Ladies and gentlemen, good day, and welcome to Q1 FY25 Post-Results Conference Call of Fortis Healthcare Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Kalra, Senior Vice President, Investor Relations at Fortis Healthcare Limited. Thank you, and over to you, sir.
Thank you very much. A very good morning and good evening, ladies and gentlemen, and welcome to Fortis Healthcare's Quarter 1 FY25 earnings call. The call is being chaired by our MD & CEO, Dr. Ashutosh Raghuvanshi. With him, we have our Chief Financial Officer, Mr. Vivek Goyal. From the Agilus side, we have Mr. Anand, the CEO, and Mr. Mangesh Shirodkar, the Chief Financial Officer. We'll start with some opening comments by Dr. Raghuvanshi on the results and the business performance, followed by which Anand will take you through some of the key highlights of the diagnostics business, and then we can open the floor for question and answers. Over to Dr. Raghuvanshi.
Thank you, Anurag. Good morning and good afternoon, everyone. I hope everyone is doing well, and you have taken time to join us on our Q1 financial year 2025 earnings call today. I'll dive right into the quarterly results and share my thoughts on the business performance and our path forward. Our performance in Q1 financial year 2025 has been impressive, showing a significant improvement over the previous year. In fact, this achievement has been driven by strong performance of our hospital business. We reported a consolidated top-line figure of INR 1,859 crores, a growth of 12.2% over Q1 of financial year 2024.
Noticeably, our hospital business revenues have grown 14.4% to INR 1,549 crores, while the diagnostic business revenues stayed on par with previous year at INR 343 crores. Our consolidated operating EBITDA saw an uptick of 25.5%, reaching INR 343 crores, yielding a margin of 18.4% versus 16.5% in Q1 of financial year 2024. The hospital business operating EBITDA was INR 287 crores, resulting in improvement in margins by a strong 330 basis points, from 15.2% in Q1 of financial year 2024 to 18.5% in Q1 of financial year 2025.
The hospital business EBITDA now accounts for 84% of total consolidated EBITDA, up from 75% in Q1 of financial year 2024, indicating strong, profitable growth in this segment. In eight of our facilities, we have recorded operating EBITDA margin above 20% during the first quarter. These eight facilities contributed 69% of the hospital revenue, compared to 62% in financial year 2024. Operating EBITDA margin in the diagnostic business basis gross revenues were at 16.1%, which was 19.4% in Q1 of financial year 2024. The operating margins were 18.7% after factoring the impact of one-offs related primarily to the rebranding exercise undertaken by Agilus for the brand change and the provisions pertaining to certain government business.
On a like-for-like basis, the adjusted operating margins were 20.8% in Q1 of financial year 2024 and 15.9% in Q4 of financial year 2024. Our consolidated reported profit after tax for the quarter increased 40.4% to INR 174 crores. Coming to the balance sheet side, we remain quite healthy, with a net debt to EBITDA of 0.22x as on June 30, 2024, as against 0.35x on June 30, 2023. This is Q1 annualized EBITDA. Our net debt stands at INR 308 crores as on June 30, 2024. Generally, Q1 is a relatively softer quarter. However, our hospital occupancy improved to 67%, compared to 64% in Q1 of financial year 2024.
This translates into occupied beds increasing by 4.6% to 2,715, compared to 2,595 in Q1 of financial year 2024. Our hospital business saw a 9.7% increase in ARPOB, reaching INR 2.41 crores per annum. This growth was largely fueled by revenue gains in our key specialty areas—oncology, neurosurgery, cardiac sciences, orthopedics, gastroenterology, and renal sciences collectively. These specialties achieved a 15.7% year-on-year growth and contributed 63% of the total hospital revenues, which is on the similar lines as Q1 of financial year 2024. Specifically, growth in neurosciences at 23% and oncology at 22% was quite encouraging.
This is also reflected in the number of procedures performed in neurosciences that reported a growth of 23% compared to the corresponding previous period, while the number of robotic surgeries performed increased by a strong 59% compared to Q1 of financial year 2024. Our revenues from medical travel grew 11% compared to Quarter 1 of Financial Year 2024, to reach INR 127 crore. Revenue contribution of internal, international business stood at approximately 8% in Q1 of Financial Year 2025, similar to Q1 of Financial Year 2024. Most of our key facilities performed well during the quarter, with revenues from Mulund, Anandapur, BG Road, Shalimar Bagh, and Amritsar each growing in excess of 20% compared to the corresponding previous period.
During the quarter, we further strengthened our medical talent with onboarding of specialists in the area of cardiac sciences, neurology, orthopedics, obstetrics and gynecology, and ophthalmology. I'm excited to share that our commitment towards augmenting our medical programs has made notable strides in advancing our strategic growth initiatives, marked by brownfield bed expansion and continuous investment in the state-of-the-art medical equipment. Recently, Fortis Nagarbhavi, that was previously a 50-bedded facility, expanded to 80-bed multi-specialty tertiary care facility in a significant upgrade that included introduction of 24/7 emergency and trauma care, ICU, and critical care. I am pleased to announce that FMRI Gurgaon introduced South Asia's first Gamma Knife Esprit radiosurgery equipment for neurosurgical treatment that employs non-surgical, computer-guided precision to target brain tumors, both malignant and benign.
We are progressing well on our brownfield expansion plan for this year and will be adding capacities across our key facilities, including Faridabad, Anandapur, Shalimar Bagh, and Noida. In addition, we expect the 350-bed Manesar facility that we acquired in financial year 2024 to be operational in the ongoing quarter. I would like to touch upon our continued efforts and the resulting success of our digitization efforts as well. We have successfully implemented electronic medical records for OP modules across six of our units now, while the application and deployment of IP module is underway. Revenues from digital channels continue to demonstrate robust growth. Revenues from website, mobile applications, and digital campaigns witnessed a 52% year-over-year growth and 17% quarter-on-quarter growth in Q1 of financial year 2025.
Revenues from digital channels contributed almost 30% to overall hospital revenues versus 23% in Q1 of financial year 2024. On our diagnostic side, the business reported gross revenues of INR 343.5 crore, versus INR 342.7 crore in Q1 of financial year 2024, and INR 338.4 crore in Q4 of financial year 2024. Our operating EBITDA margins versus gross revenues were at 16.1%, compared to 19.4% in Q1 of financial year 2024. Operating EBITDA margins versus gross revenue in Q1 financial year 2025 were better than the trailing quarter margins of 14%, primarily driven by cost optimization initiatives, including, amongst others, improved network efficiency and reduction in manpower costs.
Continuing with our network expansion strategy, primarily the addition of new customer touchpoints, total CTPs as on 30th June 2024 stood at 4,055. The preventive portfolio revenue in Agilus overall revenues grew 13% in Q1 financial year 2025, and contributed 12% to the operating revenues versus 10% in the Q1 of financial year 2024. The diagnostic business performance is still adjusting to the impact of Agilus rebranding exercise, which involved extensive rebranding efforts and associated marketing costs. Additionally, certain provisions related to government business have also affected the performance. That said, I'm confident in Agilus' potential to scale up both in terms of its revenue and margins based on its considerable network presence, a balanced B2C, B2B mix— and the increased focus on preventive care and specialized testing.
To also add, I do believe that the Agilus brand is being well accepted and gaining recognition, which would place the company in a better position to further scale up performance. With this, I'll conclude my comments. I think it's been a healthy start for the first quarter of 2025. We are making significant progress on the growth at all possible fronts. We will also continue to explore and assess various growth opportunities that align with our cluster strategies and offer promising synergies. I believe these initiatives will further enhance our growth potential and strengthen our position in the healthcare sector. Thank you, and I will hand over now to Mr. Anand for his comments on the diagnostic business now.
Thank you, Dr. Raghuvanshi. A very good morning and good afternoon to everyone on the call. Thank you for joining us today. On behalf of Agilus Diagnostics, I warmly welcome you all to our Q1 FY25 results conference call. Agilus Diagnostics reported a revenue of INR 343.5 crores in Q1 of FY25, compared to INR 342.7 crores in Q1 of FY24. Q4 of FY24, revenues stood at INR 338.4 crores. During this quarter, Agilus conducted 9.92 million tests, compared to 9.95 million tests in Q1 of FY24, and 9.61 million tests in Q4 of FY24. Operating EBITDA for the quarter stands at INR 55 crores, compared to INR 60 crores in Q1 of FY24, and INR 47 crores in Q4 of FY24.
Operating EBITDA before one-off expenses is INR 64 crores, compared to INR 71 crores in Q1 of FY 2024, and INR 54 crores in Q4 of FY 2024 of the previous quarter. During the quarter, we incurred one-time expenses of around INR 9 crores, primarily in relation to Agilus rebranding and the provisioning pertaining to certain government contracts. Our average realization per test for Q1 of FY 2025 is INR 340, and per-patient revenue is INR 845. The business continues to benefit from a well-diversified geographical mix, with no overdependence on any particular region, allowing us to capitalize on our pan-India network optimally. Regional revenue contributions are 32% for north, 21% from west, 30% from south, and 14% from east, and 3% from international markets. Our B2C, B2B ratio is currently at 54:46.
Our wellness portfolio increased by 13% in Q1 of FY 2025, compared to Q1 of FY 2024, and 3% compared to Q4 of FY 2024. Our genomics portfolio also showed strong growth in Q1 of FY 2025, with 12% growth compared to the previous year and 13% growth compared to the previous quarter. From a product standpoint, revenue contributions are 34% from specialized testing, 54% from routine tests, and 12% from our wellness portfolio. During this quarter, we expanded our network by adding over 185 new centers and three hospital labs. Post a successful brand transition in the previous year, we are sustaining our brand awareness campaigns through digital platforms and various other ATL models.
We aim to enhance our reach within the medical community through a range of initiatives, including continuing medical education programs, sponsored events, in-clinic visual merchandise, and scientific papers. Continuing our partnership with the Indian Olympic Association, Agilus Diagnostics is the official lab partner for the ongoing Paris Olympics 2024. On the clinical side, we continue to invest in new tests and technologies with a special focus on genomics. We are witnessing consistent, healthy growth in this segment, and one of our goals is to continually build on this portfolio. As an organization, we are consolidating to boost efficiency, strategically focusing on key cities to establish leadership, and enhancing the customer experience to build loyalty to the new brand. Thank you, and over to you, Anurag.
Thank you, Anand. Ladies and gentlemen, we should now open the floor for questions and answers. May I request the moderator to begin, please?
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Hardik Doshi from White Whale Partners. Please go ahead.
Yeah, thanks for taking my question. You know, if I see your presentation, our, you know, overall occupancy on a sequential basis has improved from 66% to 67%. Our, our ARPOB also on a sequential basis has improved quite heavily. But even then, you know, when I look at the operating EBITDA margins, they're down from 22.4% to 18.5%. I understand there was some one-offs in Q4, but even adjusted for that, I think Q4 margins were 21%. It's still a pretty meaningful decline. So any kind of one-offs in Q1 or any investments that we made, what is the reason for this decline in margins?
Yeah, if I can take this question, Vivek this side. Yeah, you are absolutely right. There are certain one-off in the quarter four, and if you adjust that one-off, it is around 21% EBITDA margin. So there are a couple of reasons for the drop in the EBITDA margin. One is, of course, there is certain one-off in the current quarter also. So there is around 0.5% EBITDA improvement, I'm talking hospital business alone. Which is 0.5% cost has been absorbed in this 18.5, which is non-operational in nature. One of the costs is we have to increase the price capital for converting some of our debt in one of our subsidiary companies. And then there is certain GST related liability on some corporate guarantee earlier company has given.
And there is a higher provision for bad and doubtful debt because of the lower collection in the first quarter. Typically, first quarter, the collection is lower, and as we will, the provision for doubt, bad and doubtful debt goes up. So this take care of 0.6% of the EBITDA margin thing. So the balance 2% EBITDA margin drop is attributed mainly to, you know, the payer, sorry, specialty mix. In this quarter, as Dr. Raghuvanshi mentioned earlier, there is a higher share of ortho and onco, and the surgical mix has also gone up, where, you know, the EBITDA margin, gross contribution margin is lower, and the doctor share is generally on the higher side. So these are the main reason for, you know, the EBITDA drop.
Okay. So then how does this, you know, kind of change your outlook for the full year margins that you had guided to?
So first quarter, we, we have targeted around 19% EBITDA margin, and we are around that level. So we are well on track, for our EBITDA margin improvement guidance, which we have given earlier.
Okay, understood. The second question is, as I look at your hospital margin matrix, you know, the, for full year FY 2024, I think there were 5 hospitals that were less than 10% margin, which account for 8% of revenues, but now that is 7 hospitals now, accounting for 10.5%. So which were these two kind of facilities where margins might have kind of fallen? And again, is this transitory or, I mean, are there any issues that you're facing here?
So we know specific hospital where, you know, so, one is of course the FEHI hospital, where, this quarter, the EBITDA margin is lower than the previous quarter, and that has fallen to the lower category. And, another hospital, which is in this category actually, is CG Road, which is a smaller hospital in, in Bangalore. And there again, you know, because these are the hearts, mainly heart related stores. And, first quarter generally in, include, you know, the increment related cost, and these hospitals are unable to pass on those costs to the, to the, in terms of price increase. And that is the reason this, the EBITDA margin is lower in these two quarter, these two hospitals.
But we are taking other initiatives which, through which we'll be able to bounce it, both these hospitals back. Other hospital has performed relatively okay.
Okay. And then just moving on to Agilus, you know, I think we had gotten an extension from our private equity players, where maybe I think August was the deadline to kind of come up with some kind of resolution or they had the put option. Any update in terms of the IPO plans or, a, a sale or anything to provide an update there?
Yeah. So, you are right. There was a deadline type of date of thirteenth August. So we have already started the process of, you know, going right as per agreement, because IPO process not looking like, you know, we will be able to start immediately. And, in that backdrop, we have started, we have appointed one valuer for doing the put option valuation as per the agreement. And, we got the valuation now. And, I think, we are at the final stage of getting the maybe notice from the private equity investor for exercising the put. So we are at that venture, at present.
And so then, you know, once you've gotten the input from the valuer, I mean, what would be the kind, you know, the cash that we have to sell out to buy out the stake?
Yeah. So valuation of 31% stake of private equity is coming around INR 1,780 crore as per this independent valuer. So we will be, we have committed the facilities available to fund this type of acquisition. So from the funding perspective, it will not be a challenge. From the leverage perspective also, we are still very comfortable position. Our debt to EBITDA will be around 1.5 times, so for taking this additional debt to this put option. And we will continue to do our CapEx as per our original plan, and we will continue to look for new acquisition opportunities as per our original plan. So this will not hamper our growth prospect in the hospital business.
This put option, we feel this is the, maybe the right approach right now, you know, so acquire this stake and then work on Agilus to improve the profitability of Agilus, and look at, you know, the other alternative for Agilus maybe at a future point of time.
Okay, thanks. Thanks so much.
Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Thank you so much. But what will be the timeline for completion of the, you know, acquisition of the PE's stake in Agilus? Would this, you know, would this be done this year, or this could require some approvals, et cetera?
Yeah. So, Neha, the timeline, as I mentioned, by 13th of this, we are expecting put option notice from the PE investor. Post serving of the notice, there is a 65-day time so that, during this period, we will be seeking shareholder approval because, we are, we may be raising, debt in the form of FPI, which is listed debt, so there will be requirement to take the shareholder approval for that. And plus some sort of, SPA we have to enter with the private equity investor, share purchase agreement, basically. So those, for that also we'll be requiring shareholder approval. There will be maybe—w e are checking with our lawyer, there may be requirement of, you know, CCI approval also for, for acquiring this stake, so that we will be checking.
Understood.
All those formalities need to be completed within the 60 days period.
Okay. And the remaining stake in Agilus, you know, what about that?
So there is no immediate plan for that remaining stake. That will remain like, you know, they will remain, the other shareholder will remain like a minority shareholder there. We will hold around 88% plus shareholding in Agilus.
Got it. And, you know, just continuing on Agilus, you know, I know we've been commenting on growth trends improving, but we aren't really seeing anything, or at least on the volume side, in terms of growth coming back. You know, what gives us the confidence of growth? When should we start seeing that in numbers? And, you know, what are the internal guidelines when we think about revenue growth of this business? Historically, we have indicated in line with industry, but when do we eventually get there?
So, Neha, this is Anand here. So we have, you know, during, after the brand transition, we have seen some, you know, degrowth in some segments, especially those segments, you know, customer, revenues, the B2C segment. So those segments we are now, catching up after we have started spending on the brand. And, you know, we have started, doing the process of rebranding from the middle of previous year. So from that, as you have seen, you know, whatever the, you know, degrowth we had in those segments, they're all coming back to normal. So we are expecting that through this year we will be able to consolidate and, get back on track in terms of our growth, expectations.
Sorry, sir, I missed the last part. You said consolidate this year end?
We expect to be back on track in terms of growth expectations.
So probably get to industry growth next year?
Yes.
Okay, got it. And last on the, you know, on the litigation, High Court litigation, I think the, we had the hearing last month. Any incremental update post the hearing?
Yeah. No, the hearing, I think, has been completed as far as the banks, corpus, et cetera, are concerned. We believe that the next hearing is due, which, where the Religare would be heard. That, I now believe, is the last party to be heard. So I would say that it appears that that, at least, hearings are likely to conclude very soon.
Okay, got it. Thank you so much, sir.
Thank you. The next question is from the line of Amey from JM Financial. Please go ahead.
Yeah, thank you for taking my question. So, I have first question on the Agilus. So, there has been underperformance from this segment for last few quarters. So, is this underperformance across the region, or do you see that any specific region where the decline has been substantial, which is dragging down the overall performance?
So we did the brand change around end of fourth quarter last year, so the maximum impact will be seen in this particular quarter. But as we saw that, you know, the trailing quarters, the Q2, Q3, and Q4 of last year also were impacted by this brand change, and we will see some drop in the business. And as I told earlier, the drop has been primarily on the B2C side of the business, which is directly impacted by the brand change. And those segments, we are now, you know, getting them back on track, since we have started spending more on the brand and also creating more brand awareness through various activities. So that's how we are bringing it back on track.
When we see the B2C business, I believe it will be still a prescription generation for the diagnostic test to be still through doctors, right? So it is basically doctors who might not be aware about the new brand name, basically. So the activity would be basically our field force going to the doctors and to making them aware, right, about the new brand. Is it how it will work, or what else would we need to understand on this?
So in our, in our B2C business, about 60% is driven by doctors, 40% is driven by self-prescription, so the patients come by themselves. So the prescription part is not difficult because all the doctors are now aware of this change, and that is not an issue. The issue is more about patients who are walking into our centers. So as you know, it's mostly these diagnostic tests are out of pocket, and, you know, they're not. Even though the doctors direct them, mostly the patients have their own choice as well, in terms of where they go. So that's where, you know, we have been impacted to some extent in that business. So that we are bringing it back on time.
Sure. So, second question I have in the hospitals, where we are seeing a good sequential growth for FMRI, FMRI and Mohali. If you can highlight, what are the drivers for this, growth for these two hospitals and the outlook for these two hospitals for the full year.
Yeah. So, there are growth in these hospitals. Mohali, we have added around 30 beds last year. So those beds we were able to fill, and, you know, there is some growth in this ortho business also there. And same, so their occupancy level has gone up, basically, with the nine-bed capacity. And, in FMRI, actually, we are full in terms of occupancy. We are operating at 75%+ occupancy in FMRI, and we have added certain new clinical talent, especially in ortho side. Sorry,
Onco.
Onco and—
Onco and cardiac.
Cardiac science. So that has led to, you know, filling up the bed faster. So this hospital is now operating at 75% plus occupancy level, and we are trying to expedite our expansion program to the extent possible, so that we may accommodate more patients there. So this is the—these are the two main reasons for higher profitability in this.
Sure. So Mohali might see continuous increase, basically, but, FMRI, till the expansion, the increase will be driven by largely the placements and the, pricing, basically. Because also—
So there are two-
Got you.
Yeah, there are two phases of expansion in FMRI, which is one is the brownfield expansion, which we have been talking about for quite some time. So there, the physical construction is actually happening, and the civil part should be over by the end of this year, and then in next six months, we should commission those beds. So obviously that will give the major flip. But in the interim, within the existing structure, we are adding few beds. So we will be getting about 21 beds in the interim, which we should hopefully get by the month of November. So that would be another kicker as well.
Sure, sure. And the last question I have is in general, basically, when the hospital chain is as large as Fortis, with more than 35 hospitals in the portfolio, there will be some or other assets where the patient satisfaction can increase because of several issues, like the pricing or things not going well. So how does the management at the top would be keeping aware of these things, and what steps one can take to correct any course in such facilities? And in terms of our experience, have we experienced such things, and what steps we have taken and how have been the outcome? Thank you.
Yes. The, you know, like any other consumer industry which is spread across multiple locations in the service industry, we would definitely be having the situations where there would be either complaints in the service or there could be, you know, issues regarding the billing, et cetera, as you mentioned. So we have a very robust system in place. There are two things which we monitor, which is the NPS, which we monitor on a regular basis, which is given by the patients once they are discharged from the hospital. That gives us a general pulse of what is happening around this network. But we also have an internal system of monitoring events wherever there is any grievance in a hospital, et cetera.
And there are many times when the patients directly connect with the corporate patient experience team, and sometimes directly with our officials, including me. So, that's how it gets addressed. So there is a mechanism at the unit level, and then there is a mechanism at the corporate level to deal with these kind of issues and problems, so that we can address them with some speed.
Are there any benchmarks set in terms of every operational aspect of the hospital, let's say, cleaning or, let's say, outcome of some cases, et cetera? Are there any benchmarks set so that hospitals are so that the service is at par across the hospitals basically?
Yeah. So as clinical governance is concerned, we have a very robust mechanism. Every hospital is NABH accredited, and because of that, there are certain parameters of outcomes which have to be reported. So we collect those. And our central medical services and operations group has a separate quality division, which looks at those. We also have additionally started reporting some of the outcomes in major cardiac procedures, et cetera, which would be available on our website. But we are in the process of sort of making this system even more robust.
So that we can do an open reporting to which the patients have access as well in terms of outcome. As far as the infrastructure related monitoring is concerned of say the cleanliness, security level, and all other aspects, for that we have a separate internal mechanism by which we monitor. So we have a central team which does an audit every quarter of each and every unit.
Sure, sir. Thank you. That was quite elaborative. Thank you so much. I really enjoyed that.
Thank you. The next question is from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Hi, good morning. I had a doubt on the, Agilus's, EBITDA margin numbers. The reported EBITDA is INR 55 crore, and in your footnotes, you have mentioned that you have taken a INR 19 crore write-off related to Mohalla Clinic. So if I add that, it becomes INR 74 crore EBITDA, but still you say that, excluding one-off, the EBITDA was only INR 64 crore. What am I missing here?
No, operating, you know, operating EBITDA for the diagnostic business is INR 64 crore after accounting for that INR 8.8 crore. So you add that back, then it becomes an operating EBITDA, about 18.7%, which is where it's like 16 of our presentation.
No, no, that's-
8 point is primarily rebranding expenses and some other additional provisions for write-off of the Mohalla Clinic business.
Sorry, sorry. I think you didn't get my question. In the footnotes to your financial statements, it is said that in this quarter, INR 19 crore of write-off was taken related to Mohalla Clinics. Am I correct there?
No, the INR 19 crore is the total provision till date of Mohalla Clinics since the beginning. For this quarter, we had taken around 2.5 crore of provision for the Mohalla Clinics.
Okay, understood. Understood. I think the wording is a little confusing there. Okay, got it. Thank you.
Thank you. The next question is from the line of Nancy Yadav from Allegro Capital Advisors. Please go ahead.
Hi, sir. Thank you for taking my question. Could you please shed some light on the Ind AS 116 impact on our numbers for this quarter?
Do you have, Mangesh? Hospital. There is hardly any Ind AS impact on the hospital business. Mangesh is just putting out, you know, the numbers for the diagnostic business.
Sorry, sir, I didn't get you.
So what I'm saying, in hospital business, there is hardly any impact on the of the 116, Ind AS 116. Diagnostic business, we have certain reimbursement. For that, Mangesh is just telling the numbers. Just wait for it.
Okay. Sure.
Or we can send you separately if it is okay with you.
Nancy, we can share offline those numbers with you related to the diagnostic business.
Okay, sure. Thank you.
Nancy Yadav, does that answer your question? Hello?
Yeah, yeah, yeah. Yeah, we will, we will, connect offline and give the information, so you can move to the next person.
Thank you. The next question is from the line of Saurabh Kapadia from Sundaram Mutual Fund. Please go ahead.
Yeah, thanks for the opportunity. If you look at the payer mix, you know, there has been increase in the CGHS patient, both CGHS and ECHS. So how should we look at the, you know, mix of, the CGHS patient, going ahead with the, you know, new, beds, getting added for next, you know, six to nine months?
Yeah. So there is a little bit increase in the payer mix in some of our hospitals, and as a result, overall, there is an increase in the scheme business. Although we have targeted a slight reduction in the scheme business. So we are working on this particular metrics, and hopefully we will be able to correct it in the coming quarter, and that should lead to some improvement in the profitability margins.
Okay, but, new bed addition will not lead to higher scheme patients?
Yeah, so new bed addition is coming in Faridabad and Manesar also. So there, of course, there will be some impact, but wherever possible, like in NCR, most of our hospitals, we are operating at a different occupancy level, so there we may be, we try to correct this matrix a little bit more better.
Okay, got it. And, do you see any impact on the international patients, because of the Bangladesh situation?
There is some impact because of the recent development in Bangladesh as well as, you know, Israel and other countries, so fight is going on. But I think the impact may not be material, looking at our patient flow from these countries.
Okay, got it. Thank you.
Thank you. A reminder to all the participants that you may press Star and One to ask a question. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity. So my first question is with regards to the Manesar operating cost. So the 18% margin, what you have in the hospital business, does that also? Was there an impact of, you know, the clinical talent cost and other overheads of the Manesar facility, or you are currently capitalizing that cost?
So the Manesar has yet to be operationalized. So till operationalization, whatever expenditure we are incurring, whether it is, you know, the administrative cost, administrative staff, plus some clinical talent we have added. So that cost is right now getting capitalized. But, as Dr. Raghuvanshi said, we are in the final stage of opening that hospital, so that it will be coming as a loss to the business.
Sure. And with that operation cost, you're guiding for close to 19% margin for the full year.
Not really. Not, we are, we are still talking about consolidated margin of the hospital business?
Yes. Yes, sir.
Yes, yes. Consolidated margin for the full hospital business, we have guided 20%+ EBITDA margin, and we are well on track of that, sir. So—
Okay. Okay, understood. Okay. So my second question was, pertaining to the promotion or the marketing on the rebranding side of Agilus. So, I mean, how should we see this cost, you know, in this particular fiscal? Because I think compared to last year, it's gone up a bit, but for the full year, you know, any color on how the margins either on Agilus, Agilus would look like?
We have, we have planned to spend around INR 50 crore this year for the rebranding expenses. That will be the one-off cost for this year. Apart from that, you know, we'll be doing our regular other marketing and other regular activities as well.
Okay, sir. Thank you.
Thank you. The next question is from the line of Adrit Chaturvedi from Nomura India. Please go ahead.
Hello.
Yes. Yes, please.
Yeah, I would just like to understand the revenue mix on Agilus. So you said roughly flat. So I believe the tests per patient are sort of rising, so less patients are coming, we're just selling more tests to them. And when I view that, in the revenue mix where wellness testing, that's essentially bundled, that's gone up 2% share. And I believe that that's translating to a lesser realization per test, because you're charging lesser for the individual test in the bundle than you would if you would sell them separately. So, since there is a sort of a drive to increase wellness share, shall we come to expect that as you grow this product mix, realizations per test would sort of not increase? Or would you look to offset that by more specialized testing?
No, actually, see, what is happening is currently, when we want to promote directly to patients, so we offer wellness as a, as a source of, you know, promoting directly to the patients. When we do that, we also offer additional discounts. So during these, times, we offer, we do some campaigns. In the last quarter, actually this quarter, we are doing some campaigns, around, you know, discounted packages. So naturally, that's having an impact. But you know, those discounts will be, you know, not be available always, so that will not happen in the overall, as we move forward on the, you know, on your, average realization per test.
Okay. So, like, the targeted increase will not have an impact. And so the specialized bit, so we've not been able to increase a lot of the share there. However, that is a priority. So could we come to expect that as wellness share increases and you reduce the discounts there and the any ancillary products and specialized keeps increasing, could there be like a, like, a guidance on how realizations per test would move? Because you're suggesting that they would significantly improve.
Yes. Yes, if you see, even on the specialized side, we are focused on next generation diagnostics. We are seeing in genomic portfolio, we are seeing a higher growth rate. So that is also we are focusing on. That will also help us build, you know, as we have, as we tie up with more hospitals, more specialists, as we work with oncologists and all the new specialties, our contribution from this part of the revenue will also go up.
So, so very quickly on that, so I believe most of the specialized is going to be driven by the pickup business, the B2 B business, going forward.
Specialized tests are usually driven by hospitals and, you know, other segments that also speaks to us. So it is. It will be a pickup business, yes.
Okay. And just on the hospital business, so you've seen even a sequential increase in occupied beds and occupancy both, and generally Q4 is very strong for occupancies. And it was also earlier, like, referenced in the call that the institutional share has sort of increased. So I believe that a lot of the footfall has actually come on the institutional bedside. So I'm just wondering that this kind of a strategy that to drive up occupancies and then to drive up these OBDs, you sort of increase the institutional bed share. How is that going to affect EBITDA per bed? Because realizations are going to be lower and margins are going to be lower. So, is that a decent strategy when you have two options, where you can increase occupancy?
A nd sort of have a lower EBITDA per bed, or you can just keep occupancies lower and have a higher EBITDA per bed. Is there like a strategic direction there?
So if I can answer this question differently, you know, first of all, the payer mix has not deteriorated that much. If you see the, it is almost like flat, there is little bit increase in the, in the, scheme business by 0.5%. And that is true when you know you are having, expansion drive, like, you know, brownfield expansion. As you know, we are having lot of brownfield expansion. And on the marginal, profitability point of view, this incremental, occupancy, even if it is coming from the government payer, it is giving us a different EBITDA margin because our fixed cost is fixed, so it is, fixed cost is a person on the higher base.
Having said that, our endeavor is to reduce this government payers to that thing possible as I mentioned. It is hospital-specific strategy. Wherever we are having higher occupancy and we are facing challenge of, you know, filling the beds, we try to optimize there. But where we have a lower occupancy, there, our endeavor is to fill the bed first and then, you know, look for this payer mix thing. I hope I will answer your question.
Yeah, yes. I, so yeah, that's what I was trying to understand. That in your lower occupancy clusters or hospitals, EBITDA per bed is not really a priority, it's, it's more of like growth and revenue. And-
Yeah.
And then your higher hospitals, you're sort of driving EBITDA per bed. Thanks. Thanks a lot.
Yeah.
Thank you.
Yeah. Great.
Thank you. The next question is from the line of Prashant Nair from Ambit Capital. Please go ahead.
Yeah. Hi, so my first question is on the Manesar project. Can you, you know, how— I mean, how many beds will you be operationalizing at the start? And can you just outline how this could evolve over the next two to three years? By when do you see maximum beds being operationalized here?
So Manesar, the facilities have a total capacity of around 350 beds. So we will be initially operationalizing around 100 beds, and once we reach a particular occupancy level, when they were at, say, 60-65% occupancy level, then we open up, you know, the balance beds. So it will be gradual, and in our estimate, it will, you know, if the thing goes as per our plan, we will open, able to operationalize all 350 beds in a, say, 18 months period of time from now.
All right. And, second question, again, related to Manesar. So from a pricing perspective or from an ARPO perspective, I mean, how can we benchmark this with, say, your FMRI? How much lower could it be versus that hospital, when it starts? And then over a period of time, will it narrow or will it remain a slightly lower, ARPO hospital compared to FMRI?
Yeah. So FMRI is a very, rather flexible and a premium hospital, where, you know, we are not having any scheme in there, lot of international patients are there. And the type of work we are doing there in terms of, you know, the clinical work we are doing, that is a high-end work. So with that, I think the ARPO for FMRI is the highest in our network, actually. So we are not expecting that type of ARPO. The ARPO will be maybe 25-30% lower than FMRI.
Okay. And this is when it starts, at the time of a commissioning or is it more it will grow to over a period of time, that 25-30%?
Yeah, this is at the start we are saying, and we will see how things pan out, and then accordingly we'll take a call on this.
Okay. All right. That's it. Thank you.
Thank you.
Thank you. The next question is from the line of Anshita Jain from Nuvama Institutional Equities. Please go ahead.
Hi. Good day, everyone. My first question is on the diagnostic business. So have you taken any price hikes in the diagnostic business in the last 6-8 months? And what's the impact of it, if you have taken any?
So in fact, we have taken a small price increase in, around the end of Q4 of last year. That's only on the B2C business, on the walk-in business. And also only in some of the segments that we have taken. So overall, the impact is not very significant as we also do some discounting on that business at this point of time for brand promotion. So as such, if you see overall compared to Q4, we have an improved performance in Q1.
Okay. Thank you. And second, my second question is on the hospital margin matrix. So now, we have 7 hospitals which are below 10% margin mark. Which are these hospitals, and do we have plans to divest any of these? Also, you talked about some other initiatives to turn around these facilities. So could you please elaborate on the same?
Yeah. So these metrics we are sharing for quite some time. So there are usual candidate here. One is FEHI, Jaipur and Vashi. These are the three big hospitals which are part of this bucket. And we have, we are taking all our making a lot of efforts to improve this. FEHI, I have made a comment earlier because of, you know, the annual increment thing, they are not able to absorb and w e are working on the cost side of FEHI, and you know, also improving, you know, the, the revenue mix there. Because right now it is majorly a cardiac, center, so we are trying to add, other facilities. We are adding clinical talent and other, you know, the things there.
We are working on the infrastructure improvement also there. We are at, we are spending a lot of money on the CapEx on this hospital. So hopefully the things will improve in FEHI with the, all these efforts. This quarter, it has come down from 10% EBITDA margin, last, it able to achieve last quarter. Jaipur, there are other issues which are, we are grappling with. There is—a nd as a result, the revenue has also fallen and EBITDA margin has actually turned and gone into negative territory. Vashi is grappling with the competition around that area, and the state of the facility is not that great.
And we are taking a lot of effort, but Vashi, as we said in the earlier call also, we are not able to crack anything there right now, and we are working to improve margins through increasing the occupancy by whatever means we can increase through the marketing initiatives and things like that. We have added one more hospital here in Ludhiana, too, which is a new hospital we have added six months back, so it is early days for this hospital. Although I must admit, this hospital has not performed the way we wanted to perform in the six months, but we are working on this.
Thank you. This is helpful.
Thank you. The next question is from the line of Atul, an individual investor. Please go ahead.
Hello. Good afternoon and good morning. My question is, what has been the occupancy levels so far, since August? July is already passed, and we are like seventh day of August. So if you can answer that.
Yeah, we will not be able to give you a specific number because it is price sensitive, but, directionally we are moving the best, it is better than, you know, the last quarter.
Okay. And any active inorganic opportunities, which are in pipeline?
There are a lot of opportunities we are exploring right now, but these things have not reached a stage which we can disclose. So we are working on that, and as and when we reach a particular stage, we will definitely come back to the market.
Since all the hearings in the courts are done, like, you know, are you anticipating the legal costs to come down in the next, you know, quarter?
Not really, because these are just a hearing is completed. I don't know what will be the reaction of Daiichi, whether they will appeal in the higher court and things like that. So as things, you know, and we have not come out from the woods completely, we are yet to receive the order. So all those things will determine the legal cost. So my estimate is legal cost will continue to be high in this year, and this has already been budgeted and accounted for when I giving various guidance on the EBITDA margin front.
Okay. Thank you. Thank you. Appreciate it.
Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of our question-and-answer session. I would now like to hand the conference over to Mr. Anurag Kalra for closing comments.
Thank you, ladies and gentlemen. Thank you very much for taking the time to join us today. In case there are further clarifications or questions, my colleague, Amit, and I are available to address those either telephonically or by email. Thank you very much once again, and have a good day.
Thank you. On behalf of Fortis Healthcare, that concludes this conference. Thank you for joining us. You can now disconnect your lines.