Jupiter Life Line Hospitals Limited (JLHL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Jupiter Life Line Hospitals Limited Q2 and H1 FY '27 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Ankit Thakker, Managing Director and CEO. Thank you, and over to you, sir.

Good morning, everyone. I thank you for joining us on our earnings call to discuss the business and financial performance of Q2 and H1 FY '27. I hope everyone had a chance to view our financial results and investor presentation, which were posted on our website and the stock exchanges. I'm joined this morning by Mr. Anand Apte, our Chief of Business and Strategy; Mr. Aditya Gupta, Senior VP, Corporate Affairs; Mr. Nitin Patodi, Head of Finance; Ms. Suma Upparatti, Company Secretary and Compliance Officer; and our Investor Relations advisers on the call from SGA. I'm pleased to share with all of you that following successful negotiations with the landowner, the Board has approved the acquisition of the land currently leased for our Pune South Hospital. The land measures 11,452 square meters and the total agreed consideration for the land is INR 150 crores. The INR 50 crores of deposit that was already paid earlier will be adjusted against this. So the incremental cash outflow for the company is limited to INR 100 crores. The land is expected to be registered in our name in the coming few days. We have always said that we prefer to own the land on which our hospitals are built as it gives us control, certainty and better long-term financial value. The Pune South project is also progressing well and remains on schedule. At Mira-Bhayandar, the project is currently in the regulatory stage, and we expect to commence the next phase of activities before the end of this financial year. BKC is in the planning stage and will soon go into the regulatory clearance process. Coming to our operating hospitals. Our existing hospitals continue to perform in line with expectations with Thane, Pune and Indore, all staying on course. At Dombivli, the ramp-up is continuing well. The EBITDA impact from the hospital was INR 20 lakhs in Q2 compared to INR 9.5 crores in Q1. Part of this improvement reflects higher medical admissions during the quarter, driven by a seasonally higher infectious disease burden in this region. This has traditionally been the case with all of our existing hospitals as well, where Q2 occupancy has been higher than Q1 and Q3. The overall ramp-up trajectory of Dombivli, however, remains intact. Moving to the financial performance. Q2 numbers, the income stood at INR 456.5 crores in this quarter. The EBITDA stood at INR 106.9 crores in this quarter with a PAT of INR 56.4 crores. Half yearly numbers, the income is INR 867.5 crores with an EBITDA of INR 186.2 crores and a PAT of INR 93.9 crores. The ARPOB is INR 71,800. The IP ARPOB is INR 58,700. The ALOS is 3.79 days and the occupancy for first half is 59.5% for all the hospitals, but excluding Dombivli, the occupancy is 64.8%. So with this, I'm happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Abin Benny from JM Financial.

Congratulations to the management for the great set of numbers. Sir, my first question, if you could indicatively help us understand what kind of revenues did Dombivli clock in the quarter and the kind of occupancy levels we exited for the hospital?

So currently, we have not been giving unit-wise revenue numbers. So I would not have that accessible with me.

Sure, sir. But in terms of metrics, what kind of occupancy levels that we are seeing right now? And given this higher infectious diseases that are there, what kind of metrics -- evolution are we seeing right now?

Currently, occupancy should be in mid-30s.

30%, right? Sure, sir. And my second question, regarding the mature assets, especially Pune and Thane that is there, any brownfield bed expansion opportunities that we might have, any kind of bed increases that we can see? And second, growth here, indicatively, as you have earlier also mentioned that is much linked to inflation. Apart from that, occupancy-wise, any levels that we can probably see in future?

So Pune, there is no further scope of expansion. Thane, I said that, we may have a possibility to add some beds subject to regulatory clearance. We have not got the clearance yet, but we remain hopeful to get it soon. If and when that happens, I'll update everybody about that. Then on Thane front, occupancy is already high 70%. So unless the new beds do come in, inflation remains the only lever. Pune occupancy is close to 70%. So it still has a little more headroom of growth in terms of occupancy as well besides inflation.

The next question is from the line of [ Kalkesh Jain ] from [ Jain Securities ].

So one question I have. So Dombivli EBITDA loss narrowed sharply around INR 9.5 crores in Q1 to INR 0.2 crores in Q2, partly due to the higher infectious disease. What would be the Q2 losses have been excluding the seasonal benefit? And what loss should we expect in Q3 as [indiscernible].

So we -- I mean, it's hard to segregate and label each patient and say what if this person had not come in and what would be the losses with that and without that. So it is difficult to do analysis at that level, and I can't answer that question. Q3, again, I wish I had a crystal ball into the future, which I don't. Broadly speaking, as I said, the trajectory is positive. Q3 occupancies traditionally in all units are lower than Q2. So in that sense, you must expect a little moderation, but how it will offset with the growth, et cetera, remains to be seen.

[Operator Instructions] The next question is from the line of [ Janardhan ] from [ JF Securities ].

Recently, the Supreme Court has raised concerns regarding the commercialization of private health care, particularly the markups on medicines and the pricing of medical consumables. From Jupiter Life Line Hospitals' perspective, how do you see these developments translating into potential regulatory changes more specifically if the government introduces restrictions on medicine margins, pharmacy pricing or hospital billing practices, what could be the potential impact on Jupiter's revenue mix, EBITDA margins and overall profitability? How much of the company's operating economics could be affected? And what measures would management take to mitigate that impact? And the second question is, I want to know the economic moat and sustainable competitive advantage. So if we look at Jupiter Life Line Hospitals in the context of its peers, what are the structural advantages that allow the company to build and sustain its competitive position over the longer term? For instance, considering clinical expertise, doctor relationships or patient trust that we have built up, case complexity, occupancy, payer mix and capital efficiency, which of these factors genuinely differentiate Jupiter from competing hospital chains? More importantly, which of these advantages become stronger as the business scales? And how do they translate into sustainable pricing power, superior returns on invested capital and long-term shareholder value. So these were the 2 questions.

So [ Janardhan ], long question, but unfortunately, I don't have a very long answer. The first part of the question pertains to Supreme Court. I don't want to make comments on issues that Supreme Court is still deliberating on at this point in time. Whatever happens will be law of the land. And like all other hospitals in the country, we will abide by law of the land. How that will play out depends on what the law becomes. So I don't want to venture a guess into that. As far as the Jupiter's position is concerned, we have a strong position in each of the community that we operate with a strong infrastructure, medical team and clinical services, all of that together. So I don't have anything new to say than what I have already said in the past.

The next question is from the line of Dhvani Shah from DSP Mutual Fund.

Congrats on good set of numbers. Firstly, I wanted to understand a little bit more on Indore facility. So we can see that the top line has grown by almost around 18%, but the EBITDA number has remained flat. So if you can just explain how this kind of turned out in the quarter and what is the trajectory you're expecting?

So Indore, as I said a couple of months back is kind of in a growth phase, and this is a phase where we are investing more into medical team. And till this matures, you will keep seeing for the next several quarters in my mind, a little bit of fluctuation in all numbers, top line, EBITDA, even occupancy because if -- once we add some more beds, once these beds get occupied, we have a chance to add 1 more round of expansion of beds and then the percentage occupancy will also drop, and then we'll add more medical team. So EBITDA will go up and go down. So generally, we wish that the journey was more linear, but it is not. So broadly, the trajectory is positive, and you will see bumps along the way.

Understood. But until the next set of beds come into play, is the medical hiring almost near completion? Or do you expect this to continue for at least the next 2 to 3 quarters?

Ongoing, we expect it to continue for some more time.

Fair. Also slightly on the bookkeeping number, we say that there's a goodwill number which has been reported at INR 5 crores. And this is mainly for the IV fluid, I think, manufacturing facility near Ujjain, which we have acquired. But the cost of acquisition is around INR 3.8 crores. So just trying to understand what is it that led to goodwill creation on this?

So this was a historical land which was bought, and it has been transferred at the current ready reckoner land value. 3.8 was the equity value. There was debt in the company of about INR 7 crores, INR 8 crores or something of that sort. So that is the difference, about INR 10 crores of debt, I don't know...

Understood. And just one more thing. Like last quarter, we did try and understand that Dombivli runs at a fixed cost of around INR 6 crores to INR 7 crores per quarter. And at that time, the losses were around per month and the losses were around INR 3 crores per month and occupancies of 25% to 30%. If just forward that math into this quarter wherein the EBITDA losses have almost broken even and -- but occupancies are still at 35%. So would it be fair to understand that the balance impact is the seasonal incidents benefit that we've got in the quarter?

So it is a combination of general organic growth and a little extra seasonal padding that you get in this quarter. What would have happened if this quarter was Q1 instead of Q2 and how much growth would you have gotten anyway, I really don't know. So we'll find out in the next 1 or 2 quarters how it goes.

The next question is from the line of Aryan Jain from Groww Mutual Fund.

So sir, my question was a follow-up on a previous participant's question. So the margin cap on onco drug has already, I think, come out and will be effective from 1st November, if I'm not wrong. Since we don't give out case mix for our revenue, just wanted to understand ballpark what would be the impact of this 30% margin cap on our revenue EBITDA, just ballpark would be fine.

So Aryan, very honestly, we have not done that modeling because whatever happens, we can't -- we don't have any way of influencing the margin. It is what it is now. We'll find out how it plays out in this quarter and maybe end of this quarter, we'll be happy to tell you what has been the ballpark in fact.

Okay. Understood. And sir, on Dombivli, since this quarter, we were almost breakeven. I know it may sound a little repetitive, but still, I just wanted to understand your earlier guidance was achieving breakeven maybe close to end of second year of operation. So would you be revising that guidance right now? Or would you wait a bit maybe a couple of quarters for that -- for the revision of that guidance?

Let's see how it plays out. I mean, I've said that typically, new hospital should -- you should expect 2 years for EBITDA breakeven, whether that means each and every hospital will break even exactly in the second year or some will take 1.5 years, some will take 2, some will take something different. I mean, predictions of that accuracy are hard to do. But broadly speaking, that is the budgetary model that we make when we start any new hospital that we will face a drag for 2 years. Positive surprises are welcome, but one must kind of, in our view, be conservative in estimates. Let us see how it plays out over the next 1 or 2 quarters, and then maybe we can see if we want to revise anything.

Okay. And just one last thing. How much debt levels would be comfortable -- will be comfortable with the expanding -- doubling our bed capacity?

So the Board has currently mandated a self-imposed ceiling of 3x of EBITDA. We will not increase debt above that. Currently, we are within the number. But yes, that is the thought that we don't want to go more than 3x EBITDA.

[Operator Instructions] The next question is from the line of [ Mohit Mittal ] from [ JH Investment ].

So sir, can you please share the ARPOB details, excluding Dombivli for this quarter and the first half?

Interesting question. Let me see if I have those numbers. [ Mohit ], I just have the blended numbers with me currently, sorry.

The next question is from the line of Ahmed Madha from Unifi Capital.

2, 3 very brief questions. Firstly, in your presentation, you provide occupancy details, excluding Dombivli. Can you give a brief sense, how should -- how is that number being calculated? Just trying to reconcile the numbers better. Should one assume like 200 operating beds and into, say, 35% occupancy of 70 beds operating in Q2. That's how one should look at it? Can you give some sense on it, please?

I'll tell you the logic is that when you do excluding Dombivli, you will exclude the number of occupied bed days and the bed from the numerator and the capacities on the denominator and whatever remains as the performance of the other 3 hospitals will be reported as excluding Dombivli. Just -- I don't know, I don't have access to your sheet, but occupancy is related on census beds and not total beds, 200 is the total beds, which would include some daycare beds, dialysis, ER, all of those on which occupancy is not calculated. So probably you have a higher denominator.

Okay. So what denominator one should consider?

150, something like that.