Ladies and gentlemen, good day, and welcome to the Q2 FY23 post-results conference call of Fortis Healthcare Limited. As a reminder, all participant lines will be in the listen-only mode. 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 and then zero on your touchtone telephone. 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, Mr. Kalra.
Thank you, Inba. A very good afternoon, good morning, ladies and gentlemen, and thank you for taking the time to be with us on our Q2 FY 2023 earnings call. The call is being led by our MD and CEO, Dr. Ashutosh Raghuvanshi. With him we have our Chief Financial Officer, Mr. Vivek Goyal. From SRL, Mr. Anand, who is the CEO there, and Mangesh Shirodkar, the CFO of SRL. Along with me, I also have Gaurav. I hope all of you have got a chance to go through the results deck and the press release that we have circulated on Friday evening. We will begin with some opening comments by Dr. Raghuvanshi, following which Anand will take you through certain key highlights of the diagnostics business and then we can open the floor for question and answers. I now hand over to Dr.
Thank you.
Thank you, Anurag. Good morning and good afternoon, everyone. Thank you for joining us on our Q2 financial year 2023 earnings call. I hope all of you have had a great time with your family and friends during the festival season. I would like to straightaway talk on the performance of company for the quarter, and then Anand will take you through the highlights for the diagnostics business. We have witnessed a strong set of earnings for the quarter. Our consolidated revenues have increased 10% versus Q2 of financial year 2022 to INR 1,607 crores. I'm very pleased with the way our hospital business has performed. Our hospital business revenue has grown 18% versus Q2 of financial year 2022, and 9% versus Q1 of financial year 2023.
Our diagnostic business, on the other hand, witnessed a revenue decline versus Q2 of financial year 2022, which was primarily on account of the significantly lower COVID contribution. However, it is pertinent to note that compared to the trailing quarter, the business witnessed a 6% revenue growth, reflecting early but encouraging signs of pick up post the COVID impact seen previously. Just to recall, the diagnostics business had an approximately 22% revenue contribution from COVID and COVID-aligned tests in Q2 of financial year 2022, which stood at a mere 5% in Q2 of financial year 2023. If we adjust the COVID revenues on a like-to-like basis, the diagnostics business revenue actually grew 5.3% versus Q2 of financial year 2022.
On the profitability metrics, our hospital business EBITDA stands at INR 246 crores, an increase of 30% and reflecting margins of 18.9% versus 17.2% in Q2 of financial year 2022, and 17.4% in the Q1 of financial year 2023. The improvement in margins has been led by healthy performance of all the key hospital operating metrics, which I shall speak of in a while. On the diagnostics segment, commensurate with the decline in COVID and COVID-aligned revenues, EBITDA for the quarter stood at INR 73 crores versus INR 103 crores in Q2 of financial year 2022. However, EBITDA was higher versus INR 64 crores in the trailing quarter.
This reflects margins versus gross revenue at 20.7% for the quarter versus 25.7% in Q2 of financial year 2022, and better than margins of 19.3% in Q1 of financial year 2023. Combining both the hospitals and the diagnostics business, our consolidated EBITDA for the quarter was INR 319 crores compared to INR 292 crores in Q2 of financial year 2022 and INR 272 crores in Q1 of financial year 2023. Consolidated EBITDA margin was at 19.8% versus 20% in Q2 of financial year 2022, and better than 18.2% in Q1 of financial year 2023. To highlight the contribution of hospital EBITDA, increased to 77% in Q2 of financial year 2023 versus 65% in Q2 of financial year 2022.
This significant size, the momentum in our hospital business earnings enabling us to maintain our consolidated margins despite the impact in diagnostic business as a result of lower COVID volumes. At the PAT level, we reported a profit after tax prior to exceptional items of INR 167 crores compared to INR 130 crores in Q2 of financial year 2022.
This is a 28% growth versus the corresponding quarter and 24% growth versus Q1 of financial year 2023. I would like to mention there was an exceptional gain of INR 15.6 crores, which pertains to reversal of impairment in one of our associate companies. Let me also briefly touch on the consolidated H1 financial year 2023 financial numbers of the company.
For H1, our consolidated revenue stood at INR 3,095 crores, a growth of 8% over the corresponding previous period. EBITDA for the quarter was INR 590 crores versus INR 575 crores for H1 of financial year 2022, translating into a margin of 19.1% versus 20% in the corresponding previous period. PAT, excluding exceptional items for the period, stood at INR 301 crore versus INR 255 crores for the H1 of financial year 2022, at a growth of 18%. On the qualitative aspect of the hospital business, we have made significant progress on all fronts.
With a strong demand for elective procedures, our surgical revenue contribution to overall revenue was at 59% compared to 56% in Q2 of financial year 2022, led by a better specialty mix and robust traction in our international patient revenue. Our hospital business witnessed an occupancy of 70% versus 65% in Q2 of financial year 2022, and 64% in Q1 of financial year 2023. While ARPOB grew 5% to INR 1.97 crores from INR 1.87 crores in Q2 financial year 2022. ARPOB was similar to Q1 of financial year 2023. If you would recall, we had indicated that our aim is to reach 75% by the end of this fiscal. However, given the strong traction, we were able to achieve this rather quickly.
I would tend to be cautiously optimistic in Q3, which is generally a festive season across North India, and hence occupancy may see some seasonal impact in Q3. On the international patient business, we continue to witness strong traction. International patient revenue were at INR 109 crores, a growth of 164% over the corresponding quarter and 23% over the trailing quarter. International patient revenue during Q2 of financial year 2023 contributed 8.4% to total hospital revenues versus 3.8% in Q2 of financial year 2022. It is also important to highlight that some of our key underperforming facilities have witnessed higher revenues and better profitability versus both the trailing and corresponding quarters.
On our brownfield expansion plans, which we have been discussing with you, our expansion plans are well on track, and we are adding capacities across all our major facilities like SMRI, Mulund, BG Road, Shalimar Bagh, Noida and Anandpur. Currently, our teams have been working tirelessly on several digital transformation projects, such as implementation of electronic medical records, ERP implementation, and improving patient experience through websites and apps.
We are quite excited with the EMR project specifically, as it would further strengthen our core belief of care for good for all our patients, enabling quicker access to healthcare records and faster diagnosis and treatment. During the quarter, we commissioned several medical programs and further strengthened medical infrastructure at various facilities.
These include launch of a state-of-the-art lung transplant clinic and pulmonary medicine unit at Fortis Jaipur, bone marrow transplant unit at Fortis Mohali and Fortis Faridabad, a new Linac at Fortis Mulund, an ortho robot at Fortis BG Road, a neuro navigation system at Fortis Amritsar and a new cath lab at Fortis Mohali. Commensurate with our medical program expansion, we continue to attract high-quality clinical talent.
We have onboarded clinicians in the specialty of cardiac, oncology, neurosciences, and gastroenterology during this quarter. On the diagnostic side, though the business was impacted due to decline in COVID volumes, adjusting for the COVID revenues, non-COVID revenues have grown 5.3% versus Q2 of financial year 2022, and 5.6% versus quarter one of financial year 2023.
Additionally, if we look at H1 financial year 2023, non-COVID revenues grew by 15.5% versus the corresponding previous period. On SRL, our focus is on strengthening the business's growth drivers by expanding our geographic footprint and channel network with further additions of stat labs and customer touchpoints. Anand will take you through more of the details in a short while. On the balance sheet, we remain quite healthy with a net debt to EBITDA of 0.44x versus 0.74x for Q2 financial year 2022. Our net debt stands at INR 565 crores as of September thirtieth, 2020, and our debt equity mix allows us the flexibility to leverage our balance sheet to further our growth objectives.
With that, I would like to end my comments, reiterating to all of you that we remain steadfastly committed towards our growth path in order to further our operational performance and create longer term value for all the shareholders.
Thank you. With this, I would like to hand over to Anand for his comments on the diagnostic business.
Thank you, Dr. Ashutosh Raghuvanshi. Very good morning to everyone on the call. Thank you for joining us today. On behalf of SRL Diagnostics, I warmly welcome you all for our Q2 FY23 results conference call. I hope all of you and your families are safe and in good health. During the quarter, we reported a revenue of INR 351 crore, with 95% of our revenues coming from non-COVID testing. Our EBITDA stands at INR 73 crore with a margin of 21% for Q2 FY23.
We conducted 10 million tests in the quarter and serviced over 4.3 million patients. While COVID-related testing and volumes have slumped as predicted, we are witnessing an uptick in non-COVID volumes across our network. SRL B2C, B2B revenue mix stands at 55-45, consistent with our Q1 ratio.
Our non-COVID revenue growth stands at 5% in Q2 FY 2023 versus Q2 of FY 2022, and at 6% versus the trailing quarter Q1 FY 2023. Non-COVID revenue grew by 16% approximately in H1 FY 2023 compared to H1 of FY 2022. In a post-pandemic setting, we are witnessing a heightened wellness consciousness among customers, and this reflects in our preventive portfolio, which has grown 21% in terms of revenue over Q2 of FY 2022. Keeping in line with our network expansion strategy, we have added 207 new customer touchpoints in Q2 of FY 2023, and our customer touchpoint per lab ratio now stands at 18.6 compared to 12.1 in the corresponding Q2 FY 2022.
Our new customer experience initiatives, including WhatsApp chatbot and live phlebotomist tracking features, have received a good response from our patients we service through our home collection network. On the people front, we completed more than 1,300 mandates of training in Q2 FY 2023. In the last two years, SRL has progressed to bring many tailor-made competency enhancement programs.
Training, learning, and development continues to be one of our priority areas. Over the years, we have built strong learning and development functions at SRL, where we manage more than 90% learning interventions internally. We use technology for learning enforcement as well as talent assessment through learning management systems and assessment tools.
We are working relentlessly on building the organization as a great place to work, and we have significantly progressed on our overall NPS score and going ahead strong on being the preferred employer in the diagnostic industry. Our state-of-the-art reference laboratory at SRL Mumbai has been re-accredited by College of American Pathologists, USA. This is a testament to our continued focus and commitment to next-generation diagnostic services. We will continue to focus on expanding our network in priority and expansion cities and focus on continuously improving our customer experience across all our network. Our NPS score for patients remain consistent at 78. On the scientific side, we will continue our concerted efforts in the chronic diseases category, lifestyle diseases, preventive healthcare category, and our specialized portfolio that comprises autoimmune diseases, transplant immunology, infectious diseases, and oncology.
Our genomics portfolio revenue grew by 27% in Q2 FY 2023 compared to Q2 2022. Our sustained focus on genomics and next-generation diagnostics, along with our work in digital pathology, will help us differentiate ourselves and also enable us to be future-ready. Thank you very much for your attention. I would like to now hand over the call to Mr. Anurag Kalra, Head of our Investor Relations.
Thank you, Anand. Ladies and gentlemen, we should now open the floor for question and answers. Inba, please moderate that.
Thank you very much, sir. Ladies and gentlemen, we now begin the question and answer session. Anyone who wishes to ask a question may enter 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. Anyone who has a question may enter star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kunal Randeria from Nuvama. Please go ahead.
Yeah, good morning, and thanks for this opportunity. Just on the hospital business, I still see that 20% of your revenue comes from CGHS, government PSUs, and ECHS. I assume the bed contribution will be even higher than you know this. Now that you have a good 70% type occupancy going forward, do you see this number coming down quite a bit, and what we should expect in the coming years?
Yeah. Good morning. I will take this question with this side. You are absolutely right. There is opportunity here to change the payer mix in our favor in some of our hospitals, where, you know, the occupancy level is quite high. It will be very selective. It will not be like across the board.
Sure. You know, your TPA plus, I think cash is around 70-72% odd. Should we expect it? It should remain at these levels going forward?
The payer will go for TPA, cash, and the international business. You know, the other business in scheme business will come down.
Got it. Okay. One just quick one on diagnostics. The 5%, you know, non-COVID year-on-year growth is slightly lower than what some of your peers have
Just wondering, you know, especially since you've added a lot of touchpoints in the last few quarters. Just wondering, you know, the kind of growth momentum that you expect, especially considering the kind of competition that you are seeing in this industry.
Thank you. This is Anand here. Usually the Q2 is the best quarter for the year for diagnostics. What we see here is primarily because last year because of COVID, we see a lot of testing happening, especially around hospitals. What we calculate as COVID and COVID-allied tests, just a few tests related to COVID. As you know, during COVID during the second quarter of last year, there was a lot of hospitalization that happened, and the testing momentum also increased at the time. Maybe it may not be the right comparison between Q2 and Q2 of this year in terms of non-COVID as well. At the same time, internally for us, we also have a situation where, you know, we had a Himachal Pradesh tender.
We were having a HP PPP project which we were running last year. We've been running it for the last eight years. The contract ended this year, so it was not part of the. It was part of Q2, but Q2 of last year, but it's not part of Q2 of this year. That has also contributed to it. If you adjust for that, our growth will be close to about 9%.
Got it. Thank you very much.
Thank you.
Thank you. We'll take the next question from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks for taking my question. Dr. Ashutosh Raghuvanshi, on the hospital network expansion, we talked about 300, 200-bed per annum addition over the next 3-4 years. Now, two things. One is, A, this entire expansion is gonna be brownfield, right? Or are we looking at. Is there any element of greenfield in this expansion?
This entire expansion is brownfield. It is within the given hospitals. At some places we have to construct a fresh tower, and in certain places we already have the civil construction done and only the interior work needs to be done. It's a mix of both. Essentially this is all in the category of brownfield.
This will typically what a INR 50-60 lakhs per bed sort of expansion cost for the expansion?
Yeah. On a blended basis, the entire thing would come to about INR 18 lakhs per bed.
Despite it being like a brownfield sort of expansion?
Yeah. Because, you see, we will also be enhancing and upgrading equipment and, larger diagnostic equipment and imaging equipment will also be enhanced along with it. Because as the capacity of these hospitals will increase, we will need lot of other medical equipment as well. Compared to a kind of a greenfield, which would easily be about INR one and a half crores, this is definitely, much less than that.
In terms of this expansion that we're undertaking, you know, it's fair to assume that bulk of it will be coming in what you call tier one town and metros?
Yes. Majority of this is in NCR and in Bangalore and Mumbai, and in Kolkata.
Thanks. If I just push that, you know, on the operating facilities which are there that we have right now, beyond this expansion that we will undertake over the next three, four years, I mean, how much more can we add from a brownfield capacities on our existing network? I mean, if you were to hypothetically just stretch it out maximum, how much more can we do on the existing facilities in general?
Other than the planned 1,300 beds which we have given a kind of a timeline for, another 700 beds more could be added further.
Approximately about 2,000 beds on the current network, and thereon our expansion would be largely has to be on newer assets, whether we buy something out or we do some greenfield.
That's correct.
Okay. In the metrics that we've discussed on the improvement in the hospital-wise improvement, if you can probably just shed some light on which have been the more notable movements in this quarter. There has been some movement in the lower tier hospital, lower profitability hospitals which have reduced in this quarter.
No, no. Yeah. There is an improvement, overall improvement as we have seen. Overall improvement in the profitability of all the hospitals. The hospital from the lower table has moved to the upper table. Anurag will able to explain.
Yeah. Just to give you some examples, in the highest bracket we've added BG Road, which is one level lower. We've added Anandpur, which is one level lower. Mohali continues to be in the higher bracket. In the next category, we've added a few more hospitals, like Faridabad and Ludhiana. Those are the ones that have been doing well. Overall, if you were to just look at it in its absolute basis, when you look at FY 2022, the topmost bracket had about 700-odd beds. Today the topmost bracket is at about 1,170-odd beds. That gives you a very good indication of how we are moving up, level to level.
Right. Anurag, of the hospitals which are there in the lower two tiers, any sort of outlook on that? There's another 1,000 beds which are there in that less than 10%-15% bracket, and specifically 700-odd beds in the less than 10% bracket. I mean, how are we looking at these assets?
If I can answer this question. There are a couple of hospitals which are already showing very good sign of improvement. We have discussed in every call, like, PG and Jaipur are in this category, which are definitely showing very good sign of improvement. We have planned how to improve it further. Maybe some more investment may be required, maybe some more facility we may be able to add to these hospitals. Those type of plans are work in progress. With that, these hospitals may reach to, you know, 15%+ EBITDA margin category. That will take some time.
The other hospital in this chain are two in Chennai, which we have one is a sort of new hospital and the ramp-up is taking some time, but the team is working very hard to improve the bed ramp-up there. Other is Vellore, where the progress is improving, but at a slow pace.
Sir, if I had to speculate, of the six hospitals which are there in this 10 lower than 15% bracket, all goes to plan, we should have probably this number should half as we go forward in the coming quarters, more than. It should be probably two or three hospitals, which probably should not be more than two or three hospitals going forward.
Not in the coming quarter, but yeah, maybe in the medium term, we can sort them a little better. In a 1.5-year time, we can expect that. At least we have planned to move to above 15%.
Okay. Thank you.
Thank you. Our next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah, good morning, and thank you for taking my question. Just first on the guidance for occupancy, Dr. Raghuvanshi, you said that we've touched 70% and would like to progress towards 75. Despite some seasonal Q3 may be slower. Just what are the drivers of this, Dr. Raghuvanshi, in terms of is it that you're seeing more and more specialty. Is it international patients. Is it market share gains. You know, if you could help us understand. NCR clearly at least are one of the key reasons for you. There is quite a lot of supply also coming. How do you kind of embed that into your outlook as well.
Yeah. Shyam, as I have said many times before that as far as the additional capacity which is coming across in the region in NCR, that will get very easily absorbed, and that is not of concern because there is a little bit of demand-supply gap in this region.
It serves a huge hinterland. The main driver for us would be volumes coming because of the addition of clinical talent. As I mentioned, we have added quite a bit of talent in last quarter. As they start getting stabilized, that would be one of the drivers. International definitely has been showing continuous improvement. It has come to a good level now. It has been in absolute terms, it is little better than pre-COVID levels.
Since our domestic numbers have grown, so as a percentage of overall revenue, it is still at about 8.5%. That is likely to go above 10-12% as well. That will be another driver for growth as well.
Okay. That's helpful, Dr. Raghuvanshi. The second thing I saw was your mix, specialty mix. You know, surgical revenues have grown 24%, just calculating it from your pie charts. Something like oncology has grown, like, 50%. What are we doing here? Maybe there's a base effect, I don't know. I'm just saying, which are the specialty mix that you think you will continue to see further traction?
Sir, it looks like the management line is disconnected. Ladies and gentlemen, we request you to please remain connected while we join them back. Please do not disconnect your lines. We'll call the management right away. Thank you. Ladies and gentlemen, thank you for your patience. We have the line for management connected. Mr. Srinivasan, I think-
Yeah.
You'll have to repeat your question.
No problem.
I'm not sure how the.
Yeah, yeah. Okay, great. My second question was just on the specialty mix. So if I were to just do a simple math on using numbers of the specialty mix, onco revenues have grown 50%. Roughly. When I look at overall growth is 18%. Just want to understand how we are achieving this. You know, can this kind of sustain the kind of growth we are seeing in some of the higher growing specialties?
Yes. Onco growth specifically, you know, as we had stated about two years back that onco is an area where we are focusing, and we had acquired some talent. Plus we had created some facilities like, for example, in BG Road, we did not have oncology earlier. We added there two years back. And many other infrastructural things we have done in the oncology segment. We expect that oncology will continue to show higher growth for at least another one year or so. And that would be sort of then stabilize to a much more regular rate of growth. Other than that, the other core specialties which we have been focusing on, those also have grown significantly.
Oncology definitely will remain a focus area.
Yeah. Thank you. Thank you, Dr. Vanshi. Just the third question is on margins. You used to call out the losses at Arcot Road. Can you quantify that? Just to Mr. Vivek's question on slower progress in terms of ramp up, if you could clarify that also, please, in terms of how long do you think a breakeven at, say, Arcot Road could happen?
Yeah. If I can take this question, Shyam, again. Arcot Road performance actually has not improved if we compare with the last quarter. It is incurring EBITDA negative of around INR 8 crores per quarter. That is continuing. That is primarily contributed because we are not able to ramp up the facility there. You know, the occupancy there and main reason we have discussed earlier also. There is some construction going on, some bridge is going on just in front of the hospital, which is obstructing the patient flow. That is the main reason. I think we are also building you know the clinical talent there. We are also spending some money on the advertisement and other things.
Just to highlight this facility is very good facility, state of the art, and all other parameters, it is very good. I think just because of this obstruction, I think the patient flow is affected. Team is working. Regarding your second question, by when we expect it to be EBITDA positive, at least not bleeding, at least for us, we are expecting in next 6 months' time it will be in that, this range.
In 12 months, you're saying, Vivek?
Six months' time. Six months, yes.
Okay. Sorry. My bad. Last question is on SRL. Mr. Anand, just one on, you know, you talked about 9% growth for non-COVID if we exclude the government contract. If you could also help us understand the split between volume and price for that, sir. Thank you.
Thank you, Shyam. So in terms of contribution, if you see, it was about 4% of our revenue in Q2 of FY 2022, HP PPP contract. It was largely more of, since it was a government contract, the volumes were quite high and ARPT was quite low.
Yeah, no, sir. My question was different. I was saying excluding that, you talked about your growth in non-COVID for Q2 this quarter versus last year was 9%. I'm looking for the split of that into volume and price.
Just a second. Let me look at it. Our ARPT has grown by about 8% on the H1.
Mm.
It's a sort of a mix of volume and ARPT growth, which are larger contributor on the ARPT side.
Anand, safe to assume some low single digit volume growth, right? When can this kind of improve, right? I don't think it's only for you, right? Everybody else is struggling for volume growth. Would that be competition, especially in, say, semi-specialized spaces driving this? Or you think, patient footfalls into even your B2C has been slower than usual?
In our case, as I told you, it is primarily because of the HP PPP, which was very high in volume.
No, no.
Their volume was very high.
No, no.
the ARPT was very low.
No, no.
That is why we are seeing the growth here as higher ARPT and lower volume growth.
No, no. What I'm trying
If you see separately, we are seeing a good growth on the B2C segment as well.
Anand, sorry to persist, but I'm completely removing HP PPP project in both your Q2 last year and Q2 this year. Okay? Let's assume I'm not even talking about that business at all. You then look at the non whatever, right? Just the business which is non that, and you said it's 9% growth. That is what I was trying to dissect. I'm not even looking at this project, this government project. There, when you do the math, you suggested about low single digit volume growth for that business. My question is simple, right? Why is that growth slower? And it's not only for you, right? Everybody seems to be facing this issue. That's where the question is coming from more.
I think it is more to do with, you know, the higher revenues during the Q2 of FY 2022 driven by COVID. Even though we calculate only COVID and COVID-allied tests, only four tests of COVID is considered COVID-allied tests. As you know, during last Q2, there was a lot of drive into hospitals and, lot of testing happened on multiple parameters, not just, you know, the IL-6, d-dimer, CRP, those kind of COVID-allied tests. A lot of other tests also happened. That has boosted the volume during that time in a much bigger way. It will be too early for us to really look at any trends on this at this point of time. I think we'll have to allow another, one or two quarters to settle on, how exactly this growth is turning out to be.
Got it. Yeah. Thank you. Thank you, and all the best. Thank you.
Thank you.
Thank you. Our next question is from the line of Abdulkader Puranwala from Elara Capital. Please go ahead.
Hi, sir. Thank you for your opportunity. Sorry if this may be a repeat question, but I'm just going through your hospital margin matrix. If I look at the margin for your hospital, which falls under the 10%-20% bracket, I mean, the occupancy has surged to around 70-72%. Though it is still remain in this margin bracket itself. You know, apart from occupancy, we wanted to know what will be the other factors which you guys are working upon to improve the margin in this hospital beds.
Yeah. It is a good question. Apart from the occupancy, we are very well working in improving our care mix, which I have covered in my earlier comments, where, you know, we are trying to reduce the existing business to the extent possible and increase the share of TPA, Cash and international business, which are high margin business for us. Secondly, we are also trying to improve the specialty mix also in our favor by adding more specialty, by investing in infrastructure in the form of equipment and things like that. That those are the stage one. Thirdly, we are also working on the margins. We do come out with some margins in cost optimization things where, you know, we can maximize the productivity and things like that.
All those things will lead to, you know, this improvement in the margins.
Got it. Thank you, sir. I'll get back to you.
Thanks, sir.
Thank you. Our next question is from the line of Sanjay Shah from KSA Shares and Securities. Please go ahead.
Yeah. Good morning, gentlemen. Thanks for opportunity. Dr. Ashutosh Raghuvanshi, my question is regarding our strength, that is our parent strength. That is IHH Healthcare. They are into personalized care ranging from primary to quaternary and even some ancillary offerings. How in India we compare ourselves with the parent treatment to our patient? Is there any scope to add more to our offerings and profiles?
Yeah. Sanjay, we are getting a lot of support, and we are using a lot of synergies with IHH, especially regarding the quality. We participate in their global quality program, quality benchmarks and metrics are followed on a regular monthly basis across the entire IHH network. The best practices of clinical quality and other innovative initiatives is shared across the network, including with Fortis. That is one big advantage.
Another thing which I had briefly mentioned during my statement is about the electronic medical record, which we are working along with the IHH folks to implement across our Fortis network, which will help us to improve the speed with which we can deliver discharges and medical records to our patients, and also it will help during the treatment and diagnostic process as well.
Sir, over and above this, digital, that EMR what we are talking, do we have any surgical side or any other inpatient care which can offer and which we are right now not offering in India and have a scope to expand that in India?
Generally we have all these areas being offered in India as well. There are no specific surgical facilities. In oncology, especially on the CAR T-cell therapy and proton therapy, we are coordinating with them so that some of our patients who may be wanting for proton therapy, we can refer them to Singapore for doing that. That kind of collaborations are also in place.
Okay. My last question was regarding this EMR, what you mentioned. Is there any regulatory binding or regulatory rules which we need to understand on this EMR? Is that EMR only for our hospitals, our records or even we have to share with the patient also?
Yeah. The EMRs, of course, are patient's property. The record, medical record of an individual patient is something which is patient's property. However, we manage it. There is the national guidelines which are there, and there are certain requirements for keeping it interoperable so that it can be transported from one provider to the other. It is absolutely compliant to the guidelines which have been issued here.
Thank you, doctor. Very helpful. Thank you and good luck to you, sir.
Thanks.
Thank you. Our next question is from the line of Bharat Sheth from Quest Investments. Please go ahead.
Hi, sir. Thanks for the opportunity. Sorry I joined little later. This question, if it has answered, can you repeat please? Like in diagnostic we have some government business, so do we have any kind of a such obligation in our hospital business where we have to provide them at concessional rate and which over a period we may reduce so it can help us to improve the profitability?
No. Except in Delhi we have 25 beds reserved for economically weaker sections. I don't know. I don't think there is any other facility. No. Apart from Delhi, we don't have any obligation at any of our facility to take government business, government patients or provide free service or concessional rate service.
Okay. Second question, sir, on this hub-and-spoke several tier institution, I mean, hospital, companies are going in a hub-and-spoke mode, say for tier two and tier three cities. Do we have any kind of a such aspiration or is that really a profitable business or make a business case?
Yeah. We have stayed away from that because there are challenges in the tier two, tier three cities on the operations side. Typically these markets are very price sensitive and clinical talent doesn't come by so easily over there. We have not selectively gone for that. However, if there is in future something which is very synergistic to our larger cluster in a metro city, we will consider that on case to case basis. Not on a standalone basis, we are not looking at that.
Okay. Last question on diagnostic side, sir, how do we really plan to ramp up our facilities as well as, I mean, our geographic diversification?
Right. So we are actually adding, as you know, we are probably having the best equitable distribution of our business across all geographies. We continue to add, you know, expand our network through our focus city expansion plan, as well as adding more collection centers. So we have added even in this quarter up to 207 customer touchpoints. Similarly, that is the way we are expanding in hub-and-spoke model, where we are adding more reference laboratory, more regional reference laboratories, and then stat labs to complement that, as well as collection centers to expand it further.
Okay. Sir, recently there is an interview of our parent company where they have suggested that they may change the Fortis name to Parkway because of the kind of, I mean, obligation. I mean, this brand belongs to the erstwhile promoter. Will it have any kind of impact? I mean, what are we doing to promote this new brand? Or, if at all that will really can have a kind of, say cannibalization of the brand? Hello?
Yes, you know, we had earlier also made an announcement that we will consider changing the name to Parkway. That definitely remains something which we are continuing to evaluate. You are right that, you know, that brand change always carries a certain amount of risk and expense as well. There are certain constraints around the brand which is owned by the ex-promoter. Since there are still some clarifications we need to seek from the legal point of view, this is some time away. This is definitely our preference to consider a change in brand after careful evaluation.
This valuation is to be done further to decide finally as to how to go about it and when to time it. Certainly the moment those clarities emerge, we will make the proper announcement.
Okay. Thank you very much, sir, and all the best.
Thank you.
Thank you. We'll take our next question from the line of Dheeresh Pathak from WhiteOak Capital. Please go ahead.
Yeah. Thank you. I'm not sure if you already answered, but you are explaining the ground floor potential immediately of 1,300 beds in certain locations like Bangalore, Mumbai, Delhi and Kolkata. Is there a more granular breakup which is given like, you know, what could be the CapEx outlay in the next few years in which, you know, cluster the bed will be-
Yeah. As mentioned earlier, the bed extension is on our existing hospital only and all are in metros. Major extension is happening in the NCR region, followed by Bombay and Calcutta. Bangalore also.
Can you give numbers also, sir, if possible? Like how many beds in NCR, how many in Bombay and how many in Calcutta?
Yeah. 50% of the bed extension is coming in the NCR region. Bangalore we are expanding around 200 beds and Calcutta around another 200 beds. Mumbai, we have already you know, completed the construction. We are waiting for the OC. We have partly operationalized the beds. Total expansion is only 10 beds, out of that 45 beds already been operationalized.
Okay.
Calcutta has already got. Yeah, these are the places where we are doing the major expansion.
Okay. The 50%, the bigger expansion in NCR, what is the timeline for commissioning of those beds?
Look, these include expanding the capacity in three of our major big hospitals in NCR, which include SMRI, Shalimar Bagh in Noida. There we are expanding bed capacity by almost 170-200 beds in each location. Plus there is a 60-bed extension which is underway in Faridabad. The Faridabad expansion is underway. It may be completed in a year time. However, the other three expansion, we have submitted the drawing to the authorities. For one hospital in Noida, we have already got all the approval. Construction work will be started post this NGT restriction is removed.
Probably like, you know, the bigger one will be in NCR, where probably commissioning is probably like, you know, 18-24 months away. Is that a fair assumption?
Yeah, that's correct. Absolutely.
Okay. The second question is in terms of the regulatory, you know, from the Supreme Court of India order and other things, can you just clarify like what all you are allowed to do? Like name change as per the interview in the media, understanding the name change you're allowed, capital structure and shareholding change in the listed entity, you know, is that allowed? What is allowed and what is not allowed?
Yes. As you know, we are still evaluating the legal position and our lawyers are working on that. Some of the areas are very clear that there is no restriction like brand as you mentioned. But as far as the other areas are concerned, those still some clarity has to emerge. Regarding MPO, of course, this is a matter which IHH needs to clarify with the authorities, and then based on that they will be making the necessary steps what they need to take. As far as Fortis is concerned, we definitely don't have much effects of this on our operations.
The only areas which we are to wait for is the clarity on the RHT transaction with about like what will take further.
No, what I meant was, let's say for example, if you want to buy an asset in M&A and issue your shares as currency, would that be allowed or that also would not be allowed?
Share as currency, we don't think, is allowed at the moment. We do have capacity to look at some other smaller acquisitions which we will evaluate.
Okay. Change in capital structure and shareholding is not allowed. Okay, understood. The last question is on this bed, this you know, EBITDA margin profile based on number of beds. There is five hospitals with 716 beds which are less than 10% EBITDA. One obviously is the Arcot Road. Which are the other assets because they would have been operational for a while. Is there a structural issue that these hospitals? Can you identify some of these hospitals and what is the issue with these hospitals that they are, you know, less than 10% EBITDA?
Out of this five, six hospital, you know, Arcot Road and I have explained in detail what is the problem there.
Right.
Some sign of improvement, but at the same time, you know, the progress is slightly slow because the fix there require some, you know, some long-term fix in the form of infrastructure improvement and things like that, getting the fire NOC, all those things are required, which is slightly time-consuming. Something is in our hands, which we are trying to complete, and something we have to, you know, get it done through the government agencies. As regards Jaipur and Tehri, both are progressing quite well in terms of occupancy as well as in the margin. In both the hospital, we also feel that there is a opportunity to add further, you know, facilities. That is something which we are in the exploration stage.
Once we complete it, I think that will give the further boost to the margin expansion of both these hospitals. The last hospital in this category is the Vashi Hospital, sizable hospital in this category, which is, you know, again, having its own challenge because of the specific area where this hospital is being operated. There are infrastructure challenges also, and it is a government hospital, and we are operating it. That hospital is also slightly slow in improving the overall progress. I think the-
Jaipur would have been operational for a while, so you're saying you don't have the full stack of specialty. That is the reason that it is being lower?
Onco is not there in Jaipur.
Okay.
It is at a very good location. There is a bed capacity available to extend. Those type of things we are exploring.
Understood. Okay, thank you for taking my question.
Thank you. Our next question is from the line of Amit Kirtane from Laburnum Capital. Please go ahead.
Hi, good morning, and thank you for the opportunity. Your press release mentions or talks about portfolio rationalization and inorganic expansion going to be drivers of operational performance. Could you elaborate a little bit on both these aspects, especially in light of the Supreme Court judgment? Are you ready to press ahead on both these levers?
Yeah. We are moving ahead on both these levers. Brownfield expansion anyway, you know, the CapEx requirement is quite low. As you have seen, the cash flow generation from the business is quite handsome to take care of this brownfield expansion of its own. As mentioned in Dr. Ghose's speech also, the leverage ratio is quite comfortable. Our debt level, net debt level is INR 500 crore plus level, which is, you know, less than half of the one-year EBITDA. That gives us confidence that we can very well fund it by a little bit leveraging our balances. We are actively pursuing, you know, the acquisition opportunity which makes sense for our overall growth strategy.
Understood. Should we expect some kind of strategic action over the next 6-12 months?
Yeah. These things are very difficult to predict, but yeah, our aspiration will be to close the deals during this period.
Got it. This holds true for both, for portfolio rationalization as well?
Yes. Yes.
Got it. Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing comments.
Thank you. Ladies and gentlemen, thank you very much for joining us on the call today. Gaurav and myself are available in case you have any further clarification or queries. Please feel free to reach out to us or email us. Thank you very much and have a good day.
Thank you, members of the management. On behalf of Fortis Healthcare, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.