Ladies and gentlemen, good day, and welcome to Max Healthcare Institute Limited's Earnings Conference Call. 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 Mr. Suraj Digawalekar from CDR India. Thank you, and over to you, Suraj. Thank you, Michelle. Good morning, everyone, and thank you for joining us on Max Healthcare's Q3 and 9M FY 2024 Earnings Conference Call. We have with us Mr. Abhay Soi, Chairman and Managing Director, Mr. Yogesh Sareen, Senior Director and Chief Financial Officer, and Mr. Keshav Gupta, Senior Director, Growth, M&A, and Business Planning. We will begin the call with opening remarks from the management, following which we will have the forum open for an interactive Q&A session. Before we start, I would like to point out that some statement made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Abhay to make his opening remarks. A very good morning to everyone, and a warm welcome to Max Healthcare's earnings call for the third quarter. This quarter has been exceptional for us, primarily for two reasons. First, it represents our 13th consecutive quarter of year-on-year growth. We recorded a healthy increase in network revenue and EBITDA by 14% and 12%, respectively. More importantly, we managed to grow ARPO and EBITDA per bed sequentially, despite Q3 being a seasonally lean quarter. Second, this quarter marks our foray into central UP, which is one of the most populous and fast-growing states in the country, through the acquisition of 550-bed Sahara Hospital in Lucknow. This acquisition will fortify our presence in Northern India and is in line with the articulated strategy of entering new markets where peers have demonstrated success. We expect to consummate the transaction in Q4 and are ready with a plan of action to improve the infrastructure, augment the operational bed capacity, add to the existing medical talent, as well as integrate the hospital with the IT systems. On the clinical front, we have launched the CAR T-cell therapy at Max Vaishali in collaboration with ImmunoACT. Also known as a living drug, this groundbreaking therapy is expected to enhance the quality of life for many patients and reflects our continuous endeavor to provide our patients with the latest therapeutic options for cancer treatment. Now, coming to the highlights of Q3 performance. Occupied bed days dipped marginally by around 1% year-on-year due to lower prevalence and spillover of vector-borne diseases in this quarter compared to last year. Average occupancy for the network was 73%. Institutional bed share at 29.5%, compared to 29.4% last year and 27.3% in Q2 this year. However, after excluding Max Shalimar Bagh, the overall institutional bed share stood at 27.4% during Q3, and occupied bed days were down by 8% for this segment. Sequential increase in institutional bed share was a conscious call taken, owing to Q3 being a seasonally weak quarter on occupancy. Average revenue per occupied bed for the quarter improved to INR 76,800, growing by 15% year-on-year and 3% quarter-on-quarter. Year-on-year improvement was witnessed across all specialties, with oncology, neurology, and renal sciences being the key drivers. Network gross revenue was around INR 1,779 crore, compared to INR 1,559 crore in Q3 last year, and INR 1,827 crore in the previous quarter. This reflects an increase of 14% year-on-year, driven mainly by growth in ARPOB. Revenues declined by 3% quarter-over-quarter due to festive season in Q3 and vector-borne diseases led jump in admissions during Q2. Revenue from international business grew significantly by 25% year-on-year. This payer channel now accounts for around 9.5-9.4% of the total revenue from our hospitals. Network operating EBITDA stood at INR 471 crore, reflecting a growth of 12% year-over-year and a decline of 5% quarter-over-quarter. Most importantly, annualized EBITDA per bed rose to a highest ever of INR 75.6 lakh, clocking a growth of 13% year-on-year and 1% quarter-on-quarter. Operating EBITDA margins stood at 27.9% for the quarter. Year-on-year growth in EBITDA was impacted due to a one-time charge of INR 25 crore, driven by movement in provision for doubtful debts, reversal of provision for old phantom stock option plan in Q3 last year after launch of the new ESOP scheme in November 2022, GST impact of variable management fees, and one-time litigation cost. Max Shalimar Bagh, where we added 122 beds, recorded year-on-year growth of 36% and 42% in its revenue and EBITDA, respectively, with an average occupancy of 74%. Profit after tax was INR 338 crore versus INR 269 crore in Q3 last year, and at the same level as in the previous quarter. Year-on-year improvement of 26% was primarily attributable to flow-through of improved EBITDA and lower finance costs. Free cash flow from operations generated this quarter amounted to INR 226 crore, after a digital outlay of INR 40 crore for purchase of robotic systems at four of our hospitals. Of this, INR 137 crore was deployed towards the ongoing capacity expansion project, and INR 97 crore was distributed as dividend. Net cash position improved to INR 1,295 crore at the end of December 2023, compared to INR 372 crore same time last year. Continuing our efforts to support the local communities, we treated approximately 36,700 patients in OPD, and 1,250 patients in IPD from economically weaker sections of society, absolutely and entirely free of charge. Both our strategic business units continue to maintain their growth momentum. MAX@Home reported a top line of INR 44 crore, reflecting a strong growth of 24% year-on-year, and 5% quarter-on-quarter. We continue to witness good demand for the SBU services, as demonstrated by over 50% repeat transactions by patients in the last one year in our home care service alone. Max Lab, the non-captive pathology vertical, now offers its services in 41 cities and has a network of over 1,000 collection centers and active partners. This SBU reported a gross revenue of INR 34 crore, reflecting a growth of 20% year-on-year. On the status of our expansion projects, Dwarka, for the 300 beds, as informed previously, application for occupancy certificate was submitted in October. Finishing is under progress. In the meanwhile, we already have the unit head and all other key functional heads in place. We have commenced hiring for middle-level staff as well. For the 329 beds at Nanavati, basement and ground level structures have just been completed, while steel fabrication above ground floor has begun. The project continues to be largely on schedule. For 300 beds at Sector 56, Gurugram, approval for structural drawing has been received in the first week of January, and RCC works have already commenced. 190 beds at Mohali, design development is under finalization. In the meanwhile, the base raft concrete activities have started. Both of these are largely on schedule. 350 beds at Max Smart at Saket Complex, tree transplantation work is underway, with 159 trees transplanted and balance 316 trees in process for transplantation. As per plans, existing structures have been demolished and shoring work for sewage and water treatment plants is going on. Barring the initial delay of 6-7 months, the project is on schedule now. For 300 beds at Max Vikrant at Saket Complex, the building plans have been resubmitted to the municipal corporation post their initial review. Water and sewage infrastructure, there were some payments to be made that have been paid and that has been connected, and the documents are underway for floating to contractors. Application for NOC by forest department has also been filed. For 250 beds at Patparganj, the fire department has issued an NOC for the building plans and municipal corporation approval is in progress. All projects continue to be largely on schedule, despite some disturbances linked to enforcement of GRAP, which is the Graded Response Action Plan in NCR, to combat air quality issues. Finally, moving on the overview- onto the overview of the company performance for the nine months ended December 31, 2023. Network gross revenues stood at INR 5,325 crore, reflecting a growth of 16% year-on-year. Network operating EBITDA grew by 17% year-on-year to INR 1,404 crore. Increased ARPOB, improved case mix and augmentation of network bed capacity by 146 beds, translated into improvement in EBITDA per bed by 15% to INR 73.8 lakh per bed. During the nine months, we generated INR 924 crore of free cash flow from operations after interest, working capital changes and routine CapEx, of which INR 265 crore has been deployed towards ongoing expansion projects and INR 97 crore was distributed as dividend. With this, we open the floor for question and answers. 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 withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets. Please go ahead. Hi, good morning, and thank you for the opportunity. My first question is on the payor tariff revision, which we saw in the month of December. So, you mentioned there will be net loss of around INR 6 crore annually. Is this, like, ongoing? And just want to understand if, if this wouldn't have happened, the net gain, which you mentioned for third quarter, INR 14 crore, should we have added this INR 6 crore back, like 14 + 6, if the payor prices were not declined? No, Damayanti, so basically, INR 14 crore is for the quarter, right? Okay. That is run rate. That run rate also has some impact of this price revision, which happened in the month of December. Right? So the, so around, you know, one week impact is already coming there. So, so INR 6 crore number is the annualized number, INR 14 crore number is a quarterly number. So and now you can do what you want to do. Okay, and any- Coming to the question, if you didn't have the INR 6 crore, then you would have added back to this EBITDA. You would have added to this EBITDA. No, no. Not for this quarter. Yeah, yeah, for the whole year. Yeah, yeah. INR 1.5 crore. 1.5, okay. And, do you expect any further revision in tariffs for this channel? Or, do you think, like, now government is broadly done, and we might not see any additional revisions? We are expecting the revision in tariff, even this Pat city thing, we think, which has been erroneously done. We've made representations, so we are in talks with them to revise. Okay. So further can come, right? And then that should be like, maybe beneficial to our channel. Even I expect this, even this hopefully this Pat city should get revised, because it went the other way. We believe it was an error. Okay, okay. That 10,000 going to some 11,500 or something, right? No. So, Damayanti, the tariff for Patparganj had come down by around 50%, right, from 22,500 to 11,000 something. So it was 50% reduction, and that major impact, as you know, oncology happens to be a big share of revenue for us. And so that was an INR 10 crore impact on the for Patparganj. The tariff had gone up by around INR 4 crore, so net impact is INR 6 crore, right? And that's all annualized numbers I'm talking. Okay, understood. And, Abhay, I guess, a few quarters back, you talked about this Heal in India initiative, which should be giving good boost to your international business. So any update on that front or any discussions ongoing around that initiative, which you can share? I know, you know, they haven't done a big bang as it was expected. What they've done is, there's a lot of movement in the embassies and so on and so forth. They're fast-tracking medical visas. You know, they've taken off those policies of reporting to police stations. They've brought down the price of the medical visas and generally promoting it globally. You know, the Government of India, participating in various medical tourism forums and so on. And this is, I mean, right now it's leading to a trickle effect. I mean, trickle effect meaning, it's growth of 25%. I mean, and it is not, but given the size of the opportunity, it's not exponential. It's still incremental, right? At a 25% CAGR on this. Okay. And from Max perspective, right now, it's around 9.4%, revenue contributed by international patients. How much it can go up in, say, next three years, even if we don't hear any big changes by the government and these kind of small or I'll say, regular improvement happening? 25% CAGR. I mean, it's not this quarter. Last quarter was the same. The previous quarter was the same. I think last five, six quarters been at this. I mean, I don't really see it awaiting. Yes, so Damayanti, if the overall growth is 14% and this channel is growing 25%, obviously, the share should go up, right? Going forward. Yeah, got it. And my last question is, as you mentioned, oncology is a big focus for you, and you have been investing in this segment. So, which are, I'll say, key growth opportunities, as per Max focus? And then, what kind of expectation you have from this segment in terms of addition to your hospital revenues over the next few years? No, so I think, you know, there are within the the three streams really of oncology, you've got surgical, you've got medical, you've got radiation. I think there are various sort of innovation happening within these three itself. If you look at surgical purely, you know, more and more robotics, so, it's a better access, it's better outcomes. And, you know, but at the same time, the percentage margins are lower, but absolute value to hospital is more because, you know, in terms of the EBITDA per bed that you're able to derive from that is higher than what you do for a normal oncology surgery. And that number sort of doubled over last year. So, I mean, we have seen major growth in these. Now, similarly, if you look at radiation, okay, you from a typical linear, you've gone into now various kinds of these things and so on and so forth. But, you know, and so there have been other kind of innovations within the medical oncology as well. And now you're also looking at immunotherapy. You know, like you mentioned, that we started CAR T- cells, so this is another stream altogether. Which is some segment of chemo, but nevertheless, and globally, I think, I mean, it's a little expensive right now, and we are seeing prices come down, so adaptability of that is going to be a lot more. But that's what the world is moving towards in oncology, right? Is immunotherapy now. Understood. Thank you for your answers. Thank you. Thank you. The next question is from the line of Harith Ahamed from Avendus Spark. Please go ahead. Good morning. Thanks for the opportunity. My first question is on the recently acquired Lucknow hospital. So currently we have around 250 operational beds there, and we've talked about a capacity of 550 beds. So can you share your thought process in terms of taking the operational bed count higher, more towards the capacity bed count? So what is... You know, one is the amount of, area which is already being constructed. It's about close to 1 million sq ft. Number of beds operational are 285, so, you know, there's obviously an opportunity. I mean, you can ramp up to the 550, as we intended originally within this. Yeah, the facility has been ignored for a while, so I think, we are going to be changing the equipment and, you know, we have to sort of redo the infrastructure. When I say redo the infrastructure, it's basically internal renovations which needs to be done. This is a brand new building made by L&T. A phased contract for construction started in, I think, 2010, 2011. So it's not, it's not an old structure, but, you know, of course, you need to, you know, kind of renovate it. So I think within a couple of years, we should be at that, 550 mark, number of bed mark in, you know, perhaps a little before that. Do keep in mind that, we are going to be closing the transaction. We're not in the saddle as yet. You know, there are a majority of the CPs as per schedule have been done. The rest are also on schedule, but, till the last one is done, you know, that's the time we'll be able to give you, share more details about it. Okay. And my second question is on the timelines of some of the upcoming hospitals. So apart from Dwarka, you guided for three other hospitals to getting commissioned in the next 12-15 months. That's Mohali, Nanavati, and Gurgaon. But when I look at the CapEx, project CapEx, specifically, we are tracking a bit lower versus our guidance of INR 900 crore for FY 2024. We are at around INR 300 crore, nine months of FY 2024. So, are we still expecting these three hospitals in Dwarka to get commissioned in FY 2025? No, absolutely. So Dwarka, which is getting commissioned, do keep in mind it is off our books because this was the asset-light model, right? The developer is investing the money, whereas we are bringing the medical equipment in place. So the entire 300-bed hospital is not signed, and the hospital is complete in all respects. I mean, we are right now in the phase where we are doing the finishes to the hospital and, you know, sort of whatever medical equipment that we brought in, we are implementing it. It's not going to be a major CapEx for us going forward either, as far as Dwarka is concerned. It was never meant to be, because the asset-light, we're essentially paying a lease amount for that, right? Say, a yield of, I think, 6%, 7%, 7.5% or something like that. That's a 60-year contract for the land and building, a finished land and building of 300 beds. As far as Nanavati is concerned, we've already built our three basements, and we've come to ground level. Now, this is where things start speeding up. Do keep in mind, the first part of construction is really the superstructure, which doesn't really cost that much money. I mean, if you were to, it typically costs INR 1,500-INR 1,800 per sq ft. So if you're building even 1,000,000 sq ft, then you would have spent, like, INR 120 crore just doing the construction, right? Which is superstructure. Real money is spent at the latter half, part of it, when you go into finishing, when you go into interiors and so on and so forth, when you bring into the high side, low side, you know, equipment, lifts and so on and so forth, air conditioning and all of that. So I think everything as far as the payments is concerned, and the thing is concerned, we're on schedule. So I would not look at that, you know, as... The payments are always lumpy towards the end, so I will not look at that as a surrogate for completion of project, at least at this stage. Okay, perfect. Last one with your permission. Slightly broader question. When I look at the Saket complex, currently, if I understand correctly, we have around 800 beds there. And, in the next three years, we are looking to add close to 800-900 beds, and we have plans to add maybe 500-600 beds beyond FY 2028. So that, that's almost 2,000 beds in almost a single location. So, it's kind of unheard of. So can you share your thought process behind such a large number of beds at a single location? How are we gonna differentiate, and how do you plan to... What is the strategy to ensure that there is no overcapacity situation in that location? So firstly, you know, on the Saket complex, it's pretty much tearing, it's the main flagship, as you're aware, right? I mean, so we are pretty much tearing at the seams as far as Saket is concerned. You know, we've added, in a place like Shalimar Bagh, we added about 40%-50% more capacity, which was then what was present there. And, you know, within the first month or so, our capacity occupancy went down to, went up by about 80%-85%. My belief is that, and we, collectively very strongly believe that, if we were, you know, so this, 1,000 beds or 800 beds or 900 beds that you're speaking about is not coming all together, as you may appreciate. First, the 300-odd beds come into play. My belief is when you add 40% capacity on top of this, on top of the current sort of capacity of 770-800 beds that we have, that will be more or less instantly taken up, right? I mean, you're gonna have very quick sort of occupancy of the first 300 beds. And very soon, you know, let's say very, very soon thereafter, you're gonna be ready for the additional capacity. Like in Shalimar Bagh, we already ran out of capacity, right? So even over here, you're gonna have the same situation. So you'll require the next 300 beds. And so, you know, what you can't do is start constructing 300 beds then and take another three years. You will need that 300 beds once the first 300 beds are occupied, and that really speaks for the first three. Now, then comes the last phase of, let's say, another 300 beds thereafter, right? Right. Now, that only when this 300 beds, the second 300 beds, get occupied, okay, do you look at the last piece. Okay. You will, you will make the superstructure, which I again mentioned, it's not a major cost, okay? This is if things are going as per plan, but you can always stall. You can always, as the last 300 beds, you can always say, "Look, I'm completing the superstructure and the external of the... Say I'm not fitting it out," if you see any sort of softness of demand. My belief is this is a trajectory that we have over the next 5-6 years, you will be able to occupy all of those beds. But it does not mean that after phase one, if you're not-- Let's say, for some reason, okay, and which is beyond me, to be honest, the first 300 beds don't get occupied. You're not going to put out the next 300 beds. You're not going to build the next 300 beds. Okay. Also, this is a base case. Do keep in mind, at various stages, at various phases, there are default options. You don't build a – it's a hospital. We can't have a disruptive process. The infrastructure, the superstructure cost isn't a lot. Again, if you look at 1 million sq ft, it's only INR 120 crore. Or INR 150 crore, INR 180 crore for that matter. I mean, that's about it, right? It's not more than that. Also, FY 2028 onwards is a placeholder, right? That's a potential. We are not investing anything for the FY 2028 capacity now. We don't even have the approval from the board to spend on that, right? So that's only reflects that we can build those many beds more on those, on those land pieces. I mean, theoretically, in Lucknow, if you look at it, it's 27 acres of land. You can build another 3,500 beds. That's the potential. So you see a potential post 28 up to infinity, does not mean we'll be building 3,500 beds. Yeah. Got it. All right, thanks, Abhay. Thanks for taking my questions. Yeah. Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Yeah, thanks for taking my question. Abhay, on the Lucknow acquisition, how should we think about narrowing the, you know, operating performance gap that is there between, let's say, what Max is doing now and Lucknow, particularly since, you know, we'll continue to ramp up that bed? Is it fair to assume that we need to get to that full 550 to narrow that gap meaningfully, and it would happen over a period of time? So we are quite confident that, you know, in the next, within couple of years, we will be able to get all of these beds, okay, in the sort of, condition or perhaps better than, what we have in any other hospital, and be able to catch up with our peers as well. And you know our peers over there, okay, both in terms of, in on every financial parameter there. If not exceed. Okay. But this would take a few years in your view? No. So like I said, couple, it should take, it should be done within two years. Got it. Second, you know, just extending the Lucknow question to a more broader strategy. Now that we have this, you know, we'll have 500 beds. I know you said, you know, you have land for adding more capacity, but do you see that as a market where you can have, let's say, multiple facilities? Is that something that you're looking, that this could be a third hub outside of, let's say, the current two hubs that you have? No, no, absolutely. So, you know, I look at Lucknow, justifying certainly many more healthcare facilities. You know, UP's population is the size of Europe, and literally, it's got 1.5 corporate hospitals over there right now, as we speak. Besides, hopefully, when we get in, it will become 2.5. But if you look... I don't know if you've been there recently, but you know, the level of development, connectivity, the roads, the infrastructure, the kind of focus in that city is getting, I mean, I think it will be a metro very soon. And just the scale of infrastructure, the airport and so on and so forth. The connectivity with other areas, backward areas and so on, both from, you know, from rail, air, road, every which means. On top of that, the government itself has a very, very strong program that the Chief Minister Fund over there actually pays hospital tariffs for patients. I mean, you can imagine the entire population where the Chief Minister Fund is paying hospital tariffs for patients at the hospitals. You know, not the CGHS rates, not some low rates or whatever else. I mean, I think on multiple fronts, it certainly justifies more than one hospital. This would be through M&A, do you think, or to just make it happen faster, or would you, you know, choose a more organic approach of expanding into that market? You know, unfortunately, I don't think there are too many M&A opportunities or existing hospitals in Lucknow. They are far and few. I mean, if we are able to get lucky again, like we've got in this case, of course, we'd look at an acquisition first, because that's a faster in. But if not, then we look at inorganic, in, organic growth as well. Build out. Got it. And my second question is on, you know, Dwarka. I think you mentioned that the unit head, key functional heads have already been appointed. Is that cost already sitting in the quarter? Because if I look at, you know, the- That's right. cost, that hasn't increased as much in the last three quarters. So, you know- Yes, so that cost is sitting, and also certain doctors have been sort of onboarded, and that cost may also be sitting in this quarter. Okay. Okay. So as we commission this and phase it up, you should start seeing that contribute to ARPOB up pretty quickly? That's right. Because that cost is already incurred. I mean, a large, the biggest cost is always the non-medical personnel, right? I mean- Yes, yes. I always mentioned that 23% or 24% of the overall revenue. In fact, for a new hospital, it's higher because the revenue is lower. And, that is typically brought in, I mean, that's really the significant amount of head that you have is under that cost, and that comes in closer to the hospital commissioning, which is now. I think, you know, very shortly you should have that hospital up and running. For, you know, break even in Dwarka, is, you know, 12 months, 18 months, a good timeframe to assume? Well, that's the textbook. Okay. We hope to do it faster, that is textbook. All right. Thank you so much. Thank you. A reminder to all the participants that you may please press star and one to ask questions. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Hi, thank you for the opportunity. So first one, on the institutional rates, I think there has been some revision upward, some revision downward. But when we sum it up, let's say for the first nine months, what could have been the ARPOB impact in that channel? I think for the first half, we had suggested the institutional ARPOB has grown at 28% year-on-year. If you could provide that number for first nine months. I think it, you know, if my knowledge anything go by, that it's been up on everything except for one item which went down, which I, my belief is, in this case, we made a representation. But what is the impact? Yes, Kunal, you have the number with you. I think the price increase is INR 14 crore per quarter, and there's a INR 6 crore annual impact of this. So that means the net impact is INR 50 crore on the institutional business in terms of price. So it can divide it with the numbers, we will get the increase in the ARPOB, right? Which will be what, percentage-wise? Which will be up, for 3%-4%. 3-4%? Yeah. More to that. Overall, ARPOB will be less than 1%. Less than 1% in the overall ARPOB. No, but last quarter, we had said that the institutional ARPOB increased by 28%, which is 18% of the revenue. Not, we talk about- Overall, overall ARPOB impact is less than 1%. No, but if your institutional revenue is around 18%, and that revenue is growing at 30%, then the weighted average impact should be around 5%, right? No. So, I think let's not confuse ourselves. First of all, the total impact is INR 50 crore, right? As, as you, as things stand today, on the overall top line, which is less than 1%, right? Our, our top line last year was, you know, around 6,600. So if you take INR 50 crore, that will be less than 1%. So that's one, on the overall ARPOB. This is last year revenue. This year 17%. Yeah, yeah. So let's say now, if you talk about the ARPOB of the institution itself, then we do around INR 1,200 crore of business in a year from institutional, and this is a INR 50 crore impact on that, right? So it will be 4%, around 3%, 3.5%, 4%, I think. Yeah? Okay. Is that clear, Kunal? Yeah, this is clear, but last quarter then, when... I don't I don't know. No, the last quarter growth in ARPOB is not only price, right? We never said that it's all because of price. Mm. There's been a growth in institutional ARPOB, but we haven't said it's by price. It's still the growth, right? Okay. Even in this year, this quarter, if you see, compare, the price impact is only 4% that. Rest is the business mix. Also, you should understand that when the Onco goes up, the premium of this goes up. When the premium goes up, the ARPOB improves, right? And a large part- We've been focusing even with institutional on the higher end specialty. That's why. That's the outcome. Sure, sure. You know, the 15% ARPOB growth that we have seen, I think first half was also 13%-14%. Yeah. Going into next year, what is, you know, is that you kind of, you know, would be thinking about in terms of ARPOB growth? Because clearly these numbers are, in my view at least, it's above the historical trend line, and we have been doing high-end surgeries, robotic surgeries. You know, do you think that this can sustain, this run rate of ARPOB growth for the next two to three years? Well, you're the analyst, you have to tell me. I mean, I keep asking the same question. Is there any one time price change which has led to this? I mean, in my mind, you know, there are a few factors which have led to higher ARPOBs. One is more higher end surgeries. Second is international patients. Third is proliferation of insurance, and so on. These are things which are leading to higher ARPOBs, and if any of these is non-secular, then your guess is as good as mine. My belief has been that they seem pretty secular, and that should lead into next year as well. None of this is based on one time. Yeah, and Kunal, it's not only we, right? So you see the competition, the ARPOB has been improving in all other hospital chains also. Yeah. Right. There is a non-secular trend which has been propelling it, but, I mean, I'm at a loss of what it could be. Sir, one logistics question on the international patient bed share this quarter, if you can share that. It'll be around 5.8%. 5.8%. Okay. Okay. I have more questions. I'll join back. Thank you. Thank you. The next question is from the line of Ankit Shah from Canara Robeco AMC. Please go ahead. Yeah, hi. Thanks for the opportunity. So my question again pertains to the Dwarka additions. So you mentioned that some of the costs have started coming, but major portion of the non-medical costs will come going forward. So can you give some sense of like how much of that non-medical cost will be of the total cost of... And also, you had mentioned earlier that total losses initially in this should not exceed INR 30 crore-INR 40 crore. So can you give some sense on how this... I mean, would this be completely front-ended or, you know, costs come in a stepwise fashion, so it will be more divided across quarters? Some granularity on that front would help. No, I think it'll be in, it'll be graded down, so it will be in a decreasing fashion. Of course, you know, the first month is more, the second month, will should be less, and then it sort of starts tapering down till you hit breakeven. Yeah, so the textbook, this size of hospital should have, you know, similar sort of INR 1,450 crore kind of loss, but we hope to, perform better and maybe break even, hopefully sooner. Okay. So, most of these losses, It's hard to, you know, kind of project, because as and when the doctors come in, you, those particular programs kick in, right? I mean, certain doctors will be brought in with certain minimum guarantees and others with certain other minimum guarantees, et cetera. Because to give you that loss figure and actually what the trajectory of that loss is, I need to figure out what the exact revenue figures are going to be on that particular month. Thanks. But, so on the hiring front, I mean, does the hiring happen in one shot for the entire capacity, or is it does it happen in stepwise fashion, sir? No, no. So we are going to be coming up with 160 beds first, and of which also, the, you know, let's say we want to operate 100-odd beds, then we, we, in the first go, we will be hiring at least 400-odd beds. Okay. Got it. Got it. Unless, you know, we get enough of those kind of clinical programs to kick in, where we start off with 116 directly. Mm-hmm. So right now we're only doing this much, but, you know, there's always... Let's say if there are 20 LOIs, which we have issued to 20 various doctors, et cetera, if 12 or 15 of them have joined, another five are in the process, it's in the works, right? So as and when I have it in hand, I know this guy is coming. I need to sort of get enough nurses and resident doctors for him to support him. Got it. Got it. Yeah, that was my question. Thank you so much. 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 on the international patient- I'm sorry? Not able to hear you. Yes, sir, we are not able to hear you. Am I audible now? Yeah. Okay. So just on the international patient, would like to understand the growth maybe for the quarter and as well as for the nine months, how, if you could break down into volume and, maybe the realization growth? Then the growth has been 25%, I think both on nine months as well as quarter. But still when it comes- Yeah, so the ARPOB now has grown by 9% in the quarter, but the next year is 5.8%. And overall it's flat, right? So it's a 158 through last quarter and 157 through revenue this quarter. Sure. Sure. Okay. And then this... Right. So this 9% increase in realization is to do with case mix or, it's like the similar treatment? So there's no price element in this. It's basically the case mix. Right, we haven't increased the prices. Typically, the price of international patients are linked to the self-pay patients, and these get revised only in the month of April. All right. Sorry, sir, I missed. I said the price increase for international patients is tagged with the price increase in self-pay patients. The self-pay price increase happens in the month of April. So to that extent, there is no price element in this. It is only the mix which is increasing the ARPOB by 9%. Understood. And secondly, just on the overall operational cost, in terms of, let's say, employee cost and other expenses for FY 2025 in particular, where considering the different new hospitals coming up. So what kind of cost increase one should, you know, think about? No, so we can tell you about the cost increase on the existing hospitals, which is typically an increment of around 7%. And then if there are any additional beds are in, you know, created, there'll be many required. So typical many would be six people to one bed, right? So let's say we adding 100 beds to the operational capacity, you should assume there will be 600 more people. And to that extent, you know, you can, you can really value that. Right. So, I mean, I can't give you the exact number of the growth, et cetera, but I'm just giving you mathematics to really get to that number. Got it. So effectively trying to understand, considering the ARPOB, scope of ARPOB growth as well, but at the same time, addition of cost on account of, at the existing sites as well as new hospital getting added, getting added. So is there a scope for further margin improvement in FY 2025, or we would be, let's say, having bed-related revenue growth, but margin would be pretty stable? Is that the way to understand, or there is a scope for margin improvement even in FY 2025? No, I mean, there are two—you're mixing two things. One is your current base, right? Your current capacity, which is about 3,500-odd beds that we have, right? There is your cost growth and you have a revenue growth. Okay. Right. Assuming your revenue growth continues on the same trajectory, then you have that cost growth, which would be similar to what happened last year, right? So EBITDA growth in that fashion should... I mean, currently, what is, there is, it should be that plus, because you get some operating leverage as well. So whatever EBITDA growth that you have over here, you would automatically be having that, right? Yeah. Then comes the new hospital. The new hospital will be, let's say, the first 300 beds. That's about 7%-8% further capacity. That 300 new beds, day one, will obviously start with a lower ARPOB and negative EBITDA to start with. Then the question is, when do you break even? Do you break even in six months? You break even in eight months, you break even in 12 months, you break even. If you break even, even in 12 months, then it will have a negative listing on the EBITDA. If you break even in six months, then one year later, it may be a neutral impact to your EBITDA.... So I mean, but it will be still fully down because, if it's zero, you are, you're taking a positive EBITDA, then you're taking a negligible EBITDA kind of this. So you've got two conflicting kind of wins happening over here. But, my belief is because it's only 8% on the overall this thing, it doesn't move the needle too much. Understood, sir. Understood. Thanks. Thanks a lot for this. Thank you. Thank you. The next question is from the line of Karan Gupta from Varanium Capital. Please go ahead. Hi. Good morning. Am I audible? Good morning, yeah, we can hear you. ... and your voice is muffled. I would request you to use your handset, please. Yeah. Yeah. Yeah, so basically, my question is related to the international business. So what kind of traction we are seeing in the Delhi region for, you know, on medical tourism? And what steps we are taking to get increase that traction or maybe improve or improve the quality of our treatment? I mean, because you know, in India, the treatment costs is, I think, 1/6 of what the U.S. and Europe is. So what's the traction coming from U.S. and Europe? Because basically, you said in your earlier on call that the major traction is coming from the Bangladesh. So what's the position of this two different, U.S. and U.K.? And we don't get many patients from U.S. and U.K., because in U.S. and U.K., India are much cheaper, but it's sponsored, right? They're sponsored. NHS pays for it. And the U.S. also, government, it doesn't matter if it's expensive, somebody else is paying for it. So it's never been my case, people from developed countries will come to India. It's only the people from countries where it's self-pay which will come to India. Okay. Okay. So when you talk about medical tourism, so what's the patients? Where are the patients coming from? We're getting the patients from 145 countries. Okay. Okay. And, yeah, that's it. That's the question. Thank you. Thank you. The next question is from the line of Amit Kadam from Canara Robeco Mutual Fund. Please go ahead. Hi, Amit. Yeah, hi, sir. Good morning. Good morning. So couple of things on this. The swing what we saw in the inpatient volumes this quarter, largely you attributed to the vector-borne disease. Just wanted to know, because we have a very limited understanding. Like, in last three years or so, we haven't seen such kind of large swing, because the bed days for this quarter is -1%. So just, can you just throw back from your past experience that, have we had seen such kind of large swing which could have a material impact on the inpatient volumes and which could result in the bed days? What we are saying is, last year, same quarter, okay, we had a big influx of dengue patients. Okay. We haven't had the same influx this year. Therefore, what you have is a reduction of 1% on the previous quarter. And so, Amit, I think if you see the historical trends, you'll find that quarter two to quarter three, there is already a decline. You pick up any competitor, any previous reports of quarter two to quarter three comparison, previous years, you'll find quarter three is always softer, right? Now, and so -1% OBD is very normal. If you compare Apollo, Fortis, Narayana, you pick up their last year results, obviously, this quarter is not out, but you'll find that there's a decline in quarter three over quarter two. So there'll be. So there's no exception here, right? So I'm saying this is the secular trend. You will always find quarter three is down compared to quarter two because of the festivities, et cetera. Diwali, Dussehra. Yeah. Now, the, in our case, one particular picture is in last year, since in, in, especially in Delhi, we had influx of patients in October, right? Typically, dengue finishes by September. But last year we had even in October, which was a Diwali month, you know, we had dengue patients, and the Diwali month occupancy was 76%, right? Which is generally unheard of, right? In a Diwali month, you will have occupancy of less than 70%. So last year, October was very high occupancy because of dengue, and that's the reason why you see a drop a bit more, more sharper, right? Otherwise, it would have been probably flat. If I really take out the, the drop in the, in the internal medicine and pediatrics, where we get the patients admitted, that drop is 12%, right? While you see, you know, Y-on- Y, the drop in OBD is only by 1%, but that particular specialty, you know, which is 22% of the overall, you know, bed share, dropped by 12%, right? Which is because of the fact that in last year, October, we had dengue patients. So I think we-- What we're trying to say is that there's nothing operationally wrong in this quarter. It's only when you compare Y o Y, because of this October influx of patients, there is a bit sharper drop, rather than, rather than, you know, what it should actually look like. So if I really adjust it, then you'll find that OBD actually went up Y-on- Y. Historically, see, it's a seasonal business, right? Second quarter and fourth quarter are the strongest quarters in the hospital business. The first quarter and the third quarter are weak quarters. First quarter, because your bus structures are moved up, and your third quarter, because your revenue has come down. Is that clear, Amit? Is there any? Yeah, no, I was just not contesting you on that particular point. I just wanted to know, because we have a very limited history. So from the data point, we did not have, I did not have the insight that whether such kind of some seasonalities, when I'm talking seasonality, I'm trying to compare YoY, because of some, in, like, vector-borne disease can have a material impact on the volume growth YoY. I can understand how quarter two to quarter three seasonality works, but I was just listening, in the past history, whether such kind of events like vector-borne- Yes. not there, could have a material impact on the volume growth. Just wanted to 100%, yes. Okay. I mean, it did in this year, right? Because, last year's quarter three had- It's not an anomaly. Yeah. It can't. I mean, because it depends on when rain happen, when this, you know, this epidemic-type stuff happen for- Y-o-Y, but you're not comparing nine months to nine months. You're only comparing this quarter to last quarter. Yes. On an overall annual, this thing et cetera, it'll be not a significant impact, right, on your occupancy? Right. That I get it, but first time I saw this. But yes, but yes. I mean, you can. If you don't have a dengue season, you can. I mean, in fact, a drop can be much sharper than this, much sharper than the 1%. Okay. Just on the, 1%-3% fluctuation on both sides, positive as well as negative. Okay. Got it. And just on the outpatient thing, is it just an outcome of the similar effect, that because there were lesser patients visiting because of the there was no disease? That's right. Okay. So nothing much to read in this particular thing, based on this particular, like, why it was this? Like, because I've earlier seen this outpatient at least growing at mid-teens or, kind of thing, but now it showed 3% in this particular quarter. Nothing much to read? I think one thing you're rightly doing is you're looking at it, year-over-year rather than quarter-over-quarter, because, you know, like I said, you have seasonality in this. So your third quarter, in any case, is weaker than your second quarter. But if you look at it on a YoY basis, you can attribute it to the number of dengue patients in, Delhi. Okay. Just one more final point is on the Lucknow thing. So, as per the current timelines, we should able to integrate that particular business, financials to us, by quarter one, next year, FY 2025? That is your- Yes. That's... Yeah, yeah. I mean, depends on when, when does the closing happen. If the closing happens in this month, then, you know, we'll have to consolidate it from the date of closing, right? Yeah. It's not, we don't have a choice. Fair enough, sir. Thank you, sir. That's it. Thank you. Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead. Hi, good morning. Hi, good morning, everyone. So, on that question on ARPOB, we have reported a 15% ARPOB CAGR over the last three years, and you alluded various factors, case mix, international, institutional, insurance, et cetera. Now, would it be fair to say that a larger chunk of this improvement can be attributed to an improved case mix? So Alankar, if you see the. So you know the elements of ARPOB case. On is, the increase in the prices, right? Which, then, we've been saying that it can be up to 3%. Then there's an increase in OPDs. You know that OPD revenue increase will improve the ARPOB, because you don't consume any beds for those OPD revenues. So that typically contributes around 2%. So this makes 3 + 2, five, right? Then you have, you know, oncology growing. In our case, you've seen the oncology growth is, you know, outpacing the overall growth. So that oncology happens to be a highest, high-end specialty. So that typically adds 2%-3% to the, to the ARPOB. And then comes the whole, you know, channel mix and the case mix. I'm saying, if you take out the, you know, the oncology out of the case mix, and then there is balance specialties and the channel mix. I think that typically has been contributing around 6%-7% increase, and I don't see any reason why it should not go forward. So, from my perspective, I think if there's a 9%-10% growth in ARPOB, that should be reasonable. But, you know, having said that, you have to keep in mind one thing. We are talking about a healthcare system where there is capacity constraint in some manner, right? I mean, you've got occupancy levels which are pretty much at threshold. When you have that situation, then typically you'll see a higher uptick on ARPOB compared to vis-à-vis occupancy, because you can't move up on occupancy, there isn't so many beds. So more and more patients get sort of pushed to daycare, you know, which lead on, you know, smaller surgeries compared to larger surgeries. So you kind of schedule the larger surgeries first. The smaller surgeries are scheduled at, or the appointments are given at later dates, et cetera. Some of that later dates kind of evaporates. So what you see is the quality of work start moving up. But at the same time, if you, if I had a magic wand and I had, I could, put up, beds adjacent to each one of the hospitals, then what you would see is the higher uptick on occupancy and lower visiting on ARPOB. There's always an interplay between the two. That's helpful. Maybe a question linked to that is, as we double our bed count over the next 4-5 years, would the case mix for the newer beds be as good as our flagship hospitals right from year one, or the ramp-up in the case mix will be more gradual? No. So if you take Shalimar Bagh, right? And, you know, Shalimar Bagh, we did a brownfield. So you can look at expansion akin to 85% of it or 90% of it is brownfield, essentially, right? So if you look at Shalimar Bagh, where we added the 40% odd more beds, and you see our experience over there. Now- The beds which got taken up obviously get taken up more by the institutional business that we are kind of driving out. So therefore, you know, if you see our institutional business, we say apple-to-apple, year-on-year, it is the same. But if we look at Max Shalimar Bagh, then we are far better in the institutional, the institutional overall has come down there. But what it means is, even if your ARPOB, your operating leverage is so significant, okay, that your EBITDA per bed, which comes out of from the incremental beds, is significantly better. Yeah. So, so I mean, suddenly the ARPOB growth in Shalimar would not be the overall growth. It'll be less than that. Fair enough. My second- In fact, the operating margin used on these beds, okay, is higher than the existing beds. Yes. Understood. Understood. Yeah. My second question is, you spoke about the potential of Lucknow and Uttar Pradesh for us in general earlier. Now, when it comes to expansion beyond our already announced plans, you had said earlier that we are looking at some 21 cities for potential expansion. Absolutely. Will we continue to aggressively look out for acquisition opportunities in these, 20-odd cities now? Or do our priorities get aligned more towards Uttar Pradesh, now with the Lucknow entry? No. So, you know, priorities don't get aligned from that standpoint, because it's not as if I'm going to get two or three acquisitions in a place like right now. Even if you have a strategy, you're looking at building it out, et cetera, it's going to still take some time, right? It takes years. We are looking at deploying our balance sheet today, so and we have the wherewithal to do it. You know, for us to add one, two, three, four hospitals in a space of 1-2 years, et cetera, is not a big thing, because the rest of the things that we're doing is essentially brownfields in any case, and it doesn't tax me more. I mean, it takes me as much effort to do expansion on Shalimar Bagh as operating Shalimar Bagh, and similarly wherever we are doing brownfields. Both from a financial or a human resource standpoint, you know, we are quite comfortable with what we are doing, and we are prepared to go to these cities as well. We are actively looking at, I wouldn't say aggressively, we don't like to do things aggressively, but we are actively pursuing opportunities in other cities as well. Understood. Thank you and all the best. Thank you. Thanks, Alankar. Thank you. As that was the last question for today, I would now like to hand the conference over to the management for closing comments. Over to you. Thank you all for being on the call yet again for the third quarter, and we are looking forward to a robust and a strong Q4, as usually is the case because of seasonality. Thank you so much. Thank you, members of the management. Ladies and gentlemen, on behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you. Thank you.