Aster DM Healthcare Limited (ASTERDM) Earnings Call Transcript

Good day, ladies and gentlemen and welcome to the Q3 and 9 Months Earnings Conference Call of Aster DM Health Care Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Brar from CDR India. Thank you, and over to you, sir.

Thank you. Good day, ladies and gentlemen, and welcome to the Aster DM Healthcare earnings conference call for investors and analysts. The call has been hosted to discuss the Q3 and 9 months FY '20 financial performance, to share operating highlights and outlook. On the call, we have Dr. Azad Moopen, Chairman and Managing Director of the company; Alisha Moopen, Deputy Managing Director; Sreenath Reddy, Group CFO; Dr. Harish Pillai, CEO, Aster Hospitals and Clinics, India; Mr. Balachandar R; and Sumanta Bajpayee from the finance and IR teams. [Operator Instructions] At this point, I would like to highlight that some statements made in today's discussion may be forward-looking statements, and the actual results may vary significantly from the statements made. A detailed statement in this regard is on the company's earnings presentation, which has been circulated earlier. I would now like to invite Dr. Moopen to commence by sharing his thoughts. Over to you, sir.

Hi. Good morning, everyone, and thank you for joining us on this call today. We have crossed 9 months in current financial year, and I'm happy to inform you that we have achieved revenue growth of 12% as compared to last 9 months -- last year, 9 months. During the 9-month period of the current financial year, India revenue grew by 28%, whereas the revenue growth in GCC region was just 8%, as growth in GCC clinic has remained muted due to challenges of insurance pricing. We expect the transition of low-yield patients from Aster to Access Clinics in next couple of quarters, to free up the capacity at Aster clinics for high-yield patients. While it may take a couple of quarters for a -- have perceptible growth in revenue, we are actively working for optimizing various cost heads for improving the margins. During the 9 months period, we have recorded EBITDA of INR 652 crores, which is an increase of 27% compared to last financial year. We have also improved the EBITDA margin by 122 bps points, which has translated to an EBITDA margin of 10.1% for the YTD December. Mr. Sreenath Reddy, our group CFO, will take you through the granular details of our financial performance for the quarter and period till December. Let me share some of the business updates for the quarter. One of the very important milestones that we have crossed is 100% legal ownership in our subsidiaries in Emirates of Dubai, which contribute majority of our GCC business. As per UAE low requirements, nationals of the UAE have to hold directly or indirectly be the legal registered owners of at least 51% of the share capital of UAE company and foreign investors cannot acquire more than 49% of legal ownership. The government of UAE announced last year permitting 100% ownership to foreign companies. Subsequently, the government department released a list of business activities that can be 100% foreign ownership, in which health care was a part, including the retail. I'm very happy to share with you that we have received formal approval from -- approval letters from government adoptees to convert all our business in Dubai into 100% legal ownership. I reiterate that we don't have to pay any money for this legal transfer and hope to complete the process by the end of the current financial year. I'm sure that you will consider this as a very positive development as legal ownership was a concern for investors, though we had beneficial ownership earlier. In other Emirates of UAE, we are in the process of getting this. As you know, in Saudi, we already have 97% stake, and we have 70% legal ownership in Oman, also. So this means that most of the areas where we have large operations, it is getting into a full ownership. We are venturing into additional business lines, both in GCC and India, which are less capital intensive like lab and home care business. Shall be starting the Aster Lab in India in March this quarter. As part of this strategy, we acquired 100% stake -- as part of the strategy for the home care, we acquired 100% stake in Wahat Al Aman Home Healthcare Limited, Abu Dhabi. Wahat offers home care services, wherein nurses are deputed at residence of the patients to provide health care services. Presently in Abu Dhabi market, the home care business is dominated by 2, 3 large players and some other smaller players, and we hope to be among the first 3 of the players in the home care business. The financial details of this shall be mentioned by the group CFO. There are some other small transactions completed during the quarter, all in line with our objective of consolidating our holdings. In India, Aster DM Healthcare has increased its stake in 2 of its subsidiaries. The first one in Prime Hospital, Hyderabad, wherein our stake has increased by 4.89% to now aggregate shareholding of 77.30%. The second one is Aadhar Hospital located in Kolhapur, Maharashtra, where our shareholding has increased by 2.06% to 86.99%. In January 9, 2020, the Board of Directors of the company approved the proposal to buy back shares of the company at INR 210 per share on a proportionate basis through the tender offer process. This buyback program is part of our endeavor to maintain a balance between our growth aspirations and ensuring regular returns and value for our shareholders. We are cognizant of the need for reducing CapEx and building positive free cash flows. We are evaluating the liquidation of some of the idle land assets in India to fund the ongoing projects; one of the most important strategies to reduce the manpower costs as a percentage of revenue by 2% and the procurement of cost by 1% in the next financial year will also help in improving our margins. In line with our strategy of discontinuing loss-making operation, we have closed our operations in Philippines. We are focused on sweating the present assets in India by putting into operation, 500 to 600 already built capacity, but in next financial year. This will help in better margins and better ROE. We are equally focused on delivering best health care services and constantly looking at various avenues to ensure our medical and service excellence levels are improved. For detailed operational and clinical highlights of the last quarter, please refer to the investor presentation. Overall, we did better than previous corresponding quarter, and I look forward to a positive year ahead. Thank you. I would now like to pass it on to Sreenath Reddy, who will walk you through the financials.

Thank you, doctor. Good day, everyone. Aster DM Healthcare has shown a healthy financial performance in Q3 FY '20. As you already know, we have transitioned to Ind AS 116 during the year. However, for the purpose of comparability, we will present the numbers before Ind AS 116 impact and later brief upon the financial impact due to the accounting standard transition. In Q3 FY '20, we have registered revenue from operations of INR 2,322 crores with 8% growth on a year-on-year basis and corresponding constant currency growth at 9%. In Q3 FY '20, we have reported EBITDA of INR 314 crores, which is 19% growth on Y-o-Y basis and corresponding constant currency growth is the same, that is 19%. EBITDA margin in Q3 FY '20 was 13.5% as against 12.2% in Q3 FY '19, an improvement of 126 basis points. Profit after tax grew by 54% to INR 155 crores as compared with Q3 FY '19. Coming to 9 months performance. Revenue from operations for the year till date, December 2019, grew by 12% to INR 6,437 crores from INR 5,762 crores for the year till date December 2018. EBITDA, excluding other income, grew by 27% to INR 652 crores from INR 513 crores for the year till date December 2018. PAT has grown by 61% to INR 200 crores from INR 124 crores in year-to-date December 2018. Our revenue and EBITDA under constant currency growth stood at 11% and 26%, respectively. Moving on to Ind AS 116 impact. It is important to note that our GCC operations are predominantly based on asset-light model, with the lease, land and building. Due to this, Ind AS 116 accounting standard has an impact on our financials. Because of Ind AS 116 impact, EBITDA has increased by INR 72 crores in Q3 FY '20 and PAT has decreased by INR 16 crores. Resulting EBITDA and PAT post-Ind AS 116 are INR 385 crores and INR 139 crores, respectively. EBITDA margin has increased by 3%, and PAT margin has reduced by 1% on account of Ind AS 116 impact. Coming to the segmental performance. Revenue in hospitals increased by 16% on year-on-year basis to INR 1,218 crores in Q3 FY '20. EBITDA increased by 24% Y-o-Y to INR 186 crores in Q3 FY '20. The EBITDA margin is 15% compared to 14% during the same period in the previous financial year. Revenue in GCC clinic is stable at INR 543 crores in Q2 FY '20. The EBITDA margin remained at 18% compared to the same period in the previous financial year. The muted performance in this segment was on account of higher volumes of lower economic segmentation. The strategy is to move the lower economic segment patients from Aster to Access. This transition is likely to occur over a period of next 2 to 3 quarters. For pharmacies in GCC, revenues have grown 4% to INR 623 crores and the EBITDA margin is 12% in Q3 FY '20 compared to 11% in Q3 FY '19. Coming to the balance sheet, the group net debt stands at INR 2,791 crores as at December 31, 2019, compared to INR 2,329 crores as at March 2019. The breakup of debt stands: in India at INR 350 crores compared to INR 242 crores as of March 31, 2019; and the GCC net debt stands at USD 342 million compared to USD 301 million as at March 31, 2019. CapEx during the 9-month period was INR 540 crores, and the purchase consideration for acquisitions was INR 214 crores. Considering our robust growth in Q3 FY '20, we have a positive outlook for the current financial year. With a strong focus on growth and cost of optimization initiatives, we believe that our financial results will further improve going forward. On that note, I conclude my opening remarks. We would be happy to give you our perspective on any questions that you may have. I would request the operator on this call to open the question-and-answer questions. Thank you.

[Operator Instructions] The first question is from the line of Prakash Agarwal from Axis Capital.

Yes. Just a little more clarity on the statement you made in your opening remarks on the completion of 100% ownership which is, I think, a very great step. Just wanted to ensure, it's for all the entities in the UAE, and there is no incremental costs involved, did I heard that correct?

Ladies and gentlemen, we seem to have lost the line for the management. Request you to stay connected while we join them back. Thank you. [Technical Difficulty] Ladies and gentlemen, thank you for patiently waiting. We have the line for the management reconnected. And I would request Mr. Agarwal to please repeat your question.

Okay. So my question was, on the opening remarks, Dr. Moopen talked about 100% ownership in all the UAE business. So it includes all the UAE hospitals, clinics, pharmacies, just making it sure. And there's no incremental costs involved is what I was trying to understand.

Yes. So just to be more clear, as I mentioned, our -- large part of our business is in Dubai. So in Dubai, this is approved and which is -- majority of our business, about 80% of our business in UAE, is from Dubai. So that actually is the place where it has been approved because Dubai government usually goes fast forward. So this has been approved, and we have got the approvals from the government. Earlier, there was a doubt whether the retail will be allowed, but even that has been included. And we have got a letter, approval letters. Now that process is going on. And one thing which we had doubt was whether there will be any charges for this, but the authorities have made it clear that there is no additional charges required. And we also don't have -- as already, this is structured in such a way there is no beneficial relationship to the local partners. We don't give anything to anybody, and it will be just the minimal charges, which will be required. So that's regarding the -- all the hospitals, all the clinics, and all the pharmacies that we have in Dubai. In the other Emirates, where we have minimal business like in Sharjah, we have 1 hospital as well as a few clinics and pharmacies, in other -- Abu Dhabi as well as other places, which is just 20%, that process is going on, which will take maybe a few months, but we are sure that -- that will also happen. But what we can confirm is about Dubai.

Perfect. That's very helpful. And is there a clarity on other countries, the other GCC countries also in terms of Qatar, Bahrain?

Yes. So regarding Saudi, as I had mentioned in the call, it's already -- 100% ownership is allowed in Saudi, and we have 97% stake there. In Oman, they allow 70% of the legal ownership, but up to 95% of beneficiary ownership is allowed, and we have legal document for that. In Qatar is one place where they allow only 49% legal ownership. But we have 99% financial or economic benefits, which can be legally certified by the notary, and that is also in place. And in Bahrain, it's 100% ownership. So overall, when you look at, there is only minimal that is remaining, where there is a 100% ownership is required to be converted. And we hope that all the other GCC countries also will go in that direction. But as I told earlier, this was the big piece, and that is being now sorted out.

Perfect. Great. And sir, second question on the pharmacy and clinics business where you yourself said that growth has been a little softer, you mentioned a couple of points because of the pricing and you're bringing more -- the Access patients are coming in. So you mentioned about high-yield patients. So what are the other initiatives -- one, you mentioned optimizing costs. If you could just elaborate a little more on how much time -- what is the time frame that you're looking at in terms of seeing the optics improving?

Sure. So one of the most important things happening is that we had some challenges when we looked at after the insurance came in, then we looked at our existing software. So we are shifting. This is in the Aster clinics as well as Access Clinics. So we are in the process of implementing. It is about 25% over. And by end of March, we hope that all the complete Aster primary care clinics, that is the Access, as well as Aster clinics, will be completely into the new software. So this will definitely improve the period at which the doctors can see patients as well as the efficiency and also, most importantly, the insurance cases being sent. The RCM cycle will improve and the rejections will reduce. So that, we are quite confident. And apart from that, there will be a reduction in the workforce also, which will reduce HR costs. So with all this, we hope that we will be able to have a significant improvement in whatever is happening now in the Aster hospitals and that -- Aster Clinics, and that will reflect also in the pharmacy, because, as you know, most of our clinics are attached with the pharmacies, and when the Aster Clinics, it goes up, then pharmacies also will do well. As such, we don't find a challenge in the Access clinics because that is one sector where the lower-income patients are coming, and we have efficiencies there. And so we are having that growth as well as the EBITDA margins. So overall, we hope that we will be in a good position in 2 quarters.

I would request Mr. Agarwal to join the queue for follow-up questions. [Operator Instructions] The next question is from the line of Shyam Srinivasan from Goldman Sachs.

The first question is on the India business. We've seen very good growth in top line, I think, 24% for the quarter -- sorry, 28% for the quarter. But margins don't seem to be kind of improving. I'm looking at Slide 25. This is pre-Ind AS. So I'm assuming it's like-for-like from an operational perspective. So 13% margins have remained flat. So what needs to be done more? I know there could be start-up losses. But I'm just trying to understand from a margin and an operating leverage perspective, when will we see margin expansion in India.

Yes. Shyam, we've also got Dr. Harish. Dr. Harish, you can briefly give about the India questions. On the margin side, if I want, I can pitch in.

Thank you for that question. So over -- when you compare last fiscal and this fiscal, we have taken a lot of initiatives to stabilize operations and improve margins, primarily by focusing on 2 critical aspects of our work in India. One is obviously the manpower piece. We have brought in a huge amount of efficiencies across the chain by clearly looking at the manning ratios across the board and that has really shown us significant results. The second aspect is on the material piece, where we have gone about standardizing the workflows. For example, the drug formulary across the network has now been standardized and we have a close grip on consumption patterns in our network. So that -- these 2 big initiatives have really brought in efficiency. Third aspect is, we are also, in some of our specific geographies, we are changing the payer mix. We are moving away from scheme patients to more of cash, otherwise, TPAs and insurance, and we can also see an uptick on margins on account of changing this overall -- the payer mix strategy. So these 3 things are there. The fourth, I would say is that, also, our international patient flow has also helped us that our -- the type of patients coming to a hospital has also changed. So these 4 initiatives have really helped us to grow the margins.

Yes. To add to what Dr. Harish said, Shyam, if you look at in quarter 3, the EBITDA margins in India remains the same. But however, if you look at the 9-month period, what was a 10.4% EBITDA margin, that's moved up to 12.2%. So we expect that in coming quarters, India should do well. No doubt there are start-up losses of some of the facilities. But having said that, in spite of that, coming quarters should look better.

Got it. So just digging here further, so 15% is the established unit margin I can see for 9 months. So is there a scope for that to move higher?

Yes. The established hospitals, one of the established hospitals, which is on the lower side at this point of time, which is in Calicut. So that is why the effort is being put in. And once that hospital will be able to yield better results, definitely, the margins will go up. That's a significantly large hospital. And the other hospitals also in Bangalore, which have now moved into an established state, so even that will do higher margins. With that, we feel that we should be looking at overall in the next 1 year a 15% margin from the India hospital.

Got it. And my second question is on -- just going back to the question on clinics and pharmacies. For the quarter, constant currency growth is, like, 2 -- 4%. So -- and you said you'll take 2 more quarters for us to get the things right here. But what is a normalized revenue growth? Clearly, might be lower than hospitals, but I'm just trying to understand, the weakness now has persisted from last quarter, this quarter also. So do we have the visibility that in 2 to 3 quarters this can be fixed?

This is Alisha. Yes. So I think as Chairman had mentioned, there has been a slight sort of slow movement as far as the growth is concerned in the clinics and the pharmacies. So with the new system that's been implemented, we expect to see recovery in terms of rejection as well as our manpower optimization. When you're talking about the revenue growth, we do expect to see bigger traction and higher movement, so upwards of 10%, which should come in after the next couple of quarters. One of the more positive things we're seeing here is, if you look at now what's coming into the hospital as well, there's a -- the level of services that are being offered have changed. So for last year, I think we had mentioned about how we have started 2 cath labs here, which have been doing quite well. So we are just starting cardiothoracic surgeries as well. So the yields that we are seeing in the hospital is also increasing, which is a very positive trend. So what we are seeing is the services that we're doing in the Dubai and the GCC, which typically used to be secondary care, there is that shift, which is happening more to tertiary care. So you will see that in our ARPOB also, which is evident, which has seen a small shift, which is going on. So I think there is a -- the clinic story is just taking a little bit more time because that whole payer mix, people, when they're changing insurance, it takes almost 1 year for them to change those insurance. So if we have agreed for certain networks, it's not as easy for us to move it on a quarter-by-quarter basis. So that transition takes a little bit more time. So while that will get flushed out and we will see more of the higher yield insurance networks getting covered in Aster and the lower yield insurance networks going into the Access and seeing the volume pick up there, in parallel, what we are trying to do is see how we can improve the yield, per se, which is easier now and a bigger opportunity, which we see in the hospital. Because in terms of the clinical skill-set, what we have is higher than what the medium-level hospitals here usually cater to. So the benefit that we have with the India hospitals and the clinical skill-set, we're trying to sort of utilize that to do services which are not really common in this part of the regions.

Okay. And my last question, if I can squeeze in. Refinancing via issue of a dollar bond. So just understanding the dynamics of it and how do we look at our debt over, say, fiscal 2021?

So Shyam, what we are looking at is up to a $400 million bond, which we are exploring. So if the terms and other things are favorable, then we are looking at going ahead with this bond. Otherwise, we may not go ahead with the bond. Mainly the bond is something because if we have to go for a bond, we need a certain size. So that is why this USD 400 million is there. But however, it could be anywhere in the range of USD 350 million to $400 million. Now this bond is mainly being write to repay the existing debt. And assuming that we are not going ahead with the bond, the way we are looking at it is that going forward we would like to reduce debt. And -- for which we are looking at monetizing some of our land, which is idle in India. So that is something which we feel that next year we'll be able to at least monetize a few of this idle land. And 2 is that on the projects also, we are very selective in taking up any further new projects. The idea is, we know pretty well that everyone is looking for a free cash flow. And the intent is to see how fast we can get into that free cash flow model.

The shared -- any quantum that you want to share, either land value or debt absolute reduction that you might target?

So Shyam, we'll be able to -- see, we are working on it. It's preliminary at this point of time. But definitely, with the Q4 results, we'll be able to give an exact picture as to what the CapEx is likely to be in the next year and how much of debt we are going to reduce. These 2 things is something, which we'll be able to give an exact picture because we are working towards that monetization of the land. So that is still in the preliminary stage. I think in the next couple of months, we will have better clarity.

The next question is from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.

Sir, my question is, you have spoken a lot about free cash flow and the cash generation, the intent to reduce the debt. So on this note, if you can tell us what is the kind of OCF post working capital that we have generated in this quarter on a consolidated basis and probably for the 9 months? And also, earlier, when you spoke about the CapEx, that INR 540 crores in 9 months, the INR 300 crores -- INR 214 crores. Is it including or is the number is INR 750 crores CapEx?

Yes. So if you look at, at least on the call, in the past, we had said that we are looking at INR 580 crores CapEx in the current year. So for the 9 months, the CapEx, what we have incurred, is INR 540 crores. And also on the call, I had mentioned that this CapEx is without any acquisitions. So -- but however, we have done certain acquisitions. Mainly the acquisition, what we have done is there's home care business in Abu Dhabi. We have also acquired a few clinics and also increased our stake by 5% in one of the profitable vertical of ours, which is Medcare. Now for the acquisitions, mainly for the acquisitions, what we have done, we have spent 240 -- INR 214 crores. So therefore, the total CapEx spend for the 9-month period is INR 761 crores. But however, if we ignore the acquisitions, the CapEx, what we have spent for the 9 months is INR 540 crores, and we should be close to what we had committed, that INR 580 crores on the CapEx for the full year, excluding the acquisitions. And going forward, we don't want to do any large acquisitions.

Sure. On the OCF and cash flow, sir?

On the OCF, see, we generate almost close to around 70% extra cash of the EBITDA.

Okay. And sir, when we spoke about this $400 million of bond, if at all, we are raising mean, if I look at the interest cost and the debt, we are largely in at around 7% on a blended basis. What would be the kind of savings that one would be looking at? And what could be the -- because when you're taking a dollar-denominated debt, what could be the risks in terms of exposure towards U.S. dollar as a currency?

Yes. On the bond side, if you see, this is going to be a fixed rate for a 5-year period. So therefore, we don't see any fluctuations on the rate. But coming to the specific pricing, today, the bond pricing, whatever is there, it's almost similar to the pricing what we get on the debt side from the banks. So therefore, in terms of pricing, the benefit, whether we will get significant benefit, we don't know, because only when you assess the market, we'll come to know about it. But right now, it looks more or less the same. But what it will do is that it will enable us to have sufficient cash within the company. Because whatever we are generating that cash is something which we can push it to India and -- as dividends and maybe we can also think of in India reduce certain debt. And at the same time, also, look to give some kind of dividend for the shareholder.

Sure, sir. So one, third question, final question from my side is, we spoke about these clinics and pharmacies. A lot -- we had discussed about focusing on higher-paying patients. I mean there seems to be a strategy that we have not taken in the last 2 quarters, specifically. Number one, what is the trigger here? And number two, has there been any change in the insurance policy? Or what has really changed the management strategy over here? Because [indiscernible] has been seeing a rising trend in terms of growth and margins as well.

Yes. So what has happened is that, see, when 1.5 million people, the people covered through insurance, went to 4.5 million over the last 3 years, and it was stabilized in the last year. There is a lot of churn happening in the market and people, insurance companies, they try to push for patients who are in the lower category into the higher level clinics if we have to have that higher level business also. So we were forced at some point of time to accept patients with a lower yield in the Aster clinics and even in the Medcare clinics. So now that we have the confidence that we will be able to have sufficient number of patients having high yield, we are gradually pushing out. So when the contract happens, it is not for just 6 months or 1 year. Many times, it is for 2 or 3 years. So we are now in the process of just getting out the patients who are low yield and getting in the high-yield patients, which is a process which will take, as I told, it will take 2 to 3 quarters, and it is not something which can happen on a go, just say that, okay, we are not -- I'm mean taking any patients, which can be done due to contractual obligations. So -- but our move is towards getting into that segregation of these 3 kinds of patients and getting whatever is into that category, which will sort most of these issues of -- see, the footfall is good, but at the same time, the revenue is not good. So the per patient collection is lower, which is having the challenge. Then, of course, the efficiency improvement also is there. So I think that in 2 to 3 quarters, we should be there with a decent top line growth.

Also, just to add to that, when you look at the basic insurance, which most of the companies went through because it's an employer-backed insurance, most people naturally took the lowest insurance scheme. Now what we have seen in slightly more mature Emirates like Abu Dhabi, which has been through this process over 5 years, is that their premium has -- is almost double that of Dubai. So while it might not reach that level, there is a discussion, which is happening at the health funding level, where we have to probably increase the basic insurance level because that is what will be needed to kind of sustain the requirement of the population. So again, that is a conversation which has been going on, and we hope that there will be some sort of policy change that happens over the course of a few months or a year.

The next question is from the line of Harith Ahamed from Spark Capital.

There's been a lot of news around governance-related issues at your largest competitor in UAE, which is NMC Health. I was just wondering if this could be an opportunity for you, given the potential fallout of these issues on the NMC brand and their ability to attract or retain doctors and which would have an impact on the patient volumes. So do you see there's an opportunity for Aster here?

Yes. Thank you very much. Thanks a lot. We are very sad that something like this has happened, very unfortunate and which also gives the -- to us the message that the most important thing in public market is to look at very granular fashion or anything related with the government. So that's a good lesson. Looking at the opportunity, we definitely, if there are people coming out of NMC and due to whatever basis, we have opportunities and we'll be taking them and as well as we'll look at the opportunities that -- as we go forward because that picture is still not clear what is going to happen. So we don't want to jump into fray and produce an issue. But if it turns out to be there are opportunities at the higher level, like for something that we can take, we will also -- we'll look at that. But it's very preliminary stage. We won't be able to comment on that. But answering your first question, if people are coming, doctors are coming and trying to join us because there is a very good workforce there, we will be happy to consider that.

Okay. Secondly, on the home care acquisition that you recently announced in Abu Dhabi, that's a fairly big one. Can you comment a bit about the revenue potential of the EBITDA that's currently coming from there? And what's the long-term game plan here?

So right now, Dr. Harith, this business, the revenue is around USD 20 million, with an EBITDA margin of around 23% to 24%. So what is happening in Abu Dhabi is that there are many players. Now what we acquired is a large player. Now the thing is that the insurance for that wants to deal with large players. They don't want to deal with many small players. So therefore, we find an opportunity where we can consolidate many of the smaller players, and this being a high-margin business. So we would continue growing in the home care business, and it's a very asset-light business. Because we have done this particular acquisition, we think that in other geographies, also, we can do it organically. So therefore, even if you look in India, we have started in a very small way, the home care business, which we would like to increase that going forward. And in the GCC region, we would like to extend whatever the learnings are in Abu Dhabi, we would like to extend it to other Emirates as well and also other countries also in the Gulf region.

Okay. Last one from my side. On the new hospitals in India, we've seen the EBITDA losses come down quite significantly on a Q-o-Q basis. What -- which asset is driving this? And would you be able to share some timelines around breakeven for Aster RV?

Dr. Harish?

Yes. So basically, we are looking at 2 hospitals, 1 is in Kurnool and 1 in Bangalore. So in the case of the Kurnool hospital, it's a question of providing the right type of service for the market because there was no such facility before. So we have this unique situation of a very accelerated ramp up, which you don't typically see in a new hospital, where we're almost at 100% occupancy. At this point of time, that hospital is more or less stabilized. And we are looking at how do we increase the margins from that business. Answering your question on RV, we are very happy at the way it has also ramped up in comparison to similar hospitals in Bangalore. When you compare, we find that RV's ramp up has been also on an accelerated pace. Answering the question of breakeven, we expect that within one quarter, we should be able to turn the corner.

The next question is from the line of Shashank Kumar from JM Financial.

This is Anmol Ganjoo. So my first question is to Dr. Azad. Dr. Azad, this beneficial ownership versus legal ownership, does this change anything operationally or psychologically [indiscernible].

Nothing. Because we were even earlier having the complete control of the business as well as we were having the economic benefits as it will be in future also. The only thing is that there's a perception that you have only a legal ownership of 49% or whatever it is and which was producing anxiety in people who are not here. People who are here know that this is a way in which business is run for many decades here. And -- but whatever said and done, there is a reality that it has to be a legal ownership. So it is only that part will change. There won't be any change in the way in which we are doing business or the way in which the economic benefits we are getting will change.

But did your priority markets, et cetera, ever get influenced by the fact that there was this overhang or that just stays the way it is? Because in terms of diversification, et cetera, any thoughts that -- any actions you took because this was perceived to be a hindrance by some people, although operationally it didn't impact you?

I didn't get that question. Can you repeat it, please?

In terms of trying to define your priority markets, areas you would get into, was this ever an influencing factor, which now stands to change?

No. I don't think it is going to change at all because we have the same perception earlier as well as now, but the market perception has changed, which is advantageous because at least the market will see us in a better stead. But for us, that doesn't make any difference the way in which we are doing business here. It will be the same way. And we have plans now, not like what we said, you will see in our financials that we have slightly increased our India business to around 20%. Our aim is to go to 25%. And that journey will continue. And we don't have any change in that because this has happened to have more focus here or more focus elsewhere. It will be the same.

That's helpful. My second question is around margins. Obviously, we have benefited from reduction in losses in our India operations. If you map out next 12 to 18 months, could you just highlight what the drivers of the margin expansion potentially could be and to what quantity? I mean what's the extent of margin expansion we should work with, given that a lot of losses now are in the base or reduction of losses is in the base, especially from an India standpoint?

Ladies and gentlemen, we lost the line for the management. Request you to stay connected while we join them back. [Technical Difficulty] Ladies and gentlemen, we have the line for the management reconnected. And I would request Mr. Shashank Kumar to please repeat your question.

This is Anmol Ganjoo, again. So my question is that we benefited from a reduction in loss in India hospitals. From a margin standpoint, if we map out next 12 to 18 months, what is the margin expansion extent that we are looking at? And what are the drivers for that? What are we aspiring for in terms of margins for the next 12 to 18 months? And how should that map out?

Dr. Harish?

Yes. As mentioned in my previous statement, the key drivers for improving margins in India are primary to look at efficiencies in your manpower costs and material consumption costs, which we have already working over the past 2 to 3 quarters, and we can already see the benefits of it. There is still room for improvement in these 2 sectors. And that is something which we are continuing to do. The second aspect is in specific geographies in India. We are deliberately changing the business strategy of moving away from scheme patients and driving in more of insurance and TPAs and also cash patients. So that is something, which I'm sure will help us. Third aspect is in terms of medical value travel patients. We are also looking at changing the case mix in the type of patients coming to our hospitals, which we are also confident will improve the margins. In terms of -- like we mentioned before, the expected ramp up, the ramp up in the 2 new hospitals, which are contributing to EBITDA losses, have been much better than what we expected. So that overall has actually reduced losses vis-à-vis what we anticipated. So over the next fiscal, we are very confident that the EBITDA margins from India operations will be significantly more.

So just to add to that, what Dr. Harish said, see there are about 600, 700 beds sitting there in the hospitals, existing hospitals, which are already made up, and we require very minimal capital for this to be operationalized. So from the capacity beds to the operational beds, so that will happen during this next financial year, which will have significant impact on the margins. And we hope that, that will be one of the drivers, too.

The next question is from the line of Dipan Mehta from Elixir Equities.

Yes. Sir, my question is regarding the segment-wise result, which is presented in the -- to the stock exchange. In that, if you see the clinics, although the turnover has remained static, almost the same, yet the PBT has gone from INR 73 crores to INR 122 crores. So what is the reason for such a sharp jump? And also in retail pharmacies going from INR 52 crores to INR 68 crores, although it is flat in terms of revenue. So what is there to such a huge increase in the PBT margin?

So this is -- if you look at the Q3 numbers, on the segmental performance, clinics, the EBITDA in the same period last year of INR 97 crores, now it is INR 98 crores. So clinics, per se, the margins, more or less, remains the same compared to the same period previous year. But in terms of pharmacies, pharmacies, that's an increase, mainly because if you look at it earlier, what used to happen, we used to get all the bulk purchases, all discounts, used to get at the back end of the year. So at this point of time, what is happening is that it's getting spread out throughout the year. So therefore, you'll see higher margins in pharmacies with a lower revenue growth.

Sir, you're explaining at the EBITDA level, I'm at the PBT level. How does this -- the mix go from INR 73 crores to INR 122 crores at PBT level and you just said that the EBITDA is flat.

At the PBT level?

Yes. At the PBT level. I'm referring to the -- what you have submitted to the stock exchange, the table, which goes to the stock exchange.

The investor presentation or you're talking on the financials?

No. See, first of all, sir, the investor presentation, you give some information, which we cannot directly connect to what has been filed with the stock exchange. So we don't get the drawdown right up to the PBT level for each of the verticals. Having said that, specifically, if you go to the page where you have given the segment profit loss performance to the stock exchange, not the investor kit. Over there, the PBT in clinics has gone from INR 73.24 crores to INR 122.96 crores, when the revenue has remained static from INR 542.32 crores to INR 542.82 crores. So my question is, how are we showing such a huge spike in the PBT because that would take care of all Ind AS and all other adjustments. At the PBT level in clinics, why there's such a huge spike?

So this I'm not -- in the sense that the financials -- what's been given to the stock exchange, it is a consolidated number. So I don't know where you're talking about the clinic part of it because this is a number, which includes hospitals, clinics and pharmacies.

Yes. So the segment-wise result.

Oh, segment-wise, okay, on the financials. So I said that not to go by the financials segment-wise. If required, we can do a reconciliation from the financials. I would suggest that to look at the investor presentation when it comes to the segmental. So on a separate, same region...

In the investor presentation, sir, you do not give the breakup right up to the PBT level for each of the segments. So it's difficult for us to connect. And even [indiscernible]

[indiscernible]

[indiscernible] We don't have comparables till Slide #25, where you are giving the breakup up to EBITDA.

Yes. No. I got your question. See what happens at the financial level is actually we have got various organizations. So when the auditors look at it, they look at that particular unit because we have got multiple organizations, they go based on that particular subsidiary and consolidating those numbers. So what -- however, the real numbers is shown at the EBITDA level in the investor presentation. So financials, the way the auditors show is slightly different compared to what in reality the segmental performance is there because actual will not be shown in the investor presentation, and we'll stop it at the EBITDA level. So we don't go up to the PBT level. But we can provide a reconciliation, which is -- because on the financials, the way the auditors look at it is slightly different from the real facts of the business.

Okay. I would just appreciate some more information right up to the PBT level and comparable 3 months, 9 months. Because Slide 25 there just gives 3 months but it doesn't give the comparables. So it's difficult for us to understand how the shift has actually taken place.