Shalby Limited (SHALBY) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q1FI27 Earnings Conference call-off shall be listed, hosted by LRS Security. As a reminder, all participant lines will be in the listen only, and there will be an opportunity for you to ask questions at the end of today's presentation. If you do need assistance using this conference call, please signal an operator by pressing star then zero on your touchstone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Kashish Thakur from Ilara Securities. Thank you, and over to you, sir.

Thank you, Manav. Good morning, everyone.

This is Kashish Thakur from Ilara Securities.

We welcome all the participants to Shalvi Limited quarter one financial year 2027 earnings call hosted by Ilara Securities. Today, we have with us senior management representatives from Shalvi. We will start the call with performance highlights from Group CFO of Shalbi Limited, Mr. Amit Kumar, and Mr. Deepak Anand, Executive Officer of Shalbi MedTech. After that, we will open the floor for question and answer for all the participants. I will now hand over the call to Mr. Jigar Todi for important disclaimers regarding any forward-looking statement that may be made. Over to you, Jigar.

Thanks, Kashish. Good morning, everyone. Our investor presentation is uploaded on the stock exchange website and our company website shall be.org. We do hope you have already had the opportunity to go through the presentation. Please note that some of the statements made in today's call may be forward-looking in nature and may involve risk and uncertainties. Kindly refer to slide number 2 of the investor presentation for a detailed disclaimer. Now, I would like to hand over the call to Group CFO Mr. Amish Kumar for his opening remarks. Thanks. Thank you, and over to you, Amit.

Yeah, thank you, Jigar. Good morning, everyone. Welcome to the running call of Shalping Limited for the Q1. Now, I will walk you through the consolidated financial performance of the company for the quarter one of 2027. This performance I will explain in Karos and on year-on-year basis. For the quarter one, the company delivered a healthy improvement across all key financial parameters, Starting with our consolidated revenues. The EBITDA margin stood at 14.5% compared to 16% in the corresponding. Consolidated PPT stood at 19.7 crore compared to 22.7 crore in the quarter one of the last year with the PPT margin of 5.8%. The consolidated PAT has been higher at 10.5 crore with a PAT margin of 3.1% in the Q1, as again 7.7 crore with a PAT margin of 2.5% in the quarter one of FY26. The group continues to maintain a healthy balance sheet with a comfortable gearing ratio of 0.46X and a net debt of approximately 163 crores. And we'll further walk you through the standalone performance of the hospital segment. The standalone revenue for the quarter one stood at 259 crores as against 242 crores in the quarter one of the last year, listing a growth of approximately 7% on year-on-year basis. The standalone EBITDA approximate list stood at 47.8 crore as against 52.4 crore in the quarter one last year, with an EBITDA margin of 18.4% versus 21.6% in the corresponding quarter last year. The standalone PBT stood at approximately 34 crore as against approximately 40 crore in the quarter one of FY26 with a PBT margin of 13.1%. The standalone PATH stood at 25 crore compared to 25.7 crore in the quarter one of the last year. This has a PATH margin of 9.7% in the quarter one, as against 10.6% in the quarter one of the last year. At the net debt level, this stands for the hospital segment for 54.5 CR at the end of the quarter. The standalone ROC for the quarter has been at 9.4% at an annualized level. The operationally RRPOP has been 44,711 compared to 45,673 in the corresponding quarter last year. The loss has stood at 3.69 days as compared to the quarter one of the last year at 3.53 days. The number of occupied beds has increased to 701 in the As against quarter 1 of the last year at 639, this shows a growth of 9.8% year-on-year basis with an occupancy rate has been at 51%, excluding Shelby International, which stands at 54% during the quarter. The payer mix for the quarter had been 30% self-pay, 38% insurance, and 32% government business. Importantly, now coming to Shelby International, our Gurgaon unit, the revenue stood at 26.2 crore, as against quarter in the last year at 23.2 crore. Our RPOV has also increased to 91,326, while our loss has stood at 3.8 days during the quarter. International revenue contributed about 42% of the operating revenue of the Shelby International in the respective quarter. Importantly, here to also mention that the Gurgama unit has achieved its EBITDA break-even for the first time since the acquisition, and this is a sustainable and a growing EBITDA we look forward from in the subsequent quarter. Overall, international business for the Shelby group has been at about 13 CR, which comprises about 2 CR coming from the Gurgama unit and rest 11 crore coming from the other unit of the Shelby offices. We are also pleased to share that during the... Here, the group successfully completed 47 transplants, including 41 kidney transplants, 5 liver transplants, and 1 bone marrow transplants. This has been the summary of our hospital performance and the consolidated performance. Now from here, I will move forward to our medtech performance during the quarter at a consolidated and standalone level. So we have started FY27 on a very stronger note in our MedTech business with encouraging performance across our all key business units. Importantly, a meaning and power improvement in our profitability. The first quarter demonstrates the progress we are making in building Shelby MedTech into a more diversified, scalable, and profitable medical technology platform. Also, to brief you now, how the performance has been at the top line and EBITDA. To start with the top line and revenue performance, at the consolidated level, Shelby MedTech as a whole delivered a revenue of approximately 47 crore in the quarter one of the FY27, registering a growth of 17% in the quarter four of the year compared to the quarter four of the last year, and 53% strong performance if we compare it on a year-on-year basis. Moving to the, this performance was driven primarily by strong momentum in our Chelsea MedTech Limited at India level, which delivered a revenue of approximately 36 crores, restoring a growth of 29% sequentially and 98% on year-on-year basis. We are particularly encouraged by the performance because it reflects the increasing traction for our products, improving execution across our business unit by the team. At the SAT-US level, we also remain stable, delivered a revenue growth of 30.8 PR with a modest sequential growth of 9% on year-on-year business. Our Singapore unit, the SGPTO, reported a revenue growth of 9.9 million, while this is a lower sequentially, but the business remains strategically important to our broader medtech portfolio, and we remain focused on improving our profitability from here. Overall, the consolidated business is showing increasing scale.

I believe the underlying growth opportunity remains very attractive. And importantly to mention, this stagger of

9.50%, which we have been retaining from quarter on quarter and year on year, we are confident to see the same level of the growth in the coming quarters also. Moving to the profitability performance, most encouraging is Aspect HOS G1 is the improvement in the EBITDA. And at the consolidated level, EBITDA has been posted positive, and this has been a post-conjugative provider for MedTech as a whole reporting a EBITDA positive performance. Moving to entity level, the SNTL, our India-level entity, approximately reported 22.9 CR, compared So, we have received 2.9 CR revenue as compared to 10 million in quarter 4 of the FY26. With INR, 12.8 million in Q126. This represents an approximately growth of 191% sequentially and 130% on year-on-year basis. This is a very important milestone for us. The improvement is not merely a functional revenue growth. Rather, it is also the benefits of operating leverage, better business mix, and improved execution over the period where we have been consistently working upon that. Thank you. At the US level, the EBITDA has been marginally negative during the quarter at a standalone level. We are actively working on improving the profitability and confident to see that in the coming quarters through our operational efficiencies and the business initiatives we are taking across. At the Singapore entity level, the SGTPL, on the other hand, delivered an EBITDA of approximately 5.8 million, a significant improvement compared with the previous quarters. As I mentioned earlier, the EBITDA has been posted positive at about 1.7 million in the quarter run of the 27, and it has been the post-quarter consecutively reporting a positive EBITDA. While we recognize that there is still considerable room for the improvement at the consolidated level, however, we are confident the direction towards which we are working and execution would reflect us a more better and stronger number from here on. Now to mention about our inventory level, which has been a key parameter to evaluate and drive business. The good part is our inventory level has been on an improving trend. Our inventory at a consolidated level is declining, showing a significant increase in our DSO holding period. And as per our estimate, we expect a 30% improvement in our inventory holding days, which has been a significant focus area for us in the recent quarters. At the same time, our consolidated revenue has increased from FY25 at $1.3 billion to FY26 at about $472 million and just in the, sorry, I'm repeating it again. Our revenue at the consolidated level has been $923 million in the FY25, $1.3 billion in the FY26, and now just with the first quarter, it has shown a number of 46. 272 million. This shows a strong performance and also gives us the confidence to improve our inventory level and its holding period from here on. We will remain highly focused on working capital disciplines throughout the year. Looking ahead, we enter the rest of the FY27 with our priority remains unchanged. Importantly to mention, first would be we want to sustain the strong growth momentum in the year. And finally, we will also continue investing selectively on our products and technologies that can create sustainable long-term growth for the Shelby MedTech as we hope. We believe the underlying MedTech opportunity in India and globally remains very significant. Important to mention, our objective is not to simply grow. The top line, we want to build a business with a stronger margin, higher asset productivity, better cash conversion, and a sustainable long-term growth. The Q1 FY27 number give us confidence that we are moving in that direction. With that, I would like to thank our employees, customers, partners, shareholders for their continued support. We will now hand over the call to participants, and we will be happy to take any questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles.

A reminder to all participants, if you wish to ask any questions, you may press star on the bell. We have our first question from the line of Raja Kumar from RK Invest. Please go ahead.

Yeah, good morning. Thanks for the opportunity. First of all, congrats for the good set of numbers. Good to see that the hospital segment is doing well this quarter, and I think you kind of kept up your promise there. So I just wonder whether now this segment will continue to be steady state and the margins will continue to improve from here on. There are no one-offs and there are no headwinds on this segment. That's my first question.

Can you come again with your question? We could not hear you properly.

Yeah, no, no. My question is on the hospital segment. So, it is good to see that your margin performance is kind of back to year-on-year levels. So, this is in line with whatever the commentary that you gave in the last two quarters that you are expecting to see a better performance. So, it is really good to see that. So, the question is whether these margins will sustain or will it improve further from here on now?

Yeah, thank you for your question. And on to the margins, to reflect, we are confident to see an improved margin from here on. And the reasons are, their underlying reasons are very obvious that if you mention it about, importantly to include that we had deployed bunkers in our units already in the last year, which got activated also in the quarter one. But we see the more uptrend of that to come in the subsequent quarter, which would flow to our EBITDA margin straightaway. That would be the significant part of the upside of the revenue where we are confident. Another to include our new TPA renewals are also actively underway, which would give a significant upside on to the renewals, which holds a potential of 5-7% jump onto our revenue with the TPAs and other tie-ups which are in active discussion. Another to include as an overall at the hospital, we have already mentioned that the Gurgama unit, which has been underperforming. has posted an EBITDA positive and we are just confident to see a better margin from there on because it's building on a better top line from there. Another to include And we are confident to see that trajectory to also follow. There had been few units which had been, which had underperformed, including Surat and Indore, where the active work is on to recruit a right set of the doctors, where the close discussions are underway. So all these set of things, we are confident to see a better top line and may.

That's good to know, sir. So the second question is on the manufacturing and trading of implants, that segment. Why the bottom line is deteriorated, you know, despite your revenues have gone up year on year, 28 crores, from 28 crores, it has gone to 42, but the bottom line is deteriorated. And in the last two calls, we have been saying that the COGS has been coming down significantly, but why then the bottom line is bleeding, you know?

So yeah, thank you for your question here. While we see our CAGR has been growing, on to the bottom line, we had been posting an EBITDA positive numbers. And the more importantly to include is, if you notice in the earlier years, this is as a result of that we had been earlier investing, which has been resulting into an interest expense, which is now not significantly increasing. Our debt had become stable. The differential reason is also the depreciation onto the intangibles and other products which we have done, other capex we have done in the earlier year. And the full year effect is coming into this quarter. We do not see our bottom line to get, we do not see our bottom line to worsen off from here. Rather, we are confident to see a better bottom line in the subsequent quarter. Also, importantly, by the reason of the upside on to our gross margins, which had been, which is expected to increase about 100 inches to 200 inches points. Each quarter, from here on.

Okay. Yes, sir, but what is the reason quarter-on-quarter the bottom line has, I mean, the losses have gone up like 7.4 crores to 11.4 this quarter, from Q4 to Q1. So, is there any one-off sitting in here, or is it going to be like this, you know?

This is also why the one-off, if you would not have noticed, the earlier quarter had some impact of the forex gain, which had been otherwise in the current quarter. So once that stabilizes, we would see that the one-off would not be there into the P&L, and we would see the improving trend of the bottom line. Okay.

Okay, and last question is to the CFO. Sir, why are you not recognizing the defer tax on the losses? Because otherwise, your tax rate is getting, you know, vitiated. You know, it looks like you are providing higher taxes. So, when do you think you will start recognizing the DTA on the tax losses?

So, we are already recognizing our DTA wherever required in our hospital segment. On to the US MedTech operation, that is an accounting call. On a conservative basis, we are not recognizing a DTA currently, but as soon we see the profitability improving, we will reconsider and evaluate it out.

Okay. Thank you so much, sir. All the very best. Thank you.

A reminder to all participants, if you wish to ask any questions, you may press star and 1. Anyone who has a question for the management can press star and 1 on their touch, don't telephone. We have our next question from the line of. Kashish Thakur from Ilara Securities. Please go ahead.

Hi, thank you for the opportunity. So, regarding MedTech business, our MedTech business revenue has grown around 53% but EBITDA was around 1.6 million. So, what is driving this weak profitability, particularly at US front, and what can we expect sustainable double-digit EBITDA margins from when can we expect that?

Yeah, so there are a couple of things. So as our CFO mentioned, you know, a large part of, you know, the profitability decline has been because of the foreign exchange, you know. Changes in terms of the dollar to INR, right? In terms of the volume, the volume has grown significantly in India. As you can see, there has been a growth of over 100% in terms of the volumes of sales in India. In terms of the US, you know, we have been predominantly stable in terms of the volumes of sales in the US business. So that has remained flat for us. And, you know, there are multiple initiatives that we have taken to grow that sales number, right? Coming to the cost of, you know, the EBITDA margins improving. So, I think there are a couple of initiatives which we have taken, significant initiatives taken in the quarter one of this year, and because of those initiatives, you know, we are going to be investing, you know, our total inflow into the company is going to reduce by about 3 crores a month, right? So that is the impact of all these initiatives that we've taken, you know, in terms of... Working with the right vendors, etc. And the other thing is that, you know, there is another significant project which is underway where, you know, after which, you know, which after which if it is implemented, you know, which is going to be implemented and executed by the quarter four of this financial year, we will see that the cash flow requirement will go down further by another three crores per month. So, you know, there are these A double-digit EBITDA margin, you know, from there on, because these are the important changes which we have to make, and like we have discussed in our earlier calls, and as you all are medical and palmer analysts, you would understand that any changes that, you know, we have to make within this segment, very, very... The USFDA and other regulatory bodies, it takes about six to nine months, one year, often to kind of make these changes. So, you know, this is all underway. Half of the progress is already made. The other half is expected in the next six months, you know, from Europe.

Sure, thanks, sir.

So, next question is on our hospital business. So, hospital occupancy has improved to 51%, but standalone margins were broadly, like, declined by around somewhere around 20 BEPS to 18.4%. So, what was the margin pressure? And again, can you reinstate your FY27 EBITDA margin guidance?

So, on to the, you are right, the occupancy has significantly improved about 600 basis points. And on to our EBITDA margins. See, our top line had increased. Our units which I mentioned like Krishna and Naroda had shown a jump off year on year basis about 30%. The EBITDA margin is, the pressure on the EBITDA margin is temporary because we have We have deployed new doctors and new specialties which had come in. So it takes some time about the quarter or so that the doctor reflects its complete profitability. Into the subsequent quarter, we see the EBITDA margin to improve by that reason. And also by the reason which I covered previously that the new EPA renewal and the bunker revenue which to flow into the subsequent quarter giving the full effect would be reflecting a better EBITDA margin from here on. We are strongly confident as per our estimate to see a beta margin of upward to 20% on a year on to the whole year basis.

Understood, sir. Sir, in last, I think, sir, I recall in previous two quarters, we have done few addition in Shelby International in doctor's front. So that has been stabilized or we are still adding?

Yeah, so yes, we have done the replacement and new recruitment of the doctor, importantly to mention on to the Onco and ENT side, that had been showing a good growth momentum and had contributed to our revenue, where we have recently recruited and replaced doctors, include the liver transplant and KTP. Their revenue contribution in the quarter had been lower because that had happened in the middle of the quarter or at the end of the quarter. The full effect you would see coming in the quarter too. And also to mention our bone marrow transplant which had been not there in the last quarter. The active discussion is on with the doctors, and that effect would also, you would see in the quarter two and quarter three, which will be taking a top line further up from here. And further also, the international business also remain impacted to some extent, which had been showing a Thank you very much.

Hello.

Again, just continuing on Shelby International, we have already turned EBITDA positive despite having occupancy of 24%. What are our aspirations for the occupancy and EBITDA margin for the same hospital in FY27? And by when can we achieve pet breakeven as well for Shelby International?

So, with a very, with a kind of estimate and the work which we are executing at the ground. We do expect our occupancy level to touch 30% or up from quarter 3 or quarter 4 onward, and we... We are also likely very confident that on to the quarter 4 or near quarter 3 end, we would be able to see a PBT positive number also. We are not far from here. We are not only EBITDA positive. This time we have posted a 7% EBITDA and so hence the journey to see a PBT number positive and so hence the fact we may see that to happen from 6 to 9 months there with the specialties already deployed in and few are already underway.

So, thanks for tax rate. Our tax rate has seen a bit of moderation. So, can you just guide what kind of tax rate we can expect for FI 27?

So, first to mention at the hospital level, we have already transited to the new tax scheme with a lower tax rate of about 26%. From earlier of 35% in the previous year. So that is the one benefit which is a permanent benefit showing already flowing to a standalone P&L. At the overall group level, if you would notice, our ATR has significantly come down to 47% as against the 66% in the quarter one of the last year. So, this is the kind of the permanent tax benefit which will be flowing to the whole scheme of the things. And once it's important to mention into other medtech and our Doolgawa unit, since we have carried forward office, as soon as we are currently flowing to the PBT, we would not have a tax expense for the next 2-3 years. That would be a straight cash benefit flowing to our overall profitability. And taking our ECR at a more better rate from here.

Understood, sir. So, one last question from my end. So, our consolidated ROC remains still low at somewhere around 16.7% versus management, earlier stated doubling the ROC. What are the key levers and timelines for this to be achieved? And one question on Mumbai expansion, how it is framed.

Okay, yeah.

So, first to answer on your ROC, yeah, at a group level, we are at about, at a standalone level, we are at about 9.5%. Group level, we are approximately 7%. Now, we see... This ROC to improve from here on by largely two reasons. One, our CAPEX deployment has been heavily happened in the last years where we have done a 150 crore of the CAPEX, including our bunker spec city, and where we had been already.

Yeah.

So I would continue to answer your question on to the ROC. I would. To re-summarise it, your question had been on a lower ROC at an overall level. So I had mentioned about our group level ROC is at approximately 7% and a standalone level it is 9.5%. This has been made by the major reason of the Capex deployment in the recent years, including where we had invested in Dunker, Pet City, Rome Tech, and we have been investing in the Thank you. And our estimates and our plans in the recent, in the current year and for the next year are to, we would be able to manage with a minimal capex since we have already invested that and we are positive into our different program unit. So far the overall team of things, see our ROC to be improving from here on. And we do that to call in the built-in industry standard from one to two years from here, which is between 11 to 13 percent.

Student, sir, last question on Mumbai expansion. How is it coming out?

So the discussions are on with the trustee, including the once the alignment happens, it will be the approval or the review of the trust office there. So these discussions are underway. Whenever there will be another development, it would be

informed to the respective stakeholders.

Thank you. Thank you for the opportunity. That's all from my...

Thank you. A reminder to all participants, if you wish to ask any question, you may press star and one. Anyone who wishes to ask a question may press star and one on the touchstone telephone. A reminder to all participants, if you wish to ask any question, you may press star and 1. We have our next question from the line of Tripti Shukla from Kedia Securities. Please go ahead.

Hello. Good morning, Shuk. So, thanks for taking your question. So, my question is, like in late July, ICRA downgraded our long-term credit rating from A plus to A for our 830 crore credit facility. So, could you walk us through the primary drivers behind this downgrade and how you are managing your debt profile alongside with the recent 129 crore working capital facility from Kodak?

Thank you. So, to answer on the rating, our rating had been now at A from A plus, and however, the outlook has improved from negative to stable. This had been a procedural assessment which they had done, and they had their own parameters, but it could be re-evaluated in the coming quarters, and that can go on to the upgrade from there on. On to your second question, on to the recent debt facility which we had announced. It's not a new fresh debt inclusion which we are doing. It's just a replacement at an efficient cost which is about 30 basis points lower to our average. So that has been the reason. This is not an increase in the debt level. This is just a replacement. Our outlook has been done better off from the negative to the stable. That has been a procedural assessment they had to do, and that would be probably reassessed in subsequent quarters. On to your question of the speaking of. I was mentioning that this is a new, not a new debt inclusion which we are doing, it's just restructure and replacement of our existing debt.

The record was about three basis points.

Sorry to interrupt you, sir, but we are unable to hear your voice is breaking. No, sir. Your voice is still breaking much. Yes, Amitra, this is better now.

Okay, cool. So, I was just mentioning on to the new posting which has been announced. It's not a new infusion of the debt. It is just at a better cost, which is lower than our average. Our net debt levels do not increase by this. And also in the subsequent quarters, we do not estimate our net debt to go higher from here. It could be on a stable or a reducing trend into the coming quarters.

And so, my second question is like, I was looking to the presentation. So, I saw that the government pair made some significantly from 32% in Q1 27, from 24% a year ago. So, concurrently, your overall Thank you. Year-on-year compression to $44,711. So, is the shift toward government scheme a temporary or at least high-derivatory volume strategy? And furthermore, how are you protecting your cash conversion cycle, even the typical longer receivable time associated with the government?

Yes, our government's share of residents has decreased, if you come to the room, yes.

Sorry to interrupt you again, sir, but we weren't able to hear your answer. Okay, we are moving. Yes, sir. Can you hear me now? Yes.

So, yeah, we have moved to, our share of the government scheme has increased, but this also follows the renege and renewal and review of the rates which we get from the government. As to mention, in recent case, we have been able to get a super specialty rate in our Krishna unit, which is a one bigger unit for us, and such other initiatives are also underway, Including where we have installed bunkers, and that would be also falling into the new, would be falling to give us the upside down to the revenue on the bunkers treatment getting covered in the government scheme. And another, into our Gurgawa unit also, we are already NABS, and where we follow the CGHS, it would be on the better rate side. So, the profitability we are protecting and constantly reviewing wherever possible, wherever required to protect our profitability also. Onto the cash conversion cycle, yes, you are right. This is a complex process, and for that matter, we had already deployed and revisited our process to secure our cash conversion cycle, also including the automated tools wherever required. We have been using and installed the kind of the platforms which we need to follow up on our recoveries and outstanding on a prompt basis, ensuring our bill submission and the other kind of the requirements which have to be communicated with the government officials and including activities to their offices.

Okay, so my next question is related to ROC, like you go to double your ROC, which currently sits near around 7% on consolidated pieces. Concurrently, you are planning to expansion in Mumbai via 200 beds of Ashraf. So could you give us a sense of expected cash for this mobile facility in 2027, and how will you balance this heavy investment against your goal of immediate ROC exploration?

So, once if it is finalized,

we know that it's a greenfield project. While we have to invest into it, we may have to have a different benchmark to compare our overall ROC. However, when that to be finalized, we would look at it differently. And also importantly, what would happen by that time, we expect, we do not expect further investment infusion of the debt into hospitals. Importantly, not on our medtech and our hospital into the program. So overall, we see this could be, this would be assessed at that time, that point in time. How do we do it from the debt or internal approvals?

Thank you.

A reminder to all participants, if you wish to ask any question, you may press star and 1. Anyone who has questions for the management may press star and 1 on their touchstone phone. A reminder to all participants, if you wish to ask any question, you may press star and 1. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

Thank you, everybody, for joining the call.

We will connect again into the next quarter. Apart from that, if you have any questions, you can reach out to our investor email ID. Thank you and have a good day.

Thank you, sir. On behalf of Ilara Securities, that concludes the conference. Thank you for joining us and you may now disconnect your lines.