Ladies and gentlemen, good day and welcome to the Q1 FY 2023 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 zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Dr. B.S. Ajaikumar, Executive Chairman of HealthCare Global Enterprises Limited. Thank you, and over to you, sir.
Thank you very much, and good evening to everyone. Welcome to all the present on the Q1 FY 2023 earnings conference call for HealthCare Global Enterprises. I have with me here Mr. Raj Gore, our Chief Executive Officer, Srini Raghavan, who is our CFO, and Ashutosh and Venkat from our management. HCG is a leading oncology care provider, which is patient-centric, technology-oriented and outcome-based. Our focus has been on oncology and in conjunction with partners in areas, some areas which has built a strong legacy as a world-class oncology institution and go-to brand for oncological treatment and services across India. We are also into infertility as well as few multi-specialty hospital, which we are also strengthening.
Our focus on strong clinical talent, good infrastructure, technology and timely upgradation of the same has enhanced our ability to deliver exceptional clinical outcomes equal to or better than global standards. In the very near future, we are putting together data on head and neck and breast cancer on these outcomes and see how we can challenge the global outcomes. HCG is today not only a service provider, but has taken a lead role in research and academics. Recently, we have acquired Next Generation Sequencing in genomics, which is a sequencer of high-end, and in process of acquiring circulating tumor cell platform. These additions are already enhancing our capabilities, precision diagnosis, leading to early detection of not only cancer, but also early detection of recurrent cancer and genomic-guided therapy. We have a separate tumor board for this with relevant expertise.
In addition, we have introduced enterprise RIS-PACS in collaboration with Siemens for the first time in this country for AI-based precision imaging, which will enhance our research capabilities and also improve our effect on the patient outcomes and diagnosing the patients in proper staging. Further, HCG is introducing first of its kind in the country, an AI-enabled adaptive radiotherapy in our Center of Excellence in Bangalore, which will again make a difference in how we precisely treat cancer patients. Under clinical initiative, we have achieved a sizable scale in terms of caseload and patient outcome across centers and continue to enhance our in-house capabilities to increase the number of clinical trials carried out at present and work with the pharma companies on drug discovery and related matters backed with significant data.
Talking of our environmentally friendly initiatives, we have done a very successful implementation of 3.3-MW solar plant at our Bangalore facility, related to our Bangalore facility, slated to be commissioned in a couple of months, which will result in substantial green cost savings also. We have already initiated a pioneering effort in genomics, metabolomics and microbes to unleash indigenous research in India for Indians rather than extrapolating Western origin data and force fitting in the context of Indian populace. In addition, we will be transitioning away from the conventional medical record system to electronic medical records, which will not only provide value for the patients in terms of their clinical management, but also analytics and data intelligence will be gathered.
We are working on modus operandi to ensure that the last mile benefits our precision and personalized medicine endeavors through tech-enabled innovations like HoloLens, a phenomenal technology that's marked by super processing power and wider field of vision to provide help to our patients, not only in the center of excellence, but also in tier two, tier three cities. With these few remarks, I now hand over to Mr. Raj Gore, our CEO. Raj.
Thank you, Dr. Ajay. Good evening, everyone. A very warm welcome to all of you. We are delighted to share healthy financial and operational performance yet again for Q1 FY 2023. We are happy to report robust growth for quarter ended June 2022. Our consolidated revenues for Q1 FY 2023 grew by 26% on year-on-year basis. We've reported PBT of INR 10 crore for Q1 FY 2023 as compared to loss of INR 9 crore in Q1 FY 2022. We are also happy to report that we've been able to successfully accelerate the financial performance for HCG over the last eight quarters. Our revenue has increased by 1.7 x since Q2 FY 2021 on a quarterly run rate basis.
Correspondingly, our EBITDA in absolute terms has grown by 2.4x over the last 8 quarters, and has been able to achieve consecutive PBT positive quarters. We have been working on multiple fronts to take HCG to greater heights by constantly improving holistic value that we offer to our patients and thus create value for the business in a sustainable manner. We are confident of maintaining our growth momentum going forward. 4 key areas of our strategic roadmap that we are currently working on are 1. digital transformation. It means 2 things. Building digital capability to build HCG brand online to increase digitally influenced patient footfalls into our hospitals. 2. Improving our processes from patients' perspective to deliver an e-experience that matches evolving consumer behavior and expectations.
This initiative will involve omni-channel patient engagement with the help of multiple digital assets like website, social media, WhatsApp bots, patient app, portal, centralized call center, integrated CRM and advanced analytics and business intelligence. We're already seeing some green shoots. For example, our website traffic is up by 2.7 x over last six months. The second initiative is cost optimization and efficiency enhancement. We have also been working on our structural cost optimization and efficiency enhancement program. We've been able to evaluate multiple areas for enhancing workforce productivity and optimize staffing accordingly in a scientific manner. Additionally, we have also relooked at our pricing, and collectively these initiatives should drive significant operational efficiencies to improve margin. We will later, but we are targeting a healthy margin improvement from these initiatives. The third initiative is growth of our medical value travel business.
We have recast our international business strategy starting a couple of quarters ago. Largely, the strategy is focused on enhancing our footprint, both geographically and channel-wise. We have set up 6 new information centers across our large contributing geography for creating greater brand pull. Currently, we are averaging about 1.1x-1.4 x the monthly average during the pre-COVID times. The fourth initiative is inorganic acquisitions. We are also scouting for a few inorganic acquisitions as a part of our growth strategy and are actively pursuing some. We will keep the market posted at appropriate times. Our history of successful partnerships and upscaling of the acquired businesses over a period gives us confidence to pursue this strategy.
To conclude, I would like to reiterate that we have strengthened our senior management team, our clinical team across the network, and have been continuously upgrading our technology and capabilities in cancer care for providing all oncology related services under one roof. With this, I would like to hand over the call to Srini to take you through the financial and operational performance highlights for the quarter ended June 2022.
Thank you, Raj, and very good evening to all of you. We have uploaded our Q1 2023 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. We are delighted to share that we have been able to grow our revenues ahead of the industry growth due to the trust and brand created for HCG over decades. On the revenue front, our consolidated revenues for Q1 2023 stood at INR 408 crore, INR 408 crore, as compared to INR 323 crore in Q1 FY 2022, a growth of 26%. Revenue split between HCG and Milann stood at 96% and 4% respectively for Q1 FY 2023. Revenue growth for HCG stood at 26% YOY, and Milann stood at 33% YOY.
As mentioned in slide 27, revenue from the existing centers stood at INR 298 crore, a growth of 23% on a YOY basis. Revenue from new centers stood at INR 75 crore, a growth of 23% on YOY. We are delighted to state that our new centers are inching towards maturity and are seeing good traction across geographies. Coming to slide 33, our revenues from oncology business grew by 35% on YOY basis to roughly INR 343 crore, and revenue from non-oncology business stood at INR 58 crore. I now call your attention to slide 34, where we have for the first time disclosed bifurcation of our operational parameters across our existing network and new network. Our company-wide AOR stood at 64.6%, and AOR for existing versus new centers stood at 64% and 66.1% respectively.
Higher occupancy for new centers is due to only 70% of beds were operational in new centers. AOR and capacity base, beds stands at 49%. Our ARPC on company level stood at INR 38,454, and our ARPC from existing network stood at INR 40,606, and for new centers it stood at INR 32,958. ROCE for existing network stood at 19% annualized for Q1 FY 2023, as compared to 15.4% in FY 2022, a growth of 360 basis points. ROCE for new centers stood at -4.6% annualized for Q1 FY 2023, as compared to -8.3% in full year FY 2022. This again is an improvement of 370 basis points. Across geographies, we have given our revenue break up in slide 35. Jaipur grew by 263%.
Revenue from Ranchi grew by 112%, and Mumbai grew by 53%. Bangalore Center of Excellence grew by 37%. Our Milann business is also doing well. Revenues have increased by 43% in Q1 FY 2023 on year-over-year basis, and new registrations grew by 139%. New centers revenue growth in Milann stood at 70%. On the EBITDA front, our consolidated EBITDA for Q1 FY 2023 stood at INR 72 crore as compared to INR 51 crore in Q1 FY 2022, a growth of 41% on year-over-year basis. Our EBITDA growth on quarter-on-quarter basis stood at 14%. We have also given bifurcation of our EBITDA across existing and new centers. I would request the participants to view slide 27 for further details. We are happy to report that EBITDA from our new centers is growing.
EBITDA margins for Q1 FY 2023 stood at 17.7% as compared to 15.9% in Q1 FY 2022 and 17.3% in Q4 FY 2022. EBITDA margins expanded by 180 basis points on year-over-year basis. We draw synergies from various cost saving initiatives, including strategic efficiency projects that Raj talked about. We are confident of improving EBITDA margins by 100 basis points -200 basis points over the next 12 months- 18 months. Some benefits of these initiatives are reflected in the higher margin for this quarter. On profit before tax, we are happy to report PBT positive number of INR 10.4 crore in Q1 FY 2023 as compared to a loss of INR 8.9 crore in Q1 FY 2022. We aim to be a profit-making company on a consistent basis from now onwards.
Happy to share that we are PAT positive by INR 6 crore in Q1 FY 2023, which is fairly sustainable and likely to grow in the coming quarters. PBT on Q-over-Q basis increased by 11 x. PBT margins for Q1 FY 2023 stood at 2.6% as compared to -2.8% in Q1 FY 2022. Our net debt position excluding capital leases as on thirtieth June 2022 stood at INR 191.5 crore compared to INR 293.7 crore on thirtieth June 2021 and INR 190.5 crore as on thirty-first March 2022. CapEx for Q1 FY 2023 was INR 16.3 crore, bifurcated between existing centers and new centers at INR 12.2 crore and INR 4.1 crore respectively.
Our expansion of existing facilities at Ahmedabad phase II and Whitefield extension of Bangalore COE is on track, and we have incurred INR 7 crore and INR 1 crore respectively. Total planned CapEx for Ahmedabad is INR 85 crore, expected date of operations being Q1 FY 2025, and for Bangalore COE is INR 25 crore, expected date of operation being Q4 FY 2024. With this, I would now like to open the floor for question and answer.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one. The first question is from the line of Shubham Ajmera from SOIC. Please go ahead.
Hi. Thanks for providing me the opportunity and congratulations on good set of numbers. Sir, I would like to get your view on the international patients, like have you reached the pre-COVID level here? What kind of growth we are seeing here, and what is the current percentage of revenue from international patients in our total revenues? If you can give us some broad idea on that.
Yeah. Hi. Thank you and thank you for this question. As I mentioned in my opening remarks, you know, post-COVID, I think we have Bangalore. We always had Bangalore as one of the destination to get international patients.
Post-COVID, today we have Mumbai as well as Kolkata, two more destinations. We have made significant efforts in expanding our geographical footprint as well as channel footprints, whether it's government ties, insurance ties, institutional ties with different corporates, or as well as digital channels. As a result, we have seen in quarter one, our business, you know, is 1.4x the pre-COVID levels. I think today, at a HCG level, our international business is about 4%. You know, you'll be happy to know that at our center of excellence in Bangalore, it's at 15% of top line. I think we're just getting started.
Thank you. Thank you so much. Second question is, we have done some changes in the life of property, plant and equipment. Can you please elaborate on which category we have done it and what is the current life of such asset from the previous year?
Yeah. This is, it's not a major change. Basically, it's the PET CT machine, which we were depreciating over a period of 10 years, the Companies Act and the industry practice allows to kind of depreciate for a period of 13 years, which is what we have done.
Okay. Got it. Thank you. Thank you so much. That's all from my end.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Good evening. Thank you for taking my question. Just the first one, team on AOR. I know you don't, you know, kind of look at it like how we look at other hospitals, but just that's been a significant jump. Is there something from an operational standpoint that's changing? We have reached, like, close to 65%, right? Just want to understand what's happening on occupancy. I don't know whether you have an outlook for it, but just would like to understand this one.
Yeah. Thank you, Prashant. I think we've been mentioning in the last several quarterly calls that there is a lot of effort that we have taken over the last 4 quarters -6 quarters in improving, you know, our clinical strength in each hospital, adding more technology, adding more services. Mainly, a lot of effort has been taken on our go-to-market strategy. Our, you know, number of empanelments with different TPAs, different corporates, different payer channels. There's a lot of, you know, groundwork that has happened. There is a lot of activation activities that have happened to create awareness about HCG's capability in treating cancer patients. I think we're seeing a consistent, you know, growth in our, you know, footfalls as a result of all these efforts.
As a result, the, you know, the occupancy is, you know, growing. If you see the trend in occupancy is consistent over last few quarters.
Sure, Raj. I get the factual point, but I'm just saying, is this how we should look at it going ahead? That's one. We are now breaking new ground, right? I don't know whether I have at least seen historical numbers of this high. How does it actually impact our business model, either in terms of what growth you can you know kind of aspire to versus and the kind of margins, because I'm assuming generally simple that higher utilizations means better margins.
Yeah. As you know, Shyam, in the past, the question has been asked about our occupancy, and we were always in the 50% or so. We were said it is because a lot of outpatient therapy going on. Now, with, as you can see on a revenue growth of 26% in the last 8 quarters, like what Raj said, increasing footfall, essentially this is what we were expecting. We have space. We don't have space constraints. We don't have to put more brick and mortar. This occupancy is happening as per our expectation, as the revenue grows from each center, because our center of excellence and areas in Jaipur are all reaching, you know, historic growth. Naturally, the occupancy by default will increase.
It won't remain stable at 50%. That is the growth we are seeing. Going forward, yes, we still have, we are at 64. Some consider 75 as the maximum. We will, I think we may reach there at that point when all other centers do, but it also could be depending on centers. For example, Jaipur now we are almost full, so we are at capacity. Also in our Ahmedabad center. Actually now in Ahmedabad, we are building a new center. All of this will also take care of this. It is a healthy growth. It is expected, and we are obviously happy about it.
Got it, sir. Very helpful, Dr. Ajay. My second question is on ARPOB dynamics, and slightly different trends, right? For example, new centers, we have not seen ARPOB grow, but if I were to look at existing centers, they have grown well. Blended is 6%. Can you walk us through some of the dynamics here, what's happening either in terms of price, mix, what is being done here?
Yeah. Shyam, just one more data point on the previous.
Sure.
question that you asked. I think, you know, we have a capacity of about 1,974 beds right now.
Mm-hmm.
We have operationalized 1,737 beds. If your question was anyway, you know, or if your question was related to how much upside of growth is, you know, as and when we increase our occupancy, we will continue to commission more beds that are already built. I think, you know, I don't see capacity as a constraint going forward. On ARPOB, I think that has happened, you know, on improvement in ARPOB, it happened due to 2 levels-3 levels. One is pricing increase. Second is I think, you know, we have pricing for cash as well as TPA revision. Then, you know, we are seeing some positive mix change.
We have more hospitals which are NABH accredited, which gives us additional, you know, pricing ability. As a combination, I think our ARPOB is improving.
Fair enough. Raj, you mentioned in the opening comments also, we have looked at pricing. Cash and TPA, what's the revision like? Is it like linked to 4% or 5% medical inflation or higher?
Yeah. You know, usually we, you know, year-on-year we do about 2%-3% inflationary increase. But I talked about you know operational efficiency improvement program. Under that program, we have done a more structured pricing revision, starting with our Bangalore markets, and I think that's also contributing, you know, to higher margin. Now we are in process of rolling out that initiative across, you know, 10 more centers in the network. You will see additional improvement on realization because of that.
Thank you so much. My first question is still pending, which is why the difference between existing versus new ARPOB. I'll stop there. Thank you.
Yeah. A new center, if you look at the growth, I think Jaipur has really picked up. You know, Jaipur, I think the mix is more in favor to scheme business. You know, as a result of that, the realization is constant.
I think the way we are approaching at Jaipur is we want, you know, more and more patients to experience our services and all, and the optimization will happen as and when we go closer to the utilization level, higher utilization level. Regarding your question of why ARPOB is increased, more in our existing centers, it is because of the mix technology price increase. Obviously, our center of excellence, Bangalore, will have a much higher ARPOB even as we go forward when we look at ARPOB in a conventional way. That could be the reason also the difference is there, Shyam.
Got it. Thank you and all the best, Dr. Ajay, Doctor, and Raj, sorry.
Thanks, Shyam.
Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead.
Yeah, good evening, sir. Thanks for giving me the opportunity and congrats for good set of numbers. My question is on the structured pricing revision you just talked about in Bangalore center. Can you just elaborate it and how you are planning to implement it into other centers?
There are two types of pricing exercise. One is annual inflationary price increase. Every two, three years, we would like to do a more structured pricing increase. What does that mean? That means we map the competition, we look at the pricing, we map our positioning in the market, our value proposition in the market versus, you know, other players. We look at our capacity utilization for particular services and see, you know, if there is an opportunity to increase pricing premium. We go line item by line item in a more structured manner and identify items where we can optimize our pricing. Now, that's a methodology that's specific to a particular market.
Therefore, you know, we started with, you know, Bangalore, and now we will take it to other markets. It does take some time to study the market and map it, and we will take it to more markets as we move forward in this year.
All right, sir. My second question is on your cost optimization strategy, which was, you know, explained in the initial comments of the management. Can you just elaborate on how you are planning for this, you know, cost optimization strategy? Because these are some of the levers which will help us to drive the margins. As sir said that you are, you know, focusing on achieving around 150 basis points- 200 basis points improvement in the margins. I think these are the levers which will help you to drive the margins. Can you just elaborate on your cost optimization strategy?
Absolutely. So you know that as an industry, we've been facing increasing competition, price regulation, pressure on margins, and therefore we believe that we must do everything, you know, to increase margin. The key in that is, you know, identify micro efficiencies which in aggregate helps us to improve overall margin. There are several levers we are looking at it. One is workforce productivity. Workforce cost is one of the major cost item in our, in our P&L. Second is indirect cost optimization, the long tail of fixed cost. What we do in that is basically go line by line.
Identify duplication-based non-value adding activities, redesign processes, introduce technology to improve the productivity of certain processes, do shared services, introduce shared services so that we can have economies of scale. We do a very structured, you know, program, line item by line item. I think, you know, again, we started this initiative in Bangalore cluster first, and we will now take it to other markets.
Right, sir. Right. My third question is on, sir. I've gone through all the clusters. We have seen that most of the clusters have done great strong growth. Maharashtra, we have seen only the growth of just 10%. Any particular reason for it?
Maharashtra growth. I think if you look at Maharashtra, Nashik is one of our big centers. I think it's the biggest center for us in Maharashtra in terms of top line. Last year, Q1, we had a significant COVID business in that hospital. You know, this quarter that is not there, and that's why the percentage is looking lower.
Oh, okay. It is because of the high base of the COVID-
Yeah. Yeah.
Okay. Sir, one last bookkeeping question. This quarter we have seen tax rate little bit higher at INR 7.9 crores. Is there any one-off in it?
The thing is more from a conservative point of view, we don't take any deferred tax effect on our loss-making business. That's the reason why. That is the reason why it is like that.
What would be a normalized tax rate for the year?
We are at about 34.5%, which is the normal tax rate EBITDA reflects us at this point in time. At an appropriate time, we will evaluate the lower tax of 25%.
Okay, sir. Okay. Sir, last, if I can ask, sir, as you mentioned that, optimum capacity utilization is something which you are, you know, looking at all the centers. So when you think about putting a CapEx, you know, what kind of a utilization you have in front of you for a particular center? For example, Ahmedabad, as you said that currently it is now, you know, fully utilized capacity. So, when you do a expansion or when you come out with a greenfield project next to a particular hospital, what kind of, you know, capacity utilization or occupancy you normally look into, that after which you have to expand the capacity?
See, in the capacity utilization, as we discussed previously, you know, about occupancy rate bed, our focus going forward in the greenfield, if we do, will be less beds and more outpatient facility daycare because the whole cancer care is moving towards that. When we talk about capacity utilization, it is not only about beds anymore, but it is about how many linear accelerators, what is the amount of patients a linear accelerator can take. Can it do 100 patients? Because some of the newer technology and all can use up to that kind of capacity. When we are running, for example, in Jaipur, we are at capacity utilization on the 2 units. We are now trying to bring a third unit. We are reaching there.
Another important thing is, as we know, our CapEx is actually we have discussed this in the past meetings, where it is now pay-per-use model majority of the times, even though there may be exceptions. With this model, the CapEx actual requirement in terms of what is actual CapEx becomes less. It is more of a sharing the revenue. So with all this, I think we are very well positioned to handle even a capacity needed, putting extra technology without actually putting extra CapEx in it. So it will be risk reward sharing. So all of this, I think, will help us to grow very fast in future, depending on where the need is. It is very specific. For example, we may be reaching capacity in Jaipur, but we may not have reached capacity in Kolkata or South Mumbai.
We will now also focus on that, which areas needs to be focused, and the management is putting in extra effort to these areas to reach capacity.
Right, sir. Thanks. Thanks for the understanding and all the best for your future quarters, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Akshay Jain from Jain Capital. Please go ahead.
Hi, good evening. I have couple of questions. First, sir, can you elaborate on digital initiatives taken to increase the revenue? How do we see the overall technology playing a major part in the increase in revenues?
Yeah. Thank you for asking that question. See the whole genesis of HCG is bringing the most advanced medical technology to cancer patients in India. This is something that we are pioneering. I think if you look at what has happened parallelly in other industries is digital technology has been used to meet evolving consumer needs. Consumer needs around self-service, consumer needs around online payment, consumer needs about information requirements, consumer needs about comparing different, you know, players, different product services. But mainly providing convenience.
You know, to pay to consumers when they avail the services. This is one area we feel that, you know, we want to really invest in through multiple channels, right? You know, right from creating awareness about HCG's oncology capabilities online. Ours is a customer base which, you know, every year you have about 15 lakh-20 lakh new cancer patients in a population of 140 crore. Our ability to reach to them in traditional sales or marketing methods is very limited and will not be as productive.
Today we know that, you know, patients want, patients and their families want to learn about their disease, want to do research online, want to take second opinion, and are willing to travel, you know, any corner of India or world, you know, if they feel that's where they get the right treatment. It gives us an avenue to reach out to our, you know, fragmented, thinly dense, you know, patient group in a very effective manner. We have, you know, historically, you know, we have a very good track record. We treat, you know, more than 100,000 patients every year. That patient base is, you know, spread all over, India, and the word of mouth has helped. Where in addition to this is another thing that we are deploying.
The other part is we know that, you know, the myth around digital is it's mainly a domain of millennial male in metropolitan cities. We know that post-COVID, you know, the rural users of internet have, you know, surpassed the, you know, metro users of internet. We know that people with age group of more than 45, that group is as big as millennial, which is 20-35, in terms of internet usage. Things are changing. You know, the internet, you know, penetration is, you know, almost doubled over last couple of years, and now half of India's population is covered under that. It will continue to grow.
We feel that with our kind of differentiated and specialized products, it gives us a very good channel to reach out to masses across India, in fact across world, through digital channels. That's one thing. Second is we, you know, cancer patient journey starts before HCG and will, you know, continue while they are getting treated at HCG. You know, they will always have, you know, this sword hanging over them, and they will have to do follow-ups once they finish the treatment for rest of their life.
Through digital, you know, assets, it gives us ability to make sure that their journey before HCG through, during HCG and after HCG, is convenient, you know, and, you know, we can, help them, by giving them the right advice, okay, doing a follow-up with them, sending reminders, bringing them back, because early detection gives them, you know, best chance to improve their outcome. There are several aspects of this initiative. We've started working on it. We are seeing some of the green shoots, and we feel that, you know, with changing consumer behavior, I think this will become a, you know, growing channel for us going forward.
Understood. Second question. When can we expect the new centers, perform as the mature centers, and, maybe at what scale and, within what time frame?
Yeah. Sorry, can you repeat your question again?
Yeah. My question is, when can we expect the new centers perform as the mature centers, and at what scale and within what time frame?
As you see, you know, this time we have given a breakup between existing and new centers. You see how the traction on new centers has been. Year-on-year growth has been fantastic. Occupancy rates are going up. This bucket was loss-making. Now it's, you know, EBITDA positive. One by one, we turn all centers around. Kolkata is our newest center. We expect that to be turned around this year. I think, you know, we are on the right course. You know, unfortunately for us, the two years of COVID pandemic slowed down our ramp-up on these new centers. You know, as soon as the COVID is going away, we've seen, you know, immediate acceleration in this turnaround story.
We expect, you know, one, you know, negative EBITDA center, Kolkata, the newest center, to be turned around, you know, this month. You know, ramp-up has been fantastic. You see Nagpur ramp-up. You see Jaipur. Jaipur has done fantastically. You know, we are very confident that in next 12 months-18 months, you know, this bucket will, you know, start getting pretty close to existing centers.
Okay. Understood. Yeah. That's all from my side. Thank you.
Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one. Next question is from the line of Rajesh Joshi from Ace Securities. Please go ahead.
Hello. Sir, what will be our strategy for expansion in the form of greenfield, brownfield and inorganic? Can you elaborate on the same? What will be the CapEx guidance for the next coming 2-3 years?
We have refrained from giving a CapEx guidance going forward. However, on your greenfield question, today we have your two Mumbai centers as well as Kolkata centers, which are, you know, greenfield centers for us. We are in process of ramping them up. We have also further announced two centers. One is an extension center in Whitefield for our center of excellence, which is a greenfield project. Our Ahmedabad center of excellence, you know, has peaked out in terms of utilization. We are relocating in a newer site with an expanded capacity. That's another greenfield project we are doing. I think, you know, beyond that, we will focus on inorganic acquisition route.
As and when we find targets that we feel fit in our, you know, strategy, we feel that we can either ramp them up quickly, or, you know, turn them around quickly, and we can get it at a good valuation, in a value-accretive manner. That's our plan for brownfield growth. As and when we have more definitive, you know, developments, we'll share it with you.
Okay. Sir, what are the steps taken to improve the revenue and the margin from the new centers, especially from the Mumbai and Kolkata centers?
Again, both of these centers were, you know, relatively new before we entered into COVID pandemic era. The playbook for us has been very simple. Get the right clinical talent, introduce more treatment capabilities, more technology, enhance the customer base by, you know, your go-to-market activities, with tie-ups, institutional tie-ups with TPAs, insurance, PSUs, different payer channels. Bring, you know, for Mumbai, Kolkata especially, I mentioned it earlier. Prior to COVID, we had only Bangalore as a destination to bring international patients, but Mumbai and Kolkata are very well connected, you know, across the world. We are already, you know, as a result, able to bring in international patients to these two more locations.
That has helped us to improve our international business 1.4 x the pre-COVID levels. We will continue to drive that growth going forward. The playbook is, you know, pretty simple for turning around these new centers.
Okay. Thank you, sir. That's it from my side.
Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Priyanka Gandhi from ACE Capital. Please go ahead.
Hello, sir. I just have a couple of questions. Sir, you mentioned about cost rationalization, but can you quantify on the same? What will be the uptick in margins due to the decrease in costs and increase in efficiency?
Yeah. Thank you, Priyanka. Priyanka, as I mentioned, we started this project with our Bangalore cluster sometime, you know, a couple of quarters ago. We're already seeing just in Bangalore cluster about 20 basis points -30 basis points improvement in our margins in quarter one alone. We will take this initiative to, you know, more locations. We expect about 100 basis points -200 basis points improvement in our margins as we roll out these initiatives across all centers and ramp them up to their full capacity or potential.
All right. My next question being scalability and industry growth for cancer. Can it be scaled up and across the country as a multi-specialty hospital brand?
Sorry, as a multi-specialty what? Can it be scaled up as what?
Can you repeat the question?
Can it be scaled up across the country as a multi-specialty brand hospital brand?
No, we are very focused as an oncology brand. We don't see the need to really incorporate multi-specialty because when you look at oncology being focused factory, that is how we have grown from a very small enterprise in 2005-06 to this level. Because we always believe a focused factory approach is what drives the excellence, the center of excellence, the quality outcome, and that attracts the real cancer patients to come to the center of excellence. On a multi-specialty, as you know, it's usually an inpatient model where they do cardiac surgery to renal to oncology.
The oncology itself rarely attracts patients to come for oncology care, where exceptions are there. Usually in a multi-specialty patient goes with a symptom of abdominal pain, lump in the breast and ends up being cancer and gets the treatment there. That issue is there for all the time. That is why we don't have like 120,000 patients driving through this, through oncology is what we see. There is no way a multi-specialty can drive that number of patients. We are very clear in our focus, and that is how we have driven it. In future also, categorically, we are going to drive multi-specialty only. We feel there is enough for.
Single specialty.
Single specialty only. We have enough need for it. Like, you know, if you look at HCG itself today, we have nearly 50 crores people can access, but there is lot of need for it to expand. We are not even in certain parts of India, and also within where we are, further expansion can happen there, including in tier two. We are one of the few which are in tier two, tier three cities also in oncology, which is not there in many multi-specialty. We are very clear, and we are very positive for the future growth of oncology specialty. Okay.
Just to add to what Dr. Ajay said, Chintan, if you look at healthcare is usually characterized as demand-supply gap sector in India. That demand-supply gap, when you talk about oncology, is even higher. Now you look at what HCG has been able to achieve. We already have 22 cancer centers across 19 cities, nine states. That's scalability. The market has been growing over last few years with a CAGR of about 12%. We've growing about 16% CAGR. That's HCG's brand pull. That's HCG's differentiated and specialized product.
The fact that we've been able to achieve this with an oncology-focused care model in big cities, in tier two, tier three cities, with double-digit revenue growth, which is higher than market growth at 20+% EBITDA, in our mature centers with high-teens ROCE, and higher EBITDA in our center of excellence, more than 25%, it explains the scalability, viability and strength of HCG's unique model. I think, you know, the opportunity for growth is plenty out there for HCG. We are a market leader on many parameters, and, you know, we will continue to, you know, be market leader and consolidate our position going forward.
Got it, sir. Thank you for answering my question. That's all from my end.
Thank you.
Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Rishabh Parekh from Sunidhi Securities & Finance Limited. Please go ahead.
Some exceptional set of numbers. Now that we have a 25%.
Mr. Parekh, this is the operator.
Thousand-
Your audio is breaking. Please check.
Can you hear now?
Yes.
My first question was on our mature centers. We are at a 25% EBITDA margin, INR 40,000 ARPOB and a 65% occupancy. What is the kind of centers in the next this year and the next year?
Mr. Parekh, sorry to interrupt you. There was an audio loss from your line. Please repeat the last part.
Hello?
Yeah, yeah, please go ahead.
No, my question was around our mature centers. Now that we are at a 25% EBITDA margin and, you know, INR 40,000 ARPOB, 65% occupancy, what is the growth we can expect from our mature centers and what are the levers that we can use to drive growth?
See, the growth in the mature centers, certainly there is there, Parekh because of, these are all becoming centers of excellence or hubs where new technology will be put in, new areas of diagnosis, genomics and others will take place. Because of that, new talent acquisitions will happen. Look at, for example, putting in mature centers. There are a lot of mature centers don't have robotic surgery, may not have very high-end therapy, and genomics. As we do this, the obviously the revenue impact will be higher and occupancy may increase to up to 75%-80%. But more than occupancy, the footfall will increase, the radiation load will increase, the outpatient chemotherapy load will increase, ARPOB will increase. We are seeing like in our Bangalore center, our ARPOB is INR 66,000.
There is an opportunity for that to reach 66,000. We have to aim for the gold, as they say. Because nowadays patients also look for high-end oncology centers near them, and I think the fact we are building a very big center in Ahmedabad itself is a credit to that. The opportunity exists for us to expand the existing centers as hubs and even, you know, we have talked about expanding in Cuttack, making it a center of excellence, how it has grown. There are. Of course, Mumbai, I think in the next few years will become a center with clinical talent acquisition and all happening. I think the mature centers, I believe still have an opportunity for growth.
Particularly what Raj talked about digital, you know, in my coming in, all of this will only enhance the footfall and definitely it can increase. We are very positive on the mature centers growth in the future.
No, thank you. That's very helpful, outlining the headline of the headroom that the mature centers have to grow. My second question is on ARPOB. Does the base quarter, which is Q1 FY 2022, have the impact of any vaccination revenue which was not there in this quarter, hence optically the ARPOB increase was only about 5%-6%?
Yeah. No, that's not the reason.
In Q1 we did not have any vaccinations. Vaccination primarily started from Q2.
Okay. Q1 FY 2022 did not have vaccinations.
No.
Got it. Okay. Thank you.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Raj Gore for closing comments.
Yeah. Thank you everyone for joining the call. We'll keep updating the investor community on a regular basis for incremental updates on HCG. I hope we've been able to address all your queries. For any further information, kindly get in touch with us or Strategic Growth Advisors, our investor relations advisors. Thank you once again. Stay safe.
Thank you. Ladies and gentlemen, on behalf of HealthCare Global Enterprises Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.