Ladies and gentlemen, good day, and welcome to the Q3 FY 2022 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 touch-tone 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, Lizanne. A very good afternoon, ladies and gentlemen, and thank you for taking the time to join us on our Fortis Q3 FY 2022 Earnings Call. The call is being chaired today by our MD and CEO, Dr. Ashutosh Raghuvanshi. With him we have our Chief Financial Officer, Mr. Vivek Goyal. On the SRL side, Mr. Anand, the CEO of SRL, joins us over here. With him, we have Mangesh Shirodkar, who is the Chief Financial Officer of SRL. I hope all of you have got a chance to go through the results, the PR and the presentation that we had sent across on Friday evening. All these documents are also uploaded on our website. We will start the proceedings with some opening comments by Dr. Raghuvanshi.
Anand will take us through some brief highlights of the Diagnostics Business, post which we will open the floor for Question- and-A nswer. Over to Dr. Raghuvanshi.
Thank you, Anurag. Good afternoon, everyone, and thank you for taking the time to join us on our Q3 FY 2022 Earnings Call today. I hope all of you are safe and well in light of the third wave that we witnessed in January this year. I shall come straight to the results for the quarter and my thoughts on the business performance and the way forward. Q3 for us has clearly been a relatively robust quarter. I say that due to the fact that in this quarter we have a lot of a string of festivals and as a result of that typically the Q3 performance is generally muted versus the trailing quarter.
However, this time around, our Q3 performance for both hospitals and diagnostic business has not only been very strong with the corresponding previous quarter, but is also similar to the trailing quarter which itself reflects the health of our business. Our consistent efforts towards revenue acquisition and cost optimization initiatives have began to yield results, and we do expect these to continue to play out as we move forward. Specifically coming to the quarter, our consolidated revenues were at INR 467 crores, a growth of 25% versus the corresponding previous quarter. This compares to INR 1,463 crores in Q2 of FY 2022. Our consolidated EBITDA margins are at a healthy 20%, which is 300 basis points higher than the corresponding previous quarter and similar to Q2 of FY 2022.
Our Profits Before Tax has increased 70% to reach INR 185 crores, while our Profit After Tax has grown a robust 163% to reach INR 142 crores. We continue to maintain a healthy balance sheet, given our cash flow generation have further reduced our net debt by approximately INR 248 crores in the quarter. Our net debt at the end of Q3 stands at INR 621 crores. This reflects a net debt to EBITDA of 0.53x compared to 1.3x in Q3 of FY 2021. Our net debt to equity stands at 0.09 at the end of FY 2021. Our hospital business remain on a firm footing.
We have witnessed an occupancy of 65% in Q3 versus approximately 64% in both the corresponding and trailing quarters. COVID contribution to this is negligible, with non-COVID occupancy in the quarter at 64% and non-COVID revenues accounting for almost 98% of the total hospital revenues. Higher complex surgical volumes in selected medical specialties and the rebound in the international business have resulted in an 18% increase in ARPOB to INR 1.86 crores. All these have enabled the hospital business revenue to reach INR 1,118 crores in the quarter, a robust growth of 24% and also slightly better than the Q2 of FY 2022. The hospital business EBITDA grew 46% to touch INR 190 crores.
This reflects a margin of 17%, a 260 basis point improvement over Q3 of FY 2021 and similar to the margins in Q2 of FY 2022. If you were to exclude the start-up costs of our Vadapalani facility in Chennai, hospital business margins are at approximately 18%. Our diagnostic business has also performed meaningfully well, with revenues growing approximately 27% to INR 389 crore versus the corresponding previous quarter.
Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir.
Thank you. I'm sorry for this disruption. I think there's some problem with the line. I think I was talking about the diagnostic business, which has also performed meaningfully well, with revenues growing approximately 27% to INR 389 crore versus the corresponding previous quarter. This was aided both by the acquisition of DDRC in Q1 of FY 2022 and the higher B2C revenue components. Non-COVID revenue grew 33.8% versus Q3 of FY 2021, while COVID revenues declined marginally versus the corresponding previous quarter. The EBITDA margins in the business stood at 26.6%, which were 270 basis points higher than Q3 of FY 2021, and better than 25.7% margins in Q2 of FY 2022. Some qualitative comments on both businesses.
On the hospital side, investments are on track to augment our bed capacity by 250-300 beds a year for the next few years and further bolster our medical and clinical infrastructure. We have added oxygen generation plants in five of our facilities, and have introduced several other high-end equipment like neuro microscopes, neuro navigation systems, cath labs, and endoscopy suites in many of our facilities. We have also onboarded eminent clinicians in cardiology and oncology in selected facilities. The international business recovery has been encouraging with revenue of crores in the quarter, a growth of 45%, versus Q3 of FY 2021. It's also important to highlight that our digitization initiatives have now begun to show traction.
Revenues from digital channels led by the efforts to further enhance key digital mediums such as our website, apps, and digital campaigns, have resulted in a year-on-year increase in digital revenue of almost 125% versus the corresponding previous quarter. On the diagnostic business, while Anand will delve into more details, I'm quite pleased that our consistent performance and earnings trajectory. The acquisition of the stake in our DDRC SRL JV has turned out very well, and we have now completed the integration of that business into SRL. The B2C revenue component, which contributes a healthy 52% to overall diagnostic revenues, has grown in excess of 40% in the quarter, led primarily by the growth witnessed in walk-in patients. SRL continues to expand its customer touch points and has added approximately 284 such customer touch points in Q3.
At present, the business has 2,200+ such touch points, which are expected to further increase going forward. This should hopefully result in a better customer touch point to lab ratio, improving utilization and gaining higher operating leverage. To sum up, all in all, we have witnessed a good Q3 across both our businesses, and plans are put to ensure that as we end FY 2022 and enter FY 2023, the growth momentum will continue. I say this with a bit of cautious optimism, as the current quarter has had an impact due to the third wave of COVID, primarily in the month of January, and one doesn't know if, how, if at all this situation comes back again. As we speak, we are seeing gradual recovery in businesses, which we expect will only accelerate going forward.
This should hopefully enable us to end the year reasonably well. In addition, the strength of our balance sheet also allows us the flexibility to evaluate, select inorganic opportunities in our focus clusters of Delhi, NCR, Kolkata. Such strategic initiatives and a steadfast focus on revenue enhancement and cost optimization in both businesses should bode well for the growth and profitability for all stakeholders going forward. With this, I hand over to Anand for an update on the diagnostic business. Thank you.
Thank you, Dr. Ashutosh Raghuvanshi. A very good afternoon to everyone on the call. Thank you for joining us today. On behalf of SRL Diagnostics, I warmly welcome you all to our Q3 FY 2022 results conference call. It's really good to be able to speak to you again this quarter. We witnessed the onset of an Omicron-induced third wave in many parts of the country, and it has been a relief that the effect of the surge has been milder compared to the previous surges. I wish you all well and hope that the future holds better days for everyone. Looking at the numbers for Q3, we are confident that our streak of good revenue growth continues. We have posted revenues of INR 388 crores in Q3 FY 2022 versus INR 306 crores in Q3 FY 2021, recording a growth of over 27%.
Q3 FY 2022 figures include DDRC and not directly comparable with Q3 FY 2021. COVID revenue share stands at 19% in Q3 2022 compared to 24% in Q3 2021. COVID revenues have reduced due to price caps across the country. COVID revenues will depend on how the pandemic pans out in the coming months. Our non-COVID revenues, however, have grown by about 33.8% in Q3 FY 2022 versus the corresponding previous year quarter. Our test volumes has grown to 11.2 million tests in Q3 FY 2022 from 6.7 million tests in Q3 FY 2021, registering a 69% growth. Out of the total test volumes, non-COVID volumes specifically grew from 6.1 million in Q3 FY 2021 to 9.9 million in Q3 FY 2022, recording a 63% growth.
We have maintained a healthy EBITDA margin at 27% for Q3 FY 2022 versus 24% in Q3 of FY 2021. In our endeavor to go closer to the customers and improve our omnichannel presence, I am pleased to inform that we have opened the highest number of customer touch points in the last quarter. SRL added 284 net new collection customer touch points to its network in Q3 FY 2022, taking the total number of touch points to 2,200+. SRL has been aggressively expanding its network, having opened approximately 100 such touch points each month since August 2021. This also translates well in our B2B-B2C contribution of the business, which stands at 52% as compared to 46% in Q3 of FY 2021.
We have an equitable distribution across geographies in India, and our endeavor is to grow further in focused geographies through organic and inorganic routes. We are exploring opportunities for acquisition that make a strategic fit. I am also happy to announce that SRL's lab software, CLIMS, is the first among lab chains to be integrated with the Government's Ayushman Bharat Digital Mission as a health information provider. We have pioneered a lot of concepts in India fueled by our endeavor for innovation. It's our privilege to be part of the national digital health ecosystem in India. Offering superior customer experience and enabling convenience at all touch points has been our relentless pursuit, especially since customer expectations have changed during the pandemic. We are continually improving our web and app interface, patient experience at all our centers, and home- visit experience.
Currently, we are providing home collection services at 150+ cities across the country, and this will remain one of our focus areas. Our average NPS scores for patients for Q3 is close to 80. Improving our patient experience and patient satisfaction scores will remain a constant endeavor. We are also witnessing an upward trend in the wellness category, as customers are now more cognizant about their health and are taking measures to monitor their vitals. SRL has well-curated wellness packages, and our offerings of smart reports for wellness packages has received an encouraging response from customers. SRL's revenues from preventive healthcare packages grew 23% over Q3 of FY 2021. To support our government in the National COVID Vaccination Program, we started vaccinations for General Public in four of our centers. SRL vaccinated approximately 16,500 people till end of December.
We are particularly taking care of the safety of our employees and have begun the process of administering the precautionary dose. We have added 20 new specialized and super specialized tests to our test menu in the period between July and December 2021. We will continue building our test menu and advance our efforts, particularly in genomics, in the areas of oncology, reproductive health, infectious diseases, and inherited disorders. With that, I would like to hand over the call to Mr. Anurag Kalra, our Head of Investor Relations. Thank you for your attention.
Thank you, Anand. Ladies and gentlemen, we shall now open the floor for Question- and- Answer. Requesting the moderator to begin, please.
Thank you. Ladies and gentlemen, we will now begin with the Question- and- Answer session. Anyone wishing to ask a question may please press star and one on your touch-tone 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 will wait for a moment while the question queue assembles. Participants, if you wish to ask a question, you may please press star and one. The first question is from the line of Amit Khetan from Laburnum Capital. Please go ahead. Amit, your line is on the talk mode. Please go ahead. Mr. Amit Khetan, your line is on the talk mode. Please go ahead. As there's no response from the current participant-
Hello. Can you hear me?
Yes, sir. We're able to hear you. Please go ahead.
Yeah, yeah. Sorry for the issue. Firstly, can you talk a little bit about the new hospital in Chennai? How is that ramping up? How many beds are currently operational, and what is the kind of occupancy we are seeing there, and when is this expected to break even?
This is Vivek. I can take this call. This hospital is built for around 200 beds when it will be fully ramped up. Right now it is operating around 75 beds, and occupancy is around 45%. There are some challenges. I think next year it should be breakeven on the EBITDA side.
Understood. Secondly, if I look at the margin profile that you've shared of your hospitals, there are some five or six hospitals that continue to be in the less than 10% margin category. Which are these hospitals and where are you seeing things improving in the near term and where do you see structural issues? For the hospitals where we have some structural issues, is there a plan to take any kind of strategic decisions, maybe once the SE judgment is out of the way?
Yeah. The four or five hospitals remain the same. One is of course Escorts, our premium hospital for cardiology. Followed by Jaipur, Vashi in Mumbai and the Chennai hospital, Malar. These are the four hospitals which are majorly contributing, thus coming in this list. We are evaluating all the options. Escorts and Jaipur, including Vashi, are showing very good sign of recovery. With Malar, we are still struggling. We are exploring all the options whatever possible in the current circumstances.
Sure. Would it be right to assume that the any actions you take will be post, you know, the Supreme Court judgment?
Yeah, I think nothing to do with Supreme Court judgment. Right now, you know, we are evaluating various options.
Got it. Thank you. That's it from my side.
Thank you. We'll move on to the next question. That is on the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah, good afternoon. Thank you for taking my question. The first one is on the ARPOB, INR 1.86 crores. So it's up 18%. What are some of the drivers for this? Is there an element of pent-up when we look at this number? Or do you think, you know, this is the kind of level maybe like a double-digit growth in ARPOB? Is that sustainable?
Yeah. Shyam, this is a mix of a couple of factors. One was the case mix, so there were higher number of surgical cases. I don't believe this is pent-up demand because for Q2 also we saw almost near normal work on the non-COVID side. One of the contributing factors was the international business which picked up especially during the month of later part of November and December. That contributed in a significant way. As we had said in the previous quarter call also, that we would expect the ARPOB to be slightly muted, as we had at that time said that it is likely to be less than the Q2 .
However, it has been higher, and it is showing this growth simply because of the case mix as well as the international contribution being better than expected. I expect that eventually it will not be in the same percentage of growth as we have seen now. We may see some growth in future as well.
Dr. Ashutosh Raghuvanshi, I remember we were doing a lot of things, right? One is this payer mix rationalization. Second was the GIPSA rate increase. Aren't those sustainable or why is there a little bit of caution around the ARPOB?
Yeah. GIPSA, as we had mentioned that somewhere around the Q2 , and there are obviously expectations that the international traffic will come to normal gradually. The reason why I am being cautious about it is that the case mix itself is likely to change as the things start getting more and more normalized. There will be increased number of medical patients, et cetera. Because of that, we believe that on a blended basis the rate of ARPOB growth may be little lower than what we have seen typically in this quarter. There certainly will be a growth, as I said.
Yeah. Last point on this, just sorry to harp on this, Doctor, especially on the price increases. We are not considering something at this point of time, right?
Not right away, but we will be taking some price increase. As you know that the yearly costs start hitting when the new year starts in terms of increments and staff costs, et cetera. Certain inflationary pressures are there. In order to take care of that, we will have some price correction mid-year.
You mean mid-year this year, next year? Sorry, fiscal 2023 you mean?
I mean the calendar year, not the financial year. You should expect that in the Q1 of the next year we should have a price.
Like a 4%-5% Medical Inflation-L inked Price Increase, you think?
Yes, somewhere in that range.
Got it. Okay. Thank you. Just a second question around human resources, doctors. What is the attrition that you're seeing? During the last 12, 18 months, I think we have managed to pay or reduce guaranteed fee for doctors. As things reopen and things become more normalized, do you foresee there is an issue here in terms of inflation in both wages for medical, non-medical staff, even for doctors as they come back and start doing the higher volume of growth and expect to be paid higher? Is that a dynamic that you think will likely play out in, say, fiscal 2023?
You know, the dynamics is complex as you have rightly appreciated. What we have seen is that we haven't seen a major attrition happen during this period, and that could be because of many factors and people may not be wanting to change, et cetera. When we look at the model of payment and the changes we have made to that, I don't think that will affect. The reason why we are confident of that, when we do a detailed analysis and look at individual incomes, et cetera, the new model actually has given people better individual remuneration, especially to the people who are more committed towards our organization and are not visiting consultants.
With that in mind, I am pretty confident that this new model is actually something where the company's interests and the physicians' interests have got aligned. As a result of that, this should be very, very sustainable. The only place we still see challenge on the human resources is the nursing side, where during this phase of pandemic, we saw the attrition go down. That has again started going up, but that is more of an industry- related problem, so we are not too concerned about that. There are many other progressive steps we are taking in terms of other cadres of human resources. Like for example, The Apprentices Act, 1961 has been liberalized and has been made very topical.
We are exploring many of such initiatives in order to make sure that we have a better and a continuous supply of manpower. Also, there is some cost advantage.
Got it. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.
Yeah. Hi, thanks for taking my question. Sir, can you know, talk about the pricing environment, particularly in the diagnostic, in the non-COVID space? What's happening there?
Pricing environment in the sense?
No, how is the, you know, competitive and pricing environment in the diagnostic space for the non-COVID tests? Are they stable, increasing, decreasing, and by what rate?
The pricing environment in the non-COVID business is sort of stable as far as requirements for acute and chronic diseases are concerned. You will see a lot of pricing happening in the wellness packages, which is, you know, which is where all the digital operators are there. There you will find that there are a lot of pricing offers have been rolled out. Otherwise, if you see, the prices have remained more or less the same across the board.
Sir, as you know, the COVID contribution comes down, going forward, and you sort of, you know, execute on the collection center and volumes increases. What should we expect, in terms of, steady- state, EBITDA margin for the diagnostic business?
Currently we are having an EBITDA margin which is in the range of 25%-28%, which is primarily due to, you know, higher workload and operating leverages that we get from COVID. But going forward on a steady- state, we would expect it to be somewhere around in the 23%-24%, is what my take is.
Okay. That's helpful. Secondly, on the hospital side, sir, can you give some granular details on your expansion plan, which are the key hospitals, you know, where you would be adding. You know, I think you mentioned about 300+ beds every year. Also on the acquisition prospects, what are you seeing in the marketplace, both for hospital and for the diagnostic system?
On expansion side, we are well on track for all our expansion programs, whereby we have scaled down this plan for expanding our bed capacity by 59 beds over next four years' time. We have completed expansion in Shalimar Bagh, where we have increased the bed by 50 beds. Similarly, we have completed the expansion in Mulund, where 100 beds have been added. There are four hospitals where we are increasing almost 250 beds in each hospital, where you know the land is available and we are building a new block there.
The work is on. I think in next couple of years, those hospitals will also start over there. Apart from that, there are opportunities available in hospitals whereby a little investment we can increase the bed capacity. That also we are exploring, like in Kalkata, like in, you know, Bengalore, a couple of units. All those opportunities we are exploring. On acquisition side, Dr. Ashutosh Raghuvanshi.
Yes. As far as acquisition is concerned, I think we have said it earlier that, you know, there are certain geographies which we are interested in, which is where clusters where we already are present. NCR obviously remains one area which we will be considering. The Mumbai- Maharashtra Area is another one. There are some potential opportunities may come in other geographies like Bengalore and Kolkata as well. Our first priority is the Brownfield Expansion within the given hospitals. Then the second option is for acquisitions. In a category we will certainly be exploring all the opportunities which come to us.
I think we are in a pretty strong balance sheet kind of situation right now, and we will have ability to execute some of those.
Okay. Thank you, sir.
Thank you. We'll move on to the next question. That is on the line of Rishabh Parekh from Sunidhi Securities . Please go ahead.
Hi. Just a question on your ARPOB again. One of the key drivers this quarter, as you mentioned, was Medical Tourism, which is about 5-6% of our revenue. Just wanted to know what was the peak number, pre-COVID, and structurally, how much higher ARPOB do medical tourists contribute? Thank you.
Overall, the contribution to the business was about 10% before the. As far as the yield is concerned, it is all pretty similar to cash- paying patients, which is the highest paying. That's why it gives the positive impact on the overall ARPOB, because this is at the highest price band of whatever prices we charge. But it is not significantly different from what a domestic person pays.
Just following on from that, what would be the difference between the cash- paying patients versus our company level ARPOB, which is 1.86?
It is different for different specialty basically. It is a mixture of, you know, the payer mix and the specialty mix. Generally, cash- paying patients are having the highest ARPOB, followed by TPA, which is, you know, generally 20% lower than the cash- paying. The Government Business means PSU business is, you may say, 30% lower than the cash- paying patient. The ECHS and CGHS are generally 40% lower than the cash pay patients. It is a function of, you know, specialty mix and customer.
All right. Thank you for that. Coming on to SRL, so you all have done a phenomenal job in the last one year in expanding revenue, EBITDA and touch points. You know, just earlier on the call, you mentioned that steady- state EBITDA margin without COVID would be anywhere between 23%-24%. This is still lower than our competitors. Is there any fundamental cost structure that we have in our Diagnostics Business that we cannot correct, or what is the reason for the gap?
Thank you, Rishabh, for your confidence. What I would like to say is that as we continue to grow our business, as we continue to expand our B2C share of the business, the margin profile will keep improving. This is what in the short term that we are saying that we'll be doing that.
Understood. Okay, that's clear. Thank you.
Thank you. The next question is from the line of Shantanu Basu from SMIFS Limited . Please go ahead.
Hello. Thanks for the opportunity. I mean, most of my questions have been answered. Just one data point. I want to know the non-COVID ARPOB that was there. Was it very similar to the actual published ARPOB for the whole business?
Non-COVID ARPOB is lower than the, you know, the COVID ARPOB. I'm talking hospital business. It is around in the range of INR 1.4 crore-INR 1.5 crore, although, you know, the occupancy is quite low at this point of time.
non-COVID ARPOB was lower than the overall ARPOB?
COVID. My mistake.
COVID.
Yeah.
COVID, not COVID.
Non-COVID is around INR 1.95 crore.
INR 1.95 crore. Okay, that helps. Thank you. Thank you very much.
Thank you. The next question is from the line of Kunal from Edelweiss. Please go ahead.
Hi. Good afternoon, everyone, and thanks for taking my question. I don't think I completely understood the, you know, SRL margin guidance. I mean, last year you did somewhere around 23.5% kind of margins. This year you did 26.5%, right? At the same time, your COVID, you know, you had a very sharp decline in COVID realizations year on year. Now, with COVID actually going down again, I mean testing going down again, you are saying the margins will fall. I don't completely understand this. If you can maybe just, maybe explain that to me?
Well, if you see, we had, you know, FY 2021 a margin profile of about 19%. In FY 2021/2022 and in this—I mean, this current year, our margin profile has improved significantly, mainly driven by operating leverages as well as some changes that we have brought about in the overall processes and systems. What we feel is that, currently, if you see this quarter, we have about 19% contribution from COVID, but on a yearly, on a year-to-date basis, we'll be somewhere around 21%, contribution from COVID. With that kind of a contribution from COVID and with the COVID rates during the year being very fluctuating, it's very difficult to determine the exact contribution for the operating leverage that we get from COVID.
That is the reason we are saying that we need to go through a non-COVID phase and how much of non-COVID returns and how much with the kind of volumes that it will bring in, so we'll be able to understand this better. That's why we are placing it at about 23%-24%.
Okay. Got it. Just one question on the hospital side. Currently 17%-18% of the revenue comes from, you know, PSU, CH, CGHS, EWS, et cetera. Just maybe in 12 or 24 months down the line, you still see around the same proportion, or should it, I mean, just fall down substantially?
That we expect to continue the same, reason being we are on the expansion mode and, for the expanded bed capacity, initially we may require, you know, this payer mix also. You may expect the similar type of payer mix. Although our endeavor will be to increase, you know, non-g overnment and PSU business share. Reduce the non-Government PSU business share and increase PP and corporate, which is the fact actually is going up, quarter-on-quarter.
Right. Just one more question. You know, in one of your slides, I see that Teleconsultations have dropped down very, very sharply after COVID Second Wave in April and May. What should we expect, you know, going forward? I mean, what are your aspirations? What are you building? Is this the part of the business that you know want to invest and build?
Could not get the question.
I could not get it. Can you please repeat? Sorry.
Sure, sir. In one of the slides, you know, on patient volumes, you have
Yes.
I see that Teleconsultation has gone down very sharply after the COVID Second Wave.
Yes.
Now, I mean, it's almost like from peak you have gone down, I think, 80%. So is this one part of the business that you would like to build going further? How should we see this business panning out?
Essentially the outpatient numbers have still been low, and they have not come back to the kind of pattern which we used to see earlier. Though in terms of how many patients are coming, it has recovered significantly, but as you have correctly noted, that the overall numbers have been low. What we are seeing is that patients are avoiding outpatient appointments, but they are coming for procedures. In terms of inpatient admissions, we are seeing a good trend. Going forward, as everything normalizes further, the number of outpatients may increase further, but we are not banking solely on that. We are also taking certain steps in terms of enhancing our digital offering as well as having a very aggressive outreach policy, including having outpatient departments in a wider geography.
Sure, sir. That's helpful. My question was specifically regarding Teleconsultation. Is this maybe a number that we should probably work with? You know, maybe, you know, I think there are some 4,300 or something like that teleconsults.
Yes. Teleconsults we don't expect to rise too much, but there should be some kind of steady growth. What we have noticed is that the kind of service offerings we have of tertiary, quaternary care patients tend not to go for a Teleconsultation, and they prefer a consultation in person. Whereas certain specialties like mental health, et cetera, are ones which are gradually moving towards Virtual Consults. We expect to grow on that. We want to build on that expertise and experience and build the numbers further. I would say that short term, in say next couple of quarters, we would not expect a very large increase in this Virtual Consults.
We are trying to build the other part of the business which is primarily focused around mental health and few other chronic illnesses. That should yield these numbers to go up in virtual consultations.
Perfect, sir. Thank you very much, and all the best.
Thank you. We'll move on to the next question. That is on the line of Jayesh Gandhi from BNP Paribas Mutual Fund. Please go ahead.
Good afternoon. Am I audible?
Yes, yes.
First of all, thank you for the opportunity. Couple of questions from my side. First and foremost, if you can give us a very quick brief update on the various litigations or court matters, where do we stand now? It's been quite a while since we've been hanging around. That was one. Second is, of course, the news item which we've seen regarding Emqore Envesecure Private Capital Trust, you know, filing a suit against us, another 21 parties for infringement of copyright. Maybe a quick update on that as well. Your perspective is very helpful?
Sure. As far as the legal case in Supreme Court is concerned, you know that the hearings had concluded, the argument hearing had concluded in the month of May last year. Normally, in normal course, one expects the judgment to come in six months' time, which has also passed. We do not have a visibility currently as to, you know, when they are going to pass the judgment. As you know, the court was also quite disrupted in between.
Mm-hmm.
We are hoping that we should get something soon, maybe by March latest. That is our expectation. That's what is kind of an educated guess. We don't have on that. Regarding the second part of your question about the Emqore litigation, which we had reported earlier, that is in our view an absolutely frivolous kind of case where we believe that we have absolutely no reason to be concerned of. Having said that, the merits of the case are as follows, which is that there is a party which claims that they had some kind of a non-binding term sheet signed with Fortis, and they never got an opportunity to invest in Fortis.
Whatever records, et cetera, which we have available, that doesn't show that. The second part of their contention is that the erstwhile promoters had pledged the brands to them, and that was the second part of their claim, and they say that they should be compensated for that. Neither is the New Jersey jurisdiction in any way linked to us or even this organization. We don't know where it operates from. We believe that this is a completely frivolous suit and it would be tackled as and when we get the notices. We had said earlier in our disclosure that we have not received a notice. However, one notice has been served to IHH, and hence we are aware of the details of the matter.
Okay. It's been served to IHH, not to you as of now?
As of now, it seems that they have also included Fortis as a party.
Okay, I understand. Fair enough. My second question is regarding the overall business momentum and the way forward. You know, currently we're running at around 65% utilization or you know, occupancy, however you look at it. As you see the next two years, how do you see this improving? That was the first part of the question. Second is that, you know, if I look at quarter two and then quarter three, on the hospital business side, it seems like we'll be hitting a kind of plateau in terms of revenues, ARPOB, and you know, margins, et cetera. So what would be the levers for us in the next two years to improve some of these key metrics?
As far as the occupancy number figures are concerned, before this wave came, were trending towards about 68%. We expect the occupancy levels to go and settle at 70% plus over a period of time. That is one lever which we are going to get. The second thing is as far as the Q3 is concerned, historically the Q3 is always a slightly muted quarter for the reasons that there are multiple festivals which come during this period, which make, because of which sometimes the doctor and staff also takes vacations and there are that is why it sort of reduces the number of elective cases happening during the month these months.
Considering that slightly higher revenue than the previous quarter, rather than lesser. In our view, this has been a reasonably good thing, and there will be further growth. The third lever of growth which we have is that, as we stated, there are certain Brownfield Expansions within our network. Some of those bed capacities are coming on stream now. We have approximately 45 beds in our Shalimar Bagh facility, which is incidentally doing extremely well. Then we are adding another 13 deluxe rooms in our FMRI facility, as well as there are the beds which are going to be commissioned in our Mulund facility in Mumbai, approximately 70-odd beds by April, either March or April.
With all that addition also we expect to see a certain top-line growth. Since these are all Brownfield kind of growth, so any growth which happens in revenue obviously would impact the margins in a very positive manner.
Sure. Okay. These numbers don't seem pretty large, but nevertheless. Final question is on CapEx. What would be your CapEx for next two years?
Yeah. It will be in the range of INR 300 crore-INR 350 crore annual. It will be a mixture of, you know, the maintenance CapEx and the growth CapEx. You may attribute 50% each to that.
Fair enough. Would it be fair to assume that there is really no greenfield CapEx that you are doing now? It's largely Brownfield for next two years, at least not envisaged as of now.
Yeah. We are not inclined towards doing greenfield. Our focus is on Brownfield or a possible acquisition if it comes in an attractive valuation. The Brownfield Expansion itself, we have about 1,200 beds which are going to come on stream. Out of that, about 200 are already functional. About 110 are the ones which I mentioned, which will get commissioned within, say, within the quarter, the running quarter.
Mm-hmm.
The following year also we expect to add another 150 beds. That is a pretty decent pace of growth. Greenfield, we are not very inclined to, except for in certain geographies where there may not be opportunities to acquire something, because nothing exists. Like for example, if I have to say, north of Bengaluru, where a lot of housing developments are happening and the hospital
Mm-hmm.
Supply is low. We would like to take a position there, then those could be greenfield. Other than that, we will be focusing on an attractive valuation acquisition if possible within the given clusters we have.
I understand. No, I guess where I was coming from is to take a clue from some of what some of your competition has announced, significant greenfield expansion across India. That's where I was coming from. Anyway, all the very best, and thank you for the inputs.
Thank you.
Thank you. The next question is from the line of Shaleen Kumar from UBS. Please go ahead.
Thank you for the opportunity. Just sorry to repeat this again, I think carrying from the previous participant. So we are looking to add how many beds on a yearly basis, Brownfield plus greenfield or acquisition? And if you can talk about, let's say, three-four-year plan, is there a possibility? Broader guidance, what is that?
1500 beds is our plan.
Out of which, I, if I heard correctly, around 1100-1200 beds Brownfield.
All are Brownfield actually. See, we had earlier given a guidance of about 1,200 beds.
Mm-hmm.
Now we are increasing that guidance further, and we are saying that about 1,500 beds. This is Brownfield. As far as acquisitions are concerned, those are slightly opportunistic, and we won't be able to put a number on it.
Absolutely. Brownfield we have a visibility, and this will be over a period of next three-four years or four-five years kind of thing?
Four-five years.
Four-five. Sir, what was the broader CapEx per bed here? Because it's a Brownfield, so I believe it will be meaningfully lower than greenfield.
Yeah. INR 55 lakh-INR 75 lakhs, depending upon the location.
Absolutely. Last bit on this. Even should we consider them to come like evenly, like something like 250 or 300 beds every year again? Or is it like there could be a we will see some spike coming at a later half of your timeframe guidance?
Yeah. I think the spike you will be seeing in the third year onward, where you know the major. Because most of the Brownfield is where we are building additional tower.
Mm-hmm.
This takes only 18 months-24 months for building the tower and then stabilizing it.
Mm-hmm.
That's why I'm saying three years, in three years' time you will be seeing that spike.
Understood. All right, sir. Thank you so much. That's it from my side.
Thank you. Reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Arjun, an individual investor. Please go ahead.
Hi, Dr. Ashutosh Raghuvanshi and team. I think, congratulations on a good set of results. We think the company and all its different arms and businesses seem to be now headed in the right direction and firing on all cylinders. I will not waste too much time. Everybody is very concerned about the Supreme Court judgment. I'm sure it'll come in due time, and hopefully, ruling should be positive. I just want to know what the company plans to do post this event. If you could just throw some light on that from a company perspective. That's my only question. Thank you.
Yeah. Thank you, Arjun. There are several initiatives which would be taken post this resolution. I mean, a lot depends on how exactly the resolution happens. We need to make our structures a little more efficient. That is one initiative which we will have to do so that, you know, we get advantage of our operational flexibility, et cetera, between different entities, et cetera. That is one major activity which we will have to undertake. As you know, we have PE investors in our diagnostic business. We do have an agreement with them where over the next few years we are supposed to give them some kind of an exit, either an IPO or something like that.
Those certain steps will be taken in that direction. Other than that, we would also have a little more flexibility in raising some fresh capital and going for some significant acquisition. As I said earlier, we will be careful and calibrated in our growth.
Perfect, Dr. Ashutosh Raghuvanshi. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
Thank you, ladies and gentlemen, for taking the time to be with us on the call today. If there are any follow-up questions or clarifications, Gaurav and I are available. Please do feel free to reach out to us. Thank you very much again, and have a good day.
Thank you.
Thank you. Ladies and gentlemen, on behalf of Fortis Healthcare, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.