Shalby Limited (SHALBY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shalby Limited Q3 FY '22 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abdulkader Puranwala from Elara Securities Private Limited. Thank you, and over to you, sir.

Yes. Thank you, and good afternoon, everyone, we welcome all the participants to the Shalby Limited Q3 FY '22 Earnings Call hosted by Elara Securities. Today we...

Ladies and gentlemen, the line for Mr. Puranwala seems to have got disconnected. Please stay connected, while we reconnect him. Ladies and gentlemen, thank you for patiently holding. We now have the line for Mr. Puranwala reconnected. Over to you, sir.

Yes. Sorry for the interruption. So we have on the call with us, Mr. Sushobhan Dasgupta, Vice Chairman and Global President; and Mr. Shanay Shah, President; followed by that, we will have a discussion on the financial performance by Mr. Venkat Parasuraman, Chief Financial Officer, and then we'll open the floor for Q&A. So I now hand over the call to Mr. Puneet Maheshwari from Shalby for important disclaimers regarding any forward-looking statements that may be made in today's call. So over to you, Puneet.

Thanks, Abdul. Good afternoon, everyone. Our earnings presentation is uploaded on the stock exchange website and our company website, shalby.org. We do hope you have already had the opportunity to go through the presentation. Please note that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to Slide #30 of the investor presentation for a detailed disclaimer. Now I would like to hand over the call to Mr. Sushobhan Dasgupta, Vice Chairman, Global President, for his opening remarks. Thank you, and over to you, sir.

Thank you, Puneet, and good afternoon, everyone, and a warm welcome to Shalby's Third Quarter and 9 Month Full Year 2022 Earnings Call. All of us at Shalby sincerely hope that you, your families and your friends are staying safe and healthy. During the quarter, we continued to see a strong recovery in surgeries, increasing by 84% year-on-year basis to clock 5,600-plus surgeries. Generally, the third quarter of a year is always moderate due to festivities where patients usually postpone elective surgeries. Despite this, by clocking 5,600 -- pre-COVID period average count of 5,000 surgeries per quarter and recorded the highest revenue numbers for any quarter 3 in our company history. All of you are aware that there was this rising threat from the Omicron variant of COVID. However, it was fortunate to see that in most of the cases, hospital -- if you look broadly during the first and second wave of COVID-19, Shalby has took firmly with patients to provide high-quality health care services and even added additional beds to accommodate more patients in need. The paramedics and doctors remain fully committed to save lives during these testing times. Our Shalby Homecare services was also well received, allowing Shalby to tap on to the vast patient base that it serves. Furthermore, it was encouraging for us at Shalby to see numerous words of praise and positive testimonials flowing in from our patients on how we are making a positive impact in patients' lives. From a strategic perspective, I can say that Shalby is now truly established as a group of multispecialty hospitals. We are focused on core specialities such as arthroplasty, cardiac science, oncology, general medicine, other orthopedics and neurology, all gaining traction. At our hospital in Jaipur, one of our renowned cardiothoracic and vascular surgeon, Dr. Lalit Malik performed the first mitral valve replacement minimally invasive cardiac surgery. This is indeed a matter of pride not only for Shalby Hospital, Jaipur, but for the whole state. Our Shalby Hospital, Indore was awarded the most preferred hospital in Madhya Pradesh, a recognition well deserved by the hard-working team there and to be highly proud of. As an organization, it gives us immense feeling of pride and satisfaction that the society at large is acknowledging the quality health care services that has been provided by Shalby that helps boost our confidence for becoming a true multi-specialty hospital serving thousands of patients across India. Our top priority continues to remain improving occupancy levels at each of our hospitals. Our senior management teams are closely evaluating the performance at unit levels and taking necessary steps to drive occupancy across many of our units. So let me share with you some of the key initiatives that we have undertaken during the quarter to increase our occupancy. We have appointed Dr. Pankaj Shah as the Head of Department of Nephrology and Transplantation Medicine, SG Shalby Hospitals. Dr. Pankaj brings 40 years of experience and has received Dronacharya Mentor, Mentee awards in several countries such as Hong Kong and Spain. On similar lines, we are in the process of getting highly qualified, experienced and reputed doctors on-board at all our other hospitals through direct engagement, workers group meetings and regular CME activities. Investing in latest clinical technologies like digital spine navigation in Ahmedabad for orthopedics, IVUS for cardiology in Indore and cochlear implant for ENT in Mohali, we have had a number of patients opting for high-end procedures in these hospitals. We organized 3 medical camps for joint replacement and orthopedic consultation services in Bangalore, organized 40 camps in the states of Rajasthan, Gujarat and Madhya Pradesh for health care awareness. To further strengthen our position in joint replacement in orthopedics, we have organized national OPDs and camps in partnership with a number of organizations and have been getting very good response. And finally, Shalby marketing team has also launched several innovative digital and market awareness programs with the aim to grow the key segments of cardiology, oncology, neurology and orthopedics and strongly reinforced the Shalby brand nationwide. In addition to the above, Shalby is following an asset-light approach under franchise partnerships to penetrate further into Tier 3 and Tier 4 cities to enhance brand awareness and increase occupancy across the hospitals. As you may already be aware, in the last quarter, we have launched our very first franchise-owned and franchise-operated, we call it FOFO as the terminology, hospital at Udaipur and the performance in that unit is in line with our expectations. We are doing roughly around 10 to 11 surgeries every month now, and the business has grown around 25% on month-to-month basis since its [ operationalization ] under the Shalby brand name. Our next franchise hospital will open in Rajkot sometime during the second half of this calendar year, and we remain on course to open 50 hospitals under this franchise model over the next 3 years. Overall, all these strategic initiatives are expected to drive higher occupancy at our hospitals in the coming years, where we are taking a laser-focused approach as I described above. Now let me quickly update all of you on our U.S. implant business. During the quarter, we have had significant progress on all the key fronts on our orthopedic implants manufacturing and business in the U.S. We have completed successfully the onboarding of our leadership team with the recent recruitment of a Human Resources Manager and a Supply Chain Director. This will bring in stronger systems, processes and talent. We now have a total of 55 employees at our Shalby Advanced Technologies company in the U.S. We have significantly turned around our operational capability by 50% with the ability to now manufacture 2,500 components output per month. Just imagine 6 months back, we were outputting around 500 components per month. We are also upgrading our management accounting and payroll processing software to enhance visibility and better productivity across all parameters. Our orthopedic implant business has recorded total revenues of USD 1.2 million in quarter 3 full year '22 and our year-to-date revenue of USD 2.8 million starting from May 16 till the 31st of December 2021. EBITDA also has turned the corner, driven by gradual changes in customer mix from wholesale to retail, which in turn drove a higher average sales price in the current quarter and a onetime liquidation of some low-value refurbished inventory as well. Our ongoing focus for this business is to reengage with existing customers, surgeons, hospitals, channel partners through regular management field medics in the U.S. and also set up better systems and processes. In the next phase later this year, we would like to expand into other core markets of Japan, Latin America, India, South Asia and Southeast Asia. Overall, with clear strategies in place for our hospital business and our implant business, we remain confident to drive sustainable growth in the coming years through flawless execution and relentless focus. Now let me hand over the call to Shanay Shah President of our company to discuss Shalby's performance during the quarter. Over to Shanay.

Thank you, sir. Good afternoon, everyone, and thank you for joining in. In our previous interactions, we have emphasized that over the next 5 years, Shalby as a group will build on 3 major verticals of growth, which are the hospital business, the franchisee business and the implant business. To focus on these strategic growth drivers, we have also strengthened our management team who remain committed to reinforce and grow the Shalby brand globally. The COVID-19 pandemic has highlighted the need for technology improvement within the health care industry. Shalby is also spearheading towards digital transformation by leveraging various technologies to enhance patient care and experience. Recently, we have implemented an AI-based Chatbot and a CRM software and continuously improving its features and functionalities to make the technology as a business enabler. We are also revamping our website and the mobile application. The implementation of the SAP S/4HANA is in an advanced stage and is expected to go live in March 2022. As a growing health care service provider, we are continuously investing in the right technology tools to enhance our service offerings. From a governance perspective, market regulators today have put a lot of emphasis on the disclosure of sustainable practices, including environmental, social and governance. We believe that health care sector has a pivotal opportunity to unlock value. We remain committed to adopt sustainable best practices at all levels of the organization while growing shareholders' value. Furthermore, we are conscious of our social responsibilities and as a health care provider, continuously, we are trying to improve the health outcomes while raising the cost effectiveness of therapy. Being community anchors for creating new employment opportunities, we are also running various initiatives through our Shalby Academy to not only give the country more trained paramedical service and staff but also to generate more employment. Now coming to the quarter performance for the hospitals. I'm also happy to report that Shalby has surpassed full year FY '21 hospital business numbers in the first 9 months of the fiscal year. In the first 9 months of the fiscal year, we recorded the hospital revenue of INR 57.5 crores, which is a growth of 78% year-on-year and EBITDA of INR 110 crores, which is up by 80% and with EBITDA margins remaining strong at 22%. The profit after -- profit is at INR 54.1 crores, which is up by 70% on a year-on-year basis. Our hospital business revenue is driven by an increase in surgery count by 84% year-on-year to 5,679. Inpatient count and outpatients count registered a robust growth of 17% and 60% on a year-on-year basis, respectively. Our occupancy levels remained stable at 42% and ARPOB, excluding vaccination, also recovered to INR 32,049 as compared to INR 26,660 with a pickup in elective surveys. In quarter 3 of FY '22, the arthroplasty, critical care, cardiac, oncology, orthopedics and neurology contributed 38%, 11%, 10%, 10%, 9% and 6% to the revenues, respectively. During the quarter, we also saw high number of cosmetic surgeries and oncology. Although Shalby continues to remain and maintain the leadership position in arthroplasty, it has also transformed itself as a multi-specialty hospital with a diversified revenue mix. I would also like to take a moment to introduce you to our Chief Financial Officer, Mr. Venkat Parasuraman who will join Shalby recently. He's a chartered accountant and brings a rich experience of over 20 years in the health care industry. His previous assignment was with Gleneagles Global Hospitals, Hyderabad as a Corporate Finance [indiscernible]. Prior to that, he has worked with companies of repute like Healthcare Global Enterprises, Johnson & Johnson, Indiabulls Group, et cetera. Now I hand over the call to Mr. Venkat to present the company's financial performance.

Thanks a lot, Shanay, for your kind introduction. Good afternoon, everyone. I will just walk you through the financial performance of the company. On a quarter-on-quarter basis, the revenue has -- the revenue recorded for this quarter is INR 153 crores, up 16.2% from the previous quarter. EBITDA is at [ INR 31 crores ], down 3.3%. PBT is at INR 17 crores, down 23.3%. PAT is at INR 12.6 crores, down 22.7%. The cash profit for the quarter is at INR 21.7 crores, down 15%. On consolidated -- on a consolidated basis, the revenue for this quarter is at INR 165 crores, up 23.2% from the previous quarter. EBITDA is at INR 31 crores, down 6% from the previous quarter. PBT is at INR 13.8 crores, down 39.8%. PAT at INR 12.9 crores, down 23.2%. Cash profit is at [ INR 22.2 crores ], down 7%. Coming to some brighter numbers. The 9-month financials on a stand-alone basis recorded a revenue of INR 507 crores, up 78.5%. EBITDA for the 9 months was at INR 110.3 crores, up 80.3%. PBT was at INR 77.3 crores, up 150%. PAT was at INR 54.1 crores, up 70%. Cash profit was at INR 80.7 crores, up 36.3%. On a consolidated basis, the revenue for this 9 months was at INR 544 crores, up 86%, EBITDAwas at INR 104 crores, up 67%. PBT was at INR 63.8 crores, up 99%. PAT was at INR 43.9 crores, up...

Ladies and gentlemen, the line for the speaker seems to have got disconnected. Please stay connected, while we reconnect the speaker. Ladies and gentlemen, thank you for patiently holding. We now have the line for the speaker reconnected. Over to you, sir.

So I'll continue -- I'll repeat the 9 months financial consolidated total numbers if that is fine. So the revenue was at INR 544 crores, up 86%. EBITDA for the 9 months was at INR 104 crores, up 67%. PBT was at INR 64 crores, up 99%. PAT was at INR 44 crores, up 34% and cash profit was at INR 75.6 crores, up 26%. Besides having an extremely strong balance sheet this has been a fantastic year -- 9 months for the company. However, just a few points on the slightly muted performance for the third quarter in terms of the bottom line. The third quarter against was -- if we pitch it against the quarter 3 of '21, there was a significant dip in the number of COVID patients, which we saw in this quarter as compared to the same quarter last year. And that has primarily brought down the margins to some extent. Parallelly, there has been some increase in the employee cost in this quarter. So again, that is the second reason why the Q3 performance from a bottom line perspective has been a bit muted. Thank you very much. And now I can open the call to any questions which you all may have.

[Operator Instructions] The first question is from the line of Vibha Batra from FairConnect.

Yes. I have 2 questions. One is that our operating margins have been impacted. So what will be our guidance for the coming year, FY '23? And second is that our occupancy is kind of very, very stagnant. And you've given very good disclosures in your investor presentation. In that if we see the older hospitals, SG for example, there also the occupancy is 45%. So if you can elaborate on why the occupancy is low and how would you expect it to move going forward?

Sure. So thanks for the questions. With regards to the operating margins, what has happened is that in the first 9 months of this financial year, we have done a lot of vaccinations. And because of the vaccinations, the margins for the hospitals are very small. They are to the tune of about 10-odd percent. So the cost of consumables goes up significantly. And hence, you have seen that our cost of materials in quarter 3 of this year has been much higher compared to quarter 3 in last year. Also, last year, it is important to note that about 45% of the revenues actually came in from COVID work. This year, we have done a lot more surgical work and which means that whenever we are doing more surgical work, it happens that you are using a lot more implants and more consumables, and that is the second reason why the cost of materials are higher. So -- with regards to the EBITDA margins for FY '22 and '23, we believe that we will remain between the 20% and 23% range. And as the occupancy ramps up, obviously, you will see that this number will be inching towards the higher end of the band. With regards to the occupancy levels, we have already showed you in the presentation that the newest hospitals of the group, which is 0 to 5 years, are contributing almost 36% to the revenue, which is basically the highest in terms of all the 3 brackets. The second being 5- to 10-year hospitals with 35% revenues and the balance coming in from the oldest hospitals of the group at 29%, right? As you know, that in Ahmedabad, we have -- we are operating 3 large hospitals. So what happens is that the occupancy also gets split up between these hospitals. But as Mr. Dasgupta mentioned in his commentary, we are adding top specialists for different segments who try and build in-house key capabilities to ramp up the occupancy at these levels. We see this -- as a group, we see this as an opportunity that we have significant room to grow even in the mature hospitals, even though we are operating at 35% margins in those flagship hospitals with a very, very high ROC.

I think it still doesn't address my question on why our occupancy rates overall are low. And why aren't they moving up? In fact if you see...

Sorry, go ahead.

So possibly last year, there was a positive impact of COVID, but ex-COVID, if you were to see the occupancies, my assumption is they would be 42-odd percent only for several quarters.

See it is important to note that last year, when you look at the Y-o-Y numbers, last year, because of 45% COVID work, the average length of stay for the hospital was 6.5 days. In this quarter, it was 4 days, right? So what has happened is that an average patient staying in the hospital was much higher last year compared to this year due to COVID. So if you see the inpatient growth in absolute numbers, there is a 15% to 17% growth in that number and more than a 20% growth, if you basically factor in the fact that an average patient was staying for much longer. So there is a growth, it is picking up. And as we -- as I mentioned earlier in the commentary today that we are already showing a significant growth, and we are expecting that in this year, we will be growing at 30% compared to the FY '20 numbers and 50% compared to the FY '21 numbers.

Let me also add Ms. Batra. Let me add one thing as well. I think when you look at the COVID phase, we expect definitely that the COVID will go away and these sort of things may not come back in the world or in our country. But when you look at, I think, where the biggest positive aspect is, the number of surgeries. So we had a strong recovery in surgeries. We grew by almost 84%. And that 5,600-plus surgeries is a big testament of what Shanay was talking about and a 16% growth in the inpatient. And I think that is a very clear good trend and indication that we are moving towards the right positive direction on occupancy. And as I mentioned earlier, we're doing a lot -- we do understand that occupancy needs to be improved, and we are doing several, several things as I mentioned before, which will help us increase and turn around occupancy. Sorry to interject.

Yes. No, no, that's very helpful. On the elective surgeries, I think last year, because of COVID a lot of patients didn't opt for elective surgery. So how will this number vis-a-vis previous year when there was no COVID, say FY '20?

Yes, I will answer the question, and then I'll let Shanay. If you look at the average pre-COVID times as well, the average surgeries are at around 5,000. So when you look at our -- and if you take this quarter or the last quarter to be free COVID and you see the number of COVID patients are very, very small or negligible, we did cross around 5,600. So actually, if you look at from a surgery standpoint, we're actually showing an increase on an improved trend over the previous quarters compared to a like-to-like situation of pre-COVID versus today's situation without COVID.

Okay. Fair enough. And your strategy to improve occupancy in the hospitals, it seems very low actually for a very established brand. And considering our country where health care -- actually availability of health care is an issue.

Can you hear me clearly?

Yes.

When you look at the strategy, and I think when you -- what is -- what really drives occupancy in the hospital. When you look at the occupancy, first of all, is the brand of the hospital, Shalby brand. So if you look at the several activities that I talked about, we already have a strong brand. We need to strengthen it further. So we are doing a lot of activities to strengthen the brand. Secondly is the attractive quotient of the surgeons or the clinicians in the hospital. I mentioned [indiscernible]. I could give you several other names that we are looking at and getting them into our hospital following several of our units that will increase our occupancy. Thirdly, I think we are doing a lot of awareness. Even today, even in our country, we do see still that there is a bit of hesitancy coming to a hospital. And that's why we are doing a lot of awareness programs to camps as well as to our digital [ Briggs' play ]. Our marketing team will look working overtime. If you see the number of posts that come out in the digital social media with Facebook or in LinkedIn or in some of the others, you'll realize we are doing tremendous effort to ensure that we can reach out to our patients so that they can get quality there in our Shalby Hospitals.

I think Dr. Shah also wants to kind of comment on this.

Good afternoon. There are 2, 3 things I would like to mention here as far as the occupancy is concerned on the present date. First thing, Shanay and Mr. Dasgupta said about patients here to come for surgery in a larger hospital. So January was weak. December was partly weak, but it is improving substantially now. Second thing is last year in our all new hospitals, we were doing [indiscernible] and other low value surgeries which we have stopped now. So the occupancy has gone down, but better value surgeries are picking up. Further to this, the more important thing is, as technology is advancing, our discharge rate is increasing faster. So previously, we were keeping 4 surgery 4 days, 5 days now we are keeping for 3 days. So actually, net value is increasing and the overall occupancy level remains same. So if you see in 5 years, we have grown from INR 350 crores to INR 700 crores. This year we might close at INR 700. So it is double in 5 years, and you will see that occupancy has not improved a grade. Other things is -- the fourth thing is we are continuously coming up with newer hospitals. So we are expanding. So overall, total net remains low when you are expanding correctively. So there are 3, 4 things which actually affects this thing, but it is continuously going up our top line, our bottom line, our EBITDA, everything.

Sir, a this is a very important data point you've shared that your top line has doubled in last 4, 5 years. And also, the average length of stays is lesser now and therefore the occupancy is negatively impacted. But if your average length of stay is lesser then your margins should have expanded because typically, the -- if it's an elective surgery...

I tell you, margins, there are 2 aspects. When we are growing, we are hiring more number of people. So cost of staff also goes up at that particular moment. And the second thing is last 2, 3 quarters, we have been giving lot of vaccines, and vaccines don't have lot of margin. It is only [ INR 50 to ] INR 150 out of INR 1,000. So -- and the cost of material also has grown up. So cost of material, if you see in detail, it is up by INR 4.5 crores because of vaccines. So it is -- it is the vaccine which is now going to go away vaccine part, which is a low margin, high material cost theme.

Sure. I think that's very helpful. You have any nice slide, which talks about the revenue vintage, right? Just one suggestion, that on that vintage, if you can also keep the occupancy margins if it's possible. That's it.

We'll take your suggestion. Thank you.

[Operator Instructions] The next question is from the line of Avinash Balasubramanian from Brookfield Private Limited.

I have just a couple of questions. One on your balance sheet. If I see your balance sheet for the last 3 to 4 years, the accounts receivable as a percentage of sales is pretty high. I just wanted to understand, like, in fact, if we see the last year's balance sheet it is around INR 80 crores and the year before that is INR 90 crores. So I just wanted to understand why is the number that high because in a hospital patients pay before discharge, just throw some light on that.

So thanks for the question. I think what is significantly to be noted is that there is, of course, the increase in revenue is there, but what also drives the receivables is the outstanding with the insurance and the government organizations. We have a lot of tie-ups with the governments and TPAs, wherein -- while the TPAs still pay us in 70, 60 to 60 days or so, but the government receivables tend to go up and a lot of our business tends to come from that as we serve COVID, various government schemes. So that is what is primarily driving up the receivables in the [indiscernible].

Yes. And essentially, if you see that if the company, as Dr. Shah just mentioned, if the company has grown from revenues of INR 350 crores, and it is going to almost 2x on that number, the working capital cycle will also, of course, go up. And because of that, we have seen an increase in that. And over the last 5 years also...

Specifically to the receivables because I mean expansion and all that would not kind of change what is the terms that you charge to the customer. So I just want to understand like what proportion is -- because in one of the annual reports I read that the majority is actually self-paid. And insurance and TPAs actually forms a very -- a lower percentage of the overall sales of the company.

No. So I'll tell you about 20 -- if you look at the slide, about 22% of the top line has actually come in from government schemes. The balance, 40% has come in from the insurance patients. So if you look at the pie, about 65% of the business has actually come in from the insurance and the government sector, insurance being the majority, right? Having said that, we are keeping a continuous track and trying to monitor this at group level. And basically, we know that we have -- actually, we have kind of contained it over the last 1.5 years, if you see the -- if you see the trend. Having said that, we are consciously cutting down on the work of some of the government schemes where basically, the payment is taking a lot of time to come. Having said that, all the receivables that you see on the books are good receivables and are expected in the -- over the next few months.

Understood, sir. Sir, I guess I can just make a 2-part question. One is, if you could give some indication on what would be the likely CapEx for the this medical implant business that, going forward, maybe an overview over the next 3 or 4 years, how do you see that business expanding?

Yes, I'll answer the question. So when you look at the implant business today, so when we took over this company, we bought -- we purchased the assets of the company. And so the machines, the equipment, the plant, everything came along with that. So we have a full-fledged flow of after -- if you look at the entire manufacturing process, after the casting and forging, which is being purchased from the foundries, once we get that, the entire aspect from machining to polishing to quality control to sterilization to cleaning and then the labeling and final dispatches, everything happens in our factory in El Dorado. And this is one of the very few factors. If you look at most of the [ occupative ] companies, except barring the big ones, they all go and collect from one place to the other. So this is a one comprehensive end-to-end system. So when you look at, we have not made too much of CapEx investment outside of what we bought. We have recently ordered, 2 months back, a machine, which will help us to increase the output of [indiscernible], which is in the [indiscernible] that will be helping us further. So as I told you earlier, we are at 2,500 capacity per month. We are looking at quickly expanding it to 5,000 per month capacity with the current setup barring, we have to add some more finishers into the mix. When I say finishers, it's basically the workforce in the mix. After that, we are looking at how we could expand. We have a facility in our operations in an area. We have around 12,000 square foot of shed, which we can use. Where we are looking at right now, we are not immediately looking at expanding into the CapEx mode into that area, but we are definite -- absolutely definite that we will be using that in the future in terms of expanding our CapEx. Right now, our focus is to ensure that we get this current factory up into 100% capacity as quickly as possible. Once we get an indication that we are closing to that, we will certainly put in our CapEx. So maybe in the future, quarterly calls. I'm sure we will be talking more about...

I mean would it be in India? Or would it be like more CapEx in the U.S.

It's too early to say Mr. Balasubramanian. It's -- we just started around 7 months back. And I said our focus is phase by phase. So the Phase 1 is to get from 500 to 2,500 implants components manufactured basically by [indiscernible] manufacturer and then go up beyond that. Once we are in this -- we could, absolutely, I think we could get into India as well. That would be a part of our plan. But right now, it's too early to comment. I'm sure in the next few months when we see you, I would be in a better position to let you know.

[Operator Instructions] The next question is from the line of Sanket B. from Kedia Securities.

Just wanted to know in regards to Consensus, right now, let's say, if you have to come to India, how long would it take? Would there be any regulations that you might have to get, which might take a little while. How would you come to India with Consensus? Or you can just start selling in India immediately.

[Technical Difficulty]

Okay. I think Mr. Das Gupta will join in and take that.

Ladies and gentlemen, thank you for patiently holding. We have the line for Mr. Dasgupta reconnected. Over to you, sir.

I did not get the question. I heard about Consensus and then I got dropped off. I'm sorry.

No worries, sir. Sir, I was just asking for Consensus to come to India, do we need any different types of regulations which might take a while before we launch -- before we start a business in India? And how long would that process take?

I got -- I'm getting dropped off and on, but I heard your question. And the answer to that is yes, we would be coming shortly into India. We have already -- there's a lot of documentation involved, as you know, from a regulatory standpoint. The great news is that we have all the documents ready and we have compiled them, and we have actually submitted to the regulatory authorities sometime in November. The regulatory authorities are evaluating our documentation. Some questions have come through. We have answered that. So this is a usual prospect that takes place. And we are pretty -- very, very optimistic that we should be able to get our regulatory approval within this quarter. If that happens, we will try and launch as soon as possible.

That's great.

I'm sorry, I don't know whether you heard me because I'm going on and off.

No worries, no worries. I got your answer. No worries. So this INR 100 crores that we are getting in FY '23, this would come from which market? This would come from the U.S. or would it come from other economies?

No, it will come primarily from the U.S. As I had said, so when you look at the history of Consensus, they were -- they had slowly, slowly, slowly were moving to a different technology and then hired another company called [ Trackpad ], so really neglected this organization and this hip-and-knee implant business. So the good news is because our product -- and this is one of the very few products, I can vouch for it, it has a 0 product recall. If you look at any orthopedic company, Google it and see how many companies can claim that they have 0 product recalls in their 25 years of operations. And we have implanted 60,000 knees and close to 40,000 hips in the world, mainly in the U.S. So to your question, our primarily work in the full year 2023 is to satisfy and give to all our loyal customers who have been urgently or eagerly waiting for. So we will be -- our supply chain is becoming robust. We'll be supplying to all of them. Obviously, we will also get new customers in the U.S. We'll also cater to Japan. And we will, as I said, we will enter India as well as we would be entering some of the Southeast Asia markets. Having said this, our bulk of our business for full year '23 will come from the U.S.

All right. Okay. Okay. And just one last thing. In terms of the occupancy, what exactly will be normal occupancy that we can expect, which is normal for a business like us. And also for this kind of an occupancy, whatever will be the normal occupancy, do we need to undertake any hiring or association to increase it to that particular level?

Sorry, can you repeat the first part of the question?

Yes. normal -- I just wanted to know what exactly would be an occupancy level. A normal occupancy level for a company like ours. Like does it stay at this level or it should be higher as we've seen the other -- in the other company?

See, I want to give you a perspective. Some of our peers have stopped showing occupancy in their investor presentation at all. Because what happens is that everyone starts looking at that one single number. One, the way they should be looked at is, of course, occupancy is one important number that should be looked at. But along with that, some of the other numbers that should be looked at are the inpatient count growth, the outpatient count growth. The outpatient count growth for the company in this quarter has been in excess of 108,000. Now these many outpatients have never been recorded in the history of this company, right? And which means that basically, the pipeline for the company over the next few quarters is really good, right? So from that perspective, inpatient count growth should be looked at, outpatient count growth should also be looked at, how the revenues are growing should be looked at, along with the occupancy. So these are the 3 or 4 things one should look at along with the trend of the average length of stay for the group, right? Now for any hospital group, to increase occupancy by adding star doctors to the hospital group is an easy task because the doctor can come in with his entire patient base, and you will see that occupancy will go up. However, the only issue with this model is that your occupancy will go up, you will be able to show the revenues but because you will not be able to keep the control on the doctor cost to the revenue for these kind of doctors as well as the consumable cost, what will happen is that we will not be able to reflect the kind of revenue growth in the bottom line, right? And as you follow most of these hospital groups, almost 50% to 60% of the cost to the top line is actually the cost of materials plus the cost of doctors. So we have to keep a watch on that. And which is why it is very important to see the trend. And the trend for us, as Dr. Shah mentioned in the call earlier, is that we have been growing 15%, 20% year-on-year if you take the average of the last 5 years. And we believe that within the existing capacity without adding any capital expenditure, we can grow 2x from this number in the next 3 to 4 years. So -- and as I said earlier, some of our peers in the market have stopped showing the occupancy number also. So we are still showing it because we want everyone to see all the different areas, which are important.

[Operator Instructions] The next question is from the line of Abdulkader Puranwala from Elara Securities Private Limited.

Sir, my first question is on how the third wave has panned out for us as a hospital business? And by that, I mean, how has the January month and so far, February been for us. I mean, are we seeing some improved occupancy again and because of COVID or how is the patient inflow currently?

So the way we are looking at things right now, at the moment, the occupancy levels are much higher than the average of Q2 and Q3 for us. And the good part is that we don't have too many COVID patients admitted. So we are able to continue with the elective work that we are doing. I'll just throw some light to the earlier question that was asked. I think there was a question asked about the hiring part. Since we try and manage things in a very efficient way, the existing staff that we have across all the hospitals are good enough to serve the existing number of patients that are admitted. So as this number grows over the next few years, the number of [indiscernible] will, of course, increase but it will not be in the same proportion because there will be operating leverage that will kick in.

Got it. Got it. Okay. And sir, my second question is with regards to the payer mix. So just wanted to broadly understand for you as a hospital and for the broader industry, that if I look at your presentation, the self-pay or the cash patient count has decreased quite dramatically, if you see from last same quarter it's now close to 36%, while insurance is moving up as well. So going ahead, you see these trends are more sustainable? Or this is more largely linked to the larger specialty surgeries, what you are doing currently and things should normalize after it.

No. Of course, we do believe that quarter 2 and quarter 3, the kind of trend we have seen in the mix between self-pay insurance and government will continue. And the insurance pie will continue to increase. The government pie will continue to reduce. And which is where the company's focus is as we talk, where we want to increase, and we are focusing on increasing the self pay and the insurance pie. But you're right, the trend over the last 10 years, we have seen that there is a significant increase in the insurance penetration in the country.

Okay. Okay. And just on...

Dr. Shah wants to say a few words.

One more thing that I'd like to add here is, this quarter, we'll have an impact of rise in insurance pricing. Government insurance companies have increased our rates by 20%, all 4 major companies and our associates will also improvise accordingly. So that will have a definite impact on February and March.

Got it, sir. Got it. So my next question is on ARPOB. So ARPOB for the entire 9 months, you have seen that it has seen some increase. Initially it was because of COVID and now that the patient inflow is improving, we have managed to survive that kind of a higher ARPOB. So I had -- when we think this kind of a run rate on the ARPOB front, is it maintainable? And is there any further scope for you to improve it further from these levels?

Yes, absolutely. So ARPOB in a typical non-COVID quarter has been in excess of 30,000 for us. In this particular quarter, we have done in excess of 32,000 -- and as Dr. Shah mentioned, the average length of sales coming down, right? And because of that, of course, this will also increase the ARPOB from the perspective of the trend. And as we have seen that during the COVID, in the quarters where we had a lot of COVID work, we saw a significant drop in the ARPOB, but we believe that this trend of 32,000-plus kind of ARPOB will continue for us looking at the current trends for the company.

Sure, sir. And sir, my final question was on the implant business. So I was seeing the presentation, the implant business is already breakeven on EBITDA. In fact, you're slightly better than that. So sir, are we still maintaining our revenue guidance? And to at what point of time would you believe that this business can generate a company level EBITDA.

Yes, we would be looking at the income credit for full year '23. That is the plan. And for that, as we mentioned, we are trying to not only increase our sales. We'll also try and increase our mix of sales. So when you look at the business, the EBITDA in the U.S., it has a mix of retail and wholesale. The average realization of pricing is more in the retail. So we are moving from a -- when we started that business, the wholesale business was almost 90% and the retail was 10%. We are moving to a much better ratio going forward. Every month, we see an improvement in the mix. So our plan is to get a reversal in the ratio where our retail ratio will be much higher than the wholesale ratio, which will give us a much better realization. And that, in turn, with our efforts of getting our costs correct, we are ensuring that we get reduction in our manufacturing costs, as we call it, bleed the assets as maximally as possible. We should be getting into an income accretive for full year '23.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing remarks.

Thank you, everyone, for joining this call.

Thank you, and thank you very much, and we look forward to seeing you again in the next quarter. Thanks a lot.

Thank you, sir.

Thank you. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines.