Ladies and gentlemen, welcome to the Q2 and H1 FY25 Earnings Conference Call of HealthCare Global Enterprises Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of the date of this call. These statements do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * then 0 on your touch-tone phone. Please note that this conference call is being recorded. Now, I hand over the conference to Dr. B.S. Ajaikumar, Executive Chairman of HealthCare Global Enterprises Limited. Thank you, and over to you, sir.
The Q2 earnings conference call for HealthCare Global Enterprises Limited. Today, I'm joined by Mr. Raj Gore, CEO, Ms. Ruby Ritolia, CFO, and senior management team along with SGA, our investor relations advisor. I am proud to announce the robust financial and operational performance for Q2 FY25, a testament to the dedication and expertise of our exceptional capabilities, team of doctors, and support staff. For over two decades, HCG has served as a beacon of hope for millions, establishing itself as one of India's most trusted healthcare brands. It is because of our team's commitment that today we manage one of the highest volumes of complex cancer cases across diverse geographies, consistently delivering excellence even in the most challenging cases. This strong performance for the quarter not only reflects our operational capabilities, but also the resilience and compassion that define HCG.
At HCG, we recognize that cancer is a complex and multifaceted disease with over 600 types identified, and each requiring a unique focused approach to diagnose and treat. Our models are based on personalized, patient-centric care, ensuring that each individual patient receives precise treatment tailored to their specific cancer type and stage. This involves leveraging specialized teams that include organ and modality-specific oncologists who collaborate to deliver comprehensive multimodal care. We are also, in this regard, have become leaders in research and academics, and our R&D department is one of the most growth-oriented departments where we are seeing a number of papers being published. In fact, recently at the conference, in the international conference in Chicago, ours was the only Indian presentation at the podium presentation, and we are very proud of it.
Our commitment extends beyond treatment with an end-to-end approach that includes lifelong aftercare support, recognizing that cancer management is a journey that requires continuous vigilance and care. HCG's integration of advanced technologies, genomics, and artificial intelligence reflects our dedication to staying at the forefront of cancer research, ensuring that our patients benefit from the latest innovations in cancer care. In this regard, I'm again proud to announce that we have signed agreements with the ProCan in regard to working with them on fundamental biological research, and also with Accenture, where we are going to be doing computational work with them, which will help in identifying patients who require precise treatments, and based on that, we can bucket to see which patient requires the right treatment at what time.
Lastly, our hub-and-spoke model plays a crucial role in extending specialized and advanced care across regions, with central hubs providing expertise and support to a network of satellites. This structure ensures that even patients in remote areas have access to top-tier cancer treatments, contributing significantly to our operational success, and most importantly, bringing out better outcomes for these patients. As we know, in the past, the outcome has been a big answer, and we are very proud to say today HCG's data clearly says in some of our. In closing, our strong performance this quarter reflects HCG's commitment to excellence in cancer care, a dedicated team, advanced technology, and a focus on patient-centric treatment. We are well expanding our reach, enhancing our services, and upholding the standards that have made HCG one of the most trusted names in healthcare.
We look forward to building on this success for the years ahead. I would now like to hand over the call to Mr. Raj Gore, our CEO, who will provide insights into our strategies moving forward and share the operational performance of the quarter. Raj?
Thank you, Dr. Ajaikumar. A very warm welcome to all the participants on the call. Today, I'm proud to announce that our performance for Q2 and H1 FY25 has reached new heights, marking the best quarterly results in HCG's history and outperforming the industry growth. We have achieved revenue of INR 553.5 crores for the quarter, reflecting a robust growth of 14% compared to the same period last year. Likewise, our revenue for H1 FY25 has also increased by 14%, standing at INR 107.9 crores compared to H1 FY24.
Our adjusted EBITDA crossed INR 100 crores first time, reaching INR 104.2 crores, witnessing a strong growth of 21% for the quarter on year-on-year basis, and margins have shown significant improvement, reaching 18.8% in Q2 FY25 compared to 17.8% in Q2 FY24. Pro forma revenue growth, including Vizag acquisition, stands at 20%, with EBITDA margin of 19%. This increase reflects higher revenue and cost efficiency, with operating leverage positively impacting our performance. Additionally, we have focused on digital initiatives, which have enhanced our operational efficiency and streamlined processes, contributing further to our margin growth. This growth is the result of our collective efforts, driven by focused commitment to delivering clinical outcomes that match the best institutions globally, right here across India, in not just metro but also non-metro locations. The oncology business has experienced impressive 20% growth after adjusting for the exited center in MSR Bangalore last year.
Revenue growth has been strong across all markets where HCG operates, reducing concentration risk and reinforcing our market leadership in 16 out of 18 locations. The domestic business has performed strongly, more than offsetting a 17% decline in international revenue due to geopolitical challenges in a few markets, particularly in Bangladesh. We expect the situation to start normalizing by Q4 of the current fiscal year. Looking ahead, we have been working on several key strategies to accelerate and sustain the growth of HCG. After several years of steady organic growth, HCG is now focusing on accelerating its expansion through strategic acquisitions. In the past year, the company has completed two acquisitions, one in Indore and the other in Visakhapatnam, reinforcing our earlier stated position of adding 200 to 300 beds of growth through acquisitions.
Alongside our growth initiatives through acquisitions, we are prioritizing brownfield expansion across our network, with significant focus on our key markets in Bangalore, Ahmedabad, and Cuttack. We successfully operationalized our new state-of-the-art 200-bedded comprehensive cancer care center in Ahmedabad in Q2 . The transition has been smooth, with minimum impact on our business. We are currently developing two state-of-the-art hospitals with a total of 125 beds in North Bangalore and Whitefield area in Bangalore. These facilities are expected to be fully operational by early FY26. We plan to add 60 beds in Cuttack, with the potential to expand to over 100 beds in the future. Construction is set to begin in the current financial year, with operations expected to start by early FY27.
We aim to expand in our existing markets by operationalizing over 900 additional beds across the network within the next three years, including this year's addition. Of these, 350 beds are fully invested but not yet operational. Now, let me share an exciting update on our digital transformation initiative that we embarked on about two years ago. To recap, there were two primary objectives behind it. First, with around 20 lakh reported new cancer patients diagnosed every year among the population of 146 crores, ours is a thinly dense, widely spread, fragmented target market. Taking advantage of increased internet usage and evolving consumer behavior, we want to make it easier for cancer patients across all India to find HCG care by creating online awareness and omnichannel access to quality care.
This is a huge opportunity for HCG to move from being a network of current 18 physical micro markets to a pan-India cancer network with a combination of physical and digital presence. Second, we don't treat cancer. We treat patients with cancer. Cancer patients' journey starts before HCG hospital and continues after HCG for the rest of their lifetime. We want to stitch together an omnichannel, seamless journey and a relationship with our patients with the help of digital technology. The objective is to build a long-term relationship with our patients, to be a trusted advisor over a lifetime and not just a care provider at one point in time. We are pleased to share that digital initiatives have significantly boosted our patient finance, raising digital channel revenue to 14% of our overall revenue in Q2 , up from 4% in Q2 of FY23.
By strengthening our patient acquisition capabilities through HCG-owned digital assets like websites, social media handles, and online campaigns, we have been able to grow digital revenue 4.6x in metro and 6.3x in non-metro locations during this two-year period. Our aim is to achieve 25% of revenue through digital platforms over the next three to five years. Lastly, on our emerging centers, we've been focused on boosting revenue from these centers. I'm pleased to share that our center in Kolkata has shown particularly strong performance of 66% growth in revenue. This growth has not only increased our margins but also contributed to an overall revenue boost, helping us absorb fixed costs and drive operating leverage, which has positively impacted our margins. Our South Mumbai center has faced challenges due to the decline in international business, due to the geopolitical situation in key markets, though domestic business continues to grow.
To offset this, the company is expanding into new domestic catchments. While international business is expected to recover by Q4 of fiscal year, we remain confident in the center's potential for a turnaround. Our recent acquisition of MG Hospital in Visakhapatnam has been progressing in line with our plan, and we are rightly positioned to consolidate our presence in the region. As we look to the future, we remain focused on innovation, patient-centered care, and expanding our reach to bring hope and healing to more cancer patients. Together, we are not just building a stronger organization but a brighter future for all those we serve. Thank you for your continued trust and support on this journey. With this, I hand it over to Ms. Ruby, our CFO, for financial highlights.
Thank you, Raj, and good morning, everyone. As Raj already elaborated, I am pleased to report that our performance this quarter demonstrates strong momentum with a robust 14% year-on-year growth, driving our top line to INR 554 crores for Q2 -ended FY25. Excluding Milann, our HCG centers delivered an impressive 15% year-on-year revenue growth, fueled by consistent volume increase across all modalities. Specifically, HCG oncology centers, on a like-for-like basis, adjusting for our closure of M.S. Ramaiah Hospital , achieved an outstanding 19% growth year-on-year. Our key operating metrics have also shown significant improvement this quarter. OPD footfalls, which are a vital indicator of volume growth, are accounting for 18% of our revenue, increased by 9%. In medical oncology, we saw a 14% increase in chemotherapy sessions, reflecting the continued expansion of our patient base.
Capacity utilization for our Linac machine reached 70%, up from 55% in the previous quarter, with three machines currently being under replacement. Through our innovative hub-and-spoke model, we were well-positioned to expand Linac installations in new locations in the near future. Additionally, our patient bed occupancy rate remained strong at 61%, underscoring our commitment to optimize facility utilization and improving patient access to care. Turning to our core operations, both our established and emerging centers have delivered strong performance this quarter. Our established centers continue to demonstrate steady growth with a 13% year-on-year revenue growth, alongside a robust 20% growth in EBITDA. At the same time, our emerging centers have exhibited exceptional momentum, achieving a 32% increase in revenue for the quarter, with EBITDA expanding fivefold. Notably, our Kolkata center has posted an impressive 66% revenue growth, while our Mumbai centers have collectively grown by 15%.
We are also on track for our South Mumbai centers to break even this year. These markets are pivotal for us as they are located in tier-one cities with large catchment areas and are key hubs for international patients. The outstanding growth in our emerging centers is a result of multiple initiatives implemented across locations, which is further bolstered by operating leverage that is steadily enhancing our financial profile. We are confident in our ability to maintain this upward trajectory as our strategic initiatives, coupled with enhanced operational efficiencies, continue to drive sustained growth and strengthen our overall financial performance. Coming to ARPOP, total ARPOP grew by 7.4%, standing at INR 45,188. Established centers witnessed an ARPOP growth of 7%, standing at INR 43,394, and ARPOP for emerging centers witnessed a strong growth of 10%, standing at INR 72,652.
CapEx spent for the quarter was INR 52 crores, which includes the CyberKnife replacement in Bangalore. We expect the CapEx to be around INR 250 to 300 crores in FY25. Other income for the quarter includes one-time insurance claim and EPCG settlement to the tune of INR 5 crores. Our ETR for the quarter is at 25%, and this is on account of profits accruing in subsidies, thereby minimizing the tax credit losses that we have. This is the performance summary that we had to share. If you have any further questions, please let us know.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press Star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star and 2. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question is from the line of Sagar Karna from Alchemy Ventures. Please go ahead.
Thank you, and congratulations on a good set of numbers. I think you've been delivering what we have been talking about since the last few quarters. I have two questions. One is, what was our loss in Bombay Hospital in the first half?
Loss in terms of EBITDA?
Yes.
First half, in Q1 , Bombay Hospital put together posted a profit of INR 10 million in Q2 .
This is South Mumbai and Borivali, right?
Yeah.
No. Just say, South Bombay Hospital, what would be the total loss for the first half?
So South Mumbai first half would be close about INR 3.8 crores, officially INR 4 crores.
4 crores odd, right? Okay. Second thing you also mentioned, there is some slump sale or divestment of the business to a wholly-owned subsidiary. Can you explain this transaction and how it impacts and what is the rationale behind this?
This transaction that we have mentioned as a resolution to the board meeting has been on account of us looking at our Triesta and Cyclotron business moving out of the HCG fold into a separate entity, from where we can look at growing it beyond the HCG networks also. So this is more on account of business realignment, where Onco comes under one company, and the expandable business, which we can look at expanding beyond our own networks, which is the lab and the Cyclotron business, can move to a separate entity, and it allows greater freedom with a separate entity structure.
What are the scopes of activities we will undertake here?
Largely, it will be the lab business and the Cyclotron lab business, which is under Triesta.
Got it. So it will be more like a standalone radiology pathology lab kind of a business. Is my understanding correct?
Yeah. I think the main reason is, as we know, lab has become diagnostics has become very important in any field, particularly oncology, with re-expanding into genomics and personalized treatment. What Ruby was trying to convey is there is a scope for extension beyond HCG. So it requires a focused approach, and that is why we decided to take this action. So it could grow as Triesta brand name. And similarly, with Cyclotron, which is a production of FDG, it's a production unit which can produce FDG for non-HCG also. So these two ideas have been brought together with the area of because their growth has been good, and they can continue to grow beyond HCG growth. That is the intention we have to see that it can grow.
So currently, how many centers do we have?
You're talking about HCG centers?
No, these Triesta centers.
No, all of the Triesta centers are there along wherever the hospitals are, with 24 centers. We have Triesta centers all over. They're all attached to hospitals. Now we are trying to see how we can bring in work from outside our HCG hospitals. That is the intention.
Got it. Got it. So it will not be like a standalone, and it will continue to be a part of a hospital network or part of the hospital infrastructure itself. Do you understand?
At this time, that is the goal. That is the idea.
Got it. Thank you so much.
Are we going to the next question? Hello?
No, I'm done, sir. I'm done with my questions.
No, are we going to the next question?
Operator, can you go to the next question, please?
Yes, sir. Just a moment, sir.
Is there something wrong?
Yes, sir. The next question is from the line of Ankush Mahajan from Axis Securities. Please go ahead.
Thank you for providing your opportunity. So, sir, this is once again that in the existing center, the EBITDA is on sequential basis, is on the lower side. So the question still arises that in existing centers, when will we build a double-digit ROC? I really appreciate, sir, if you throw more light on this side because continuously we are focusing on this part. Existing centers are not making ROC, and EBITDA is continuously decreasing. So would you throw some more light on it, sir? Can we say, sir, that if you compare ARPOB of the Max and Fortis, they are quite on the higher side, and we still have the there is a gap of ARPOB? That is a major reason. We want just a view on it, sir, that the ROC on the existing centers.
Hi, Ankush. Is this the question on existing centers or emerging centers? Emerging centers, right?
No, no, existing centers. Existing centers are already emerging. I'm talking about existing centers, sir. It's more than two years, sir, now.
Just a clarification, sir, regarding it. Is the question on emerging centers or existing centers?
Emerging centers, sir.
Okay, so there are two things here we need to look at. One is, I mean, we have changed the definition of our emerging centers. Now, only three centers are part of our emerging centers, which is Mumbai, two centers, and Kolkata, one center. We have been reporting strong performance on Kolkata in some last three, four quarters. As you see, and in fact, at the current year, we are expecting to add almost about more than 10 quarters of EBITDA in the current centers. Last year, Kolkata center delivered a negative ROC of almost about 20%. This year, we are expecting we are on an H1 annualized basis. It's a positive ROC already. This ROC in Kolkata center, we are expecting it to be in double digits, which is, let's say, high teens. So this is showing the path.
Kolkata is showing the path in terms of where the ROC could be. There has been a dramatic change in terms of return profile of the centers. So this is one market within the emerging centers. So we are very hopeful with the progress the way we are making in Kolkata. The second one is in Mumbai centers. We are progressing well as far as our Borivali center is concerned. We are generating decent ROC there in single digits. We have our own challenge as far as South Mumbai is concerned. So in our entire portfolio, be it emerging or existing, we have one center which we need to turn around, which is South Mumbai. That center is also heavily invested because that center has heavy CapEx in terms of which has been invested in technology. There are two machines, radiation machines.
Together, they account for almost about INR 30 to 35 crores. Overall, we have made an investment of INR 100 crores in South Mumbai. So this is one center-specific issue, and we are very hopeful that as the Kolkata and Borivali center grows, our ROC should pan out. We have our tasks in hand as far as South Mumbai is concerned, which we expect to turn around within a couple of quarters.
Thank you, sir.
If I can address your ARPOB.
Yeah. My question was, if we compare with the industry leaders, not industry leaders like Max and Fortis, they have a higher ARPOB. So can we reach to these levels? What are the aspirations?
Yeah. So as you know, historically, we've had a larger presence in tier two, tier three markets. The centers that we have opened in the last five years are largely in Mumbai, Kolkata, and better and bigger quality of markets like Nagpur, like Baroda. We have moved from about 35,000-36,000 ARPOB two years ago to 45,000 ARPOB in the previous quarter. That's a blended ARPOB for the whole network. But if you look at our ARPOB in, let's say, Bangalore or Ahmedabad, it is in mid-80s. If you look at our ARPOB in Mumbai, Kolkata, it's in higher 60s or lower 70s. If you look at our ARPOB in Nagpur, Baroda, which are growing very well, they are in 50s. As these centers continue to grow and contribute higher percentage revenue share to the total revenue, our ARPOB will continue to improve in the north direction.
So once again, we've made very good progress on ARPOB in the last two years. Our big market ARPOB is actually comparable or better than many other players. And as we grow, our ARPOB will start moving in the north direction.
Thank you, sir. That's from my side. Thank you. Before we take our next question, we would like to remind participants that you may press Star and 1 to ask a question. Our next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks. Quick question. Raj, you mentioned a few opening comments around your digital initiatives. I mean, two or three things. One is, can you help us understand the strategic importance of increasing digital sales in the business? And I mean, what kind of impact does it have on the profitability? I mean, is it a more profitable stream of business than the non-digital part of the business? And does it really contribute much to the metro part of the business or the non-metro part if you can just probably throw some more light on these aspects?
Thank you for that question because it's really important strategically for us, this initiative. As I mentioned in my commentary, we know from our experience that India as a cancer market is growing at a very high rate. The availability of comprehensive cancer care, it's skewed towards metro cities, and it is not available if you go even 50, 100 kilometers away from metro cities. Now, we know that if there is any specialty where patients don't mind traveling large distance, it's cancer. Historically, we've seen the public hospitals or trust hospitals which were cancer-focused, like Adyar Cancer Institute, Kidwai Memorial Institute of Oncology, Rajiv Gandhi Cancer Institute and Research Centre, Tata Memorial Centre, have drawn patients from all across India. Now, we feel that as a head city, as the dominant player in cancer, we should be able to tap into the entire Indian market.
The best way to reach out to these cancer patients and create awareness and make sure that we convert them into aid is through their mobile phones or through their laptops. Therefore, I think what we are doing is currently, we are at some of our 18 micro markets, physical micro markets. With our digital initiative, with online presence and awareness, we have an ability to have a pan-India virtual and a physical market. We know that consumer behavior is also evolving at a very rapid rate where forget cancer, even to go to a restaurant to buy any product, to experience any service, we reach out to the internet, and we do our background work. When it comes to life and death in cancer, patients are definitely going to exercise that option.
That gives us an opportunity to get into their consideration set because, after all, we are the largest player, and with online presence, it's easy to get into their consideration set. Once we get into their consideration set, what we have is an omnichannel platform with websites, social media campaigns, social media handles, call centers, physical call centers. With a newly implemented CRM center and a digitized call center, we have an ability to convert every query, every need in few clicks to our OPD consultation chamber of our oncologists, and then we have a visibility, longitudinal visibility from an initial interest lead to OPD consultation, to diagnostic, to treatment, to post-successful treatment, follow-up in three months, six months, for the rest of their lifetime through our CRM capability, so in many ways, it's not necessarily a digital transformation.
It's actually a transformation of our relationship with patients from an episode relationship to a lifelong trusted advisor relationship. That gives us the ability to be there for cancer patients and meet all their needs before hospitalization, post-hospitalization, and give us the ability to nudge them to come back after post-successful treatment for follow-up so we can ensure that cancer hasn't come back. And unfortunately, if it comes back, we have an ability to retake in time, which is a key to delivering better outcomes and bring them back for treatment again. So it's a very strategically important initiative. As I mentioned, we usually make a mistake of associating internet usage to metro cities. What we have seen in some of the markets, we have very good response in non-metro markets. Our metro markets have grown 4x. Our non-metro markets have grown more than 6x.
Now, what we are doing is we are adding vernacular capability in our call centers, in our website, social media, YouTube channels, which I feel will give us even a deeper penetration in tier two, tier three markets where there is a dearth of cancer treatment options and therefore gives us the ability to bring them to our physical locations. So that's the overall strategy for digital. We have grown to about 14% in just two years from a 3% to 4% of our total revenue coming from digital influence so far. We are very confident in the next three years, we can take it to 25%. Today, digital revenue is our second largest hospital, if I look at that. And we feel going forward, that will continue to be our largest hospital in terms of patient footfalls.
Just to add to that, in terms of your other question was on profitability from patient sales through digital means. The primary difference as far as the profitability is concerned between digital and non-digital source patients lies in the cost of acquisition of the patient. As you would know, we have two sources of the patients. One is B2B, and B2B is primarily through our network participating doctors, where our cost somewhere lies close to about 6% to 7%. In comparison to that, the digitally driven patients, the cost of acquisition of those patients are in the range of 1% to 1.5%. Within digital channels, I mean, there are two primary sources. One is organically sourced patients, and second is digital campaign-led patients. The cost of acquisition of patients through digital campaign-led patients are a little higher compared to our organically sourced patients.
What we have seen over the last three to four quarters is that the patient volumes from our organic channels are increasing compared to our campaign-led channels, so as we move forward, this 1% to 1.5% also is expected to go down in future, so we are very hopeful in terms of simply, it's a very highly profitable channel of our business. As it grows, it should also add to our overall market. Thank you, Ashu, and there is one more point. If you look at the industry after industry, the disruption has happened due to digital technology in customer acquisition front. We've seen e-commerce platforms doing backward integration and acquiring brick-and-mortar businesses. This is our way to go forward. We have the strongest network of brick-and-mortar hospitals.
This is our way to move forward and create a virtual channel and own the relationship with cancer patients directly without any middle person. Whether anyone refers them or not to us, we want to have that ability to create awareness and get into their consideration and own the relationship directly with our cancer patients throughout their lifetime.
Got it. Thank you so much for this comprehensive answer.
Thank you, Nitin.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. For any follow-up questions, you may rejoin the queue. Our next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Good afternoon. Thank you for taking my question. I joined a little late, so if it's been asked, just pardon me. So just on the MG Hospital acquisition, they have about 30% share. I think you also have a reasonable amount of share. So just want to understand from a micro market or Visakhapatnam perspective. And when I look at some of the even the growth estimate, I don't know why it's fiscal 2024E for in your slide 29, but growth has been 5% to 6% only for this particular hospital. So how should we look at growth for this once we get it acquired into our system? Do you think there is scope for improving the growth? And the margins, when I look at it, I know you've talked about it in the past as well, but they're sliding down. So anything that you think we need to do differently for this acquisition?
Yeah, absolutely, Shyam. Thank you for that question. This is a new question this time. However, we've addressed some of your concerns in our previous calls on MG acquisition, but I will again explain. We have had a presence in Visakhapatnam for the last almost from 2017, 2018. We have a 17% market share. Number one player has been MG with more than 30% market share. We bet that Visakhapatnam is a top 10 GDP growing city market in India. It's an important location for the state of Andhra Pradesh with port, airport connectivity and focus on industrial growth. We felt that we had a perfect opportunity to consolidate our market share in this city and state where we already have a larger presence. Now, coming to your question of MG growth, what we have observed is there are two, three levers that we have available.
One, we have identified the way to add about 25 beds in the center, and that will ensure growth. We will, on the other hand, our own center, we are about to add about 30-35 beds this year and another 30-35 beds in the coming two years. So between these two setups, we will be able to add about 60 to almost 90 beds in the next two-three years, so that will ensure that both businesses and our market share in Vizag continues to grow and both businesses continue to grow. We have identified levers on a revenue side, synergy levers on the revenue side. Both hospitals have independent deeper penetration in terms of your go-to-market capability, in terms of referral network.
Both hospitals have very strong capabilities on the clinical side, but there are complementary capabilities that we can spread over both centers rather than just one center to drive better utilization of our medical equipment and clinical program and get better productivity on our sales and marketing machinery. I think as a combination of that, we are confident that we'll continue to grow both businesses and combined business in this market going forward.
Sir, when you look at the bottlenecking, like you said, when you're trying to add these, what is our current AOR? Or I know it's less relevant for oncology, but just want to understand, what is the current AOR at MG?
Yeah, so I think MG would be about 70% to 75%. That is probably the reason why it's been stagnating or slowing down in the last three years or so. That's what we are debottlenecking going forward.
Yeah. And just the second question on the overall company, if you could exclude MG, just want to understand how should we look at overall growth for the remainder of the second half, top line, and what could happen to margins? If you could give us some directional sense, please. Thank you.
Yeah, so as I said, in H1, we have grown at a 14%. Our oncology business has grown at 19% if we adjust the exit from MSR Bangalore Hospital, which was there last year. So I think we are outpacing the industry growth. We'll continue to maintain that momentum in Q3 and Q4. We are very confident. As you know, we have both quarters, Q1 and Q2, we've had about 100, 110 basis points margin expansion. We will continue to move forward on our margin expansion journey. And before you joined, we shared that we feel that we will today, if you look at a pro forma basis, we are 19% EBITDA. Without MG, we are about 18.8% adjusted EBITDA. We will continue to go forward on our margin expansion and we'll inch towards 20% by Q4.
Yes, Shreedhar. Thank you and all the best. Thank you.
Thank you.
Next question is from the line of Yash Tarek from RSC Inventors. Please go ahead.
This is Aiman. Are you on audio?
Yes, I see Yash. Please go ahead with the question.
Thank you for the opportunity. With respect to other income, HCG's other income is going to be a one-off. So are we expecting the other income to run down a bit here and there, or is it going to be in the same range?
This one-time is only for this quarter. We reported a PAT of about INR 18.2 to 18.3 crore, which if we were to adjust for this one-time, would go to about INR 15.3 to 15.4 crore. However, as we know that in Q3 and Q4 , we get a better operating leverage and margin expansion happens, that would also close to the PAT. These one-time expenses were one-time. These will not continue.
Okay. And can you give an ETR guidance for the full year? Are we expecting to pay more tax in Q3 and Q4?
So ETR, we will be around in the range of about 28% or so. We should be below that. So we'll continue with the better ETR percentage. For the first time, we hit 25% this quarter, which was on account of largely our subsidies turning into profit, and thus we're not losing our tax credits over there. So this week, and hopefully, we want to continue. And for the rest of the year also, it should not go beyond 28%.
Thank you. So in the Ahmedabad facility, is it completely operationalized, or are we expecting it to ramp up slowly?
Did I hear the name correctly, Ahmedabad?
Yes, yes.
So, just to recap, what we've done in Ahmedabad is we had about a 100-bedded facility, which we had a dominant market share. While we continued to grow, the capacity was a bottleneck. In the last quarter, we moved to a newly built-to-our-spec modern premium facility, which is 200-bedded. We have moved from our old facility to the new facility. That transition happened in Q2. And going forward, we want to grow and therefore the additional capacity. So we will continue to ramp that facility going forward, which will give us an ability to grow at a higher rate going forward.
Just a last question. The total CapEx for the year is around INR 300 crores. By now, how much have we already incurred? And the average cost of debt?
I think Q1 , we incurred about INR 80 crores, and current quarter, we incurred about INR 50 crores. About INR 150 crores we've already incurred.
The average cost of debt?
No, I don't think this is an amalgamation of your maintenance CapEx as well as growth CapEx. So it's difficult to give you an average per bed because it's a mix of both. And just to add, for the new beds which we are adding, we have separately disclosed in our presentation for Ahmedabad center and Bangalore centers.
Okay. Thank you, sir. Thank you so much.
Thank you. Our next question is from the line of Priyank Parekh from Abakkus Asset Managers, LLP. Please go ahead.
Yeah, thanks for the opportunity. Sir, I just wanted a clarification on the number of beds that we would be having Q3 onward. So currently, we have 1,809 beds. So next quarter, we will be operationalizing, I mean, consolidating Visakhapatnam 100 beds. And I think 100 beds from Ahmedabad. So is it fair to understand that we'd be having close to 2,000 beds in the next quarter onwards? Operational beds?
As far as the patient beds are concerned, we have included in Q2 of the 200 beds. We have operationalized about 118 beds in Ahmedabad. We may be adding maybe 15-24 beds in terms of operationalizing them, but more than that, we are not operationalizing. As the volume grows, we will continue to operationalize more beds. But in the next two quarters, we may be adding only about 20-25 more beds and addition of MG Vizag beds.
Okay. So 1,900, 30, 50 kind of beds.
Yeah.
Okay. Understood. Yeah, and sir, on the pre-index level, what should be the right figure to take for FY25?
Is that pre-index question? What was that? Sorry?
Yeah. Pre-index question. [inaudible] Sir, now am I audible?
Yes.
Yeah. So sir, you say that we'll be inching towards 20% post-index EBITDA for this year. What should be the pre-index number corresponding to that?
We have a rental cost of about INR 25 crores per quarter. We've adjusted.
Okay. Understood. Yeah. I can conclude. Yeah. Thank you. That's it from my side.
Thank you. Our next question is from the line of Dhruv Shah from Dalal & Broacha. Please go ahead.
Yeah. Thank you for the opportunity, sir. So my first question is with the focus strategy on expanding through organic acquisition of brownfields. So approximately what kind of size of these acquisitions are you looking at, say, in terms of value and say, in terms of bed capacity? And what is the payback period that you're expecting from it?
Typically, the standalone cancer centers, which becomes our target, are in the range of 80-100 beds. The acquisition price is in the range of 10 to 12x of the EBITDA of the operating hospitals. Our payback period for these acquired hospitals is in the range of six to eight years, depending on whether it is a strategic value or financial value.
Are you looking at new geographies, or are you looking to expand in the current geographies only?
I think our expansion policy as what we have taken a call is to do in the current geography as much as possible. We are, as we know, in Bangalore, Gujarat, as well as in Maharashtra area, as well as in and around Kolkata. So initially, we want to expand existing centers around that areas. We also have a plan of developing oncology outpatient clinics. That is our goal right now, to expand in existing areas more or less. Ashutosh, you want to add anything?
No, no, sir. I'm good.
Hello? Does that answer your question?
Yeah, yeah, yeah. Just one more question. So currently, close to 2,000 beds we have. So by FY26 and FY27, what kind of bed capacity should we look at, including both your?
Yeah. I just want to say I know before Raj will also say a few things on this. As we know, oncology is more and more becoming outpatient. Always it has been, and it is trending towards more. Our average length of stay actually is below two days. So when we look at it, our focus will be more on footfalls, outpatient care on that. So unlike a regular multi-specialty hospital, once you look at the oncology center as total in terms of what is the exact number of footfall of patients. And that is what we'll be focusing on. But naturally, the bed strength will increase, but more focus is on the footfall. Raj?
So Dr. Ajaikumar, yeah, just to add to what Dr. Ajaikumar said that it is very evident from the average length of stay within our hospitals going down that it is becoming more and more outpatient. And on the expansion beds also, we have a decent number of daycare beds and not all inpatient beds. Just to reiterate what Raj said earlier on his speech is that in the next three years, we are going to operationalize incremental 900 beds, including the beds which we have added in Ahmedabad. Of the 900 beds, we have already invested in 350 beds. The incremental 550 beds is what we're investing in the next three years.
Right. Thank you, sir. Those are all questions. Thank you.
Thank you. Our next question is from the line of Nitesh Ragai from Kreos Capital. Please go ahead.
Hi. Thank you for the opportunity. As you mentioned.
Sorry to interrupt, Mr. Nitesh. Your voice is not audible. Can you please switch to handset mode ?
Yeah. Is it better now?
Yeah, it's better. Please go ahead.
Yeah. So thank you for the opportunity. So as you mentioned earlier on the call that we've moved locations in Ahmedabad. And this will involve shifting of large equipment. So can you quantify how much of this one-time expense have you incurred for this?
Yeah, we have done this. I think broadly, we have been very meticulous in terms of transitioning our equipment. I think the one-time cost is in the range of INR 1.5 crore of primarily shifting the medical equipment, the bigger equipments, Linac and PET-CT. This is the range of one-time costs that we have incurred.
Okay. And also, is there any impact of severe rains or LINACs being down during the quarter?
Yeah. So actually, Linac is not going to be that much down because one of the Linacs is functioning in the existing center, which is outside the purview of where we are exiting. That's a separate center. Bunker is there. And so that will absorb most of the patients, have already absorbed. So there has been very little downtime in this. Only the doctors that around 20-25 patients we have been treating left. We transferred all the patients from TomoTherapy to, sorry, to TomoTherapy. But given that capacity limitation of TomoTherapy, we could take 20-25 patients less per month. Some impact was there.
Actually, they put them on waitlist and absorbed all of them.
That's right. Going back to your question, there were some rain disturbances in Gujarat region during last quarter. And when it comes to Linac, we have upgraded our Linacs in Bangalore, one Linac and one CyberKnife during the last quarter. They're fully operational by end of within last quarter only. So now we have upgraded CyberKnife and a Linac in our Bangalore hospitals.
Okay. Sorry, could you quantify the impact, please?
So in terms of revenue, I think probably about INR 1.5 to 2.5 crores of revenue impact would be there in the quarter. Sorry, per month. Sorry, in a quarter.
Quarter.
And the EBITDA impact on radiation typically is our high-margin business. The EBITDA impact would be in the range of about 70%, 20%, 25% of the revenue impact.
Okay. Okay. Thank you so much.
Thank you. Our next question is from the line of Nancy Ara from Allegro Capital Advisors. Please go ahead.
Hi, sir. Thank you for taking my question. I wanted to understand the CapEx split for the previous half year that has gone by. If you could tell me the total amount has been used for what all?
See, as Ruby mentioned, around 54 crores of CapEx has been spent in Q2 . Of that, 18 crores of CapEx has gone to our gross CapEx. And we made a large replacement in our Bangalore center. As Raj mentioned, we replaced our CyberKnife at Bangalore center. That costed about 25 crores. So 25 plus 18 is the major spent, which is 43 crores. The remaining are all maintenance CapEx.
Okay. Sure. Thank you, sir.
Thank you. Ladies and gentlemen, in the interest of time, that was our last question for today. I would now like to hand the conference over to the management for closing comments.
So once again, thank you for joining us and your best and encouragement to HCG. We are really happy to announce the results. We're very confident that we're going to maintain our momentum going forward and continue to grow the business profitably going forward. Thank you once again and wish you good luck.
Thank you. On behalf of HealthCare Global Enterprises Limited, that concludes this conference. We thank you for joining us. As you may now disconnect your lines.