And my second question is on the onco share decline that we have seen in Q4. While clearly, the reason highlighted is a discontinuation of chemo drugs, but it still feels a bit sharp, given we had quantified onco drug impact to be about INR80-odd crore. So, if you could help us understand what has happened here? And by when do we expect this to reverse?
There are two things. You have the onco drugs, that is day care, the margins on which were coming out a little perverse to us. So, discontinuation of these high-value drugs not only impacts your top line, but also impacts your OBDs (occupied bed days), which are related to it because some of the patients, which are coming for day care, are also admitted in the night. So, it has a knock-on effect on that as well. Our OBDs have sort of come down by about 5% to 6% in oncology, which is related to this.
The first question is with respect to doctor costs. So, we see that our doctor costs have gone up and we have hired in advance. But just wanted to get a sense on for which all expansions have we hired and like which are the hospitals where further doctor additions are still pending, which might hit the cost line item in the next one to two quarters?
That is a very good question. So, there are two things. End of 2024, we essentially added close to 25% to 30% more capacity. This was whether through Dwarka, whether through the Jaypee acquisition, Sahara done some time before that or Alexis in Nagpur. This year we have already started a phased rollout of 20% plus more capacity, which includes Mohali (Punjab), Nanavati (Mumbai), Smart (Saket) as well as we added more beds in Lucknow as well. So, somebody asked me a question before this about Noida. And we have seen meaningful improvement over there because we have expanded our doctor base. So, all of these new ones which are coming, we have added doctors.
Second, sir, are you seeing the risk of these medicines being taken directly by the, let us say, health scheme or CGHS in other therapies?
Firstly, because of being in Delhi, we have a larger amount of institutional business, which was coming to our Delhi hospitals and this impacts that largely. What they basically said is that we have to provide these drugs at 30% discount to MRP. And so, they have not selected the drugs. They said all medicines at a 30% discount to MRP or alternatively CGHS, patients can get the medicine from CGHS. So, from a hospital standpoint, if your margins are less than 30%, then you probably discontinue it because it becomes loss-making, but the patient has the option of buying it from the CGHS dispensary.
With respect to doctor talent cost, given the kind of bed addition and starting of hospitals by multiple corporates probably over the last, maybe couple of years and subsequently over the next 4 to 5 years. Are you seeing this doctor talent cost sort of the negotiating power moving to doctors from corporate?
There are two things. Firstly, it is not a new phenomenon that hospitals come up in locations where there are existing hospitals. And it is not as if in any micro market, it is like you have got five hospitals and three more have come up or four more have come up. It is pretty much been one here and one there. But when that happens, you know your own clinicians tend to negotiate their compensations and it does go up from that standpoint. But having said that, it does even out and it is transferred over a period of time to the patient because eventually, it's still a 10-12% PAT margin business, it is capital intensive, and we are reinvesting. It is a natural phenomenon. It gets a little lumpy sometimes.
My first question is on the brownfield beds that we have added. When do we start seeing them contributing to EBITDA more meaningfully? Did I hear it correctly that all of these brownfield beds will be commissioned in the next two quarters. So, second quarter, third quarter is when they should start showing up more meaningfully on EBITDA?
So they are already contributing to EBITDA and it is not any form a negative contribution. But what happens is that you sort of get the better end of operating leverage as you go along because right now, for the total 1,000-odd beds, we have initiated a phased rollout of lesser beds. Say, if you have 400 beds at Max Smart, which are being rolled out in a phased commissioning, you would have started with about 100 beds over there. So, as you open up the balance beds over the next couple of quarters, you will see the entire operating leverage as the balance beds get occupied because your costs related to even the brownfield are not linear effectively.
Okay. And is it fair to assume that the occupancy and these ramping up should not be a problem? We should get to a fairly good level of occupancy as soon as we start these beds. That should not be a problem, right?
Yes. So, I mean it is a two-way thing. I mean, we do not open beds if we do not have occupancy, but what we have seen is a very good ramp-up of that occupancy. And therefore, you have seen in spite of new beds opening up, occupancy remains high. But having said that, I must also point out what is embedded within it is also higher ALOS. So, what tends to happen is you are just a little more efficient when you do not have the beds. When you open up the new beds, there is a tendency for the ALOS to increase. It is slightly temporary in nature. We have tightened it again, but you have seen that ALOS has gone up by 9%.
My second question is on Gurugram. Did I hear you correctly that we are now expecting Gurugram commissioning by the end of this fiscal year? And we should not be expecting any further delay on that because that is been pushed out a few times now.
Yes, we are expecting commissioning by the end of the year. That is right.
On the Bhubaneswar asset that we have acquired, this will start integrating from first quarter itself? Or is there any approval, etc, that we require before closing this?
Yes, from the first quarter. We have already acquired the majority stake so we will be consolidating it.
So just again on Gurugram, how should we think about the operationalization of beds, assuming we commission towards the end of fiscal '27? What will be the Phase 1 operationalization? And what is the count that we should expect in fiscal '28?
So, I think in fiscal '28, we will be looking at breaking even within the year. I mean, it is a greenfield, as you are aware. Having said that, our experience with the Dwarka greenfield, we operationalized it, we guided to a 1-year breakeven, but we actually broke even in 6 months. We had an operating loss, consolidated EBITDA loss in the first 6 months of about INR 35 crore. However, by the end of the 12-month period, it was less than INR 10 crore. Even if that number is more or less in this case, it is not a meaningful change to perhaps what the projections are going to be.
But in terms of beds, are we expecting phase-wise manner of operationalization here, because it's a 500 bed facility...
Yes. You always do it, even tactically, in that manner. So physically, the beds come out in phases, but even so tactically because if you have 500 beds, day one, you are not going to have occupancy of 500 beds. So, you do not operationalize or staff all the 500 beds. So, if I take the example of Dwarka, we had 300 beds, we started with 140 beds. We ramped up occupancy, broke even with the 140. So, the balance beds start to yield as you go along. You are seeing a similar sort of story play out in our brownfields right now. And with respect to even the greenfield at Gurgaon, you are going to start with, let's say, about 200-odd beds. And once you kind of break even within that, then you start rolling out the balance beds.
So, I mean, do we have a plan in place, how do we replace it? What alternative protocols would you have?
Basically, some of this is permanent because we know that we will not be able to do this kind of a business on the minus-margin basis. As you have also seen in this quarter, although the OBDs have degrown by 6% in oncology, but we have overall OBDs have grown. That means the other specialties have been able to compensate for it. So, I think that is the plan even going forward, that we do not expect the share of oncology come back to 25-26% as it was earlier. It will continue to hover around 21-22%, and we will then have the other specialties fill up that vacuum.
And the CGHS rate revision benefit, has that started to flow through in Q4?
Yes. All except the super specialty rates. A very large part is already in, but there is a small part, which is left out, which is around INR 25-30 crore per annum. That will be phased out over this year. It has started to come in two hospitals, but balance is still pending. But that is all in this quarter.
My first question is clarification. Abhay, you mentioned you are rolling out beds in a phased manner, even for say facility like Smart. So, help me to understand this better. In the past, whenever you have opened or commissioned brownfield facility, I understand the ramp-up happened much faster than what we are seeing right now. So according to you, anything has changed since then? That is why you are going for more gradual phased way of prescribing beds.
No, we have always opened brownfields in a phased manner. Whether brownfield or greenfield, it has always been opened in a phased manner. And it is opened in a phased manner because as soon as any part of a new facility, any floors are ready, there is always a tearing need for those floors. And you have seen that play out in the occupancy as well. So, we try to put it to work as soon as possible. So whichever floors are ready, and it is the same at Nanavati, it is the same at Mohali, it is the same at Smart. It has been same in the past at Shalimar Bagh or Vaishali or every facility, which we have rolled out has been rolled out in this manner.
And when it comes to ramp-up of some of the newer facilities. You mentioned about Dwarka. Similarly, can you update on the status of the Noida unit, how it is ramping up in terms of occupancy, etc.? Last quarter, if I remember correctly, you mentioned there are some issues which you are trying to resolve. So, if some update you can share on Noida unit?
So, the Noida has ramped up well now in this quarter. So the occupancies have been more than around 64-65%. There is further room to grow. But on the revenue side, it has done well compared to last quarter. And we have also hired doctors in that hospital. I would say we are happy with where we are with respect Noida when it comes to quarter-on-quarter growth.
And my second question is a clarification on discontinuation of oncology drugs. You mentioned 5-6% OBD got knocked off because of it. Just wanted to understand, these drugs are like high in terms of ticket size, etc. but were they meaningful contributor at the EBITDA level also?
Yes, earlier, they were given at MRP, and we had 15-16% margins on those. So that used to flow to the EBITDA.
And I think my last question is on the pipeline projects, which you indicated, which are coming up in '28 or so. Is any facility there where we are seeing some delays, etc., in terms of approvals or it is just like completion of the facility, which should be done as per your indicated time line? So, any regulatory clearance or any other clearances which are due?
No, nothing. No regulatory clearance is pending over and above what has been anticipated. In the past, there have been delays because of GRAP 3. We have had delays because of shortage of manpower due to the LPG crisis. Forest approval was delayed because there was an issue with respect to Delhi tree transplantation where the Supreme Court had taken cognizance of. There was a matter between the Lieutenant Governor versus the Supreme Court - contempt of court matter because of which it got stalled. So, these are not typically regulatory approvals, which have been sort of delayed. But I think we had issues and incidents with respect to pollution and shutdowns of construction or tree transplantation or Iran war causing shortage of LPG and therefore, manpower not showing up at site.
And sir, just to better understand, so this INR435 crore for doctor fees in Q4, that should not materially change going forward, at least for the next few quarters. Is that the fair way to think about it?
Yes, it should actually start getting operating leverage in fact. My belief is that marginally all of this percentages start coming down
And this Kalinga Hospital. So, any start-up losses or like what about breakeven time lines? How should we think about that?
It is already profitable. I think there is about INR 10-odd crore of EBITDA. So, you are not starting with a negative.
And the last question would be with respect to the new units or whatever we have operationalized in the last 12 to 15 months, how have their overall revenue and margin trajectory look like, any colour there will be helpful?
Basically before rolling out this 20-25% capacity rollout that we have recently done over the last 3 to 5 months, the previous generation for about 12-13 months, we did not really add any capacity. We added it before that, again, which was a little lumpy. We did Lucknow, Nagpur, Dwarka, Jaypee; so are those the four you are referring to? Okay. I think all four have done significantly well. Lucknow, for example, is doing pretty much 5x of EBITDA of what we acquired it for. The meaningful addition in Nagpur, and in Noida also we have seen that. Dwarka is not only operating at 80-85% capacity utilization, but we are already planning a brownfield over there of another 200-plus beds.
This was more on the Lucknow side, while we have a very decent land bank as far as Sahara hospital is concerned. And, of course, in the history you see Shaheed Path land was also acquired more or less at the similar timeline. So how are we evaluating in terms of which land bank to sort of set up? I understand that the Board has given sort of approval for Shaheed Path. But if you could help understand how are we going to sort of utilize both the land banks and build up Lucknow sort of hospital network.
So, I think it is a very good question. We have a land bank of about 27 acres of land at Gomti Nagar, which is right in the heart of Lucknow, and 5-plus acres, which is on Shaheed Path. We are expanding our capacity over the next few months, you will see our capacity of Gomti Nagar go up to about 570 beds. What we intend to do is we intend to start another hospital. We want to have a multi-location strategy of about 700 beds in Shaheed Path, which we will be operating in a phased manner. It should take about 3 years to build it. Simultaneously, we believe we will be running out of capacity at Lucknow at Gomti Nagar as well. So, we will be adding another 200-300 beds over there.
So, I mean, it reflects the kind of confidence you have on this Lucknow as a location, building up such a strong almost it will be about 1,000, in fact, more than 1,000 plus sort of a bed size eventually and not like immediately, but over a period of time?
Absolutely. Let me put it this way, over the next decade, I see even probably Gomti Nagar going close to perhaps 2,000 beds, in just that one location. We will do it in a phased manner. We have the land bank over there. And the kind of ramp-up we are seeing is because our clinical programs are very strong over there.
And just lastly, with Gurugram, we had to sort of start second half. So, is it like now we are indicating in for a few months, sort of taking some time? Is that the way to think about?
No, that is right. We were saying second half and we meant middle of second half, and now it is end of the second half. But there have been two issues over here. One was a lot of labour went back during elections, particularly Bengal elections. It was a bit of a festive season for them from that standpoint. So yes, we had a lot of reduction in manpower at the sites. Second is also the LPG issue. Most labour, they cook their own food, so we had disruption over there because the labour did not have LPG. We have started serving meals for all labour at our sites now, in order to surpass that.
It seems like confusion regarding the discontinuation of chemo drugs due to MoU conditionalities, this is specific to Max Healthcare in a region or this is industry-wide pan-India. And if I understood it correct, it had a knock of negative impact on revenue to the tune of INR130 crore, and they had around 16-17% EBITDA margins, if you can help clarify that?
Firstly, this is an industry-wide phenomenon. Secondly, as a proportion of its business, Max perhaps does the maximum amount of oncology business. And then within that, if you actually see, we probably do the maximum amount of institutional business as well, which is CGHS, ECHS, etc. So, although it is an industry-wide phenomenon, the impact would be felt maximum by us for these reasons.
Just a follow-up on this CGHS part. So, if I see the contribution from CGHS, it is barely moved the needle. And where our onco revenues are seeing a sizable dip. And within that, if you could help us understand that what portion of your CGHS revenues actually comes from oncology and how should we look ahead as well?
Obviously, there's a lesser impact on the beds for this. These chemotherapies are billed in the daycare. When you discontinue these drug billings or providing these drugs to the patient, there's an impact on the revenue but there's no impact on the beds. Nevertheless, there are some of these patients who also then avail surgeries in the network and some of these patients are also then admitted in the hospital. To that end, the Occupied Bed Days (OBDs) for oncology patients have come down by 6% YoY. Now your question is that within the overall CGHS business, how much is oncology? That'll be probably around 35-40%.
And sir, then on your existing Network that is prior to any bed additions that you have done, in terms of the steady state revenue and EBITDA growth, sir, how should we look at in terms of your, say, bed network, what you had developed for '25 or for '26. And the levers of growth, would it be more ARPOB driven? There is some element of case mix as well, which can help to at least post a single digit kind of a growth.
Basically, there are two elements which make the revenue go up. One is the ARPOB and other is the Occupied Bed Days (OBDs). You know that even at the existing hospitals, we are adding more beds. There is brownfield expansion being done in Mohali, Nanavati, Lucknow and Smart. Our role is to make sure that where we have 80-85% occupancies, then we add more beds there and try to ensure that there is OBD growth also. So, if we do not have OBD growth, then the only growth would be the ARPOB growth rate, which will be, let us say, 6-7% of the revenues.
Just a clarification on chemo drugs, again, sorry, here, we are losing out on OBD also. So, if it is only the dispensary and the drugs to who are -- I mean, to whom we are losing the OBD patients in general, the 5-6% impact on OBD, clarification on that will be great? And Q1 so far -- I mean until now, you are seeing a full impact of this chemo drugs, at least, right?
That is correct. Quarter 4 has already had the full impact. We started to discontinue these drugs in Oct '25. So, to that extent, quarter 4 has the full impact of discontinuation of all these chemo drugs. What we have not gotten yet is the full impact of the price gain on the CGHS side, which will come starting this quarter. So, as I said, 2 of the hospitals have already got the super specialty rates. And during the course of the year, we will have more hospital also getting those rates.