Max India Limited (MAXIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Max India Limited Q3 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. Thank you, and over to you.

Thank you very much, and a warm welcome. Good evening on behalf of Max India Limited, welcome to this Q3 FY '24 earnings call. For the benefit of people, who are joining us first time, I have with me my colleagues: Ajay Agrawal, Deputy CEO and CFO for Antara Senior Living Limited. He also spearheads the Investor Relations of the company; Ishaan Khanna, CEO of Antara Assisted Care; Sandeep Pathak, CFO for Max India; Ankit Kalra, CFO for Antara Assisted Care; Nishant from the Investor Relations team; and SGA, our Investor Relations Advisors. I'm sure you would have seen the investor deck that we've already uploaded and given to the exchange as well. I hope you have had the opportunity to peruse that deck. So let me start by giving a summary of our performance in Q3. First of all, very, very pleased to share with you that Antara Senior Care has been certified by Great Places To Work. This is an exercise they do with over 5,000 companies who apply and only 250 get certified. And then they do the ranking later. So it's a big milestone. We are still an early-stage organization. So we're very happy that some of the good work that we do to build our culture, to have the right set of employees, serve our seniors and our customers is paying rich dividends. So we have the certification from Great Places to Work. On the residencies side, I'm pleased to inform you that 100% of our inventory has been sold out in Doon. There was 1 unit, which got sold in Jan '24. And 189 apartments of the 197 have already been handed over. So it's a vibrant, buzzing community with over 160, 170 people staying there and it's also reflecting both in our resident satisfaction score, which continue to be as high as 88%. And also the community is PBT and cash positive with a surplus of INR 125 crores as of December '23. On the Noida side, all inventories were sold out in March '23. Construction work has been on track for all the 3 towers and now finishing interiors work is underway. We are confident we'll complete construction of Phase 1 as planned. Project completion expected by March '25. For Phase 2, we are in talks with RERA for the necessary approvals. For the new geographies, the definitive agreement has been executed for Gurugram. The massing, designing and marketing strategy have also been analyzed. This is our first attempt at an intergenerational project in which we will have about 290, 300 units of senior living with 0.72 million square feet. For Bangalore, we have closed the terms for definitive agreement and are waiting for some final clearances. However, in the interest of time, we've already submitted the development plans with the authorities. This is a 1.08 million square feet development with about 544 units. For Hyderabad, we have executed the term sheet. Currently diligence is on. And in the next 1 month or so, hopefully, we'll close that as well. This will be the largest development for Antara with about 748 units in 2 phases, about 1.3 million square feet. Further geographies of Chandigarh, Goa Pune, active dialogue is on with landowners. And hopefully, we should be able to close something in the next few months. Our target, as we told you last time also, is in the deck as well, is to do 1.5 million square feet of development every year. On Antara Assisted Care Services, we have 68 beds operational in Gurugram. We have finalized 2 care homes comprising 83 beds in Bannerghatta Road, Bangalore and 60 beds in Noida, for which fit-outs are underway and expected to be operationalized from March '24. So by FY '24, we'll have about 210 beds. If you recall, I've been saying 360 beds. So the other beds, we've been able to identify, we have done the letter of intent with the landlord just that the fit-outs are taking the quarter more. Otherwise, we are well on track for that. We have 85 beds in Whitefield, Bangalore, 80 beds in Chennai, 102 beds in Gurugram and 100 beds in Hyderabad. So there'll be much more than 360 beds, about 700 or so by the year in FY '25. For the 360, the gap is just a quarter. We have the beds, we have the LOI, it is just the fit-outs, we are taking a little more time. On Care at Home, we have touched about 13,000 lives since inception. Most of the revenue comes to from critical care, physiotherapy and diagnostics and caregivers. We started operations in Bangalore and Chennai in the last quarter, and we're now preparing for launch in Q1 FY '25 in Hyderabad. On MedCare, we have 800 for the SKUs, which include Antara labeled products, both for sales and rental. So far, we have sold about 4,500 packs of adult diapers through retail channel on Amazon. Our walkers are now the sixth best seller on Amazon with about 1,000 units sold. On an average, we sell about 15 to 20 per day. During Q3 FY '24, we launched new products like smart beds, S-shaped walkers, bed wipes, underpads and air mattresses. We are preparing to launch MedCare products in Chennai by Q4 FY '24. AGEasy, which was a phygital platform for helping seniors, look at self-care protocols for chronic diseases, which are expert assisted products and solutions. So the seniors can age with release with relief, with ease and joy. We have launched the first 2 chronic conditions of knee pain and fall detection. 17 products have been launched across 2 chronic conditions. Braces and pain relief products have received very good response in the marketplace. Obviously, in a new venture you get learnings, which we are now looking at to be able to improve our trajectory going forward. We already have 3 health studios, which are our physical spaces that seniors can walk-in and seek expert consultation. They're operational in Delhi, Gurugram and Bangalore, and work has been initiated now for the launch of next chronic conditions, hearing aids, respiratory ailments and diabetes, which are planned in FY '25. Now coming to financial performance for Q3 FY '24. On a consolidated basis, we achieved revenue of INR 45 crores, which is down 3%. As explained earlier, this is primarily because we don't have any more inventory to sell. As we launch Gurugram, Bangalore and Hyderabad, this gap will get closed. It's purely temporary. On consolidated EBITDA basis, the loss is INR 13 crores as against a marginal gain of INR 0.1 crore in Q3 FY '23. Again, the reason is dip in revenues because of no inventory to sell, but also because we're spending now or investing in new businesses in scaleup. That's why the expenses are going up. This EBITDA trend will continue to be in similar trends for a couple of quarters, as we make the investments and strategic growth initiatives, but treasury and other assets stand at INR 500 crores as of December '23. Very strong balance sheet positions with consolidated net worth of INR 513 crores as of December '23. On the residences side, cumulative inception to date, the sales collection of Dehradun stands at INR 676 crores as against INR 615 crores in December '22, which is a 10% growth. In Noida Phase 1, we have a cumulative ITD collection of INR 334 crores, which is about 58% growth over last year and a collection efficiency of 98%. In terms of construction, all on track, already completed block work for all the 3 towers and now finishing and interiors are underway. Our Antara Assisted Care, overall net revenue increased by 56% to INR 7 crores in Q3 FY '24 from INR 4.5 crores in Q3 FY '23. The Care Homes net revenue stood at INR 1.5 crores in Q3 FY '24, grew by 28% year-on-year. Adjusting for revenue of inoperative care homes, as I shared last time, some of the operator models we had tried didn't work so that -- those care homes we had to shut down. The contribution margin improved from minus 5% -- to minus 5% from minus 6%, adjusting the cost for operated care homes. In the Gurugram care home, which is the 1 model that has been steady, which is a proof of success, the margins have improved sharply from minus 1% in Q2 FY '24 to 12% in Q3 FY '24. And hopefully, as we ramp up the occupancy from the current 58%, the margins will tend to go to the number we have already stated in our earlier calls. On the Care at Home vertical, this vertical has done very well. We achieved the highest-ever net revenue of INR 2.5 crores in Q3 FY '24, which grew by 45% over Q3 FY '23, led by high-margin service offerings and sanctioned new geographies, particularly Bangalore and Chennai. The contribution margin also improved to 15% in Q3 FY '24 from 14% in Q3 FY '23. On MedCare, we've also achieved the highest ever net revenue of INR 2.1 crores in Q3 FY '24. It's a growth of 170% year-on-year. The contribution margin at minus 5% is impacted by a shift in channel mix from B2C to B2B and sale of some old inventory that we have bought during COVID times. 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 label products. On AGEasy, which was launched on the Elders Day as promised, August 21, 2023, has been only a few months. The net revenues already scaled up to INR 1 crore in Q3 FY '24 from a meager INR 0.1 crore in Q3 FY '24, and we are ahead of plan on this one. In Antara Assisted Care, our customer satisfaction score continue to be healthy, 94% across all verticals, 93% for Care Homes, 94% for Care at Home and 95% for MedCare. 61% NPS score for AGEasy and 70% renewals, which is proof of belief that customers have in our service and products. If you look at Dehradun, 40% of our sales came through resident services. Again, a vindication of how customers believe in this brand. Some of you who have joined the call for the first time, I just want to reiterate we are the only organized brand in India trying to create an integrated care ecosystem for seniors. We have 5 business verticals, Independent Residents for seniors who are healthy, but want to stay in a safe and secure community; Assisted Living or Care Home for seniors who need more immersive and intervention or help, either they've gone through a medical episode or can't be taken care at home. And Memory Care meant for seniors who have neuro disorders like Alzheimer's, Parkinson's, dementia. We also have Care at Home services, which is critical care, diagnostics, x-rays, caregivers at home, pathology. And if seniors require products for their convenience or recovery from mobility, wheelchairs, commode chairs, diapers, walkers, walking stick, hospital beds that we have through our MedCare vertical. And the latest phygital platform, AGEasy, which is a platform meant to address chronic conditions and empower the seniors with self-care protocols through a combination of solution-led advice, combination of products and services. That's what AGEasy attempts to do. Currently, we're getting very good traction. The seniors can approach us through our physical spaces, through WhatsApp video call or call an expert at home. The market size continues to grow, besides the $10 billion to $12 billion in the senior care space. The AGEasy market size itself is an additional INR 40,000 crores. And I'm only talking of the top 30 cities in Sec A and Sec B. So it's a large growing market. To summarize, in Antara Assisted Care, we have served so far over 18,000 patients. On medical equipment side, about 800 SKUs. So hopefully, in the next 5 to 7 years, the promise we have made that we will have 8 to 10 cities for our communities, 4,000 to 5,000 units of senior living; 1,500, 2,000 beds for care homes, memory care homes; 45 to 50 health studios for both physical presence and online presence across North, West and South Cluster. Our focus is 4 million customers, household income 15 lakhs and above of Sec A and Sec B and residents staying in our communities. So that's the Antara story so far. That's our progress we have made. Quite happy with the quarter, very focused on executing. We have to build scale as we go along, and some of the feedback that you've given us in the past and hopefully should be able to meet all our commitments that we made to you people. So I'll stop here. Welcome any questions.

[Operator Instructions] The first question is from the line of [ Ranodeep ] from MAS Capital.

Great set of numbers, congratulations on that. So we've seen the 64% year-on-year growth in the patients served and 45% year-on-year growth in revenue for the Care at Home's vertical. So what are the early trends that you are seeing in this vertical? And if you can also share that we've seen a run rate of INR 2.5 crores. What are the projections, by when do we see this doubling, if you can just guide in terms of the timeline?

If I understand your question, you're talking about the growth in Care at Home, what is driving it? And what are the future projections, when it will double, am I right?

Correct, sir.

Yes. So I think Care at Home has been a good story for us. As I've been saying, we focus on high-margin services and customer experience. And it's a good entry strategy for a new geography for us as well, and that is now -- the reality experience is turning out to be exactly what we have thought. It's a healthy contribution margin business, very focused on productivity and utilization of resources that we have. And since we have our residents in Dehradun, who also utilize these services, people in care homes also utilize these services and we're able to have synergies in the manpower we deploy in care home, that is why the contribution margin with the combination of focusing on higher-margin services panning out. Difficult for me to comment when it will double. It's a forward-looking statement. But in the prospective plan for FY '25, we should be able to look at numbers in line with what you're saying.

So my next question was, we usually target the top 2% of our target addressable market. Ideally, they are the ones with high disposable income, right? So if I marry this fact to the recent surge in Gurugram and Noida real estate prices, so are we looking at an aggressive pricing strategy for our Phase 2 at Noida?

Ideally, yes, why would we say no to that, to be honest. And we're also looking at aggressive pricing for Gurugram because you're right, the market is doing well. But we are very wedded to product-to-market fit. So we do a lot of research and study on what prices the seniors can afford, what is the market price, and we make sure we are priced appropriately. But needless to say, as you said, the market is buoyant at this point of time, and we will take full advantage of it.

Okay. And my last question, sir. We've seen a massive investment into the silver economy in China. And we -- I mean -- and we are aware that India is maybe a decade behind China in terms of the demographics, right? There -- we see the silver tsunami hitting India too. So what's your projection in terms of -- do you see similar investments, especially government initiatives? Do you see coming in, in the next few years and that, in turn, impacting our company?

I think this is clearly a sector, which will see an upward trend in the next 10 years. I mean we are getting there in terms of demographics. There is now attention being paid. I can give you a few proof points of direction in which the government and the private players are thinking. So if you look at the government side, health care sector council is now [ laying ] out standards for care at home. NABH declared the first draft standard for care homes. We are seeing now money raised by different players of different sizes from $4 million to $35 million fundraisers happening. There are partnerships being looked at. The government is setting up committees to look at this sector. Advisory council has been set up in Uttar Pradesh already, which I am part of. As an association for senior living, which is an association for voluntary associations that represents the industry, we have taken out a checklist for residences for seniors along with Grant Thornton. So we're able to audit all facilities. So I think everything is pointing in the right direction in terms of, a, attention from the government; b, the market picking up investor interest flowing in. And slowly some kind of structure policy. If you read the paper, Maharashtra announced yesterday under RERA the minimum standards for senior living. So I think things are starting to get together. It's a 10 years play, I must admit. It's not something we will phenomenally change in 2 years, but it's a long growth sector. It's much like what insurance was in 2000.

The next question is the line of Harsh Kundnani from Aionios Alpha Investments.

Three questions from my end. Firstly, on MedCare and Care at Home, if you can just help me explain where this growth is coming from? Is it mostly the in-house customers or the external customers that is leading to this kind of a growth? Second, on AGEasy, if you could just help us with the contribution margin. And if there is any other capital that would be deployed in the additional conditions that you guys have mentioned in the PPT, which is this hearing loss and a couple of others that you have mentioned. And large -- and lastly, what explains this sharp jump in other expenses on a quarter-on-quarter and Y-o-Y basis?

On a consolidated basis, you mean -- consolidated basis?

Sorry?

You're referring to expenses on a consolidated basis?

Yes, on the consolidated basis.

Okay. Let me address those questions. On the MedCare and the Care at Home, the growth is coming from new customers. Because if you look at, we only have 1 community in Dehradun and 68 beds operational. As these beds in these communities increased, the contribution increase. Currently, it's coming from new customers. Also starting to come from new geographies because we are finding the response in Bangalore, Chennai to be far stronger than North. Perhaps is a more mature market. So it's coming from there. MedCare, in any case, we are listed on the marketplace as well as an offline channel, right? So that is also causing. The spurt that we saw in the B2B channel, which also impacted the contribution margin in MedCare negatively is something that we will wind down over a period of time as our other channels pick up. Because we do want to have healthy contribution margin on this side. Also we're increasing our proportion of private label products, which should then push the margin up. That's the question on growth. Your second question was about AGEasy contribution. But it's too early for us to comment on contributions. It's a 4, 5 months old business. We are more focused on metrics like repeat transfers, NPS, revenue coming through that. We have allocated separate capital for that, but the gross margins are quite good at this point of time, right? But as you build the business, the contribution profile will become clearer. But as I said, for any new phygital e-commerce kind of business to have a run rate of INR 1 crore in 3 months is quite commendable and that we've been able to achieve. But as we launch more disease conditions, so we have separate capital allocated. I think in FY '24, total capital spend will be on AGEasy -- about INR 43 crores, which will be on AGEasy and we are working on the plans for next year, so we'll be able to share more about that in the next quarter. Let's talk about other expenses. So those include the launch of AGEasy business. So I guess that's why we're seeing the ballooning, essentially because of that.

So basically, there are 3 vectors of expenses, which is coming in the consol, which is basically the residences and the Antara Assisted Care Main and AGEasy. As you know that Antara Assisted Care and AGEasy both are in the expansion and growth mode. So there, the additional costs is coming in so predominantly it is led by the marketing expenses -- much same as the business.

[Operator Instructions] The next question is from the line of Parth Vasani from KK Advisors.

Sir, I had a couple of questions. First one was on care homes facility. So I just wanted to know what is the criteria in terms of payback, ROCE and returns for care home facilities?

You'll say all the questions first and then we answer, or you want to go question and answer type?

Yes, sir, I can ask you the next question later and you can answer this.

Okay. So I will probably break the answer into a couple of points. This is Ishaan here. Our care homes breakeven at contribution level in 4 quarters or at around 45% occupancy. We start seeing a 20% plus contribution margin at around 70% occupancy, which we've timeline to around 8 quarters. Steady state IRR and ROCE would be over 20%. Does that answer your question?

Yes, yes. It was very helpful. Sir, and the second question, I just wanted to know what is the competitive edge that Antara holds. I mean basically -- I mean, what is the learning curve in terms of time, in terms of cost and execution challenges which new entrants face which -- who are trying to compete with Antara?

If you're talking about the entire business, there are 2 or 3 edges that we have. One, we have pioneered senior care. So we have done all the learnings and residences for seniors, on care homes, et cetera. We are the only branded player trying to construct an integrated care ecosystem. So after a while, just imagine, when you have 10,000 seniors staying in the 5,000 apartments, people staying in care homes, they are actually your captive customers for all your services and products. Given our legacy, we understand health care, we understand real estate, we understand hospitality and we understand insurance and that gives us a unique capability to be able to stitch together. Other players who are doing residences for seniors are perhaps outsourcing health care services somewhere else. We don't need to. We understand that game fully. So that gives us a unique advantage in the marketplace and a high barrier to entry. So having learned the business, being the early pioneers, built a very strong brand across and the ability and the competencies required to be able to stitch together the solution. The talent that we have on-boarded, so for example, for the AGEasy, which is more an e-commerce kind of play. We have people from Pristine, people from Amazon, Ishaan Khanna, who leads the business comes from LifeCell and diagnostics. So we have on-boarded the right talent as well to be able to support the business. So that gives us the advantage over others.

[Operator Instructions] The next question is from the line of Aditi Sawant from ADM Advisors.

The first question, can you please share the details on the customer inquiries made for Noida Phase 2 project? And what will be the price per square foot?

So if the question is that do we have enough queries for Phase 2, the answer is, yes, we have a waitlist actually for Phase 2. And we'll price it accordingly based on the market price and what we can command as a premium. At this point of time, difficult for us to make a comment because it's future forward-looking, but we'll be appropriately priced. Just to give you the data of the past, we had launched about 6,500, 7,000 box price for Phase 1, but the last price that we could command about 12,000. So that gives you an idea of how the market has moved.

Okay. And can you share any brief on like portion of repeat customers for our Care Homes and Care at Homes?

So If you look at our total base book Care at Home, 50% of our total revenue is contributed by renewals, which basically depends also service-wise of the ALOS or the average length of stay of the service that we have. So some nursing caregivers, patient caregivers, et cetera, which are higher in ALOS so the renewal base keeps building up accordingly. If you look at AGEasy, which is our new business, the digital business, we've had 1,200 repeat customers in the 4 months post launch. So we see a very high repeatability, if I can so, in both our businesses.

Okay. Got it. Just 1 last question. What is the peak revenue that can be achieved after 5 to 7 senior living communities are like fully operational?

Yes. So typically, in any project for senior living, we get revenues to 3 ways. We get a revenue by DM fee that we get, which is 8.5%, 9% off the top line. We get a share in profits in proportion to the equity that we invest and then the annuity income belongs to us. So typically, a 250, 300-unit facility, about INR 10 crores to INR 11 crores is the total revenue for the year split into 60% will be common area maintenance, 40% will be other services seniors consumed, that's typical. But, the actual numbers, Ajay will share.

So if we want to say about the annuity as well as the income from the residences as DM fee and share of profit, by financial year '29, we should be achieving a turnover topline of approximately INR 750 to INR 850 crores.

[Operator Instructions] The next question is from the line of Y Mehta from [ AC ] Capital.

Yes. I just had a couple of questions. Sir, we understand that there is a huge untapped market. Can you please share specific customer acquisition strategies that has been implemented?

So it depends on which product or which vertical you're talking about. On residences for seniors, we do a fair bit of go-to-market in terms of ATL. But as the community matures, we get a fair bit of referrals from the existing people who have bought. We do a lot of digital as well on this residences side. On Care Homes, Care at Home, MedCare, AGEasy, depends really on the verticals, but Ishaan can embellish that answer.

So if I look at our care home business -- actually, if I look at all the assisted care business lines, there's a fair share of combination of marketing that we do online or digital in nature, which comes through all the social media promotions, performance marketing sector. And we get a lot of our high ALOS services with that. We also have built a strong referral channel through hospitals and doctors that give us leads for all of our services. Coming to AGEasy. It's largely a digital-driven channel because we want to source our customers from across the country because our services and teleconsultations happened across the country. So it's primarily digitally driven, but we have also recently started working with resident welfare associations and corporates as well because we feel there is a large value to be driven from there as well. I hope that answers your question.

Okay. Sir -- lastly, sir, what are the key metrics that we are targeting for FY '25 and also please if you would share expected topline and bottom line expectation based on targets for FY '25?

So FY '25, it will be difficult for us to give a forward-looking statement as a process what we have been following, but our deck very clearly explains what aspirations we are having for more care homes, more residences and then what has to draw its own line.

[Operator Instructions] As that was the last question, I would now hand the conference over to Mr. Rajit Mehta for closing comments.

Thank you very much for all your questions. I really appreciate. As I said, we are well on our way to execute the strategy as we had envisaged. The bed capacity that we wanted to build is already in sight. We've entered new cities like Chennai and Bangalore and preparing for Hyderabad. The definitive or the term sheets have been signed for residences for Gurugram, for Bangalore and Hyderabad, and we are looking at opportunities in other cities as well. So our ambition of creating 8 to 10 communities across top 5 to 7 cities in India, looking at about 1,500, 2,000 beds for Care Homes, robust Care at Home and MedCare business, and the latest kid on the block, AGEasy, to be able to launch in 8 to 10 cities, which is physical presence, though the digital presence is agnostic in terms of geography. Very healthy NPS or customer satisfaction scores, which is what will drive future business, as is evident through resident referrals as well as the repeat customers we have in AGEasy and renewals and Care Homes and Care at Home. I am extremely pleased to get the Great Places to Work certification. It's a great indication of the culture and values to be able to build a strong culture to serve our customers well. So might be pleased with the performance in the quarter. There's consistent growth and look forward to these trends playing out long term as well. Thank you for your support. Really appreciate it. Thank you.

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