Manipal Health Enterprises Limited (MANIPALHOS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Manipal Health Enterprises Ltd. Q1 and FI27 on your conference call. As a reminder, all participant line will win the listen only more 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 touchstone phone. I now hand the conference over to Mr. Diwakar Pingli from EY. Thank you and over to you, sir.

Thanks a lot, Dhanesh. Good morning to all participants on the call. It's our pleasure to welcome you to the first earnings call of Manipal Health Enterprises Limited. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or known risks, uncertainties, and other factors. This must be viewed in conjunction with our business risks that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. Please note that we have mailed the results, and the same is also available on the company's website. In case you have not received the same, you can write to us and be happy to send the same over to you. To take us through the results and answer your questions today, we have the top management of Manipal Health Enterprises Ltd., represented by Mr. Billy Jones, MDM CEO, Mr. Samir Agarwal, Group CFO, and Mr. Karthik Rajagopal, CEO. We will start the call as a brief overview about a company and on the quarter gone past, and then move over to the Q&A session. With that said, it's my pleasure to now hand over the call to Dilip Jowes. Over to you, Dilip.

Thank you, Dibakar. Good morning, everybody, and welcome to our inaugural earnings call. As Dibakar said, I'm joined by my senior colleagues, Samir Agarwal, our CFO, and Karthik Rajagopal, our Chief Operating Officer. I hope you all had a chance to go through the presentation that we uploaded last evening Thank you. Our Q1 revenue of 3,091 crore represents a growth of over 38% year-on-year. Our network EBITDA was 749 crore, a growth of over 26% over last year, excluding a one-off gain that we had in the first quarter of last year. The growth is over 30%. Our operating margin excluding Sayadri was 25%, and at a network level that includes Sayadri hospitals is at 24.2% for the quarter. As I mentioned earlier, we had a volume-led growth this quarter as well. Our inpatient volumes grew by about 39%, and OP volumes by 26% over Q1 of last year. Average occupancy across our network was 65%, a 290 BIPs increase over Q1 of last year, while we maintained an industry-leading air loss of just 2.7 days. Excluding Sayadri, our ARPORB is Rs. 77,200 per day, a growth of about 9% over Q1 of last year. Our digital revenue grew significantly and contributed about 710 crores during the quarter, representing about 23% of our overall revenue. Out-of-hospital earnings, a set of initiatives that we started a while ago, if you look at that, our e-pharmacy processed over 15,000 orders across 23 hospitals in four metro cities. Our telehealth solutions completed over 17,000 virtual consultations, and our chatbot, including the MAI, what we call the Manipal AI-enabled digital health companion, handled over 9,600 interactions during that quarter one of FI27. Our centers of excellence, that's six centers that we consider as our high-acuity specialties, cardiology, cardiac sciences actually, oncology, neurology, gastroenterology, orthopedics, and renal sciences continue to be a key growth driver. Their revenue contribution rising to about 65% to 65% in Q1 of FI27. During this quarter, IP revenues across these We also continued our efforts to further strengthen these specialties with investments. To share just a couple of examples, during this quarter, we installed a linear accelerator and a PET CT at our hospital in Nasik, introduced optical coherence tomography at our flagship facility, MHP Old Airport Road in Bangalore, As well as two other locations in the same city, we commissioned an AI-assisted, artificial intelligence-assisted neuro-biplane cat lab in our Mukandapur facility in Kolkata. We believe that the interventional radiology program that we have just launched in that city would be able to deliver cutting-edge clinical outcomes for that region. I also would like to highlight just a couple of outstanding clinical achievements, including first ever and regional first kind of milestones. Our Whitefield Hospital in Bangalore performed world's first robotic pancreatic surgery on a one-month-old infant. Our Vijaywada Hospital in Andhra Pradesh performed the state's first emergency living donor liver transplant, and our recently launched two greenfield facilities, Kanakpura in South Bangalore and Yelanka in north of the city, completed their first robotic renal transplants, and you would recall that both these facilities are in their first year of operations. Let me also give you a brief update on the performance of Sayadri hospitals. Sayadri reported revenue of 332 crores in quarter one, a growth of over 13 percent compared to last year. EBITDA for the quarter was 58 crores, rupees 58 crores, a growth of about 19 percent year on year. Operating performance also improved significantly. RPO grew by 15% to about 45,000 rupees a day. Occupancy reached 63%, and we've been able to improve the length of stay, that is, reduce the length of stay by about 8% compared to last year. And in Q1, we reached 2.8 days of length of stay in the Sayadiri network. Work on integration of that set of hospitals to the larger Manifal hospital network continues to progress as planned. Key initiatives, including enhancement to clinical programs, talent addition, improved conversion efficiencies, phased digital adoption, and infrastructure upgrades are already contributing, as we saw, to the Q1 performance. As we progress to a full brand integration over the next few months, we have already introduced an element of a network of Manupal hospitals into the Sayadari brand already, like I mentioned. In other updates, we commissioned a brownfield capacity addition of 103 beds, along with the newly installed linear accelerator and PET CT at our Nasik Hospital, increasing its Thank you. Thank you.

Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Namayanthi Kerai with HSBC.

Hi, thank you for the opportunity and congratulations to the management for a good start. So my first question is on Sayadri integration. Just want to understand a bit more in terms of management focus on the areas of segments which will be critical to improve profitability of this unit and closing the gap between Sayadri and the corporate average margins. So, you mentioned about mix, efficiency, etc. So, a bit more on the details and how do you see the turnaround time? According to you, how much it will take to bring it on par to the corporate as well? Thank you.

So, thank you, Damayanthi. I would start off and I would request my colleague, Karthik, to really amplify. As I mentioned, you know, in the quarter, we have seen a significant improvement in performance of Sayadri. We have reached EBITDA margins of almost 17.5% in the first quarter, which is a significant growth, like I probably mentioned earlier. It's been a volume-led growth and really driven by clinical enhancement and also operating efficiency. The integration take, you know, the way we have planned is over an 18-month kind of a period. I would request Karthik to really give you the granular feedback on Q1 and his priorities as we look ahead for the subsequent quarters. Karthik, over to you.

Yeah, hi, Dhaminti. I hope you're doing well. Well, the entire piece is we follow a certain playbook when it comes to looking at acquisitions, you know, and how we look at the integration. So the whole process takes about 16 to 18 months. But your question on when it will get to, you know, the EBITDA for what the network is doing, that obviously is, you know, some time away. But in terms of priorities, what we did with people was we've got the regional structure in place, and that's the entire HR organization that we actually go ahead and do for our rest of the clusters and regions as well. That's the first thing that we put in place. And what we do in the three key metros, Bangalore, Calcutta, and Pune right now, is to look at the interoperability of clinicians. So there are about 58 of the clinicians now, because we've got nine hospitals in Pune, Seven from the Saadri Network, two from Manipal. So the interoperability has been increased. About 58 clinicians now move across, you know, both the brands. From a branding perspective, full-fledged, you know, re-christening into Manipal, we're just deciding on the dates as to when we could do that. Usually it's about 14 to 16 months from the day we integrate. But from a logo perspective, as Dilip mentioned, the Manipal Thank you. Infrastructure upgrades. We're getting, you know, most of the hospitals up to speed with the, you know, Manipal system.

So, for now, this is what we are looking at.

Outside of that, we have a lot of emphasis on our service strategies, Amianti. So, that's something that we're actually doing together in Sahidri as well. So, slowly, I actually start to see the results coming through, and over the next few months, this will, you know, move in completely into a, you know, Maniphal outfit.

That's very helpful. So, just a bit on the mixed part. So, here, as well, you will be focusing on your Congo R mix, which is around 65% for the network at this point of time. So, should we understand that there is more headroom to improve the mix part so that you will see the overall improvement in the profitability for Sayadri?

Daminti, in terms of, you know, the Congo mix, there's not a big difference in terms of the contribution between Sayadri and the Manipal network. It will probably be very close to each other. It's only in the complexity of the Congo cases that, you know, Manipal has an advantage, and that's the exact playbook that we're trying to bring into, you know, Sayidri as well, in terms of moving up the complexity as far as the Congo means to be concerned, and that will definitely positively impact, you know, ARPOV and the other financial parameters as well.

So, my second question is on your strategy in the Delhi NCR market for the oncology segment. So, what we understand, Manupal has been focusing a lot to build up a very strong doctorate team to really step up its presence in oncology space in Delhi NCR. So, a bit of better understanding on this segment will also help us. Thank you.

So, Damendi, this is Dilipyaar, if I may take that question. I think we already have a very strong ONCO program in Delhi over the last several quarters. It's a program that's been growing steadily, and if you also look at our presentation and what I mentioned also during my introductory comments, that our Congo, our mix is growing at about 45%, and oncology is maybe among the fastest growing. So, therefore, you know, it is not only in Delhi. Around the country, we are looking at growing oncology. And also, if you look at our presentation, that, you know, if you look at that, there's a pie chart which is given in the presentation, you could see that, you know, there is a movement in the oncology proportion in that already. You could see that from 10.8% in last year, it has already grown to 12.2% at the network level. So oncology would continue to be a focus, not only in Delhi, around the country, and it is also buttressed by the fact that we have added significant oncology capacity in Bangalore as well. The three green fields that we have commissioned in the city, in the city of Bangalore in the last 12 months, all of them have comprehensive oncology facilities, and that also would drive up our ability to address the growing need of oncology in the country.

Thank you. I'm really sorry, but you may please rejoin the queue for ever more questions. Thank you. Our next question comes from the line of Neha Margulia with Bank of America Securities. Please go ahead.

Yeah, thanks for taking my question. My first question is on the XIADRI margins. You know, if you could give us a little bit of color on how you should think about these margins in terms of which market probably or which cluster do you think you see scope for margin improvement? And if I were to take a little bit, let's say, 18 to 24 months, is this a steady state margin that we should assume what we have seen in FI26 or how much scope for improvement there is? Thank you.

Suneha, thank you for the question. The ex-Syadri margin, like we have covered in our presentation, is about 25% for Q1. And that remains robust. And, you know, you could see, actually, there is a marginal dip over last year, Q1. And the reason is the green fields, which are, you know, which, like I mentioned earlier, green fields, which are up in Bangalore, they are still ramping up, although ahead of our plan. Greenfields are ramping up. That brings down our, you know, composite margin at that. But barring that, if you look at our portfolio of hospitals that, this is with reference to your second question as to, you know, how do you see the margin expanding? So if you look at our portfolio of hospitals, apart from that network of Sayadri, which is at a combined margin of about 17%, 17.5% in Q1, a large number of our hospitals are in excess of the portfolio margin that we have, which is 24%. So, as these green fields drift up, you know, the green fields in Bangalore currently are at the two older ones, you know, older ones meaning, you know, six or seven months old. We are already broken even, and they are at about 13% margin in Q1. As these trend up, you know, like over the next year, year and a half to where they ought to get to, you know, that will pull up the composite margin, portfolio margin. As Sayadri, you know, like Karthik mentioned earlier, as those initiatives take shape and, you know, over the next few quarters, we expect to push up Sayadri closer to where the portfolio is. We have had a volume-led growth, Neha, like I mentioned earlier in Q1 and complexity-led growth in Q1. If these things really, you know, we think these are the sustainable trends, this is what will drive up margins further. We don't want to indicate a specific number where we will get to. But, you know, when we look at our portfolio, like I mentioned, we have hospitals at 30% margin, in excess of 30% margin, you know, several hospitals greater than 30, 32% margin. So, we would work towards pushing up our portfolio, entire network to, you know, further improving to those levels. I'm not guiding you to a timeline or a number, but this is directionally how we see that, you know, we can progress. Samir, you want to come in? Samir is our CFO.

Samir, if you would want to come in. I think so, Dilip, Yehai Neha, I think so, Dilip has covered. If you actually strictly go on the numbers, there is some one-off impact actually. Last year, same quarter, we had a reversal of 15 crores that gave us benefit last year. That was a one-off. It was a contract which was pre-acquisition in Medica, which the management team actually negotiated and we got a benefit. So, if you remove that, it is almost 0.6% because of that. And some of the doctor costs, as Dilip explained, because of the greenfield, as the greenfield ramp up, we will see the operating and doctor leverage come through in the balance part of the year.

Okay, that's very helpful. And just to clarify, we do not have any more greenfield coming in, I think, till the time we commission Mumbai in 29th. That would be right, right, based on the decisions that we have made?

No, Neha, you know, after Q1, you know, we, like I mentioned, our 50th hospital came up in an electronic city in Bangalore, which was in the month of July. So that would be in Q2 of this fiscal. You know, we don't, we have Raipur, which should be coming on stream towards the end of this year, or, you know, last quarter of this fiscal. That would be the next large, next green field in our pipeline. Subsequent to that would be Juhu, like you mentioned. In between Raipur and Juhu, we would also get this kinder, you know, we mentioned earlier in the introduction that, you know, we added 100 beds through an acquisition in Whitefield in Bangalore. So, we are reconfiguring that hospital. It's a reconfiguring to add to our profile in that region, in that part of the market. That would also come into play, additional 100 beds between Raipur and Mumbai. So, that's the line of sight that we have at this point, Neha.

Thank you, Neha. If you have more questions, you may please rejoin the queue. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participant, we request you to kindly limit your question to two questions only per participant. If you have a follow up question, please rejoin the queue. Our next question comes from the line of Aman Goyal with IFL Capital Services Ltd. Please go ahead. Aman, you may please proceed ahead with the question. Aman, your voice is very low.

Aman, would you like to rejoin the queue?

As there's no response from Aman, we'll move forward to the next participant. Our next question comes from the line of Bansi Desai with JP Morgan. Please, Cret.

Hi, thanks for the opportunity. So, firstly, on Sayadri, you know, historically, when, you know, Manipal has acquired assets, we've seen that, you know, we've invested into those assets in the initial years, and, you know, we are likely to Do the same with Sayadri as we integrate the asset and as we invest into specialties and everything. How should we then, you know, think about the medium term to longer term build out here? You know, any aspirations on growth margins if you could provide?

So, Bansi, thank you for the question. Like I mentioned in the introduction that, you Sayadri has already grown by 13%, 14%, 13% plus in revenue year-on-year, and I think 19% or 20% in EBITDA. This is, like you know, early in our journey with Sayadri, it is a few months, six, seven months into our fold, and we've been able to move up on this trajectory. And also, Banfi, as you recall what Karthik talked about, this has happened through the initial efforts of the doctor interoperability, conversion efficiencies, and also trying to really focus on the Congo mix and, of course, the service standards that we are trying to introduce. Now, all these would cascade into more efficiencies and more benefits to the bottom line as we progress. Now, like you mentioned, there is expansion happening in almost all locations of Sayadri. Deccan Gimkhana is undergoing an expansion. An entire tower is getting added. Hadebsar is adding beds. Like you also know that we have started a green field in Vakkad in North Pune. And like I mentioned earlier, Nasrika has already added the Oncook capacity, 100-plus beds. Oncology, Leenac, and PetCity have come. We are introducing Oncook capabilities at Ahilyanagar also. So I think, like you also pointed out, Ransi, we are investing in capital, in advanced technology, like Indeed we have done in all the other acquisitions in the past. So therefore, when Karthik talked about the playbook that we are trying to follow in Sayadari, It is exactly right, because these are the things which have worked for us in really turning around the past acquisitions, and that's the confidence that we have in Sayadri. And we are really happy to see, even in a short time, we've been able to improve our POP, significantly drive up volumes, add up to complexities of the work that we have, and continue to really drive on operating efficiencies. And that's the way we look at. And, you know, Karthik, I think you want to talk about the next year, year and a half, how do you see the trajectory? We are not guiding a particular number, but you could talk about how you see efficiency.

Banti, for a start, the amplification for the brand will come in once it's completely rechristened into Manipal, so that the nine units can then function as one. And pretty much it's going to be the same in terms of the concentration on the Congo R. Obviously, digital is yet to mature, you know, completely. We've also, as I told you, I mean, you know, the internal conversion efficiencies and the rest of the stuff that Deepak was talking about in terms of, you know, the out-of-hospital care, you know, the revenue opportunities, et cetera, all that will start folding into, you know, the brand in terms of what we're actually going to go ahead and look at in terms of the future. So it will be a combination of operational efficiencies, more clinical talent, you know, coming in. I think more initiative in terms of out-of-hospitals, etc., plus in terms of business development, both in terms of up-country markets as well as, you know, the Pune market, and a full integration of all the nine units is what is actually going to go ahead and lead us in terms of, you know, the next possible 16, 18 months.

And, Bansi, to talk about, you know, you could already see, I mentioned the length of stay improvement in Sayadri. I think 8% improvement already coming down to 2.8 does come through operating efficiency, right? I think, you know, that's a benefit. That's what Karthika is talking about. You know, it is a multifaceted approach, you know. A lot of initial efforts would be on operating efficiency as we scale up capacity and, you know, investments happen. But if you just look at the ARPOV improvement, the volume growth in patients, And the length of stay, which has already come down, despite the complexity of work increasing, I think this is the playbook that we have in mind. And that is what will drive up the margin profile in those hospitals. Yeah, thanks.

Appreciate the color there. My second question is on the expansion plan. So, you know, fiscal 27, we laid out a plan to add, you know, about 1,000 beds. And I'm assuming, you know, all of this will come in a staggered manner. And even within that, the commissioning of beds would happen in a phased manner. So, if you could highlight, you know, what kind of number of beds should we assume for commissioning in 27 and what could fill over to 28?

Karthik? Yeah, so Bansi, the near 300-bed addition in terms of our electronic city facility, which came up in Q2, that will, you know, happen, and we are expecting Raipur to get commissioned in, you know, the Q4 of FI27, and NASIC is already added in in terms of the 103 beds. So these are the three large parts that will actually go ahead and come in. And as far as the kinder buyout is concerned, we want to do what we do best, which is look at multi-speciality where the women care brand will actually be tucked in as a part of the hospital. So we're trying to go ahead and look at that as well. It's obviously an eight

So, we are on track to whatever we have committed in terms of addition. In fact, what Karthik said What kinder could be over and above to what we are actually committed in terms of bets. So we are on track in various points of time during the year. These bets will get added.

Our next question comes from the line of Shyam Srinivasan with Goldman Sachs.

Good morning. Thank you for taking my question. And just going back to the ex-Saihadiri margins, like the core margins, there has been a dip, like I think what Jus was saying as well. So, you know, if you were able to give us some quantification of the greenfield losses, is it like one percentage point of revenue or something like that, so that then we can back out what the like-for-like mature margins were?

So, Shyam, you know, if you could look at the last year versus this year, XI Adria margin, last year, Q1 was 26.5%. This year, Q1 is 25%. That's a dip of 1.5%. And Samir already talked about a one-off gain that we had in Q1 of last year, that material cost benefit that we had, you know, relating to a pre-acquisition, you know, contract in Medica. That, if you knock it off, the difference, that is 0.6%, like Samir explained earlier. The difference is 0.9% between last year and this year. And the greenfield, there are two elements. You know, the greenfield, Dr. Koss, you know, we have in both Kanakpura and Yelanka, the two greenfields in Bangalore, which were operational in Q1. While they are in the early parts of their lives, we are fully staffed with all the doctors. So the Dr. Koss element of that is above 0.5% for the network. That's the impact that we have. The other difference would be, Sham, that in Q1, some of the collection, particularly the scheme patient's collection has been a little slow, like the whole sector has been talking about. So that's only the two as they ramp up the doctor costs fall into place. And collection is something that, you know, which would also, as the year progresses, the year to this year, Sham, is not something which we are really concerned about. It is not a dip in terms of any operational issues. It is not a dip which is, to our mind, a sustainable kind of a situation. These are two one-offs. So that's the way we look at last year to this year.

Helpful. Thank you for that. And my second question is just on overall growth. I'm not asking for Sahih Adhri or any of that project. How should we look at, say, or if you want to call out, you know, just the standalone growth, is there some guidance that you're offering in terms of the path forward? Because 23%, again, I'm talking core growth here for the quarter, appears strong, right? So are there elements of it which is one-off in nature or seasonality related in Q1? Or do you think, how should we look at the path forward on a standalone basis?

No, so, Shan, the core growth is strong. You know, that's the point that we made in the beginning. You know, you are absolutely right in calling it out. It is a strong growth, and it has come through a volume-led kind of progress. So we don't really, you know, if you look at the underlying features of that, you know, the volume growth, of course, I mentioned both IP and OP, and the high-acuity specialties growing, that, you know, we pointed out the Congo are really growing, and therefore, our hope improving along with that. Green fields would ramp up, you know, now as we get into So, Q2, we are talking about three green fields, you know, including the electronic city one in Bangalore. So, these, you know, in our mind, the Q1 trends are not one-off trends, you know. These are fairly secular kind of, you know, tailwinds that we see for Manipal. So, we don't see these as one-off. Well, we are not guiding you to a specific core, you know, network growth. What we are saying is that, you know, these are the tailwinds which should sustain in the context of Manipal. And so that's the way we would look at it, Sham, unless Samir, you have anything to add?

No, no, no. So, Grip, I think so you captured it well. And this is the investment that we had made in the organization almost three, four years ago about the green fields. And the green fields have ramped up well for the last six, seven months. And those are adding to the organic growth that we are getting in the city. So, 23% growth, which we pointed out at Sayadri, seems quite robust at this point in time, And also, Shyam, that, you know,

at the cost of, you know, overloading you with information, let me say, when you look at the two green fields that we had in Bangalore, Kanakpura 1 and the North Bangalore, El Anka 1, you know, the Kanakpura 1 broke even in the fifth month of operations at an EBITDA level. The Alanga Hospital broke even in the second month of operations. These are the benefits. These are ahead of our own expectations. In our home market, when we add capacities, like we are now doing in Pune, like Karthik explained earlier, the capacity addition coming in the home market of Pune, I think that would add to the speed at which we can grow. I think these greenfields, like Samir said, are accelerating, and in Q1, we have 13% EBITDA margin from the greenfields, way ahead of any plans that we had. So, I think that's the confidence that we have, that, you know, without guiding you to a specific number, these are the tailwinds that we have as a Manipal network as we head out into the subsequent three quarters of the fiscal.

Thank you. Our next question comes from the line of Amman Goyal with IFL Capital Services Limited. Please go ahead.

Yeah, thank you. Thank you for the opportunity. So, my first question is on ALOS. So, we have an industry-leading ALOS. So, I just want to know how we have built this ALOS despite we have the largest hospital chain with a high base and where our peers are lagging somewhere between three and a half to four days. So, can you throw some qualitative aspect? What is the medical or clinical excellence we have done over the past few years?

I only want to say, Aman, welcome back. We missed you at the first round. You know, glad to have you back on the line, and I request Karthik to answer the question on length of strength.

Aman, actually, you know, this entire Allos bit started about a few years back when we had actually been there at about 4.2, 4.3. What we did was the first step to weed out the inefficiencies because we felt that much of 4.3 didn't have a, you know, clinical connect. It probably had an administrative connect and some inefficiencies there. So we worked on, you know, administrative inefficiencies to actually start to go ahead and look at it. So that was one reason why very, very clearly we started to look at a trend down as far as the, you know, loss is concerned. Reasons two and three would be that from an institutional mix of government payers, we have about 14%. There again, you know, the allos tends to be a little higher, though our, you know, international patient growth has actually been, you know, very good in the first quarter, about 65% over, you know, last year. It still continues to be about 3% of our, you know, overall revenue. So these are the three things. And, you know, within the Allos, the main, you know, emphasis was on actually going ahead and reducing the discharge turnaround time. So be it with cash patients, be it with insurance, et cetera. We'd worked significantly, put in a lot of internal operating processes in place, you know, like planned discharges, et cetera, to ensure that, you know, we do, you know, discharge the patients on time because, you know, one, it turns over the bed faster. Second, we don't want anybody to actually go ahead and spend, you know, more time in the hospital as a patient because that's not good for them. They can recuperate much better at, you know, home as well. So, this is how we actually brought it down.

Thank you. That was very nice. So, second one on this. So, what is the optimal leverage we will consider in future to post the IPO proceed? I mean, we will repay the debt. Right. So what level we are actually comfortable going ahead? And what is the KPIX guidance for the next two, three years if you help me with this?

Samir, our CFO would respond to that.

Yeah, I am. So as, you know, Dilip was pointing out about the greenfields that we are going to launch, Mumbai is going to come up. We had, you know, in the next three, four years, as we add the 3,000 beds, we will spend around 4,000 crores of KPIX. As far as the leverage is concerned, we are currently, the net debt to EBITDA is around 2.8 times. Once we repay this debt, which we will do it in quarter two, since the trigger has already been initiated post-receiving the IPO funds, our net debt to EBITDA will go down to 0.9 at quarter one level. So, we are fairly comfortable. I think so, we will continue to use debt judiciously as we look at opportunities to keep growing. I think so, leverage of industry averages currently around 1.5 to 2. We are fairly comfortable operating at that level. But in case if we have to go higher, it will be only due to an opportunity which cannot be missed. Otherwise, we are fairly comfortable operating at 1.5 to 2 leverage, Aman. As far as the CAPEX for the current year is concerned, I think so current year we will end up spending almost 2,000 crores of CAPEX because of the bean fields and brown fields that are coming up. You will also be happy to note that we have spent quite a lot of money in quarter one itself. Almost 900 crores has been spent in quarter one. So we are trying to front end a lot of CAPEX so that we get the benefit and leverage of that for the entire financial year.

Thank you. Our next question comes from the line of Bala Murali Krishna with Oman Investment Advisors. Please go ahead. Mr. Krishna, you may please proceed ahead with the question.

Yeah, yeah, good morning. So, first of all, congratulations on good listening, and also I would like to appreciate the time to reduce the early end of stay, and also focusing on the volume of growth rather

Thank you for the comment on the length of stay and the volume growth. Like I mentioned earlier, we believe, you know, as you agreed, that, you know, that's a sustainable way for a hospital to grow, that serve more patients and not really look at the price-led growth. So that's been the Manipala philosophy, and I'm glad that you quote that. Kinder, you know, we, like Karthik also mentioned, Bala, it is currently a women Women and children kind of a hospital, our intent is to really modify that asset, you know, slightly rework on it to convert it into multi-speciality. So, we are really not looking at the current revenue or EBITDA profile. I think current revenue is about 22 crores or something. Yeah, 4 crores a month. Yeah, and 3 to 4 crores a month was the current We are not really looking to build organically on that at all, Bala. The reason that we acquired this asset is Whitefield in Bangalore is a high-growth area. We already have two large hospitals there, which is really performing at a very high level. For us, this adding this 100 beds gave us a good capacity addition in a high-growth geography, and that's the reason for our acquisition. It is really not to build on women and children capability that kinder has. I think we will, over the next six, seven months, remodel that hospital to multi-specialty, and then we would really take it to its potential, you know, what 100 wets can do for us in that wide field area. So, it is not at all about current revenue or current margin profile of kinder. It is, frankly, irrelevant for our purposes. It is about what the opportunity

And this comes with the land and building included. So, there is no rental. So, as we remodel this hospital, there will not be any leakage in terms of rent. So, this facility has been bought with the existing building and the land which will get transferred to us once the necessary CPs are fulfilled. That's great, sir.

So, on the specialization front, so infertility is one thing. There are some, which is like super speciality in infertility. There are some speciality clinics or in standard clinics. So, what is the contribution in our business in this one, and do we have any views to improve this? So, if it is available already in our business, then what would be your projections about that if you want to improve that system?

So, again, Bala, like I said, we are not looking at kinder specialties, you know, to add to the base that we have. You know, actually, what we plan to do is shut down that hospital for a few months, you know, really to remodel. So, it is, you know, currently, you are right, you know, they do infertility work, and they have Opsgaini work. We have infertility work happening in our Whitefield Hospital already. So, we have the infertility capability already existing in that geography. So, that is not something that we need to retain at Kinter. Like I mentioned earlier, we will temporarily close down that hospital for a few months for renovations. And as Karthik mentioned earlier, post-renovation, it would be a multi-specialty, you know, kind of a facility, really as an extension that, you know, our two other hospitals in that area, Whitefield and Vartu, both are multi-specialty quaternary care facilities. This would be, in many respects, an extension of that capability, that capacity. So, once again, we are not looking at what Kinder did in the past. Frankly, like I mentioned earlier, not relevant for us because those capabilities we already can accommodate in our existing other hospitals in Whitefield. This is really about adding significant capacity in a fast-growing micromarket in Bangalore, and we believe this was a very attractive transaction that we could enter into. Like Sameer said, after CPs are completed, we expect in the next 60 days, the transfer to Pudli take place and then take up remodeling that asset. And I hope that makes it clear.

Thank you. Our next question comes from the line of Alankar Garude with Kotak Institutional Equities. Please go ahead.

Sir, firstly, can you comment on the performance of AMRI and Medica in this quarter, and how soon do you expect margins in these two acquired entities to reach the network margins?

Sorry, what did you ask, Kalankar? AMRI and Medica performance. Alankar, just give a second to pull out the numbers.

What was the second part of the question, margins?

So, the second part there was, how soon do you expect margins in these two entities, both AMRA and Medica, to reach the network-level margins?

So, thanks for the question, Alankar. AMRI, actually, this quarter has grown 17% over the last year, same quarter, and Medica has grown 15%. So, both of them continue to grow at the trajectory. Obviously, East will see some changes that will happen as far as the government mix is concerned. We already started seeing the slowdown of the government mix because the scheme will get maybe recristened from the current scheme to the national scheme. But one of the things that has worked well in East overall is the cash and TPA businesses actually grown 22%, despite the overall growth being 17%. So, if I mix AMRI, and I always say that, you know, it's AMRI, Medica, Colombia, Asia, there are three entities that exist in East. We run East as one state and Kolkata as one city. So, if you look at East as a region, actually, we have grown 17% in top line. But the cash and TPA has actually increased 22% because the government business has been pretty flat. So, all the efforts that has been done in terms of adding doctors, clinical talent, And adding investments, our Dhakuria facility will have extra beds. I think that will come on stream in the next quarter as well with a fully integrated ONCO program. So, EAST continues to do well. And it is on the trajectory that we plan for EAST in terms of margins as well, Alankar.

Just one follow-up there, Samir, is this transition in the scheme makes. How long do you think this will continue? Would it be a matter of a few months or a few quarters?

Yeah, I'll just ask Karthik to give you an update on that. Alankar, it's on the anvil. Hospitals are in, you know, discussion with the authorities, so we should hear from them, you know, very, very shortly as to what the way forward is and what the next steps are. But, you know, as Samir mentioned, in the meantime, we continue to actually go ahead and, you know, through brand equity, attract cash and TPA patients, That's what we will do. But it is on the annual, Alankar, and it should get closed shortly.

Thank you. Our next question comes from the line of Karanvora with Goldman Sachs. Please go ahead.

Thank you for taking my question. My first question is with respect to the kinder acquisition and the rationale for the size of the hospital, right? So when we speak to some of the peers, the general thing which we get for a multi-specialty hospital, the ideal minimum size is like 250 to 300 beds, right? However, we have been successfully running multiple hospitals with like 100 or less than 150 beds, right? So, just wanted to get a sense with respect to what's your rationale for the same, and do we provide all the multi-specialty services in such hospitals, or we just provide whatever is not there in our existing other larger hospitals nearby those smaller units?

So, Karan, I'll discuss it here, and I'll take that question. Now, the intent of actually showing up Whitefield is because it's still a high-growth housing inventory, you know, micro-market, and we already have two hospitals, you know. So, the intent is to actually bolster that by giving this, and if you really look at the original Columbia Asia model, Most of them were sub-100 bedded hospitals, which we moved from secondary care into tertiary care. So we quite adapted handling sub-100 bed hospitals in terms of, you know, the super speciality and quaternary mix. So what will actually go ahead and happen here is minus of transplants, which will happen at the, you know, hubs in Whitefield. The rest of the specialties will be, you know, offered. We're actually going to go ahead and have a cath lab, CT, MRI. We're going to go ahead and provide them with good theater so that clinical talent coming on board will have good facilities to operate in. So everything minus a transplant to a large extent will be here, and that's how we run most of the other sub-100 bedded hospitals as well. And to your question of 250, 300, if you were to go ahead and look at a micro market independently, Yes, that's the size that we would like to go with. But given the fact that we are fairly well served here, a 100-bed addition is only going to be more beneficial for us. So that's the way we are looking at it.

And Karan, you know, also to your point, if you were to build a new hospital that, you know, we are building a green field ground up, like Kathik said, we would look at that minimum capacity. You know, we would not build a 100-bed green field facility. You know, that is certainly the case, you know, the point that you made. But this was an addition that we were making in a territory, which really would be a third geography, third location that we have in that Whitefield area. And therefore, incremental capacity when two large hospitals, multi-specialty hospitals are already there, it's a running start we get. So that's the way we, it's a capacity addition, it's a cluster of hospitals that we have in Whitefield, and barring radiation, like Karthik said, barring one or two specialties like radiation oncology, it would be multi-speciality, and that's the way we would look at that. Got it.

Really helpful. My second question is with respect to, I think there has been a regulation change where now even for-profit entities can run medical colleges. And one of our peers recently highlighted entering into that business. Now, given that we already have within the broader Manipal group medical colleges, are we planning to bring some of them into the listed entity or do more like medical college work into the listed entity? Any plans on that?

No, Karan, we have no such plans. We believe Manipal Health Enterprises should remain focused on providing the highest end of tertiary and quaternary care, the brick-and-mortar hospitals that we run. I think that is what sets us apart. That is what gives us clarity as a management team and gives clarity to our customers that this is what Manipal Hospitals is about. So, we would not want to dilute that focus. I think we intend to remain a specialty provider. Like we talked about our high-acuity mix and centers of excellence, we would want to remain a national player, really leading in clinical outcomes in these complex procedures. I think that's been our growth and our trajectory over the last decade, and that's where we would want to remain focused on currently.

Thank you. Our next question comes from the line of Ankush Mahajan with Zectum Wealth. Please go ahead.

Sir, thanks for the opportunity for the question. Most of the questions answered was in sum of, sir, we have now 2,600 product for beta for FV26. So, I just tried to understand in some way that what are the growth drivers that would lead this growth like product mix. So, Ankush, you know,

the answer is exactly like what you detailed just now. I think the way we look at our futures around what will drive our growth in FY27 and in the years ahead, the way we look at it is exactly that, Ankush. If I could summarize, we have the largest bed capacity in the country, over 13,000 beds now, and like Sameer talked about earlier, 2,000-plus beds are coming on stream in a short period of time. So our bed capacity would continue to increase. Because our length of stay is so low, we've been able to treat a very large number of patients with just occupancy of just 65% is our occupancy level at this current network. So, we have headroom to grow in occupancy. We got additional bed capacity coming in. Like you mentioned, our Congo R, our centers of excellence, high-acuity mix is growing. That's the third element. And Sayadri, you know, came to us as an under-managed asset with low EBITDA margin. We've already been able to take up the EBITDA margin to 17%. And in the Sayadri network, you know, whereas the ex-Sayadri network is at 25%. So that's the third, you know, the lever that we have. Then all the green fields as they ramp up, you know, three in Bangalore, which have already been commissioned in the last 10 months, or Raipur, which would come towards the end of this fiscal. Juhu in Mumbai, you know, following that. Vakkad in Pune, which would be following that. So these are the four or five levers which have clear visibility for us. This will drive our growth. Operating efficiency would continue to be there, you know, in terms of, you know, everything that we can improve in material costs or, you know, length of stay further, conversion efficiencies, digital revenue. These are the levers that we have actually as we go ahead to really, you know, look at the growth further. And finally, also like Samir mentioned earlier, we have a delivered balance sheet post this IPO. You talked about 0.9 times that EBITDA gives us the ability to really, you know, raise funds to expand to other geographies. So far, I have been talking about existing capacities and already committed bed counts which are coming into play. We have keen interest to expand to Kerala as and when an opportunity arises. We would be keen to further expand our presence in NCR. We would want to look at Hyderabad. These are inorganic kind of opportunities that we will keep in mind. So, this inorganic liver is completely out of the other four or five things that I outlined earlier. So, therefore, as a team, we have great confidence in our ability to grow. The healthcare sector in general is poised to grow. You know, it's got all the right tailwinds which is driving the sector. And we believe Manipal is positioned very well to tap into that for the reasons that I outlined, you know, in the last two, three minutes.

Thank you so much. Ladies and gentlemen, due to the time constant, that was the last question for today. I now hand the conference over to Mr. Diwakar Pingli for the closing comments. Thank you, and over to you, sir.

Thank you, Dhanesh. Thank you all for joining us today and for your continued interest in Manipal Health Enterprises Limited. We appreciate time and engagement. Should you have further questions or require any additional information? I know there are a few participants still waiting in the line for questions. You can definitely write to us at investor.relations at manipalhospitals.com, and we'll make all the effort to kind of get back to you with those questions. Again, I'm just repeating the email ID, investor.relations at manipalhospitals.com. Thank you once again, and thanks for joining for the first earnings call of Manipal Health Enterprises. Have a great weekend. Bye.

Thank you, Diva Kastro. Ladies and gentlemen, on behalf of Manipal Health Enterprises Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.