Nephrocare Health Services Limited (NEPHROPLUS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to NefroCare Health Services Ltd. Q1 F527 Earnings Conference Call hosted by IIFL Capital. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as of date of the call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 the touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Naman from IIFL Capital. Thank you, and over to you, Mr. Naman.

Thank you. Good morning, everyone. On behalf of IFL Capital Services Limited, I welcome you all to the Q1F520 conference call of NEPRO Care Health Services Limited. We are pleased to have with us the management team, presented by Mr. Vikram Bukula, Chairman and Management Director, Mr. Kamal Shah, Co-Founder, Mr. Rohit Singh, Groups CEO, and Mr. Prasam Gohengar, Groups CEO of NEPRO Health Services Limited. We will have opening remarks from the management followed by a question and answer session. Thank you. Thank you.

Very good morning, everyone. This is Vikram Bupala, founder chairman and managing director. Thanks, everyone, for joining our first quarter of FY27 earnings conference call. Along with me, I have Kamal, the co-founder. We have group CEO Rohit Singh and our group CFO, Prashant Goenka, on this call. We began FI27 on a study note, with Q1 revenues growing more than 20% year-on-year. This study performance reflects the strength of the platform business we have built over the last 16 years, supported by disciplined execution, a resilient operating model, and a continued trust of our patients, payers, and hospital partners. The foundation of this platform was laid 16 years ago. When we recognized that the growing prevalence of diabetes and hypertension would inevitably lead to a significant increase in chronic kidney disease. As kidney disease progresses, majority of these patients eventually move to the stage 5 where you require dialysis or a transplant to survive. However, we also realized that delivering dialysis at scale would require addressing three fundamental pillars, quality of care, accessibility, and affordability. These principles continue to guide every decision we make at Nephroplast. Let me start with our core pillar, quality. Dialysis is fundamentally different from most other healthcare services. It is not an elective procedure or a one-time procedure. It is a chronic, life-sustaining treatment. Every dialysis session enables a patient to live another few days. In Nephroplast, we take quality as the cornerstone and... Hence, the quality team does not report into the business team. They report to the chief medical officer directly. This enables our quality managers to do their clinical audit work without any pressures from the P&L owners. Every clinic... And all of our clinics across the network are ranked on clinical outcomes.

It's across five countries. 5% of the revenue. The Philippines and the India model. Our business in the Philippines remain one of the strongest validation of the NephroPlus India model. We added seven clinics here this quarter and crossed a significant milestone of 50 clinics across 39 cities. the country, we have become the second largest distributed dialysis network. The India model is much more than a network of clinics. It is a proven operating platform built over 16 years, combining standardized clinical protocols, robust operating processes, and deep expertise in managing reimbursement-driven dialysis ecosystems. It lets us deliver superior outcomes efficiently at scale and gives us a repeatable blueprint for new geographies. But simply, Nephroplus is a dialysis platform built in India for the world. On public-private partnership, we deepened our footprints in Bihar this quarter and signed a new contract in Tamil Nadu. We also let go to clinics under the Uttarakhand PPP that are valued additive. We will not pursue business that does not meet our return thresholds. That discipline is deliberate and we remain positive about PPP opportunities overall. Clinical quality. Clinical quality is the foundation of everything we do and makes the model replicable. Two proof points in this. First, our early vascular access program in Andhra Pradesh. A catheter in hemodialysis raises risk to life by roughly four to six times, and mortality risk is the highest in early phasor dialysis. So, across 21 centers and 2,000 guests, we moved monthly AVF creations from 15% of the guests to 30%, thus reducing mortality. to close to 15%. Second, the Nefroplus Index, a single composite health score derived from seven rated clinical matrices. It is live across 29 centers into 2,600 guests, letting us predict outcomes and intervene at the individual guest level. Overall, the coming quarters, we will aggregate it up to clinical clusters, zone, and country level, giving us a single lens on clinical performance across the network. The Blue Book, our manual for putting our guest first culture into practice at the last mile. Clinical standards can be matched. A culture this deeply embedded cannot be. What we call the NIDA as an in-house program to build a pipeline of renal nurses qualified to work anywhere in the world. The first batch will begin training in the third quarter. Access to trained renal nurses is a genuine constraint on an international expansion in this industry, and NIDA is how we intend to. It's already live in several back office functions. We have created our subsidy in Kazakhstan, creating a platform to evaluate opportunities across the country and in Central Asia. Our approach to new market remains disciplined. We assess reimbursement, regulation, demand, and long-term sustainability before committing capital. In Saudi Arabia, we continue to make steady progress. Our first clinic at the Riyadh Hospital became operational in July, and we have commenced home dialysis operations there as well. We have also obtained our medical operator's license and submitted our response to the Ministry of Health's tender RFI. With the formal tendering process expected to begin in a couple of months, we remain optimist about the market, while recognizing these timelines are not fully within our control. Looking ahead, our priorities remain unchanged. We will continue to expand access to quality dialysis care, strengthen our leadership in India, replicate our proven model internationally, and pursue growth with the same disciplined approach.

Thank you, Rohit, and a very warm welcome to everyone joining us today. I will take you through the financial and operational performance of the company for the first quarter of FY27. As Vikram and Rohit highlighted earlier, on a steady note, with healthy growth across our key operating and financial parameters. Revenue for Q1FI27 grew by 23.7% year-on-year to Rs. 282 crore compared to Rs. 228 crore in Q1FI26. The growth was primarily driven by higher treatment volumes, supported by continued expansion in our international business, which also contributed to an improvement in revenue per Moving to profitability. Our adjusted EBITDA, excluding USOF cost in Saudi, student rupees 65.1 euro, Corresponding quarter last year, reflecting a growth of 31%. Adjusted EBITDA. Thank you. 27. RPT. 3 rupees in the same period last year, representing a growth of 9.2%. The improvement was We also remain focused on disciplined capital deployment and improving capital efficiency. Our annualized adjusted grosses stood at 21% in Q1 FY27. On capital allocation, we continue to deploy IPO proceeds towards expanding our network. And pursuing center acquisition across both India and international market, as well as paying off our term loans. As on June 2026, we have utilized 68%, which is about 207 crore, from fresh issue from IP. The capital expenditure for Q1 stood at 44 crores towards center acquisitions and growth. Overall, our Q1 performance reflects continued execution across our growth initiative while maintaining focus on profitability, capital efficiency, and discipline expansion. Lastly, as highlighted earlier, our growth strategy continues to be anchored on the three key levers we have previously outlined. We continue to maintain our medium-term growth guidance of 15-20% over the next 3-5 years and remain focused on delivering sustainable and capital-efficient growth. With that, we now open the floor to questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 when it touches on 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. The first question comes from the line of Afshay Thakur with Helios Capital. Please go ahead.

Hi, sir. Very good morning, and thanks for taking my question. So, my question is on the depreciation. So, the primary equipment in the clinic would be the dializer and some other CAPEX things also. How do you depreciate these assets? What is the timeline?

Yeah, so this is Prashant. I'll take this question. On the depreciation front, first of all, I just want to highlight depreciation as a percentage of revenue has remained flat year on year, which is around 8.6 to 8.7%. To answer your question, we depreciate our machines anywhere between 7 to 10 years. Depending on the country and the local regulatory requirement, one of the things that you would have noticed this time is that we have seen two major changes on the depreciation front. One, we are becoming more and more disciplined about our fixed asset, deployed a new technology whereby through RFID, we are able to track our fixed assets machines, and which has resulted in far more disciplined approach in deploying the capital assets. Resulted in a reduced depreciation cost in markets like India. Second, in markets like Philippines, we have done seven acquisitions in the last quarter. For these acquisitions, we typically pay a goodwill, which we then split into intangibles, which result in a slightly higher amortization, which result in a slightly higher depreciation, which then sort of dilutes over a period of time as we amortize it over a period of five to seven years, the goodwill amount.

Thank you, sir. Thanks for the comprehensive answer. My another second question is on the fixed capital investments. So, you had mentioned that you spend around 4 million per bed for the Philippines Greenfield. Can you, do you have any ballpark figure for the acquisitions you make on a per bed basis?

So, in Philippines, I think... As we indicated earlier, it's a market with a lot of mom-and-pop shops. 150 to 200 are owned by large chains like us, two-three large chains like us, but the remaining 700 clinics are owned by... Either one or two clinics. for negotiation happening at a mom and pop level. So, as a matter of practice, we don't share the details because they tend to be very variable, and it also is a competitive information for us.

Okay, sir. Thank you. One question on the working capital part. So, you had mentioned that your working capital days are around 120. So, is there an indicative or understanding on the India part and the Philippines part and the Uzbek part? Is there a differentiation in that number? Can you help us in terms of qualitative sense? Can you help us understand the variability in that?

Yeah, so I think as Vikram in previous calls have explained, dialysis is a slightly more different type of industry, right, where structurally the working capital requirements are higher because we deal with the government and the government payment typically comes over three to four months. So whenever we look at projects, we look at the ROSI as one of the key metrics, and in the ROSI, we account for the working capital requirement, and only when the project makes sense. From a ROSI perspective, we invest in that project. And therefore, working capital is an expected number and we are very comfortable with it because we have accounted for it as we made the investment. Now, to answer your more specific question around how much is the working capital days, while I cannot get into the specifics of the country, but just to give you an idea, one of the key drivers of working capital days is the AR. And compared to last year, our working AI days has improved from 121 days to 101 days. So we have seen a 20-day improvement on the back of a lot of digitization and a lot of AI work that we have done in the company. But having said that, the industry should expect the AI days to remain relatively high because that's the structural part of our industry that we are in.

So thanks for answering my questions. That was very helpful.

Thank you. A reminder to all the participants that you may press star and want to ask a question. Next question comes from the line of Siddharth Negandhi with Chanakya Wealth Creation. Please go ahead.

Thanks for taking my question. Just wanted to understand two things. One, the material margin improvement that we are seeing has been fairly robust, right, and quite good. How much of that is driven by the fact that there is a mix on the international side? And much of it is driven by inherent sort of cost improvements that you're doing. The second part is if I look at the center growth, right, we've taken 60 centers or added 60 centers on a base of 500, I started taking this to about 550, if my calculations are right, which would be a 12% increase in centers for a 13% guest volume increase. And therefore, the remaining is productivity improvement on a... Um, on an average per center, right? But that, that obviously would, would be different for existing centers and new ones established. So if you could give us some understanding of occupancy or productivity per center on, on how that has improved. Uh, and third one, you spoke about AI on obviously a lot of. AI initiatives that are reducing the back-end operational work and bringing efficiency. Any AI initiatives that are likely to improve patient outcomes that you're working on? Yeah, those would be my three questions.

Sure, Siddharth. I think I'll take the first one around margin improvement, and then I'll request Vikram and Rohit to help on the other two questions. I think you talked about the margin improvement. Yes, we have seen the EBITDA margin improve by 125 basis point. A good part of that improvement came because our COGS, if you look at the COGS as a percentage of revenue, has improved by 175 basis point. As we have discussed in the past calls, this is, MetroPlus is a platform play. We have operated in a country like India with the lowest price point. And created an operating model that when we take it to other markets with higher price point, we are able to scale more profitably. The same thing happened this quarter. We were able to take our procurement platform to other markets, and we were able to improve our COGS efficiency at a meaningful level. And that is one of the key factors that has driven the improvement in the EBITDA margin. So that's the first question. In terms of the center and the AI, I'll, yeah.

On the center point, Siddharth, this is Vikram. Essentially, we look at capacity utilization from a clinic-by-clinic perspective, right? We don't look at it from a country-level optimization perspective, but any clinic which is already heavily utilized, let's say 85% utilized, in dialysis, you need to have some spare capacity for breathless guests who come in unannounced, right, unplanned. So, capacity utilization, the point around 13%, the addition of 50 clinics, it's at a country-by-country level. We optimize it at a micro-clinic level, wherever there is utilization improvement that can be done with addition of guests in a center with low utilization, we go for it. But highly utilized centers, we cannot go. So, we can't add up underutilized. Good, well-utilized, and heavily-utilized clinics, and look at it at a macro level. That's on the point number two. On the AI question, I will ask Rohit to answer the question.

Thanks, Vikram. On the AI front, as I briefly mentioned, that we have taken several initiatives to improve processes. And that's still a work in progress, and we still see a lot of headroom for improvement there, and that will continue. To answer your precise question around AI initiatives for guests, on the clinical front, I think there are many details in other companies that are working on that. So there is no precise AI initiative for the guest clinical improvement that is happening, but we are definitely focusing on data. We are working on Nefroverse Index, and we will be effectively using AI to interpret that data and probably look at some forecasting tools in future.

Yeah, I'll just add to what Rohit has said on AI on the clinical side. I think last quarter we mentioned about our reform.ai application, right? That way we can make sure that the processes are followed to the T using CCTV cameras and our AI algorithms much better than any other manually driven audits, right?

It was a very detailed and very useful response and wish you all the best. This was really helpful. Thank you.

Thank you. Next question comes from the line of Aniket Singh with Kotak Institutional Equities. Please come in.

Hi, sir. Thank you for the opportunity. So, I was going through your presentation, and in one of your slides, you have mentioned that it's an asset-like expansion model with low amount of CAPEX required. So, what is our moot here that is leading to strong growth for us? Is it our network that we are operating at such a large level that our costs are rationalized? And what is the key differentiation that we are providing to the customers? So, for example, if a customer is going to a private hospital compared to coming to a NefroCare clinic, is there any particular differentiation in the customer experience?

Yeah. Thanks, Aniket, for the question. This is Vikram. Essentially, in dialysis business, throughout the world, you need massive scale and 100% focus, as I mentioned in my opening remarks, right? If you look from a network mode perspective, NephroPlus has been EBITDA-negative for the first 11 years. Pat-negative. Pat-negative for 13 years. So you need massive scale to amortize a high fixed-cost business. Like the dialysis business is like airline business. And you need massive scale to amortize your fixed cost. So any player who wants to enter the dialysis business, they will have to build that scale, and they have to be 100% focused. From a barrier to entry or a mode perspective, right, it's not a high margin business at low scale, like a pathology business. This is a very different business. The second point is, at a network level, at a platform level, we have built four distinct levers which enable us to create supranormal margins compared to any other player. The first one being global procurement of our consumables, which... Which are the most expensive cost item in a country like India. In consumables, we have various levers, be it even contract manufacturing of low-complexity consumables. The second one is efficient human resource management. Because we are only focused on dialysis, we have training academies to create fresh talent, which are at much lower competitive cost and much better trained compared to procuring talent from the market. So that gives us a competitive edge on the HR front. The third one is our in-house biomedical team. Throughout the world, most of the dialysis networks use We have contracts with manufacturers on their maintenance and repairs. We believe that there is information asymmetry between manufacturers and service providers, where the service providers are usually taken for a ride. So, 80 years back, we built our own biomedical team, and this now is applicable in every country we operate, where we do preventive maintenance. This machine is just like a car. If you take care of the car really well, then the repairs cost will be much lower. Whereas a service center, if you go to a service center with a car, they will mention three, four technical terms and bill you very high because there is information asymmetry. So biomedical is a huge lever for us. Fourth is the lean operating model which we have built in India. So because of the lowest price point in the world, we have built. Audit function, we have built operational overheads, the finance overheads, HR overheads in a very lean and mean manner. From your last question on what is the difference when a patient goes to a hospital-operated dialysis unit versus a nephroplast, to give you an idea, hospitals don't generate more than 1% of their revenue from dialysis operations. It's not even the 10th profit driver of the hospital. It's a loss-making business mostly because they neither have the scale nor focus. The hospitals do not have the bandwidth because the Congo specialties are where the profit drivers are, and they would rightfully so focus on the other specialties where the profits are higher. Hospitals do not focus on dialysis operations, whereas for Nephroplus, that's our only... The way we run the clinical protocols, the way we standardize the clinical responses to complications, the way we... Vigilance-related audits, no hospital. There is a distinct difference, and hence the hospitals are partnering with us throughout the country. There are more than 300 hospitals.

Thank you, sir. Thank you for that detailed answer. So, just to continue on that point, the private hospitals are partnering with NefroCare. So, you provided that these partners provide you space and utilities, and I'm assuming that we would be installing our own machines, and how does this revenue share agreement work? Because, as you mentioned, that it's less than 1% or 2% margin for these hospitals. So, like, we are also taking revenue from those operations. So, is it just the low investments from their side that is leading them to give the business to us? Or is it something different in terms of the agreement that we have?

So, Anike, this is Rohit here. So, when we partner with these hospitals, typically they provide us space and utilities, and all the other investments in the equipment and furniture and other assets are done by us. So, it is purely build, own, operate kind of model there. And why do hospitals partner with us? Obviously, because we got the scale so that we are able to run the operations profitably. And for hospitals, as Vikram mentioned, this is not a big profit driver. And also, it helps them free their operating bandwidth. Their focus on dialysis, since it is not the most profit-generating one, is one of the services that the hospital provides. It is not the focus service. For us, this is 100% of our revenue, hence it is 100% focused. So, there is operating bandwidth that gets freed for the hospital partners. There is no upfront CAPEX investment there, and they get the desired unit economics because they are partnering with us. So, the unit economics is taken care of, and Nefroverse delivers world-class quality dialysis. So, their objective of dialysis at the quality is, and with the unit economics protected, is taken care of by freeing their bandwidth and CAPEX saving.

Yeah, just to add to what Rohit is saying, the hospitals, no hospital in the world makes money on pure dialysis operations. They make money from the adjacencies of dialysis, which is kidney transplants, ICU admissions, lab procedures, pharmacy, fistula procedures, and so on. When they outsource to Nephroplast, they continue to make money on the adjacencies. So, in an ideal world, 100% of the hospitals should outsource dialysis, but we are in the early stage of the maturity of the dialysis market, right? 16 years back when we started, 0% was the organized market. All the hospitals were running their own dialysis operations. 16 years later, it's 21-22%. But still, there is 78-79% of the hospitals who are running their own dialysis operations in a very inefficient and not so measured quality clinical outcomes manner. So, this will take a long period of time for the conversion from the unorganized market to the organized market. But it's a fundamental financial unit economics related decision, as Rohit mentioned. This is not... Medical Quality Improvement Initiative. This is a pure financial optimization initiative from the hospital side.

Got it, sir. Got it. And so lastly, as I'm seeing that rising revenue per treatment for you has been going at a case of around 11%. So what is driving this? Is it a shift to international markets where realizations are high because that mix is also improving for us for the past couple of years? And do you expect this mix to continue to rise and the share of India business will continue to decline over the coming years as you continue to expand in international markets?

Yeah. Hi, Anik. This is Prashant. I'll take this question. So I think there are a couple of things that drove that Kager that you mentioned. I think one, obviously, the improving international mix is the primary driver of that Kager. As we have stated before, it is to add. A new international market every 12 to 18 months. And that strategy will remain a key focus area for us, and we are constantly working on it. For example, you have seen Rohit talk about Saudi. We have done a stock exchange disclosure on Kazakhstan opening an entity. So we continue to share a few things with the market, but there are many more things that we are doing from a business development perspective. So, in terms of the international revenue currently standing at 45%, it was 30% a year and a half back, that number will continue to inch up slowly, with India being the core platform, right? So, it's not that the international growth is coming at the expense of India growth slowing down. The India platform will continue to grow, because without the India platform, we really cannot make the kind of profit we make internationally. But the fact that new countries are getting added, that number will continue to inch up. Second, on the 11% CAGR, one more thing that we should note is in Philippines, we saw a 55% to 60% price increase in October 2024. In dialysis, you will see the price typically increases slowly. And once in a while, there is a lumpy price increase. So in Philippines, that price increased after 10 years. And now probably that will remain at the same level for a certain period of time. That also is coming as a factor in that Kager number that you drove. So one should not expect that same Kager number to continue forever. The numbers will fluctuate up and down depending on the international market we enter in and how the mix changes.

Thank you. Thank you, sir, for answering all my questions.

Thank you. Next question comes from the line of Pranav Chawla with JMAMC. Please go ahead. Mr. Chawla, please go ahead. Mr. Chawla, please unmute yourself and go ahead with the question. Since there is no reply from the line of Mr. Chawla, we will move to the next participant. That is Khusel Chawatia with Nomura. Please go ahead.

Yeah, hello. So, first of all, can you let me know what was the contribution and revenue of the currency this quarter? How much was due to the fluctuation of currency?

So, Prashant, this is Prashant here. I'll answer this question. This quarter, we did not see much from the forex front. We only saw 20 lakhs favorable outcome. Currencies were largely, there's a little bit of background noise, currencies were largely flat in this quarter compared to last year. So, not too much action on that side.

Okay. And can you let us know what is your CAPEX guidance for this year, split it into between India and Philippines?

So, Kushal, we typically don't give guidance on the CAPEX front. For this quarter, as I mentioned, we have done about 44 crore worth of CAPEX. That compares to 43 crores same quarter last year. We have indicated in our calls that we intend to open 40 to 50 clinics in India every year, 10 to 15 clinics in Philippines every year, and we intend to open a new international market every 12 to 18 months. And that is the extent of what guidance we are providing in terms of our CAPEX plans, more at a strategic level.

Okay.

And any assumption on the tax rate which you can provide for those financial years in this quarter we saw just a 20% tax?

Yeah, so we currently operate at scale in three markets, India, Philippines, and Uzbekistan. There are a few other markets, but the B3 market predominantly drives the numbers. India and Philippines are similar markets where the tax rate is 25%. If we maintain our healthcare services revenue at more than 90% of the revenue comes from healthcare, then there is no corporate tax. So, Rudeik is at 0% tax rate. So, I think the composite of the three depends on the revenue mix, but I think the current number probably reflects a good proxy you can use. The numbers may fluctuate a little bit depending on the mix, but the current numbers are a good proxy.

Yeah. Thank you. That's welcome.

Thank you. Next question comes from the line of Pranav Chawla with GM AMC. Please go ahead.

Hello. Am I audible? Yes. So sorry, sir, for the previous issues. Sir, I'm not sure if you've highlighted this earlier in the call, but what has led to the sharp increase in other expenses as a line item?

Thank you. Actually, other expenses, if you compare it to the last quarter, it has improved by 133 basis point, meaning it has reduced by 133 basis point. Of course, if you compare it to the same quarter last year, it has deteriorated. There are two, three factors at play. One, you know, ECL provisions that we take quarter on quarter, which is typically in the range of two to two and a half percent of the revenue. And again, this is driven by a model. As we discussed earlier, in the dialysis business, structurally, the AR cycle will be three to four months. And to ensure that we have a very strict way of modeling the AR-related items, with the help of KPMG, we have arrived at an ECL model, and we use the number that comes from the model where there are different aging bucket and loss rate and all the other modeling factors. This is that we arrive at an ECL provision that we take every quarter, which tends to be between 2% to 2.5% of the revenue. So that is one factor which has grown up in line with the revenue also growing up. The second factor is, as we became a public company, there are a few other cost items that come in. The audit fees increases. There are more legal fees that come in with respect to all the things that a public company has to do that you didn't do as a private company. So, that is the other factor that has come into the numbers. Third, I think as we stated earlier, we are looking to grow internationally in newer markets. We are building capability on that front, whether it is business development. In many markets, we invest upfront in building the foundation even before the market starts. So there is some amount of investment that is done on business development and other foundational activity to grow internationally. So all those three factors combined have resulted in other expenses to be at the level it is currently. But on a previous quarter to this quarter basis, it has actually reduced by 133 basis point.

Got it. Sir, another question that I wanted to check with you. Have you seen any price hike in India with CJH's price hikes coming through for some of the corporates?

Yeah. Hi, Pranath. This is Rohit here. Yes, we observed a price increase in the CGHS last year, October, and I think Prashantar briefly mentioned that in the analysis business, price increases on an annual basis is marginal, but on a periodic basis, say a large period of, say, 8 to 10 years time period, there is a lumpy price increase. So we witnessed that in CHS as well. This price increase came after probably 10 years to 11 years, and there was a 35% odd price increase at the increase. So this is very much as for the lines of the trends in the analysis business, and we have experienced that.

If there's nobody in the queue, can I ask a couple of more?

Yes, please.

Sir, and depreciation as a line item, we have seen that sequentially declining despite we doing a couple of acquisitions in Philippines this quarter. Is there anything to read into this? Sorry, say that one more time. Depreciation and amortization as a line item at the actual value has declined on a QOQ basis, despite we doing a couple of acquisitions this quarter. Is there anything to read into this line item?

No, I think as I mentioned, there are a couple of things at play in that number. Number one, we are using a lot more technology to drive much more disciplined capital allocation. For example, in all the countries, we are now using RFID to tag our assets and do a real-time tracking of our machines. So we have now more intelligence at a center level how many machines we have, how many idle machines we have at a network level. Last year, we were deploying about 50 machines every month in terms of replacement and other type of activity. In the last three months, we have hardly given any new machines, but utilized the machines on a more efficient basis. Of course, it's a one-time benefit you get when you bring a new technology like this, so we benefited from that. On the other side, Philippines, we did the acquisition, seven acquisition, which was towards the end of So the corresponding goodwill and the amortization of the intangibles of the goodwill also played into the numbers. I would say that there is not much to read into the numbers, but there will be some healthy, you know, improvements in the number on a marginal basis.

And, sir, on the Dubai business, can you just highlight if there is any update over here? Because sequentially, we have seen the losses go up. How many centers you would have added? How are you seeing that business transform and any medium to long-term guidance on when the next round of tendering would happen and how do you expect to ramp up on the Dubai of the Saudi piece?

So, Pranav, I'll take this over there. So, Saudi, right now, we are on the investment phase. We are building foundation. We are preparing for the tender. We have built a team there. So, the approach is to be ready for the tender when it comes. Right now, there is EUI was submitted, but we are still awaiting the tender documents to come out from the Ministry of Health. And given the volatile situation, they're also in that region right now. I think we are three to four quarters away from realizing any benefits or having a clear visibility. But I think this will be a journey or tendering process we'll go to next.

So, Rohit, for the next couple of, so for the rest of the fiscal, should we assume this three-odd crore sort of loss on the JV side should continue for the rest of the fiscal? So, can we start to realize revenue?

So we are not giving any guidance on the loss assumptions for the Saudi. As I'm saying that we are in the investment stage and we started one clinic there in Saudi. So this may fluctuate a bit. But again, as I said, there is no clear visibility on the tendering timelines, which could take one to two quarters or probably longer. So as soon as we have visibility on the timeline, we'll be able to kind of answer that more precisely.

And one last, if I can squeeze in. Sir, we've recently incorporated a subsidiary in the EU region. Can you highlight when do you expect this business to start and what kind of business models followed in that geography?

So we have registered a company there, but we are still exploring. I think Kazakhstan as a market looks interesting, but we are yet to kind of form a view on that. Market is similar to that of Philippines with the universal coverage. Price points are little on the lower side, around $75. And there are already standalone centers and private players in the market. So we are still forming an approach on the market. So it will be too early for us to comment on that.

Thank you so much, sir, for your time. Thank you. I'll do that.

Thank you. A reminder to all the participants, please restrict yourself for two questions. Next question comes from the line of Shubh Mehta with ICICI Securities. Please go ahead.

Thank you for the opportunity. Sir, I wanted to understand the broad nature of 19 new clinics, which we added in India geography. Is it a green field or brown field or PPP sort of nature, if you can give us some sense over there?

So, Shubh, I'll take that question. India has a blend of all three. We had PPP centers added in Bihar, we had four private clinics added, and then we also had one or two greenfields. So it was a blend of all three fairly balanced in that case.

All right. And if you can quantify, sir, what is current RPT for India at present? Like since you have mentioned that we have seen some hikes over there, if you can give us some figure over there.

Yeah, so I think India is a basket of many price points. PPP is different, captive is different, and all that. I think in our previous calls, we have mentioned the high-level RPT for each country. So, the India RPT remains at a $20 to $23 price point. That is the RPT which is at the average level for the country.

All right. On the Philippine side, we have acquired seven new assets over there. Can you tell us the bed capacities on an average as we have seen that there are 10 beds average for the overall business? However, for seven new assets, is it higher side of the bed capacities over there or higher dynamics over there?

Shubh, we've mentioned that earlier also that our Philippines business is averaging 10 to 12 beds center, and it seems to assume that these two are also following a similar trend, so I think there is no great outlier in that.

All right. And how is utilization over there, sir, since it is an acquired asset?

So, we again look at our network level utilization, so it's fairly in the…

74% is the number that we have listed at the consolidated level, and that's a reflection of all markets.

All right. That's all for my sake. Thank you so much.

Thank you. Next question comes from the line of Devang Patel, with Samishya Capital. Please go ahead.

Sir, you mentioned some delay in Saudi Arabia, a rollout of clinics, but to recoup this three-odd crores of losses, how many clinics do we need to reach to achieve a breakaway?

So, Sivang, Saudi Arabia is a tender market. So, it's not about how many clinics. It is about the tender. So, once the tender clarity is achieved, and depending on the scale of the tender, there could be, and it is a one tender that will be resulting into X number of clinics, which is still unknown. So, the better way to look at it is when the tender is out and what are timelines of tenders, and that will take care of the investment if we are able to secure the tender. There is still a probability that we may not be able to secure the tender in the southeast as well.

Yeah, just to add to what Rohit is saying, Devang, this is an investment phase. We are running this clinic to showcase our clinical outcomes in that country. Saudi Ministry of Health and other regulators, they want, they do not give so much value to overseas clinical outcomes. They want the interested companies who want to participate in the tender to set up a few clinics in Saudi Arabia and demonstrate clinical outcomes in their regulated market environment. So, this is... This is a binary market. You win one of the four clusters in the tender, you have a business. If you don't win, you pack the bags and leave the market. So, we are currently in the investment phase. It's very early days. It's not that we add 4-5 clinics and we'll be able to achieve break-even. That won't happen.

So, in case we win a tender, we are not sure we will recoup the losses and break even.

No, no, if you win the tender, obviously, any market that we enter will make the scenario analysis, right? If you win the tender, we will more than recoup all the historical losses, right? That's when it makes sense.

Okay. And we've made all the investments we needed to. Before we get a tender, these costs can go further.

So, Devang, right now, as I mentioned, we have started one clinic, and this is more of a showcase clinic where we are showcasing our clinical and execution capabilities. But now when the tender terms are out, that would require us to increase our footprints and cater. It will be a national-wide tender and maybe divided into zones, which we still don't know. So the point is we will be required to make more investments depending on the tender terms, which would be known to us in time.

That's all for my time. Thank you so much.

Thank you. Next question comes from the line of Anuj Goyal with Bastion Research. Please come back.

Yeah. Hi, sir. Thanks for the opportunity. So, my first question would be, can you explain the in economics per bed for Indian international markets, like the peak margins and the peak ROC per bed when it gets matured, some sort of bed?

Hi, Anuj. This is Rishan. I'll take that question. We don't provide unit economics at a country level, but in terms of unit economics at a consolidated level, I think you can look at our P&L. Some of the key drivers of the unit economics are obviously, it's a consumable heavy business, so COGS is a key element, which is about 22% of the cost. Hospital share is another big component of unit economics. And the... Salary payment to the technicians and nurses is a third component. But all those information, you can take it from the P&L, which is shared at the consolidated level, to get the UNEDIC MAMEX.

So, is there any angle of deep margins for clinic in the operations or international operations? Is there any angle of that?

No, so I think unlike some of the other industries, we don't have a new versus mature model in this industry. We typically take a running center in most cases, and the OPEX break-even happens within the first few months, and the CAPEX break-even happens over a period of time depending on the country. So I think the P&L will give you the required details to model out the unit economics.

All right, all right. And my second question would be that, is there any angle of customer loyalty in your business? Because I remember that the guest doesn't even give the bed which is allocated to them for the treatment. So, is there any angle?

Anuj Jaya, I think given that it's a reimbursement business and it's a... Therapy that is prescribed by the nephrologist, typically. So, there is definitely a customer angle. He is free to choose to get dialyzed, whichever clinic they find the right quality and the proximity and right outcome. So, there is definitely a customer angle. But then there is also part angle around who is a payer for that treatment for that particular customer or the patient or the guest, that we call them. So, it's a blend of both, essentially, that where the payers are. Like in the Philippines market, it is a completely PhilHealth, right? Totally complete. Everybody is covered in that. So in that case, the guests are free to move around more freely. In India, depending on who is the payer for them and which center is entertaining that payer or has an empanelment with that payer, those options are selected, and then there is an angle around there.

Thank you. Next question comes from the line of Simran Thakkar, Bayes Capital. Please go ahead.

Thank you so much for taking my question. First question goes like this. The material cost reduction, it's quite impressive over here, and we understand it is more towards renover or reprocessing, right? So, on the field visit, what we understood are there were some discrepancies on the reuse of protocol. So, could you please help us understand what's the central protocol reuse that you all have laid out? That's the first question. Shall I go for the second?

So let me address this first and then we can go to the second question. Reuse protocols for India being a health is a state subject. References, not always aggression, guidelines and preferences. from various pairs, various contracts, various micro markets. So, there is no linearity around it. But how Nefroplus operates is that we, for us to take a decision, if there is reuse options available, we have it not on the count, but on the fiber bundle volume. So, our decision making is very clinically oriented, not just pure count oriented. But having said so, there are guidances which are given or preferences given by each pair in a different market. So, it's a blend of all. So, once you go to one location to other locations, you will see that difference depending on the region and the pair, piece of it. But to answer your point on the reduction of the COGS, it's essentially a blend of several things, right? The economy of scale playing in, we also have negotiated better terms with our suppliers and obviously optimization in the utilization also. So it's the end of all and not just the reuse count, which drives the COGS reduction.

Understood. So, very well explained. So, my second question goes like this. As you identify in the larger metros, this was for Mumbai, we'd like to understand how is your city level or bin code expansion approach over here. That's the second question.

So, we are fairly, what do you call, comfortable in every part of the world. So, we have not focused on any pin code specific expansion. We have focused on increasing access across the country. As you know that we are operating in 300 plus cities now in India. So, we are fairly, we are not focused around any one or two particular metros. We are very comfortable in any part of the world and in any part of the country. In fact, our 75% plus of the clinics are in TN2 and T3. That clearly shows you the approach of the company. How operationally comfortable we are and how passionate we are about increasing access to quality dialysis across the country and not concentrating it in future.

Thank you for taking my questions.

Thank you. Next question comes from the line of Pawan Kumar with Shade Capital. Please go ahead.

Thank you for the opportunity. I am audible.

Yes, yes, Pawan. Please go ahead. Yes, ma'am, you are audible.

Mr. Kumar, please go ahead.

Yeah. So, my first question is, like, we are having, growing pretty good in the international market. Can you tell me market share in Philippines and Uzbekistan markets?

So, we are the second largest network by the footprint in the Philippines right now. The largest chain has 58 odd clinics. And total clinics in the Philippines market in a standalone setup right now is around 900, and we are operating right now 51 of them. So you can estimate the market size based on that, 6-7% at the moment. And on the Uzbekistan front, we are the only private operator. Rest all dialysis is provided by the government, but the Uzbekistan market is close to 9,000 patients, and we are servicing close to 1,800 of them right now.

And what competitive advantage we are really offering there usually the competition.

So, obviously, I think Prashant had also mentioned in the beginning of the call, Philippines is a very mom-and-pop fragmented market. So, NefroPlus being the second largest player has a huge brand value. We have this economy of scale, the scale value, and at the same time, we have the operation capabilities to go in every corner of the country. So, there's operating leverage that we have. We have a brand leverage and the efficiency leverage that we have over other individual players there. And over the time period, this will only grow as we keep growing on those geographies. And on the Bekistan front, we have mentioned that previously also, that we have demonstrated very strong clinical outcomes, and we have delivered the project in record time as compared to any other provider in the region. So definitely, there is a lot of goodwill that we have generated in the ecosystem.

As far as talking about Indian market, like you have a pretty good market share, what is the viability of D2C kind of, like a private cleaning kind of business? Is it really viable in the long run? Can you give us some credit on that?

Yeah, this is Vikram. Thanks, Bhavan. India is still in the very early stages of the dialysis market maturity, right? So, as I said, 16 years back, there was no pure play dialysis network in India. We started that whole concept, and today the organized market is 20%. Throughout the world, except India and Indonesia, dialysis is done in standalone clinics, not inside hospitals, because people with kidney failure are immunocompromised. Clinically and financially, it makes more sense for standalone clinics, but the Indian regulatory ecosystem is still coming to terms with standalone clinics. Because everyone is so used to the hospital-based model, the comfort of the nephrologist, the comfort of the government payers, and the regulation comfort, we are talking to them. We are advocating the growth of standalone clinics. We currently run 25 standalone clinics in India, but it will take a long time before standalone becomes the mainstream. This is early days in the ecosystem. Over the next 5 to 10 years, you will see a lot more stand-alone than the in-hospital model.

And the same is applied globally also, like most of the businesses run through like the tender or maybe the government-sponsored schemes.

So there are two models globally. One model is the tender model, which is the Uzbekistan, the Saudi model. The second model is the... Philippines model, the US model, the Saudi model, where there are clinics in private setups, which are reimbursed by the health schemes. Like imagine a standalone clinic in India reimbursed by Aishman Bharat, right? That's the second type of model where you're running in a private setup, but you're reimbursed by a state health scheme or an insurance scheme.

Thank you. Mr. Kumar, please reach out to you for more questions. Next question comes from the line of Nilanjan Karfa, with TCGAFC, please go ahead.

Thank you, sir. So, just a question, I mean, in the past, we have not sort of split out, you know, the patients between...

Yeah, why is this little, could you please come closer to the speaker?

Sorry, am I audible? Yes, please go ahead. Yeah, thank you. So sorry for that. I was saying that in the past, you have not split out the patients between India, Philippines, and the various markets, basically. Would you want to do that going forward? I'll tell you the reason. If you look at how our centers have expanded, so roughly... I guess between the same time last year and this year, the total network has expanded upwards of, I think, 10, 11 percent, out of which almost one-third is, you know, there's almost 30 percent plus expansion in the standalone clinic itself. A very high percentage of it in the Philippines, where the revenue growth is already obviously expected to be very high. So... It makes it very difficult for us to figure out how the core revenue growth is there from, let's say, the same, something very similar to, let's say, the same store sales growth that we use in consumer companies or retail companies. Would you want to talk about how the same set of centers did over the last 12 months?

Yeah, Neelanjit, this is Vikram. I think this is ZeproPlus. We need to understand it as a platform story rather than a country-level story. India as a core business is the driver of the platform. The platform is built on 16 years of the experience that we have generated in the India platform. The market is very, very different from the other segments that you have mentioned. We are more comfortable to discuss on the console level at the platform level. At the end of the day, we are not looking at a country-level objective. We are looking at a platform-level objective. The investments, capital allocations has to be rosy-accretive at the platform level. Why India is the core?

So that was the first part of my question. The second part was actually the organic growth itself, right? Because we are obviously going into, you know, increasing number of centres in the same country and going out as well in different countries. And that's the broad plan for us. So on an organic basis, how much we are growing? So if you want to talk about, let's say we have three lines, like the captive clinic, the PPP, and the standalone, how each of these three lines have grown, let's say.

So, I think we have mentioned this earlier also. We have three levers of growth. One is same center growth. Second is increasing footprint in the markets. And third is a market expansion or a big M&A or a PPP, right? So, and we also mentioned that our network level, we are maintaining a 74% utilization. So, the way to look at it is the utilization of the network and our guest count. That would give you a flavor around the growth of the organization. And that's where we would also want to focus on.

Yeah, at the macro level, Neil, what happens is, unlike a pathology lab, right, it's not an unlimited, so to speak, capacity. It can be done in India. You can't do more cycles on the same machine, right? Because four hours is mandatory treatment.

Ladies and gentlemen, due to time constraints, we have reached the end of question and answer session. I now hand the conference over to the management for closing comments.

I think we have mentioned all the details in our opening remarks. We thank everyone for joining this call and look forward to the next Phoenix call. Thank you so much for joining.