Good day, welcome to the Q1 FY24 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 on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 0 on your telephone. Please note that this conference is being recorded. I now hand the conference over to Dr. Ajay Kumar, Chairman for HealthCare Global Enterprises Limited. Thank you, over to you, sir.
Thank you very much, good morning, and a warm welcome to all those present for the Q1 FY24 earnings conference. I am here joined today in our corporate office by Mr. Raj Gore, the Chief Executive Officer, Srinivasa Raghavan , Chief Financial Officer, and also the senior management team. We'll be sharing our operational financial highlights for the quarter ended March 2023. While we have always looked upon Bangalore as being our center of excellence for several years, similarly, we are now trying to establish center of excellences in Mumbai, Ahmedabad, and in future in Kolkata. In this regard, we are also looking at further growth of HCG centers across the country, and I'm very happy to report that we have made an acquisition in Indore, SRJ CBCC Hospital , Indore.
This is a comprehensive cancer center, 50 bed facilities, and it is scalable up to 100 beds in future, with facilities offering both surgical and radiation oncology. It's the largest private player and leader in Indore in private, private section. One of the things we have looked at in the future, in the near day, is how do we enter Central India? We have a strong presence, as you know, in Maharashtra, Gujarat, Karnataka, and in Eastern India. This will give us a presence in Central India, and it will propel the growth for us in this part of the country, particularly with the approach scope model we use. This acquisition and few others we have done, and we are in the process of doing in the future, we will continue to dominate the oncology market in this country.
Coming to the medical excellence, what we are focused on in the field of academic and research, as we all know, HCG has been a pioneer in excellence, data collection, and outcome focus. In future, this will improve the outcome of our cancer patients, and of course, improve the modalities of treatment. We are also, you know, very proud to say that we have established multiple robotic surgery units across India, and this will once again provide the best of care of our cancer patients across the country. This will definitely bring about a change in our data in future, particularly the work we are doing in the areas of genomics, circulating tumor cells, and continue to position ourselves as a cancer destination.
With these few words, I would like now to hand over to Mr. Raj Gore, CEO of HCG, for his comments on the strategies going forward and operational performance. Raj?
Thank you, Dr. Ajay. A very warm welcome to all participants on the call. Allow me to initially comment by elaborating on the recent advancement in this quarter. To consistently deliver organic growth over the series of many quarters, we had stated our clear intention to accelerate HCG's growth in organic process. We are delighted to share that we have initiated our journey of expansion through inorganic means, successfully completing the acquisition of two centers situated in Indore and Nagpur. These are strategically significant and attractive locations in central part of India, and both projects have an already established market leadership position. With our time tested and highly replicable playbook, driving sustained acquisition growth across geographies, we are confident that these two hospitals will contribute to HCG's growth in the forthcoming years.
Switching on Nagpur, you know that we have been operating comprehensive cancer care center since 2018 in partnership with Dr. Ajay Mehta, who is a minority partner. There existed a complex structural arrangement between two entities, HCG NCHRI LLP, which is our operating hospital, and NCHRI, which is 100% owned by Dr. Mehta. Nagpur is a strategic market for us, located in Central India. It promises significant growth in future, supported by large strategy. We have a market leadership position that we have already worked hard towards, thereby creating a compelling case for integrated structure by acquiring stakes from Dr. Mehta in both the entities. This is expected to result in enhanced operational efficiency and generate larger economic benefits.
With our already existing presence, strong presence in Maharashtra, Gujarat, East India, our first set of footprint in Central India would strategically position us across larger India. We see the performance during the first quarter of fiscal year 2024. We recorded highest ever revenue for the 10th consecutive quarter of INR 461 crore with a 13% year-on-year growth. This growth was propelled by 22% year-on-year growth in our emerging fund centers, highest ever quarterly revenue in digital travel and digital channel, and overall improvement in operating metrics. We recorded EBITDA excluding ESOP of INR 76.4 crore for Q1 FY24, with 5% YOY growth. This lower than expected EBITDA growth was due to some special data on account of 2 factors, apart from the annual additional cost increase. First, investment in digital talent.
As indicated in previous quarters, we are aggressively pursuing to increase our market share in emerging markets, primarily driven by digital talent acquisition, which is visible in the growth of our services. Second, delayed LINAC installation and operation. Downtime and installation delays of LINAC machines at 5 locations resulted in loss of more than 300 and 300 operating days on radiotherapy in Q1, which impacted our revenues from radiation oncology. This is a high-margin segment, affecting our overall margin profile. However, 4 out of these 5 LINACs have already become operational during Q2. We expect it to be normalized in Q3. In summary, we are expecting through performance in the coming quarters with the operational impacts and the operating leverage between contributing positively to our revenue and margin dynamics. With this, I hand over to Srinivasa Raghavan for financial highlights.
Thank you, Raj. Very good morning to everyone. We have uploaded our Q1 FY24 financial results and updated investor presentation on the stock exchanges and company's website. I do hope everybody had an opportunity to go through the same. Let me take you through a few highlights regarding the same. On the revenue front, revenue split between HCG and Milann stood at 86.5% and 2.5% respectively for Q1 FY24. Revenue growth for HCG stood at 3% YOY to INR 444 crore in Q1 FY24. As mentioned in slide 10, revenues from virtual centers stood at INR 31 crore, a growth of 11% on YOY basis for Q1 FY24. Revenues from emerging centers stood at INR 113 crore, a growth of 22% on YOY for Q1 FY24.
We're delighted to state that our emerging centers are inching towards maturity and are seeing good traction across geographies. Moving to slide 7, these are the key operational KPIs for our HCG. Chemo session increased by 9% YOY, taking the total chemo sessions to 35,000 in Q1 FY24. Our capacity utilization stood at 69% for Q1 FY24, which was 61%, 67% for Q1 FY23. Composite occupancy stood at 66% for Q1 FY24, compared to 65% for Q1 FY23. I now request your attention to slide 12, where we have disclosed our operational parameters across our virtual networks and emerging centers for Q1 FY24. Our company-wide AOR stood at 66.9%, and AOR for mature versus emerging centers stood at 67.1% and 66.4%, respectively.
Our ARPA on company level stood at 99.86, and our ARPA for virtual centers stood at 51.3, and for emerging centers stood at 35.66. Across geographies, we have given our revenue breakdown in slide 13. Kolkata grew by 54%, Rajkot by 51%, and Ranchi by 27% for Q1 FY24. For our Milann business, revenues for Q1 FY24 witnessed a degrowth of 8% in revenues. On the EBITDA front, our EBITDA excluding ESOP for Q1 FY24 stood at INR 76.4 crore, EBITDA margin of 16.6%. We have also given the bifurcation of our EBITDA across virtual and emerging centers. I request the participants to view slide 10 for further details. Other insights on EBITDA has already been shared by Raj, and let me move on to PAT.
PAT for this quarter stood at INR 7.6 crore, as compared to approximately INR 6.1 crore in Q1 FY23. Our PAT pre-Ind AS adjustments for Q4 FY23 stood at INR 11 crore as compared to INR 9.2 crore in FY23, Q1 FY23. Growth in our virtual networks stood at 20.2%, annualized for Q1 FY24, as compared to 19% in Q1 FY23, an improvement for higher believers. Growth before corporate allocations for virtual centers, 4.5%. Growth for emerging centers stood at -5% for Q1 FY24, as compared to -4.6% in Q1 FY23. Our expansion of existing facilities in Ahmedabad, phase II, and Whitefield extension of Bangalore COE is on track....
of operation being Q1 FY25. Bangalore COE is 25 growth, expected date of operation being Q3 FY25. With this, I would now like to open the floor for Q&A.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question, may press star and one on their 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. We'll take the first question from the line of Kaustubh Pawaskar from Sharekhan. Please go ahead, sir.
Yeah. Good morning, Dr. Ajay, the other members of the management team. Thank you for giving me the opportunity. My first question is on the EBITDA again. Raj, you just mentioned that there were two of the one-offs, sorry, not one-off, one of the, that is LINAC machine were not operational, 5 of the LINAC machines were not operational during the quarter. Could you help us to understand how much was the impact because of this, you know, loss of operation? Sequentially on year-on-year, if we look into the utilization of the LINAC machine, both were higher on quarter-on-quarter as well as YOY basis.
Just want to understand, you know, why, you know, there is a loss, in terms of, you know, margin or business?
Hello?
Gentlemen, we've lost the connection for the management. Please take a minute while we reconnect them. Ladies and gentlemen, thank you for holding the line. We've got the management and reconnected. Please go ahead, sir.
Yeah. Good morning. This is Kaustubh here. I just want to continue the question on the EBITDA front. Mr. Raj, you just mentioned that there was issue related to LINAC machines. Five of the machines were not operational, and that had an impact on the profitability because these are the high margin, gener- high margin generating businesses for you. Just want to understand, you know, what could be the impact because of this non-operational of five LINAC machines, and you know, from quarter to whether, you know, things would normalize in terms of profitability or, will it take some time?
Yeah. Regarding the linear accelerator machine, 3 of them were a replacement, so when you bring down the machine, there's a time lag. We had expected they will be done and operational in the Q1 itself. Now, they are all operational in the Q2 , so we are now not going to see any impact in the Q2 . Certainly, the numbers, what we have seen in June, are very promising, so we should be able to reach our expected level in the Q2 . Obviously, we will see the further growth of these new machines, which are coming in, in the, in fact, in the 2nd, 3rd, and Q4 , which will hopefully meet our, we think we will meet our, whatever expectation is at point.
Also, as Raj mentioned, we are beginning to invest in the areas like in Mumbai with high talent. Talent acquisition has also cost us in Q1 , and that was part of the reason we had this margin issue. We are now catching up, and we should be able to move, as I stated, in the second and Q3 .
Talent acquisition, I guess, is something which will continue because you want to, you know, expand into newer markets, and that is something which is part of your business strategy. I guess that part will continue going ahead as well.
Talent acquisition is part of the strategy, but when we bring talent, that is rather more cost. I think it's cost versus talent. These talent people have come a little bit more expensive than what we normally do, particularly in a high area like Mumbai, which is why our cost there was gone up. It get normalized as we move on and as the revenue increase. Because of this talent, we see increase in the revenue coming from this, and that will get normalized to whatever is our, the doctor to overall revenue ratio.
Right. One last one on the debt part. Debt has gone up on the books, and you have mentioned the reason that because of the acquisition, debt has gone up. Should we expect any further, you know, increment in debt, considering the ongoing CapEx, which is there on books or from here we should expect debt levels gradually to come down or remain at, you know, the same position what they are at the current level?
Yeah. The thing is, you know, the debt level that you are talking about is planned for the acquisitions that Rajesh spoke about. Internally, the way we have budgets together is most of our CapEx should be paid for debt. The now debt number that you are seeing, I think we should be able to kind of sustain it.
Okay. Okay, thank you. I will get back into you. Thank you.
Thank you, sir. The next question from the line of Jay Modi from CIMB. Please go ahead, sir.
Yeah, a couple of questions from my side. First was around the chemo session. In previous quarter, we see growth to be higher at around mid-teens to high-teens, whereas just only 9% growth. Any particular reason for this?
Can you please repeat your question?
Sure. Can I hear me now?
Yes.
Yeah, so my question was around chemo sessions growth. In earlier quarters, we've seen growth to be higher at mid-teens to high-teens, whereas this quarter it's only 9% growth. Any particular reason for this?
My chemo is growing lower.
Yeah. These, these chemo numbers were also higher in the previous quarters because our some of the sectors in emerging markets were ramping up. Like, for example, Jaipur and Nagpur. Those sectors have led to the higher volume growth in our emerging centers, thereby leading to overall volume growth in overall volume growth in chemotherapy. These sectors are sort of normalizing. However, we expect these numbers to be further driven by Calcutta and Mumbai going forward.
Okay. Do these sessions have any element of price increase or what is the volume growth ideally translates to revenue growth for us?
What we are seeing is techno pricing, if we take an annual, however, what we are seeing some change in adoption of molecules in medical oncology. Larger and larger adoption of immunotherapy in medical oncology is leading to higher revenue realization.
Yeah, on this matter, we are seeing a change in the approach how we manage our oncology patients. There are two things here. One is, we all know cancer patients are now living longer, so cancer has become a chronic disease. As cancer patients, repeat cancer patients come back and, you know, when we do the first line of treatment, there are certain number of people who recover. Particularly for them and even for first time, as technology advances and as more genomic studies and all come, when we become more patient-specific, we are beginning to see the treatments like immunotherapy becoming very prominent, apart from genomic testing. Because of this, immunotherapy drugs or you can say drugs, they're, they are quite expensive. You will see a definite ramp up in our oncology section, where our revenue is increasing.
Our percentage of oncology contribution in medical oncology is also increased. This is what we are beginning to see, and this may be only the beginning, because in the future, you know, the, the therapies like, like immunotherapy, will increase significantly.
Got it. In chemotherapy, do we have any element of scheme-based patients wherein the government comes to bill or it is largely the private patients which forms the majority of share?
Even in scheme, yeah, even in scheme patients, it is gradually happening because now the states like Odisha, some extent Gujarat, also Maharashtra, are beginning to recognize the importance of this kind of targeted therapy. Even though they are expensive, they are beginning to approve. I think, you know, of course, it all relates to the budget of these people, what the states have in healthcare. They will have a final say, yes or no. In the long run, I think the states will have to recognize, and at some point, of course, they will become generic. They will become far, far cheaper for governments to approve. We are beginning to see that trend.
If I can just add, the personal also get present, chemotherapy includes scheme patients. Just to mention that our scheme patients distribution across the modalities more or less are similar. However, little skew to the positive side in chemotherapy, primarily led by our tier two centers, where we see late-stage patients, and late-stage patients really undergo medical oncology. That actually leads to a little bit of skewness. Those poor patients who probably get diagnosed late, are covered by the scheme patients, thereby leading to that little bit of skewness in chemotherapy translation.
What is the ideal mix between, what is the share of scheme patients in our overall revenue, scheme-based patients?
Scheme patients. Okay, that's a question, right?
... When you talk about only schemes, which is like a, like a scheme in Agra. Raj here, when we look at DPL and state schemes, share of those schemes is about 20% of our total revenue.
Okay. Sir, next question was around Milann. We've seen a lot of competitive pressure building up, lots of players coming in, a lot of deals happening. Could you speak a bit about the competitive intensity that you are seeing on the ground, and also any particular reason why we've seen a steep decline this quarter?
Yeah, Milann, as far as Milann is concerned, as we know, we are quite a dominant player in Bangalore, and we are sticking to that dominance in Bangalore. We have put a lot of systems in place to grow. Unfortunately, you know, there was a slight drop in the Milann revenue because of the regulatory surrogacy, which forms a, art, which the government regulators at the time. This has been cleared. All our centers have a certificate, and we are beginning to see a healthy ramp-up happening. In fact, July, it has already happened. We are focusing on Milann to make it center of excellence, good quality outcomes, and this kind of approach in Bangalore only. Our future growth primarily will be in Bangalore, and we will have we have a center in Delhi, which has not been doing good.
We are shutting down the center in Delhi. There also, you know, the gender center is doing... We are putting some efforts to improve. Apart from that, greater Bangalore area, we will be growing. We don't see that much competitive pressure. We have addressed for also being in Bangalore, but, because I can see long term, we have, our doctor, Dr. Kamini. I think in the future we will be able to come back and grow and certainly reach a leadership position.
Got it. sir, typically, what is the cost of setting up one Milann center? Is it a very cost intensive process?
No, no, it is not cost intensive. It a bout, I think, INR three to five crore is the cost, right, Raj?
Yes.
You want to say anything, Raj?
No. No.
My last question was around the margin. A couple of years we've seen, we give on the consolidation that we have had, and we were trying to actual data centers and far more profitable than what we did in the past. This year, we've seen 2 acquisitions and a couple of boundary expansions taking place. Do you, do you think expansions or acquisitions in any way impact our margin in short term, because it will naturally take some time to ramp these up to our optimal level?
She, you know, the company has charted out all the expansion plans unit by unit. At some point of time, you're right, of all the company expansion plans. Other where she has already expanded, and if it is a vertical expansion of our existing facility, we expect operating levels to play out, margin should expand. Yeah. For example, in, in our vision for the future also, for example, just announced about Indore. We expect we, we could be expanding. Right now, the data also prepared adjustment, and we expect to be building building, which should be expected. We expect the market operation to happen with a better margin. This expansion, I don't know whether this question is related.
However, the two acquisitions which we have announced should add to about INR 14 to 15 crore of incremental EBITDA during the financial year.
Thank you and all the best.
Thank you. Before we take the next question, a reminder to all participants, if you wish to ask a question, you may press Star and one on your touchtone telephone. Ladies and gentlemen, if you wish to ask a question, you may press Star and one on your touchtone phone. We take the next question from the line of Karan from RKIF. Please go ahead, sir.
Hi, sir. Thank you for the opportunity. Am I audible?
Yes, sir.
Yeah, Karan. Hi.
Yes. Hi. Sir, we have been guiding for margin improvement since Q2 FY23 earnings call. If I zoom out a little bit, it was mostly being derived from 3 aspects. Number 1 was our cost efficiency measures, derived from consultants coming in and making us more efficient, leaner, better pricing in different emerging centers, et cetera. Number 2 was obviously our operating leverage playing out and making many emerging centers go towards, going towards maturity and doing much better margins. 3rd, obviously, our consultant costs weaning off each one now. The margin expansion, what we were hoping for, also the trajectory we were hoping for was around to the tune of 150 to 200 basis on adjusted EBITDA basis.
We have only done around 16% reported and adjusted EBITDA margins for us for Q2 FY23 was around 18.8%. I just want to know more on, more detail on what really went down this quarter and why were the flatish in absolute EBITDA and perhaps lower to 200 basis in Q1 FY24 from an adjusted EBITDA perspective. This is partly due to the consultant costs that we took on and operating any efficiency benefits we should, it should have flown in. just follow up on this... Can you just highlight some cost line items and other expenses which were the most impacted? What does that mean for us in terms of, you know, mean reversion to 19% and then expanding it to 20%, 21%? Does that look much harder to achieve in FY24?
Yeah, I mean, I'll just break this into two, three pieces. See, you're right, that now our EBITDA was almost about 13%, adjusted EBITDA was about 19% in the Q4 . Just to substantiate what Rajendra suggested on radiation business, the three, three things which we observed was, our radiation business are efficient because of the machine. That has costed, if you, if you see our previous reports, radiation business used to constitute about 18% of our business, which has gone down to 10%. I think this is more of a quarter one phenomenon, it should keep up going forward. 1% of business is close to about, close to about, INR 4 crore and INR 4.5 crore.
We operate somewhere around, you know, 80% margin on radiation business. It costs are all retained. Construction costs are there. There is no higher consumables on this. Costs are all breaking. Now, we expect a higher level of earnings, coming out of this into going into the coming quarter. Further, as we know that now in healthcare, we all take, all the hospital groups, we take annual price increases or interest rate cost content and subsequent start through the positive operating leverage on that. We have already started the positive operating leverage from June onwards, because we in the month of April. Yeah, that we should see whether that would play out. First in June. Yeah. Third is, again, sticking with to what Raj said on, my investment in doctors happening in our emerging markets.
It is, I would notice more or less done. It has, it has been happening from Q4 and Q3. We have also announced that we are investing in end markets to our clinical development continued to grow, and that is reflected in our revenue growth. Some point of time, if not Q2 alone, from Q3 onwards, you should start seeing operating leverage on doctors also being played out once the revenue starts ramping up for this. I mean, this is one of the quarter where, two, three variables has gone against us, and we should be able to bounce back from the coming quarter, in the coming quarters. Yeah, and one more thing was we focused upon our consumption cost. Just to, just to restate that, our consumption cost has been taken out.
From Q1 , we have not had any consumption cost, which was there in, till Q4 of last financial year. We had also stated that last part of those benefits, almost 70% to 80% of those benefits were, accrued in the previous financial year only. Only 20% was remaining that we should see in the coming quarter.
Got it, sir. Got it. Sir, on the emerging center side, we are doing margins of close to 9% to 10%, depending on which quarter we see, right? Can you tell us what levers we have to take it to 15% kind of, or, you know, mid-teens or low teens kind of EBITDA margins going forward?
See, I, I think, one more thing, one thing I would say is, the one acquisition which we just announced, Nagpur, where we had a complex structure, that itself should add to our EBITDA margin of emerging projects to an extent of about 30 basis point to 50 basis point. Now, the lever, other levers are primarily operating leverage in nature, because I do believe that 80% or 90% of our investment in clinical talent as well as market making is done. When the revenue plays out, we should be able to see this operating leverage coming in. Somewhere, somewhere we just mentioned, we should be closing it in Q4 . Just to, just to, I know, I mean, isolate built upon center, is already 20% + margin. Airport Center is also in close to 20% margin.
It's primarily, and our whole focus is on, two centers in the portfolio is Kolkata and South Mumbai. I mean, these are the two newest centers, and we are not right now focusing on, margins on those centers. We are focusing on revenue growth. We are happy with the revenue growth, which is coming in, and we do believe that EBITDA margins will play out, in the quarter.
We feel, similarly for our South Bombay centers, because we've been investing in clinical talent and, you know, trying to take that EBITDA break even and obviously, EBITDA on those, centers. Where are we on those centers currently?
Kolkata and South Mumbai sort of, I mean, pulls down almost one and one, one to 1.5% of overall EBITDA margin of the company. These centers to make our margin higher by 1.5%.
Understood. Sir, what would be the timeline for that, according to you? How do you feel that extremely?
We should be able to achieve that in around Q4 of this year.
Understood. Understood. Just one last question from my side. Can you just highlight what was the total acquisition cost for both Nagpur and Indore? I understand that we've leveraged around INR 100+ crore for this acquisition, but I'm assuming that some deliverables have been through internal accrual as well. What was the total spend on the both these acquisitions that you've done?
It's like, see, you know, we are saying that our debt would go up to INR 107 crore, while the funding, the company is having enough sufficient cash, but it also has debt lines. Both sources of fundings are available to us. However, because of that INR 107 crore cash going out, our net debt should increase by INR 107 crore.
Oh, okay. Understood, understood. Then I was just going through your press release on Indore, and I, I couldn't see a reported EBITDA is, EBITDA on the Indore center. Can you just call out on what is reported EBITDA is for the Indore center currently?
It seems like right now, the company is also in the middle of doing a little, I mean, some more deals. Supposedly right now, we are not in a position to sort of disclose some of those parameters. That's why we have, you know, both the centers together, our EBITDA should be higher by INR 14 to 16 crore per annum, and net profit after tax INR 12.7 crore. At an appropriate time, once we get into those situations, we disclose the details as well. I mean, we do not want to reflect on some of the things which can be affected our position for future deals, which we are talking about.
Understood. Understood. That's it from my side, sir. Thank you. Thank you for your time.
Thank you, sir. The next question is from the line of Aditya Khemka from Finsec PMS. Please go ahead, sir.
Yeah, hi. Thanks for the opportunity. Aditya, can you elaborate a little on the critical talent that you guys are investing in? What are these people doing? Why were they hired, and how is it that they will help you to create revenue? If you could just elaborate a little more.
It's a question about what type of clinical talent? Aditya, we have, as we know, Mumbai, particularly, we have been really trying to acquire significant clinical talent in the field of medical oncology and particularly in surgery. In this field, we are very happy to see that we've been able to recruit one of the star medical oncologists from UK. She was, she was the director of the breast program in London, which is a big cancer center. Dr. Sachin, he has joined us, he has been full-time since June. That is one of the things as we go forward, we will see that he has been positioned as a director of medical oncology in the region.
His job is to really not only recruit talent for his department, apart from breast cancer, he'll be looking at entire solid tumor oncology, and also he'll be building a team. In this regard, we are also happy to say Dr. Vini Krishnamurthy , a lady, a breast surgeon, a renowned breast surgeon, trained in Sloan Kettering in New York, and also joined us for South Mumbai. Her role is to really, you know, work on the breast cancer in women and see how we can make it a Center of Excellence for breast cancer here in South Mumbai. Both of these talents, apart from, you know, several of the associate talent we have recruited.
We are trying to create per center, which is doing well, and our South Mumbai center, which has got different talent and technology to really look at a center of excellence. That is where we are positioned going forward, and also we will consider to international market. Apart from this, to make it a center of excellence in Mumbai, Borivali, we have just installed a robotic therapy. It will also improve our talent acquisition, as already done in terms of uro-oncologist. In this, we will also see significant growth in the surgery, as well as, of course, it will be a truly a center of excellence with all the available technology being present in one, under one roof.
Got it, sir. these, talent that you have acquired is basically doctors, whether hospital doctors or allopathic doctors?
What was the question?
Talent is, we acquired only the main doctors.
The talent is for mainly doctors, but as you know, we are a big healing center, so all of this will propel, you know, people to come to the residency programs and includes. The center of excellence will have all the residency program associates. It will, it will go and we will be looking at, you know, data from it, outcome from it. So many things will happen. When we have a talent like this, this will definitely improve. We are also, you know, along the same lines to improve this kind of rotation of talent. Since we are also putting a third, you know, we are putting our robotic also in Kolkata. All of this will bear significant benefits for us. For our concentrations, of course, that is the, that is the most important thing.
We'll also add to our top line and also improve our efficiency and what.
Got it. I think one of the concerns that investors have had for some time now is, you know, stories or streets say that your primary investor, which is CDC, might look to exit in the near term. Can you throw any light from that? Anything that you, you know, you would like to share with us, you know, if there is a near-term exit of the private equity?
At this point, yeah, as you know, CDC said that they are here for long term, and they may exit whenever they feel is appropriate. As far as I am concerned, Raj is concerned, and the entire management team, we are really working hard to expand our oncology, and they have been very cooperative in it. I think they have been a very good partner financially and also strategically for us. We are really enjoying this partnership we have for further growth of oncology.
Wonderful. Thank you and all the best.
Thank you, sir. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.
Oh, yeah. Hi, and thank you for the opportunity. My first question is on this Indore facility, what is required? If you could highlight, you know, what kind of, you know, surgical revenue on oncology front, which it is doing coupled with that on, you know, some details on the operation part, like, consistency, if you could share, please.
The Indore facility, what is required? Indore facility. Indore facility has both surgery, radiation, and medical oncology. It is a comprehensive cancer center, it is rated actually number 2 in surgical oncology in the, in that city. There is also scope for further expansion. We are also in the process, as we know with our partner, we have an agreement to build a bigger sector cancer center with Dr. Rajesh. Once we complete this acquisition, which we have done, we will begin to grow here. Now the surgical number of surgeries here will increase once we go into the new center. Our goal is to become the premier center in Central India with this acquisition and the future growth plan we have.
Absolutely. Indore Center is has a number 1 market share in private cancer care in Indore. It's a very established center. In all modalities, it has a top 3 position. It has a very high percentage of the margin business. It doesn't do any stream business. It has cash TP business. It has, it exists before the facility, it, it can grow this revenue, and we have a plan to open another center in coming 2 years so that we have a path to grow it successfully in future. You know, dominate this market as in a number 1 market.
Secondly, on the start of addition of this LINACs on your Sigma, and what you called out for, I think in the last call, you also indicated that you may be adding seven to eight more at a future date. Is that still on track, and will that happen in FY 2024, or you plan it to do as when there is some necessity coming up?
Apart from these 5 machines, we are also evaluating adding a machine in Kolkata, in Nagpur, which will probably come, and Vizag, 3 of our well-performing centers on radiation, which will probably come, you know, beginning of next year. We are, we are on track. We are already preparing the bunkers, et cetera, ready, and we should be able to, you know, grow that radiation business in these 3 centers, in beginning of coming year. Next year.
Thank you. Okay, the next question from the line of Deepak Agrawal from Yellowstone Investment. Please go ahead, sir.
Yeah, hello. Thank you for the session. The first question is on the Nagpur center. We were already owning 76%, and now we have gone to 100%. Is that right?
I see it, yeah. There are two developments in terms of Nagpur. As Raj mentioned in his earlier stage, the structure was little complex. There was an infrastructure company, and there was an LSB. LSB was the operating company. There was a revenue share arrangement. Now we are buying the stake in the entire stake in the infrastructure, by which we will be able to consolidate the entire operations, which will give us better leverage on operational efficiencies and also economic benefits. Also we are 26% of our partner, that is Jaipurat Purvi Paias, 10%. Both places will become 100% owner, which is bottom line.
Okay, that's why there is some EBITDA contribution, because otherwise the operational EBITDA would already be in there in the consolidated with us.
Right.
That is 40. Right. Right. Okay. Okay. Understood. Okay, that's all I had. Thank you.
Thank you. We take the next question from the line of Mitesh Shah from Kotak Associates. Please go ahead, sir.
Sir, my first question would be regarding your debt margins. I mean, what is your plan to deleverage the balance sheet going ahead? Where do you see the debt levels by end of this year, financially at 2024 and financially at 2025? Coming to your ARPOB numbers from the existing centers, where, when can we, I mean, expect this to reach the levels, marginal levels? I mean, how exactly are we, I mean, pushing it to come to, you know, mature centers levels and where- when do we see the numbers coming in? These sessions will be this.
Let me first take the debt part of the question and be taken by that. See, if you see the debt numbers as it stands today, you know, if you see what we have shown in the investor presentation, I'm talking about clear debt. Bank debt is about INR 217 crore, and we are trying to add about another INR 107 crore, largely to fund these acquisitions. Don't look at debt in isolation. These acquisitions, as, you know, senior management members said, we are all coming with a hospital EBITDA margins, and that will only kind of, you know, support this debt. If you look at it on an overall basis, as I mentioned, you know, we are looking to fund most of our CapEx from our internal accruals.
Any debt will be as well as this one would be only for the acquisition, remember, acquisition. It will be both revenue as well as EBITDA accretion. We are largely looking at to keep the debt level in the range of about 2 to 2.5x the debt-to-EBITDA. That's the kind of leverage we are looking at, that is, that is the way that is the way we are looking at it.
Okay. Mitesh, any question?
Yes, sir.
Go ahead, Mitesh.
Yeah. Just, just one question, sir. When we say that we are going to... Like, I just wanted to know what would be our spend per bed when we are going for an expansion, let's say, we are starting a new hospital tomorrow, and then what would be the cost per bed, and what would be the payback period for that particular bed? Let's say, per bed occupancy, what would be the payback period? At least the ARPOB levels.
At this point, Mahesh, at this point, we are not doing any greenfield. Like what Srini said, we are only acquiring hospitals which already have a positive revenue and EBITDA, and this will be based on obviously at a lower level to EBITDA times because that is what we are acquiring them at. It will be definitely beneficial for us in terms of further expanding it and increasing the, you know, dominance in those regions. We are not doing any greenfields. To give you any details about what will be the cost of hospital expansion about, we are not doing greenfield, okay? At this point, except, you know, what we call it in Bangalore, we have an expansion we are doing in Whitefield. It is part of the Bangalore dominance expansion. We are not calling it truly greenfield.
It is expansion of our existing centers. That is how we are expanding. Similarly, Ahmedabad also, we have a new center. Similarly, in Ahmedabad also, it will be a new center because we run out of space. That will have a huge, positive potential as we go.
Yeah. Sir, the metrics behind winning the brownfield expansion, I mean expansion is that, are we looking at hospitals which have ARPOB been in line with our existing or existing centers, or they are little lower and we're trying to bring them up? How exactly are we looking at it from now, from here on?
Mahesh, the investment thesis, primarily what we have today, as Raj said, Dr. Rajendra said, that we are not looking into generally not looking into greenfield. Any acquisition which we are taking, what we are seeing is should be at least at par or compared to our return capital inside. Now, when that happens, typically, and you also touched upon the payback period, we are expecting based on the headroom available and whichever targets we are taking, we should be able to within 6-7 years. That's the profitable level. Now, once that happens and you have enough headroom available to grow, that makes a high viable business sense for us. This is how sort of, you know, broadly we are looking at any future investment or brownfield to field.
Right. Sir, also one more thing, because operating leverage in our business will come only when you are actually operationalizing projects, right? I mean, just wanted to understand that thing, where exactly the operating leverage in our business comes from.
Absolutely right. I mean, when you operationalize your bed, you have a bit of a offensive portion of your revenue goes up, operating leverage comes in. We have been saying that, I mean, we have an isolated success on certain centers, which is doing now the entire portfolio. If you look at our existing centers, the margins are healthy, the return on investment is healthy, and if you look, I mean, the past EBITDA and operation results, we are in a very good position to improve the profitable returns. That's what we have been sitting upon these 2 centers all the time that, you know, we are not looking at profitability. We feel that we can do good in, in terms of increasing our share in those regions, doing the right things, when it comes to and clinical execution.
Profitability will follow, follow through in coming, I mean, coming forward. We are, as we said, we are already seeing the improvement in EBITDA, and we should be able to do that in Q4 of the current year. If you look at our slide number 10, we have been working on an increasing path, I mean, on a growing path in EBITDA. Our EBITDA in Q4 , one emergency center was INR 81 million, it has gone to about INR 99 million. We expect this to keep growing as the program in the future quarters.
Thanks, sir. All right. Thanks a lot, and all the best.
Thank you. Next question is from the line of Karan from Monarch AIF. Please go ahead, sir.
Hi, sir. Thank you for the opportunity again. Sir, sorry to ask this again, I'm, yeah, I'm still confused on the total acquisition cost. I understand that you gave that breakup of, you know, the debt plus the cash bit. If you can just call out the total acquisition cost to complete, that would be with debt, the uncertain , et cetera. The total cost, that would be, that would be really helpful, sir.
Well, just to say, our net debt is going to be INR 3,107 crore. Of that INR 107 crore, INR 30 crore of debt is what we will be consolidating from NCHRI. If you take out that debt of INR 30 crore, the net INR 67 crore would be primarily to our acquisition plus... No, not INR 67 crore, INR 30 crore. INR 77 crore would be cash out of the system, either in the form of debt or cash going out. That is the total consideration being paid for the 2 acquisitions.
Understood. INR 77 crore, we are actually paying, because INR 30 crore debt we are getting on our balance sheet from the Nagpur center. Is my understanding correct, sir, that's why we're coming to that debt figure?
That's right.
Okay. Thank you, sir. Thank you so much.
Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Once again, thank you for your interest and support to HCG. We are happy to have further conversation. If you want any more clarification, please feel free to reach out to our investor relations. Thank you for joining. All the best.
Thank you. On behalf of HealthCare Global Enterprises Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.