Max India Limited (MAXIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Max India Limited Q2 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajit Mehta, Managing Director, Max India Limited. Thank you, and over to you, sir.

Thank you. Good morning, everybody. On behalf of Max India Limited, a warm welcome to all of you on the Q2 FY '24 earnings call. For the benefit of people who are joining us for the first time, I have with me Mr. Ajay Agrawal, who's the CFO for Antara Senior Living, and also Spearhead Investor Relations for the company; Ishaan Khana, who is the CEO of Antara Assisted Care Services, Sandeep Pathak, CFO for Max India; and Ankit Kalra, CFO for Assisted Care; and Ishaan from Investor Relations team, and of course SGA, our Investor Relations advisers. We've already uploaded the investor release on the exchanges, and I hope everybody had an opportunity to go through the same. So let me start with you, giving you a summary of the quarter, it has been a great quarter, actually. So on the residential side, in Dun, all inventories now sold out, except for one, which is occupied by our employees. 183 apartments have been handed over. It's a buzzing community now with 180-plus residents. It is also reflecting in the operational income that we have, and the satisfaction scores continue to be high at about 88%. On Noida, I've been -- we have been saying for a long time, all inventories sold out. Construction is on track for all the 3 towers, and the finishing work has already started. And we are liaising with the RERA for approvals of Phase II. With Gurugram the definitive agreements in the final stages. The marking and designing have been finalized. There'll be about 288 units approximately that we'll construct with about 0.7 million square feet. Bengaluru, definitive agreement is in final stages. The design architect has been on-boarded. That development will be about 1 million square feet, 482, 490 apartments in that range. Hyderabad, we have also finalized the broad commercial terms. And hopefully, in the next few days, we'll execute the term sheet as well. That's a large development, about 1.2 million, 1.3 million square feet, about 750, 760 kind of apartments on there. And discussion is also ongoing with Bengaluru, Pune, Chandigarh and in Chennai. Our target is to look at 1.5 million square feet of construction every year, and the Gurugram, Bangalore projects in the final stage of negotiations, that is a clear possibility. On Antara Assisted Care Services, we already have 68 bed operation in Gurgaon. We have tied up 150 beds in Bangalore already. The fit-outs are underway. That's in [indiscernible]. And we are now for 50 more beds in Bangalore. The scouting for Chennai already started, both in terms of office space as well as care homes. And we're looking at about 100 beds more in NCR. On Care at Home, we already touched about 12,000 lives until date since inception. We have 8-plus services live in Delhi. Most of our revenue comes through now critical care, physiotherapy, diagnostics and caregivers. We have 5 service lines alive in Bangalore, including Home Critical Care and now preparing for Chennai launch. On Medcare, 800-plus SKUs available include Antara labeled products both for sales and rental. So far, we sold about 1,700 diaper packs through the retail channel and through Amazon. And our walkers are all tend to 6th bestseller on Amazon with 15 to 20 now being sold daily. AGEasy was our digital platform, let me retrace. This was a platform which is expert-assisted products and solutions to help seniors manage their chronic conditions so they can aid, relief and the joy. We had launched the first 2 conditions of knee pain management and fall watches. There's been a great response 17 products have been launched across assisted chronic conditions. We already have 2 health studios, which are physical spaces that seniors can walk in and seek the expert consult. They are now operational in Delhi and in Bangalore, and the third one in Gurgaon will be operational before Diwali. Amazon platform is alive. We're also listed now on Flipkart. And great momentum built on marketplaces, particularly for smart watches and for new bases. And the work has been initiated now for next launches, which are planned in Q4. Coming to the financial results now. On consolidated basis, we have achieved revenues of INR 55 crores in Q2 FY '24, which is up from INR 46 crores in Q1, but down 10% year-on-year. This we explained last time as well, since we don't have any more inventory to sell in residential. Therefore, for a while, you will see on a consol basis a dip in revenue. It's purely temporary. As we start selling more facilities, you'll find this number ratcheting up. So while there's a healthy increase on all verticals, including Antara Assisted Care, on consol basis, for a while, you'll see the revenue compared to same period last year a little depressed. But our EBITDA has done well at INR 1.5 crores in Q2 FY '24 compared to a INR 7 crore loss sequentially last quarter. And at the end of Q2 FY '23, the reduction, as you know, compared to last year is because we are now investing more in the growth of the business. There's the cyclic nature of revenue recognition residential and the OpEx per new business vertical AGEasy and the cost of scale of [ residency ]. I'm confident the revenues will continue to show steady growth. EBITDA performance will continue for a couple of quarters, as we are making investments in strategy growth where the costs are obviously up-fronted. Our treasury and monetizable assets stood at a healthy number of INR 530 crores, September '23, which includes a significant treasury of INR 125 crores in Antara Purukul, which is what we had said last time. Antara Purukul continues to be PBT positive, cash positive and has surplus now. The company had a very strong balance sheet with a consol net worth of INR 529 crores as of September end. On the residency side, accumulative ITT elections of Dehradun stand at INR 676 crores in September '23, as compared to INR 592 crores in September '22, which is a 14% growth. During Q2 FY '24, we have sales collection of INR 30 crores. In Noida Phase 1, we have a cumulative ITT collection of INR 325 crores with 96% growth over last year and the collection efficiency of 96% plus. During Q2 FY '24, we have sales collection of INR 41 crores, which is quite ahead of our plan. In terms of construction, we're already on targets, completed the block work for all 3 towers, and now the finishing and interiors are underway. On Antara Assisted Care, overall, net revenue increased by 30% to INR 5.3 crores in Q2 FY '24 from INR 4 crores in Q2 FY '23. The Care Homes net revenue at INR 1.3 crores in Q2 FY '24. It's obviously adjusted for the inoperative care homes, which I explained last time the change in strategy we had done. And we are now looking at full service care homes. Our revenues grew by 45% year-on-year. The contribution margin improved to minus 9% in Q2 from minus 12% in Q2 FY '23, adjusting obviously for the cost of inoperative care homes. This is purely a temporary impact, it'll get neutralized for the next quarter or so. On Care at Home, that vertical has done very well, we achieved the highest ever net revenue of INR 2.1 crores in Q2 FY '24, grew by 27% over Q2 FY '23, lead by high-margin service offerings and expansion to new geographies, particularly Bengaluru. Contribution margin also improved to 20% in Q2 FY '24 from 14% in Q2 FY '23. On MedCare, we also achieved the highest-ever net revenue of INR 1.75 crores in Q2 FY '24. It's a growth of 169%. Obviously, it's a small base, so the percentage number is very high. The contribution margin at minus 2%, particularly because the impact in shift in channel mix from B2C to B2B. But this mix should stabilize in the quarters to come, and a steady contribution margin will be achieved as we start to do more and more private labels, most products. On AGEasy, the business was launched on August 21, as promised on the World Elders Day. And achieved the net revenue of INR 11 lakhs in Q2 FY '24. Ahead of the plan, but a small number and too early, but very good traction. Some of you may have joined the call for the first time. Just want to reiterate, we are the only organization in India endeavoring to create an integrated care ecosystem for seniors. We have 5 business verticals, independent residences for seniors who are healthy, but want to stay in a safe and secured community with like-minded people. Assisted living of care homes for seniors who need more immersive interventions or have gone through a medical episode, need to stay for a few months or a few weeks with us. We also have memory care. We also have Care at Home services, which is critical care, diagnostics, x-rays, pathology, nurse, nursegiver, patient caregiver at home. The market is $10 billion to $12 billion. To that, now please add what we are discovering on the AGEasy side, so the senior spend. That market is about INR 40,000 crores of the spend of seniors on outside hospital spend in the top 30 cities [indiscernible]. So it's a large market, has a long-term trend. We're already present in Delhi. Bengaluru launched operations and looking for now entry into Chennai very soon. As you know, the development in Noida, Gurgaon, Bengaluru, Hyderabad are more condominium style. It's a high rise. And the care homes are meant for people who need more emergency medical interventions and memory care for people who have neuro disorders like Alzheimer, Parkinson's and dementia. We also offer services in the convenience of the senior's homes. And our MedCare vertical continues to expand its presence both in terms of SKUs. And we keep on doing small, small innovation. So we will launch a host of mobility and related products, for example, the walking sticks we have looked at, which has a torch and an SOS alarm for the senior. So we will keep on launching such products across retail channels and across Amazon. AGEasy, as I said, has got a very good traction. The seniors have options of either the health studio or WhatsApp video call or calling the expert home. Now if you put all this together and start looking at the aspiration that we have of creating 8 to 10 communities, about 5,000 units, so about 10,000 people who will stay in this community. They are in one sense, captive audiences to us because they will have healthcare needs, medical equipment needs, chronic condition management needs, and therefore, we'll be able to cross-sell, but the customer acquisition cost is quite low. We commenced our journey in 2013 with Dehradun. Slowly, we have expanded, done well on both on sales and collection perspective. I already shared the cash surplus of INR 125 crores that we have in the community. In Dehradun, 180 people staying. And we have leveraged the learnings to make sure that what we launch in Noida and Gurugram in an appropriate model suited to the market at a price point, which is a good product market fit. We have agreements with developers in terms of developing and our equity participation is not that high. We are pleased to inform you that besides Gurugram the commercial legislations for Bangalore are now closed and documentation are in the final stages. The Bangalore facility is very strategically located. It's about 5 -- 10 to 12 minutes from the new airport. It's part of a last 200-acre development in which about 460 to 500 units will be constructive. Total built-up area of 1 million square feet. There are already in that community about 2 senior living communities fully operational. The Gurugram one is on the Dwarka Expressway, which is the new upcoming area for NCR. Again, part of a very large community. And this will be our first attempt at an inter-relation community for which we'll be providing all the senior living know-how and expertise to developer. The marking and design for Gurugram has been finalized, about 288 units with 0.72 million square feet to be constructed. Recently, we also closed our commercial for a very nice location in west of Hyderabad. The nonbinding term sheet is scheduled to be executed soon, post which we'll start our due diligence and other processes. And aggressively scouting opportunities in Chennai, Pune, Goa and Chandigarh to pave the pipeline for the future. In Antara Assisted Care, so far served over 15,000 patients. On the medical equipment side, about 800 SKUs, including Antara label products, some of which are also available on Amazon, Flipkart and 1mg. Closely working with IIT Delhi, as I said, to continue to innovate based on senior needs on these products -- on the products, so they're able to find value. Our customer vital feedback continues to be healthy at 94% plus and 70% renewals, which is a great belief that customers have. In fact, if you look at Dehradun, 40% of resident refers only. Again, one more vindication of how customers believe in Antara. And just to summarize, as I said, hopefully, we'll be in 8 to 10 cities over the next 5 years with residencies for seniors 4,000 to 5,000 units, about 2,000 beds of care homes, memory care homes, 50-plus health studios in both physical and online presence across Northwest and South cluster. I repeat, our focus is 4 million customers in [ Sec A, Sec B ] across the cities. And obviously, customers will stay with us in the community, our repeat customers of various products and services. So that is the Antara story. We are quite happy with the quarter. Very focused on executing where or what we have to execute. And hopefully, we'll be able to meet all the commitments that we make to our investors. So I'll stop here and welcome any questions.

We will now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of Harsh Kundnani from Aionios.

Congrats on a good set of numbers, especially in Care at Home and MedCare. I just had a couple of questions on the Care Home business. Have we added any beds in this quarter in the Care Homes business? And does the outlook for FY '24 remain the same?

No. In this quarter, we have not added beds because the beds that we identified and finalized in Bangalore are under fit-outs. They are built too soon, about 150 of them. They'll become operational in Jan of '24. The outlook remain the same. We will achieve our number of 360 beds by March '24, as promised. We have 50 more beds in site in Bangalore, looking out for 50-odd in Chennai, and we're already under discussion about 50 in Noida. So we will meet our guidance. And the real business become operational in Jan '24 because in Bangalore, they are basically build-to-suit and fit-outs are happening now.

Got it. And just another thing on AGEasy. Sorry, I missed which products did you mention in your opening remarks, which are gaining traction? And I understand that this business is just quite decent. So could you please quantify how much impact on an EBITDA level would this business have probably in this quarter and over the next, say, 2 to 3 quarters?

Yes. So as I said, this AGEasy, which is a platform addressing chronic conditions. Initially, we launched 17 products across 4 categories, adjusting knee pain as well as fall management. And the products that are getting traction on Amazon are basically the knee braces, which are knee caps, which help you redistribute the weight of the knee and give it support and smart watches. These are gaining very fast traction. As far as the EBITDA is concerned, as you understand, it's a new business. And therefore, it will consume capital and show a negative EBITDA before it starts to break even. I think FY '24 is INR 30 crore loss that we have projected for AGEasy, which has been [ incremental ]. Because most of the costs will appreciate in this -- it's a D2C business, are basically marketing and manpower.

[Operator Instructions] We'll take the next question from the line of [ Charanjeet Singh ] from Family Office.

My question is regarding our Homes. So what I learned is that while we launched Dehradun, it was a kind of premium property. It was INR 14,000 per square feet. And thereafter, we said that we shall be staying in more in mainstream something between INR 7,000 to INR 10,000 square feet. My question right from there. I happen to visit the site of Gurgaon. Their towers are coming. So that was under-lifted visit, but I saw that site. That site is at a very premium location. So are we putting your towers to the opportunity the apartments which we shall have there? Would it be the premium location apartments or it will be mainstream? What is the approach of the company that should we segregate our premium segment as mainstream segment or we shall remain in mainstream? That is the basic question.

Yes. So I have been saying for many quarters, we are now in more urban locations compared to Dehradun. Our objective is to achieve a product of market fit. So whatever the market needs based on research in terms of size and whatever it can afford in terms of prices, we will do. For example, we had launched Noida at INR 6,500, INR 7,000 mainly as that, all inclusive, no price. As we sold, we discovered that the price -- the market will take more and more price revision. So the last price, we sold over INR 10,500, INR 11,000, right? So then in Gurgaon, we benchmark what the market price of like developments is nearby, though we are senior focused players because the premium that we also demand over the market. Same thing in Bangalore. Bangalore needs smaller sizes, right? And the price point is very different. So to answer your question, we are looking at good product market fit, both in terms of capital cost and the monthly maintenance that you will have to pay. So Noida is about [ INR 7,500 to INR 8,000 ] in 2024 per square foot, right? So we'll be guided by what the customers want in terms of size and what the market wants in terms of price. But we'll be in that ballpark number as we go along. So Dehradun is today, resale is standing at INR 18,000, INR 20,000 square feet. So we're not attempting to look at creating Dehradun again. It's a one-of-its-kind. We may create something else as we go along. But whatever the market can absorb, if Gurgaon demands the price in that locality of about INR 17,000, INR 18,000, INR 16,000, so be it, right? But as far as I know, we'll be about INR 7,500, INR 8,000. So it really depends on the market.

Okay. Because that market is premium market, the area where your plot is there.

We'll take the next question from the line of Namit Arora from Indgrowth Capital.

My question was within the broad sort of area of senior care, do you feel that you are in most of the verticals that you need to be today? Or are there new initiatives within the broad focus of the company that you're looking to add over the next few years?

So actually, we have done a comprehensive study of what senior need and what the value pools are. So both are important, right? What senior needs and where the value pool lie. So -- it was the biggest value pools were around the [indiscernible] where the CIO report said India will need about 250,000 units, and the current supply is only 20, 25. That was one. Second was assisted living of Care Homes, which is $1.1 billion. Care at Home $3.9 billion. MedCare about $750 million, and now AGEasy is a INR 40,000 crore market, we went and did a study. So at this point of time, we are scaling up and executing across these 5 verticals. At this point of time, we are not able to see anything that we have left out with AGEasy coming in, that is answering the question of handling chronic disease as well as please remember, we just launched 2 conditions. We will keep on launching conditions as we go forward to cover the entire spectrum of chronic diseases for seniors depending on market size. So I think at this point of time, our hands are quite full. But for some other needs, we are quite open partnerships. For example, we will now provide online financial services for seniors. But if there's a partner available, we do a tie up with that partner. So we are focused on the 5 verticals. Whatever else that senior needs, which is a big market opportunity, if at all, we'll do a tie-up. But at this point of time, this is a big execution task for us going forward.

My second question was around marketing and branding. Now given the pedigree of your group and institution and the legacy over many decades, do you think that you need to sort of work further on marketing or branding only for this broad category? Because the general take up or the awareness in India may be somewhat lower than what you might expect. I'm just trying to see how do you leverage the legacy and goodwill of the group over the last few decades with the market reception. Are there any thoughts around that?

You're absolutely right. It's a great question, actually. Because what we are doing, part of it is awareness, part of it is category creation. For example, residences, there is no we need to create the category. People will understand the need for independent housing for seniors, so it's more an awareness. And the good news is as we entered Bangalore, we found the awareness to be a little higher than what we expected. In fact, we also found quite number of people using our name, which we had to then take some legal action. That's on the lighter side. But on Care Home, for example, it's a category creation job. On MedCare, it's more distribution and awareness. So you're absolutely right. We are at it and a lot more work needs to be done. So we recently also released a brand film launching AGEasy. You can have a look at it. It got a fantastic response from all social media handles and YouTube as well. So a lot more to be done on that side, and we're at it, we'll continue to focus on that. In AGEasy, as I told you, a large proportion of the spend is actually on marketing. But that's something we need to continue to do to leverage the legacy as you said.

[Operator Instructions] We'll take the next question from the line of [indiscernible] from MAS Capital.

A couple of questions. Sir, on the intergenerational project that's coming up in Bangalore. I wanted to understand, do we have any global case study of this model being successful? Or is it going to be something new that we have conceptualized for Indian market?

That's coming in Gurgaon, actually, intergenerational. Bangalore is joining a senior-focused development. But in Gurgaon it's generational. And this is the feedback we have been getting when we started our journey into NCR that seniors are looking for more life around them when they are senior folks. And some geographies, they also look for definitely if they can stay at a nearby distance, right? So that's the attempt we are making. There are international examples available. But the reason we went into this was based on the feedback we received from the market. It is not an idea that we conceived. The feedback came to us saying, why don't you do intergenerational. Because it would be a nice thing for seniors to stay or living in a buzzing community and maybe the children can stay nearby. So that's the attempt we are making in Gurgaon. Bangalore is a senior-focused development.

Okay. Fair enough. My next question was on the Care at Home. With 1,700 patients served in this quarter Q2 FY '24, where do you see this getting sustained? This is -- the reason I'm asking the question in the backdrop of there are firms to name it, Innova has just recently been funded in the series B. Some big players like [indiscernible] of the world, right? So are we ramping up Care at Home? And where do you see the numbers stabilizing on a quarterly, what kind of targets do we have, the number of patients that we want to serve?

Yes. See, as I said, Care at Home was all of the completion of service. We're uniquely placed to offer all the integrated services because of a background of the experience of managing real estate infrastructure, hospitality and in health care. . We are focused, very focused on high-margin services. So if you look at our contribution margin from 14% up to 20% now. That's our focus, which is critical care, diagnostic, physiotherapy, that's our focus really. So as we launch new cities, we will launch this service. It's a completion of service. We are more focused on residential care homes on MedCare as well as on AGEasy now. It is something we want to do, but in a very healthy contribution margin. So this is about -- and in Critical Care, we now achieved about 54% growth on a quarter-on-quarter basis. So we'll focus on higher margin lines, quite aware of what you are mentioning, also quite aware of where others have struggled to make contribution margin. So it's a fine balance we will do. The other point I'd like to reiterate, as we set up communities, the Care at Home service becomes a captive customer for us. So that's why we'd be able to drive better margins in the future. So we want to continue the journey and allocate capital, but in an appropriate manner, not being too bullish about it, and therefore, ending up the same the others have ended up in negative contribution margin.

Sure, sure. Fair enough. So my last question was with respect to AGEasy . I wanted to understand, will there be an element of engagement? There are various tech platforms that are venturing into the space where they are focusing on the engagement build for senior citizens, right? So does AGEasy have an element of engagement platform where maybe your customer is not on any of the old -- is not consuming any of the products of Max India. But in future, this is a good experience that they get through one of these engagement platforms eventually looks at all the offerings of Antara. So any thoughts around that?

Yes, sure. Very clear thoughts actually and very clear position on that. We have started various platforms where we started to develop AGEasy. As you know, it's been a 1-year research we have done. And in our inciting from the market, both in India and in the U.S. and some parts of Asia, we found that customers seldom pay for a subscription service. And anything which is not linked through a product, it's very difficult to make a good business model out of it, right? So we are very focused on products and services and very focused on a physical platform. That's another learning that we have had much like Lenskart, that you have to give the option to the seniors to either come into a health studio, do a WhatsApp video call or call an expert home based on their convenience. So we're offering a physical presence. We're very focused on products and services and solutions, which will help them [ in AGEasy ] enjoy. Engagement is a loosey-goose stuff, while people are doing it. It's more of a community creation initiative rather than a business model. So we might do it for community creation or tie up with people who are doing it to get access to customers. But we'll be focused on products and solutions for chronic disease management.

[Operator Instructions] We'll take the next question from the line of Ankeet Pandya from InCred Asset Management.

Sir, I just have 2 questions on Care Homes business. So sequentially, I've seen that the number -- revenues have been flat sequentially. Even though inoperative beds, that has also increased from 6 beds to 62 beds. So just can you give some color on that front?

So no inoperative beds have not increased. So let me explain that a few calls earlier. So we tried our hand as an operator model where we said that we will tie up with a guesthouse operator who will provide the F&B and the housekeeping services. We provide the care services. However, we discovered that the SLA and tasks were not working. We were not able to maintain the quality. And therefore, we said we'll close down. We'll only operate full-service care homes. And so there are 68 beds operational. These operators ones have been shut down. And now we are increasing capacity. The reason you see the overall revenue flat because we haven't added capacity this quarter, which will get added this quarter. As I explained earlier, 150 beds in Bangalore will start operating from Jan of '24 and on the lookout for more beds to end at 360. But if you look at the Gurgaon care home, the occupancy has gone up at this point of time. So there are about 22 move-ins in Q2 that we discussed that we had in versus 30 move-ins in Q1. And the occupancy now in September actually was 61% in Gurgaon.

So then the -- I think the main reason is from the change because of getting -- not outsourcing the beds? So that is one of the main reasons since the last 2 quarters, it has been relatively flat, we can assume that?

Outsourcing the beds? No, no. So we have not outsourced any beds. Where I said Gurgaon is a full service model where we operate everything from the care services to physiotherapy to F&B to housekeeping. The operator models were there. The housekeeping and F&B was done by the operator. We were doing the care. That model, we have shut down, right? But full suite model is what we are doing now.

Okay. Fair enough. And sir, just on the operating profitability. There also so now we have the visibility of guidance of 2,000 beds that you want to add in the next 2, 3 years, given that will also be requiring marketing spend also. So how should we look at profitability from your [ own goals ] given that the [ bed ] that we have at now the number of beds and significant addition? So in the next 1, 2 years, how should we look at the profitability? Do we expect breakeven by FY '25 or FY '26 for Care Home business?

Got it. So 2,000 beds is the aspiration we have over the next 5 years. Now at a unit level, each care home should breakeven in the seventh or eighth quarter at a 50%, 55% occupancy level. The average revenue realization per day, we are seeing now about 4,300 in Gurgaon, but could be different in Bangalore. And this also is depending on the price escalation that we go through. We see that very healthy. So on a unit basis, you should watch out for, in 7, 8 quarters is the individual Care Home breaking even and is the contribution margin slowly going up from 2%, 3% to what, 20% in 5 years' time when the Care Home fully mature. So that's the model we should follow. And the revenue is about INR 12 lakhs to INR 15 lakhs per bed. So if you multiply 2,000 beds with this number, you'll get 250 crores number. And the EBITDA margins -- the contribution margin at a unit level will be 20%, 22%, but EBITDA margin will be 12% to 14% on a consol basis. And the breakeven depends on how we open, how fast we open. So the mature Care Home will do a breakeven in the 7th or 8th quarters.

[Operator Instructions] We'll take the next question from the line of [ Karan Mehra from Mehta Investments ].

A couple of questions from my end. Sir, in Dehradun there is 1 unit occupied by a doctor. So just wanted a sense like will it be sold? Or will it remain like that? And if you can throw some light on what is the surplus that will come in FY '25 from Dehradun?