top line and EBITDA growth. Our overall financial performance for FY '25 reflected this momentum with a year-on-year growth of 26% in revenue and 22% in EBITDA. Notably, Max Lucknow demonstrated year-on-year growth of 56% in revenue and 102% in EBITDA, while Max Nagpur reported a year-on-year growth of 23% in revenue and 86% in EBITDA in the first year since acquisition. Max Noida is being integrated into our network and reported a gross revenue of INR 228 crores with an operating EBITDA of INR 48 crores at a margin of 21% post-acquisition since October 2024. Additionally, our newly operationalized asset-light hospital in Dwarka achieved EBITDA breakeven in 6 months, a new record. The hospital clocked a revenue of INR 171 crores and an EBITDA loss of INR 29 crores for the entire year FY '25 since becoming operational in July 2024. It exited the year with a revenue of approximately INR 330 crores per month and 73% occupancy on the 235 beds in March, with balance 68 beds yet to be opened. We are already looking forward to embark on the next phase of expansion of 200 beds at this facility. These results demonstrate the resilience of our operating model and the caliber of our teams. It reinforces our confidence as we prepare to commission 3 new brownfield towers at Max Smart, Max Nanavati and Mohali hospital within the next 3 months and complete our greenfield facility in Gurgaon by the end of this year, adding approximately 1,500 beds in total. Among the year's other standard achievements, we are proud to have been ranked amongst the top 20 companies in S&P BSE 100 Index and recognized under the next leaders category for corporate governance, excellence by Institutional Investor Advisory Services, India's largest proxy advisory. This recognition underscores our unwavering commitment to the highest standards of transparency, accountability and integrity in corporate governance. On that note, we would like to highlight that we continue to take corporate actions to simplify the holding structure, improve governance and optimize cash flows. To that effect, we have concluded merger of 2 wholly-owned subsidiaries ALPS Hospital Limited and Max Hospitals and Allied Services Limited. We have also filed an application with the NCLT for merger of Crosslay Remedies Limited and Jaypee Healthcare Limited, which will, in effect, reduce our outflow on the acquisition by INR 200 crores to INR 225 crores. Now coming to the performance highlights of the fourth quarter, which is our 18th consecutive quarter of year-on-year growth. Our average occupancy for the network stood at 75% versus 74% in Q4 last year and at similar levels in the trailing quarter. Whilst the occupied bed days grew by 30% year-on-year and 2% quarter-on-quarter, do note that the network occupancy stood at 78% if we exclude Max Noida, which is still being integrated into the network, something which we completed the acquisition of in November 2024. Average revenue per occupied bed for the quarter stood at INR 77,100, remaining relatively flat year-on-year and growing 2% quarter-on-quarter. Like-for-like ARPOB for the existing units grew by 7% year-on-year and 2% quarter-on-quarter. Network gross revenue was INR 2,429 crores compared to INR 1,888 crores in Q4 last year and INR 2,381 crores in the previous quarter. This reflects an increase of 29% year-on-year and 2% versus the trailing quarter. Of this, new units reported a gross revenue of INR 353 crores while existing units registered a year-on-year growth of 12% in revenue, driven by 6% growth in occupied bed days and 7% growth in average revenue per occupied bed. International patient revenue stood at INR 202 crores, registering a growth of 28% year-on-year despite contraction in patient footfall from Bangladesh and Yemen due to continuing political unrest. Network operating EBITDA stood at INR 632 crores, reflecting a growth of 26% year-on-year and 2% quarter-on-quarter. This includes INR 67 crores EBITDA contribution from new units. Network operating EBITDA margin stood at 27.2% for the quarter. Existing units reported an EBITDA margin of 28.5%. Annualized EBITDA per bed for the network stood at INR 74 lakhs, like-for-like EBITDA per bed for existing units stood at INR 84 lakhs, reflecting a growth of 7% year-on-year. Profit after tax, excluding exceptional items and one-off tax gains, was INR 376 crores versus INR 311 crores in the fourth quarter last year and INR 372 crores in the previous quarter, reflecting a growth of 21% year-on-year. There was an exceptional item of INR 74 crores towards CIS charges paid to YEIDA for seeking permission for changing shareholding of Jaypee Healthcare Limited prior to acquisition and one-off gain in tax costs of INR 18 crores, consequent to voluntary liquidation of a wholly owned step-down subsidiary in the third quarter FY '25. Overall, free cash flow was INR 422 crores during the quarter. INR 390 crores was deployed towards ongoing capacity expansion projects and upgradation of facilities as acquired hospitals. Consequently, net debt for the network came down by INR 32 crores to INR 1,576 crores at the end of March 2025. Continuing our efforts to support the local communities, we treated approximately 36,500 outpatients and 1,200 inpatients from economically weaker sections of society entirely free of charge worth INR 53 crores as hospital tariff. Both our strategic business units continue to report significant growth in the revenue and profitability. Max@Home reported a top line of INR 56 crores, reflecting a robust growth of 22% year-on-year. It offers 15 specialized service lines across 15 cities with over 50% repeat transactions. Max Lab reported a revenue of INR 46 crores, reflecting a strong growth of 19% year-on-year. It provides services in over 50 cities through its network of more than 1,200 collection centers and active partners. Now coming to the status of our expansion projects. 268 beds at Nanavati in Phase 1. The interior work is in progress, and we expect to commission this facility within 90 days. 155 beds at Mohali. Finishing work is underway, and we expect to commission this facility within 90 days as well. Plans to add additional 45 more beds through internal reconfiguration will be initiated once the new tower is completed within 90 days. 400 beds at Max Smart at Saket Complex. Interior work and MEP-fit-out works are ongoing, and we expect to commission this facility latest by second quarter FY '26. At Max Lucknow, we have added 128 beds on floors 9 to 12 as communicated previously. Through internal reconfigurations, we have added 35 beds in May and plan to add 39 more beds in the next 12 months. We expect to complete the Onco block here by the second quarter this year. 500 beds at Sector 56 Gurgaon. Structural work is in progress. We expect to commission the facility by end of this calendar year. At Dwarka, the Onco block is expected to be commissioned by the third quarter this year. All of these are on schedule, and we will see significant ramp-up in our capacity over the next 12 months. 127 beds at Max Nagpur, 12 beds have been added in October 2024. For the balance beds on additional floors, we are waiting EC approval, and that's environmental clearance approval. While the bill of quantity detailing has started, we expect to complete this project within 24 months. 397 beds at Patparganj. We already received the environmental clearance. The tendering work in the progress. The project continues to be largely on schedule. 550 beds at Max Vikrant Saket, we are still awaiting the clearance from forest department for tree transplantation. All other statutory approvals already in place, and we expect to complete the project by 2028. 400 beds at Zirakpur, Mohali. Our partner is currently awaiting the EC approval and has initiated the tendering process, detailing the contractors, et cetera. The project is expected to be completed within the next 30 months. 140 beds at Vaishali. As announced earlier, we have acquired the land adjoining to Max Vaishali and we'll be initiating drawing, detailing, et cetera, in the next couple of months. We expect to complete this brownfield project in the next 30 months as well. Presently, the Vaishali Hospital is operating at 83% capacity utilization. And finally, moving on to the overview of the company's performance for the full year, ending March 2025, network gross revenue stood at INR 9,065 crores, reflecting a growth of 26% year-on-year. New units contributed to INR 938 crores to the gross revenue. Overall network operating EBITDA grew by 22% year-on-year to INR 2,319 crores, reflecting a margin of 26.8%, while EBITDA per bed stood at INR 70 lakhs. Existing units reported an EBITDA margin of 27.9% and EBITDA per bed of INR 80 lakhs. During the full year, we generated INR 1,447 crores of free cash flow from operations after interest, tax, working capital changes and routine CapEx. INR 1,182 crores was deployed towards ongoing expansion projects and upgradation of facilities at acquired hospitals. INR 146 crores was distributed as dividend and INR 1,716 crores net of cash at Jaypee Healthcare Limited was used for the Jaypee acquisitions. With this, I would like to open the floor for any question and answers.

[Operator Instructions] The first question comes from the line of Amey from JM Financial.

Congrats on a good numbers. So first question I have, if you can give information on the profitability of the acquired units like Nagpur, Noida, Lucknow for the quarter?

Like I mentioned, there's been -- like I mentioned in the speech as far as Lucknow hospital is concerned, we had a 56% growth in revenue and 102% growth in EBITDA. Nagpur has reported a 23% growth in revenue, 86% growth in EBITDA. The Noida Hospital, which we completed the acquisition in November, has a gross revenue of INR 228 crores, and we had a INR 48 crore EBITDA at 21% margin. I think with respect to -- have we given the exact number...

No, so not in the -- so I think this year, this quarter onwards with all of the fact that these -- 2 of these hospitals were acquired in quarter 4 last year. For example, the Alexis was acquired in February and Lucknow was acquired in March. So that is the reason why we don't -- because it's very tough to now separate the last year number into 2 parts, and this is without that, et cetera. So that's the reason why we haven't put the numbers there. But nevertheless, you have the overall numbers with you. We have INR 67 crores of EBITDA from new units, which is 19.4%. Now if I take out Dwarka, Dwarka is just broke even in December. And even this quarter also, there is a small kind of EBITDA from that hospital in quarter 4. If I take out Dwarka, our EBITDA margin is 24.9% in the new units.

Sure. Sir, the reason I wanted to ask because how much margin expansion still can happen in these units, except Dwarka, obviously, which is recently commissioned. But the other 3 units, how much margin expansion scope is there for next 1 to 2 years...

No, significant. I mean, this is the first year of acquisition. As you -- by the time you put the building blocks in place, you must appreciate that takes some time. So I think, clearly, in terms of bed utilization, in terms -- I mean just to give you an example, although you had -- in Lucknow, you had expansion of EBITDA by 106%, yet, there is no radiation oncology there. There's no bunker, right? And that bunker is going to come into play at the end of H1 this year. And once that happens, the oncology business, which even currently is not anywhere near the oncology business or the rest of the hospital, there's a major move up over there. If you look at Nagpur, for example, we're already now approaching very high capacity utilization. The teams are coming in play and so on and so forth. We're already looking at the next phase, which is adding another 160, 150 beds over there. So once that happens, that gives you a major flip because you don't have any capacity left over there. As far as Max Noida is concerned, we're operating at -- we bought a unit, which is operating at less than 50% occupancy. So you have 50% more occupancy, higher sort of ARPOBs as well as all the clinical programs, et cetera, coming. So typically, when you do these acquisitions, right, I mean, the first year, you'll have less of a sort of improvement curve in terms of absolute value, maybe in percentage terms, you are operating of a smaller base. When -- the second year is when you're going to have that. And each one of these, whether it's Jaypee, whether it's Nagpur as well as of Lucknow, also affords significant further brownfield expansion. So I mean, you will have yields coming out years to come.

Also, I think the important question is to say that we have very respectable margins. For example, Lucknow margin is more than 30%, right? Nagpur margin is around 22%, probably more. Jaypee will also be in the same range. I think the main thing is that we want EBITDA per bed to improve now, which means that we have to put medical programs which are higher end. And I mean just to say the new units, overall, the EBITDA per bed is 54% of the rest of the network, which means we have to really grow that number. And that's how you will find that -- and that's one of the reason why you find that the revenue growth and EBITDA growth are -- EBITDA growth is a bit tepid compared to revenue growth because the share of new hospitals is going up and their EBITDA per bed is lower than the rest of the network.

But going forward, you're going to see that the EBITDA growth will outstrip revenue growth there. Not that the revenue growth is slowing down, I think there's still enough -- more than enough fuel over there.

Sure. Sir, second question I have on Max itself because we have said that 1,500 beds brownfield expansion will happen in next year. So this year, we have seen a lot of acquisitions. So how -- what are the objective next year? Is it a brownfield focus here? Or you think the M&A would still be there?

No, I think it's not one at the cost of the other. I think the brownfield is already under construction. It's already been built. So if you look at Mohali Hospital, it's operating 80% plus, 85% kind of occupancy levels, okay? And so you're really -- that number of beds which are coming in, which should be very, very quickly taken up, I mean that's the whole purpose of brownfield. Now similarly, if I look at Mumbai, right? I mean in the next 90 days, again, you're going to have these beds come up, but that solves the problem of the Mumbai hospital, right? I mean then Max Saket again, is that a very, very high occupancy, and that's the main hub. I mean we're really crying for space and more beds over there. So I think those beds don't -- I mean -- and the balance sheet is something which is completely different. So there are the 3 brownfields we are doing. Gurgaon Sector 56, as you are aware, Gurgaon for us is the highest ARPOB, the highest EBITDA per bed market. So again, with this new hospital, which is very, very well located over the Sector 56, we are looking to do the same sort of encore, do the same -- have the same sort of results that we've had in Dwarka. That has nothing to do with our balance sheet and our capabilities of doing other things. So we will continue seeking acquisition opportunities also. But like I said, they have to -- we have to be able to touch base on -- or clear 2 of our filters. One is the 20% to 25% ROCE within 4 to 5 years as well as in markets, which are -- where at least we have 1 or 2 of our peers. And if these 2 conditions are met, we are happy to look at acquisitions and we continue to pursue them.

The next question comes from the line of Damayanti Kerai from HSBC.

My first question is on your payer situation at new hospitals. So if I look at your institutional bed share, you mentioned it went up to, say, 33% in 4Q. So is it like -- is it because you are putting more of these keen patients to really like move up in the occupancy, cover up the fixed cost. And then I think -- can you please comment on that?

So that's absolutely right. I mean if you look at -- typically, when you open a new hospital, Dwarka, for example, you kind of fill it with all payer groups because really the first focus is to get the occupancy up and then you start turning it. If I look at Nagpur, for example, it was operating at 50-odd percent occupancy prior to acquisition, but we took up the business over there for institutional business in order to ramp up the occupancy and the occupancy now is -- I mean, it's like almost -- is full up. So what that does is, it helps you occupy your idle beds and yet cover fixed costs or at least a part of it and all trickles down to EBITDA. So it -- from our standpoint, so long as contribution is positive from any peer group, which has idle capacity, it makes sense to do that. So we continue to do that, and that's what is paying us the yields and dividends returns as well. I mean, there's no sense in keeping beds idle. If you have any idle beds, you must do institutional business over there. So we continue with that strategy.

So at what occupancy you choose to optimize between institutional or TPA patient? So say you ramp up to 40%, 45% or what level you take that decision?

See, look, we can go up to, let's say, about 80% occupancy, right? So till I get to 80% occupancy effectively, I can take institutional patient. If I have -- suppose I have 60% occupancy other than institutional, then for the balance 20%, I'll take institutional. I will not have an idle bed.

So look at it the other way round. As well as we are not refusing cash patient or insurance patient, we'd like to do the institutional patients.

That's right. So any growth in cash and insurance patient will be accommodated first.

Okay. Got it. My second question is on international patient revenue. So I remember a few quarters back, you are talking about initiatives or incentive provided by the government to ease flow of the medical international tourists in India. On back of that, have you seen any incremental -- or I'd say any meaningful pickup in your international patient business? Because if I see, I think it's still like 9% to your hospital revenue, although on a bigger base, but any significant or notable push, which you might have seen from these initiatives?

It will be 9%, but please understand we've increased capacity by 30%, right? And the growth in that business this quarter has been 29%, which is a significant increase. I mean I wouldn't entirely put it down to Government of India because even that's a slow move. But as the image of the country sort of improve. But then you have certain setbacks, right? I mean you also have geopolitical unrest. We've had that issue with Bangladesh, we had with Yemen, et cetera. We most recently had this with the Pakistan issue, where the airspace has been closed. So some of these have those, but you will always be 2 steps forward, 1 step back. But if you were to draw a line, I think we've had more than 25% growth in this business for a long period of time, and 29% is acceleration in spite of these setbacks.

Got it. And my last question is, if I look at your ARPOB on a network basis, including new and existing units. So it's somewhere around, say, INR 75,000 for FY '25. So what kind of good we should look at this parameter, given now going ahead also, we will be having a mix of existing plus new beds on a consistent basis?

It's irrelevant what the ARPOB is, right, I mean, by the overall ARPOB is. I mean today, if I acquire something for $100 and it gives me $25 of EBIT, it's a 25% ROCE. I don't worry about whether I'm -- what is producing is lower ARPOB or higher ARPOB. So overall -- I mean, what we have to look at is what is happening to overall EBITDA, what is happening to overall EBITDA per bed, what is happening to vis-à-vis what we're deploying. If I look at the ARPOB growth of existing facilities, it's gone up by 7.5%. But when I buy something worth lower ARPOB, okay, that drags it down. But the fact is should I not be acquiring something well lower ARPOB, even if it's very, very high on ROCE, even if I'm getting it very, very cheap. Answer to that can never be, don't acquire. Answer to that always has to be, yes, you must. We are -- I mean, so long as I can deploy money at a 25%, 20%, our ROCE is pretty high, 25% overall.

The next question comes from the line of Neha Manpuria from Bank of America.

I think in the presentation, you mentioned that the IP growth at 3.5% was impacted due to, I think, lower footfall in internal medicine pediatrics. Is there something to read into this? Because it isn't as if March is a seasonal quarter. So just trying to understand the reason for this business.

No. So typically, when you compare quarter-on-quarter, quarter 3 happens to have more internal medicine patients and quarter 4 happens to have less internal medicine patients. So I think there's that impact of seasonality which comes in, I think that's what we're trying to explain there, because the share of internal medicine is coming down.

But the fourth quarter -- okay, so the drop you're talking is on a quarter-on-quarter. But even if I were look at a year-over-year, it's just 3% IP volume growth. So hence, I was wondering if there is anything one-off in the quarter?

A lot of these dengue patients, et cetera, comes up. Sometimes it happens in October, sometimes it goes into the quarter 4. So I think that's probably the change that we're referring to here.

Last year, if you recall, October had a significant amount of dengue patients, particularly in places like Mohali and Dehradun, et cetera, where we had massive dengue. For some strange reason, it was went into October. This year, there wasn't. So I guess...

Yes. But I was thinking about March versus March, so -- but I understand that there could be...

Yes, yes, but nothing to read into it. I mean it could also be -- I mean if you look at some of the new facilities, et cetera, that we acquired, they weren't there last year, now they are. They may have a lower level of [ fees ] in internal medicine and so on. So I mean -- but there's nothing to -- I mean, none of our signs are showing any. If I look at the number of OPDs overall, there's been a significant increase, I think...

So -- but even IP number versus last year, they've grown by 6% existing quarter-to-quarter, yearly also about 5%.

No, fees in internal medicine specifically.

Internal medicine, so in the fourth quarter, surgical business comes up, so IP volumes goes up.

Year-on-year.

No, it will be basically a construction of the new hospital versus the old hospital.

That's right.

Got it. The second question is on Dwarka. I think in the presentation, we mentioned that the Dwarka achieved breakeven in December quarter. And based on the loss number, if I were to calculate, I still see there is a loss in Dwarka in the quarter. It's still making EBITDA loss. Is that correct? Or am I missing something here?

No, there is no loss. After breakeven, we have not made a loss. We continue on -- I mean, it's obviously lower profit, but it's definitely ever since. So it's not as of December, we were -- we broke even and then January, February or March, any of the months that we've lost money, we haven't. Since then, till date, we have not lost money. We have only -- occupancy moved up. Your flow through to the bottom line has improved since then.

Okay. And have we ramped up more beds in Dwarka from the 140 that we commissioned and what's the plan for the ramp-up for the rest of the beds?

No. So we already had 235 beds, and we have occupancy of 73%, that is March. We had INR 30 crores of revenue coming from that single hospital in the month of March, which I mentioned. So you have a 73% in 235 beds. We are expecting now any time to be opening 68 additional beds. I mean, basically, these are all ready. We just sort of staff them as the occupancy increases, you know what I mean?

The next question comes from the line of Prashant Nair from AMBIT Capital.

I just had a question on the expansion plan, since there is no slide on that in this quarter's presentation. So the 1,400-odd beds that you are planning to add in financial year '26, that remains on course, would it roughly be in the same range?

That's right. We usually have it in the investor presentation, not in the quarterly presentation. So if you see the investor's presentation, it continues to be the same. We're expecting in the next 90 days, both -- within 90 days, both Nanavati 260 beds, Mohali 155 beds. I think by second quarter, you will have Smart. By end of calendar year, you will have the Gurgaon facility, and the mix, we're also adding in Lucknow and other places. So we'll be hitting 1,500 beds, not 1,400 beds. In fact, probably northwards of 1,500 beds.

By the end of the year.

By the end of the year.

Okay. And of these -- I mean, how many would you operationalize this year, if you can just give an approximate range? I imagine the bigger project would have not all beds operational from the beginning. How do you calibrate that?

No, no, we'll ramp up. We'll be operationalizing. And I mean there's a ramp up sort of this thing, et cetera. Of course, like Dwarka, for example, we didn't commission all 300 beds, although they're ready, right? What we commission is as per occupancy. So we started with in July, okay? And by March, like I said, we're already at 73%. By April, May, it should theoretically be further. So I mean, going forward, we're opening another -- so when you see 75%-plus occupancy in any set of beds, that's the time we open the next lot. Now we're opening the final lot in Dwarka. And so I mean, roughly within the year, we've been able to occupy all the beds.

And that was the greenfield. Majority of the beds that are coming up are brownfield.

Yes. So -- but Gurgaon should have the same trajectory as Dwarka, whereas the brownfield is much faster, right? The uptake is almost immediate.

Right. So that's what I was trying to figure out. So for the greenfield, so for example, for Saket, would the rule of thumb be that you initially operationalize, say, 50%, and then once that hits 75% occupancy, you add the next block? Is that how one should think about it when...

Well, you can think of it like that, but the only difference is that in a greenfield, you take 6 months to break even, right? So by the time you get to 75% occupancy, it probably takes you a year. In a brownfield, do it almost in months. Like in a month or 2 or whatever, you'd just be ramping up capacity. So your take-up is much faster.

Understood. And when you -- just one, when you categorize into existing and new units, so new units would include all the acquired hospitals plus just the greenfield ones? Or would you also include some of the brownfield...

All acquired units plus Dwarka.

All acquired units plus Dwarka.

Yes. And on going forward basis also, it is the greenfield plus the acquired...

That's right.

The next question comes from the line of Vivek Agrawal from Citigroup.

If you look at EBITDA, right, this year, the company has done quite well, right? We have seen expansion in EBITDA margin in the existing units and even the new units acquired in that division was quite well. Now we are seeing another, I think, 1,400, 1,500 beds coming up this year. So it would be great, actually, if you can just give some qualitative color on how to look at the overall EBITDA growth margins like for the next couple of years?

So I think brownfields normally give you higher EBITDA margins, right, in percentage terms as well as everything else because fixed cost is already incurred. So primarily, the brownfields coming, which I think close 1,000 beds, they should throw significantly higher EBITDA margins. And I'm not going to give you any forward-looking statements, but theoretically, they should give you higher EBITDA margins compared to your existing business. So I think that is -- even if you are sort of occupying those beds with institutional business and whatever else, even then they give you higher EBITDA margins. That's what we've sort of annualized from all our previous brownfield that we've done. So I think that should work out well for us. And again, you have -- we literally increased capacity by 30% last year. Dwarka, of course, most of the year was -- for the first 6 months was operating at a loss and after that it's been profitable. So you'll see the full strength of Dwarka coming into the current year. You will look at the momentum of both Lucknow and Jaypee sort of snowball in the current year. On top of that, you've got 3 brownfields which are coming. And the one greenfield which comes at the end of the year may produce -- will produce some operating loss, but I think a start-up like Dwarka did, but it should more than get set off for a job by what we are doing on the brownfield and the momentum of others. That's where we are. I mean, I think we are probably going to be entering, if I was to look at it or make a forward-looking statement, the strongest year in the last 5 years that we had.

Just one more question. As I think there is a significant capacity expansion by you as well as the peers, so how you should look at the situation as far as supply of doctors or medical tellers, nurses, et cetera?

I mean, look, the brownfield capacity additions don't typically require massive increase or increase in senior-level clinicians. It doesn't because if the existing doctors, they increase their footprints within those hospitals and so on because they are the ones who are seeking these beds to start with. I think other than that, I don't see massive capacity expansion literally happening other than one more hospital other than ours in the current financial year in Delhi NCR or maybe 1.5 hospitals, really nobody else is coming in the current financial year and thereafter. We have a very strong presence in Delhi NCR. We've got about 14 or 15 facilities there. So we tend to pick the best of what is available. And if I look at Mohali, it's not as if any new hospitals are coming. We're expanding capacity. Mumbai, no new hospitals are coming right now. We're just expanding our brownfield capacity. So I mean, I really don't see -- but again, you have to keep in mind that in India, there is a need for quality health care and new greenfields are required, greenfields, brownfields and so on and so forth. And all the senior clinicians over the next years or a decade to -- who are going to emanate are going to be emanating from current set of MBBS doctors, et cetera, that you have. Even today, the cost of MBBS, this thing, the salary is about INR 45,000 or INR 50,000 a month. So your demand/supply shows up in the salary standards as well, right? So I mean I don't foresee shortage in senior clinicians.

The next question comes from the line of Piyush Kumar from Magnus Hathaway Investment.

Yes. Am I audible?

Yes.

Yes. So sir, my question is, can we see the average revenue per occupied bed go into the territory of 80,000 plus in the coming quarters? And if yes, what specialty could be the main contributing factor?

I think all these specialities, which have been growing should take you there. I mean we had a 7% growth in the erstwhile kind of hospitals. The present hospitals are growing at a higher sort of this thing, et cetera.

So we're already at 77.1 ARPOB, right? So INR 77,000 ARPOB is the current ARPOB. So I'm not sure what is 7,000 you're saying. But yes, there is a gap between the new units and the existing units, right? So obviously, we have to -- as Abhay mentioned, that we don't have a traditional oncology, for example, in Dwarka, even in Lucknow. Once we start that, then obviously, that will add to the ARPOBs, but we obviously want to shorten the gap, but there'll still be a gap between in a Nagpur ARPOB and a Delhi ARPOB, right? We can't really [ dismay ] that. So there will be some difference, but I think we will, I would say, shorten the gap.

So -- and the second part is that all the prices coming up are in like Mohali, Saket Complex, Smart, Gurgaon...

Mumbai.

Mumbai, which are -- we're still balling it, but the numbers have a higher ARPOB in the current mix.

And sir, my second question is regarding the stock price. So sir, in the last 6 months, the stock prices range bound over 1,200 level. So any comment on that, sir?

You have to tell me. I have no idea how stock prices work. I mean I'm happy to discuss operations and financials and balance sheet, but markets have their own territory.

The next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Sir, just if you could share like for FY '25, ARPOB, maybe like payer-wise, institutional ARPOB, international patient ARPOB and, let's say, cash ARPOB.

No. So we typically don't share the ARPOB separately, but we do mention that what's the various parameters. So typically, the international ARPOB is 1.3x of the cash this time in this quarter. The institutional is around 40% lower than the cash. So that's the parameter that is coming into this quarter, right? So it changes from quarter to quarter depending on what the contribution of patients that we got from international and also the institutional. So institutional ARPOB has degrown a bit, it's degrown by around 3% to 4% in this quarter compared to previous quarter. But I think that's a moment, which is -- I would say there's nothing changed on the directionally in any of these ARPOBs.

And on a full year basis, you have to think about in terms of either growth or decrease, if you could share that?

No, so I would say similar trends as we see. I think the recent trends are more important than the full year trends. So I would say that's what we see. Let's say, the cash is 100, the interest will anything between 1.3 to 1.5, depends on which quarter you talk about, right? And the PSU would be -- in some quarter, it is 52% of that 100 or sometimes it is 57% of that 100. So that's the range that you have. And PPA will be 8% to 9% lower than the cash. That's what it kind of works out.

The next question comes from the line of Kunal Lakhan from CLSA.

Abhay, you said earlier during the call that your -- because of the brownfield expansion, the margins should improve or rather it's accretive to the margins. So our existing units are operating at about 28.5% margin and EBITDA of INR 84 lakh per bed. There is an upside potential to this going ahead as per you then?

That's right. That's the whole -- I mean I always guided to that. Your brownfields have higher EBITDA per bed and have higher EBITDA margins because your management cost and your senior clinician cost is already incurred by the existing hospital, right? So any incremental beds that you have, even if you were to fill them with lower ARPOB businesses like institutional, et cetera, okay, still give you a much higher -- will give you a higher EBITDA per bed as well as EBITDA margins below.

Sure, sure. As and when this incremental brownfield capacity stabilizes, right, where do you think these ARPOBs or rather like EBITDA margins or EBITDA per bed could settle?

I'm not going to give you a forward-looking statement.

Okay. No worries. Okay. Secondly, on the free cash flow side that we are generating some serious free cash flow from operations. And going by your newer assets are also like reaching EBITDA breakeven faster. Any upfronting of your long-term guidance of, like, say, adding or doubling your capacity over the next 4 years, any upfronting of that guidance?

No. So look, what we do is any guidance that we give, right, is based on us already having acquired the asset, okay, breaking ground or permissions or whatever else it is. So it's not a blue sky kind of thing. So what I don't tell you is that look, my belief is over the next 5 years, I will generate, let's say, INR 15,000 crores. So I would look at tripling my capacity or whatever else it is. No, that's not how we sort of guide either. What I can tell you is that, look, we've guided that we are happy going up to 2.5x debt to EBITDA. We have very, very little leverage on our balance sheet, on our books. We are going to be funding all of sort of our expansion mostly through internal accruals, okay? And we will -- I mean, we have more than spare room to kind of acquire. And I mean, last year, we did 3 acquisitions, right? What is very difficult for me to do is guide, okay, in terms of till the transaction is closed that what we are doing. Now there are other places that we're looking at expanding, putting up facilities, et cetera. But till I have that signing, I can't sort of this thing. I am sort of cognizant of the fact that at 2.5x debt to EBITDA, we get money at 8%, 8.25% and we're able to deploy it at 24%, 25%. But as and when the deals happen, we'll announced and that number on a rolling basis will only go up. So I mean, today, I'm guiding you, by 2028, I may have 9,000 beds, but I'm pretty sure 1 year down the line, that number would have moved up.

Understood. Understood.

So availability of cash is not a constraint for the capacity addition, right? It's not only cash, even the balance sheet, I have enough room in the balance sheet.

Correct. Correct. Understood. Lastly, a bookkeeping question. Can you give me occupancy numbers in Q4 for the newer units individually, Nagpur, Lucknow, Noida?

So Dwarka, I've told you is 73%. The older units were 78%. The Chitta and Jaypee acquisition, which we completed in November, I think that's 46%, 47%.

46% on average.

46%.

52% in Jaypee, Noida and 26% in Chitta.

Chitta, right? And Chitta is a really small unit. And we obviously didn't pay anything much where we didn't have any EBITDA to start with.

Sorry. And how much you said for Lucknow and Nagpur?

So Lucknow is 65% with the additional bed that we opened, right? So Lucknow operating capacity has gone up. And in fact, in this quarter, again, it will go up to 413 beds. It was 324 beds in last quarter. So added beds in Lucknow, on the additional beds that we added on the overall capacity it 65%.

No, the operating capacity that we bought was what?

That will be 209 beds on 234 beds, right? So it was 90%.

So it was 90% occupancy on the beds that we bought. After that, we keep ramping up the beds. So I mean if you look at the n number of beds today, then it is 67%, okay, but this is the beds that we've added over there, right?

Yes. And some beds we got down in this quarter in quarter 4.

Yes. So don't -- let's not...

Nagpur is 81% plus.

Nagpur is 81% plus.

The next question comes from the line of Rajit Aggarwal from Nilgiri Investment Managers Pvt Ltd.

First off, congratulations on a good set of results and the overall growth achieved during the year. I just had 2 very quick questions. And this is not a concern exactly. The interest cost has been going up quarter-on-quarter. And just for how to model it, should we assume the current quarter as the run rate going forward? Or is it expected to go up even further?

No. So we don't expect any material change in the number. I think this went up since the October quarter, because we borrowed money for the Jaypee acquisition of INR 1,000 crore. And then we also taken INR 600 crores loan for the Sahara acquisition in March '24, right? So these are the annual -- situation that we have is INR 1,572 crores at the end of March, which means that vis-à-vis 2 -- primarily vis-à-vis 2 term loans that we've taken which is actually affecting the net debt. So unless we really do any major acquisitions, I don't think any major change expected in the interest cost as such.

So similar run rate for the remaining quarters.

If we do an acquisition, then yes there will be change, right?

Yes, absolutely, absolutely. Second question, while Mr. Abhay touched upon this on the supply side, on the competition side, but specifically, given that a peer of yours is coming up with the same number of beds in Gurgaon and at the similar premium location. Do you think that is going to impact your numbers or the overall scenario for the next 1 to 2 years?

No. I'm not seeing any impact on this. We have a very large network in Delhi NCR. I mean, we got -- like I said, we've got 14 to 15 hospitals. Today, in terms of number of locations, we had twice the number of locations that our next 3 peers, okay, have put together. In terms of number of beds, we are equal to or more than the number of beds, all of them have put together in NCR. We've got 35,000 health care workers, of which 20,000 live in Delhi NCR. Out of our 6,500 senior clinicians, about 4,000 live in Delhi NCR. This is the largest home care business, only profitable one in the country, entirely focused -- almost entirely focused on Delhi NCR. Then we have third largest lab over there.

In terms of brand, it's a much sort of this thing. And like I said, what we are doing over there today, I mean we have a facility in Delhi NCR, okay? But the performance is far better than the flagship of any other hospital chain that you heard of over there, I mean in terms of occupancy, in terms of ARPOB, in terms of EBITDA per bed...

Yes, absolutely, I agree.

Yes. So I mean, for me, I'm solving my own need. I don't see the same. I don't think the other hospitals are the same size either, probably half the size.

Okay. They're doing the same number, but yes, you would know -- I think you would know much better. Anyhow, thanks for the feedback.

Thank you.

The next question comes from the line of Dheeresh K. Pathak from WhiteOak Capital.

Sir, for the Noida asset, what is the total FSI potential and how much has been used currently?

I mean, it's 18 acres of land for Noida. And I think we can add another 1,000-plus beds. So I don't think -- and the present facility is operating at 50%. So there's tremendous potential over there. And we keep adding. So I don't think we have a problem in the next decade at least.

The next question comes from the line of Tarun Bhatnagar from Tribeca Investment Partners.

My question is on Gurgaon specifically. Now Gurgaon gets a lot of international patients. So should we assume that once Gurgaon comes up, then your international numbers will increase? And you mentioned on the competition that you have some strength. Any particular competitor who you think can be like very tough competitor for you in Gurgaon? Or you think that you have much better, like right to win in that region?

Look, every hospital of ours, it's a micro market, okay, and we have 22 now. It's the best-performing hospital, okay, with respect to perhaps every line item, including occupancy, significantly higher occupancy. We operate at maybe 75% and the next closest competitor is at 65%, okay? It's a function of the value proposition we put together. Now Delhi NCR also coincidentally happens to be our backyard. So I am quite confident about what we are going to be doing over there. So it's nothing which is sort of moving our competitive intensity or what we believe would have been the outcome. So yes, that's where we are as far as Gurgaon is concerned.

Okay. And international numbers would see an increase once Gurgaon comes up?

Sorry. The international numbers, yes, sorry. I got that. No, honestly, it is destination for international business, but it's very similar to Delhi. So I don't give it a significantly higher sort of this thing. But in the overall scheme of things, I don't think it's going to really move the needle for us. At the enterprise level, will it significantly increase medical tourism? Answer is no. In any case, in the first year or so, you are going to be taking in all sorts of occupancies, right, not only international business, but institutional otherwise, so on and so forth, like we've done in Dwarka. And so I don't see day one majority of the beds being filled up with international patients. It also takes time to do that, to mature that business for that particular hospital. So no, I don't think it'll be a major move.

The next question comes from the line of Rishi Mody from Marcellus Investment Managers.

Can you hear me?

Yes.

Yes. So Abhay, I was just looking at your capacity beds, it's around 5,100 beds. And our operational bed count is around INR 4,654, which comes to a ratio of 90% operationalization. This has been the ratio for the last couple of quarters. Just wanted to understand, historically, we used to do around 95% of our capacity beds were operationalized. Is there -- like are we going to get to that 95%? Or is it like there's a theoretical capacity, but we are using the space for something else and hence the operational bed count on the existing infrastructure will remain the same?

No. So I mean, if I take the example of the last 2 acquisitions that we did, we acquired Jaypee Hospitals. And along with it -- so basically, there was a hospital in Chitta and Bulandshahr which have come. They have a 200-bed capacity and it's operating at 26%. So that leaves out about 150 beds there and then.

26% on 100 beds.

Or 26% on 100 beds.

Yes, we haven't opened...

Okay. So that's one. But nevertheless, it's basically 150 beds over there out of your 5,100. Then you have the Max Jaypee Hospital, which was acquired, which is a capacity of 500 beds operating and -- sorry.

We opened only 377. So let me -- so your question is about the operational capacity and available capacity. So I think there are 3, 4 hospitals where we haven't opened all the beds. For example, Jaypee, Noida, the hospital has the capacity to go up to 500 beds. We have opened only 377 beds. There is some spend to be done to build that 377 capacity to 500. So we haven't -- we're planning for the spend. But knowing that the occupancy on the 377 beds is 52% only, we are not really fast tracking that. Similarly, Chitta Hospital's 200-bed hospital, only 100 bed is opened. We don't plan -- and that -- on that 100-bed also, we have only 26% occupancy. So there is no plan to open the 100 beds. That also we look at them as spend. Dwarka hospital, as Abhay mentioned that we opened only 235 beds. The capacity is around 303 beds. So we'll open another 70 beds and some of them has already been opened as we speak. And then we have 200 beds at Bathinda Hospital, where we opened only 100 beds. So this is the capacity at Bathinda and probably Chitta. I mean leaving these 2, I think the others will open in due course of time. I mean, Bathinda, we haven't seen the demand, so we don't plan to really open the other 100 beds. But rest all will be onboard, I would say, in another 8, 9 months' time.

Also to the point, all the capacities are real. These are not theoretical capacities and they don't bring down to operational because of them not being available. They are outcome of the business plan. We don't make them live because the business in some sites may not so ask at that point.

Okay. Got it. So like in practicality, if the demand is there, you can open up 5,100 beds?

That's right, yes. That's right.

I wanted to understand ALOS, right? So I'm comparing existing to existing, it is around 4.2 days. Like I just wanted to understand, are we taking any structural efforts to bring ALOS further down on at least the existing infrastructure? Or it's more like now we have optimized to a level and hence the fluctuations will remain on account of seasonality of mix?

It's ongoing. It is seasonal, and it is ongoing and it also depends on your clinical programs. You can't even compare any 2 hospitals across the board. You have to do it on an absolute basis, because no 2 hospitals have the same clinical programs. ALOS by itself is not a bad thing. It depends on which programs you're running. So just to give you an example, higher-end business, which is international business and a higher-end surgical program, which is, let's say, transplant, will always have a higher ALOS, but we'll have a higher EBITDA per bed per day as well. So I think that is what we should be focusing on rather than purely that, unless you have a huge capacity constraint. So at this point in time, we have that. I think the teams do work on discharge and so on and so forth to hasten the discharges, et cetera, et cetera, et cetera, to turn around the beds faster. But if you have capacity, then it becomes theoretical simply because if you -- whether I have -- let's say, I had 1 bed for 365 days, whether I have 365 patients on one per day or had one patient staying for the whole year, what matters to me is what is the EBITDA per bed purely from a financial perspective.

Okay. All right. Finally, I think on the Nanavati piece, you mentioned we've got one block upcoming. And post that, I think we're going to demolish some 260 beds block and then build up a new one to replace it, which net-net we'll have a higher bed amount. But so just wanted to understand till what period like on those 260 beds at Nanavati which will be demolished will we be losing revenue?

No, we're not building -- breaking 260. We are breaking 160 beds, okay? Also, these 160 beds are -- typically, a large amount of them are the ones which are not fully occupied. We're adding 268 right now. For a period of 2 years, these 160 will not sort of this thing and then we come back with another 280 beds, right? Then we'll have 280, 168 plus another, I think, 150, right, approximately beds, yes.

Okay. So if I understand it correctly, the current 160 beds, which will go under demolition 2 years out, which means in FY '28. Is that correct?

So currently, we have 300-bed hospital. We are activating 280 beds approximately now as phase 1. After that...

And get to 600 beds?

After that 580, minus 160...

Minus 160, and we'll be activating another 275 to 280 beds as phase 2.

So the 160 deactivation is happening in FY '26 or FY '27?

These will go, then you have new beds coming, another 280 beds coming. So for 2 years, you'll have 400 beds when we deactivate 160.

But these 160 you're saying are not that occupied like I'm just trying to understand the hit on revenue will commensurate to the bed or it will be lower?

Most of these 160 beds are ward structures and lower occupancy beds. They are the old economy beds. So the idea was to redevelop in any which way. We've got a chance to develop them in a much better fashion to add a new tower altogether on that area, on that footprint.

The next question comes from the line of Alankar Garude from Kotak Institutional Equities.

Just one small clarification. Had you booked some cost in Dwarka in the first quarter before commencing operations, which are contributing to the full year EBITDA loss of INR 29 crores?

Yes, we did. You know that this hospital start-up was delayed, right? So we are planning for in quarter 1. So we had higher manpower and that's the reason we could ramp up it up faster. So there was some loss in the quarter 1, I think it's around INR 5 crores to INR 6 crores, which was also reported, we actually mentioned about it also in the earnings update.

Ladies and gentlemen, as there are no further questions, I would now hand the conference over to the management for their closing comments.

So thank you, once again. We will hear from you next quarter. We appreciate all your time.

Thank you.

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