Narayana Hrudayalaya Limited (NH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Narayana Hrudayalaya Management conference call. [Operator Instructions] I now hand the conference over to the management. Thank you, and over to you, sir.

Hi, this is Viren Shetty here. I'm the Chief Operating Officer of NH. I have with me Dr. Rupert, the CEO; Mr. Kesavan, the CFO; and Ashish from Investor Relations. We don't have anything prepared. Essentially, we're doing this call to answer any questions that you may have about this very fast-evolving outbreak and the impact it's having on our business and on the health sector. So yes, you can just start with the question.

[Operator Instructions] The first question is from the line of Chintan Sheth from Sameeksha Capital.

Sir, just wanted to understand, yesterday on the news channel, you mentioned about the impact in the Cayman Island facility wherein you have to quarantine the nursing staff and all. So is it also impacting our Indian operations as well?

Yes. There's 2 questions. We'll walk through what happened in the Cayman Islands first. Last week -- sorry, 1.5 week ago, we had a cruise ship passenger come and dock onto the Cayman Islands' port. He had had 2 heart attacks before and he was in a very poor condition. And this was an emergency admission. At the time, we were given the medical report, we said we will try to revive. He came into the hospital, and we did the emergency procedure on him and he recovered. But it wasn't revealed to us that he had coronavirus nor did he show any symptoms of coronavirus at the time. But what happened 8 days after his admission, his oxygen saturation fell down, his vitals got worse and he entered into shock. And once we tested him, he came to be COVID-19 positive. And so as per the protocol, followed by that country as well as the NHS, we have to quarantine all the staff who were in touch with him. And as an abundant precaution, we temporarily suspended new admissions into the hospitals so as to disinfect the areas and to give enough time for the facility -- to discharge all the existing patients and then start taking in new ones. So for now, we've announced a 2-week suspension. This week was the first week, next week will be the next. 40 nurses have been quarantined. We've given all the test results for testing. Fortunately, 20 have come back as negative. So that is good news for us. We'll wait to hear back on the rest. But we feel more or less positive that things should be able to reopen. But I think the larger question you asked, which is what is the impact on India? Is -- that is essentially why we're here. The fact is in most countries, the protocol for what to do around these times is to reduce your elective cases and keep beds free in anticipation of an outbreak of cases requiring ventilation, requiring intensive care. So your hospital doesn't remain as what we traditionally are, which is an elective surgical hospital, where if you come for cancer treatment, you come for bone marrow transplant, come for kidney transplant -- we stopped being that. When an out -- if and when an outbreak happens, hospitals like ours will all be commissioned towards dealing with the most severe cases. So we are working with the government to create a series of triages in which most patients can be self-quarantined, managed in the house. Those who are somewhat of a threat can be kept in government hospitals and those who will require some amount of monitoring can be monitored and only those who enter into lung failure, end up in hospitals like ours. But in India operations, so far, we have not had an impact. But it is not saying that such a thing could not happen tomorrow. The fact is, we have a large number of patients visiting us, a large number of attenders. We have restricted visitors. We have restricted patient parties. We've reduced the number of OPDs, just so that we minimize the chance of an outbreak of this same kind happening. But again, these things could happen, even after all the precautions we're taking.

And to follow-up on like what the experience in Cayman -- that infected patient came in? What kind of precautions we are taking in the Indian network? How are -- are you screening or any form of precautions, internally, we must be doing it, but the patients coming in, are we checking the background and whatever is required to understand whether the patient is potentially infected or not?

Yes, we're doing all that. So far, we've not taken any knowing infected cases. What will happen is once more, people start getting infected, then becomes -- unknown infected cases enter the system.

So from operations point of view, we are still -- if and when the event evolves, we'll be -- we have to keep our bed capacity free for any exigencies like widespread corona. But so far, we haven't -- we have -- our Indian operations are operating normal, right? That's the correct understanding?

Yes, only -- 85% to 90% of the patients needs to be at home -- self-quarantine. So only the 10%, 12% of the patients will require hospitalization. See, we are just running fever and -- screening fever and cough -- kind of clinics where we isolate people, and we look at whether they are potentially one of those patients. And only then -- only when it starts spreading into the community, then this will become - this will put a lot of strain on the good.

And on ground. What are your thoughts about how it's likely to evolve in terms of spreading in India, given the number of cases, it's still...

Very difficult to guess. A lot of experts are saying we are still in Phase II while few are not agreeing with that. They are saying we are already in Phase III with many in the community will be already having it. But it's anybody's guess as of now. Yes. So we just have to keep waiting and watching and take all the abundant precautions at every unit of ours.

Essentially, the difference between Stage 2 and Stage 3, Stage 2 means you are getting infected from outside, Stage 3 means there is a critical mass of infected patients already in India, which is not still identified, who are now infecting other people. So we don't yet know if we are in Stage 3 because we have not done enough testing. But ICMR did one study sometime last week where they took some 80-odd samples, and they said that it all came negative. And so that means we're not yet in community outbreak stage. If you can believe that or not, that's question. But ultimately, the government has been very proactive, fortunately. Very early on, Karnataka government started clamping down on all mass gatherings, the social distancing has become a norm, a lot of cities are putting up Section 144 to prevent movement of people. In time, we should start to see all these large gatherings completely eliminated. And so that does reduce the transmissibility of the virus. We will do a lot towards delaying these kinds of outbreaks. Smaller outbreaks will happen. The fact is even if 100 people get into a room, that's enough to cause an outbreak. So -- but we're just trying to delay it as much as possible so that the health care system can manage it by taking few, few cases at a time.

[Operator Instructions] The next question is from the line of Keshav Lahoti from Angel Broking.

Sir, I want to understand, so far, how has corona affected your business. So far, it has been positive, whether people nowadays are locating hospital -- if they are having common cough and cold. Or is it people are just being reluctant to look at hospital, go out of their homes. So how is it going?

I mean, over a period of the last week to 10 days, we've noticed a gradual decline in people having very nonemergent kind of problems. So unless they slowly - there's a lot of follow-up patients are calling up, who have been our long-standing patients, and they keep calling up and coming. But if every -- anybody is having acute problems, they do come. But for the elective kind of work, they gradually -- the patients themselves with all this media information that has been going on, they have been trying to reschedule themselves. So we've been seeing a gradual decline in that kind of work.

But the point that asked about the patient cough and cold, any of those patients don't come to hospital nor should they. And those patients, if they do show up, we direct them towards appropriate places for them to get treated, which is in the case of Bangalore, Rajiv Gandhi Institute of Chest Disease and other states have these institutes for infectious disease.

As you are hearing that few Pathlab, certain hospitals in future might be allowed to do corona testing. So is it possible Narayana would also be part of that if the government permits?

Yes. So we're working with ICMR and the government to allow testing. We're speaking with equipment companies also to source the kits. As and when they open it up to the private sector, we will also start testing. But we will generally not offer testing the way Lal Pathlabs offer testing. Our testing is mostly for our patients. We have a very large lab that process a huge amount of samples, but we don't really take samples from outside. Our testing purpose is only for our internal purposes.

Okay. So whether there is going to be any price cap on this testing or will it be decided by you only?

We don't know. It may be price capped. The test itself costs around INR 5,000. So it's not an unreasonable amount of money.

[Operator Instructions] The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

Yes. My question pertains to the patients at Cayman. What would be the occupancy at Cayman currently? And after the suspension, what happens to the existing patients, and can this suspension extend beyond 15 days?

We've stopped new admission and we started discharging all the patients that we have. So as per my last understanding, there are almost no patients left in the hospital. After 2 weeks, we will take a call based on the number of people that we have, our own staff who are declared clear and symptom-free from this coronavirus because even the test is not 100% accurate. What we will do is not open up the doors and start immediately. We will take it in a more phased manner. So for example, patients on chemotherapy, we'll be taking in small numbers, patients with minor procedures on the daycare side, we'll start taking. And we'll slowly reopen for the next 2 weeks after that. So there will be a definite hit on the financials for this month but this is something that -- you can take it as a sort of seasonal pattern, and it's something we can recover from quite easily.

The next question is from the line of [ Patosh Stephen ] from [ Willan Capital ].

This is [ Asher.] My question is actually with regards to our Indian operations. So with people coming lesser and lesser for elective procedures, say, even on our Indian operations, probably that should be a hit on the ARPOB side going ahead. And also, there should be a slight hit on occupant - we'd like to keep some beds unoccupied for a severe outbreak that may occur?

It will not have any impact on the ARPOB. I think the -- this is a very, I would say, a little unique situation in terms of tiding over this period. Otherwise, I don't think it is going to affect any fundamental aspects of the business per say.

No, sir, what I'm trying to say is if people don't come in for their transplants and the sort of procedures that they can delay, then those - those are kind of expensive procedures, visible people coming in for only the emergency cases from that point of view, does it affect us?

Yes. The transplants also are not in huge numbers. And also, there are certain transplants you cannot wait because they - are in the period of waiting, they themselves might die. So whenever a clinical scenario warrants that not to postpone or defer by a couple of weeks, we explain, take an informed consent and go ahead. Wherever this is feasible, only then -- that's a very small percentage of it, only then we will defer it. To add, the choice of elective would possibly -- the cycle would get a little extended in the current context, but I don't think it will affect any aspects of realization as such.

See, just to -- the broad point is our responsibility in our business is to our existing patients, and the cases that we manage. We don't have a great infectious disease practice nor we have any hospital dedicated towards that. That is normally the prerogative of the government. Any sort of proactive measures we're doing to reduce the patient flow to reduce elective cases, we're doing in the interest of those very patients. Not that we want to fill up the hospital with these infectious disease patients. We're doing it just so that, just in case tomorrow it happens that there's an outbreak, that our existing patients don't get affected by it. Because it is very deadly for a patient who's on ventilator, who has heart disease, who's come with liver transplant, if there's an outbreak in the hospital. Because they are the most vulnerable. Most patients who just only -- if the only problem they have is COVID-19, they will recover. But if you are immunocompromised, it is a death sentence for you. So our business operations are trying to maintain as much as possible, but it will look a bit muted for the next month because we are doing things to maintain the business continuity.

Next question is from the line of Chetan Thacker from ASK Investments.

Hi, Viren, just one question. If the test kits are provided free-of-cost by the government, then what would be the charge that the private sector will need to take to recover cost?

There's a lot of ifs over there. Right now, we don't know that the test kits will be provided by the government to the private sector for free. They will keep it for themselves and offer free testing. If the private sector does a test, we will buy it from companies like Roche, Gilead, Biomer or whoever does that. We will pay retail price for that and be able to charge whatever the MRP is allowable on that test.

And these would largely be antibody test to look for the RNA, which are...

Right now, it is the PCR, polymerase chain reaction test. The antibody, IgM and IgG, we are expecting some validation and things to come in 4 weeks' time. But that's a big if whether that will be there because that will be a more of a rapid point-of-care kind of thing.

And those come in the form of test kit with test strips, which can be done at home. So it's not necessary to come to a hospital for the antibody test. The hospital test will be the PCR test.

And once you get a go ahead from ICMR, and how much time can the private player ramp up these tests?

Weeks. I mean, in the time it takes for us to get the machine. It's pretty straightforward to set up.

Okay. So I just wanted to understand the lead time. So how much -- given the situation right now globally, how much time will it take to procure the machines? So just wanted to understand if you get a go ahead, the private sector gets the go ahead. And they start testing the next week onwards or after 2?

The PCRs, there are many different types of PCRs. There are more advanced PCRs where it comes in the form of a cartridge, which -- the cartridges have not yet got validated, and they have not come into the market. But the older generation of where you have the complex primers and other things being done, where you need a little bit of an infrastructure of having a team, rooms and things like that. Those needs to be this one. And those who already have that kind of facility will be able to start off the moment you get the reagents and other things from the suppliers.

Just for example, in Bangalore campus, we have the PCR machine. It is already in a cleanroom. We just don't have the primer and the control. If the government lift the restriction, we will start importing the primer and control, and we can start doing the tests the day after that.

But yes, realistically, if you want to give a time line, I would say, 2 weeks max.

The next question is from the line of [ Shatan Subasu ] from Stewart & Mackertich.

This is -- yes, this is Shantanu Basu. So basically, at the opening, you mentioned that you might be working with government as a result of this outbreak. So can you enumerate, what did you mean by that statement? What would -- I mean, what would you do by working with government? What would be the steps? And you also mentioned that in -- I mean, in the worst-case scenario only, that it's only when the patient would have a lung failure, the patient would be admitted to the hospital. So just want to understand the nuances connected with it?

Yes. Prior to our interactions with the government, what the sort of line of thinking among the policymakers were less they will take up beds in all the hospitals to send COVID positive patients. What we are trying to convince them to the more practical line of thinking, which is along the lines of what is followed in Singapore, South Korea, Taiwan, which is you follow a series of triaging. Step 1, get tested. If you're positive, you self-isolate. If your symptoms start to get worse, you are kept in a dedicated hospital, just, you call it a COVID hospital. This is completely independent from any other hospital. It doesn't do anything. There are no heart patients, there are no children, there are no maternity cases, nothing else. This is just a holding area. If you remember that the new [indiscernible] from a few months back when they said China built a hospital in 7 days. That wasn't really a hospital. It was more of a very large dormitory. Because that is fundamentally all you need. You just need to hold patients in a bed in isolation, and they recover by themselves. So that is the step 2, those patients come in. Step 3 is where we would step in, which is only after all of that, if they're not recovering, the situation gets worse and they're required to be admitted and ventilated, only then is when the private sector would step in. So we're working with the government along that. The other things we're working in the government is, we were working really hard in lobbying with ICMR to allow private sector to do the testing because we are very much undercounting the number of patients there are by -- under testing. So these some lines. Similarly, in Delhi and West Bengal, we go and attend all the meetings held by the health ministers and health secretaries and so on to advise them on the best protocol to follow. And of course, pledging our support as and when required as industry peers have funding, as regards to staffing, as regards to any sort of support they need to help them in this endeavor, that is our engagement with the government.

But the testing would be done only for the existing patients or for any new patient as well?

Are you talking about in general or only for NH?

For NH.

The idea behind us getting the testing machine is so that we're able to test the patients who are coming into our hospital.

Okay. So in the Step 3, in and around Step 3, those patients or...

No, we want to run elective cases for as long as possible. So even those patients that are coming for, let's say, heart disease or dialysis or whatever, we want to be able to do a mandatory PCR -- the test for them, just to give ourselves some comfort.

Okay, as a precautionary measure?

Exactly.

So essentially, the testing would be done for NH patients?

Yes.

Who come to NH for other procedures.

Yes.

The next question is from the line of Mayank Hyanki from Axis Mutual Fund.

My first question is this current situation would last 7 and 10 -- 7, 10 days, what is the kind of fall back we have seen in inpatient and outpatient volumes? I understand that -- from previous comment that you don't see any immediate change or impact happening on the ARPOB side. But in terms of volumes in the last 7 to 10 days, since [indiscernible] has announced, what is the kind of impact to your cost?

Yes, we're about 60% to 70% of the original, both because the international traffic has completely stopped. Around 11% of our patients come from Bangladesh, Middle East, Africa and so on, that has completely stopped. So hospitals in Bangalore and Delhi, for example, that get a lot of these patients, we are not seeing any more. Furthermore, our patients are volunteering to delay, allow the procedure that they can as much as possible. So 1-month, 2 months delay, you'll start to see. So you can say about 30% -- 40% drop in these normal sort of day-to-day volumes. But cases is still going on. Hospitals are still full. ICUs are still full. OTE lists are still going on. But definitely, we're not running full tilts like before, both as a choice and both by circumstance as well.

And this current situation, I mean, as the hospital -- understand that not a lot of your costs is variable in [indiscernible] but would you be able to do some kind of cost reduction measures in view of the COVID situation to -- basically to help profitability or that is something which is not...

Actually, to be very honest, I think it's a very delicate subject to talk at this particular point of time in terms of cost. But nevertheless, the only variable cost in the business at this particular point of time is the consumable part, which is around 24% to 25% for us. And all other costs put together in various semi-variable -- other variable overhead sort of a thing, which would add another 7%, 8%. So if you take only 33% of the cost is variable. The other 67%, 70% of it is fixed in nature. We need to pay the employees, we need to pay the doctors. We need to incur the rentals for the facilities, maintenance of the equipment, all that will go on. Because our assumption is that we will get over this quickly in the next 2, 3, 4 weeks, whatever, and be up again. So if that is true, then I think it's a momentary stop in operation, so everything should come back to normal. But we have not thought this to be a very long break in terms of whether we need to see, whether we need to take, let us say, any drastic steps on any fixed cost containment or something like that at this particular point of time.

Okay. Even we look at a very challenging situation, and I hope that we, as a company, in the world comes over that soon as possible. Second question was with regards to the discussions that you're having with the government and there -- that you have suggested with the government follow the protocol, which has been followed up till now in places like China and Syria on here, on having some special COVID kind of hospitals about to treat. So on that point, have you any confusion with these that what procedure we have to follow in case of an unfortunate outbreak, like [indiscernible]? Or that decision has not been taken yet?

There's no official sort of declaration that happened. Because this is a one of a kind -- something like this has not happened since 1918. Around that time we had a different set of people ruling us. As regards to the COVID hospital, the Karnataka government has already verbally agreed that this is the first step they're going towards. Mumbai has also gone ahead, and they have commissioned SevenHills hospital, which was a defunct hospital for a very long time, and that is the designated COVID hospital. Other states will more or less also follow the same line of thinking. Because that's -- this is the most practical way of thinking about it. But in terms of the official guidelines for what to do in case of outbreak, there's no guiding document because, honestly, no country has that, not Italy, not U.S., not even Singapore out there. We just sort of have the steps to -- in order to take care. But in the more sort of extreme scenario, you have a situation like in Spain, where they just said, "Okay, all the hospitals is going to belong to the state, and it will all be requisitioned for taking care of COVID patients. And all other people just sit at home and just relax." Now fingers crossed, god forbid, all the things that -- we don't get to that point because India is least prepared to deal with that. Even if the government took all the hospitals under their control, we will not be able to deal with the sheer volumes that will happen from a nationwide outbreak, because we're talking about millions of cases. We don't even have ICU beds, in the whole country are only in few thousands. So that is a sort of scenario that none of us want to even fathom.

[Operator Instructions] The next question is from the line of Nikhil Mathur from AMBIT Capital.

My first question is on Cayman facility. I know you mentioned that the initial shutdown has been taken for a couple of weeks. Now even if the hospital is reopened again in a couple of weeks for new patients, would there be any footfalls given that there's so much of travel bans pertaining to that part of the world?

Most of our patients are domestic patients, so that will still continue. We have a lot of patients coming for dialysis, for chemotherapy, for MI and so on. Our international patients, yes, that will go to 0 almost immediately. But a good chunk of our volume comes from the domestic, which we will still continue for the next two months.

Okay. And secondly, on the international patients that would be 0 in the coming few weeks in the domestic facilities, now were these few cases, mostly elective cases and [indiscernible] once the situation normalizes, say, 2, 3 months down the line, and most of the travel bans are lifted, would they be having certain options inside their home countries or they would be looking -- to coming back to your facilities and get -- to get them treated?

You're talking about Cayman, no?

No, no, he is talking about...

No, I'm talking about domestic facility, the international patients.

Yes, since most of these procedures, which they come for are tertiary and quarternary, that will continue to -- once the travel bans are removed and -- they will start coming back. Because the options for them are always there. Most of them who can afford it, they're not going to Singapore and Thailand. But the ones that come to India, the ones who are generally on the better side. So there is still no health facility in the world whose healthcare is less -- is lower cost than Indian hospitals.

The next question is from the line of Aditya Khemka from DSP Mutual Funds.

Viren, you mentioned early that there are some 40 nurses that you quarantined in the Cayman Islands facility and 20 of them have tested negative. So in what time did you come to know -- for the results for the balance of 20 nurses?

To get them back into the quarantine period is, as of now, we are working with the government of Cayman, and it's around 14 days. Before they come back into service, they need to have 2 consecutive samples, 2 days of -- I mean, 24 hours apart, which will come negative, which is before they come into the -- come back into -- for work. The samples which we did for -- as we requested the government, and we did the sampling for all. And some of them, where out of this 40, there's a couple of -- few doctors in the ICUs and the cardiology department were also involved. That is one of the reasons why we couldn't continue with the outpatients and various other inpatient activities because doctors were also -- had to be quarantined. So -- but we are working very closely with the government. And once we -- once the samples come negative or the period of quarantine is over, we will work with the public health authorities there. And once they are reasonably satisfied that they can come back into clinical service, then we will work with them, and then we slowly re-open subsidiaries. We'll be slowly reopening in about a week, 1.5 weeks more from now at the most.

The next question is from the line of [ Jatin Agarwal ] from IDFC Mutual Fund.

Viren, on the things that you mentioned about peers' preventive measures that you're taking on the Indian business, this is across all units or are there specific locations where you will be more cautious as the other parts of the country?

Across all.

Across all units. The only differences is we're a little more paranoid in our crowded units, which is Calcutta and Bangalore. Because these are very large facilities, which get thousands of patients and relatives in a day. So those are ones we're a little more paranoid. Our smaller hospitals in Tier 2, Tier 3 hospitals, there's really not much outbreak in those places. And we don't monitor them as closely as we do Bangalore and Calcutta.

And secondly, have you seen any incidents of COVID infected patient getting admitted to any of your larger hospitals so far in the network?

There are no -- in India, we've not got a single COVID infected patient so far. The -- and the protocol for that is, we don't allow COVID infected patients right now. They are all supposed to go to the government-approved centers. If you are a COVID infected patient, you are not to be admitted in a private hospital.

The next question is from the line of [ Chirag Patel ] from [ Avinash ].

I have 2 questions. The first one is, like, earlier also such epidemics, like diseases happened, like SARS, [indiscernible] do you think this situation is completely [indiscernible] the pessimism is too high, or is it in real sense a tough one compared to the past incidents in last 2 decades?

I'll tell you one joke. In the ER, I forget which hospital, one patient came with breathing difficulty, respiratory distress and all the people in the ER started panicking. And then they quickly ordered the tests. And then one of the doctors said, "Oh, okay, don't worry. It's only H1N1." H1N1 was all the rage 10, 12 years back, and that is equally as infectious, equally as deadly, sometimes more deadly also. What is different this time is that it is very transmissible. It is much more transmissible than H1N1 ever was. And it's acquired a pandemic status, which H1N1 really did not achieve. I wouldn't say that the -- we are overhyping and overreacting because if not for the stories coming out of Italy and Spain and now even the U.S., the world would have not woken up to how dangerous it can be. The number -- the mortality number is very less. It's 1%, 0.1%, very, very small numbers. But you're talking about 1 billion people, and all whom can be a carrier for this. So you fellows will be fine, all middle age, healthy people, who are able to maintain -- you're perfectly fine. There's absolutely nothing that will happen to you. You'll have a fever, you'll have a cough, you'll see the doc and you'll be fine. But worrying for us is in our hospital, we have large numbers of immune-compromised patients. We have large number of people with diabetes, hypertension, all these compounding factors. And so if you have the comorbidity, this sort of thing becomes bad for you, just like H1N1. If you have H1N1, if you have any other thing and you happened to be going for some other operations, these things become very difficult to recover from. So that is the worry from our perspective, from a hospital perspective. So the -- just to protect the hospital and to protect the event of outbreak is where we've implemented social distancing and closing down things because that is the oldest method we know for stopping transmission. From the time of -- in Egypt, when there were plagues, people were doing social distancing. You can read the Bible and they talk about that. So it's one of the oldest things that we know, and it is very effective. Similarly hand wash, keeping your homes clean, minimizing contact with people, all of that will prevent transmission. Because you will be fine, but you will pass it on to someone who will not be fine. And that's why everyone's using social media to drum up a very sort of doomsday scenario message. Because without that, I guarantee people will be going around their daily business, shaking hands, traveling, going to large melas or going to crowded place like the mall and infecting other people.

Okay. And then my second question, like we do regular CapEx at our end facilities across on every year we do. So -- and if I'm not wrong then some of the equipment we do as a part of replacements maintain [indiscernible] from China or other export countries. So this time there will be disturbance of COVID, are we still any CapEx for this particular quarter or like Q1 FY '20 as well?

[indiscernible] in CapEx. See, actually, if you see like -- if you see our numbers last 3 quarters, I think we have already been on a very tight lease of CapEx. In the sense, like our CapEx additions were very, very minimal in the last 3 quarters. But nevertheless, what will happen is like, of course, wherever the items have to be procured from places where it is affected, of course, it will delay the cycles even if we have to, let us say, capitalize those items or we need to those items. So -- but from a requirement perspective, as far as NH is concerned, I think we may have a normal CapEx cycle. But from an availability perspective, I think we need to look at it, which areas, which regions are affected, and how far or how late we will get it.

We're not going to go too aggressive on the new CapEx, even for the next year. We've done a very moderated budgeting for CapEx that's required. And some things may get deferred, some things cannot be deferred. But it is something that we will try to preserve the sort of fiscal prudence as the guiding thing behind the decisions combined with the clinical need. So for example, buying these testing kits, the PCR machines cost some INR 20 lakhs to INR 30 lakhs. Those obviously have immediate business requirements so we will get that. Whereas some things which are more forward-facing can be deferred by a quarter or so.

Your next question is from the line of Krishna Prasad from Franklin Templeton.

Yes. If you look at the -- your international [indiscernible], so do you think that even after the current situation kind of eases, there could be somewhat a delayed return of these people and maybe even you could have some measure of the comment which could just - flu [ occupations ] into India. I mean, is that something that one should factor in?

Yes. That could very much happen. So as an example, if let's say, India has pandemic under control, but theoretically, let's say, Oman does not because Oman is very exposed to Iran, which is nearby. And then India, for example, may decide not to allow Omani citizens. They may open up the travel curb, but there's only people from Oman not allowed. So yes, we will be a little bit a hostage to the larger geopolitical issues and issues completely out of our control. But having said that, we are talking about patients who have deferred cases. So it will definitely be made up by the other countries who also similarly lift their curbs once the pandemic is under control in their respective countries. So even now, we do get a lot of inquiries from patients to come in. And those who are able to get through, do get through. And we're treating them as and when required.

Sure. And just to understand it better, you said 10% to 11% of your overall revenues come from International patients in India.

10% to 11% of the India business.

India business. Understood. And we should see typically higher margin differences?

Relatively higher, yes, because they occupy private rooms and so on.

The next question is from the line of Keshav Lahoti from Angel Broking.

My question is, you have mentioned earlier that the private sector should be allowed to conduct testing, both hospitals as well as Pathlabs, predominantly because there could be a case for underreporting of these cases, actually given that we are not doing -- conducting enough testing until now. On the -- so do you really think that cases are right now being underreported their impact given the lack of testing? Or is it just that because of the climate is providing some sort of a natural shield for us?

Not really. Singapore is hotter than India. Thailand is hotter than India. Australia had an outbreak in the summer. And I don't know if you have ever been to Australia. If you go to Melbourne in the summer, you might as well be in Delhi. So the heat is not something that has proven to be something that slows down the transmission. It's a very resilient sort of virus. Yes. So it's not - now to the point of under testing as a good thing or whether that's [indiscernible] give you facts. South Korea, which had the most aggressive response to testing, and they had the most -- they kept it under most amount of control. They even opened up drive-thru clinics, where you can just drive to the lab, drop your sample off and they'll e-mail you the results. They did 48,000 tests per million people. Singapore did around 30,000 tests. Taiwan did around 20-odd thousand. Italy, which had this huge outbreak and all of that, even they, they were doing 1,000 tests per million people. India does 5 tests per million people. So even if you agree with me that many of the tests are not necessary and maybe you don't want to overdo it, fine. But to talk about 2 orders of magnitude difference between us, and the country with the worst response to coronavirus, which is Italy. So that also gives you some room to think now. If not 5, at least we should doing 50, forget about 500. Ideally, we should be doing 2,000 tests per 1 million people, but we may never get there. But we can at least start from a -- when on a very low base.

The next question is from the line of Prashant Nair from Citigroup.

Just 1 question on your patient mix. Would you have an estimate of how many patients or what share of the revenues come from patients who come to your centers from outside the city it is located in? And would there be a meaningful fall in those patient costs?

We don't normally disclose that data but just anecdotally, I will say, that is relevant only for our hub hospitals, which is the Bangalore Health City, the Calcutta RTIICS, the Delhi facilities and so on. Whereas the [indiscernible] mostly get patients from within the city itself. Even our Bangalore, yes, volumes from Bangladesh have gone down, but volumes from Tamil Nadu have gone up. Yes, one compensates the other. The fact is that most of these are driven by the sort of legacy of being there a long time and patients coming because there are very few places they can go.

Great. And the related question was in such a situation where people are not -- are opting to stay at home, as far as possible or not travel too far, do you see any impact or do you think this should not be materially impacted?

There is an impact. So the new patients, for example, and our -- the volume that we're seeing right now in terms of the walk-ins are about 70% of what they normally would have -- what we normally would have expected for a March month. Yes, there is definitely an impact.

The next question is from the line of Rahul Veera from Abakkus Assets Management.

Just trying to understand the way Cayman Islands had a protocol, like if one of the patients had turned out to be a COVID positive, do Indian system also have some kind of a protocol that we might have to follow?

So right now, if you're COVID positive, you get treated in the government hospital.

All right. No, sir, not treated, but from the other perspective, if somebody has turned out to be positive, which we can come to know later. You might direct them to go and get treated in the government hospital?

Okay, no. So let's say they're already admitted in our hospital for something else. And it turns out that during the course of treatment, they turn out to be COVID positive, then they are still our patient, we can't throw them out. Then we'll have to isolate them. We have to keep them in a negative pressure room. They need to -- all the people attending them have to wear the personal protective gear, all these infection control protocols will start activating.

Okay. Okay. So shutdown like Cayman will not be the case?

Shutdown like Cayman will be the case, if that person manages to infect a lot of people before that happens. Why do we want a testing also so that we can know very early whether any patient has COVID or not. So that he doesn't -- so that we can early on, isolate them and quarantine them and put all the steps in place.

The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities.

For currently COVID positive cases, since there is no prescribed method of treating them, is it possible that they'll get auto-correct?

It's completely new strain. So -- but the people will -- once they get in -- the larger population gets infected, they'll all develop their own immunity. Because it's a pandemic, because it's a completely new strain and nobody had handled before. So the vulnerable ones who have comorbidity or the elderly are the ones who get into trouble because of this.

But majority of cases, they recover by themselves. They just have symptoms. And you rest for 2 weeks, and then you'll be fine.

[Operator Instructions] We have a follow-up question from the line of Charulata Gaidhani from Dalal & Broacha.

My question pertains to, are you going to support the government in terms of any COVID hospitals from your network?

Yes, we talked about that earlier. It is practically impossible for us to convert our hospitals into COVID hospital because it is like taking sort of a Ferrari car and using it just to go to the grocery shop and take the groceries and then come back. It is -- the COVID hospital is -- firstly, COVID hospitals have to be non-air conditioned. They can't have central air conditioning because they have central air conditioning, you're just spreading the virus all around. Then it operates more like a hostel. So in Singapore, for example, they literally took 2 hospitals from the NUS, and they put all the people there. And they monitor them very closely. So it doesn't require a very fancy high-end setup. Our setups are more designed around treating very high-end cases, elective cases, surgery cases, transplant. Only if the patient develops serious symptoms that needs to be hospitalized only then -- and even in the hospitalization, if they require ventilation or ECMO, only then they can end up in one of our hospitals. And that we will already know, we will already have the case sheet, we will already be prepared for them. But a COVID hospital, which is the first point of [Technical Difficulty] symptoms, that is something our hospitals are -- they're not really meant for. But having said that, we are working with the government, and we are planning some contingencies. So for our Bommasandra hospital, which is a city in Bangalore, we will requisition some space in a hotel nearby, which can function as a kind of quarantine zone. So if patients do end up maybe COVID positive, we'll keep them separate from the main building. But our hospitals cannot practically be used as COVID hospitals. It's simply overkill.

Okay. Do you see any impact on the ARPOB?

Should this continue? So a couple of things will happen. If it turns out to be a full-fledged outbreak and you're talking about lakhs and lakhs of people falling sick then, yes. This is a kind of -- the disaster scenario I mentioned earlier. Then, of course, then all the elective cases will stop, and all our beds will be requisitioned for use only as of treating very sick patients. And at that point, we don't know if we would be able to charge for this. We don't know how we'll get paid. We don't know how many doctors will be able to manage in that situation. But that is a very low probability scenario with a very high impact. So if you're trying to calculate the expected value of that, it does have a huge impact but if we assume that things are under control, and the government does the work properly and you put in the system in place. I don't expect that outside of 2 months, I think we all are hoping that this thing should blow off and that has its own steam, and we can start going back to the normal sort of schedule. But for right now, you will have the sort of volume drop, so revenue drop. ARPOB actually probably may go higher because then only the most high-end cases will end up coming here. So ARPOB is a per bed sort of number. But your revenue drop, yes, you'll have to anticipate that for the next month, 2 months until this dies down.

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

So a quick question on the availability of kits. If the government wants to allow the private kits to get into it, do you think it's easily available?

Yes, most of these kits are quite sold out. The fact is we've been on a waiting list same as every other country. But we also -- the fortunate thing is that many companies have gotten into this game all at once. So we may not get to the latest generation of kits, we'll get the older ones, which are still quite reliable. And we may end up having to get fewer kits at a time. But yes, I don't anticipate that there's a huge shortfall, but definitely it will be something that will slowly have to be ramped up.

Okay. Any number that you can talk about? I think what we heard from [indiscernible] India has about 150,000 kits at the moment. Does the number look okay?

We need at least 10 to 100x that. I think from 10 we'll go into 100. So that's still at the low end.

Okay. And do you think India can get to that number in earlier days? That's the question.

I don't know. These things are not made yet. Unless an Indian company starts making it, I don't -- I'm not sure about that.

Will the government allow you to directly deal with the [indiscernible] or will government procure them and then give it to private groups?

No, no, no. We will deal directly.

Ladies and gentlemen, that will be the last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you.

Yes. So this is sort of unprecedented scenario. This is something we want to keep actively engaging you with. In terms of the impact on financials, we'll have a much better sense of what happens when we do our Q4 results and so on. By then we'll have the March numbers, and then we'll have a much better sense of the trend and trajectory. We still remain confident. There are a lot of steps that we've taken to prevent an outbreak. And we tried to do a lot of proactive things in working with the government towards ensuring that we are best prepared and best able to respond to this. But this is a continuously evolving scenario. And so as when required in the future, we may have another call -- even if required, if things change too drastically, we may have another call before Q4 results to update you on anything that happens. But otherwise, just normal health advice applied. I'm sure all of you know to stay at home, wash your hands, take care of your families. If you have old people at home, please make sure they don't get exposed to other people because they are the ones most sensitive to this. And yes, just maintain the social distancing and try and avoid travel if possible. Thank you.

Thank you very much. Ladies and gentlemen, on behalf of Narayana Hrudayalaya, that concludes today's call. Thank you all for joining us. And you may now disconnect your lines.