Neha Manpuria · Bank of America
Occupancy dropping in larger hospitals (FMRI/BG Road/Faridabad) — onco capping impact, doctor cost, FY27 hospital margin outlook?
Vivek Goyal: Occupancy drop in some of the hospital attributed towards the drop in the international business to some extent. If you see our international business growth in this quarter is around 11%, while for a year, it has grown around 18% to 20%. Another reason for the occupancy drop in some of our hospital in North side, Punjab side is because of the medical onco drug capping that has also led to a drop in the revenue and occupancy to some extent.
Most of the drop is coming where we have larger share of ECHS and CGHS business, mostly in Punjab region. The drug prices are capped at 30% to the MRP. So that has led to some of the drugs where we are not earning that type of margin, we have stopped taking those patients.
Ashutosh Raghuvanshi: As far as doctor costs are concerned, there has been a slight increase. We don't expect anything further to happen because we have already taken the necessary steps in this direction. FMRI occupancy is almost close to 90% on some of the days, it is up to 95%, which is almost unmanageable. So luckily, we are having the new beds getting commissioned over the next week or so.
On FY27 hospital margins: I think we have been very much tracking on our plans and that guidance remains absolutely intact. If at all, we are more confident now that we can continue to deliver this progress every year, at least to 1.5% to 2% year-on-year.
Shyam Srinivasan · Goldman Sachs
CGHS issue resolution + FY27 hospital & diagnostic guidance + Agilus volume/value split?
Vivek Goyal: Very difficult, Shyam, to give any time line for this because government CGHS and ECHS has already issued a circular towards that. So industry has given their representation. But having said that, we are moving on alternate business opportunities. This drug price is having a negative impact on the revenue, but not on the margin to some extent because margin-wise, we are quite okay.
On FY27 guidance: revenue-wise, we are well poised to see on hospital side, 15% plus revenue growth. And EBITDA side, we expect another 150 basis point margin improvement for the current financial year.
Anand K: For Diagnostics, this year, we said that we'll be around 22% to 23% in terms of EBITDA. So we are there. For the coming year as well, we'll be around 23% to 24% kind of EBITDA margins. In terms of revenue, I think from where we were, we have improved quite well, and we have come to about 8.5% now. And we'll definitely improve and touch about double digits this year is what we are hoping.
On volume-value split: this year, we are seeing roughly about 5-plus fee kind of volume-to-value relationship, so 5% growth in volume. So we expect that next year, it would be similar about 70% coming from volume and 30% coming from value.
Amey Chalke · JM Financial
Smaller hospitals FEHI/Jaipur outlook + FMRI tower phased opening + Diagnostic demerger thought?
FEHI has improved a lot. The EBITDA margin has improved, and we expect there is a further scope of improvement in the EBITDA margin in FEHI. As regard to Jaipur is concerned, we expect the Jaipur to grow around 15% plus next financial year with EBITDA margin in the range of 13%, 14%.
On FMRI tower: the capacity utilization is quite healthy. We are operating at around 85%, 90% occupancy level. We are actually facing bed shortage. We expect to operationalize this new tower in a week time. Our initial plan is to operationalize in a phased manner. We don't want to open all the beds immediately because it is having impact on the cost also. In the current financial year, our target — our plan is to open around 100 beds. But if the occupancy ramps up fast, we can open all the beds also.
On brownfield margin scope: this brownfield expansion, our experience is quite good. We're able to ramp up the capacity quite fast. And with the economy of scale, we're able to ramp up the margin also.
On Diagnostic demerger: Currently, our focus is more on improving the profitability margin. The business has started showing good result and focus is on getting full potential out of the business. I think this is not the right time to do any sort of value locking at this point. And once the business mature and start performing as per the market and as per competition, then I think we can look for some alternatives.
Aman Goyal · IIFL Capital
Manesar revenue/KPIs + FMRI ARPOB growth driver + Bangalore cluster rationale + bed deferral 300 from FY28 to FY29?
Vivek Goyal: Manesar is doing quite well. In terms of revenue, it is exceeding our expectation also. INR140 crores is the revenue number for last financial year for Manesar. Occupancy is around 48%, but it is quite deceptive because during the year, we have opened up new beds also. As I mentioned earlier, last year, there was an EBITDA loss over this unit because it is a new unit for us. It has already breakeven.
On FMRI ARPOB increase: One reason for FMRI ARPOB increase is the international business itself because if you see in a year, we have grown by 20%. International business generally includes markup and that lead to the higher ARPOB when we see at the gross level. Plus we have added a lot of new technology in this unit like MR Linac was started in this unit. Gamma Knife was started.
Ashutosh Raghuvanshi: On Bangalore cluster (People Tree): there are micro markets within any large city, and this is a new micro market. This micro market is not as highly competitive as the one in BG Road. There is a large drainage area, which is grossly underserved at the moment. In a city like Bangalore, multiple positioning is very important because if you don't have a cluster and you don't have that kind of presence and then you are not in the competition.
Vivek Goyal: On bed expansion: only FMRI unit has been moved to the '27 financial year. It was supposed to be starting in the last quarter of the last financial year. Next year, we are targeting around 500-plus bed expansion, commissioning of 500-plus beds on the brownfield side. As regard the capex guidance, we expect to incur around INR900 crores annually on the capex, which may include 60% towards maintenance capex and balance is the growth capex.
On 300-bed FY28→FY29 deferral: It's mainly Shalimar Bagh. There is the big extension, where we are expecting some approval related issues to be sorted out. And once it is sorted out, we will move fast on this expansion.
Sanjay Shah · KSA Shares and Securities
PE-backed competition + asset-light model — Fortis differentiation + hospital maturation cycle?
The main differentiator is going to be the clinical quality outcome, patient satisfaction. And we continue to remain focused on it. As far as the PE-backed platforms are concerned, I think that's a future opportunity for the legacy players who are the kind of strategic in the market. And this would give future opportunities for us. There are concerns about the valuations, etcetera, being driven by these transactions. But that, I think, will be something which market will take care of over a period of time.
On maturation cycle: typically, the cash breakeven happens at 18 to 24 months. And then after that, it takes about maybe a year to get to about 18%, 20% EBITDA. That's for greenfield. Brownfield will depend on the already existing operations. For example, in most of our brownfield, the capacity absorption was immediate. So because that is just a hospital becoming larger. So it drives in economy of scale, then the profitability of the hospital becomes better immediately.
Jestin George · Individual Investor
Major brownfield expansion sites — Mohali / Shalimar Bagh / Amritsar / BG Road / Mulund?
We are having new towers coming up in Mohali and Shalimar Bagh, which will take about 2.5, 3 years near about. These are large expansions and also in Amritsar. So these 3 large ones are going to come.
There is some brownfield capacity in Bangalore, which we are yet to commission. But as discussed earlier, the occupancy levels currently are lower. So we are waiting for that to improve before we add more capacity. We have about 100 beds more over there.
Mulund, we have already built a new capacity a few years back, and that is well absorbed now. We are currently at about 65% occupancy levels over there. So there is a possibility of adding another tower in Mulund facility, which we are in the process of planning.
BG Road: It's a brownfield in the same building. The building is already constructed. Once the occupancy numbers improve, we will commission.