Ladies and gentlemen, good day and welcome to the Q2 FY24 earnings conference call of Jupiter Life Line Hospitals Limited, hosted by JM Financial. 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 * then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jainil Shah from JM Financial. Thank you, and over to you, Mr. Shah.
Good morning, everyone. On behalf of JM Financial, we welcome you all to Jupiter Life Line Hospitals Limited Q2 and H1 FY24 earnings conference call. We have with us Dr. Ankit Thakker, Executive Director and CEO, and the senior management team. The company's financial results and investor presentation have been uploaded on the company's website and stock exchanges. We will begin the call with opening remarks from the management, followed by Q&A. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect has been included in the earnings presentation. I would now like to hand over the call to Dr. Ankit for his opening remarks. Thank you, and over to you.
Thank you, Jainil. Good morning, everybody. Thank you for taking time and joining us on our call in this Diwali week. This is our first earnings call, and we are here to discuss the business financial performance of Q2 and first half of FY2024. With me today are Mr. Anand Apte, our Chief of Business and Strategy, and Mr. Anish Vyas, and Mr. Prashant Pitale from our finance team, and along with them, our IR advisors and the SGA team. So being the first earnings call, I'm going to take some liberties and address some of our philosophies and thought processes also, besides talking about numbers, for the benefit of the wider audience who may not have had a chance to meet us during the IPO process.
Before we start, I'd like to express my deep sense of gratitude to all our shareholders, both in our previous private Avatar and now in the listed world as well, for buying into our vision and work. I'm also grateful to the bankers and the lawyers who helped us tell our story to the wider investor community. I'm thankful to all our doctors, team members, partners, consultants, vendors who helped us to create this story in the first place. Most importantly, I'm humbled by the trust that all our patients have had in us for over 16 years now. It is for you that we exist, and it is your well-being and interest that is foremost in our minds at all times. It is because of this focus of patient-centricity we have developed our business model the way we have.
Coincidentally, we found that the interest of patients and investors largely overlap. We have taken a conscious call to have all our hospitals as custom-designed and built because we realize that a well-planned infrastructure is essential to delivering good care. We also own all our assets. By buying land and owning the building, plant, and machinery, we are able to avoid the future stress of inflation-linked and perpetual drain of lease on our cash flows. We are not in this for the short term, and we are happy to make peace with the reality that healthcare is a capital-intensive business, and in order to build a business which has strong fundamentals and which is sustainable over the long term, we will have to make bigger investments in the early phases.
We have also chosen not to follow the hub-and-spoke model because we believe that spokes are incomplete facilities, and we would want to focus our energies on building full-service centers of excellence, which can not only provide the best care to our patients but also achieve economies of scale and generate good returns for our investors. We hope to continue walking on this path, and we hope to keep growing and creating value for the communities we serve and our investors. A lot of people told me during the IPO process that once you're listed, there'll be a lot of quarterly pressure. But those of you on the call who I met during the roadshows will be able to vouch for me when I say that I have always maintained that we are in this for the long haul.
Of course, the financials need to be reported on a periodic basis, which we will do, but so far we have not, and going forward, we do not intend to make decisions or take actions purely for the purposes of short-term interest. In our private Avatar, we were blessed to have shareholders who bought into the vision of long-term value creation and who also wholeheartedly supported the guiding principle of always doing the right thing. I'm sure even in the listed world, we will find similar support. To give you a brief introduction about the group, for those of you who may not have a background about us, Jupiter started its first hospital in Thane in the Mumbai Metropolitan Region, that is MMR, in 2007. The second one was in Pune in 2017, and the third in Indore in late 2020. This is a 96+% subsidiary.
Thane and Pune hospitals are both around 375 beds each and were greenfield projects, while the Indore hospital was an acquisition which is planned for about 430 beds, but we are currently operating around 231. All our hospitals are full-service independent hub hospitals where we provide all services from childbirth and newborn care right up to cancer and organ transplantation services. As we speak, we are constructing a 500-bed hospital in Dombivli, which is also in MMR. The land is purchased, all permissions for construction received, the excavation is now complete, and we have begun constructing upwards. The project is likely to be operational anywhere between 2-3 years from now. We have a strategic focus on the healthcare market in Western India, where we have a strong understanding of the regional nuances, and we believe there is a significant and growing demand for high-quality health services.
In fiscal 2022, the penetration of health insurance in India was around 38%, but the average for the Western Indian states, that is Maharashtra, Gujarat, Goa, and MP, was about 78%. We believe that by developing our business model around the insured population, we will be able to address the affordability question in healthcare and will be able to generate strong demand for our facilities. Even now, we have over half of our revenues coming in from the insured patients, with the government schemes only contributing around 1% of our revenue. Our aim for the next few years is to continue growing in the Western India region and build more hub hospitals of between 300-500 beds, taking our group's strength to about 2,500 beds. I realize I have gone on too long on an earnings call without talking about specific updates and numbers.
The presentation has been uploaded, and I'm sure you would have gone through it, but let me enumerate some key developments. In the current quarter, the company has become fully debt-free by repaying all our loans with the fresh proceeds from the IPO. We are also left with a net cash of about INR 320 crore on our book, which we plan to use for future CapEx and growth. Our hospital in Indore has now turned EBITDA positive, and soon, even on PAT levels, we expect it to be positive. We have in Indore completed empanelment with the insurance companies, and going forward, we believe this should improve the demand and the occupancy levels in Indore. In Pune now, we have signed rate revision contracts with the insurance companies, and going forward, we believe these will help in improving the ARPOBs as well as the margins of the hospital.
Eventually, the financial performance of the company should improve as a result of the insurance developments of Indore and Pune going forward. Coming to numbers in FY24 Q2, the total income stood at INR 264.2 crores, which is 18.4% growth year-over-year. EBITDA for the quarter stood at INR 62 crores, representing a margin of 23.5%. EBITDA has increased 8.8%. PAT for the quarter stood at INR 33.7 crores, representing a margin of 12.8%. PAT increased by 24.4% corresponding quarter year-over-year. Summary for the first half: H1 2024 revenue was INR 508.4 crores, showing an increase of 19.8% compared to H1 year-over-year. EBITDA for the half year stood at INR 116.1 crores, representing an increase of 8.4% compared to H1 year-over-year. EBITDA margin 22.8%. PAT for the half year stood at INR 87.7 crores. The average occupancy was 62.3% in H1 FY24 compared to 58.6% in H1 FY23.
The ARPOB for the first half was INR 53,075 at the consolidated level, and the ALOS stood at 3.89 days in the first half of this year. So with this summary, I am happy to talk to everyone and take questions, and look forward to talking to you. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may please press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abdul Qadir Puranwala from ICICI Securities. Please go ahead.
Yeah, hi sir. So thank you for the opportunity. So for my first question, I saw basically you're on Thane and Pune, so with the insurance rate revision which has happened, so what is the positive impact on EBITDA which you're already seeing because of Thane? And ahead with the rate revision in Pune, how do you see the margins panning out for the near-term 3-4 quarters from here on?
Thanks, Abdul. So the rate revision in Pune has just been signed early this month and probably last week, and it will come into impact from this week onward. So we believe that the Pune rate revision of insurance companies should show you a positive impact for the last 4, 5 months of this year. The rate revision should be in high single digits, I think, and that should give rise to an RFOP and revenue increase on a blended level because 100% is not insurance. On a blended level, the RFOP and revenue increase should be around 4% or so.
Yeah, sir, understood. And so the second question is on Dombivli when you're constructing Thane and Pune. So once Dombivli comes into or becomes operational, so how do you see Thane operations getting impacted? I mean, would that be any impact, first of all? And for Dombivli per se, can similar metrics like what you have in Thane be achievable at this facility as well?
So as I was saying in the opening remarks, Dombivli is in MMR region, and our business model is predominantly in all the units we have high insurance segment patients. So the insurance reimbursement in MMR region everywhere should be similar. So we have a feeling that, of course, first year or two, you do more of primary and secondary care work. The complexity of work improves only after year two onwards. But once it settles down, then Dombivli and Thane should show similar metrics is what we believe. And as far as impact on Thane is concerned, I think it would have no impact because the population of that region itself is already very high and growing very, very rapidly. So I don't think that would have any ripple effect on Thane. The local demand itself is quite high to take care of Dombivli Hospital.
Understood. And so lastly, on the near-term aspect, so are you guiding in terms of what could be your revenue growth for fiscal 2024-2025 and EBITDA margins for?
Mr. Puranwala, can you please increase the volume a little bit? Your voice is not that clear.
Sure. Is this better now?
Yes.
Much better.
Yes.
Yeah, yeah. Sorry. So yeah, what I was asking basically is, are you providing any particular guidance in terms of your FY24-'25 revenue and EBITDA margins, or just to have some bit of a flavor since Q2 has seen some bit of an improvement in your overall margins? So where do you see ending it up for the year ended or for next year as well?
No, honestly, we are not providing guidance as a thought process, and we will definitely provide updates of what has already happened in each quarter. You could make assumptions based on what you have seen in the first half of this year, but we are not wanting to give guidances for future currently.
All right, sir. All right, sir. Thank you, and I wish you all the best.
Thank you.
Thank you.
Thank you. Participants who wishes to ask questions may please press star followed by one. We'll take the next question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Just on this, Pune Hospital, is the insurance and the self-pay mix similar to the company level, or is it different?
So Pune and Thane both have a higher level of insurance. It is roughly two-thirds of the patients are insured in Thane and Pune. Indore had a much lower number, and that is why at the consolidated level, I think you see some 52%-53% of insurance. And that was because Indore empanelment was not fully complete, and Indore also generally, historically, had lower penetration, which is now growing. But for those two reasons, Indore was dragging down the insurance as a payer segment on a consolidated level. Pune and Thane both have about two-thirds of insured patients, 65%.
Understood, sir. So secondly, on ARPOB, while in first half FY24, the growth rate has been 4% when I compare with FY23 and the first half ARPOB. And with this rate revision coming into picture, so any further other levers like case mix optimization which can drive ARPOB from here on?
So case mix optimization potential is there in Indore. Thane and Pune have a fairly matured case mix. I don't think there can be dramatic changes in case mix in Thane and Pune. So as an ARPOB driver, inflation is an ARPOB driver for Thane and Pune.
Understood. That's it. That is understood. Thank you.
Thank you.
Thank you. The next question is from the line of Harsh Bhatia from Bandhan AMC. Please go ahead.
Yeah, hi, Ankit. Good morning. Am I audible?
Yes, Harsh.
Yeah, just one or two clarifications. In terms of Thane asset, can you help us understand the OP/IP volume growth? Because we have given the combined H1 to H1 OP/IP volume growth, which is mid to high peaks, on an H1 to H1 basis. But purely from the Thane asset, if you can help us understand.
Thane volume growth, you want to find out? I don't know if I have it on me immediately, but let me just try and look at it.
Sure. So should I go ahead?
One last question, so maybe we could answer that till someone looks it up.
Sure. And secondly, just to understand the cost structure from the quarter-to-quarter perspective on a year-on-year basis, could you help us understand what is the movement in the overall cost structure? Because Indore has now become EBITDA positive in the second quarter. But despite that, there is a slight dilution at the margins purely from the cost perspective. Gross margins are more or less stable. So where is the incremental cost coming from?
So some doctor costs because of some new hires which we have done in some of the hospital, that is an increase. The second contributor for increase in some cost is in Pune because we have added beds in Pune just a few months back, and the fixed cost associated with those beds has already come in. But obviously, they don't get occupied the day you commission them. So for a couple of quarters, whenever we commission new beds, we see a little bit of increased cost, and the revenue lags by a couple of quarters to fill up those beds. So these are two factors. The third factor is Q2. You are from Mumbai, so you know. Q2 in this part of the world, infections and fevers are quite high. So of your total occupancy, you have a larger percentage of medical management.
For them, the ARPOB will be lower if you have a higher medical management. These are a few factors which have played some role.
All right. Sure. Thank you. Best wishes.
Thank you. This is Anand Apte. Harsh, with regards to your previous question, the Thane revenue grew by 14%. OP volume was up by 3%, and IP volume was up in terms of numbers by 11%.
Okay. So IP 11% and OP 3%. Right now, the occupancy is somewhere around 71%-72%.
That's right.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Anuj Suleja from Trulife. Please go ahead.
Yeah. Hi. Am I audible?
Yes.
Yes, sir.
Thank you for taking my question. I just wanted to understand what is the seasonality like for Jupiter? Because we have a unique mix of, say, western and also there is Indore. Can you give a sense on how H2 would look generally? How does it look in front of H1? And if you could also provide some amount of guidance in terms of how should we be looking at occupancies and ARPOBs for the second half of the year, this year itself?
So Q1 and Q3 are typically slightly lower because of lifestyle-related issues. That is, Q1 being summer vacations in this part of the world. There is, both, at any given point, some of the doctors are always on a vacation. Similarly, the elective surgeries also, the patients would like to push or pull a little bit for reasons which can be postponed. They choose to postpone it. And again, Q3, festivals, and weddings, similar reasons where elective work kind of goes down a little bit. So Q1 and Q3 are slightly lower. Q2 is slightly higher because of, A, a little bit of overflow from the Q1 elective procedures and also the infections which I was just talking about being much higher in Q2. So Q2 is higher in terms of occupancies and volumes. And yeah, Q4 is kind of somewhere in the middle.
Okay. Okay. And if we were to say in Q1, there was some amount of one-off because you had hired some new talent, right? Is that understanding correct?
Yeah.
So on a steady state, the numbers that have come this quarter and the numbers that have come last quarter, somewhere in the middle should be the ideal EBITDA mix, EBITDA margin for the business?
It should be something like that. So honestly, Anuj, how do we, because I know you have asked a numerical quantitative question, but I want to give you a qualitative answer to that. How do we look at the business, and how do we look at our approach to management? So as far as we are concerned or as far as the revenues, if you look at it, is a collection of each individual encounter between a doctor and a patient, right? So whatever needs to be done for each patient needs to be done for that patient. You can't do more, and you should not do less. This quarter, for example, you had more medical management patients. And the trend was that for medical management patients this quarter, on average, they did not require as much of ICU stay or critical problems as they did last year.
Now, how do you plan that, forecast that, or guide for that a priori? You can't. And if the patients don't require it, what do you do about it? You don't do anything. You don't give them that critical care. As a result of that, will your ARPOB or margin get compressed by a few points? Yes, it will. Do we get troubled or worried about it? No, we don't. Similarly, next year, if maybe there is more critical illness and there is a higher ARPOB associated with that, will we really pat ourselves on the back and thump our chest? No, we will not. So we don't think that too much of microscopic analysis in healthcare is really doable. And even before the listing event, we have never been looking at business in that fashion. However, do we need to be attentive of which way things are going?
Of course, we need to be. So when we look at the overall utilizations, the occupancies, the number of procedures that we are doing, those kind of things are more of a guidance for us whether things are going in the right direction or not. And so far, I think they are going in the right direction.
Very good. Perfectly all right. I got my answer. Thanks a lot. Thank you.
Thank you. Thank you.
Thank you. Anyone who wishes to ask questions may please press star followed by one. The next question is from the line of Sachin Shah from SS Securities. Please go ahead.
Hello. Thank you for giving me an opportunity. I have a couple of questions. What are your views on ownership versus leasing model? Will you be considering leasing opportunity to reach 2,500 beds?
Yeah. So we will consider everything at all times. We are not closed-minded or rigid in our attitude or approach. So as far as consideration goes, we'll always consider all opportunities that present itself. If they make sense, we will take them up. But broadly, what is our thought? Broadly, our thought is that ownership is a better long-term story. If you are going to lease an asset to me, the lease is always going to be marked to market with the current inflations and current economic conditions. The lease is going to escalate year on year. The lease is never going to go away. So far, pre-listing, we were debt-funded. We funded all our assets with debt. The debt goes away in 8-10 years, and then the asset is free on board.
So we believe that after the first three, four, five years, the lease model does not play out well, and the ownership model plays out much better year five onwards. So for that reason, we have chosen to own the assets. However, if some interesting structure comes up or a very good opportunity comes up which is not available on ownership and we think we can justify it, we will look at a leased option. But as a default parameter, we prefer to own.
Okay. And how do you think of an expansion post your WWD facility?
So we are looking for some more land in Western India currently. We would like to buy two pieces of land. That is our thought for now and build up two more hospitals, again, of this size. We think that 300-500 beds is a sweet spot in terms of efficiency of operations and finances, both. So that is what we are trying to do, that identify two parcels of land which we can buy and build upon them.
Got it. Thank you so much.
Thank you.
Thank you. The next question is from the line of Bhagwan Chaudhary from Sunidhi Securities. Please go ahead.
Hi. Thanks for the opportunity. I think just in a broader sense, I have two, three questions, and this is regarding the WWD hospitals. So how we should look at it? First question is from the Indore side. Currently, it's having 50% kind of occupancy. So going forward, what can be the maximum occupancy? And the second thing, how do we look in terms of the revenue mix? Will that be more accretive towards the margin, that patient mix change, or it will be the same which is going on now?
Sure. So whenever we design a new facility, our thought is that at the peak or a matured state, it should reach a mid-70% occupancy if we think and mid-70% of what? And that is how we will size the facility. Whatever we think can be at 70+% . Because if you think that you can't achieve that, then better to have a smaller size, right? No point having a huge facility which you can't fill up. So eventually, at a mature state, whatever we build should reach 70+% in occupancy. That is a first factor. Second factor is specifics. That currently, Indore is at 50%, and we are updating 231 beds. So once the occupancy crosses 60%, 60, 65-ish, we will add some more beds and then ramp those up and then add some more beds and ramp those up till we are saturating the entire capacity.
So that is a thought process of occupancy ramp-up for Indore. On the ARPOB and margin level, last year was the second full year of operations in Indore, and we were almost at a break-even level, very small, few lakhs negative EBITDA on INR 100 crore revenue. So this year, we have turned EBITDA positive. Going forward, in the next couple of years, EBITDA margins of Indore should also become high teens and then grow forward. But at all times, we think that Indore margins might be 1% or 2% lower than those in the Mumbai region because of the cost structure of Indore is lower. And that leads us to believe that even though Indore can reach north of 20%, but it should be a little lower than that of Thane.
This margin expansion in Indore will come from the occupancy, or will there be some contribution from the ARPOB as well?
Both. Both. Case mix optimization-driven ARPOB growth and occupancy, both.
Got it. Secondly, in the same line, if I look at the Thane hospital, where your occupancy is 72% around, so what can be expected from here onwards in the Thane, any improvement in occupancy, or it will be totally driven by ARPOB now onwards?
Small plateauing, lingering kind of growth can be possible. Realistically, I don't think any hospital can consistently operate at above 80% occupancy. Mid- to high 70s is what it can reach. But is there, in my control, any magic to make it 72%-77% tomorrow? No, there is not. But yeah, that slow, little bit of lingering upward trend in occupancy can happen, and inflation-linked ARPOB growth will happen.
Got it. And the same comment on the Pune side as well?
Pune, yes, but Pune has a lower percentage occupancy. So Pune occupancy will definitely grow faster. And Pune had, what, 60-some% now. So that has a 10%-15% headroom of occupancy growth. So Pune will see both RFOP growth as well as occupancy growth.
Got it. And my last question on this.
You don't be worried.
Unit, by what time do you expect it to come be operational? In 2026 or 2027?
Yeah. If at 2026, it should be operational, I think, end of 2026.
Got it. Thank you.
Thank you. Participants who wishes to ask questions may please press star followed by one. The next question is from the line of Abdul Qadir Puranwala from ICICI Securities. Please go ahead.
Thanks for the follow-up. At Indore, now that the insurance empanelment has happened, how should we see the occupancy ramp-up from here on? I mean, some qualitative indicator if you could provide. And secondly, you talked about the high-teen margins for the near-term for Indore. Once there are close to 200 beds which you'll get to operationalize here, how soon would you be operationalizing them? And post that, will there be any immediate impact on the margins of Indore as well?
So, Indore—how soon will [we] ramp up the occupancy? Currently, it is 50%. So once it crosses 60%, we'll start planning for increasing the beds. And we generally, as a thumb rule, would like to keep operating between the 50%-65% occupancy range. So as a broad indicator, once we reach 65% occupancy, add enough beds to come down to 50% occupancy and then again ramp them up and keep doing this two or three times till you exhaust everything. So that is how we plan to ramp up Indore. And margins, yes. Once the bed capacity goes up and those start getting occupied, then the high teens and eventually 20% margin is what we are expecting there.
Sure. Sure. And so last one, on your further expansion beyond WWD, if you could provide any flavor, have you already initiated talks for buying land or doing some M&A of already an established hospital chain? And what is the kind of ticket size you would be typically looking out for when you try and search for a potential acquisition candidate?
So nothing concrete on the M&A or acquisition side. We have not found anything which is looking very promising or aligned to our thought process and business model yet. So I have nothing to say there. On the land side, yes. I mean, land being land, everyone in India understands that it is one of the most challenging things to acquire in the country is land. And that also at the right location, at the right value, and free of litigation. So that is where the challenge lies. So we are currently engaged in several conversations about land. But till the time you don't sign anything, I don't think it is wise to engage in speculation on land discussions. But yes, we are talking to a few people for land. And as soon as we have anything to announce, we'll make that announcement to everybody.
Understood. Thank you.
Thank you. You may please press star followed by one. You may please press star followed by one to ask questions. The next question is from the line of Jigar Shah from AK Securities. Please go ahead.
Yeah. Thank you, sir, for taking my question. Sir, first of all, congratulations for a good set of numbers. I believe we have done fairly well compared to PS. I have just a couple of operational questions. How do you go about selecting the location for building a hospital, and what are the key criteria, if we say? And second one would be, which are the key therapies that you focus on at your hospitals?
Yeah. The second question is very easy. I'll do that first. We don't focus on any one or few therapies. We choose to do everything in all our hospitals because we think healthcare and medical branches are interlinked with each other. And in order to excel in any branch of healthcare, you will have to excel in all of them. All the facilities are full-service and independent, and we try to do everything everywhere and do it well. That is the second part. The first part is the location selection. In Western India where we operate, I think it is one of the more underserved markets as far as healthcare is concerned. North and South have more penetration in general. There are plenty of locations which are densely populated in prominent tier-one locations and which don't have health facilities.
So we believe that instead of going and sitting next to an already established hospital in a more glamorous location, we'd rather go to some such location where there are a lot of residential populations, 1+ million people, and who don't have access to quality healthcare. And as I was saying earlier, with the rising penetration of insurance, the affordability question is now slowly getting out of the equation. A lot of people, especially post-COVID, are choosing to get themselves insured even if their employer does not provide them an insurance. And a lot of employers also now are realizing that health insurance, like in the West, is becoming kind of a minimum prerequisite as a part of their employment benefit program.
Combination of all this, high insurance, making affordability easy, high population density, and lack of other facilities wherever we find these kind of locations - and there are plenty of them - we think that is a good area to set up a hospital.
Correct. Got it, sir. And lastly, sir, our Dombivli Hospital, once it gets operationalized, I mean, we would be the largest in the area, right?
Yes.
Got it, sir. Thank you, sir.
Thank you.
Thank you. Participants, you may please press star followed by one to ask questions. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you all for taking time and attending the call and listening to us. I hope that the answers were clear and satisfactory. If there is any further afterthoughts or any further questions which you may have at a later date, you could reach out to the SGA team. They are managing our IR activity, and they'll be happy to put us in touch with you. Again, on behalf of all of us, Happy Diwali. Have a great year ahead, and see you again or talk to you again next quarter. Thank you.
Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.