Ladies and gentlemen, good day, and welcome to the Fortis Healthcare Limited Q1 FY24 post results conference call of Fortis Healthcare Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Anurag Kalra, Senior Vice President, Investor Relations at Fortis Healthcare Limited. Thank you, and over to you, sir. Thank you, gentlemen. A very good afternoon, good morning, ladies and gentlemen, and thank you for joining us on the quarter 1 FY 2024 Fortis Healthcare call. With me on the call today are our Managing Director and CEO, Dr. Ashutosh Raghuvanshi. We have our Chief Financial Officer, Mr. Ray Dore, and we have Gaurav, my colleague in Investor Relations. Before we start off, I hope all of you have got a chance to look at the presentation and the press release. I would also want this opportunity to probably tell you that, you know, in addition to our standard disclaimer, we've also given a disclaimer regarding the board's evolution, past efforts, focus, and Agilus Diagnostics Limited on initiating the process of the initial public offer. In that respect, I would want to read out the disclaimer for everybody's benefit. Agilus Diagnostics Limited, a subsidiary of Fortis Healthcare Limited, is proposing subject to the receipt of regulatory approval, market conditions and other considerations, an initial public offer of its equity shares in the near future and is in the process of filing a draft red herring prospectus with the Securities and Exchange Board of India. The board of directors of Fortis and Agilus Diagnostics Limited have respectively approved the process of initiating the proposed IPO in its board meeting held on August 4, 2023. In light of the publicity restrictions imposed on Agilus Diagnostics Limited and Fortis, no further information other than that contained in this presentation can be disclosed. The equity shares have not been and will not be registered under the United States Securities Act of 1933, as amended, or any other applicable law of the United States, and unless registered may not be offered or sold within the United States, except those in an exemption from, or in a transaction not subject to the registration requirements of the U.S. Securities Act and applicable state securities laws. The equity shares may only be offered and sold in the United States only to qualified institutional buyers, as defined in the 144A, in private transactions exempt from the registration requirements of the U.S. Securities Act, and outside of the United States in offshore transactions as defined in and in compliance with Regulation S and the applicable laws of the jurisdiction where any such offers and sales are made. There will be no public offerings in the U.S. It is in light of this disclaimer that we also do not have today the management of Agilus Diagnostics Limited with us. We will start with some opening comments by Dr. Ashutosh Raghuvanshi, so soon we can open the floor for question and answers. Over to Dr. Raghuvanshi. Thank you, Anurag. Very good morning and good afternoon to everyone, and thank you for your time to join us on our Q1 financial year 2024 earnings. I hope all of you are well. Before I talk about the performance of the company for the quarter, I would like to talk about a few key strategic actions with respect to both our hospitals and diagnostics business. This, I must add, clearly signifies our intent to move forward and ensure that the company is well-placed to further enhance its growth momentum. Let me quickly take you through some of these developments. I'll start with the diagnostic business, which is now known as Agilus Diagnostics Limited. I'm particularly pleased to share that the board of Fortis and Agilus have granted approval for Agilus to initiate an initial public offering process by way of an offer for sale for its equity shares, subject to receipt of required approvals, market conditions and other considerations. On the hospital business, before I move on to the financials, you are well aware of our portfolio rationalization strategy for quite some time, which would enable us to allocate our resources more efficiently. To this effect, in July 2023, we have divested our Arcot Road hospital operation for INR 152 crores for financial year 23. The Arcot facility had a revenue of INR 51 crores and an EBITDA loss of INR 36 crores. We have in the quarter also signed definitive agreements to acquire a 350-bedded hospital in Manesar for INR 225 crores, enabling us to increase our footprint in Delhi NCR and accelerate our focus on key geographical clusters. This acquisition complements well our flagship facility of FMRI at Gurugram, and we hope to close this acquisition shortly. These were some of the key corporate actions. Let me now take you through the performance of the company for the quarter. The year has begun on a steady note as we witness a growth in our consolidated revenue. Compared to Q1 of financial 23, our revenues have increased by 11.4%, reaching INR 1,657 crore in Q1 of financial year 24. Our consolidated operating EBITDA margins were at 16.5% versus 16.9%, and our reported profit after tax was INR 124 crore versus INR 124 crore. On the balance sheet, sheet size, we remain quite healthy with a net debt to EBITDA of 0.35x as on June 30th, 2023, compared to 0.54x as on June 30, 2022. Our net debt stands at INR 393 crore as on June, June 30, 2023. Coming specifically to the hospital business, we have witnessed a revenue growth of 13.6%, or to INR 1,354 crore, compared to INR 1,192 crore in Q1 of financial year 2023. Operating EBITDA stood at INR 206 crore, reflecting a margin of 15.2% and EBITDA growth of 6.8% compared to Q1 of financial year 2023. Generally, Q1 is a relatively softer quarter. The business performance was also impacted due to a slightly lower occupancy and a comparatively less favorable payer mix, which was a bit skewed towards the government-related business. While occupancy was at 64% versus 65% in the previous period, our ARPM rose by 12% to INR 60,036 per day, about INR 2.19 crore on a randomized basis. I do expect that we will see an improved set of key performance metrics in the quarters to come. Our investment in bed expansion and medical equipment are on track, with the latest being the commissioning of a da Vinci robotic system at Fortis Noida in the quarter. We remain on course for a planned addition of close to 1,400 beds in coming 2-3 years. These include expansion in some of our key facilities like Mulund, FMRI, Noida, Shalimar Bagh, and a few more. Some of these facilities that I just mentioned would gain significant scale and size, reaching to almost 450-500 beds. We are also actively enhancing our presence in some key medical specialties like oncology. This specialty has grown 34% on year-on-year basis and now contributes almost 14% to our revenue. Our top six specialties contribute over 60% to our hospital revenues. During the quarter, we have onboarded eminent clinical specialists in the key medical fields of urology, pulmonology, and neurology to further augment our plans to grow these specialties. International patient revenue continues to see good traction. International patient revenue grew at 29%, contributing 8.5% to the overall hospital business revenue, up from 7.5% in Q1 of financial year 2023. On our diagnostic business, please do appreciate that I would have to be very limited in my comments since we have to adhere to the publicity guidelines in place, having initiated the Agilus Diagnostic IPO process. The business reported gross revenue of INR 342 crore, a growth of 2% versus quarter one of financial year 2023. The non-COVID revenues have grown 9% versus the corresponding previous quarter. Our operating EBITDA margins reached 19.4%, compared to 17.4% in Q1 of financial year 2023 and 14.9% in Q4 of financial year 2023. With this, I'll conclude my comments. I think it has been a steady start to the fiscal 2024. We have started to progress on some of our growth and portfolio rationalization priorities that we have been talking to you about in the past. We will also continue to pursue and evaluate various growth opportunities that fit well with our cluster strategy and provide attractive synergies. These, I believe, would further augment our growth levers and place us well in the healthcare landscape here. Thank you. With that, I would like to hand over the call to Anurag. Thank you, sir. Ladies and gentlemen, we will now open the floor for question and answer. Savin Patel is asked to moderate you. Thank you. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes on the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead. Hi there, good, good morning. I'm audible? Yes. Yes. My first question is on the revenue by asset that you disclosed in your presentation. There seems to be a kind, kind of a stark difference here, in the sense that if I look at on a quarter-on-quarter basis, some of the flagship or the larger hospitals have done fairly well, whether it's FMRI, Mohali, BG Road. Even order in Shalimar Bagh aren't, aren't that bad either, despite Q1 being seasonally weak. But the smaller hospitals seems to have done worse off than the larger ones. Is there any key reason here? I mean, some competitive pressures or general slowdown, or what are the key reasons for the underperformance of the smaller assets? One thing is, you know, this time there is a change in the way we report the EBITDA number unit-wide. Earlier, we were. Sir, I'm talking about revenue. Sir, I'm talking about revenue. Okay. General revenue, generally, you know, if you have seen the trend, the surgical revenue has gone up, and this is the case for the larger hospitals. Smaller hospitals, generally, you know, the gyne and other business which has been, which is, having a softer, softer quarter this year. That is the main reason. Plus, some of the specific units are having some specific problems, like, you know, Kalyan in Mumbai, where there, you know, because of the rainy season and other, other things, the accessibility to the hospital was affected. Those types of reasons are specific to some of the units. Okay. and in in the last quarter con call, there was a margin guidance shared on the hospital side. I think it was somewhere to trend around 19%-20% in the in the coming quarters or so. Where are you on that particular guidance? Does it still hold, or you are revising it onwards? Yeah. We are maintaining that guidance in full. As Dr. Raghuvanshi said, it is a good start in terms of revenue. Profitability is slightly on the lower side, but we expect to pick up the pace in the forthcoming quarters. Right. and, and also, sir, I mean, Dr. Raghuvanshi, now that we are almost, six, seven quarters past the peak, COVID that happened, what are your thoughts on the footfalls on the hospital side? I mean, there is still a divided opinion whether there was a pent-up angle in the last three, four quarters or not, post-COVID. Any thoughts that you can share whether we are slightly heading into some sort of a slowdown or things are kind of looking as good as you would have thought a couple of quarters back? Well, I don't think there is any slowdown. There is certainly no pent-up demand as well. That is whatever was there, was limited to some elective procedures, as in the previous quarters also we mentioned, that there was a surge in our elect, for example, in joint replacements, et cetera. Overall, most specialties remained in the same ratios as they are now or they were before the pandemic. I don't think that is the case, nor is the footfall getting affected. The reason why this quarter also has had a little bit of this thing is because of little bit of unseasonal rains, et cetera. In our case, specifically, other than the occupancy, we also had an unfavorable mix in terms of the government scheme ratio being slightly higher, and that resulted in a slightly lower profitability, though the growth on the revenue side was very healthy. We expect the trend on the revenue to grow. At the same time, we are very focused on the cost side and make sure that the profitability profile remains same as what we had guided earlier. We are very much on that trajectory. Some of the corporate actions which we are taking will also help us to achieve that rather quickly over the next two or three quarters. Sure, sir. Thank you. I'll get back in the queue. Thank you. The next question comes from the line of Amit Khatan from Lavama Capital. Please go ahead. Hi, good morning, and thanks for the opportunity. My first question is on occupancy, you know, which appears to be significantly lower than what one might have expected, given how normalized the environment now is. Just wanted to understand, beyond the seasonal rains, are there any other one-offs that explain this, and how should we think about the long-term steady-state occupancies at the group level? Yeah. The occupancy trends, what we see currently in the current month, is back towards a healthy number. The reasons why this occupancy was low in the previous quarter, I think, one of the major reasons was this regional variation. Summer vacations have a huge impact sometimes. I think those were the reasons why the occupancy levels have been low. As I mentioned in the previous answer, there were also a lot of unseasonal rains in this period, which also disrupted some of the routine work. Plus, there is some addition of bed which has happened during the quarter. The ramps of this will be showing up in the forthcoming quarters. Got it. And you still stick to this guidance of occupancy trending towards 70% over, say, 2 or 3 years? Yes, yes, absolutely. Got it. Secondly, on the diagnostics business, have you considered a demerger instead of an IPO because it will continue to be a subsidiary of Fortis and will attract some kind of a wholesale discount? Amit, Amit, unfortunately, given the publicity guidelines in place, we've been, we've been advised by legal counsel managing this, not to make any comments. I apologies, we will not be able to say anything on this one. Fair enough. Thank you. Thank you. The next question comes from the line of Anish Dureja from Nomura. Please go ahead. Yeah, hi. Thanks for the opportunity. My question is related to ARPOBs. This quarter has seen actually a good increase of around, you know, 5% quarter-on-quarter in ARPOBs, and on a year-on-year basis, almost a 12% increase. I think this is supported by increasing, you know, like, a good surgical mix at 60%-61% and also improving, you know, onco contribution. Could you please confirm if the increase in ARPOBs is being explained by these reasons? How should we, like, you know, look at the ARPOBs growth number for FY 2024, if you could just guide on that? Yeah. There are, as you rightly mentioned, there are a couple of reasons. One is this improvement in the mix towards surgi- surgical treatment, I think mainly in orthopaedics and onco. Secondly, there is some price revision as well from the government channel also, and we have also taken some pricing boost that has also gone into ARPOBs. Going forward, we are expecting around a 4-5% for ARPOBs from year to year before. Okay, perfect. Thanks. Thank you. The next question comes from the line of Saurabh Kapadia from Sundaram Mutual Fund. Please go ahead. Yeah, thanks for the opportunity. If you can talk about the margin for the individual hospital, the margin that actually on your slide. If you look at some of the quarters and some of that was, you know, come in terms of lower margin. What has happened there? First of all, we just want to provide a clarification. The chart that you're seeing in quarter one, FY 2022, is after profit post allocation. You know, this is so that we can align with our reported margins also. I will say that the other chart for FY 2023 is before profit post allocation. Allow me to just run you through on a like-to-like basis, how that change has happened. When you look at the number of hospitals that are below 10 in quarter, in FY 2023, there were seven hospitals. Now, there is an addition, there is one new additional hospital there. In the margin range of between 10 to 15, in FY 2024 to FY 2023, we had two hospitals. That's actually gone up to about four hospitals now. In the range of 15%-20%, we remained static. There were seven hospitals in FY 2023. In quarter one, FY 2024, there remains seven hospitals. However, I think the gap is about between the 20% and 25% margin range, where the whole of FY 2023, we had six hospitals, and now we have about three hospitals. The hospitals that have been missing, the, the three hospitals that have actually come down the bracket, so that they go into the next category, are actually Gurugram, Mulund, and Kalyan. I think, I think the plus over here is that, you know, we are not very different in quarter one, FY 2022, as we were in FY 2023, and we hope to carry that to show to show a relatively better chart as we go forward. Okay. In the below 10% margin, loss-making units in this quarter? One of the loss-making units that is no longer there is what we are called a facility, and Dr. Raghuvanshi, in his opening comments, mentioned that that is a facility that was running at about INR 35-36 crore losses on an annualized basis. I think that benefit we will see, because we closed it in actually in July 12th, so that benefit we will see in this quarter. Other than that, yes, there are couple of more facilities, like our facility in Chennai, which is Fortis Malar, and we have a smaller facility of Sacred Heart in Bengaluru that are loss-making. Other than that, there are other facilities in that bracket, but they are not loss-making, they are less than 10%. Okay. Second question on the staff costs, if you compare and compare to Q4, that is, you know, almost 35% jump in the staff cost. Any one-off there, I think the other expenses, any one-off in this quarter? Yeah, we are just talking employee cost? Employee cost, yes. Employee cost in this quarter is slightly on higher side, if you compare with the previous quarter, because of the annual increment impact during this quarter. This is 7%-8% build in this. There is some additional clinical talent we acquired, as I mentioned in my opening remarks. That is also something which has increased. Okay. Are there any one-off in other expense as well? Yeah, that is not in the employee cost, but it is, there are a couple of one-offs in the current quarter. One is the building regularization cost, which is coming under general and administrative expenses. Ranipur, we have now got all the approvals, and we will be very soon recognizing that 80 beds which were long pending, Ranipur in Kolkata, I mean. There is slightly higher diesel cost in the current quarter as compared to, you know, previous quarter, because all the, because of all the surgical issues coming back in it. ... Can you quantify the number? Yeah. Arcot Road is, sorry, the Arcot Road one is around INR 3.5 crore, and the legal cost is incremental is around INR 3 crore. Okay, thank you. That's all. bye, thank you. All the best. Thank you. The next question comes from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Good morning, and thank you for taking my question. Just trying to deconstruct the 13%, 13, 13.5% growth in the hospitals. Looks like most of it has come from this ARPOB increase, 12%, right? The little, is there a concern on utilization, just going back to one of the earlier participant's question? 64, you said July has started better occupancy. What gives us the comfort, Dr. Ashutosh, to say, you know, can we go to 65, 66, 70 onwards, whatever, right? What are some of the things in the pipeline? I also want to know an additional question. I think your last but one slide shows 4,500 operational beds now. I thought that number was closer to 4,000, which is what you always historically say. What is the addition in terms of beds as well during the quarter? I think Vivek sir also mentioned something here. Shyam, Shyam, just to clarify that, that is including our new one, right? Yeah. We're still around the 4,000, 4,100 number. If you were to look at our own facilities, those being in ESL Asia and Watkins Mills, you know, we are about 4,500 beds. That is to give a holistic picture. That chart is just to give a holistic picture of the total number of beds, including our own. Yes. As far as occupancy is concerned, Shyam, we are seeing the trend going towards normalization. And we are pretty confident that it will remain at the levels at which we had predicted at about 30%, and then go higher on that. That is the aim. We are pretty confident that this will remain in, in the right direction. It's going in the right direction. The trend in the current month is indicating that. I, I'm not too concerned about this, but definitely this was the growth in the revenue was driven by ARPOBs. You are absolutely right on that. I think as Vivek mentioned earlier, one of the growth lines was oncology, where the contribution margins were lower. In spite of the fact that the revenue growth grew higher, the margins were not in the same proportion. These have been few factors because of which we have little suppressed. Hello, Dr. Ashutosh. Second question is on the, you know, the professional charges or the fees to the doctors, the line item there, right? You're also opening comments around the hiring new doctors. How, how is the dynamics right now around, you know, new hires? You know, when I look at that line item has grown faster than revenue growth, like 14%. How should we look at new hires? Is there some kind of inflation that you're seeing? Is there something that some of these line items had remained a little suppressed during COVID, we're now starting to see that come back. What are the kind of wage hikes that one is kind of planning? How do we kind of mitigate this, by, you know, if I were to marry the guidance of margins to be 18%, 18% plus, for the hospital business, how can we achieve, you know, higher margins, given this wage inflation? Yeah. Whatever increases had to be done in the fixed part of the remuneration of the clinicians, that has already been done. You are right, that post-COVID, in last six, seven months, we have made quite a few modifications there. However, specific to this quarter, one of the reasons why this element is higher is also because the surgical volume was high, where typically the payouts are larger. All these things have led to the current picture. The clinicians which have come on board new, they obviously will start attracting more work as, as we, we go into the next few quarters, and that will sort of even out. at, we have been mindful always that our overall ratio of the costs on the employee side sometimes have been slightly higher, and some bit of rationalization over there is required. So we will definitely be working in that direction over the next 2 or 3 quarters, and by the end of the year, we expect that to come to a better level. As far as the 18% level is concerned, I think we are well within that direction. This quarter, of course, because of the lower occupancy and the higher ratio of the surgical business, we could not achieve that number. But we are pretty confident that, going forward, we will be on this good trajectory to achieve what we had mentioned earlier. Thank you. Last question, I know you are constrained from giving, anything, but, on the, on the SRL. Is there any timelines, just from past information that we need to keep in mind? Is it the, is it the private equity exit, which is set 2024, which should be used as a, benchmark around, when timelines could materialize? Also, your thoughts on how much will the stake, that Fortis will have, eventually will it fully divest or will it still have some ownership? anything, any color here will be helpful, Professor. Thanks. I cannot give you anything specific in this, Shyam, unfortunately. However, I can tell you that one of the things which we have, as we said, that market conditions is what is going to determine. Of course, the process has its own timelines, and it will flow according to that. As we have mentioned and made it known to the public at large, is that we are initiating the process. Now there are various steps, and we would not like to declare the gifts. As soon as the steps are achieved and satisfactorily, and we get the necessary approvals, et cetera, we will keep moving on it. A reasonable time frame, I think you can deduct from what is the general rule of the industry. Okay, sir. Thank you, and all the best. Thank you. The next question comes from the line of Hansa Desai from J.P. Morgan. Please go ahead. Yeah, hi. Thank you for taking my question. Firstly, on the margin matrix, we see eight hospitals are doing less than 10% margin. Sir, if you can quantify, how many of these would be potential divestment candidates for us? Hansa, that is something that we keep on constantly evaluating. Each one hospital has to be given adequate time to have a runway to profitability. If you don't see any progress in that, then those decisions will be taken at that point in time. For example, we saw Arthur Road, for quite some time, and I think, the performance of the hospital continued to be less than our expectation, and finally we divested it. This is a case-to-case basis. It will be difficult to have a guess right now. When you had quantified in the past that, you know, you could see almost 100 to 200 basis points of improvement on account of divestment, you know, you would have assumed a certain number of hospitals, you know, to be divested, right? I was just trying to understand, you know, would you have any number in mind as to what can lead to that, you know, 100 to 200 basis points addition to our margins? Hansi, as I discussed in about 35, 44 that we have initiated. If you take on the top line of 50 or so, then you, because we get the... I think that's about an 80 basis points improvement is there. Okay, understood. Secondly, on the expansion, I know you guys have mentioned a 1,400 beds over the next 2-3 years. If you can just call out, you know, how many beds do we expect in each of these years over the next 2-3 years, and where all would these come? Yeah. Hansi, I take the question. The 1,400 beds are mainly coming in the NCR region. All of our NCR region, region we are expanding, whether it's Gurugram, Noida, Shalimar Bagh, Faridabad, all the units we are expanding. Plus, there is adjacent land parcel in Delhi that also will be expanding. Mulund, we have just completed that expansion during last quarter. BG Road, the building already we are just waiting for the occupancy certificate. These are the-- and plus, you know, the Kolkata, I have just maintained the building command. We have got all that clear, now we are recognizing that it is paid beds. With all these things, we will be com- completing this 1,400 beds. It will be because most of this is coming in the form of, you know, new building, and this will take for 2 to 3 years time to build and, you know, then operationalize the bed. I, I am expecting the, you know, 300 to 400 beds every year, from now onwards. Then, you know, in the later part of the year, say 3rd and 4th year, this number will go up to 500. Okay. Despite this addition of 300, 400 beds every year, do we still believe that we can touch an occupancy of 70%, or on a blended basis, that should be lower? No, that is our plan, to achieve, you know, the occupancy of 70% on the extended bed capacity. Most of these beds are coming, as I said, on the existing operation, where the occupancy level itself is very high and we are creating a scarcity of beds. We are not expecting much, much challenge in renting of this capacity. I will caveat myself from the Mulund in Mumbai and the BG Road, where, you know, occupancy level is slightly on the lower side. There we may take slightly longer time to rent up, but other units we are quite confident that we will be able to rent up fast. Okay, noted. Any thoughts on optimizing our payer mix further from here on? There is definitely opportunity here, and, you know, as we mentioned in the earlier part of the call, this quarter, the profitability is impacted because of the higher scheme business we have done. Definitely we are maneuvering ourselves how, you know, we can increase the payers of this payer, like TPA, Cash, and international business, and remove our dependence on the this scheme unit. There is a scope, and we are working on that. Definitely there will be some improvement with the payer. Considering all of that, we should assume an ARPB growth of, 45%, is what you're mentioning? Yes. Okay, thank you. That's it from my side. Thank you. The next question comes from the line of Neha Manpuria from Bank of America. Please go ahead. Thanks for taking my question. Dr. Raghuvanshi, for the resilience ICU, would we need any approval from the Delhi High Court or any regulatory, other than the usual regulatory approval, would there any other approval be required? Our understanding and the legal advice to us is very clear that we don't require any such approvals. Okay, there shouldn't be any delay, because of, you know, other than usual regulatory, with, you know, approvals? Yes, the usual regulatory process is what we are going to follow. Understood. On the Manesar, you know, acquisition, you know, how should we look at, you know, I think you said the transaction will close in this quarter, and when we made the acquisition, we said this would ramp up, you know, in a phased manner. So you could just give us some sense in terms of how we should look at ramp-up of this, and, you know, when can we assume normalized, you know, contribution from this, you know, project? Yeah. This hospital here is not functional at the moment, so we have to make it functional. For that, we are expecting to take about 9 months post-closure. I would say 1 year from now, the hospital would be commissioned. We would start with about 30% of the capacity. Since totally 350 beds, we'd start about 125 beds in the beginning, and then we would ramp it up a little faster. Our belief is that this being in our core market, the ramp-up should be slightly faster. Over the next 2 years following that, we should commission the entire facility, and the ramp-up should be at a good pace. When should we assume breakeven from this facility, sir? you know, given it is in our core market, we're indicating a much faster ramp-up. Yeah, Neha, as you know, this, as Dr. Raghuvanshi mentioned, this is actually a new facility. The hospitals are not complete. We, it will take slightly more longer time than value, at least 18 months, we are looking for, you know, breakeven. This is part of the 1,400 bed addition, or this is over and above that? No, this is not part of the 1,400. This is over. Over and above that, right? Okay, yeah. Thank you so much. Thank you. The next question comes from the line of Sumangal Pugalia from Rare Enterprises. Please go ahead. Hi, thanks for the opportunity. I have couple of questions. First is on the hospital margin matrix that you shared. In financial year, FY23, we had two hospitals that were above the 25% threshold, and the first quarter, we've gone below 25 for all. Is there a classification change in, specifically when we talk about what happened in these two facilities? Yeah, as I mentioned earlier, in the current quarter, we have slightly changed the way we were reporting, you know, the unit growth data. Earlier, we were not deducting the corporate expenses from the data, and that's why the data margin was showing at higher side. This quarter onwards, we will be saying after deducting the allocated corporate expenses to the units, and that's why this difference is there. Okay. The operational performance in these two facilities are, we would say strong or should be addressed still? Yeah, there is some impact on the operational performance also. I will not say that it is apple to apple, like last quarter. This quarter is, we have discussed it's slightly softer on, and it is reflecting on all the units because of seasonal impact among the sector. But I think major reason for margin drop is the allocation of class expenses. Okay. Specifically the Sehi, the Sehi, Sehi facility, sequentially, also there's a drop from 110 to 106. Is that just seasonal or there is... How is the performance there been? Sehi, on the revenue side, they are doing quite okay. This quarter is profitability side, they are slightly low because of, you know, the inflationary impact is there in terms of employees increment and all that stuff. That has hit this quarter from day one. We are taking various measures, as Dr. Raghuvanshi mentioned, on the manpower optimization, things like that, which should frankly improve the profitability in the Sehi facility. Sure. Thank you. Thank you. The next question comes from the line of Abhay Marda from Yashwi Securities. Please go ahead. Hello, am I audible? Yes, yes. Hello. Yeah. Good morning, and thank you for the opportunity. I just wanted to ask about the current operational bed situation. Like, what is the number of beds that you are utilizing right now, according to which you are calculating the average rates or operational beds? Current operational beds from a P&L perspective are, about 4,100 beds. Okay, if you need to count on it, like, as per the annual reports, like, which are showing as the number of beds are more than 4,700, so I'm not able to get the exact figures. Like I explained also, from a PNL perspective, or from a margin perspective, you guys should purely take the PNL beds. When we add O&M, O&M doesn't contribute significantly. From a network perspective, you would have more than 5, 4,000 beds, right? From a PNL perspective, it's about 2,100. Okay, ARPU would be approximately 4,100 beds, right? Yes, yes. Absolutely right. Thank you. Thank you, sir. Thank you. The next question comes from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead. Yes, sir, thank you for the follow-up. I'm not sure if, if, if this has been discussed, but the international group seems pretty strong in this particular quarter. If I am calculating the numbers right, it's up 30% in this quarter. Any thoughts you can share on the outlook for the international business, what has happened in this quarter? Was, was there some base effect at play here or, or new countries are opening up? Yeah. International business is going up, and this is the trend we are seeing, and we expect it to, it should further grow up. It is contributing around 9% of the total revenue. We expect it should reach double-digit very soon on the enhanced base. That is what we are expecting. As the, you know, the borders are opening up, so we are seeing more and more international business. Sir, was this always anticipated by the leadership that the international will grow at such a, such a pace or, something post-COVID is emerging as new, and that's why, a better traction is being seen on the international side? Not really. We always, we were always expecting pre-COVID at around 10%, 10%-11% on the international business. We were confident during COVID period also, that post-COVID restriction go away, it would go back to the 10%, 11%. That is what I'm saying, that, you know, we should very soon, should be seeing that 10%, 11% of the enhanced base. In fact, we have already surpassed that number. Absolutely, international, we have surpassed that number. Sir, I'm, I'm not trying to look at on a percentage sales basis because the domestic has also gone up, so there might be some variation in, in, in the percentage contribution. If I purely look at the absolute numbers of international business, they are growing pretty heftily, right? I mean, at more than 20% for the last 2 years or so. I mean, pre-COVID also, was there an anticipation that in the coming four, five years, India will emerge as a big medical tourism hub, and hence the growth will be super normally high? Was that also an expectation pre-COVID as well? Yes, I think, there has been a lot of, sort of, systemic effort from the government side also to project India as a destination for COVID. They have come up with a medical tourism portal, and there are many other areas of Medical Value Travel on which the government is facilitating now. The, it was anticipated that this will happen, but I think some of these efforts are also leading to increase in the number of, patients, coming to India for seeking treatment. Right. Sir, one more question. There, there was an article in the media recently that the top hospitals in the country are facing challenges on retaining the nursing staff. Many nursing staff, they get trained for two, three years, and many of them make their way to the Gulf, where the salaries and payments are much higher. Any challenges are you seeing on this front? Or do you think that there are enough initiatives being done to have a good pool of nursing staff? Well, nursing is a challenge for the entire industry, and this challenge remains. Initially, the challenge was on the clinicians as well, but that part is being addressed quite a bit by the number of seats which has been increased in last 10 years. On the nursing side, a lot of effort is still required. I think we will see this kind of stress for next 3 to 4 years going forward as well. We also face the same challenge as other hospitals because nurses who intend to go abroad, they tend to come to the branded hospitals such as ours and others in order to seek experience, because on basis of this experience, they can get positions which are very remunerative for them. This is a challenge of the industry. Together, the industry bodies are taking a lot of actions in this direction and trying to see how we can bridge the gap, but it is definitely a challenge, Nikhil. Could it have a, I mean, things might get sorted out from a 3-5 year horizon, but in the next 12, 15, 18 months, could it have an inflationary impact on the margins? I mean, is that budgeted in when you are giving some guidance on the hospital margins? Yes, yes, it is well factored. Okay, great. Thank you so much. Thank you. The next question comes from the line of Harsh Bhatia from Bandhan AMC. Please go ahead. Yeah, thank you. Good morning. Hope I'm audible. Yes. Yeah. Just two, three quick clarifications. One, in terms of the price hike, if you would be able to quantify the price hike for the first quarter, because I think for the full year, the guidance was 4%-5%, if I'm not wrong. The first quarter price hike, including the CGHS, as I could be, to what extent? ... It would be approximately on an amended, level, about just 2% or 3%, you know, less than, less than 3%, I think. Okay. Very quickly, in terms of the ARPOB growth trajectory, I think so March quarter, we had guided for the ARPOB to grow at around 6%-7%. The first quarter is somewhere around 12%. Going forward, just from an FY 2024 perspective, one should assume a moderation to grow single digit growth rate for the ARPOBs. That would be the right way to think about it? Yeah. Because the base has become now high, this quarter, this quarter we have seen a significant increase in the ARPOB. That's why I'm giving you guidance that 4%-5% is the growth we are expecting for the full year. Right. Just in terms of the broader thought process for this, 1,400 bed addition, I think from the previous comments, I could make out that a large part of this has to be in the NCR region. In case if you're thinking about these brownfield lines, how is the bandwidth availability across the spectrum in terms of nursing, surgical staff and the doctors? What are the broader thought processes in terms of the bandwidth availability, purely from the NCR perspective? Yeah. NCR is a region where the availability of human resources is not a challenge in general, and specifically for us, being a brand, we are an attractive place for clinicians as well as other staff to come. That definitely is not too much of a challenge in NCR. Just to clarify, there has to be a certain level of addition that has to be in sync with the brownfield additions as well, in the existing assets. That's the right way to think about it? Yes, certainly. It would not be in the same ratios as it would be for a greenfield hospital. Suppose there is a maybe a running hospital where we are increasing the capacity by 100%, the number of staff additions will not be 100%, it will be only up to the tune of about 60%-70% or even less. The reason for that is because the scale starts giving the advantage, and you won't have two people doing the same function. Because of that, the cost gets rationalized. That was the point which we were making earlier, that post this expansion, most many of the hospitals in NCR area and outside as well, would be to the tune of about 450-500 beds each. That would give advantage on the scale, which would definitely get translated into a better utilization and better resources and better margins as well. All right, sir. Thank you. Thank you. The next question comes from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thank you. Thank you for taking my question, sir. On, on the Gurugram, you know, the NCR assets, given all the unrest which has been happening in the state, in recent times, does it have any implications for our business for, for the quarter? No, no, Nitin, not at all. I think, you know, this is an unfortunate event, but it did not really have too much impact on the normal life, day-to-day life. I don't think this, this has any direct implication for healthcare per se. I think healthcare is agnostic to the politics of religion. Just, I think earlier in the call, there was a comment made around the fact that, you know, our staff costs are now little on the higher side, and that's an opportunity for us to to work on. If you can, maybe just spend some time on where do we see opportunities for cost reduction? What could be the extent of cost optimization, rationalization that we can probably see, you know, over a period, over the next maybe 2 years? This is, this is an ongoing exercise, and we do this exercise every two, three years to understand which unit is, you know, operating over and above the standard operating method. Based on that, we take some corrective decisions. We will not be able to quantify as, as per them, sir, which unit, how much amount and things like that, but definitely we see there is opportunity to reduce the or optimize the factors. I mean, not going, in a, in a sort of unit-wise, in detailing of, of the possible opportunities, but on an overall sense, I mean, just to get a broad sense, how. From whatever that you see, is there a possibility on some of these cost rationalization measures to take out 1%, 2%? What kind of savings and whether this network can accrue over the next year or so? Yeah, we can easily target 1% at least on the staff cost over a period of 2 years. Okay. Okay. Okay. Thank you, sir. Thank you. The next question comes from the line of Kunal Randeria from Nuvama. Please go ahead. Just one question on pathology, which has been discussed. You, your 4%-5% growth implies somewhere in 57,000-58,000 for the full year. Since it's already done 60,000, shows that next 3 quarters you will see a very sharp reduction. Could you share some reasons, is there a change in case mix that you expect or some new beds have been commissioned that could come at lower ARPOBs? Any more color would be helpful. I could not really get your volume very well. Don't understand the question. Sure. You have said that ARPOB growth could be around 4%-5%, which implies that it should be around INR 57,000-58,000 for the full year. Since it's already done INR 60,000 in Q1, it implies that, you know, the next three quarters could see a sharp reduction. Any color, why that would happen? Yeah. So we have to see, you know, the ARPOB growth in all aspects. As we mentioned, the current quarter, there was a high increase of the surgical volume. We cannot expect, you know, the surgical volume to grow at the same pace, and there is some seasonality, seasonal impact was also there. Looking at all those things, we are maintaining our ARPOB increase guidance. You know, as we have given at the beginning of the year, 4%-5% annual. It is to take into consideration, you know, the surgical volume will not be growing at the same pace as it is growing in the current quarter. Okay. Okay, fair enough. Just, just one more, you know, slightly high-level question. While you have done very well in oncology in the last 4 years, I believe the contribution would have gone up from 7% to 14% now. It has come at the cost of, let's say, you know, a cardiac therapy, which has gone down from 22% to 18% or something like that. Just, just trying to understand how the change in your therapy mix has impacted your margins, either positively, I'm assuming it's positively, in the last 3 to 4 years. Yeah. Why is that I could not get the complete... Sure. In the last four years, your oncology has done very well, but it has come at the cost of cardiac therapies. I'm just trying to understand the change in the therapy mix, to your overall revenue. How would that have impacted the margins, purely from a therapy perspective? Yeah. Oncology definitely has a lower margin, and we have to share a substantial portion of the revenue with the partner many times. That has impacted overall margin, we see after removing the doctor fees. Oncology business is growing in line with the market. We expect that trend will continue. What we are also targeting, the other high margin specialty should also contribute more. That is, that is the reason we don't want to reduce the oncology business. We want to grow oncology business to the extent possible, but at the same time, the high margin business should also grow. That will keep a good balance within the margin perspective. Could you sort of just give a bit more color on the kind of therapies that you classify as higher margin? Yeah. So example, you know, kidney business, the contribution in this quarter has come down to some extent, which is a high margin business. Usually, the renal and the thermal range, the, you know, where, you know, the contribution has to come down slightly. So all these facilities, we are having some plans how to improve the facility, facility mix and so. Okay. Okay. I have a few more actually, maybe I'll take it up now. Thank you. Thank you. As there are no further questions, I now hand the conference over to the Fortis management for closing comments. Thank you, Sachin. Ladies and gentlemen, thank you for taking the time to be with us on the call today. If there are further questions, me and my colleague, Joel, are available to address those, either over phone or email, whatever you like to talk. Thank you very much again for your time today, and have a good day. Thank you. On behalf of Fortis Healthcare, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.