Max India - Will it maximise our investments?

Stock Opportunities Special Situations
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My notes from Q3 FY 18 concall -

Management commentary

Lackluster QTR - Lukewarm - This is one of results and confident will not recur. Reasons

  • Regulatory interventions
  • Adverse conditions (pitampura closure, shalimar bagh license suspension for 12 days and rub off effect - main reason for depressed revenues)
  • Suspension of cashless insurance by PSU insurance
  • Regulatory Price control (stents and knee implants)

Growth - 9% in revenue

  • 25% Oncology - leading
  • Liver Transplant showing good traction - 200 surgeries
  • Preferred channels outpace overall growth
    • 15% Walk-in
    • 22% International - expansion of upcountry channels (plan to accelerate G here); 4% is International here

EBITA decline of 7% on account of above reasons - Actually, 37% Growth in EBITA on adjusted basis for 9M discounting the above effects

Cost savings: 56 CR already realized (45% in personal, 30% Material, 25% indirect)

New bets (Total 3) - Done fairly well

  • 2.7x increase in monthly revenue run rate of pathology (Current 1.2cr a month)
  • Max at home - 2.9x increase in revenue (7 to 19cr)
  • 11 product lines have been launched in last 16 months - integrated in digital platforms
  • Oncology Day care center doing well - revenues grown 3x. Second day care in Gugaon going on. Initiated a search for 3rd one in Noida

Max Bupa
Business conitnues its growth

  • 26% growth in GWC (now 505 cr)
  • New sales on bancassurance has grown 100%!!
  • 30% increase in renewal price
  • Net Loss of 10 cr, near the break even at EBITA level
  • Innovations
    • Health Kiosks - placed at hospitals
    • Gone digital - “Go active” concepts

Antara
Dehradun is a greenfield project (109 units sold). Strategy changed going forward

  1. Growth will be moderate
  2. Only asset light models - No Green Field projects
    Working on opportunity where capital outlay for 2-3 yrs will be ~39cr for a project of ~700cr (Land and building by developer - SW will be provided by Max (expertise and model around senior living)

Brief Highlights for Q3’18

  • Hospitals
    • MSC gross revenues - 10% to 703 cr
    • EBITA at 56cr declined about 11% YOY in this QTR
  • Max Bupa
    • GWP grown 27% to 128 cr
    • 27% growth in renewal
    • 23% growth in new sales
    • Net loss has been contained at 5 cr compared to 9 cr the prev Year QTR
  • Antara
    • 109 units sold in Dehradun (50 residents moved into community)

Summary

  • Max healthcare charting a profitable growth path
  • Flat growth for next 12 months - due to reg headwinds
  • Plan to Increase bed capacity - 5500 beds
  • Max Bupa - Growth acceleration From 25% - strategy is robust
  • Antara - pursuing and explore the growth oppurtunity in asset lite model

Q&A

Q: Recent revision of Stent prices (~5%). whats the impact in revenue and EBITA margins
A: Revenue will come down by 80L to 1Cr - Monthly run rate. There will be no impact in EBITA/margins

Q: Bupa - Sharp jump in claims ratio, why?
A: Due to compensatory factors - low Sales growth, Airborne and new kind of diseases. Claim rations forecast to be same

Q: Antara: whats the capital exposure planned?
A: Operator model - Asset lite model. Will limit to 39Cr (50% upfront to kick start). Risk is major on developer

Q: Whats the timeline for profitability?
A: 20-25% IRR project. Differentiator is low price premium and best model from Max serices.
3 years to deliver the project - FY2021
Enough Risk mitigation built in - much smoother and no capital spills
-Total 500 units - 3 phases of 170 units each.
-Fully REDA compliant

Q: Modicare benefit and leverages possible?
A: Too early - details are unclear. need to do detailed work over 1 to 1.5 months to come out with more info. excited about it. Will look at the entire model based on the pricing they opt for. This is state level structured

Q: 10-11% EBITA model is not a good one for medium to long term
A: Going thru difficult phase. Regulatory uncertainty causing this
Med to long term will improve 100-115 bps on margins expansion. On long term will get back to 15% margins

Q: Update on stay order for shalimar bag?
A: Stay order till April 12. will take a while to get over
Hospital is back to operational and at 80% occupancy

Q: Suspension of cashless insurance from public sector?
A: GIPA body going thru tough negotiations - more a stance based on max desire
Temp suspension and back on volume at much better rates. Back in business

Q: Comparable EBITA adjusting for one off. how much this amount to?
A: YOY grown EBITA by 37% after factoring in the impact of regulatory (YOU headline shows 9% degrowth)

Q: Did you increase the procedure price for compensating on cpa on stent prices
A: Did a partial increase. because Govt. is looking at this carefully so not totally recouped by increasing the procedure costs.

Q: Whats the timeline to increase the pricing?
A: This is reset, so not possible to recoup the entire loss. only some can be done and other is a re-set

Q: Has there been pressure on the stunt supplier? are you getting a better cost on different or substitution?
A: Govt is controlling trade margins as well. Also patient care is more imp and cannot optimize. we are looking at other process refinement and cost reduction actions to protect the EBITA margins rather than playing around with the price because that will defeat the objectives of Govt.

Q: Who will be major supplier for stents?
A: variety. Abet, medtronic etc. pricing is similar

Q: Normalized margin fir max health care. mid to high teen possible? is the long term been pushed back by how far to achieve this?
A: Long term been pushed off by couple of years. perf to be in similar ball part for next 1-2 years.
Overall cost to industry is 24 months (12 months passed, another 12 months need to wait out to come back to earlier growth levels)

Confident of delivering 100 to 150 bps margin

Q: 13.5% margin is possible by FY19?
A: We actually plan to use FY19 as reset and prepare for once and all - do not want to fall back to same position as current by course correct proactively
Do measures like: Plugin revenue leakages due to patient outflow, fix the leakages in trade margins around devices etc next 12 months and go from there

Q: You still managed to grow at 8-9% even with this headwinds. Will the underlying growth be strong?
A: yes, after a year of reset we can manage

Q: What are the cash level at holding company
A: 150 cr+225 from warrant = 375 cr cash available
(3.75% acquisition replenished the cash by giving warrants to the sponsor). we have enough liquidity available to take care of future needs

Q: Whats the net debt at max health care level
A: 1200 crs

Q: Strategically looking ahead - How do you plan to unlock value
A: Currently 2 schools of thought around this

  1. Current structure is not conducive for proper value reflection
  2. We look at everyone in the world - payers are becoming provides and vice versa. we plan to disrupt it. we have Payers and providers under same house. we will discover appropriate value here

Q: Ruboff impact of Shalimarbag lic suspension. what is the timeline to normalize?
A: Will take a few months. as of now, Delhi experiencing viral outbreak lot, due to this mix has changed so the revenue growth should be back on track

Q: why do we see a Divergence in new and old hospitals margins?
A: Growth is coming from relatively stable margin hospitals (Saket, Shalimarbag) - this is where the lever is

Q: Micro perspective: how do you deal with disconnect between Govt. and people perspective of super normal profit of hospitals but the reality is 12 to 13% margin.
A: This is actually media view. we are trying to put 2 points

  1. Generally they are not looking at holistic picture - they are seeing fragmented view.
  2. Cost of delivery in Govt is actually far more - they have the benefit the land and other infra which is provided by govt

Q: Antara: Is the scale up planned after the first asset lite model?
A: yes, we are moving in pilot model. nothing much planned beyond it.
If this succeeds, then we plan to do one project a year. as the projects increase the capital intake will not be high as this is asset light model and eventually come to break even and will see profits forward.

Q: Maintenance CAPEX 2.5 to 3% of top line… is it completely capitalized?
A: yes, completely capitalized

Q: How will the CPAEX number change in future… currently Max number is very low (50% of segment)
A: This will depend totally on the kind of care - secondary/tertiary etc… so we need to compare with right clinical specialty. we are currently quite robust in spending

Q: Is growth planned outside of NCR, may be based on licensing?
A: Yes, we are discussing in other cities. owner model, OPD model etc…

Q: Delhi act. how will it be impact?
A: Its been a mixed bag. in WB it was stringent. Karnataka was quite alright. will impact drug consumables margins, unlikely it will cap procedure margins.

Q: Adverse claim ration due to what?
A: we have a business plan being worked out. so we will know the stability plan.
Claim ratio in 50’s is a fantastic number.
we do not blame the B2B space. we plan the B2C space - we plan to manage this

Q: we are actually not competing with other areas (standalone) where as other companies are having mix of models but showing good claim rations. so why our ratio is not great?
A: At current rate - Break even happening in FY2019. its a Growth vs break even trade off. we are growing at 25% where as some guys growing at 40% - so we have a staregic plan being worked out to accelerate the current growth - we will provide a clear picture on this next QTR

Q: From long term perspective will you look at the trust type real estate model? instead of the current rental models.
A: Not at a stage where the business is matured to take on asset heavy models. over the medium to long term we will think about real estate trust type opportunity.

Since your value is driven by EBITA, we cannot sacrifice here and not in that stage

Q: flat growth for next 15 months due to pre-emptive measures. do you say that without the headwinds we should have good growth?
A: Voluntary re-calib. Across industry also we are seeing others doing the same.

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Thanks for the notes, Sudheer.

This qtr was expected to be poor due to 12 day closure. Also, a lot of business headwinds all happening at the same time is resulting in poor operational performance. Despite that, revenue growth in healthcare segment is remarkable.

Max Bupa is doing well on GWP front; mgmt reiterated their commitment to attain break-even by 2019E, which is good. I believe one can see a hockey-stick sort of growth in this vertical in next 3 years. Of course they have to manage their claims ratio properly. They said it is a trade-off between growth and profitability at the moment. They have muted (25% growth), and are focusing more on attaining break-even.

Antara, well nothing to say as of now. They even don’t add a single slide in their presentation for this vertical. As many boarders pointed out above, this is poor capital allocation.

At current market cap of 2700 cr, Max India looks pretty decently valued assuming recent takeover talks for MHC. Management clearly said next year is going to be muted, and thus the stock is correcting. Who wants to block their capital for 1-2 yr in bull market! But for anyone with patience, this is a strong business with very good capabilities. Once recent regulatory hurdles settle off, we will see better numbers on MHC front.

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any idea how you would value the Max Bupa and the hospital business? there were also talks of a deal in Max Bupa?

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Please go through the whole thread. Valuation has been discussed couple of times already.

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@Mridul @rupeshtatiya @hitesh2710 @desaidhwanil Any take on promoter pledged shares ?
http://www.moneycontrol.com/news/business/markets/top-20-stocks-that-saw-increase-in-promoters-pledged-holdings-in-q3fy18-2511817.html

Disc : 2.5% allocation done in last 1 month

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News update:
Max India looking to buy out its equal JV partner’s (Life Hrealthcare, SA) stake in Max Healthcare Institute.

http://www.moneycontrol.com/stocks/reports/max-india-announcement-under-regulation-30-lodrupdates-10897301.html

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These are usual pledges “security for loan”. As share price has tumbled almost 50%, additional pledges are supposed to be made to secure the same loan amount.

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Went through Q3 FY18 concall. Got a felling that these guys are shifting the goal posts of all three verticals every qtr. MHC is in mess due to regulatory headwinds, which are expected to continue. For Bupa, when asked about guided break-even in 2019, they changed their stance that if the claims ratio does not go down, break-even might not happen in 2019. Antara, they are not even disclosing numbers and have now shifted this to an asset light strategy where returns will be after 2021.

They have said that maintenance cost for MHC per year is 2-3% of revenue. So is this business ever going to make any real money (cash) in long run? I doubt. I understand this is a capital intensive sector but the “assumed” pricing power isn’t just there. One discussion in concall exactly hovered around this point that people think hospitals are making abnormal profits, while if you look at the numbers, they are hardly sustaining or generating cash.

REITs were discussed but management said they don’t want to lower their EBITDA further by bringing rental expenditure (opex).

On Bupa, they have always said that there is a trade-off between growth and profitability. In order to attain more growth, one has to take a hit on profitability.

Overall, there is nothing happening here in next 12-18 months. There will be more pricing pressures, more regulations coming in, debt cost rising, debt piling up to 1200 cr now. I have been optimistic about this in long run, but just reviewing my stance on this one as despite having good capabilities, this business will remain capital intensive and seldom is a chance they will generate free cash.

I am optimistic about Bupa, but constant shifting of goal posts does not help.

Disclaimer: Invested. No transaction in last 3 months.

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Valuation-
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Fortis -
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Had missed this 3 months old article
https://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/radiant-looks-to-buy-max-healthcare-stake/articleshow/62423073.cms

Disc : Invested and accumulating

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Found one positive article on max bhupa

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Blockquo Asked about the competition they might encounter in Gurgaon, a spokesperson for the company said there was a “huge gap in the number of patients and the number of beds required”, in the city and there would be “no competition” as it expected continued flow of patients.

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There is lot of transactions going on in healthcare companies. Although I initially bought Max India only for Health Insurance, I am not able to understand is Healthcare a good long term investment from India perspective? With companies struggling to make profit, investing in best doctors, research and equipment will add to the woes, perception issue is another thing.

One thing I am not able to understand is why some big PE firms are on the buyer side. Apart from current low valuation, what other good they see in healthcare companies as long term investments that we are unable to see?

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As per Vijay Kedia " The worst time for a sector is best time for an investor" or as per another saying “Buy at the time of maximum pessimism”

Healthcare penetration is very low in India and growing population, urbanization, changing lifestyle, increasing air/water pollution etc all points out to long runway for healthcare sector in India. Big PE firms want to use this temporary (may last for another year or two) pessimism to get entry at a good price and exit when optimism returns to this sector. That’s how all great investors make money.

But market can test your patience and this sector can provide lackluster performance for much longer period than anticipated. So investing in such contra themes is for the bravehearts!

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Completely agree…just for sake of understanding contrarian and sector down…how do we compare current down sectors say Healthcare, Telecom and Pharma…I feel pharma has structural issues and lot of ambiguity as who will be winner…telecom and Healthcare seem somewhat similar…demand is intact but business model needs reinvention…big question…will new business model ROE and cash generation good enough for long term investors…PE investors apart…my confidence came from Mr Burman and Munjal showing interest in Fortis and Analjit Singh willing to buy remaining stake of Max from South African firms…

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The issues for each of the sectors mentioned by you are different. For healthcare sector, it is more about regulations and govt interventions. For Telecom, it is about competition as well investments required for technology upgradations. In case of Pharma, it can be split into two types of companies - Domestic focused have issues similar to healthcare sector whereas for exporters, it is more about quality ( USFDA inspections) as well as pricing power erosion (mainly in US). Trade wars add bit of confusion on top of it for pharma exporters.

Hence for each of the respective sectors to come back to its “prime” will be different. It looks like Pharma have started turning around after few years, but may take few more years to return to glory. Telecom sector will gain its importance when pricing power returns post consolidation. I guess pessimism may continue in healthcare for at least another year due to elections. But it may offer the highest reward in the 3-5 years perspective if entered at right time in right stock.

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In cities, healthcare penetration is better than USA. Doctor population ratio in Delhi and Mumbai is higher than USA.
Waiting for a cataract surgery or hip replacement surgery under NHS in UK is 6 mths to 2 years. In India, you can get it next day.
In US, it takes a month to get specialist appointment. In Indian cities, it takes 2 hours.
Healthcare penetration is very low in rural areas. And I don’t think that is an addressable mkt due to very low population density and very low incomes.

Also, the industry is very fragmented. There are thousands of standalone unlisted hospitals. Govt hospitals is another competition.
Pricing power is very poor. Also, very capital intensive industry.

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Open offer hopes fuels Max India’s price rise. The reason for the sudden spurt in price was clear when it was announced that SEBI has rejected the promoters request for exemption from open offer following shareholding rejig in 2016/17. So will there be an open offer or will Max promoters appeal again ?

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Max India Ltd
Highlights of Q1 FY19 results

  • Max India Business
    o Revenue grew by 3 % qoq to 641Cr net revenue due to re-calibration of the company due to some regulatory head winds and due to voluntary re-calibration there are some reversible and come ir-reversible impact for how the growth supposed to be in line with the expectation
    o Growth in Oncology , Orthopedic and Neurology had grown very healthily at 15.8 %. Alternate business which is the Max Labs, the Max@Home and Daycare oncology has grown 31 % sequentially looking at revenue of 29 Cr.
    o EBITDA for Q1 at Rs. 30 Cr, down 8% sequentially primarily due to Noida facility under infra revamp. Noida will be converted into Onco Daycare Center & will be operational by January of next year. EBITDA was 17.1 Cr for the July Month as compare to 30 Cr for the last quarter. This is the indication that how company is going to ramp up .
    o Digital revenue contribute 100 Cr plus to company revenue . Cost target is 64-67 Cr for the whole year and some of it is visible to company in first 4 months But primarily, these savings now are targeted across 3 lines, 50 % as the personnel cost , 30 % in material cost and 20 % in Indirect cost. Now company shifting focus to revenue and some new Initiative has take place .
    o Company has take out 2.5 lakh existing customers and 4 lakh customers who has come once to company. Now company is going to do daily CRM program which will encourage them to visit company more. Also done some tie-ups with nursing home for quid pro quo so they will get from company speciality clinics where they will refer patients to company.
    o Company is opening more channels in Patna , Ranchi and one more and also an O&M in Punjab and some new International Tie-ups.
    o Company has also disentangled some PSU which were not that profitable. So about 30 trail accounts has been closed in the quarter including NDNC . Company is contributing higher beds to higher facility speciality.
    o Shifting of value added prices is also one the way. All the Initiatives are going on to meant to push up the revenue from now on and costs are underway, and that has also started becoming visible to company in the month of July So company remain intact on trajectory projected for exit rate of Q4 this year, about INR 300 crores.
  • Max Bupa Business
    o GWP has grown by about 17% to INR 186 crores, driven by 21% growth in renewal and 10% growth in new sales. And one would observe that the new sales growth are, all of a sudden, come down, but that’s more to do with the sales uptick which company had in Q1 FY18 due to the significant price increase. Today, company is seeing a massive reversal in July whereas because of the price increase the base was low and the new sales have grown by about 52%. So national, the growth will normalize as company progress through the year.
    o Company also had d significant improvement in claim ratio and across cohort. Claim ratio is down by about 230 bps to 53%. Now company though had a loss of about INR 12 Crore in first quarter, that’s again on the expected line, because the moment company normalized for reinsurance impact last year, the loss is pretty much in line with last year.
    o Company has found new partnership with h Karur Vysya Bank and HDFC Bank during the last quarter and company has launched the branch banking in HDFC Bank.
    o Company Plan going forward is to accelerate growth, strengthen multichannel distribution strategy, expand distribution footprint by opening new branches, leverage a variability model in the loan – loss ratio market and synergize with Max Life to leverage the (inaudible) from branches.
  • Antara
    o The asset-light growth has been kick-started with the first projects in Noida.
    o Company has already launch the contract and the sale launch is expected sometime in Q3 FY19. There are few more projects which are currently being sort of explored and as they take shapes in next few quarters company will inform in coming future.
    o There have been sales trajectories which just goes with around 3 sales a month and overall units sold at least about 100 mark.
  • Max India will continue its robust growth trajectory with Max healthcare, starting out a profitable growth path over the next 5 to 7 years, and the bed capacity probably would be about 5,000 beds.
  • Max Dupa goes accelerating from current levels of about 25% as conclude the long-term strategy for the business, and Antara driving a capitalized growth in the future
    Q&A
  • On Healthcare side company revenue growth has tapered down because of the recalibration in the product mix so how this going to pan out in next 2 to 3 years? Does company is going to go back to earlier trajectory of 15 % plus kind of revenue growth ? What would be the levers of growth ?
    o Revenue growth is as expected and ramp up will be happening in Q2 onwards and in next 2-3 years company will settle down to 12 % to 15 %.
  • Will the growth will be more from organic side or from bed additions ?
    o Primarily organic and there are several initiatives that company had taken to ramp up revenue from reorienting entire sales activities, BTL, to reactivating customer data business, to digital, to opening more of country, and also, a very healthy uptick in international sales.
  • Kindle give some sense on the new business ? What is the kind of number company is looking at especially in Max Lab business in next 2-3 years ?
    o Company had broken even on the new initiatives s. The ramp-up is roughly INR 6.5 crores, INR 7 crores a month. The EBITDA is positive . Company is doing the network , samples which are showing in the Max Lab. Company is now making new offerings in term of products.
  • Does company is still in course to hit INR 250 Crore in maybe 2, 3 years or company is recalibrating the number?
    o Company had talk for total alternate business revenue and company had close to 40 Cr total revenue last year This year company target was 100 Cr but in the first quarter itself company had done 29 Cr so company will achieve its long term trajectory business target.
  • Kindly give guidelines on the Max Healthcare Business Break even and growth?
    o Company had Tied up with the largest retail bank with HDFC Bank so there will be a big material change in the business . Company is working toward breakeven by FY19 and in last 3 years company have grown from 20 offices to 30 agency offices whereas Apollo , Star Health have more than 150-200 offices so now company is planning for some Pilots because there is also a proven margin in terms of variable agencies, which is far more profitable, there is an opportunity in terms of synergizing with Max Life, a very little guarantee there, offices will expand our business tree there, branches in their agents. Now depending on the outcome of this growth as well as how quickly company ramp up with HDFC Bank , really the outcome on capital and breakeven will depend on, and sometimes their learning . So company need another 6-9 months to give proper outlook on both capital and growth outlook as well as breakeven outlook.
  • There have been several reports around a potential buyout of the healthcare partner Life Healthcare. What is the current status of this discussion ? And are there any other significant strategic expansion plans for the healthcare business? And are there any similar inorganic expansion plans for Bupa as well, especially against the backdrop of the processes like Star Health and Ready Care?
    o Life Healthcare has been sort of on the exit spree for about 9 months. So currently there are players who are looking for acquiring the business so company is waiting for how plan will pan out. Company can double organic expansion itself . Currently company is looking at an opportunity in Inorganic growth . because currently company is trading that business up like as company said that it will be a 100 Cr revenue business in the year and it is growing very sharply to 2.5x growth. So at some stage company have to leverage its hidden value and create some growth capital to take care of (inaudible) sort of existing balance sheet of the business growth, as well as to grow more in terms of hospital business
  • How much of the revenue decline came from the Noida facility ?
    o Company lost about 10 Cr
  • Why the occupancy has come down ?
    o Revenue go down primarily in the large business So the effect of Ramadan came a month early. Last year, it was July, this year, it came in June. That’s one reason for the (inaudible) is coming down, and the second was Noida facility, that slows down. A third that was an emergency in Ethiopia, and also in Turkmenistan, (inaudible). So primarily (inaudible) international business and Noida shutting down.
  • Revenue per bed seems to have come down, Is that because company decreased the price?
    o No there has been a price control through regulatory action in some parts of last year happened very early on and then in August of 2017, the orthopedic implants got a price control. Apart from that company had not decrease price.
  • What is giving company confidence to putting additional capital at the point of time in terms of expansion ?
    o Company is putting up a tower in Vaishali with 80 beds and it will become operational in December or January. There were temporary headwinds in term of regulation and price control, there is more issue of demand. It’s a supply constrained market. Company is not going to see a spike up in the government allocation Ayushman Bharat announcement that will come and it will unleash a certain volume. Company is just recalibrating model to be able to preserve profitability and that is what is taking the time. The cost initiatives are already being implemented and company is able to see the run rate coming through and that’s sort of (inaudible) 64 to 68 crores will get realized as part of company budget. And on the revenue side company is recalibrating its revenue model so that’s why it is taking time and from demand perspective it is still very bullish and therefore investment will flow in . Company is also looking for additional growth capital that needs to be given on that side of alternate business as well.
    o In terms of profit margin company will come back to 11-11.5 % by close of FY19. Growth is coming from alternate business like Oncology business is growing at 15 % annually for company so company is focused on oncology for coming 4 years . Second is Vaishali expansion and Vaishali Hospital is in a place which is in the middle of a concrete jungle so there are apartments overall and filing that is easy and whole demand of trajectory is moving up so the growth is coming there .
  • Is it possible that company will be able to make 15 % , 17 % or additional cash that deploy even after the regulatory environment changes?
    o Sure overall business getting to sort of a mid-teens ROE 4 years from now. it takes to ensure that, that trajectory remains intact and therefore company view on long-term profitability and earnings potential of the business
  • What is driving the Net Income as it is highest in the last 7-8 quarter ?
    o Company claim ratio has come down and there is an improvement of 230 bps on claim ratio.
  • In health Insurance business what is the strategy going forward as most of the revenues are coming from metro cities ?
    o Company strategy is to grow more and more in Tier-2 and Tier-3 cities through the reliability model and through Max Model. Company is already growing good in Metro Cities but at the same time the cost of delivering health care is too higher . So because of that the profitability of the business is not – as one would expect it to in terms of the business . So company want to grow more in Tier-2 and Tier-3 cities . From last 2-3 years profit from Tier-2 and Tier-3 cities are much higher compare to Metro Cities.
  • Did company will stick to guidance of adding 110 bed for the financial year ?
    o Yes 100 plus bed will be adding by December-January.
  • How much part of revenue decline because of the slowdown in the international business and d how much is it because of recalibration of the business that’s taking place?
    o About 5-6 Cr will be impact of international business.
  • Kindly break down the 15 % growth that company is expected going forward ?
    o 8-9 % from New Beds and within the 8% to 9%, there will be 3 to 4 – 3% should be pricing, and then balance will come from other channel.
  • Kindly give some brief on expansion of Healthcare business internationally ?
    o There are 2 models operating currently . One is a model that there are some hospitals which are very close not to Delhi and some decisions are being taken by doctors. Under second model have information center with sales and marketing folks who are doing – covering corporates and partnering Hospitals. There are specialty doctors in the partner hospitals and the similar flow back to hospitals in Delhi.
  • What is the treatment mix revenue from the specialist mix ?
    o It is 11 % of total revenue Then neuro would be 9% to 10%. Oncology as mentioned 15 % to 16 %, ortho would be roughly 8% to 9% and then company have renal internal medicine that will be 8-9 % , then company have a share in general surgery which is again 5.5 % and balance would be other specialty line and internal medicine and others.
  • How much revenue come from International ?
    o 9 to 10 %.
  • By when does company expect the healthcare business to come back to normal ?
    o The transformation journey is of 18-24 months however company has already started seeing green shoots in month of July and in H2 company hope that it will end up will its guidance . And thereafter, it’s a transformation journey spanning about 18 to 24 months, assuming that there is no surprise by the regulatory action.
  • In Max Bupa , What is the underwriting process ? What is the incentive structure in the system ? Does company see any regulatory headwind because of such good claims ratio in the segment ?
    o Company underwrites at the time of sale and the point is actually has to claim without asking question and giving sound medical underwriting , Company claim process is very smooth . Company have a 30 min turnaround time on the claim process And this – if you are a claimant in a hospital, then you have a point of care beds, for example in Max healthcare, company have those and now setting these up , the turnaround time for claims processing is 15 minutes Whereas when it comes to some of the insurers, it take month to process claims so it is One differentiator . The second is there is a lot of focus on health risk management. Company has done underwriting at the point of closure, therefore company is happy to honor all the claims and things like that. There is lot of data analytics engine that go behind Onboard at et cetera. And company strategy is to expand more and more in the Tier-2 and Tier-3 cities where there is lower claim ration compare to Tier-1 cities. . Third is company is very low on fixed benefit products, and the proportion of the fixed benefit product is rapidly increasing in overall case. So from combination of these three things company will be able to set Claim ratio at lower level .
  • Why was the occupancy rate was 55-60 % compare to 75 % in previous quarter because company was not able to make profits at bottom level ?
    o Company have not seen many hospitals many hospitals with 55% occupancy turning a profit. 71 % occupancy basically means that company have a lot of room to grow. It can go up to 85 % and at that point of time it will come to EBITDA because there’s no extra cost will be incurred for this extra occupancy. So company manage the hospitals at a 65-70 % in terms of demand and other Infrastructure. And when the occupancy passes that level, then the margins become very good . Company also have doctors which are not on fees to service bus they are employee . Then there is a fixed cost structure that company build up and beyond the point. So that’s how the economy work today. Then there are other hospitals which run for fee for service at cetera. but in that case, when the hospital gets to occupancy of 75%, 80%, EBITDA margin will improved which is not the case that company have . So in company case as the occupancy rate goes up there’s a lot of flow through which happens because of the model.
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