How is the Bangladesh cluster performing for QCIL over the last 9 months given social issues there, and any thoughts on the minority stake?
Bangladesh has done well and is in line with our overall performance. Top line growth for Bangladesh for YTD is at about 21-odd percent. Bangladesh does get influenced by certain external factors, but we happen to be the best place for patients in Bangladesh and therefore spring back volumes very quickly. On the minority interest, we do not want to give a very leading comment on this. We will keep you posted as and when we have a decision on this.
On the Women and Child Hospital in Hyderabad, what is the updated timeline and what preparations are underway?
It is a multi-specialty hospital of women and children -- we are going to have all specialties of women including oncology, not only maternity and gynecological cases, but all super-specializations of women and also all sub-specialties of children. We wanted to add a bunker which shifted the timeline a little bit. As projected, we will be commissioning at the given timeline. We are looking into the talent pool and which talent can be hired and how to kickstart.
How is competition shaping up in Karnataka for talent and what are your key strategies to retain your core doctor team?
We are looking at how to retain existing clinicians -- many are quite happy with the Aster culture. Some who had left want to come back, which is a good sign. We are looking at the top 1, 2, 3 clinicians in CONGO-T mix who we would like to onboard. Shortly you will hear some very big names associated with us. We are trying to get the best of the clinicians on board.
Is there a minority share out of QCIL's INR 800 crore EBITDA for 9M FY26? And between operating EBITDA and reported post-IndAS EBITDA for QCIL, is there a major difference?
Approximate minority for QCIL is roughly 20% -- we can send the exact number separately. Between operating EBITDA and reported post-IndAS EBITDA, the difference is about INR 15-17 crores.
On ALOS, Aster is among the lowest in the industry. Given oncology being largely daycare and as a focus area, should we expect ALOS to stay at this level or drop further?
Daycare has been improving day by day. Chemo daycare has more number of patients. We have also many keyhole procedures and using a lot of soft tissue robotic also for various procedures. In MedCity, we do around 80-85-90 robotic procedures. Lab surgeries are gone up. So there is a significant reduction in average length of stay. Will there be a further reduction? It is very difficult to say. This is the shift that has been happening. ALOS would be the best we are in. Length of stay is also to do with quality parameters like infection control practices.
Are there any remote diagnostics or AI initiatives for Tier-2/Tier-3 cities where talent availability is a challenge?
We don't see dearth of talent on the QCIL side. Tier-2, Tier-3 cities and Kasargod had 120 clinicians. Today you can do transplants in 100-odd cities in the country. We are looking at AI but not from a need because of dearth of talent. EOP (first centralized solution on radiation) will be AI-enabled -- not for talent efficiency but to scale up decision making, make it more speedier and robust. Getting centralized call centers, getting pre-recorded voice calls now with the consumer before they come to the hospital so that EMR is enabled with input parameters -- these also help the consumer and are playing out to drive efficiency.
Can you give us more color on the Kerala Flagship Hospital Aster Medcity performance and how much delta has been driven by the MVT volumes and whether this growth in the MVT is sustainable or not?
Aster Medcity has really grown well. We have a solid leadership at the ground level. We are able to build on, add more clinicians to the system. Programs like the robotic program have taken off very well -- in some months around 80-90 surgeries of robotic program have been done. The overall performance has been consistently around INR 90 crores and above for the last 5-6 months. MVT has grown by 64%. Especially from Maldives and Oman patients are flowing in. This is definitely sustainable because there was a temporary setback. We have started driving them back. We have a proper engagement with both Maldives and Omani patients. Flagship will definitely contribute. Other units of Kerala including MIMS Calicut and Kasargod are also doing well. The entire Kerala cluster will sustain with significant growth and very good margins of 25.5% operating margins.
On the Karnataka cluster, we have seen occupancy dip to 55% from 60%. Can you give more color on which segment the clinicians have moved out and when we can expect normalised business?
ARPP IP has grown by 17% which says we are in strong footing in Karnataka, especially in CONGO-T mix, where Oncology and Neuroscience have contributed well. Whitefield facility continued to contribute 14% of the growth. At Aster RV and the 2 micro-markets, even with competition and some attrition of clinicians, we have been able to replace them. Most are either intensivists, anesthetists or revenue generating doctors. For example at Aster CMI, when the pediatric team moved out, we onboarded some of the best well-renowned pediatric team on board. Some clinicians who left are also rejoining Aster. Way forward, plans are to hire more and well-renowned clinicians to contribute and have steady growth for Bangalore.
Have we reached an optimal level of case-mix in Bangalore and what is the sustainable ARPOB level?
There is a headroom for growth. Once we start progressing well with our CONGO-T, which will be our focus for Bangalore as well, the ARPOB should move from INR 77,000 to adding another 6-7% more in the coming days. For a mature hospital in Bangalore, the levels should be 75,000 or so.
Is the QCIL margin improvement driven solely by QCIL efforts or is there also impact of synergies from the Aster-QCIL combination?
The synergies we have are between KIMS, CARE and Evercare within QCIL -- those synergies are playing out. We started working on them about a year back. The QCIL-Aster synergies will only play out post the merger. Our payor mix is getting better, now at 80%+ (from 76-77% a few years back). CONGO-T continues to improve. We have hired almost 100-odd clinicians in the last three quarters with monthly impact of INR 24 crore. Focus units -- which were 28-29% of business -- have seen 19% top-line growth and bottom line growth of about 70%, translating to 550 basis points of EBITDA percentage improvement.
What would be the quantum of synergies from the Aster-QCIL merger, and given high greenfield capacity addition planned next year, will synergies be able to recoup those losses?
The bed growth that we are looking at may not be margin-dilutive because a large part of beds is coming in Bhubaneswar, which is a facility that does very well and we are maxed for capacity. Bhubaneswar, we are adding oncology there so it won't be dilutive. Sarjapur road hospital construction just started and should come in Feb-end of FY27, so we moved it to beginning of FY28. We expect merger to complete in Q1 FY27. We have guided that we expect 10-15% of EBITDA coming in form of synergies over the next 2-3 years. We are looking for a 24%-25% margin threshold in 2-3 years.
On the Kasargod unit, how do you see the trajectory for scale up and when should we expect the unit to turn cost neutral?
Kasargod has done really well. In the third month, we ramped up to 50-55 beds with more than 400 patients. ARPOB are at INR 31,000 being a Tier-3 city. Losses have drastically reduced to only around INR 2-2.5 crores per month. If the growth trend continues, within the next one quarter we should be able to break even. We already added more than 100+ clinicians with more than 40-50 RGDs. CONGO-T mix for the new hospital is already more than 46%.
For the Kasargod 264-bed expansion, how many beds are operational and when will the remaining come? And for remaining 750 beds planned in FY27 in Hyderabad and Trivandrum, what is the census/non-census ratio?
264 beds are total capacity beds. Census beds are approximately 183-185 census beds and balance around 80 beds are non-census beds. Non-census beds get operational quickly because there you have emergency, daycare and pre-op/post-op beds. Census beds take more time. Currently at 80 beds and we should be able to ramp up very quickly to 180 beds -- similar to Kannur which ramped up very quickly. For modeling purposes, 75-80% of beds are census beds and 25% non-census beds. Usually we start between 75-80 beds and whenever we hit 60-65% occupancy, we add 30 beds.
Kerala has seen a massive change over the last year with ARPOB growth sharp. What has changed and how much is sustainable?
Majority of ARPOB percentage growth in Kerala is coming because of ALOS. ALOS is almost 7%. If you remove that, ARPP level is around 8-9%. But if you go to ARPP IP, that's around 7-7.5%. In Kerala, in the north, 75-80% is a cash patient -- insurance penetration is quite less. Better to track ARPP IP not ARPOB. In future, between 6-8% is a growth in mid-term for ARPP IP in Kerala. Competition coming in will also drive ARPOB growth. We added more than 20-25 clinicians in CONGO-T plus broad specialties across Kerala.
What is the breakdown of QCIL expansion plan year-wise in terms of Greenfield and Brownfield and capex earmarked?
We are adding Bhubaneswar, Raipur and Kottayam for FY27 -- that'll be 155 and about 190 beds. All of these are existing facilities, brownfield. FY28 is about 780 beds, all brownfield. FY29 and beyond is another 750-odd beds. Almost 89-90% of the expansion is brownfield in nature for QCIL.
Where do you see the CONGO case mix going for Aster as well as for the merged entity on a steady state basis?
QCIL is currently at around 57.6%. The endeavor is to continue doing this. Investments in oncology are going into oncology blocks in 5 different facilities over next 2 years, LINACs. It will continue to grow -- I sense you'll be mid-60s over a period of time. Robotic systems going into various cities and expansion of talent is all helping grow CONGO-T mix.
What is the size of pharmacy business for QCIL and its margins? And how is the strategic exit from loss-making pharmacy units panning out?
QCIL doesn't have any pharmacy business -- whatever pharmacy is more of IP and OP pharmacy within the hospitals. Wholesale pharmacy previously added a second business unit to supply to retail pharmacy which didn't work out due to logistics issues. A year back we moved out of that and came back to the one we acquired. Going forward wholesale pharmacy we don't expect to do major growth because max margin is around 3-3.5%. In terms of retail pharmacy, we only own 49% and have around 203 pharmacies spread over Telangana, Karnataka, and Kerala. That's expected to break even in another year or two.
For new greenfield units in FY27-28 -- Trivandrum, Hyderabad and Sarjapur -- what EBITDA losses in the first 12 months should we pencil in?
Sarjapur is going to come in the beginning of FY28. For next year we only have Trivandrum expected first in second half of H2, and Hyderabad women and children in second half of H2. In both cases it is not a new geography -- Hyderabad has CARE already present and Trivandrum has KIMS. Usually on average, first 6 months could be anywhere between INR 2.5-4 crores per month burn.
Aster has 24% share of non-census beds which is higher than peers. Is there a reason for this difference?
In our case it is higher because we count everything -- emergency beds, daycare beds, pre-op, post-op beds, dialysis beds. We have been very consistent on this formula for last 10-12 years. Going forward, more short-stay procedures and daycare especially oncology where more than 50-60% of revenue comes from chemo as daycare is another reason. ALOS is also going down as a result. Otherwise there is nothing much to talk about.
There is about 200 basis points margin dip versus previous quarter despite Kasargod adjustment. Is this totally accountable to seasonality or are there other factors?
Year-on-year excluding Kasargod, you are talking about 22% going down to 20.2%. The dip -- almost 62-65% is impacting to the revenue side. Second is investment in clinical talent -- we are very clear we want to add more and more clinical talent. Once new doctors come on board and ramp up over 3-4 quarters, you will see benefits in volume and margin. Also the medical specialties vector-borne diseases reduced by almost 70% -- Q3 showed a dip of almost 12% in internal medicine, pulmonology and children's cases. Meanwhile oncology grew 27% and cardiology grew by more than 22%, both of which carry a high material cost. This is not a structural issue -- Q3 always slows down but with investment you can expect good ramp-up in volumes going forward.
Aster Labs margins have improved sharply to 12%. At what scale do we see these margins stabilize and what can we expect going forward?
On a YTD basis, we have already gone to 12.2% margins. The most important thing for margins to further drive up is driving our non-captive business, which is currently at 30-31% of Aster Labs revenue, to more than 50%. We are working on this with a dedicated labs app we'll be launching -- not linked to our hospitals but a dedicated retail app. Once we get non-captive up from 30% to more than 50%, we will see gross margin improvement in a very drastic way. Then we can look at more than 20+ margins. Next 2-3 years, you can see more than 20% of margin from Aster labs.
After outsourcing the wholesale pharma business, how much margin drag has been removed?
On a monthly basis around INR 1-2 crores every month is the number we have removed. In wholesale distribution, actual margin is 8% but with so much discounts to retailers and trade business, gross margin dips to 5-6%. With manpower and overheads, max you can hit is around 3-3.5%. In Q3 already we moved to 2.2% and we are consistent to keep it positive and try to drive up beyond 3%. We are not looking at increasing this business in a drastic manner -- we want high margin business, not drive the top line at cost of margin.
On Andhra & Telangana cluster, inpatient volumes have been flat for 9 months. Can you give light on this?
In AP cluster, we have Vijayawada, Guntur, Ongole, and Tirupati. Tirupati is doing exceedingly well -- consistently performing at 130-140% of budget achievement. In Vijayawada and Guntur, we had attrition and now have replaced these clinicians so volumes are picking up. Ongole also had competition where a few clinicians left, but all have been replaced and Ongole has bounced back in the last 2 months, achieving budgets. It was a temporary setback and we have taken action -- steady growth in coming days.
Material cost is up 50 basis points year-on-year adjusted for wholesale pharmacy. How much can be attributed to oncology and cardiology?
60% of the 50 bps should be attributed to oncology and another 20% is due to neuro because we have done good amount of DBS cases which have doubled year-on-year. Balance another 20% is attributed to robotic procedures -- we are doing almost 300 robotic procedures every month, 100% growth year-on-year. Out of that more than 60% of the robotic procedures are soft tissue and balance 40% is ortho. We have been driving material cost from 25.5 to below 21, last year closing at 20.9. That changed a little bit in the current year because of the case mix. In CONGO, we've grown by more than 240 basis points year-on-year -- highest was Oncology at 27% in Q3, second highest Cardio, third highest Neuro.
Where do we see Oncology as a target mix of revenue in medium term 2-3 years and how would that impact material cost?
2 years back we used to be around 8-9%, now we have moved to 11% contribution on revenue. Another 4-5 years, we expect it to be in high teens -- that's the growth engine we are looking at. Material cost should not be worried about because oncology also gives you a good EBITDA per bed growth. That is something to always watch out for.
Which synergies from the post-merger plan are most sensitive to delivering 10-15% EBITDA upside and what is the top priority?
The quick answer will be the material. Today Aster has INR 1,000 crores of procurement and QCIL has INR 1,000 crores. Bringing the two things together and negotiating a INR 2,000 crore procurement and also getting the best of both worlds on the formulary mix -- that is a no-brainer, that is going to be the first target and we should be able to do really well on that.