Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Krishca Strapping Solutions Ltd (NSE:KRISHCA, Financial) reported a gross revenue of INR693 crores, showing a growth of 13.8% year-on-year and 8.7% quarter-on-quarter.
- EBITDA increased by 14.9% year-on-year and 13% quarter-on-quarter, reaching INR184 crores.
- The company achieved an EBITDA margin of 26.6%, up from 26.3% in the same quarter last year.
- PAT (Profit After Tax) rose to INR95.1 crores, compared to INR86.7 crores in the same quarter last year.
- Krishca Strapping Solutions Ltd (NSE:KRISHCA) has made significant acquisitions, including a 200-bed hospital in Vizag, which is expected to enhance market share and revenue.
Negative Points
- Occupancy rates have decreased, particularly in the Telangana and Andhra regions, despite an increase in ARPOB (Average Revenue Per Operating Bed).
- The company is facing challenges in reducing the Average Length of Stay (ALOS) for scheme patients, which impacts overall efficiency.
- There is a notable drag on EBITDA margins due to investments in new programs and the onboarding of new doctors.
- The company has a significant amount of debt, with expectations to increase from INR1,150 crores to INR1,600-1,700 crores by year-end.
- New hospital projects in Thane, Nashik, and Bengaluru are expected to incur additional fixed costs and may initially impact profitability.
Q & A Highlights
Q: Congratulations on the good set of numbers and the spikes we have taken on the transplant side. So just first question I have on the ARPOB. Our ARPOB for the quarter has grown substantially at around more than 20%. It seems to be led by the Telangana and Andhra region, but here, the occupancy has actually come down. Can you explain the dichotomy here, like what has changed in the hospitals during the quarter?
A: Thank you for the question. If you look at the IP volumes, there has been consistent growth. ALOS is something that we have been working on reducing due to high occupancies in Andhra. This effort has led to an increase in ARPOB. However, we should focus more on IP volume growth and ARPP as true indicators.
Q: Is it a change in case mix like higher volumes on oncology, etc., which would have led to this change?
A: There is no significant change in the case mix. There is some marginal improvement in the payer mix, with incremental revenue coming from cash and insurance payers where ALOS is less. This, along with efforts to reduce the length of stay for scheme patients, has contributed to the increase in ARPOB.
Q: You have changed the way we used to report occupancy. Now we are showing it on a capacity basis. Can you give an indication of what optimal capacity utilization or occupancy would be for our hospitals going ahead?
A: Based on feedback from investors, we now report occupancy on total bed capacity. A healthy occupancy is around 65%-70%.
Q: Just to understand the ALOS reduction better. What are the factors that have contributed to this reduction in ALOS, and can we sustain this reduction?
A: We can sustain this number and are putting constant effort to see how we can further reduce it. Factors driving ALOS include incremental revenue from cash and insurance payers, case mix within the quarter, and efforts to reduce the length of stay for government-sponsored scheme patients.
Q: On the margins from the Telangana cluster, there is a sequential bounce back in terms of margins, but it still continues to be lower than where we were. Any color on where the peak margins can touch or if there is an absolute increase in EBITDA margins possible from where we are in Telangana?
A: There will be an expansion of EBITDA margin. Currently, we are investing in new programs and have onboarded new doctors, which has caused a drag on margins. Once revenue grows, margins should bounce back to 30-plus. Corporate hiring and expansion will remain the same, but as revenue grows, margin expansion will happen.
Q: Can you update us on some of your upcoming hospitals like Thane, Nashik, and Bengaluru? Are you on track to launch these as per the timeline indicated earlier?
A: We are confident we will launch the Bengaluru and Thane hospitals by the fourth quarter of the financial year. Nashik is fully commissioned and ready, awaiting the final occupancy certificate from local authorities.
Q: On your efforts to improve the mix, especially in the AP region, have you implemented oncology and mother and child care across the hospitals in the AP region?
A: We have three units that will add cancer and mother and child care by the end of this financial year. We have acquired Queen's NRI, which also has cancer services, and this will take care of the needs for cancer care in Vizag.
Q: On funding for the capex, are you relying on internal accruals to fund projects? If you have to borrow, what cost of borrowings are you seeing?
A: Our average cost of borrowing is about 8.5%. We are trying to fund as many projects as possible from internal resources. We intend to keep our debt-to-equity ratio within the range of 0.75 to 1.
Q: Can you provide more details on the Vizag acquisition in terms of current revenues and future scale-up?
A: The hospital is currently doing around INR65-70 crores in revenue. We believe it has the potential to scale up to INR250 crores over three to four years with a healthy EBITDA margin. We plan to focus on cash and insurance patients and make it a center of excellence for cancer and transplant services.
Q: There has been a sharp decline in ALOS this quarter. Is this due to scheme patients now having a lower ALOS?
A: Yes, that is correct. We are focusing on reducing the length of stay for scheme patients. Additionally, the change in case mix and payer mix, with incremental revenue from payers where ALOS is lower, has contributed to this reduction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
