Ladies and gentlemen, good day and welcome to KIMS Hospitals Q1 FY 2025 earnings conference call hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jeewani from IIFL Securities Limited. Thank you, and over to you, sir.
Yeah, thanks. Good morning, everyone. This is Rahul from IIFL Institutional Equities. I welcome you all to the first quarter earnings conference call of KIMS Hospitals. From KIMS, we have with us Dr. Bhaskar Rao Bollineni, Founder and Managing Director, Dr. Abhinay Bollineni, Executive Director and CEO, and Mr. Sachin Salvi, Chief Financial Officer. Over to you, sir, for your opening comments.
Let us start on a happy note. Today, 8th August, is a very important day. It happens to be a National Happiness Happens Day . So I'd like to present the financial and operational details for quarter one 2025. I'm sure the results will make you happy. The gross revenue of INR 693 crores, a growth of 13.8% year-over-year and 8.7% on quarter-over-quarter basis. EBITDA of INR 184 crore, a growth of 14.9% year-over-year and 13% on a quarter-over-quarter basis. EBITDA margin at 26.6% versus 26.3% in quarter one, FY 2024 and 25.5% in quarter four, FY 2024. EBITDA margin, excluding other income, stands at 26.1%, a growth of 0.1% year-over-year and 1% on quarter-over-quarter basis. PAT at INR 95.1 crore in quarter one 2025, against INR 86.7 crore and INR 71.6 crore in quarter one, FY 2024, and quarter four, FY 2024, respectively.
Consolidated EPS of INR 10.8, a growth of 7% year-on-year and 32.1% quarter-on-quarter. The average revenue per operating bed grew by 21.3% and 12.2% year-on-year and quarter-on-quarter, respectively. Average revenue per patient grew by 6.1% and 1.4% year-on-year and quarter-on-quarter, respectively. IP volume grew by 7.5% and 7.1% year-on-year and quarter-on-quarter, respectively. Conducted 420,000 OPD consults in quarter one, FY 2025, which grew by 10.2% year-on-year and 2.6% quarter-on-quarter. On the last quarter, I apprised you about our setting up a 290-bed hospital in Thane, Mumbai. Again, today, I would like to inform you about yet another new acquisition in Vizag. Queen's NRI Hospital, a 200-bed hospital at prime location in Vizag. It was established in 1995 with a built-up area of around 150,000 sq ft by a couple of doctors.
The hospital is in a densely populated locality with good potential. KIMS already has a multi-specialty hospital and a gastro unit at Vizag, and this addition will help it garner a larger share in the market. Besides, the hospital is situated in a prime locality, which makes it an attractive proposition. KIMS entered into an agreement with the owners of QNRI to purchase 100% holding in the company. The addition of a new hospital will make the chain of our hospitals longer and stronger. Our Nashik Hospital is due for inauguration this quarter. All other projects are progressing well according to the timelines. You all know that we are making clinical achievements. I keep mentioning in all these investors' presentations in the district headquarters hospitals. All are doing very well so that the patients need not go to the higher centers.
That is one of the prime mottoes of KIMS, that we need to be able to cater more care towards the patients at the district level itself. We got a few awards. KIMS has made a name in organ transplantation, having done about 190 lung transplants in three years, which is an all-India record. Last year, the entire lung and all the transplants put together, we did 259, which is the highest number in Telangana state. I am happy to inform that KIMS Secunderabad i s awarded the best brainstem death certifying team for South region by a National Organ and Tissue Transplant Organisation , Government of India, and a function held on 3rd August at New Delhi, which was presided over by the Honorable Union Minister of Health and Family Welfare, Shri J.P. Nadda. This is an important recognition of our commitment and excellence in the field of organ transplantation.
It is not only the transplantation, we are trying to create an awareness at the national level. We are the leader in the lung transplant. That's why we need to improve the awareness among the hospitals about the importance of the organ donation. So we thank the government for this honor. You are aware that 18% GST is levied on life and medical insurance premiums. Recently, the Union Minister of Road Transport and Highways, Shri Nitin Gadkari, has urged the Finance Minister to consider withdrawing of the above tax. It is a commendable move, as it will help in making healthcare more accessible and affordable. It will reduce the cost of insurance premiums, paving the way for increased insurance penetration that can lead to more inpatient and outpatient coverage and service at hospitals, and more and more patients will come into the purview of the insurance.
So that the affordability will improve, more and more people will utilize the hospitals for their diseases. It is hoped that the government will take favorable action that will have an impact on providing wider insurance coverage and health benefits to people. We are in the middle of the Olympic Games. Our congratulations to the players from all over the world participating in the Olympics, and especially to our Indian players. Special congratulations to Manu Bhaker, Vinesh Phogat, and Neeraj Chopra for their outstanding performance. Let us congratulate all the winners and hope that our players will bring more medals and glory to the nation. Who will ever imagine that a mere 100 g can make a world of difference? It is unfortunate that barely 100 g of extra weight had deprived our Vinesh Phogat of a possible gold medal at the Olympics.
In any case, she made history without a medal, and the entire nation stands by her for her valiant fight. We are just one week away from our 78th Independence Day. I take this opportunity to convey Independence Day greetings to all you in advance. Thank you very much. Opening for the questions and answers.
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 handset 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 Amey from JM Financial. Please go ahead.
Yeah, thank you so much. It's Amey from JM . Congratulations to the management on the good set of numbers and the fights we have taken on the transplant side. Just the first question I have on the ARPOB. Our ARPOB for the quarter have grown substantially at around more than 20%. It seems to be led by the Telangana and Andhra region. But here, the occupancy has actually come down. Is it possible to explain the dynamics here, like what has changed here in these specialty hospitals during the quarter?
So Amey, thank you for the question. If you actually look at the IP volumes, there has been consistent growth in IP volume. ALOS is something that we, because of high occupancies in Andhra in some of our hospitals, we've been constantly working and trying to bring down the ALOS. And if you look at quarter-on-quarter, we have been trying to reduce the ALOS. And this quarter also, we put consistent efforts to bring it down. And that is the reason why the ARPOB has gone up. But I think we should pay more attention to IP volume growth and ARPP. That would be a true indicator of.
Is it a change in case mix like higher volumes of the oncology, etc., which would have led to this change or something related to case mix which could be?
Nothing very significant change in the case mix. There is some marginal improvement in the payer mix, the incremental revenue that came in came from a cash and insurance payer where the ALOS is less. So that is one contributing factor. Our constant endeavor to reduce the length of stay for scheme patients, especially corporates and Aarogyasri is one function . So as a result of these two, the length of stays come down. But like I said, again, we should pay more attention towards ARPP and IP volume. That's honestly a measure of what the growth is on a quarter-on-quarter.
Sure. The second question I have is, we have changed the way we used to report occupancy. Now we are showing it on the capacity basis. So overall, also, it has come down. At the hospital level, it is also very substantially low. So is there any indication you can give what optimal capacity utilization or occupancy would be for our metric hospitals going ahead?
I think based on the feedback that we got from investors, we had removed one layer of reporting there, and we're just now reporting occupancy and total bed capacity. But the healthy occupancy is around 70%. 65%-70% is a healthy occupancy.
Sure. And that would be on the new formula.
Yeah, on the bed capacity.
Oh, sure. Thank you so much. I will join back.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question is from the line of Abdulkader from ICICI Securities. Please go ahead.
Yeah, hi sir. Thank you for the opportunity. Sir, just to understand the ALOS reduction better, so speaking from the previous participant, so what are the factors actually which have contributed to this reduction in ALOS? And would we, in the near- term, kind of build this kind of a reduction, or this was more specific to this particular quarter?
I think we can sustain this kind of a number, but further reduction, we are putting constant effort to see how we can further reduce. So there are two or three factors that drive ALOS. One is that the incremental revenue that came in came from a payer mix, which is cash and insurance, that is large, where the ALOS is predominantly low. Number two, the case mix within the quarter could be one contributing factor. And we are also putting effort, especially in Andhra, where the ALOS has been high because of a significant volume of patients coming in from the government-sponsored scheme. We are putting constant effort to see how we can reduce that length of stay because of a lot of documentation process that is involved. We're trying to make things more efficient there.
Got it. And secondly, on the margins from the Telangana cluster, so there is a sequential bounce back in terms of the margins, but it still continues to be a little lower than where we were. So any color here where the peak margins can touch or would an absolute increase in EBITDA margins be possible from where we are in Telangana?
Yeah, there is going to be an expansion of EBITDA margin, but at this point in time, we are investing in a lot of new programs. So if you look at, we've started a new program called for rehab services in Secunderabad. We have onboarded a lot of doctors recently in the last two quarters. So there is a drag of almost INR 1-INR 1.5 crore per month from the new doctors and from the rehab program. So once the growth in revenue happens and there's some maturity there, things should bounce back to a 30+ kind of an EBITDA margin. And also, there is some corporate hiring and corporate expansion that will continue to remain the same. But as revenue grows up, the margin expansion will definitely happen in Secunderabad.
Got it. Thank you. Wish you all the best.
Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Good morning. Thank you for the opportunity. My first question is, can you update us on some of your upcoming hospitals? So Thane, Nashik, and maybe update on the Bangalore facilities about the progress, and are you on track to launch these as per the timeline indicated earlier?
Yeah, I think all Bombay and Bangalore, we're pretty confident we'll be able to launch them by the fourth quarter of the financial year. So far, we don't anticipate any delay in either of the projects. Both the projects in Bangalore and in Bombay, we don't anticipate any delay at this point in time.
Nashik, you mentioned you will be shortly inaugurating it this quarter.
I think we're fully commissioned and fully ready. We've onboarded a few doctors. We're just waiting for the final OC occupancy certificate from the local authorities. We should expect that post-August 15th, and then we are ready to start.
How many beds you will start with in the Nashik?
With around 75-80 beds, we will operationalize 75-80 beds. But the capital for all the 250-odd beds is fully incurred or is in the process of getting fully incurred. What we mean by operationalize is we will have manpower only for 70-80 beds. As the occupancy goes up, we will keep adding more manpower.
Sure. My second question is on your efforts to improve mix, especially in the AP region. So I guess you earlier were focusing on oncology and Mother and Child care to really improve the margins or mix, etc. So again, some updates, have you implemented it across the hospitals in AP region?
So like in the investor presentation, we have three units that will add cancer and Mother and Child by end of this financial year. We have acquired Queen's NRI, which is a hospital that also has cancer. So the wide geography that will take care of the needs for cancer care. And the remaining geographies out of the six other geographies, three of them we will operationalize cancer in this financial year.
Okay. My last question is on your funding for the CapEx, which you have planned. I understand, again, you're relying a lot on your internal accrual to fund most of the projects. Is that the case? In case you have to borrow, what kind of cost of borrowing, etc., you are seeing?
As far as the cost of borrowing is concerned, as of now, our average cost of borrowing is about 8.5%. We anticipate that it remains in the same range. We are trying to fund as many projects as possible from our internal resources, as we have said in earlier discussion also, that we intend to keep our debt-to-equity ratio within the range of 0.75-1. That remains.
Okay. That's helpful. Thank you.
Thank you. Participants who wish to ask a question, may press star and one. The next question is from the line of Naman Bagrecha from IIFL Securities. Please go ahead.
Hello. Am I audible?
Yes, you are. Please go ahead.
Congratulations on a strong set of numbers. So I just wanted more headroom on the Vizag acquisition in terms of what kind of current revenues are and over the next three to four years, what kind of scale of the city, and also in terms of margins and current ARPOBs. I think you've mentioned in the slide that the potential ARPOBs would be around [INR 42,000-INR 48,000]. So wanted to know more in terms of what is the economics currently. And also, as you mentioned, that this was started by doctors. So what has led them to sell this hospital to us?
Yeah. So I think this was started by a family 20 years ago. I think the second generation was not very keen on taking things forward. They were also settled outside the country. So then they decided to divest the hospital and go back to the U.K with their children. But coming to the hospital, it's currently doing a revenue of around INR 65-INR 70 crores. At a point in time, it used to deliver a revenue of INR 120-INR 150 crores. But given that competition came in and a lot of doctors left the hospital because they didn't see growth, we feel that the potential for this hospital, given the excellent location, is close to scaling up to almost INR 250 crores of revenue over a period of three to four years' time with a very healthy EBITDA margin. We plan to do just cash and insurance in this hospital.
We don't plan to focus on any scheme patients in this facility. We have another hospital which is just 10 km away from this facility. We'd like to continue to do all scheme work in that hospital and continue to focus on building the cash and insurance layer as well. And that's why we believe that the ARPOB could be in the range of INR 40,000-INR 45,000. And the idea is to also make it a center of excellence for cancer and transplant services in Andhra Pradesh.
Currently, the ARPOB would be around INR 38,000, and we would like to scale up it.
Actually, the ARPOB is around INR 20,000.
INR 20,000.
Given that 30% of their income currently is from scheme patients, that's why the ARPOB. But if you look at the ARPOB of our Vizag unit, which does cash and insurance, the cash and insurance ARPOB is around INR 35,000-INR 38,000 per bed per day. We are anticipating it to be slightly higher given the geographical presence and given the kind of work that we want to do in cancer and transplant.
Got it. Got it. So what kind of, let's say, additional or incremental CapEx would be required to add these specialties like M&C, oncology, etc., that you mentioned?
All the technology is already there. It's a running hospital with cancer services. So there is nothing on the medical equipment that we'll have to do immediately over the next two years, three years. But after two, three years, we might have to do a refresh on the entire medical equipment. But at this point in time, we'll have to renovate the facility to bring it to the standards of what a KIMS Hospital would typically look like, which could incur a CapEx of INR 20-INR 25 crores. But on the medical front, I don't see a major CapEx happening over the next 24 months.
So also, I mean, on this one, what could be the current margins and the scale-up you're seeing?
The margin currently is around 8% or INR 65 crore kind of a revenue. We believe over the next three to four years, we should be able to get to INR 250 crore kind of a revenue in this hospital.
Okay. Okay. So my next question is more regarding to the previous participants' question. There has been a sharp decline in ALOS. So I mean, is my understanding correct that the scheme patients which were spending or staying for a longer period, that has now reduced or something else has happened this quarter?
Sorry to interrupt, sir. We have lost the management line. Please hold while we reconnect them back. Thank you. Ladies and gentlemen, we have the management line reconnected with us. Mr. Naman, please go ahead with your question.
Thank you. Just wanted to understand on the ALOS data, this quarter, we see a sharp decline in ALOS. I missed your opening comments to a participant where you highlighted that it was because of scheme patients now having a lower ALOS. Is this correct, or my understanding is completely wrong?
Yeah, that is correct. There are multiple factors for that to happen. But one of the strong reasons is because we're focusing on reducing the length of stay for scheme patients, both the Aarogyasri and public sector companies. But the other reason could be because of the change in case mix and payer mix. The incremental revenue that came in from a payer mix where the ALOS is substantially lower than the average.
We believe that this would be sustainable for the balance three quarters of this year, or we could?
It should be sustainable.
Okay. Okay. Okay. And just the last one before I get back to you. You mentioned that 65%-70% kind of occupancy on total bed capacity is what we'll be looking at. And currently, Telangana and Andhra Pradesh would be closer to, let's say, around 50%. So what kind of, I mean, in terms of by when can we achieve the 65%-70% kind of number on a full-year basis?
I think so, in Andhra, there are one facility where we have almost only a 30% occupancy. It is because we don't do any scheme there. It's only focused on cash and insurance. That facility may not go up to a 70% ever. It's just that even at a 30%-35% occupancy, we've been able to do healthy numbers. There are some hospitals that are at 90%-95% kind of an occupancy. A blend of what you're seeing is at 52%-53%. But over the next three years, three to four years, we should be, in the current capacity, we should be able to get to that kind of an occupancy: 70%-75%.
Okay. Okay. Thanks. Thanks a lot, sir. We'll get back to you.
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yes. Thanks for the opportunity. Am I audible?
Yes.
Just on this sharing, there's been a significant uptick in terms of IP holding both year-over-year as well as quarter-over-quarter. If you could share some data.
The voice is not clear, sir.
Is this better?
Mr. Tushar, could you please use your handset?
Yeah. Is this better?
Can you move a little far away, handset?
Is it better?
Yes, sir. Please hold.
Yeah. Okay. So just on this IP volume for Sunshine, there has been a significant increase both year-over-year as well as quarter-over-quarter. If you could shed some light on this aspect.
Sunshine, like we always said, once the new facility comes and we stabilize, we'll be able to show growth in revenue. And we moved into the new facility in January February, sorry, in December, January. And the last quarter, we needed time to stabilize that hospital in the new facility. And after we moved there, onboarding of doctors, growth from the existing specialties led to the growth. In fact, I think Q2 will be even more promising in terms of how things are shaping up at Sunshine.
And so subsequently, sir, so what do you think the ARPOB would settle at as we ramp up in terms of patient volume?
I think since Sunshine is a cash and insurance-based facility, the current ARPOB level should be able to sustain.
But then can that be scaled to further higher ARPOB?
Because we'll also be adding a lot more specialties where the ARPOB could be, because here it's still currently heavily dependent on ARPOB where the ARPOBs are higher. So, since we'll add a lot more specialties, it could be at a much lower ARPOB. So, to assume that we'll sustain the ARPOB is reasonable.
Understood. So on Telangana front, at least IP volume has been pretty stable. I'm not seeing much of increase. Occupancy also sort of dipping. And even in Andhra Pradesh as well, the IP volume has been pretty stable. So any particular reason to call out?
Yeah. I think once we add the in Andhra, particularly, once we add more capacity, we add these specialties like cancer and Mother and Child, we will further see an uptick in growth, both in volume and revenue. As far as Andhra is concerned, again, sorry, as far as Telangana is concerned, we have taken measures to add new doctors. Subsequent quarters, there's been good growth in revenue, healthy growth in revenue. The subsequent quarters, we will see this growth as well.
Understood. With this 48% occupancy, we are at 30% EBITDA margin for Telangana. With the addition of new specialties or the ramp-up of occupancy, so what is the scope of improvement in the profitability for this unit?
Every incremental revenue in Telangana and Andhra, we should assume 35% of that will flow through to the EBITDA. 35%-40% of the incremental revenue will flow through to the EBITDA.
Understood, sir. Understood. That's it from my side. Thank you.
Thank you. The next question is from the line of Bino from Elara Capital. Please go ahead.
Hi. Good morning. One thing, sir, any of your specialist doctors have moved from the Secunderabad facility to the new Sunshine facility?
No, no. Nothing. No one.
Okay. Okay. Sunshine is all fresh recruitment.
Yeah. No one from KIMS.
Okay. The shift out of the old facility has already happened fully?
Yeah. It's fully done. It was done in January. It's fully done in January. Just needed some time before all patients got aware that the facility is now moved. After that happened, we've seen good uptick in revenue.
Okay. What's the plan with that old facility?
So we've started. We had demolished Block 1 and Block 2 in KIMS Secunderabad. We have now shifted some services to that facility. We've started a rehab program. And after three years, when the new facility of KIMS Secunderabad is ready, we will then shut that and hand it over because it's a leased premises.
Okay. Okay. And so that old facility revenue is also now reported under the Sunshine or under KIMS Secunderabad?
KIMS Secunderabad.
Okay. So the old Sunshine facility revenue is under KIMS Secunderabad.
There's very little revenue coming in from there because we've only moved some back-end specialties. But yeah, whatever is coming is coming in KIMS Secunderabad.
Okay. And what's the update on Nagpur? Is it now stabilized? Can you expect steady performance at the levels that we are seeing right now?
Yeah. I think Nagpur has stabilized. There will be margin expansion further. In fact, there have been some one-time costs in this quarter. If not, it would have been INR 11 crore kind of an EBITDA on a INR 53 crore revenue. On a INR 52 crore revenue, we would have done a INR 11 crore EBITDA. I think things are now quite stable there. We are actually planning to do a further CapEx in Nagpur. We'll come up with a plan soon. We'll be expanding the total number of beds. We also add cancer as a service.
Understood. Thank you very much.
Thank you. The next question is from the line of Rahul Jeewani from IIFL Securities. Please go ahead.
Yeah. Dr. Abhinay, can you talk about these incremental hirings which we are doing on the corporate side? So the ex-CFO of Aster has joined you. So what are your broader plans in terms of, let's say, some of the senior corporate hires?
So like we've always been indicating in the past, there's a very strong team that's coming to build out the Karnataka story. I think Sreenath is officially on board. We'll soon have the rest of the leadership join us. We have Dr. Nitish, who will come on board as the Managing Director and the CEO of that cluster. He was with Narayana Hrudayalaya for 20 years, with Aster for 10 years. So we are expecting a very strong traction from the local doctors and his leadership further in that Karnataka story. So that's why we've always been very confident about building that story. And we've gone ahead and invested on two hospitals. We plan to do a few more in Bangalore once these two hospitals stabilize.
Sure. And Dr. Nitish and Sreenath, have they invested equity into the Karnataka cluster? And in terms of, let's say, our plans for doctor hiring for the two Bangalore hospitals, how have those been progressing?
So far, the doctor hiring, the traction is quite good. I think given their roots in Karnataka for the last 25-30 years, and their connect, Nitish himself being a doctor, and they connect with the local doctors, has been quite helpful. And with the KIMS model and the equity model, things look very promising. But again, since we're six to eight months away from commissioning the hospital, it will be too early to commit. But I think overall, there is a lot of positivity for both the hospitals and the kind of facilities that we're building, the kind of specialties that we're coming up with in Bangalore.
Sure, Dr. Abhinay. In terms of equity, are they these days investing equity into the Karnataka cluster?
Yeah. So the way it's structured is they hold a parcel of land in a place called Sarjapur, where we intend to build a large health city but over a period of time after we stabilize these two. So that has been valued at a fair market value, and that will be brought on board as equity. And that will be their share of contribution. And as in when more capital is required for the cluster, all parties will get value to the rest of it.
Sure. And by when do you expect to start, let's say, building out this new hospital in Sarjapur?
No. I think the first plan is to stabilize these two, show investors traction, and gain confidence. And then we announce further expansion in Karnataka.
Sure, Dr. Abhinay. And one last question from my end. In terms of overall occupancies, obviously, the dip which we have seen this quarter has primarily been driven by, let's say, the lower ALOS. Now, in terms of this optimal capacity utilization, which you indicated would be INR 65, INR 70 crores kind of a number in three to four years, what kind of an ALOS number should we be working with for this 65%-70% capacity utilization?
I think the current ALOS 3.9 is what is being, sorry. 3.62 is what has been reported. Anywhere between 3.62 and 3.8 is what is a definitely sustainable ARPOB. Sorry, ALOS.
Sure. Sure. Sure, Dr. Abhinay. I will join back with you. Thank you.
Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Thank you for the opportunity. I just have one more additional question. So just want to understand what is planned to reduce promoter pledge. Right now, there is notable pledging of promoter stakes. So what are plans to unwind this?
So what's happening is promoter pledge, what we are looking for now, we approved by the board. We are going to the AGM that the main promoters who are there, who are having a different business, that is infra, then their shares have been pledged. So we are going to make them public so that the main promoters and KIMS will not have any pledge maybe by end of this quarter or next quarter.
So it's the reclassification of the.
Yeah.
Yeah, some of the promoters. Okay. So this will happen by end of this quarter, second quarter?
We approved already by the Board, and SEBI has been informed. Once the AGM, which is on the 29th of this month, after that, maybe it takes about a couple of weeks.
Okay. Thank you.
Thank you. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.
Yeah. Good morning, sir. So my first question is around the ARPOB. Since you mentioned that there's not much of a change in case mix, and the ARPOB is also even sequentially substantially up by more than 10%, is it largely attributable to a tariff increase or a procedural rack rate increase?
Sorry to interrupt, sir. The management line has been disconnected. Please hold while I reconnect them back. Thank you. Ladies and gentlemen, the management line has been reconnected back. Thank you for patiently holding. Yes, Mr. Gagan, could you please go ahead with your question again?
Okay. So good morning. My first question is on the ARPOB, which is up almost 21% year-on-year and 11.5% quarter-on-quarter. If the case mix has not changed much, is it reasonable to infer that most of the ARPOB increase is coming from an increase in tariffs and increase in procedure rates?
Well, the ARPP has remained constant. It is a function of two, three things. Like I said, one significant driver for it is to reduce the length of stay for KIMS patients. Number two is that the incremental revenue came in from payers, which is cash and insurance, and from procedures where the length of stay has been lower. So these two things have been contributing to this reduction in ALOS. I think moving forward, a good base would be around 3.6-3.8. That range would be a good ALOS to assume. We have still not taken a price hike in the first quarter. We have done some price hike in July, but not in the first quarter.
What was the price hike in July? One, and secondly, your insurance rates were also, I think, due for revision. Is that also contributed?
We're expecting that to happen in August itself. But again, this has been delayed for quite some time here. Unless it happens, we are not too sure about this.
Okay. Because it's a very substantial jump and very difficult to sort of fathom how that sort of works out.
We've got multiple timelines from the association, and we have yet to see that happen.
The second one, sir, you will be commissioning four hospitals, I think, all put together in the last quarter of the year or perhaps first quarter of next year. Accumulatively, what will be the addition to the fixed cost and gross block because of these?
As far as the gross block is concerned, the total addition on account of Bangalore, Nashik, and Thane would be about some INR 700 crore-INR 800+ crore.
The fixed cost addition?
Fixed cost per center, other than doctors and consumables, the cost per center will be around INR 6 crore, which is your cost per HR and your other expenditure per center. So we have three centers, Nashik and two sorry, Thane and two Bangalore. Between these three, we'll have an INR 18 crore-INR 20 crore kind of a fixed cost. This is other than the cost of doctors and consumables.
What could be the absolute increase in debt over the year as you sort of invest into these facilities? What's the current gross rate and how does it move?
The current gross rate is about INR 1,150-odd crore. That's on 30th of June 2024. By the year end, when we are commissioning all these hospitals, we'll be having a debt of about some INR 1,600 crore-INR 1,700 crore. This is the.
Okay. Thanks, sir. I'll get back in with you for more if need be. Thank you.
Thank you. The next question is from the line of Amey from JM Financial. Please go ahead.
Yeah. Thank you for giving me an opportunity again. I have one question on the positioning of our hospital chain. So two years back, we were considered as a primary care category brand in Telangana and Andhra. However, over a period, we have seen this gap between the premium hospitals and affordable being reduced a bit as we have increased our placement, also in terms of upkeep of hospital services provided, etc. So is there a concerted effort towards improving our brand and moving towards a bit of premium brand? And also, if you can guide us on the positioning of this. And also, when you move to the different regions, will you try to keep the brand positioning similar in these regions, or you would go with the needs of those particular localities? Thank you so much.
I think we are continuing to stick to our ethos, which is to be affordable. We are trying to be affordable across all the services that we offer. So we are a quaternary tertiary care provider . We will offer all these services. As we offer, the ARPOB will continue to go up. I don't think we believe in anything such as a premium-priced hospital or an affordable-priced premium-sized hospital. We're very happy with the way we are positioned, the kind of case mix, the kind of ARPOBs that we deliver. And we'll continue to focus on that space.
Sure. But the regions like the Hi-Tech City, Kondapur, etc., which are getting populated with high-income residents, etc. So even in these regions, you would keep the hospital as an affordable care hospital, or there you would go with the needs of the region?
No, I think even so in Kondapur, we have been present in that geography for the last 10 years. For us, the pricing in Kondapur or the pricing in Secunderabad remains absolutely the same.
Sure. Thank you so much. I will join them.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Harith Ahamed from Avendus Spark. Please go ahead.
Hi. Good morning. Thanks for the opportunity. So for the new hospitals that's coming up at Nashik, Thane, and Bangalore, could you give a sense of the kind of ARPOBs that we are expecting there? Will it be in line with our current level of around INR 37,000-INR 38,000, or could it be higher? Because I understand that there'll be a higher share of scheme patients when you start off. So any color would be helpful.
So I think Thane and Bangalore, the ARPOB will be similar to what we are delivering at Sunshine and at Telangana cluster, which is INR 60,000 per bed per day. We believe that will be the case both in the case of Thane and in Bangalore. In Nashik, what we have projected or what we are seeing is to be similar to what we are seeing in Nagpur, which is around INR 35,000 kind of an ARPOB.
Okay. Given Nashik commissioning is scheduled to happen in this quarter, and then there'll be some losses that's coming from that's going to come from there, would you expect to maintain the kind of margins that you've delivered in the first quarter for the entire FY 2025?
Yeah. I think the losses that will come from Nagpur will be marginal. Sorry, from Nashik will be marginal. It should get offset with the growth that will come in from Queen's NRI, which is a new acquisition, growth that will come from Sunshine and Nagpur and Telangana cluster. I think the margin profile will continue to remain.
Okay. And then last one. So apart from Mr. Sreenath Reddy who's joining as Director of Business Strategy and M&A, you also mentioned Dr. Nitish Shetty also joining us. In what exact capacity is he coming on board?
He will be the CEO of the Karnataka cluster.
Okay. And the equity that they will own, will that be at the overall Karnataka region level, or will it be limited to the new Sarjapur Hospital, which you're planning to?
It will be for the entire Karnataka cluster.
Okay. Understood. Thanks for taking my questions.
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah. Thanks for the opportunity. So just on this Andhra cluster, if you could just help understand the pecking order of the profitability of different units?
You have three units in Andhra that deliver a 30+ kind of a margin. Then you have another four to five units that are around 18%-20% kind of a margin. As they mature and they grow, we believe that the entire Andhra cluster could expand to a 28% kind of an EBITDA margin. This could happen over the next 24, 36 months.
Which are the ones which are pulling down the margins?
Right now, one unit in they're all in their growth phase. I won't say pulling down the margins. The unit in Kurnool, the unit in Vizag, and Srikakulam are where they're still in their growth phase because of which the margins are still on the lower side.
Understood. And similarly, on the Telangana clusters, if you could also explain that?
So, Telangana, I think both the hospitals are mature. We're continuously investing in new areas of treatment and new doctors. And also, a lot of the corporate cost expansion has happened in Telangana for the group. That is reflected in Telangana for the group. That is why you see a dip in the margin. But there's a drag of almost INR 1.5 crore from doctors who have been recruited but yet to see maturity in those are yet to even break even.
Understood, sir. Thanks. Thanks a lot.
Thank you. The next question is from the line of Charul Agrawal from Bank of America. Please go ahead.
Thank you for taking my question and congratulations on the listing. My first question is regarding the Nashik facility. So we have seen a new competitor enter the market. Do we see any kind of competitive pressure in terms of doctor hiring? Can you also announce that you might be looking to expand in Nashik region? So any sense on what is happening from a competition perspective in that locality?
I think our doctors have been approached by competition. The good part is we have not lost anyone. In spite of competition coming, I think our growth has been phenomenal. It's been the best growth over the last few quarters. We don't see, I think there is space for all of us. We will continue to grow, and I hope our competition also continues to grow.
Thank you. So my next question is on the insurance bit. You did mention about insurance being a significant good driver in your opening comments with some regulation changes. I just wanted to understand that if you think of it from a metro city versus a Tier 2 and beyond approach, I think in the past years, I liked it that insurance is more of a Tier 1 and metro city phenomenon. But if you think of it in terms of your good drivers, do you see insurance as a significant good driver, specifically for the Tier 2 and beyond?
Not in Tier 2, Tier 3. I think it's still growing very slow there. There is significant growth in metros and Tier 1 only.
Okay. How do the recent government steps that you mentioned, how do they change outlook for things? Is it going to be significant?
Your voice is not very clear. Could you please? There's a lot of disturbance.
Just a minute. Is it better now?
Yeah. Better.
I was just asking that since you were mentioning the recent changes in the insurance norms in your opening remarks, could you help us understand if that changes anything significantly for KIMS in terms of good drivers?
So I think it is mentioned in the opening remark that only that the Union Minister has proposed that the GST, which is there on the insurance premium, can be reduced. It is not yet implemented.
So the proposal by the Union Minister to the Finance Minister, removal of the GST, which is 18% on the insurance premium. Supposing they remove that 18%, there are more and more people who will come into the insurance bracket. So then affordability will become a good challenge for them.
Got it. And so one last question, if I may. So you have announced quite a bit of expansion plans, and you're also building upon it. So I want to understand how much more headroom do you see in terms of adding more capacity? What would be the metrics basis which you could decide that now, from an expansion mode, we might want to consolidate a bit? So how should we look at it from a medium to long-term perspective?
Presently, we are off.
Sorry to interrupt. We have lost the management line. Please wait while we reconnect them back. Ladies and gentlemen, thank you for patiently holding. The management has been reconnected back with us.
So Charul, I was answering your question. We are currently managing 4,000 beds. We can expand the number of beds, but the limit which we are having is a capital constraint. We have said we do not exceed a debt equity of 0.75:1 and debt to EBITDA of 1.75:1. As far as we are within that range, I think there is no other limitation. And that is already there. The only limitation, as I have said, is the capital constraint. At that point in time, we will reconsider our decisions if any expansions are in sight.
Got it. That is also my side. Thank you so much.
Thank you. The next question is from the line of Parvati Rai from Equentis Wealth Advisory . Please go ahead.
Hi. Thank you for taking my question. A quick one on the margin. So while we say that it's sustainable for this year, the current quarter-level margins are around 26.5%, despite the newer, I mean, the Nashik coming in, where the loss would be offset. But next year, given Q4 and Q1, we'll see a couple of other hospitals coming online. Any color if we can have this? What would be the sustainable EBITDA margin with these newer hospitals coming in?
So I think actually, this financial year, we have Queen's NRI that's coming in. And we also have, which is already an EBITDA-generating asset, we have Nashik that could potentially add some drag for the first two quarters. And that's why we said, given that both of them will get set off, the margins of the other units will continue to sustain.
Yeah. So any color possible with the other units? So I mean, from next year perspective as well, should we see this level sustaining, or will there be a slight change with the new hospitals coming in?
Next year, I think the growth will continue to sustain for the existing hospitals. There will be incremental growth coming in from Nashik and Queen's NRI that has been acquired. But there will be drag on Thane, Bangalore, both the facilities in Bangalore. We're expecting, or we've modeled a drag of not more than INR 30 crore-INR 40 crore across these four facilities, across these three facilities.
Okay. Okay. That's good. With respect to the average revenue per operating bed, while there have been questions and you did kind of give your views, so for the full year, while this quarter has seen a massive jump, and we understand the change that you spoke of and the driving factors, will this kind of level sustain, or again, so what is the sustainable outlook for the whole year that you're looking at, largely, given the case mix change or the scheme or the changes that we saw, the insurance or the incremental revenue picking up?
I think these numbers are sustainable at the same range. 38,000 is, 36,000 to 38,000 is a sustainable number.
Okay. Okay. Great. Thank you.
Thank you. The next question is from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead.
Hi. Good morning, everyone. So first question for Nashik, Thane, and the two Bangalore hospitals. From where are we hiring the doctors? Is it largely some other corporate hospitals or relatively smaller hospitals?
A mix of both, Alankar. Largely, in Thane, it's a mix of 50/50 from closest competitor and smaller hospitals who are willing to consolidate and move to bigger hospitals. But in a place like Bangalore, it will largely be from similar competition.
Understood. And Abhinay, any thoughts on the seniority profile of the doctors? And how would you compare the seniority profile to, say, the Secunderabad Hospital?
Secunderabad is a 20-year-old hospital. So it's very unlikely to have that level of seniority across these facilities. But we will find a similar skill set that we have at KIMS Secunderabad in both Bangalore and in Thane.
Understood. The second question is on Secunderabad. Now, you had mentioned earlier some time back that there is also a possibility of doing greenfield in that hospital if the need be. Now, given the lower ALOS as well as lower occupancy, would it be fair to assume that there will not be any expansion in Secunderabad over the foreseeable future?
So Alankar, in our previous call, we had mentioned that of the 1,000 beds that we have in Secunderabad, 200 beds are present in Block 1 and Block 2. The current situation, and that's a 20-year-old facility. Though we have those beds available, they are not in a state that can be properly utilized for growth. Hence, we have demolished Block 1, Block 2. We're building a new tower there, which can accommodate an incremental 350, 400 beds. But we will operationalize them or we will incur that capital over a period of time as and when required.
So, precisely on, yeah, sorry. Go ahead.
We're building the structure to have an incremental 300 beds. But as and when required, we will start utilizing them.
Understood. So the question essentially was, from an operationalization standpoint, do the plans get delayed a little bit given the lower ALOS and lower occupancy now?
No, no. There are no plans to delay it. There is a lot of services that we want to start, and we are constrained with space. It could not be pegged, but there's a lot of outpatient daycare services that we want to start, but we are constrained with space. So we will continue to go ahead and do it.
Sorry, my friend. One final question. As on date, at a corporate level, how many doctors would be under the equity model? And if you could bifurcate those between the listed company and the subsidiaries? And maybe the second one there would be, what was the minority share of EBITDA in the first quarter?
Minority share is around 10%, 11%. But on the share of doctors, we'll come back to you.
Okay. That's it from my side. Thank you.
Thank you. Ladies and gentlemen, this will be the last question. It's from the line of Aditya from Sowilo Investment Managers . Please go ahead.
Thanks. Good morning, everybody. So I don't know if this was asked before, but my question was more on the lines of I mean, there was this government order that they try to cap the prices of private hospitals. So anything on that?
Nothing. I think, see, basically, now the Supreme Court has requested the central government or asked to look into that and do. Then later on, all these hospitals have been contested, and then they were looking at it. I think it looks like it is a standstill, and few governments are working. The state government is able to work and negotiate with the prices. Even before we said that it is a very tough job to do all these things, it's a very complex way of dealing with these things. We cannot be able to fix the pricing. I think that may not be any risk in the healthcare as of now in India.
Sorry to interrupt, sir. The current participant has been disconnected. As there are no further questions from the participants, I will now hand the conference over to the management for their closing comments.
Let me summarize all the questions that have been put forward and knowledgeable questions. Thanks for asking all these questions. Initially, when we were talking about the affordability, accessibility, quality, a couple of decades back, there were not many players in the healthcare who are doing all these variety of patients to take care of the remote places. That's where we are putting. Now, many healthcare players are coming, small, small hospitals, and all these scheme patients and lower patients and lower socioeconomic group people are getting treated in those areas. It has been well- strengthened in the entire country thanks to all the Ayushman Bharat, or the Aarogyasri . So now, insurance penetration also is increasing. So once the insurance penetration is increasing, then again, the affordability increases, and the ARPOBs and the average revenue per bed keep on increasing.
It is not that we really particularly to improve these things. It is an automatic shift is happening in the Indian healthcare. And as we all mentioned that before, whenever we look for any acquired new geography and new acquisitions, we will thoroughly investigate and put forward and see how much is the growth we are going to anticipate by those particulars. But even then, we keep telling, and then we have been proved time and again. One time, 2018, 2019, we acquired about three hospitals: the Ongole, Kurnool, and Anantapur. We could be able to turn around and continue shifting forward. And the last time, again, we took about three hospitals: Nagpur, Sunshine, and two Sunshine hospitals in Hyderabad. Even though Sunshine Hospital was a single branch-dominated one, people will have some reservations of where to change.
And we thoroughly done a lot of due diligence and then investigations here in Nagpur. So that way, we could be able to turn around now, and that gives a lot more confidence and comfort to our investors. And the other important thing, now we are going, having been shown, turn around in Nagpur, Maharashtra. Now we are going to move forward with Nashik and Thane. The way which we have been anticipated in Nagpur, we also should be able to anticipate. Now, the Karnataka cluster we are going, and then we got a good management skill with our efforts and brand, which is in Karnataka also. KIMS has a lot of Telugu-speaking people there. With these both combinations, we can turn around the Karnataka cluster.
The more important, whenever we go, we always, from the beginning, we want to partner with a few of the doctors and management so that they will also have the skin in the game, at least 15%, 20% of that entire cluster. And that way, we can be able to move on. As we're promising in the Mother and Child and oncology in Andhra units , we are doing that. Whenever we get an opportunity, some of the things we'll be able to slow down, take out the opportunity because of the cash flows mismatch. That's why now we got the Vizag unit, which is a good one, what we feel. These things we're able to look at, and it's very promising.
And then, whenever, based on the opportunities, the existing units that we need to be able to look, we'll be able to channelize the CapEx so that it will be able to move forward. And the other important thing, when we keep on improving, and the absolute number of bottom line may not keep continuously growing because in the beginning, the new units as comes, the percentage may come down, but the absolute numbers will keep going. And the ALOS and other things are different seasons, different quarters. There are two important things. One are the elective surgeries, emergencies, and the complex procedures. In that quarter, if you have a lot more of emergency and complex procedures, the ALOS may a little bit grow. And mostly on elective cases, the ALOS will come down.
And then we are adding the new therapies where some of these things may not be able to take longer time. That way, the ALOS will also come down. These are all the few important things. And as we mentioned, that the CapEx and the EBITDA, which we may not be able to be very, very cautious about it. Maybe in two, three quarters, we may cross that limit, what we have, but that we'll be able to set right after that. So we don't need because the opportunities are there. Either I have two options. Either I should be able to raise the QIP, or I should be able to take a little bit leverage of the debt and then expand and come back to the normal. These are the few that whatever is good for the investors, good for the company, we can do these quarters.
Most probably, we will go with our own internal approval and debt so that the growth will continue to grow and the opportunities will continue. Thank you very much for patient hearing, and I'm sure that we satisfied most of our questions.
On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.