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, sir. Thank you, Ryan. Good morning, everyone, and thank you for joining us on Max Healthcare's Q3 and 9-month FY25 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 begin, I would like to point out that some statements 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. Thank you, and over to you, sir. A very good morning to everyone and a warm welcome to Max Healthcare's Q3 FY25 earnings call. We are considerably pleased by our performance this quarter, with over 30% year-on-year growth across parameters such as revenue, EBITDA, and occupied bed days, notably supplemented by the growth momentum of our recent acquisitions. We are happy to share that we achieved EBITDA break-even in December 2024, within a record period of six months from the launch of our Greenfield hospital in Dwarka. This hospital reported a revenue of INR 59 crores and an EBITDA loss of INR 5 crores in Q3. Max Lucknow demonstrated year-on-year growth of 58% in revenue and 94% in EBITDA, while Max Nagpur reported year-on-year growth of 22% in revenue and 50% in EBITDA in the third quarter. Additionally, Jaypee Healthcare Limited became a wholly-owned subsidiary of the company during the quarter. Jaypee Noida is presently being integrated into our network and reported a gross revenue of INR 112 crores, with an operating EBITDA of INR 23 crores at a margin of 21% in the third quarter. We have now been able to demonstrate remarkable operating efficiencies across all formats of inorganic growth, namely greenfields, acquisitions, and brownfields. This fortifies our confidence for the upcoming phase of accelerated growth driven by significant brownfield additions within the next six months. Consequently, we continue to strategically pursue inorganic opportunities. We are expanding our footprint in the Mumbai metropolitan region through our foray into the attractive Thane micro-market, given its rapid urban growth and proximity to Mumbai. Our board has accorded its approval to enter into an asset-light build-to-suit agreement for a 500-bed hospital at a prime location in Thane to be set up by the partner as per our specifications on a built-up area of approximately 600,000 sq ft. The hospital is expected to be commissioned in 2028. This marks our third asset-light transaction designed to drive growth and maximize potential return on capital employed with minimal investment. The board has also provided its approval for enhancing the capacity of our upcoming asset-light build-to-suit hospital in Mohali, Zirakpur, to 400 beds from 250 beds planned previously. Now coming to the third quarter performance highlights, which is our 17th consecutive quarter of year-on-year growth. Our average occupancy for the network stood at 75% versus 73% in Q3 last year and 79% in the trailing quarter, while the occupied bed days grew by 36% year-on-year and 8% quarter-on-quarter. Average revenue per occupied bed for the quarter stood at ₹75,900, remaining relatively flat both year-on-year and quarter-on-quarter. Like-for-like output for existing units, however, grew by 7% year-on-year and 3% quarter-on-quarter. Network gross revenue was ₹2,381 crores compared to ₹1,779 crores in Q3 last year and ₹2,228 crores in the previous quarter. This reflects an increase of 34% year-on-year and 7% versus the trailing quarter. New units reported a gross revenue of ₹323 crores, which, while existing units registered a year-on-year growth of 16% in revenue, was driven by 8% growth in occupied bed days and 7% growth in output. The international patient revenue stood at INR 201 crores, registering a growth of 28% year-on-year and 8% quarter-on-quarter, despite contraction in patient footfalls from Bangladesh and Yemen due to political unrest. Network operating EBITDA stood at INR 622 crores, reflecting a growth of 32% year-on-year and 10% quarter-on-quarter. This includes INR 60 crore EBITDA contribution from new units. Network operating EBITDA margin stood at 27.3% for the quarter. Existing units improved their EBITDA margin by 70 basis points to 28.6%. Annualized EBITDA per bed for the network stood at INR 73 lakhs. Like-for-like EBITDA per bed for existing units stood at INR 82.6 lakhs, reflecting a growth of 9% year-on-year. Profit after tax before exceptional item was INR 390 crores versus INR 338 crores in Q3 last year and INR 349 crores in the previous quarter, reflecting a growth of 15% year-on-year. The exceptional item of INR 74 crores was towards charges paid to Yamuna Expressway Industrial Development Authority for securing permission for a change in shareholding of Jaypee Healthcare Limited prior to acquisition. Overall free cash flow from operations was INR 303 crores. During the quarter, INR 362 crores was deployed towards ongoing capacity expansion projects and upgradation of facilities at acquired hospitals, while INR 146 crores was distributed as a dividend, and INR 1,716 crores net of cash at Jaypee Healthcare Limited was used for Jaypee acquisition. Consequently, net debt for the network stood at INR 1,608 crores at the end of December 2024. Continuing our efforts to support the local communities, we treated approximately 37,500 outpatients and 1,300 inpatients from economically weaker sections of society, entirely free of charge, worth INR 52 crores at hospital tariff. Both our strategic business units continued to report significant growth in their revenue and profitability. Max at Home reported a top line of ₹55 crores, reflecting a robust growth of 24% year-on-year. It now offers 15 specialized service lines across 14 cities with over 50% repeat transactions. Max Labs reported a gross revenue of ₹41 crores, reflecting a strong growth of 22% year-on-year. It provides services in 48 cities through its network of more than 1,200 collection centers and active partners. Now coming to the status of our expansion projects. 128 beds at Max Lucknow. 64 beds have been commissioned in January 2025. Remaining 64 beds will be added in February 2025. Further, we are awaiting principal approval for the existing 13th to 17th floors for hospital use, which will add another 140 beds almost immediately. 127 beds at Max Nagpur. 12 beds have been added in October 2024. For the balance beds on additional floors, we are expecting the environmental clearance to come by March 2025. Project completion should take another 24 months thereafter. For the 268 beds at Nanavati in phase I, interior fit-out works are in progress currently. The project continues to be on schedule, and we expect completion within the next three to four months. 400 beds at Max Smart at Saket Complex. Majority of the structural work is complete. The project is on track, and we expect its completion within the first quarter of FY26. 155 beds at Mohali. The interior work is in progress, and we expect its completion again by the first quarter of FY26. 500 beds at Sector 56, Gurgaon. Structural work is in progress. We expect completion of the first phase of 300 beds by the end of Q3 FY26. All of these are on schedule, and we will see significant ramp-up in our capacity over the next 12 months, a large part of which is coming through Nanavati, Mohali, and Max Smart within six months. Thereafter, 367 beds at Patparganj, post receipt of environmental clearance. Tendering work is in progress currently. This project is largely on schedule. 550 beds at Max Vikrant at Saket. The forest approval is delayed due to Supreme Court proceedings in relation to tree felling involving DDA and the Lieutenant Governor of Delhi for the past six months. They have not permitted anybody to remove any trees in Delhi, but we think that this should get fairly resolved soon. All other statutory approvals are in place. 400 beds at Zirakpur, Mohali. No objection certificate from Fire NOC has been received. Project is expected to be completed within 30 months. Finally, moving on to the overview of company performance for nine months ending December 2024. Network gross revenue stood at ₹6,636 crores, reflecting a growth of 25% year-on-year. New units contributed ₹585 crores to the gross revenue. Overall network operating EBITDA grew by 20% year-on-year to ₹1,687 crores, reflecting a margin of 26.6%, while EBITDA per bed stood at ₹71.5 lakhs. Existing units reported an EBITDA margin of 27.7% and EBITDA per bed of ₹78.5 lakhs. Max Lucknow demonstrated year-on-year growth of 41% in revenue and 67% in EBITDA, while Max Nagpur reported a year-on-year growth of 26% in revenue and 118% in EBITDA within nine months of acquisition. Since becoming operational in July, Max Dwarka clocked a revenue of ₹92 crores and EBITDA loss of ₹29 crores. This greenfield hospital achieved EBITDA break-even in December 2024, like I said, a record of six months from its launch, as highlighted previously. During the nine months, we generated INR 1,025 crores of free cash flow from operations after interest, tax, working capital changes, and routine CapEx. INR 793 crores was deployed towards ongoing expansion projects and upgradation of facilities at acquired hospitals. INR 146 crores was distributed as dividend, and INR 1,716 crores was used for Jaypee acquisition. With this, we open the floor for any Q&A. Thank you. Ladies and gentlemen, 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 their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Amey Chalke from JM Financial. Please go ahead. Amey, if you can please unmute your line and procedures with your question. Hello. Thank you so much, and congrats to the management on a good set of numbers. So the first question I have is on the revenue from the existing units. It seems that quarter on quarter from Q2 to Q3, the revenue has remained largely flat despite being the weak quarter of quarter three. Is it possible to give an explanation on the front where we have seen the improvement or performance improvement during this quarter for the existing units? Amaya, basically, you know quarter three is typically a weak quarter because you have festivals in this quarter. And if you see the history, you will find that typically the revenue has come down by 2%-3%, and EBITDA also dropped by 2%-4% in this quarter. Despite that, right, despite the history, this time it's flat, and in fact, the EBITDA has improved over the previous on a Q2 to Q3 basis, right? That way, I think the performance has been much better, and it's mainly because of the fact that the Diwali month, right, typically you see occupancies drop by around 65%-70% range. But this time we had very, very heavy occupancies even during Diwali, and that's what made all the difference in this quarter. You must look at it on a year-on-year basis because of seasonality. Every quarter must be seen on a year-on-year basis rather than sequentially quarter on quarter. Sure. No, because I was expecting a drop this quarter, considering it is a seasonally weak quarter, that's why the question was okay. Sure. So I think basically the Diwali month made a lot of difference. I think typically the occupancies do drop, but this time it didn't happen. I think also because of the fact that Diwali was the third end of the month, that also never helped. If it's the middle of the month, then it can have more impact. Sure. And second question I have, we were expecting a price increase for some of the insurance schemes. So has that been taking place, or do you expect in the next one year any price increase to happen on the insurance side? We're not expecting a price increase on the insurance side. I think that happens if you're looking at a price increase on the institutional side. I think we're still expecting that. It's long overdue. My belief is it should come within a month or two, but let's see what happens on that. It's mostly on the institutional side. On the insurance side, it happens on a rolling basis. So I mean, whichever insurance contracts come offline every two years, that kind of you get the new rates over there. So that's happening as a course of hygiene. Sure. And if you see our therapy mix, it is continuing to improve. The oncology mix is also improved from quarter three of last year to this year. Considering the new bed addition which has happened would have a little bit lower oncology proportion, I believe for existing hospitals, the mix would have moved up sharply. So where should we see the optimized mix for the oncology revenues going ahead? So, I think the new hospitals, they should be increasing considerably, in fact, because for Lucknow, for example, the new bunker is yet to get ready, I think in April, May. I think it's coming on stream. So that should increase. What happens is without radiation oncology, even other programs suffer in as far as oncology is concerned. So you'll see a major uptick over there. I think we are looking at the new bunker coming on stream, even in Dwarka. So right now, the facility is without a bunker, so there's no radiation oncology there. So that needs to kick in over there as well. I think besides that, even in Jaypee, etc. So we are going to see a further increase in oncology. You're absolutely right. The current pie, although it takes into account improvement or increase in oncology business, but that number is kind of subdued or pulled down by the newer hospitals, newer acquisitions, where we are looking at perhaps a significant increase in oncology business. Right. Just to add more, which would be the hospital which would have the highest oncology mix, and what would be that number so that we would know the upper limit for the oncology? We can't give you the hospital-wise numbers, but I mean, the very fact that we have 25% plus as a percentage in the overall setup, obviously there will be hospitals which will be in the range of 29%-30% also. But lower, the new hospital will be lower. New hospital will be lower, right? For example, Dwarka would be around 12%, right? So those are the kind of ranges that. Yeah, but now will be single digits again. Yeah, but now will also be around 11% now. Yeah. Maybe 10%, 11%. So it's half the average. Yeah. Just last question. The PHF profitability has pulled down a bit this quarter. Any reason for the same? PHF? No. So I think you'll see it in the overall aspect. I think if you read the notes out there, these people have donated some money to the other trusts. So that is the reason you see that there. And also, we have revised the fee structure for two of the PHFs, which means that there are more upstreaming happening on the first column, right? So we're getting more fees into the MHIL, especially from Balaji and DDF. More left pocket, right pocket. Yeah. Sure. Thank you so much. I will join that with you. Thank you. The next question comes from the line of Sumit Gupta from Centrum. Please go ahead. Hey, hi. Thanks for the opportunity. Am I audible? Yeah. Yeah, hi. Sir, on the Lucknow performance, overall, it is very good. So I just want to understand how is the market panning out and what kind of trend do you expect with the overall profitability going forward also for Lucknow? Sure. How is the market panning out and? End of 12 in the profitability that you expect going forward for Lucknow? So I'm not going to give you any forward guidance, but the market is panning out very well. Like I said, we are launching another 140 beds. The reason we are doing that is because the occupancy requires that. 67 beds, sorry, 64 beds have already been commissioned in the month of January. These are new beds, and another 65-odd beds will be commissioned in February, so in the current month. And thereafter, we are looking forward to another 140 beds, which can immediately come online post-approval. So we have requirement of the beds, and that's what our trajectory kind of is what we anticipated. And that's why we're getting these beds online. We're also looking at the new bunker to come on stream over there. So with the new bunker, the radiation oncology business, the daycare business, all of that sort of increases. We are seeing very good traction with clinicians building in new clinicians and so on. I think, yeah, Lucknow has a significant amount of more way to go, more meat over there. Okay. So what is the competitive scenario there? Have you seen intensity being stagnant or it is going up? What is the trend in the intensity? What is the what? The overall, how is the competitive intensity panning out? The same as earlier. So there's an Apollo and there's a Medanta. The same hospitals tend to be there. Yeah. I mean, there's a Medanta there, there's an Apollo there, and there's us over there. And then there's other smaller nursing homes and hospitals. Okay. Sir, on the Max PPG facility in the Q1, there is a decline in the overall profitability. What has led to that particular drop? It's not a Q-on- Q is, like I said, it's a seasonal business, right? You can't look at Q-on- Q. You have to look at Y and Y. Okay. Okay. Understood. Thank you, sir. Thank you. Thank you. The next question comes from the line of Damayanti Kerai from HSBC. Please go ahead. Hi. Thank you for the opportunity. My first question is on your debt side. So INR 1,600 crore net debt after payment to Jaypee, etc. So now, in view of multiple projects coming in coming quarters or years, how should we look at the funding side? And then maybe you can just give your upper limit for net debt to EBITDA. What will be your upper tolerance level there? Our upper limit is 2.5 times net debt to EBITDA. Okay. I think we are far from that. Most of the new ones that we've announced, such as Mohali, Zirakpur, as well as Thane, they are both asset-light models. So the developer incurs the cost. We are essentially leasing these spaces from them thereafter. Dwarka expansion, again, is in a similar line, which is an asset-light model. As you're aware, Dwarka itself is an asset-light model. Now, other than that, we are looking at, I think, INR 500-600 crores over the next three to four months of CapEx towards the Brownfield and then thereafter. But yes, our overall cap is 2.5 times debt to EBITDA. This would include not only current CapEx, but also any further inorganic growth or whatever else we may do, including on and off-balance sheet debt. We are at 0.65 at this point in time after the Jaypee acquisition, right? Okay, so comfortable headroom to go for any strategic acquisition? Yes. Yes. No, we are very conservative on the debt side. I mean. Okay, and just if you can remind us, what kind of cash is currently generated from the existing business? So this quarter, we generated INR 303 crores of free cash flows. This is after tax, after working capital increase, maintenance CapEx, and any interest. So on an average, we can assume like INR 1,000-INR 1,200 crore of cash per year is getting generated against your all growth needs. Hopefully more, given the growth quarter on quarter or the year-on-year growth that we have. Okay. My second question is on price increase, which you mentioned on the institutional channel. Can you elaborate? Are you expecting something to come up on the CGHS rate, or what is it regarding? That's right. We're expecting something to come up in CGHS rates that also impacts other PSU business. Having said that, in spite of the thing, we have been sort of selective in the kind of specialties we've been attracting, even in institutional business. So the gap earlier used to be 44% between our cash rates and our institutional. Now it's come down to 36%. So the delta has also reduced. On top of that, we're expecting better rates now coming through on CGHS. But we've been expecting this for some time. My hope is that this comes in this quarter. Have you heard any announcement from the government? You mentioned next two to three months, right? You are hoping to hear something? No, we've had many assurances from the government, and we continue to have them at the highest level. But until it comes through, it doesn't come through, right? Okay. Okay. Great. And then my last question will be on institutional bed share, which is around 30% for the quarter. So how should we look at it? Because earlier, you mentioned your objective is to bring it down, right? But eventually, I understand you will take up scheme patients even when you have beds to spare. But any guidance or any target in your mind for this part of the business? So see, what happens is that as we add new hospitals or new capacities, right, your institutional business is going to go up with that. Our endeavor is not to reduce institutional business. Our endeavor is to accommodate growth in our preferred channels of business. But if I can do both, I don't have a problem doing it. So you dilute it when you have a capacity constraint. If you're able to sort of add more and more capacity to it, okay, because even the institutional business is contributing, right, towards your fixed costs. So the idea is not to unless it was a loss-making business, then you wouldn't be doing it in the first place. The first choice is you create more capacity, okay, to accommodate that business as well as any growth in your CTI or your preferred channel business, okay? Wherever you can't do that, you start distilling that business. Okay. So you have the flexibility to play around with this mix, right, to optimize the asset utilization? You've done that, right? So you see plenty of facilities where we brought it down to zero. But now you'll see that some facilities that we open up now, like let's say Bombay, we'll start that business because we're coming up with new capacity. First idea is to fill the beds because it contributes. You've seen it in the Shalimar Bagh brownfield, for example. But having said that, even with the lower rates, your ARPOB is higher simply because you've got operating leverage also, right, when you're adding brownfield capacity on existing hospitals. So if you take the example of Nagpur, Nagpur used to operate at a 55%-60% occupancy. But we've been able to ramp up the occupancy by taking in institutional business. It never used to do before our acquisition. And the immediate fallout of that is it all percolates down to your EBITDA. So you're better off taking where you have idle capacity. But if you don't have idle capacity, then you should not be taking institutional business. You should take institutional businesses where you have idle capacity. So if we can create idle capacity, great. I mean, you take institutional business. It percolates down to EBITDA, and you have higher EBITDA per bed on the incremental institutional business. Okay. Thank you. That's very clear. Thank you, Abhay. Thank you. Thank you. The next question comes from the line of Prashant Nair from Ambit Capital. Please go ahead. Thank you and good morning, everyone. Can you share your details on how much your investment would cost for the? Okay. Thank you, Prashant. But your audio is not clear. Could you please lift your receiver and speak your question? Yes. Just give me a minute. Is it better now? Yeah. Yeah. So first question was on the Mumbai project and the additional beds that you intend to add in Mohali. So both are build-to-suit projects. What would your investment outlay be for these two assets? Essentially, it's going to be medical equipment, which will be, let's say, about INR 150-200 crores. But that only happens at the end when it's constructed, right? The last three months, six months, or whatever. 30 lakh rupees per bed, yeah. Yeah, it's about INR 30 lakh rupees per bed, but it's all back-ended. Medical equipment comes after the entire project is almost complete. Yeah, and Mumbai, you intend to operationalize in fiscal 2028. Is that right? No. In Thane, yes. Thane, yes. Yeah. Thane. 28, right? Yeah. It takes about three, three and a half years to build, including permissions. Yogesh, for your business, would say 65% cash conversion be kind of a reasonable assumption to work with, or can this change, say, at any point over the next few years? I'm not clear what you're saying, Prashant. I think you're referring to EBITDA to free cash flow. Yeah. Yeah. Other than 65 is the right number. I mean, we only hope that the tax numbers will come down going forward in terms of cash outflow. So this should be okay. All right. Okay. Great. That's it for me. Thank you. Thank you. The next question comes from the line of Tushar from Motilal Oswal Financial Services. Please go ahead. Yes. Thanks for the opportunity. So the first one on the hospitals which are coming up over, say, next six months. So with respect to those, what kind of operational cost addition can be factored for FY26? Is it for the brownfields? Yes, sir. Those ones which are coming up in, say, 1Q FY26, Mohali, Max Smart, Saket, Nanavati. Marginal operational cost because these are all brownfields. We already are incurring all the major costs in the existing hospitals. Okay. So secondly, with respect to this, the build-to-suit, where the investment is lower, but accordingly, as in subsequently, as in when, let's say, at a steady state, occupancy of, say, 55%-60%, as in when that happens, what kind of margins we are sort of assuming in this build-to-suit because there would be rent share or there could be some revenue share with the partner, unlike own greenfield, brownfield expansion? So what kind of basically trying to understand what kind of margin dilution happens because of build-to-suit margin. You have to look at what we get vis-à-vis what we invest. So you have to look at it on an ROCE basis, right? Now, if 80% of the capital cost, in this case, which is land and building, is incurred by the partner, and you're locking it at 8 or 9% yield, right, and we enjoy a 35% ROCE at a stable state on the whole hospital, you can imagine what it does to your 20% contribution. Your ROCE goes beyond 100% effectively, right? And most importantly, any cost and time overrun, you're insulated against because that is to the partner's account and not to your account. Understood. And what kind of ARPOBs using this location can drive it compared to, say, metros or Tier 1s where currently Max is at 75-76 thousand? What sort of assumption for these locations? I think Thane is what a metro does. I don't think there's any difference between Thane and what any of the Mumbai hospitals will be operating. And you have some listed players like Jupiter and all, I think, which are operating in Thane. What's 75 to 80? I think 75-80 thousand is ARPOB at present. Three years later, hopefully, it'll be more. In Mohali, it should be no different from our existing hospital in Mohali, which has a 55, which is about 55,000 ARPOB at this point in time. Three years later, it should be more. As you're aware, ARPOB is growing by 7-8% every year. Got it. Just one more on Lucknow, given the current occupancy and current profitability, at least at the existing centers, while so the growth will be more driven only by beds now, given that the operational efficiency is largely in place, or you think there is still some more efficiency which can drive the profitability while beds will drive the volume growth? So when you have higher occupancy, obviously, the cost also degrades to a larger number of beds. So automatically, you have operational efficiency coming through. Other than that, like I mentioned, you have daycare, which is really your radiation and so on and so forth that there's no bunker over there right now, which should come on stream shortly. I think it's by July, it's coming on stream. And thereafter, you'll have a higher amount of ARPOB emanating from that particular facility. The other clinical programs, equipment which is online, which is coming, we order these equipment. It takes time for it to come and so on. So I think all of this will contribute to higher ARPOB, better operating efficiencies, and so on. Also, some of the doctors are joining during the quarter, right? Quarter three. So obviously, then we have full quarter impact going forward. Understood. And just one more thing on Nagpur, given the kind of size of revenue, in fact, it's relatively smaller in overall scheme of things. But just to understand here, in terms of the current occupancy, which is sort of dragging down and subsequently having impact on profitability, even if I leave aside seasonal impact, still, just to understand the potential to add another 115 beds here. No, but the occupancy on a year-on-year basis increased. I think only seasonally is down. Quarter two was 91%. This quarter is 79%. So we know that and they had the vector-borne disease last quarter. So I think seasonally it does happen. So I think occupancy is quite good there. 79% is by no means a low occupancy in a low season. I think 79% midnight occupancy, and like I said, it's going to take us 24 months to build additional beds. I have no doubt that even if you take a 5% increase in occupancy over the next two years, okay, you're already occupied out. And do keep in mind that you create infrastructure for your peaks, not for your troughs. So your peak occupancy was 91% last quarter. No, no. I meant to say that at 79% occupancy, we are at, say, INR 54 crore revenue, INR 11 crore EBITDA, which is like roughly 20%. So from a profitability point of view, we are more or less there. And then given the kind of profitability here, we intend to still add 115 beds is what I'm trying to ask. Or is the EBITDA margin still possible to get better at this site? Of course, it is possible to get higher EBITDA margins. Also, the new beds, if you say occupancy is not an issue, okay, then as far as the higher occupancy is concerned, you also get a huge amount of operating leverage, right, because it's a brownfield. So EBITDA per bed is significantly higher than. You also have to visualize this basis, the entire ROCE that we're shooting for, which is 20%-25% within four years. Other important aspect is that we still have to get to the respectable ROCE there, right? I mean, our target is 20%-25% range. We are at 10%-11% range as of now. So we have to have those additional beds to get to that ROCE level. And that's how it was all planned when we acquired the hospital. Keep in mind that only the ninth month, right? Got it. Got it. Thanks. Thanks. That's it. Thanks. Thank you. The next question comes from the line of Rishi Modi from Marcellus Investment Managers. Please go ahead. Yeah. Hi. Am I audible? Yeah. Yeah, Rishi. Yeah. So Abhay, I just wanted to understand this partner healthcare facility. So we have used the profitability there to fund the new Vikrant and the other, which is again a PHF facility. So wanted to understand, do we just control the cash flow, or do we have ownership over that free cash flow that these Balaji Society and all of these guys create? Can you give out that money as dividends to the shareholders, or you're not allowed to do that? No. So there's no dividend can be declared for any society, right? But one society can obviously contribute to the other society if the objectives are the same, right? So for example, Balaji Society and Nirogi Society, objectives are the same. So if they have surplus cash, they can obviously donate to the other society to use it for their construction purposes, and that's what we did, right? But what can be given as dividend is basically you have to upstream to the main company then, right? But the moment you upstream it to the main company, then you get only 75% of it because you have to pay tax on it. So endeavor is always to, if you need this cash in society, move it from one society to the other society. But you can upstream it. Yeah. But you have the ability to upstream. You have the ability. Your question is, can it be dividend? Yes, it can be upstream and then dividend, but of course, you'll be paying a 25% tax. Okay. Got it. And second, you mentioned on the PHF, the fee has been revised. What's the change? Like today, I'm guessing we are getting around 25%-28% of that revenue out as fee, which gets recognized in our Max Healthcare revenue books. So just what's changed on that? So basically, every two years, the fees that's revised in each of these PHFs, right? There's a method to the madness. And we review the cost, etc., and based on that and their cash flow, and based on that, the fee is raised. And Balaji's impact, overall impact will be around INR 25 crore for the fee revision. Now, I don't know the percentage, but not the exact absolute amount of impact, which will be upstream into the MHIL through the MSAs that we have. Okay. So we'll get extra 25 crores going forward from Balaji? Yes. Okay. Second, on the Thane hospital, so I read that the lease is only for five years, the initial lease, and then you have two renewals. Versus when I look at the Zirakpur one, we have around a 20-year lease with some 20-year renewal. So just wanted to understand, is there a risk of that property post we getting it being taken away by the developer and being given to someone else for a higher rental? Or why did we get into only a five-year lease? And secondly, the two renewals post that five years, how many years are they for, and who has the right for that renewal? So there are two things. It's not five years to three years. It's actually 15 years. I think there was a five plus five. So it's five plus two, 15 years. So 15 years. 15 years. After that, actually, the second is that after 12 months of operations, we have a call option on it. So we can acquire it at any point of time, right? We can acquire it. We can sell it down to a REIT. We can acquire it and nominate somebody else or whatever else it is. Other than you'll understand the commercial logic of it, because if we do a 50-year lease, that lease, then we have to pay higher stamp duty. So since we have the option, we said, "Okay, we'll take a call and then renew it." It's another option, right? Okay. So five plus five plus five. Okay. All right. Just fine. Second, the last question from my end is the IRDAI regulations or the guidelines that have come through. Sorry, just one. I just want to go back to that point. It's 15 years with a call option at our choice. Yeah. To buy the property within 12 months. I heard that. Yeah. Don't look at it only 15 years. We can always sort of change the 15 years and extend it. We can buy it and we can get some normally somebody else to buy it on the same lease. What would be that amount if you exercise the call option? How much do you end up paying to the developer? It's at cost. I'm taking, I think, debt cost. It's a cost and a very nominal yield on the real management on the project. One crore per bed would effectively 1.5 crore per bed would become the cost if you end up acquiring it. Yeah. That's the last range of 1-1.5. The real cost is for putting a project up is about 1.9-2 crores per bed for a greenfield. So that's the real cost. It's at cost. Okay. Last, on the IRDAI guidelines that's come out today or yesterday, where they have decided to cap the increment on senior citizens' insurance policy price hikes. And they've asked these insurance companies to get together and negotiate rates with hospitals and bring it closer to the PMJAY rates. So just wanted your view on, firstly, how much of our revenue within the insurance pool comes from senior citizens? And secondly, do you see any rate negotiation impact from this instruction? So there's no rate negotiation impact. In fact, I see a benefit from it because the number of people who may be going out of the insurance net because that premium goes with the step jump in their premium now won't go out of the insurance net because of this, right? Because then it's more palatable. As far as premium is concerned, there is no premium change between sorry, there's no rate negotiation of different age groups. It's not cut that way. I mean, whether the cost is, right, whether it's for a senior citizen or a junior citizen from our standpoint. Giving a price hike of 10% per year, what we negotiate with insurance companies is around 10-12% per two years. So if all insurance contracts are aligned, logic was to continue through and through. The reflective increase that hospital seeks and most of the hospital seek is lesser than what they are allowing anyways. Insurance price change on insurance, okay, every two years, it's about 12-13% at best. So that comes to a medical inflation of about 6% per year, effectively, right? At best, 5.5-6% a year. Right. Yeah. I got that. So that's the secure part. Just these guys collectively, the insurance companies collectively coming in and bargaining, does that impact? That would be a competition commission issue, right? I don't think you can cartelize. But no, I don't see any. I mean, if that was to happen, then they should be kind of getting together and negotiating current rates, right? So why would you take one segment? Like Rishi said, I think if our increase is 6% per year and they are being permitted 10% per year, so where's the problem? Okay. All right. Understood. Yeah. That's it from my end. Thank you. Thank you for taking my questions. Thank you. The next question comes from the line of Sangeeta from Cogito Advisors. Please go ahead. Sangeeta, if you can please unmute your line and procedures with your question. Hello. Yeah. Hello. This is Andre Sangeeta's husband. I think she's going to the loo. I had one question regarding the payer mix. How much of the payer mix is in your control? And to the extent that is in your control, what are the steps that you are taking in the next year or so to hopefully in favor of higher profitability? So it is not, I mean, it's a burden of disease, right? Effectively, we start adopting. You have to align yourself with what the market demand is, one. You move towards higher technology, of course, okay, and with perhaps more robotics and more higher-end programs. That is what drives the clinical mix. Yeah. No, I'm talking about the payer mix. Sorry. As far as the payer mix is concerned, you've seen there's an increase of 28% in international business. So this is because we've engaged deeper with various geographies that we get patients from. As far as domestic patients are concerned, upcountry is 40% of our business that's been growing at a very fast clip of some 24-25%. But majority of it is CTI, which is cash and TPA related. So all of that is growing at a faster clip. And so we want to have deeper engagements with upcountry. And I think some of these things and other activities that we do to engage with the communities, that should enhance the preferred channels for us. Okay. Thank you. Thank you. The next question comes from the line of Vaibhav Sabu from Nippon India AIF. Please go ahead. Thanks for giving me the opportunity and congrats on the good setup, numbers. Just one thing, I think that was asked previously also, but just want to understand. You know that on a consolidated basis, for example, our EBITDA monthly is somewhere around 78 to around 27%, but you would assume for major hospitals, it would be around 29%-30%. I just wanted to understand from the asset-light model, while I understand completely that ROCE would be very much attractive, I just wanted to understand what would be the similar what would be the EBITDA number on a mature basis for asset-light models? It would be around 20%-25%. Just wanted to understand that range. Most India is, right? The rental line comes below EBITDA. Okay, but if other PMJAY mixes, what would be the EBITDA margin? Yeah. I think it should depend on what the maturity of the hospital is. I think it should be around 5%-6% range. Or it could be 5%-6%. Yeah. All right. That was it from my end. Thanks and all the best. Thank you. The next question comes from the line of Neha from Bank of America. Please go ahead. Yeah. Thanks for taking my question. Just one clarification on the Mumbai expansion. I think once the new tower is commissioned, we are planning to phase out some of the older ones and rebuild that. So would the net addition still be the 268 beds that we have talked about, or should I also adjust the beds that will be going off for some time till we get it back? How should that phasing happen? Yeah. No, no. So it is going to be a net reduction there. When we start phase II, okay, which should be almost immediately, you will have a reduction of 100 beds. Okay? So your net addition is 168 beds on the current 300 and. Yeah. We are adding currently 283 beds. After that is commissioned, we have to take down 160 beds. Immediately 100 beds. The next is we'll be adding 261 beds and take down another 60 beds. That's a phase of about one and a half year, two years behind. So net reduction eventually will be 160 beds, and net creation would have been for around 580 beds. Okay, so what would happen with the next phase? Take 268 beds. There is no reduction there. We have to take a call on reduction. Once we do the phase II, then the reduction will happen, right? So the phase II is not happening immediately, right? Yeah. At that stage, we'll bring down about 100 beds. Okay. And. We'll bring down 100 beds. Okay. And this is over the next two years? This entire process will get completed in the next two years? That's right. That's right. But the beds which are being pulled down, okay, are more ward-style, etc., while, so one of the things we've been able to do through this expansion is right-size the beds because the kind of beds that we have a demand for and occupancy for are single beds and deluxe beds and so on. While the present facility, one of the reasons that the occupancy levels typically have been lower over here at Nanavati compared to the rest of the network is because a lot of the beds were old-style, ward-style, Nightingale ward beds. Those are the beds which are getting pulled down. So we are right-sizing the beds. So the net impact shouldn't be that much. You're getting what is required where we have almost 90% occupancy, single beds and ICUs, etc. Those continue, while the ward side, a lot of the ward side, Nightingale ward, etc., come down, which in any case won't be new. Okay. So there won't necessarily be a financial impact from it because of the right-sizing of beds. But then how should I think about the improvement? Because I think one of the areas that we wanted to improve was also the margin of the Nanavati hospital. So does that start happening once we've commissioned all of the, when we've completed phase II fully? Absolutely, and it happens on two counts because one is your number of beds, right? Okay, increases, so right now, let's say if your operational beds and you're occupied by about 30-40%. And even if you take an increase of about 150, 40, 150 beds on top of that, net increase, okay, you're looking at 50-60% more capacity addition, right, so what you're having is you'll have the same cost structure a spread over more number of beds and even the higher cost structure spread over the more beds and the right-sized beds, so you will get the operating leverage and your margins will certainly go up. Understood. Okay. That's helpful. My second question is just an extension of the previous question. I think there has been some chatter among insurance companies about getting together and trying to negotiate pricing, even using IRDAI as one of the agencies that does that. I know you mentioned competition commission, but do you see that as a risk when we're thinking about pricing with insurance? Could that 10% over two years be much lower as we think about the next, let's say, three to four years, depending on how this process progresses? Not at all. I mean, I haven't seen any approaches, any discussions, anything other than that. I mean, IRDAI is actually the regulator for insurance companies. So I don't think insurance companies can get under the umbrella and have IRDAI negotiate that or get into that discussion, etc., because I think it is far beyond their mandate, right? I mean, other than a conversation like this where you're mentioning a rumor, okay, and that also, far and few that have sort of come my way, there's never been any approach on that. Understood. I think secondly, I think most importantly, the main point is that, look, medical inflation is 6%-7%. Okay? That's the increase we get, okay, every year. You just get it every two years. So it shows up at a 12% increase every two years. But the fact is it's two years. On an annual basis, it's still 5%-6%. My salary increase is pretty much that. Any increment that you see is on real growth, which is new technology, new thing, robotics come in. Of course, in terms of percentage margins, you get less margins. But in terms of value, you get more. Because do understand, eventually all the innovation which happens in the healthcare sector eventually has to pass through the doors of hospitals, right? I mean, the same hospitals 30 years back used to do conventional surgeries are now doing robotics. The same hospitals which used to do proceed at best are doing transplants now. We used to have general surgery surgeons working on oncology. Now you have organ-specific oncology. You've got radiation. You've got chemos. You've got other robotics, etc., doing those surgeries. So all of that, you go up the value chain as well, right? So there is real growth. And also, I think if the insurance companies that organize, I think there's on the other side also, I think the hospitals can also get organized, right? There can also be a collective bargaining on the hospital side. That's easy to do, in fact. Hospitals are far lesser in terms of if you take the organized chain. Yeah. Yeah. The demand-supply equation, I guess, is in your favor. No, no. I mean, that also the density of beds, right? I mean, we are dominant players in Delhi NCR. I think some of our peers are in their own markets, etc. So if you're kind of dispersed across the country, then it's a different matter. I mean, today, look, we've got more facilities. We've got 15 facilities in Delhi NCR. We are twice the number of facilities of the next three distinct players put together. So literally, three players get together, okay, and the next 20 players are not even the same size. So your bargaining power is slightly different than. But it's not even a question of bargaining power. I think it's a question of what is right and what isn't. 5%-6% growth in pricing every two years is not something that you can win, right? How much lower do you want to be is the question. Yeah. Fair enough. Thanks so much, Abhay. Thank you. We take the next question from the line of Kunal Damesha from Macquarie. Please go ahead. Hi. Thank you for the opportunity. The first one on the Dwarka, while we have done a very good job of breaking even, based on our reported number, if I look at the indirect cost in Dwarka Hospital for the 140-bed, it seems to be roughly around INR 150-160 crore a year, assuming that our direct costs are similar in line with the network average. So my question is, given that we are going to add almost around 1,400-1,500 beds next year, how should we think about the indirect costs related to that? I know there are some brownfields, etc., as well. But again, these brownfields are separate towers versus the current towers and all, right? So there might still be higher kind of indirect costs there. So let's say all in all, this 1,500-bed, what is the indirect cost that we should assume, whether it's INR 1,000 crore or INR 800 crore, or how should we think about it? No, I think the way you need to think about it is that indirect cost is not linear, right? Correct. And if it's not linear, it's, sorry? It would come primarily in the first year, and then operating budget. So there, whatever indirect cost is you've been incurring, okay, up to break even, we've incurred indirect costs, right? Right. Based on that indirect cost, okay, on 140 beds, we have broken even, correct? Mm-hmm. Okay. Thereafter, every bed that you add, your indirect cost is not going to be linear, right? It's only a direct cost which is going to be missing. Now, indirect cost will be just some nurses and some resident doctors, etc., which is a marginal cost. So what is going to happen is every bed that you add, the revenue from that bed, okay, will give you a lot more leverage onto your EBITDA. So a lot more for almost your entire contribution margin. So let's say if you're operating at a 60% contribution margin, okay, 50%, okay, of your top line, or that means almost your entire contribution margin will flow to your EBITDA because your indirect cost is not linear. And that is the basic principle of any brownfield or opening any hospital. Frankly, I think over the next few quarters, okay, you're going to see that being demonstrated. Those beds are not coming in new towers. The existing structure already has 300 and... It already has the beds. The beds need to be fitted out. We only opened 140 beds. Correct. So once you operationalize another 160 beds, there would still be some incremental costs related to it, right? So my point is. If you have a hospital which is eight floors, okay, you operationalize four floors. Now you need to operationalize another four floors. All your costs of your clinicians, of your management, of your utilities, of common areas, all the support functions, kitchen, everything is already incurred. When you open up another floor, what do you do? You get nurses and resident doctors. So nurses cost me INR 23,000 a month, okay, and a resident doctor costs me INR 45,000 a month. Effectively, you're looking at maybe 8% of your revenues, okay, or 9% of your revenues attributed to this cost, right? So if your contribution, if your gross margin, if your contribution is 60%, you take out 8% from that. So 52% of your top line is going straight to your bottom line. Sure. When you ramp up? Obviously, when you ramp up, right? So every incremental bed will give you more and more. Post the break-even stage. Post the break-even stage. And that's not only a hospital. Any venture works like that, right? I mean, that's basic economics. Sure. Sure. And another one on the institutional mix and the payer mix or bed share and the payer mix. If I look at the nine-month payer revenue from the institutional patients, it has grown at roughly around 34% year on year. And the bed share has only grown at around 20%. So my view is that there is a decent amount of kind of rebasing of the pricing of some sort was happened. And I also see there was some order passed in February 2024 from Delhi government advising the CGHS rate. So what are we looking forward in the next one or two months incrementally? Delhi government has nothing to do with CGHS rates. CGHS rates is central government. That's why it's called Central Government Health Scheme. It's got nothing to do with the Delhi government. Delhi government cannot dictate or decide central government rates. Yeah. And Kunal Damesha already mentioned that the gap between the cash, the self-pay, and the institutional segment has come down in terms of ARPOB, right? Earlier, it used to be 44%. Now it's only 36%. That means there's an 8% improvement in terms of the ARPOB that we have, right? So basically, obviously, we're doing more oncology. And also, we are able to restrict some of the impediments whereby the ARPOB in the institutional has grown. So as a result, you find that the bed growth is not there, but there's a revenue growth. That obviously means that there's an ARPOB growth which is happening. And it's not because of rates. There's nothing happening on the rates. It's mainly because of the change in the mix of the patient and also the focus that we have on surgical business. Sure. I have some documents. Probably I'll share it. I'll get more detail on that. I have just one more question, if I can. Yeah. Sure. So this INR 40 crore donation that we have done from Balaji and Devki Devi Society, and that kind of we have taken it pre-EBITDA, which kind of reduces our profitability. So does this kind of help with maintaining the tax-exempt status for the trust hospitals? So first of all, this is not before EBITDA, after EBITDA. It's in the EBITDA only. It's basically from one society to the other society. The other societies are not having operating income, so we didn't show them as a separate column, right? We put that under the elimination column, right? And you see that the overall number matches. So it's not a major movement. It's only a movement of one society donating to the other one. And it has nothing to do with tax status. It is basically under the tax status, you are supposed to use the money that you have for the objective of the society, and that part of the objective is also to help other societies, right? So if the one society has surplus cash, then they can obviously donate to the other society. It's within that ambit of their objective clause and within the ambit of the approvals that they have in terms of exemption from the Income Tax Department to donate money to their society for furthering the objective of the society. Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments. Thank you, everyone, for taking time out to join us for the third-quarter results. We look forward to interacting with you again next quarter. Thank you. On behalf of Max Healthcare Institute Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.