Earnings Call Transcript - XNSE:KIMS 2026-11-05

Operator

Ladies and gentlemen, today, and welcome to Kim's Hospital Q2 FY27 Earning Conference Call hosted by IFL Capital. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jeevani from IISL Capital. Thank you, and over to you, Mr. Jeevani.

Rahul Jeevani, Analyst — IIFL Capital

Yeah. Hi. Good morning, everyone. This is Rahul from IFL Capital. I welcome you all to the second quarter earnings conference call of Kim's Hospitals being hosted by IFL. From Kim's, we have with us today Dr. Bhaskar Rao Balineni, Founder and Managing Director, Dr. Abhinay Balineni, Executive Director and CEO, and Mr. Sachin Salvi, CFO, Dr. Nitesh Kumar, the CEO for the Bangalore Cluster and Srinath Reddy, Head of Business Development. Over to you, sir, for your opening comments.

Dr. Bhaskar Rao Bolineni, Other

Good morning, everyone. We are amidst a hectic festive season that commenced with Patriotic Independence Day, followed by devotional Ganesh Chaturthi and recently concluded spiritual Navaratri. We are now on the threshold of Joyful Diwali. Let me start the meet by conveying our festive greetings to you. Now, I am going to unfold the financial picture of Q2. I am sure the results I am going to announce now will wonderfully blend with the festive fervour. We have recorded growth under all key parameters both in quarter-on-quarter and year-on-year basis with significant rise in revenue. A snapshot of consolidated financial operational highlights are as follows. Q2 FI 27 updates. Total revenue of INR 1363 crore, a growth of 41.3% on year-on-year and 14% on quarter-on-quarter basis. EBITDA of INR 279 crore, a growth of 34% on year-on-year and 16.3% on quarter-on-quarter basis. EBITDA margin stood at 20.5% versus 20.1% in quarter-on-quarter FI 27. and 21.7% in quarter 2 FY26. Act at INR 76 crores in quarter 2 financial year 27 against INR 37 crores and INR 72 crores in quarter 1 FY27 and quarter 2 FY26 respectively. Consolidated EPS for a period ended with 30th September 2026 of IRNR. 1.8, a growth of 8.5% on a year-on-year basis. Cash and cash equivalents, including cash, bank balance, deposits with a maturity of less than 12 months, and investment in mutual funds of INR 420 crores, as on 30th September 2026. What are two financial year 27 financial highlights consolidated? A consolidated revenue from operations of INR 1,344 crore. A growth of 39.9% on year-on-year and 14% on quarter-on-quarter basis. Consolidated EBITDA pre-India is of INR 250 crore. There is a growth of 24.7% on year-on-year and a 12.7% on quarter-on-quarter basis. Consolidated EBITDA Pre-India has been excluding other income of IRR 232.00, a growth of 17.9% on year-on-year, and a growth of 12.6% on quarter-on-quarter basis. Operational highlights consolidated. Quarter 2, financial year 27 updates. Average revenue per operating bet grew by 14.9% and 2.3% on year-on-year and quarter-on-quarter basis, respectively. Average revenue per patient grew by 9.9% and 1.2% on year-on-year and a quarter-on-quarter basis. The IP volume 81,668 grew 27% year-on-year and 12.7% on quarter-on-year. The OP volume 7,31,010 grew 23.3% year-on-year and 11% on quarter-on-quarter basis. I would like to appraise you about the acquisitions we have made recently to strengthen our network and growth path. Kim's Trust Hospital, Karkinada, 183 bed, we have acquired 51% of equity stake in Saruwatham Healthcare Private Limited. That is Trust Hospital by investing 80 crores. Now it will be known as a Kim's Trust Hospital. The acquisition holds high potential and prospectus. Ushakala Vinayas Specialty Hospital, Songly, Maharashtra. The 316 Beds, we have acquired 6% stake by investing in 15 crores. Kim's Kompali, Sikandrabath, 225 Beds. Kim's Sikra, Guntur, Andhra Pradesh, 150 Beds will be made over a period of time, whenever our internal resources are comfortable. We have entered into an O&M agreement with the ARIT hospitals in Gatchabhavali, Hyderabad, which has a bed capacity of 300 beds. We have also entered into an O&M agreement with the West Court Hospital in Shishore, Kerala. It is an established and reputed hospital with a 300 bed capacity. These initiatives will result in increased financial and operational leverages as all these units hold good potential and prospects. Our avowed aim and objective have always been to create and multiply the wealth for our investors. The latest acquisitions along with the recent expansions will ensure stable and sustainable growth of high range. Other highlights, making health care available and accessible has been our prime motto. In this connection, we are pleased to state that organ transplantations are performed across even type 2, type 3 cities in entire Andhra Pradesh. All these years, transplantations involved long distances as they were performed only at a very few centers. It is no longer so, with all our units spread across the state handling such cases. We have doubled the capacity of our Kim Savera Hospital Anantapur from 250 to 500 beds. The upgraded hospitals includes a new comprehensive oncology block and a dedicated mother and child block that includes neonatal care facilities, support maternal, newborn, and pediatric services in the hospital. The new buildings and facilities were inaugurated on 1st November 2026. by the Honourable Minister of Health and Honourable Minister of Finance, Government of Honourable Today. Royal Sima is considered a backward region in the state, and the latest facilities will greatly benefit the people of this region, who otherwise were required to travel long distances. Our international collaboration, at the invitation of Honourable Chief Minister of Telangana, recently a high-level delegation from Liverpool, UK visited Hyderabad to advance cooperation across healthcare. Life sciences research, innovation, trade investment, skill development, and sports. In this connection, I am happy to share that KIMS and NHS University Hospitals of Liverpool have advanced an agreement for cooperation in research, clinical collaboration, education, and training. We feel honored that the appointment of our independent director, Sri Suresh and Patel, As a chairman of high-level committee, Constituted by Government of India to undertake a review of India's banking sector and recommend structural, institutional, regulatory, and legislative reforms. We are being greatly benefited by his valuable contribution to the company as our distinguished board member. I would conclude now, once again, offering my multiple festive greetings to you and your families. I wish you all prospects and happy Diwali. We have done well, and we hope to do even better in the coming year with our continued support.

Operator

O2 Divine. Operator, make a guess. Okay. I was waiting for the opening round, but okay, thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shubh Kadlra from Asset Team at the Investments Intermediates Limited. Please go ahead.

Speaker 9

Hi. Thanks for the opportunity. So, first of all, congratulations on a good set of revenue numbers. So, I wanted to ask you the implementation of the trade margin rationalization on the anti-cancer drugs for the government. Could you help us understand the potential impact on the claims revenue and EBITDA margins? And, if possible, could you quantify the expected impact, particularly in terms of the revenue and profitability?

Dr. Abhinay Balineni, CEO

No, so the final details are yet to be disclosed. So, November 9th is when we are going to get all that information. Once we do get the information, we can quantify it. Right now, because oncology is not a big part of our revenue stream, the impact may not be significant.

Rahul Jeevani, Analyst — IIFL Capital

Okay, sure.

Speaker 9

So, let's say for the potential margin impact, is there any measures that the management is evaluating to, you know, mitigate the same, like is considering revisions to the package rates or other treatment-related tariffs to offset the impact, the potential impact, or should we expect some degree of harm compensation as a result of this regulation?

Dr. Abhinay Balineni, CEO

Once we get clarity on the pricing on November 9th, that's when we'll be able to decide what the impact is and how to be mitigated.

Shubh Kadlra, Analyst — Investments Intermediates Limited

Fair enough. Thank you. That was my question.

Operator

Thank you. A reminder to all the participants that you may press stop and want to ask a question. The next question comes from the line of Karan Vora from Goldman Sachs. Please go ahead.

Karan Vora, Analyst — Goldman Sachs

Thank you for taking my question. My first question is with respect to the Telangana cluster.

Dr. Abhinay Balineni, CEO

So, can you help us understand what was the

Karan Vora, Analyst — Goldman Sachs

growth and margin X, the new Kondapur expansion, or alternatively, you can just highlight what's the numbers we are doing at the new Kondapur unit?

Dr. Abhinay Balineni, CEO

So, Kunal, I think with the quarter-and-quarter growth from 625, 623 crore, we've moved to 700 crore. A large chunk of that revenue growth has come from Kondakur and Shikinabad unit. Even Shikinabad unit has ramped up quite well with the recent new clinical programs that we started. Okay. Though the revenue grew, the percentage, there's a dip in the EBITDA percentage. The absolute number has actually increased in Q1 to Q2, and this is only one quarter of Kondapur being commissioned. So, over the next three, four quarters, we should see the margins come back to how it was before the new hospital. That is an extremely fast ramp-up. We also did not expect this kind of growth. From what we moved to the old facility to the new facility, the revenue has grown by at least 70%. In just three months.

Karan Vora, Analyst — Goldman Sachs

Okay, got it. And second, so just trying to understand, so you mentioned last quarter that in the first month you were breaking even. So is that break even sustained or we are seeing minor losses at the new unit?

Dr. Abhinay Balineni, CEO

No, so there is a higher fixed cost. There is no losses, fortunately, but the fixed cost has gone up, and as the revenue ramps up further, it will go back to the stable market beta margins. Because this period, there would be a period of losses this financial year, and then stability would come in the next financial year. But because of the ramp-up, we don't see any losses. In fact, the margins also have not compressed. The absolute number has further expanded. Over the next 3-4 quarters, it should come back to a 30% kind of a margin.

Karan Vora, Analyst — Goldman Sachs

Got it. And secondly, on the Andhra Pradesh cluster, also, can you highlight with respect to what's happening there with respect to margins? Because top-line growth continues to remain strong, but we've seen some deceleration in margins versus what we had last year. So, any color and what's the outlook there?

Dr. Abhinay Balineni, CEO

Again, overall growth perspective, everything looks positive. It's just that in Q2, the end of Q1, we have launched two large Onco programs in two of our hospitals, one in Vizac and one in Anantapur, and because of which there is some drag on margin, that is one part. Though the revenue came in, the fixed costs and all are a little higher currently. Over the next two, three quarters, even that should normalize. And also there's a one-time cost towards EBDD, which is to the tune of 8 crores, which got impacted in Q2, which will potentially get reversed once the money comes in Q3.

Karan Vora, Analyst — Goldman Sachs

Sorry, what's PBDT?

Speaker 9

Provision for doubtful tax.

Karan Vora, Analyst — Goldman Sachs

Okay, okay, got it. Is this related to the government business by any chance as in scheme? Yes, yes.

Dr. Abhinay Balineni, CEO

Only the government business because sometimes there's a delay, they have to take provisions for it.

Karan Vora, Analyst — Goldman Sachs

Okay, got it. And just one last one, if I can quickly just squeeze in. So, in Maharashtra cluster, I see that, you know, your occupancy has already crossed 60% and the operating beds are just under 700 while our capacity beds are more than 950. So, like, do we see us just operationalizing more beds, which is the region where we've not operationalized? Is it Thane? Is it Nashik? Any color there will be helpful.

Dr. Abhinay Balineni, CEO

So, Tani also, we have around 75 beds that are not operational, and Nasik, we have close to 150 odd beds that are not operational.

Karan Vora, Analyst — Goldman Sachs

So, any plans to operationalize those in the immediate classroom?

Dr. Abhinay Balineni, CEO

As in when the ramp-up is happening, we will operationalize.

Guna Randeria, Analyst — Access Capital Limited

Okay, thank you.

Operator

Thank you. A reminder to all the participants that you may press star and want to ask a question. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Rahul Jeevani from IFL Capital. Please go ahead.

Rahul Jeevani, Analyst — IIFL Capital

Yeah, Dr. Ebene, I missed your comment in terms of the ramp-up which you have seen at Kondapur in terms of occupancy. Can you please repeat that?

Dr. Abhinay Balineni, CEO

I'm saying the revenue ramp up in from before the opening the new hospital to the last month, the revenue has grown by 70%.

Rahul Jeevani, Analyst — IIFL Capital

Okay, and would you want to call out occupancies as well at the Kondapur unit now, as in with respect to this new 500 hospital?

Dr. Abhinay Balineni, CEO

Yeah, we have not commissioned the full hospital. We have only commissioned 500 beds, 500 odd beds of the total capacity, of which we are already at a 70-75% kind of an occupancy. So, in the next quarter, we actually thought of commissioning the remaining beds next year, but we are going to commission the beds in the next quarter, next two quarters.

Rahul Jeevani, Analyst — IIFL Capital

Okay, so on 500 beds, you are at ballpark around 70 to 75%.

Dr. Abhinay Balineni, CEO

70% on 500-odd bits.

Rahul Jeevani, Analyst — IIFL Capital

And in terms of the AP margins, impact which you called out, which is 8 crore of doubtful death, if we adjust that, then let's say AP margins right now are trending at around 22%. And in the past, we were at around 24-25%. So obviously, this Onco launch across some of these hospitals is hurting AP. So when do you expect, let's say, the operating leverage from this Onco business to start playing out and AP margins getting back to the earlier trajectory of 24-25%?

Dr. Abhinay Balineni, CEO

Actually, one of the hospitals where we launched Onko, which is Vizag, actually towards the end of October, we have seen it come back to 28-29% at our margin. There has been a very impressive ramp up there. Anandpur just got commissioned, though we had incurred the cost in advance, it just got commissioned a month ago and officially inaugurated on November 1st. So that will take at least a year before it comes back to healthy margins.

Rahul Jeevani, Analyst — IIFL Capital

Oh, sure, sir. And this 8 crore doubtful debt, in the past as well, we have seen you booking these doubtful debts within the AP cluster. So what's the thought process in terms of some of these doubtful debts? Because they are from the government channel, do they ultimately receive that money or how does it work?

Speaker 9

We received that money, Rahul. In fact, in the last quarter, if you recollect, already we have received some 70 plus crore from the AP government. It's just that in this quarter, we haven't received that much money. And because we are following the metrics for providing for these doubtful debts, we are, as per the Indian standard, we are supposed to provide. For the current quarter, we have provided 7.5 crore, 7.8 crore to be exact, towards provision for doubtful debts. I think in the next quarter or the next to next quarter, because the money receives the same provision which we have done, we'll get reversed.

Rahul Jeevani, Analyst — IIFL Capital

Okay, sure. And the last question from my side before I join back the queue is with respect to your newer hospitals, so Thane and the two Bangalore. So if you can talk about, let's say, whether we are done with the insurance empanelments across all these three hospitals, obviously Thane and Mahadevapura have achieved EBITDA break-even. So how do you see the trajectory on those two hospitals? And let's say, when do we see the break-even for the Electronic City Hospital in Bangalore?

Dr. Abhinay Balineni, CEO

Yes, as far as insurance is concerned, that struggle is still on, Rahul. Even today, Taney does not have empowerment with three, four or two, three major companies. Otherwise, the rest of it is all done. Same as the case in Mahadayapura, we have yet to get Jipsa, Star and some other insurance companies, in spite of which both these hospitals have ramped up in Brooklyn. As far as electronic city is concerned, the month of September, we have broken even. But yeah, I think by Q3, end of Q3, we should, that also should become a bit positive. And the fight for insurance empowerment will still continue for some more time, maybe towards the end of the year, all the other smaller companies and some major companies and some of the hospitals should be.

Rahul Jeevani, Analyst — IIFL Capital

So, Electronic City, do you expect quarterly break-even in third quarter or the quarterly break-even would slip into 4Q? And just on these insurance impanels, what's the key challenge or issue in terms of getting these impanelments done?

Dr. Abhinay Balineni, CEO

I think from the beginning of the year to today, we've made significant progress, but there is some companies left for each hospital, and because we want a good rate, and we also want a good rate from their perspective, that negotiation is still going on.

Rahul Jeevani, Analyst — IIFL Capital

Sure, and on the electronic city, do you expect quarterly break-even in third quarter or fourth quarter?

Dr. Abhinay Balineni, CEO

Yeah, I think it's safe to assume Q4 rather than Q3, though we've seen the month of September break-even. The trajectory for October also has been good. But just leave some buffer in case of any unforeseen. Srinath, do you want to add anything, please?

Rahul Jeevani, Analyst — IIFL Capital

Srinath? Yeah, no, you are right, Dr. Rabinai. So, quarter four is where we are looking at the quarter break-even. Okay, sure, sir. I will join back. Thank you.

Operator

The next question comes from the line of Damayanthi Kerai from HSBC. Please go ahead.

Namayanthi Kerai, Analyst — HSBC

Yeah, hi. Good morning, and thank you for the opportunity. My first question is on your margin trajectory. So, as you mentioned, Kondapur is off to a very good start, and it's a high six-cost setup, where better scale will result in operating like the restrictor, and in AP also, you have it listed in the oncology infrastructure. And how should we look at the margin trajectory moving from here? Should we assume like 2Q was the bottom, bottom quarter in terms of? Uh, the losses from new units, et cetera, and, uh, from, say, next quarter onwards or so, we should be back to, uh, 20% plus, uh, margin. Like, what will be the exit, uh, rendered for, say, FY27 for margins?

Dr. Abhinay Balineni, CEO

Yeah, I think among all the hospitals that are now commissioned, except for electronic city, all of them are EBITDA positive. It's among the 28 hospitals that are getting operational, only one hospital is still in the track, which over the next, because it's less than one year old. But I think, yeah, this is the bottom Q2 number. I think from here, the trajectory should be upward, unless we don't see any new hospitals that we're commissioning over the next few months. The surgery should be continuing to grow.

Namayanthi Kerai, Analyst — HSBC

Sure. Then my second question is on the insurance in Thane and Men's part, where you mentioned Thane is still not done, and you are also pursuing for other new hospitals. So I just want to understand what's taking a sizable amount of time to really get into the contact with big insurance in units like Thane.

Dr. Abhinay Balineni, CEO

Some of the insurance companies we have been able to negotiate, we have to be able to close. Some of them we are still negotiating with them to get the right pricing that we believe is the right pricing for the hospital. So that negotiation is what is taking time. But now Zitanev and Mahadevpura we are just left with two or three insurance companies, not more. Majority of them are done.

Namayanthi Kerai, Analyst — HSBC

Sure. So, if I recall correctly, I think it took us a significant amount of time to get all the insurance in Parliament done for Nasik. Compared to that, Thane, Mahadev, Sura were progressing much faster, right? That's a logical way to assume.

Dr. Abhinay Balineni, CEO

Yeah, Nasik, we had challenges in getting the pricing because there were different challenges in that micro market from an insurance company. But the last implement was Jipsna, which we got that also officially we'll be able to take patients from tomorrow and in Nasik on Jipsna. So that's a big chunk. That's usually 40-50% of the overall insurance volume, which we got confirmation letter just last week. There have been some inherent challenges, some learnings from the empowerment process in the last 12 months. Hopefully we'll rectify those and let's do when we commission the next few hospitals.

Namayanthi Kerai, Analyst — HSBC

Sure. And my last question is on your transplant offerings. So, first of all, which all units are offering transplant at this point of time? And please help us understand if this segment is a high realization, high cost segment from operation perspective.

Dr. Abhinay Balineni, CEO

The kidney transplant we offer in almost all the units except for one or two. Liver transplant, we do them in five of our, five of the hospitals. Lung, we do only in three or four, three of our hospitals currently, heart and lung. Bone marrow transplant also we do in eight of our hospitals.

Namayanthi Kerai, Analyst — HSBC

Okay, so mostly it's widespread. And just in terms of the economy, is it like high realization, high cost segment? So the EBITDA margin, etc. will be like, how does it look versus a corporate advantage on a steady state basis?

Dr. Abhinay Balineni, CEO

We don't track EBITDA by therapy. Definitely the cost of treatment for a liver and heartland transplant, it is a very expensive procedure. And also because of prolonged stay before and after surgery, the realization is definitely higher than the rest of the therapy. But we don't look at it from a lens of profitability or an EBITDA margin at their therapy level.

Namayanthi Kerai, Analyst — HSBC

Sure. Thank you. Thank you for your response. All the rest.

Operator

Thank you. The next question comes from the line of Karan Vora from Goldman Snacks. Please go ahead.

Karan Vora, Analyst — Goldman Sachs

Thank you for taking my question again. Just one clarification. So, Sikandrabad, you mentioned there are some new programs which we've started, right? So, what are those? Can you throw some light on that? And also, secondly, in the Telangana cluster, if our Kondapur unit is doing such high occupancy and our overall occupancy is 50%, then which is the hospital which is kind of dragging the occupancy down or any color there will be helpful?

Dr. Abhinay Balineni, CEO

So, actually, we rectified that in the presentation this time. So, in second bed, the capacity is 1000, but what we have operational is only 700 beds. And in that 700 beds, we have a lot of nonsensis beds because in a very large facility, we have almost 80 dialysis machines. All of those are nonsensis beds. Hence the occupancy, it's bringing down the occupancy. Also in Sunshine, both the hospitals, we're still at around 60% kind of an occupancy. We have not reached that 70-75% kind of an occupancy.

Karan Vora, Analyst — Goldman Sachs

Got it. And what are the new programs you've started in Sikandrabad?

Dr. Abhinay Balineni, CEO

So, we further strengthened our onco- and orthopedic practice. We launched a very large sports medicine program in the Sikandrabad unit. And we also acquired a lot of clinical talent for our oncology hospital, which we are going to commission the end of next year, which is the new hospital that we're building.

Karan Vora, Analyst — Goldman Sachs

Oh, okay. Sorry. So this, sorry, how many beds are we adding in Sikandrabad next year? 200?

Dr. Abhinay Balineni, CEO

First phase, we will only get the 250 beds that are not operational today, operational, because they are under renovation. And once those ramp up, then we'll add another, we have a potential to add another 250 beds and take it to a full capacity of 1250 beds.

Karan Vora, Analyst — Goldman Sachs

Okay. And the land is already there in place. We just have to add a building or floors.

Dr. Abhinay Balineni, CEO

Our building is also getting constructed. In the next two months, the building, the structure will be ready, and then we'll keep doing the interiors as and when are required.

Karan Vora, Analyst — Goldman Sachs

Okay, got it, got it. Helpful. Second, just one clarification again here. So, just to get a sense on the overall Sikandrabad unit. So, you are saying today we only have 800 beds operationalized, 200 are working on operationalizing again, and that's now removed from the numbers, right?

Dr. Abhinay Balineni, CEO

It's reflecting as the bed capacity, but they are non-operational beds. So, the difference between capacity and operational beds is at 250 beds.

Karan Vora, Analyst — Goldman Sachs

Okay, got it, got it. And given that we have so many non-census beds in Sekundarabad, any plans to like revamp the structure or anything so that our occupancy kind of improves? Because Telangana occupancy for us seems to be stuck in that low 50s kind of a number. So how do we get there to at least 60? That's what I'm trying to understand.

Dr. Abhinay Balineni, CEO

60 will come. See, in the 250 beds in Sikhanabad are non-operational currently. Also, 250 beds of the old Kondapur hospital, which we are yet to decide what we want to do, are also included in the beds here. So, if you remove that 500 beds and look at it, the occupancy will further wilt in towards the 55-60% of the operational beds.

Karan Vora, Analyst — Goldman Sachs

Okay, Gaurayan, those 250 old beds in Kondapur are empty right now?

Dr. Abhinay Balineni, CEO

Yeah, they're empty. We're yet to decide what we want to do with those bags. We want to observe the ramp-up of the current hospital and then decide what we want to do with them.

Karan Vora, Analyst — Goldman Sachs

Okay, got it. Really helpful. Thank you.

Operator

Thank you. A reminder to all the participants that you may press stop and want to ask a question. The next question comes from the line of Guna Randeria from Access Capital. Please go ahead.

Guna Randeria, Analyst — Access Capital Limited

Hi, good morning, and thanks for the opportunity. The first question is on Mahadev, Pura, and Thani. Sir, are all the investments behind you, I mean, in terms of doctor hiring or whatever specialties you wanted to commission, has everything been done?

Rahul Jeevani, Analyst — IIFL Capital

So, Srijal, you have to take that? Yeah, so in Bangor, yes, we have done. At Mahathapura, we have done. All the specialties have been added. And the investments also have been added.

Dr. Abhinay Balineni, CEO

Okay, sir. As a process, you know, investments for both these hospitals are done. But doctors is a continuous process. We keep adding these doctors as we find the right clinical time to use our new clinical therapies. So, that cost will keep coming and it will take time for it to achieve stability. So, that's true for any hospital.

Guna Randeria, Analyst — Access Capital Limited

Right, right, right. Okay. So, which basically means investments will continue, and maybe then, you know, the margin ramp up, you know, might be a bit slower than what we are kind of, you know, thinking of?

Dr. Abhinay Balineni, CEO

Yeah, I think what we've seen in Nagpur is a good trajectory, or sunshine is a good trajectory to assume. First, we become a bit operative, and then we get to a high single digit. Then get to a mid-teens, and then the 20% less percent kind of margins start coming.

Guna Randeria, Analyst — Access Capital Limited

Okay, got it. So second on the Andhra cluster, I'm not sure I completely understood, but sir, you know, when we look at all the operating metrics and improvement in RPA, you know, volumes, you know, total revenue, but I can understand why your absolute EBITDA is down, even if I consider that, you know, the bad debts kind of provisioning also. So, is the case mix, which has changed drastically, that has kind of led to a margin compression, if you can kind of, you know, just give a few more details.

Dr. Abhinay Balineni, CEO

No, so, 55 crores, if you add back 8 crores to it, 55 crores is a declared EBITDA. If you add 8 crores back to it, we are talking about a 63 crore kind of a number, which puts the EBITDA margin at almost 25%. And because there has been fixed cost towards two onco programs in two of our hospitals, that has dragged the EBITDA margin by 2 crores per month in each of the centers, which as the hospitals ramp up, you know, that will get a more sense.

Guna Randeria, Analyst — Access Capital Limited

Right. So, these are the only two factors, right?

Shubh Kadlra, Analyst — Investments Intermediates Limited

Yeah, there are the only two factors.

Guna Randeria, Analyst — Access Capital Limited

Okay, got it. And so just one more, if you don't mind. I understand that, you know, in some of the hospitals where you have O&M, you have converted into or trying to convert to ownership. I think there was some healthcare and insignia healthcare. So I just want to understand the economics behind it. What multiples do you buy your partner out?

Dr. Abhinay Balineni, CEO

So, we have a call option to buy these OMM assets anywhere in the range of 10 to 12 trailing EBITDA.

Guna Randeria, Analyst — Access Capital Limited

Right. And, sir, is this decided at the beginning when you enter into a contract or it's more of, you know, as a thing goes, if a hospital is more successful, then perhaps you kind of end up paying, you know, higher. It's agreed at the beginning of the contract. At the beginning of the contract. Right, right. And recently you have done three, right?

Dr. Abhinay Balineni, CEO

The ONM message, we have done Thishur, Arit, yeah, these are the two, two hospitals that we have, we now currently have six ONM hospitals.

Guna Randeria, Analyst — Access Capital Limited

Right, no, so, sorry, I meant the one which you are converting to ownership.

Shubh Kadlra, Analyst — Investments Intermediates Limited

Oh, yeah, yeah, three, correct.

Operator

Okay, okay, sir, got it, sir, thank you, and all the rest. Thank you. A reminder to all the participants that you may press tab and want to ask a question. The next question comes from the line of Yura Saharavat from Chris Capital. Please go ahead.

Yura Saharavat, Analyst — Chris Capital

Bye. Congratulations on a great set of results. My question was on the Bangalore cluster. So we have a capacity of 800, but currently only 340 are operationalized. And given both the units are breaking even now, can you share some color on how we can operationalize the remaining beds as well?

Shubh Kadlra, Analyst — Investments Intermediates Limited

Peace. Thank you.

Dr. Abhinay Balineni, CEO

I'll take this question. So, you know, both these three of the hospitals, Thaniya, Bangalore, and Electronic City, these are the first time we went to a new city and set up large format hospitals with the intent that it will reach a 70% occupancy only in the four to five, four to six years after commissioning these hospitals. So, I think we are pretty much on track to achieve that kind of an occupancy in that timeline that we have stated earlier, and these are really large format hospitals from what we have traditionally done. So, it will take us a little time to get to that kind of occupancy.

Yura Saharavat, Analyst — Chris Capital

Sure. So would 70% be the right occupancy number where you would add more beds?

Dr. Abhinay Balineni, CEO

Yes, 70% will be a right number before. But also, see some of these therapies, sometimes you need to be able to add beds as standalone in the same campus, but in standalone. So we might, though you might see bed capacity available, we might end up adding some beds here and there to introduce new clinical therapies. And unfortunately, these therapies only work when they are given that importance and standalone presence within the same campus. So, you might see some better addition in these campuses, but overall the trajectory for growth we are pretty confident. This is the first year of operations. In case of Tana, it is 15 months. But over the next 48 months, we should get to a healthy occupancy. Thank you. That is all for me.

Operator

Thank you. A reminder to all the participants that you, my press staff, I want to ask a question. The next question comes from the line of Anshul Agarwal from MK. Please go ahead.

Speaker 9

Hi, thank you for your commentary. Just a few bookkeeping questions. The rentals, the rental payouts have sort of gone up. In the current quarter, please help us understand why this has happened. I understand ES is on rental model, but that would have been commissioned last year itself. Any particular reason why our rental payoffs are up so drastically? The major reason I shall is the Kundabur Hospital, which has commissioned operations only in the month of June. So last quarter there was an impact of only one month, whereas in this quarter there is an overall impact of three months. That is one of the reasons for rental costs going up or India's 1-1-6 impact on account of rental going up. Got it. Is this quarterly rent rate now established or do we expect these are escalation here as well? No, no. This is established rentals which will be coming in the forthcoming quarters. Got it. Secondly, how do we account for the ONN units currently? What I was trying to get us is, do we just add the EBITDA number into our cluster-wise EBITDA, or do we account for their revenue as well, or is it different for every unit? The call option which we are having enables us to get 9% of the top line at our revenue, which gets added to the revenue. As far as the call option accounting is concerned, as it is an option, we do a fair valuation of call option for all these units at end of every quarter, half yearly, as well as at the end of the year. The gain on account of call option we accounted at extraordinary items in the adjustments below EBITDA. If there is a loss, Then we reverse the gain which has been accounted, but in this time, there is no loss as such which had happened. And in fact, in the current quarter also, the fair value of the call option is enhanced by 13.2 crore, which we have accounted below EBITDA.

Dr. Bhaskar Rao Bolineni, Other

Yes, so the 9% revenue that we add to our revenue would be a complete flow through to the EBITDA in that cluster. Would that be fair?

Speaker 9

Well, we can say so, but there are certain corporate costs which we incur. So, there is no direct linkage or we do not assign as such costs to that particular unit, but you can say your assumption is correct.

Dr. Bhaskar Rao Bolineni, Other

Okay.

Speaker 9

So, the Kompali losses, would they be part of the Telangana cluster or no? Because we just account 9% of the revenue that we generate in Kompali, it wouldn't be part of the EBITDA.

Dr. Bhaskar Rao Bolineni, Other

The EBITDA losses wouldn't be part of Telangana cluster. Would that be correct?

Speaker 9

No, no. It would not be forming part of the Telangana cluster. We account only 9% of the top.

Namayanthi Kerai, Analyst — HSBC

Perfect, yeah.

Speaker 9

Also, now that the contribution from Bangalore unit is going up on Bangalore cluster going up, are minority interest, the percentage out of EBITDA will be how much cost? So, I don't know at a comfort rate level, the percentage is 11 percentage. I do not think it will exceed 15 percent. It will all around between 10 to 15 percent over the next several quarters.

Guna Randeria, Analyst — Access Capital Limited

Perfect. Thank you. Those were my questions. Thank you and all the very best for the reminder.

Operator

Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Anubhav Sangal from Anand Rati. Please go ahead.

Guna Randeria, Analyst — Access Capital Limited

Hi, sir. Thank you for the opportunity. My question is related to the old Jornapur Hospital. What is the fixed cost drug that you are expecting and for how many more months is it expected to remain operational?

Dr. Abhinay Balineni, CEO

We are incurring a fixed cost of one and a half crore a month for the whole hospital. And that includes the rental cost. That should continue for the next maybe four to five months before we decide on how we should.

Shubh Kadlra, Analyst — Investments Intermediates Limited

Sure, so thank you.

Operator

Thank you. The next question comes from the line of Simran Thakkar from Bees Capital. Please go ahead.

Simran Thakkar, Analyst — Bees Capital

Thank you for taking my question. The question is the cash outlaw on the CapEx brand. So, we see it's 6,500 million, approximately, is the number. If you could just help split it into the payments for FY26, Kondakur mainly, be the new capex. It is incurred in S1, and see the new assets that we have acquired. And if you could also give her the revised guidance for FY27 on the capex, please.

Speaker 9

So, out of the current capex, which we have spent up to H1 of 650 crore, around 275 odd crore went into 275 plus, about 300 crore went into Kundapur. As regards to the future CAPEX, there are three projects which we have announced and we are yet to complete, Shikandrabath, Rajamundri, and a bit of Kundakur because still there is some CAPEX which we have to incur at that unit. The total CAPEX outflow over the period of next 18 odd months would be about 1100 kN on these three projects together.

Simran Thakkar, Analyst — Bees Capital

I understand. Thank you. And second is on the $3,600 million of new long-term debt that you could see in the first half.

Operator

So since

Simran Thakkar, Analyst — Bees Capital

we have already raised the QIP and the money sitting in the back, any as to why this debt?

Speaker 9

So, if you see the objective which we have filed for QIP as well as the share products, we have allocated 25% of the total proceeds which we are receiving towards general corporate purposes. So we have parked it in the mutual funds or in the bank account as of now. The money is to be used for general corporate purposes, which includes loss funding, which includes smaller acquisitions, which includes minority acquisitions. As and when we decide to do so, that is the only reason it has been parked there as of now.

Simran Thakkar, Analyst — Bees Capital

Yeah, but then the new long-term debt that you could see of around 3,600 crores, if you could just state the reasons of the utilization.

Speaker 9

Sorry, I couldn't get to your question, actually.

Simran Thakkar, Analyst — Bees Capital

Okay, and so there was this new raise of 3,600 crores, sorry, 3,600 million of new long-term debt in the first half.

Speaker 9

The new debts, as I have said, we have three projects which are up and running, Shikandrabad and Rajamundari. For completing these projects, already the debts were tied up. So as and when we spent the capital on it, we are raising that debt and we are paying the capex. I understand. I understand.

Simran Thakkar, Analyst — Bees Capital

So, the third and last question is on the health care side. So, in quarter 1 FY27, it was an O&F agreement. And in this quarter, we have acquired 51% share for $7.95, if I'm not wrong. So, firstly, it was just hitting our top line. Now, it would change completely because it will also be a part of our P&L. So, I just wanted to understand, one, what was the evaluation like, EV by every basis or EV for bed? Second, what's the current monthly revenue on this? And third, what are the terms on the remaining 49% stake that we would be acquiring?

Speaker 9

So, Kakinada, this Trust Hospital, currently we are doing approximately, you know, 8 to 10 crore rupees of revenue with a positive EBIT of 1.2 to 1.5 crore.

Dr. Bhaskar Rao Bolineni, Other

Yes, it's a 150 bedded facility, and then we have about 38-40% occupancy. They could not be able to ramp up with the consultants, that's why they have given a partner with us. In the last year, the EBITDA was around 15 crores. With that, we bought about 51% at 80 crores. There is no debt. As on today in the books. So, we need to be able to ramp up by adding more therapies. We are very, very confident that it can be able to ramp up next 1 or 2 years, about 7 to 8 crores per month can go up to 12 to 15 crores.

Simran Thakkar, Analyst — Bees Capital

I understand. And what are the terms on the remaining 49% please?

Speaker 9

So, for the remaining 49%, we can acquire that stake in the coming years. There is no immediate contribution on our part. There is no, there is, as such, this 49% is held by the existing promoter doctor. So, as and when it is required, as and when they are offering it for sale, we may consider to buy it, like any of our other subsidiaries. All these

Dr. Bhaskar Rao Bolineni, Other

48% is an existing doctor. They were promoted to this hospital. As I point out, 51% of the stake of the doctors has given to us. That 49% they will continue to hold and they are going to practice there. Anybody who wants to resign to the goal, we have an option to buy in a fixed multiples.

Simran Thakkar, Analyst — Bees Capital

I understand. Thank you so much.

Operator

Thank you. The next question comes from the line of Rahul Jeevani from IIFL Capital Services Limited. Please go ahead.

Rahul Jeevani, Analyst — IIFL Capital

Yeah. Sachin, with respect to the rental cost increase which you attributed to the Kondapur Hospital, I was under the impression that we are buying out the rental partner there. So, ideally, if that is the case, then these rental costs should again reverse going forward. So, is that understanding correct?

Speaker 9

Ah, we are, we are planning to do the round, but as of now, we have not announced it. That is the only reason I am telling that as of now, the cost is setting on the books. In case we decide to merge that company into our Kondapur. Of course, the rental cost will grow up. Moreover, the rental cost round, we are also paying 18% GST on that rental cost. Therefore, there will be a significant saving on account of rent, and that will also help us to improve our puberty.

Rahul Jeevani, Analyst — IIFL Capital

Sure, Sachin. So, what is the rental component for the Kondapur Hospital, including GST, let's say, on an analyzed basis?

Speaker 9

Per month, it is 5.5 crore, Raoul. So, on an annual basis, you can say 60, 65.

Rahul Jeevani, Analyst — IIFL Capital

Okay, so that's quite clear. Okay, okay, okay. And when do you, let's say, if you decide to do the acquisition of the rental partner, when do you think that can essentially play out? Thank you.

Dr. Bhaskar Rao Bolineni, Other

Rahul, this is basically, whatever is the rent that we are paying, it will go to the bank, EMI of that particular facility. And so, whether we are able to merge today and tomorrow, if we merge today, another 400 crores of debt will come into our books.

Speaker 9

If only the loss is only the GST,

Dr. Bhaskar Rao Bolineni, Other

we will take a call depending upon our... I mean, the debt that is there in our books.

Speaker 9

So, Rahul, as Sir has pointed out, there is already a debt which is sitting on the books of this associate company. We are currently holding about 40% in this company. We may take a call to acquire the 60% budget of a merger, in which case the flip side of it is the additional debt comes on our books, but the positive side of it is the PBT gets improved every year by about 60 crore. So we are just evaluating what is the best option. Based on our analysis, we will go for it in another, we will decide on it in another, say, 12 months or so.

Rahul Jeevani, Analyst — IIFL Capital

Sure, sure, sure. Sachin, and let's say what is the net debt component as of now? Is it close to 2,100 crore post the QIP and warrants?

Speaker 9

Yes, 2,150 to be exact is the net debt, and net debt to EBITDA ratio will be about 1.9 odd.

Rahul Jeevani, Analyst — IIFL Capital

Sure, and let's say in the past we have talked about buying out the minority interest in some of the subsidiary hospitals. So if you can also, let's say, elaborate on that as well. So with the warrants and QIP money, what is the thought process in terms of buying out some of the minorities?

Dr. Abhinay Balineni, CEO

We haven't firmed up that plan yet, Raoul. Maybe towards the end of the year, once all the units are more stable in terms of its operations and capital requirement, we will then figure out what we want to do with minority or use internal controls for new growth. We will get to consolidate those thoughts.

Rahul Jeevani, Analyst — IIFL Capital

Okay. Sure, sure, sure. And the last question from my end, Dr. Abine, is to you, let's say, now we have embarked on, let's say, a massive CapEx expansion plan over the past few years. And now if I see the next two to three years, we would not have any significant capacity coming online except, let's say, a Sekundabad and a Kundapur, which are primarily core markets for us. So what is the key focus for the company in terms of, let's say, the next two to three-year period?

Dr. Abhinay Balineni, CEO

I think in addition to the two hospitals you mentioned, we have Rajamundri and Ungol expansion that's going on, both of which will get commissioned in the next four to five months. So beyond this, over the next 24 months, we are not looking at any significant bed addition, maybe, you know, on the lower side, around 400 to 500 beds. That's what we're looking at over the next 24 months. The idea is to stabilize the operations here and then be ready for the next phase of expansion and capex outflow.

Rahul Jeevani, Analyst — IIFL Capital

And that next phase of expansion would be, let's say, would start with the 300-bed hospital in Chennai, which would come in, let's say, 29 onwards, 35-29.

Dr. Abhinay Balineni, CEO

Yeah, 29-30 onwards. And then there is more expansion that we want to do in Andhra, Tarangana, Karnataka, Kerala, and Tamil Nadu. It's largely in the states that we are already operating, except for Chennai. Whatever expansion we see over the next four to five years is going to come from the states that we are already operating in.

Rahul Jeevani, Analyst — IIFL Capital

Sure, sure, sure. And just because you touched on Kerala, so the Kerala government is thinking about introducing a bill in terms of regulating the private hospital charges. So, obviously, for us, it's an O&M model in that market, but your comments in terms of whether that is doable, and if it gets done, what kind of an impact do we see for business in Kerala?

Dr. Abhinay Balineni, CEO

No, we have no idea what they are going to do, Rahul. So, unless we know what it is, what kind of impact, it's difficult to anticipate that today.

Rahul Jeevani, Analyst — IIFL Capital

Yeah, but Dr. Binet, do you think it's easy to regulate private hospital charges? Because obviously, depending on the info of particular companies, the doctor talent of particular companies, the cost would vary. So what is the Kerala government actually trying to do here?

Dr. Abhinay Balineni, CEO

Not just Kerala government, I think many governments are trying to do this, but we are yet to figure out a method to be able to create more transparency on billing. And when we are able to create that transparency, we're more than happy to figure out how we can work together and make this happen. But I think that right now, we have no visibility on how we want to do this or how they're proposing to do this.

Rahul Jeevani, Analyst — IIFL Capital

Okay, sure, Dr. Abhin, that's a pleasure, and that's it for me. So, thank you.

Operator

Thank you, ladies and gentlemen. That was the last question for today. We have reached the end of question and answer session. I now hand the conference over to management for closing comments.

Dr. Bhaskar Rao Bolineni, Other

So, the quarter has ended on a high, a bright note of sound financial results, expansions, and clinical accomplishments. It augurs well for the coming months, and we will work with the renewed energy and enthusiasm with our valued support. Thank you very much for a good number of questions, and has been enlightened us. Then we are on the job that we will be able to see that you do get a good growth in the company. Thank you.

Operator

On behalf of Kim's Hospital and IIFL Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.