Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aster DM Healthcare Ltd (BOM:540975, Financial) reported a significant growth in India operations with a 24% year-on-year revenue increase to INR3,699 crores.
- The company achieved a strong operating EBITDA growth of 30% year-on-year, reaching INR620 crores in FY24.
- Aster DM Healthcare Ltd (BOM:540975) successfully completed the GCC segregation, allowing for tailored strategies and positioning for growth in the Indian healthcare market.
- The company plans to add 1,700 beds within the next three years through Brownfield and Greenfield projects, enhancing capacity and service offerings.
- Aster DM Healthcare Ltd (BOM:540975) distributed approximately 80% of the proceeds from the GCC business sale as a special dividend, reflecting strong shareholder returns.
Negative Points
- The Andhra and Telangana clusters showed underperformance, with the company acknowledging the need for intervention and improvement.
- Despite the overall growth, the EBITDA per bed remains lower compared to peers, attributed to a significant presence in non-metro areas with lower ARPOB.
- The company faces challenges in nursing and technical talent retention, although mitigated by strategic initiatives.
- The insurance penetration in Tier 2 and Tier 3 cities remains lower, impacting the overall payer mix and revenue potential.
- The company’s net debt to EBITDA ratio may slightly increase in FY25 due to significant CapEx requirements, although it is expected to decrease thereafter.
Q & A Highlights
Q: This is [Amit] here from JM Financial. Thank you for giving the opportunity and congrats to management on good set of numbers. So the first question, I have regarding the ARPOB we saw around 14% ARPOB growth in the non-O&M hospitals is it possible to give some guidance on the price for last year and also outlook for the next year and how our ARPOB are looking like for the next year?
A: Thank you Amit. So as I called up in my speech, right overall we've grown at a 10% at ARPOB growth and excluding the O&M asset light because O&M asset light hospitals already have a very blended and lower ARPOB around [20K] and also we are treating more skin patients. You don't have that ability to do the price increase there. So if you exclude that, we're at a 14% growth. Now if you look at the historically we have grown ARPOB, but something like 9%, right, it's five year CAGR, if you look at its 9% growth what you've taken. Now this 14% growth has happened because of the multiple reasons. One is the price increase. Second is the revenue assurance project which we internally took across basically trying to ensure that the 19 hospitals what we have today, how can we leverage among these various services which we've built and also with the single service master and also we address a lot of revenue leakage, right with that we are able to address this one. In addition to pricing insurance, also major thing is related to the -- case mix also and also the [MVT] revenue because if you look at MVT revenue in the year FY23, we did around 4.6% or so with a INR130 crore-odd and that MVT revenue is almost with 40%- odd moving to only INR188 crores contributing 5.4% of our top line. These are the major out of various reasons which is added. Now, but in the future and also for another question, was the pricing, this component right? Pricing, this component out of 14% would be around something like 3.5% to 4% is what the price increase component would be. And I think that is around 3% to 4% is what of ARPOB we can in the future also we can look for the price increase bit of it. And in the future ARPOB growth because we did, you know, optimization projects in this year, that's where ARPOB growth is a little higher. But going forward we can look at something between 8% to 9% minimum is what we can think the ARPOB growth will do. Thank you.
Q: And the second question I have is on the on the Telangana region where the (inaudible) performance has been on the occupancy side and the ARPOB sides have been slightly muted. So if you can address that. Thank you.
A: Yeah. I mean, we do accept the fact that the performance in Andhra and Telangana. We are presently in a discussion with the promoter there who is running the business for us, Ramesh. So we are in discussion with them to see where we can do the intervention and improve the performance parameters. We are confident that whatever is happening last -- will be reversed. The performance aspect will be reversed in the coming months and we are confident the performance in next quarter and we are looking at some kind of concrete solution like this at this point of time only give the assurance that we are working. We are aware of the fact that the performance parameters are log update compared to other -- but we are taking all measures to ensure that things are for us, that concern will be addressed.
Q: Sure. And also once supplementary questions related to Andhra region particularly outside Hyderabad, so how has been this space in terms of because I have seen ARPOB for most of the companies operating outside Hyderabad are quite low. So is it driven by the fact that, as in the case mix it's quite inferior or because of the pricing these ARPOB are on the lower side?
A: Yeah, Amit to answer this question. See, in Andhra most of the cities are all Tier 2 and tier 3 cities. They're smaller towns and cities where of course doing the high end work is always a challenge, but we are seeing that thing is different in Kerala. We are able to demonstrate we are able to do secondary and [tertiary] care and improve the ARPOB. I think there's something similar needs to be done in other geographies. Right now the challenge in the Andhra state is. In Tier 2, Tier 3 cities most of the hospitals are doing secondary tier work and a little bit of care work. But if you migrate to doing the high end work, the talent is available and if you're willing to put up the infrastructure and create an environment. This challenge with low ARPOB can be, addressed. Now what is happening lot of patients from the Andhra are going out of state for the high-end treatment. So if once we are the operators there are able to stop this flow of patient out of Andhra. The issue of ARPOB can be addressed. At the same time, another way of addressing is to encourage the penetration of the private insurance. You have seen a great benefit when you do tertiary care and quaternary care work. Insurance penetration helps in making the high-end work accessible to everybody and specially the insured patients. So one is the insurance penetration and two is focus on tertiary care and quaternary care will help in increasing the ARPOB growth, especially in that state of Andhra, Telangana is different because most of the business comes from Hyderabad and it's a metro city it's very easy to do tertiary care and quaternary care work, but in Tier 2, Tier 3, I think we should emulate what we have done in Kerala.
Q: Sure, just last question, if I just squeeze in, if we can provide the gross block number for the year, for the India business? Thanks.
A: Maybe we will separately communicate that information. Thank you.
Q: Yeah. Congratulations to the team Aster, and appreciate the deal successfully done. And so my -- now the thing was we, we are now focusing on Indian operation. I would like to understand through from the management about the trajectory of growth from here, as you rightly pointed out about the CapEx, what we are planning in organic, we're focusing on ARPOB growth, can you highlight upon us -- which is a small business, but it's still material, have an impact on the hospital as a segment that is a pharmacy and lab that was my first question. And my second question was, since we are now separated from GCC, but still we have our management over there. So do we -- in future see any synergies to bring in international patient because still we have reached 5% of our revenue. Is there any scope of bringing doubling there or maybe more
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
