Q1 21/22

Aug 16, 2021

Good day, ladies and gentlemen, and a very warm welcome to the Q1 FY 'twenty two 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Anurag Kalra, Senior Vice President of Investor Relations at Fortis Healthcare Limited. Thank you. And over to you, Mr. Kalra. Thank you, Ali. Very good morning, ladies and gentlemen, and welcome to Fortis Healthcare's quarter 1 FY 'twenty two earnings call. The call is being chaired by Doctor. Ashutosh Raghavanthi, our MD and CEO. With him, we have Mr. Vivek Goel, our Chief Financial Officer. From SRL, the CEO of SRL, Mr. Anand, joins us, and he is accompanied by Mr. Mangesh, who is the Chief Financial Officer of SRL. I hope everyone's got the press release and investor presentation that we had released on Friday evening. And I'm going to request Doctor. Raghuwanshi to start with some comments on the business, followed by Anand, who will take you through the highlights of the Diagnostics business. And then we can open the floor for question and answer. Over to Doctor. Agwanshi. Thank you, Anurag. Good morning, everyone, and welcome to our Q1 financial year 'twenty two earnings call. Thank you for joining us on the call today. I hope you and your families are safe and well in the aftermath of second wave, which has now significantly declined. Before I move on to the performance for the quarter, a word again of thanks to the endless service provider by our doctors, medical staff and non medical staff during the 2nd wave. It has been over a year now and COVID has seen peaks in trust. This time around, given the intensity of the pandemic, we faced severe challenges in terms of some medical resources like oxygen. Despite these, our workforce made all efforts to ensure that COVID patients were treated and cared for as best as possible. We are also actively supporting the government to accelerate vaccination effort across the country with 24 of our facilities providing COVID vaccinations. I would also advise a word of caution on a possible 3rd wave, which is currently being seen in some nations globally. While we are relatively better prepared, having augmented our medical resources, the impact, if any, on the 3rd wave would also depend on its intensity and the spread of transmission. Let me begin by providing you an update on the Supreme Court matter. As you know, all hearings concluded in the first half of May, and the courts were on a summer vacation post that. They have reopened towards the month of July, and we eagerly await judgment by the honorable court, which is expected sometime soon probably before the end of next month. With this, let me straightaway go to the performance for the quarter. I'm pleased to state that despite the first half of the quarter witnessing a severe second wave of the pandemic, the later half has witnessed a speedy recovery with the non COVID revenues showing greater traction. This is in contrast to the 1st wave, wherein despite the fall in COVID cases, elective procedures were slow to begin and took a while to capture. The performance for the quarter in both the hospitals and the diagnostic business has been aided both by the volume of tests and patients related to COVID as well as the faster bounce back of the non COVID business. Coming to the financial performance for the quarter, at a consolidated level, we have recorded healthy revenues of INR INR 1410 crores with 70% coming from hospital business and 30% from diagnostics. The revenue for the quarter are significantly higher than Q1 financial year 2021 and also better by 13% versus quarter 4 of financial year 2021. Our overall EBITDA margins for the quarter are approximately 20% versus negative margin in Q1 financial year 2021 at around 16% margins in quarter 4 of financial year 2021. Our profit before tax prior to exceptional item is a robust INR 180 crores versus a loss of INR 209 crores in the Q1 of last fiscal. This is also a 64% increase over quarter 4 of financial year 2021. At the PAT level, we have reported a PAT of INR 4.31 crores versus a loss of INR 188 crores in the Q1 of last fiscal. We continue to maintain a healthy balance sheet with a net debt to EBITDA ratio of 0.9 times versus 1.04 times at the end of Q4 of financial year 2021. Our net debt to equity ratio is also similar to quarter and versus INR 9.82 crores in quarter 4 of financial year 2021. EBITDA margins were at 15% at INR INR 50 crores versus a loss of INR INR 85 crores in Q1 of financial year 2020 1. We saw an overall occupancy of 65% as compared to 37% in Q1 financial year 2021 and 64% in quarter 4 of financial year 2021. More importantly, non COVID occupancy improved from 30% in May to 47% in June and continues to become stronger in the month of July, and the trend continues in this month as well. This shows that return to normal is rather quick compared to the first phase. Our RCOB has also shown a steady improvement with the overall RCOB at INR 1.62 crore versus INR 1.51 crore in Q1 of financial year 2021 and INR 1.7 in Q4 of financial year 2021. Despite the high COVID volumes, the ARPUB has been robust with the non COVID ARPUB growing 8.5 percent to INR 1.97 crore versus Q4 of financial year 2021. Our overall COVID revenue contribution to the hospital revenue stood at 27%. In addition to the above, we have maintained our focus on various cost optimization levers and continue to look at a host of metrics, including, amongst other things, pharmacy procurement costs, medical consumables, consumption metrics and other costs related to general administrative expenses. Cost has continued to be a perennial area of focus and value addition for the team. With the speedy recovery witnessed in the later half of the quarter, we have maintained traction on our growth and investment plans. Our bed expansion plans are underway with the current plan to add 1200 to 1300 beds over the next couple of years. These would all be brownfield expansions. We have initiated investments in a host of medical equipment, including cath labs, neuro microscopes, new bone marrow units, oxygen generator plants in selected facilities. In addition to the above, we continue to strengthen our clinical workforce by adding eminent doctors in the specialties of pulmonology, oncology, cardiology and orthopedics. I'm also quite pleased to share with you that our Diagnostic business is now on a firm footing. The business recorded robust revenues of INR 4.41 crores aided by both COVID and non COVID test volumes and the consolidation of our SRL BDRC joint venture in which we have now acquired the balanced 50% stake of the joint venture. Diagnostic business EBITDA margin for the quarter were at a robust 31% versus negative margin in the corresponding previous quarter and margins of 22% in the Q4 of financial year 2021. While Anil will take through the performance of the business for Q1, I think our Diagnostic business is now well poised to further accelerate its growth and profitability. The DDRC SRL JV acquisition has fortified our presence in Kerala as a market leader and also helped SRL consolidate its SPAN India position as the 2nd largest diagnostic chain in the country by revenue. With this acquisition, we have also significantly strengthened our B2C business contribution, which is now at a healthy 56% versus 45% in Q4 financial year 2021. More for Anand to elaborate on later. Just some concluding thoughts before I wrap up. I think we have seen a challenging start to financial year 2022, but have seen the business rebound quickly, and I expect the recovery momentum to continue, allowing us to show progressively better quarters going forward. The industry has further evolved with the new health care delivery models, a heightened focus on digitalization and increasing opportunities for growth and consolidation. We remain acutely aware of all these and believe are well placed in terms of our infrastructure and capabilities to partake in these, keeping in mind our long term strategic direction. I would now hand over to Alan to take you through the Diagnostic business. Thank you. Over to you, Alan. Thank you, Doctor. Agwanshu, and a very good morning to everyone on the call. Thank you for joining us today. On behalf of SRL Diagnostics, I warmly welcome you all to our Q1 FY 'twenty two results conference call. Some of you may be experiencing new cases of coronavirus around you or would be coming out of a very difficult period due to the rising cases in some parts of the country. So I wish you all well. And with all humility and hope, I believe the future holds better days for everyone around the country. Looking at our Q1 numbers, I can only say that we are coming off a very strong first quarter where our revenues grew by 2.4% versus the same quarter last year to reach INR 4.41 crores, which is our highest ever recorded quarterly revenue. Our EBITDA stood at INR135 crores in absolute sum and in terms of margin at 30.6% for the quarter, which is also the highest ever achieved so far. I am also particularly happy to let you know that we recorded our highest ever non COVID revenues this quarter. These were primarily driven by higher volumes. Pandemic has made the world realize the importance of diagnostics, not just in terms of advances in technology, but more in terms of public perception of diagnostics as a critical vertical in health care. This has resulted in a growth spurt in preventive packages. We have seen an increase of 2.5x in our preventive care portfolio versus Q1 of FY 2021. Being a true Pan India player with equitable geographical distribution, we were able to serve patients across the country and conducted 1,600,000 COVID-nineteen RT PCR tests, the highest in the private sector. At the same time, SRL recorded the highest ever B2C contribution of 54% in this quarter, driven by digital initiatives and home collections. Throughout the pandemic, SRL also supported its channel partners to grow their businesses by promoting their services via our digital initiatives. On the M and A and partnership front, in Q1 FY 2022, we completed the acquisition of our balanced 50% stake in DDRC SRL Diagnostics Private Limited. This was in line with our strategy to increase our market share in the diagnostic space, especially in the southern part of the country. Operationally, DDRC has been fully integrated into SRL. This acquisition has made SRL a leader in the South amongst national players and a lab chain with the highest number of pathology labs across the country. We also became the official lab diagnostics partner of the Indian Volumbrich Association for the Tokyo 2020 and Paris 2024 games. As a part of our collaboration, we conducted pathology tests of all players representing India, coaches, media and government officials traveling to Tokyo for the Olympics. The COVID-nineteen pandemic has no doubt accelerated the adoption of digital efforts industry wide, making it essential for healthcare organizations to adopt new technologies. Technology and innovation, however, is not new for SRL. We have always been early adopters of technology in our category. But now we have seen its adoption has increased significantly across the board, and that can be a major growth driver in the coming years. Therefore, to improve our customer experience, we took some digital initiatives, which resulted in significant growth in home collection. We generated approximately INR 30 crores of revenue through home collection channel and conducted INR 2.35 lakhs home visits in Q1 FY 2022, which is also our highest ever quarterly number. We took multiple initiatives to expand our home collection reach and continue to do so. Currently, we are providing home collection services in 140 cities across the country. Recently, we also revamped our website into an e commerce website with PWA for a seamless user experience. Our new website comes with features like chatting with experts, searching SRS center near you, booking multiple tests, booking home visits, tracking phlebotomist real time to name a few. We have enrolled ourselves for National Digital Health Mission and are collaborating with them as a health information partner to collect and verify unique health IDs, link pathology reports with health ID and digitally share pathology reports with other health information users based on patients' consent. All these initiatives around customer centricity and digital transformation will help us build an organization that is technologically future ready and able to meet the changing expectations of our patients, clinicians and employees in the post COVID era. All along, we have also worked on improving and retooling our doctor engagement programs, which have helped us forge stronger ties with clinicians. The pandemic has no doubt highlighted the need for extensive RT PCR testing to contain the virus. And when during the 2nd wave, diagnostic facilities were under severe stress, it only affirmed our confidence that we need to continue our investments in workforce and technology. To cater to the growing demand and prepare ourselves for the 3rd wave, we expanded our existing testing capacity and opened more centers and drive through sites to collect samples across the length and breadth of the country. We have engaged with corporates in the travel and entertainment sector this quarter to support their safe return to work. As of date, we have built a network of 16 RT PCR Labs across the country. And in Q1, we commenced 111 new customer touch points across the country. Additionally, to support our government in the national COVID vaccination program, we have now started vaccinations for general public in 4 of our centers. Over the last decade, Genomics has acquired a prominent position within clinical medicine. We have established an advanced center for Genomics at our Mumbai Reference Laboratory that can provide solutions to clinicians through precision diagnostics in the areas of oncology, reproductive health, infectious diseases and inherited disorders. Apart from this, in Q1, we also launched several new tests like COVID-nineteenau, Gastro Panel, MucorReal, FungiReal, clinical exomes, gene rearrangement studies to name a few. Looking back at the quarter, I'm happy that we continue to deliver on our mission to contribute to the well-being of the communities we serve by ensuring the continuity of our operations during the COVID-nineteen second wave. I would like to sincerely thank my colleagues at SRL Diagnostics for their incredible efforts and commitment during these tough times. We also continue to make good progress on our strategy execution by enhancing our development pipelines of both routine and specialized segments, launching new tests, making inroads into newer set of markets, driving productivity and accelerating our innovation agenda. We are committed to improve customer experience through data driven, actionable insights, enabling a convenient one stop shop for all our customers' diagnostic needs. We are well positioned to continue our momentum, delivering profitable and sustainable growth in the coming months. With that, I would like to hand over the call to Mr. Anurag Kalra, Head of Investor Relations. Thank you for your attention. Thank you, Anurag. Ladies and gentlemen, we will now open the floor for question and answers. Moderator, if you could please take Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. First question is from the line of Priyank Gupta from Guardian Advisors. Please go ahead. Congratulations to the team for turning around the business and handling this COVID wave for the whole country. My heart is congratulations. My short question is regarding the Diagnostic business. The management can help us understand if the Diagnostic businesses are getting very good valuations now. So any of the investors or the companies looking at monetizing any of its stake in that business? So for us it remains a very steady business. So the other private equity investors are there, they may be doing their own steadily. But from the company perspective, put aside, this will remain as a very steady asset for us. And there is no plan for divestment. Thank you. Thank you so much. Thank you. The next question is The next question is from the line of Amit Khetan from Laburnum Capital. Can you share a little more granular details on your bed addition plans over the next couple of years? So how many beds are going to be operational in which facilities? And what is the growth and the maintenance CapEx for the next couple of years? Yes, I will take this question. So we have mentioned we have chopped out around 1300 beds, which will be adding to the facilities in the next 3 to 4 years time, okay. And most of these beds, majority part of these beds extension is coming in the NCR region in all our major facilities in NCR. We are the adjacent land parcel is available and the units are operating at 70% plus occupancy and we are planning to extend it. Apart from that, there will be a couple of other units like in Mumbai and Kolkata, where there are certain building which was under completion, which we are getting completed and making the bed operationalized. Everybody, your other question of maintenance CapEx every year. So we planned around INR 150 crores every year as a maintenance CapEx. It is slightly on higher side because the company was not able to spend much prior to back 2019 and there is a lot of accumulated maintenance CapEx and this we are rationalizing based on the priority of the particular unit. I hope I answered your question. Yes. And what is the growth CapEx for the next 2 years? Growth CapEx will be in the range of INR 200 crores every year. Got it. Got it. And can you share the occupancy levels for the month of June July as well as the non COVID occupancy for July? Yes. So that we can see here. So the occupancy for the quarter was 65%. For July, it is 61% because the COVID occupancy has come down. But we are at this occupancy level from 61% will go up further because of the surgical and non COVID work has started coming and we expect a very good growth in that. Interval. Got it, got it. And lastly, your payer mix has improved significantly in the quarter on quarter with skin patients contributing only 16%. How sustainable is this? And would this be the major contributor to the higher non COVID ARPU? Yes. That will our endeavor from beginning was to increase the cash and TPA business. And so we are successful to some extent and we continue on that line. And mind you, this is after taking into account the decline in the international business, which has substantially come down because of the travel restrictions and flight restrictions in India. So we expect and despite that we'll be able to achieve this, so there's no reason to doubt that TingFuture will not be achieving this. Sure. So the 16% of skiing patients is sustainable? Yes, 15% to 17%, as I said, there is a growth plan also. So some of the units where we are expanding the capacity, there is we may have to take the certain skin testing. The next question is from the line of Rishabh Shere Dalal from Praveen Lathal, Share and Stockbrokers. Please go ahead. Yes. Thanks for the opportunity. Just one question on this exceptional gain of 3.06 crores that you booked in this quarter. So what is this exactly if you can explain it in a little bit of details? Yes. So we can explain this. So as you might be aware that SRL our subsidiary SRL Limited was having a joint venture in Kisla in the name of DDRC, okay. So this entity, we were owning 50%, 50% was owned by our JV partner. In April 5, 2021, we have acquired the balance 50% stake from the JV partner. As per accounting standard, the book we need to revalue our investment when we are changing JV to the wholly owned subsidiary. And as a result of which we have to value this our existing 50% investment in the DDRC at the fair value, which comes to around INR 350 crores fair value. And the difference is the carrying value and the fair value is coming in the P and L. Okay. So it means that the cost of our acquisition for this 50 percent so we have acquired at less than INR 300 crores. The difference is the INR 300 crores, right? Yes. So what I said for 50 percent acquisition, we have paid INR 350 crores, okay. The additional 50 percentage stake, we have paid INR 350 crores. The existing investment or existing 50% was carrying in the books at around INR 43 crores, which include the initial investment plus accumulated reserves, okay. So that value we need to reevaluate as per accounting standard and the value the difference in the value was recorded as exceptional gain in the P and L. Okay. So 100% of the revenues of DDRC would now be included in our consolidated financial statement, right? Yes. This quarter include the DDRC revenue also. So what exactly is that number? And what is the path number, if you can share that, for DDRC particularly? Yes, yes. So the revenues for DDRC in the quarter are about INR69 crores. Their margins at EBITDA level are more or less in tune with the SRL margins. Okay. Thank you. Thank you. Thank you. The next question is from the line of Ayush Bansary from Allegro Capital. Please go ahead. Hi. Thank you. So I have a question on the same DDRG acquisition. What I understand is 50% was held by Fortis Hospitals, right? And the additional 50% which has been acquired, has it been acquired by SRN or has it been acquired by Fortis? No, the 50% was owned by the subsidiary of SRL. Existing 50% was also owned by the existing subsidiary of SRL deals and that subsidiary only has acquired the balance of 50% stake. Okay. So the entire DDRC acquisition has been made by SRL? Yes, yes. Entire DDRC through SRS. Okay. The one more question is what is the additional Indeys impact, Indeys 1.16 impact because of DDRC? Like I understand total impact was INE50 crores, INE25 crores was hospital and INE25 crores was diagnostics broadly. What would be the additional impact because of DDRC consolidation? Yes. That will be mainly because of except this one off item which I have explained in detail. There will be there are certain leases which need to be having the 116 impact. Mangesh will be able to comment on this. So we are just evaluating that. This is a preliminary PPA that we have done right now. And we'll be coming up with the exact impact by within 3 quarters. So Okay. Thank you. The next question is from the line of Adi Desai from York Capital. Please go ahead. Hi, everyone. Congrats again on the excellent quarter and historic highs in EBITDA across both segments. My question is on the SRL. I just wanted to get a sense on organic revenue and EBITDA growth. If we exclude the impact of the acquisition, what was the real like organic growth we saw both from a year on year and Q on Q basis excluding the DRDC kind of acquisition over year? Without DDRC, we have actually grown by about 21%. Is that on a Q on Q or a year on year basis? This is actually we are on the sequential on this Q on Q by 164%. If you compare it, I was saying more like to compare it with the Q1 of FY 2020, then it will be a 20%, 21% increase, right? Got it. Okay. That's useful. And then so on that, I mean, I wanted one more follow-up question was on the non sorry, non COVID volumes, which as you kind of highlighted, have increased significantly Q on Q. What was the non COVID volumes excluding DRDC over here, so DDRC over here? Non COVID revenues excluding DDRC? So non COVID volumes. So non COVID volumes last quarter was $6,900,000 in terms of test volumes and non COVID volumes for this quarter is $9,000,000 So if I exclude the DDRC volumes, what were the volumes for non COVID that we saw this quarter? Happy to take this offline as well. I just wanted to get a sense on organic growth and profitability and revenues and volumes. Right. It's INR 2.84 crores without BDS. INR 2.84 crores. Got it. Okay. That's all the questions I have. Thanks so much. Thank you. The next question is from the line of Pratik Vandana from Nomura. Please go ahead. Thanks for the opportunity, sir. Sir, one question on the DDRC, but you told the revenue is INR 69 crores. Is that the gross revenue or the net revenue that? Yes. So it's the gross revenue. So sir, what would be the net revenue number for DDRC? You can share that. So there is no specific from the POTIS point of view, there is no specific net revenue there because it's not part of that revenue generated from POTES. We'll only have a net and gross only for POTES. Okay. And then what would be the COVID and non COVID split in the DDRC revenue? 40% of the revenue is from COVID, but now this is specifically if you see the pricing of COVID in Kerala was very high month of April, but in May June it has significantly come down. So I think going forward also it will be much lesser compared to what it is now in terms of percentage of it. Okay. And so on the margin rate, so what should be the like like the sustainable margin because this quarter we have seen the margin expanded mainly because of operating leverage. It has gone about 30 odd percent. So what should be the like sustainable margins for the Asyl business? So the sustainable steady state margins would be somewhere around 22% to 24%. Okay. And then some of our peers are having margins somewhere between 25% to 30%. So can we reach those kind of margins maybe some years down the line or is there some Yes. We are moving forward to that in that direction. So I think in the next couple of years, we'll be reaching those kind of margins. Okay. Thank you. And so sir, one question on the vaccine, which is so how much revenue was renewed in the hospital from the vaccine vaccination? The total vaccine revenue for this quarter was INR 45 crores. Okay. Thank you, sir. That will be all for my sake. Thank you. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Hi, good afternoon. And thank you for taking my question. Just the first one on the hospital business. I think in the opening remarks, Doctor. Sthur said that July, August, we're starting to see non COVID come back, more surgical will come back. So what's the outlook in terms of, 1, occupancy and revenue mix as we look forward? I know there is a you also cautioned us about a potential 3rd wave. But if you were to look at over the next 9 months, what should we be keeping in mind? And a related question on the hospital is on the margins. I think if I as per your presentation, if I were to support even the Chengdu part, margins came off Q o Q between 4Q and 1Q for 14.7%. So does it have an element of the vaccine? You called out INR 45 crores, but is the EBITDA lower there from a margin perspective? Also COVID in the mix has also diluted margins? Yes. So as far as the occupancy levels currently are concerned are in the ranges between 60% 70% fluctuating. So I expect that to stabilize to 65% plus within this month and certainly from next month over. Now as compared to the previous wave, it was very different this time, and it is likely to remain different even if there was to be a 3rd wave. And we believe that the occupancy levels should remain generally within those ranges. At. So with that in mind, and I think from the numbers we've been able to achieve during this quarter, our belief is that even though there may be a 3rd wave, but it will not have too much impact on our business unless until there is something which is totally, totally unusual. That is regards to the possibility for the next few months. And also, we should see the gradual resumption of the international business, which should also give upside during the Q3 for sure. And then if there is no 3rd wave, then the 4th quarter should make it even better. As far as the profitability from COVID is concerned, it's certainly lower because of the fact that there are price controls, etcetera, and RPOPs typically are lower in the COVID business. However, if we were to take out just the vaccine part of it, then within that, the margins the profitability is about to the tune of about 28% to 30%. So that itself is not a bad business. However, there is lot of problem in terms of supply of vaccines to the private sector now, and demand in private sector for vaccines has also come down. So that is why it may not be a significant number going forward, both either in terms of top line or bottom line as far as the COVID is concerned. Thank you, Doctor. Ashish. Just want to get the margin outlook on a longer term basis. I request in the past, you had talked about it moving towards 16% to 18%. So can you highlight us whether that trajectory can take come through? And what would be some of the drivers for that? Yes. No, absolutely, you see, if we compare with, let's say, sequential quarters from quarter 4 to quarter 1, Because of the COVID wave, we have seen that our profitability has not grown. However, in spite of the fact that 27%, 28% business came from COVID, the profitability has remained more or less in the same range. So we believe that this is only as the things normalize, the profitability profile will only improve from here on. As far as the triggers for that are concerned, one of them was mentioned earlier, which is a favorable patient mix. And we have kept our scheme business always limited below 17%, and we tend to we aim to keep it between 15% 17%, except when we are having some hospitals where the new capacities may be created. But at a blended basis, we always like to keep it at that level. So that is one of the things. The second thing is for last one and a half years because of the uncertainties, there were no pricing levers used at all. So there would be some bit of pricing initiatives, which we will be doing. Other than that, we are working on some of the supply chain initiatives that would bring in some things on the savings side. Thank you. Thank you for the question. Just one last question on the SRL piece. So if you look at the COVID contribution, about 25%, 26%, so about INR 115 crores, we just back it out. So how are we seeing this quarter? Maybe while cases may have come down, testing still continues. So just keep on Western 2Q, 3Q, how should we at least in Q, how should we think about COVID contribution? And when you guide from 50% daily to, say, 22% on a longer term or a more sustainable basis, where is the thing that comes off, right? I'm just curious. Is it the COVID revenues are significantly higher margins and that is where you're trying to now strip out? So the 2 parts to your question, Shahri. So first is on the whether the COVID as a percentage of total revenue contribution will come down. Yes, it's definitely coming down and keep coming down. So we think that it will be somewhere in the range of 14% to 15% of our total revenues. In terms of as you rightly said, there is an operating leverage that has taken our EBITDA to higher levels in this quarter. We hope this on a steady state basis, we'll be able to be somewhere between 42% to 94% for the rest of the month. This is primarily not just driven by COVID related stuff because what happens in COVID is that it's not that COVID also has operating leverage. The volumes are high. So we get a higher EBITDA from there. But we also have to understand that we are overall we have we are going back to our original ways of how many centers that we have and all these centers coming up to their optimal performance. Got it. Thank you and all the best. Thank you. Thank you. The next question is from the line of Rakesh Jhunjhunwala from RARE Enterprises. Please go ahead. Yes. Congrats on the fine result. Why would you ask in normalized circumstances? What kind of occupancy we aim for? Suppose there is no COVID. So, if and you know, fountain travel is allowed. So what kind of occupancy we can target, 75%, 80%, 85% or would be reasonable? Yes. Absolutely. We are targeting anything around 75% as an optimal occupancy level. Beyond that, I think the hospital get overcrowded, but 75% is what we are targeting in next three quarters. And in your bed addition that you have 2 main capital expenditures, 1 is you're adding beds and you're adding equipment, which are not related to what is the kind of how many beds expansion have you planned for the next 2, 3 years? The total bed expansion we have planned is about 1300 beds, which will come over a period of 2 to 3 years. Some of that may go into the 3rd year and some of it, if we get any delays on the project side, might go up to the 4th year, but all this should conclude within next 3 years. Now this has spread across some of our hospitals, namely few hospitals where significant capacities are coming, like for example, in FMRI Hospital in Gurgaon, we will have about 50 beds added in our the Noida facility, we would have about 160 beds added. We would have in Vashi sorry, we would have in Mulund about 80 beds and about 90 beds in Anandpur and Calcutta. These are some of the larger capacities. And in some of the other hospitals like Shalimarwag, etcetera, also there will be beds. Now as far as the major equipment is concerned, it is primarily focused towards oncology specialty. We are looking for some newer technologies as well, which we intend to do within this year. We want to develop our fMRI center as a destination oncology center. So we are looking at focusing on cellular therapies as well as advanced radiation therapies, which are relatively new. So that in your enchilada is a very profitable field. But obviously, 1300 beds, how many beds are going to be in existing premises? All these are in existing premises, sir. So that's all going to allow you to expand your lower cost and your faster time and because of hospitalization? That is correct. Patient's faster time. That is correct. And last month, it was how much is the medical inflation a year? Last month last quarter, I think your average relation was L1.62 lakhs per day? Yes, sir. It is going by about 5 years. So for the non COVID segment, our ARPUB actually improved by about 8.5%. Like in the Q4, our non COVID Forget about COVID, COVID, COVID, Yes. So if COVID is not there, we should expect an ARPU of about 1.9 approximately. In what time? We are already running at that rate, sir. And if you one last question that I have, how many beds do you have as we talk? 3,800. P and L beds, 3,800. You can go to 5,100 in total videos. That's right. And so what happened with the cost measure? So one of the case is there still on the litigation and we have to wait for that high court level, sir. What about the income tax measure? Yes, that has not been resolved yet. I have a very big impact on that. We have 1 in the lower court. Department has gone for appeal. Department has gone for an appeal. So that's why it is not resolved. Even if we lose, we don't pay anything. And we win, we don't get anything. All it costs, I believe. Yes. So we for this income tax case, sir, you might be knowing it is disclosed in the balance sheet also. We kept the deposit from the consideration paid to Escort earlier. So we will not get out for the rest. Escort has paid the bank, compensation to department. That's correct. That's correct, sir. And at the time of transaction, monies were paid from escorts, which have been kept as a deposit escrow deposits. Excuse me. Excuse me. Excuse me. If escorts, if we win the case in the higher courts, escorts will get the result. Yes, sir. That's right. My last question is, it is my deep wish as a shareholder that you please buy the 43% of the other investors in the diagnostic business can you please deemerge and have an arm length relationship with Ford and the Diagnostic business. And I'm also ready if you buy the 43%, I can also make a contribution to buy. I don't want that IHS buys those shares and then IHS becomes a major part of the regulatory business. IHS shareholders also would like to participate. And I can also participate either by participating in the buying process or you buy them out, merge them into the company and demerge. That's my decision to convert to your borrowers. Yes, sir. All the possible point of views have will be conveyed to our Board, and they will evaluate all these issues and certainly we'll take the right step for all the stakeholders. I hope then we have the right copy of this. Yes, sir. Thank you, Sahil. Really, congrats on your fine performance. I think you will do really, really, really well. I bought 40 shares for every member of my family. Thank you. Thank you. And so you're not expanding in that Veja in Bombay? There is no space there, but we are modifying couple of floors and making some deluxe rooms, etcetera, available over there. It was very well located in a hospital. Thank you. The next question is from the line of Ritesh Rathore from Nippon India Mutual Fund. Please go ahead. Yes. Hi, everyone. First of all, heartfelt thanks for you supporting in the 2nd COVID way most of your team members are available. So a very heartfelt thanks. My question is more on the long term margin profitability, which you spoke about 16% to 18% and you spoke about payer mix, pricing mix, cost optimization. But surprisingly, you have not spoken about your hospital margin metrics. Your 900 beds are below 15% margins with 52% occupancy and within that 900, 670 beds are below 10% EBITDA margin with 52% occupancy. This is why I'm talking from your Q4 FY 2021 presentation where you have given your hospital margin metrics. Can this be a big lever on a long term basis and your long term margin profitability target can have further upside because a decent chunk of your hospital beds are at a very low occupancy and at a very low profitability? Yes. There are two sides of this, and you have correctly pointed out that there are certain assets which are underperforming assets at the moment. So now they are both an opportunity as well as we need to be evaluate continuously whether as a portfolio, whether those assets make sense for us. And we will always be evaluating every business for its performance and what are the various steps we can take in order to bring it to the desired profitability profile. So certain assets would go towards that, and we can see a lot of progress happening in few of our hospitals like, for example, in Jaipur, where there has been a real turnaround, and we have good hope for making it even better. However, our Chennai Malar facility has underperformed consistently for some time, and we are taking the necessary steps to improve that. However, we will be open to considering other alternatives in case we do not see a proper progress there. So in that case, is that possibility fair? And your long term profitability can further upside from 16% to 18% range because I assume you would divest those underperforming assets, 2 or 3 assets which you are pointing at. That is absolutely would be the assumption at the moment because you see the idea is to make the entire portfolio as possible. So every hospital should have a viability on its own. That is extremely important. And other than that, it's important that overall the group is not dragged by the underperformers. So certainly, that possibility is there. And your decision making on this would get accelerated post the Supreme Court verdict, which may be out in whatever time period, if you can give more color over there? Yes, absolutely. Supreme Court verdict though does not affect us operationally, but many such decisions will become easier for us post the verdict. So that time we can think of both the growth as well as realigning some of the assets is something which we can consider very actively and in an accelerated manner post Supreme Court verdict. And a timeline for Supreme Court verdict? So we expect it to because as I said earlier that it was over in May, the hearings were over in the first half of May. So we expect that the verdict should come certainly before the end of this month. And just one last linkage. Since you mentioned about the brownfield expansion of 1300 bytes, I presume those are not happening in this underperforming assets which you highlighted or in this 900 bytes which are which has a very low occupancy? No, no, they are not those. Thanks a lot. That's from my side. Thank you. The next question is from the line of Sion Mukherjee from Nomura. Please go ahead. Yes. Thanks for taking my question. Sir, any comments you have on M and A? I think you mentioned sometime back you are looking at assets. How is the market looking possibilities of adding beds in organically at this point? So MCT is very much supportive of any acquisition. But having said that, we have ample opportunity available within our network itself. So we are first want to utilize that and then if some opportunity comes we are open for it. On the second question was on the SRL. One question is on the pricing environment in general, now you have some of the e pharmacy players getting aggressive in that space. What is your sense as to what could be the pricing environment going forward, anything you'd like to comment on? And also secondly on the test mix, I mean you mentioned about certain innovation programs that you're running, So called esoteric tests contribute to your revenues and how should we think about that going forward? Right. So on the pricing pressures, so what I feel except for the few tests which have been controlled by government through price capping, so other tests don't fall under this. And when you talk about competition from digital players, so they play mostly in the wellness segment, which is directly consumed by the customer. So what is being prescribed by the doctor and the specialized tests and other packages, which are not coming under the purview of these players, so they will not be under pressure from those kind of tests. So it will be a very limited play on competition from the digital side. Yes. And the case and the test mix? On the test mix, currently, Our test mix is currently on about 26% is from COVID, and the balance, 74% is from non COVID. Out of this, almost about 50% is from routine and rest is from specialized. So the specialized non COVID is primarily will have the growth which is happening there because of our renewed focus on esoteric testing as well as next generation diagnostics. The 50% you said is a routine, right? Yes. Okay. Thank you. Thank you. The next question is from the line of Neelam Panjabi from Perpetuity Limited. Please go ahead. Thanks for taking my question. My question pertains to the hospital business. So you mentioned that the non COVID ARPUB is at around INR 1.97 crores. So how sustainable is this number? And if you can please comment on your long term sustainable ARPUB? Yes. So as I said earlier, the ARPUB is approximately 1.9 is what we can expect to be a sustainable number. We have already achieved it. And the month of in the Q1, it's typically higher because maybe the procedures were more complicated during this phase, but this is a sustainable number. Other thing fact which I mentioned is that there has been no pricing intervention for almost more than a year or so. So some of that intervention is also likely to happen. So this is a sustainable number. Thanks. That's all from my side. Thank you. As there are no further questions in queue, I now hand the conference over to Mr. Kalra for closing comments. Thanks, Ali. Ladies and gentlemen, thank you for taking the time to be with us on the call today. I hope we've been able to provide you all the answers. If there's anything more, Gaurav, my colleague and myself are available over the phone or by email, so do let us know. Thank you again, and have a good day. Thank you very much. Ladies and gentlemen, on behalf of Virtus Healthcare Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.