- 3 years ago
#IPO Adda | #YatharthHospitals & Trauma Care IPO opens on July 26 with total issue size of Rs 686 crore.
Whole-Time Director Yatharth Tyagi, joins in to discuss the details. #BQLive
Whole-Time Director Yatharth Tyagi, joins in to discuss the details. #BQLive
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NewsTranscript
00:00 Hello and welcome to BQ prime. You are watching IPO Heada and my guest today is from Gathath
00:05 Hospitals and Trauma Care Services Limited. The company is coming out with an IPO which
00:11 opens on July 26th and closes on July 28th. Price between 285 to 300. It's a fresh issue
00:19 of 490 odd crores and OFS of 196 crores giving the total size of roughly 686.6. The public
00:29 will be holding roughly 33.7% after the IPO is closed and the promoters are offloading
00:35 nearly 65.5 lakh shares in the IPO. And joining me is Gathath Tyagi who is the whole time
00:40 director at the company. Gathath, thank you very much for joining us on BQ prime. You
00:46 are raising roughly 686 crores or 600 odd crores in a fresh issue which includes a pre-IPO
00:53 replacement of 120 odd crores as well. What is the proceeds going to be used for?
01:00 So we are looking to repay the existing debt that we have out of the proceeds. So 245 crores
01:06 is exactly the existing bank debt that we have. So we will be completely repaying that.
01:11 Around the rest of the amount we will be using for the capex for the equipment. So around
01:17 135 crores will be going to the capex of buying medical equipment that we will be putting
01:22 in our existing facilities. And remaining around 65 crores will be the unidentified
01:28 acquisitions that we will be using and the rest will be used for general corporate expense.
01:34 You're primarily based out of the natural capital region and that's a very competitive
01:40 marketplace as far as healthcare services is concerned. How do you see your growth in
01:46 that region?
01:48 So I think Delhi NCM market is a huge market for healthcare. And especially in totality
01:56 it looks like one big market but if you look at the micro market that is the cities that
02:00 we are based out of like Noida, Noida Extension. These are the cities that are ever growing
02:05 year on year by population. We have the Asia's largest international airport, the Jewar airport
02:10 also coming up in Great Noida very very soon. So there's a lot of growth that is bound to
02:15 happen here both in terms of population both in terms of healthcare. So we strongly feel
02:19 that there is still a lot of scope and room to grow in these markets and that's where
02:25 our existing facilities are doing it over the last few years.
02:30 If I look at your metrics, your bed utilisation rates or bed occupancy has been in the range
02:37 of 45 to 46 percent which is much lower than some of your peers in the NCR region. Any
02:44 reason why it is that so?
02:47 So I think we have four hospitals and it would be rightly so if I can just quickly break
02:51 up the bed occupancy that will give you a clear idea of where we are. So as far as our
02:54 Noida hospital is concerned, there's a 250 bed hospital, the hospital that we started
02:58 in 2013. So you know one of our most mature hospitals. This is the hospital where we have
03:03 bed occupancy of around 87 percent which is quite higher than the industry average. As
03:09 far as our other hospitals concerned that is the 400 bed hospital in Greater Noida.
03:13 That hospital started in 2018 basically because it revamped from a 100 bed hospital earlier.
03:18 In 2018 we revamped it to a 400 bed hospital. There the occupancy is around above 60 percent.
03:25 So again quite good there. As far as the other two hospitals are concerned, the Noida Extension
03:30 Hospital. This is the hospital we started in 2019. So technically the occupancy is around
03:35 31 percent here. So there are two reasons for that. One obviously because it started
03:40 in 2019. So it's technically a new hospital. And second reason is because the first two
03:44 years before this hospital started, after this hospital started, for long months of
03:49 the year it was a full COVID hospital. So this was one of the biggest private COVID
03:54 hospitals in the region. So if you look at it, post COVID is where complete overall non-COVID
03:59 operations in this hospital started. So that's in fact I would say that it's showing very
04:03 good sharp increase since post COVID and has already reached 31 percent. As far as our
04:08 fourth hospital is concerned, that is the Jhansi Horseshoe Hospital that is outside
04:10 the Delhi and Sehr Market. It's located in Madhya Pradesh. This is the hospital we just
04:15 acquired last year. And last year was its first year of operation and that's why it
04:19 has an occupancy of around 8 percent there. So overall that's the right way to look at
04:24 the occupancy and we feel just how Noida and Gritnoda Hospital are doing well in terms
04:28 of occupancy is concerned. Soon Noida Extension and Jhansi, the new hospitals will be ramping
04:33 up their bed occupancy.
04:35 Give me a sense of how you've been able to mitigate the fall in COVID revenues with non-COVID
04:41 revenues because during FY21-22 you had between 25 to 30 percent of your revenues coming from
04:50 COVID operations. Have you been able to mitigate that and grow also in non-COVID areas?
04:59 Yeah, so FY23 that was completely non-COVID. So roughly around 520 crores top line that
05:07 we did, it was all non-COVID. So the reason why we are able to not only mitigate but also
05:14 grow post-COVID is concerned is because of two reasons. As I said, we had two new hospitals
05:20 that started in 2018 and 2019. So post-COVID is where these hospitals really started to
05:26 show their true flavors and started to grow in terms of both bed occupancy is concerned.
05:31 As far as other reasons for a growth post-COVID has been, there are a lot of treatments that
05:35 we have recently started that we were not offering pre-COVID. So for example, and these
05:40 are high-end ticket size treatments like kidney transplant, bone marrow transplant, oncology
05:46 we have recently put a lot of emphasis on. So because there were a lot of treatment specialties,
05:51 high-end super specialties, we're moving towards a tertiary care hospital chain now, is what
05:55 we started and that's why the growth are coming from and going forward, we will be
06:00 growing in the same lines.
06:01 How do you see the tertiary care or the specialty segment growing from here because your medicine
06:05 revenues is around 40-45% and you have a lot of other specialties. Is there specific specialties
06:12 that you're going to target going forward and increase your revenues from?
06:18 So right now, all of four hospitals are standalone super specialty hospitals. For example, all
06:23 four hospitals are doing good revenue in cardiology. They all have cath labs. So we have maintained
06:28 those lines, but going forward, in one of our hospitals, that is a Nordic hospital, which
06:32 is the biggest hospital of the group. There we are putting up oncology machines like radiation
06:37 oncology, PET scan, nuclear medicine. We're going to start soon. So this hospital is where
06:41 we will be focusing on the super specialty in tertiary care of oncology. And actually
06:46 we feel the other hospitals which are located in Delhi and say market for this hospital
06:50 would be also be acting as feeders for as far as the radiation oncology is concerned.
06:54 So also, you know, because Gritnod is coming up with the largest international airport
06:59 of Asia. So we feel we will be focusing on medical tourism and a lot of international
07:04 patients are bound to come in our cities. So we should be moving on these lines and
07:08 helping our tertiary care sector to grow.
07:11 So by the time, you know, the airport comes up, it will be a couple of more years. What
07:15 is the current revenue mix between medical tourism and domestic patients?
07:21 Traditionally, we have been not high on medical tourism because, you know, you have to see
07:26 pre-COVID, you know, around before 2018, we were sort of, we had two hospitals, the 250
07:32 bed in Noida hospital and only 100 bed in Gritnod hospital. So our real story and the
07:36 growth, you know, picked up when we started the grid, when we revamped the Gritnod hospital
07:42 to 400 bed and started in Noida from 450 beds. So, you know, the treatments that is required
07:47 in international for international patients, we recently started those. So going forward
07:51 is where we are expecting the revenue to drive in there. And that's what the focus is. In
07:55 fact, you know, Gritnod hospital, we have recently acquired the adjacent land parcel
07:59 there and we will be, you know, expanding the capacity, Brumfield there and the new
08:04 capacity, you know, we are planning, you know, maybe on the lines of international patients
08:08 and creating those facilities, especially in that hospital.
08:12 You know, if I look at your metrics with respect to average revenue, which is coming in, it
08:19 is basically, you know, much lower than your peers, like a Max or an Apollo or for that
08:26 kind of Fortis. You know, if I look at the average revenue per occupied bed, which is
08:32 around 26,500 rupees. And if I compare that to your competitor, it would be, you know,
08:41 you would, your competitor would be two times or three times that. So how do you see that
08:47 rate going up from here? And is there a scope to increase your average revenue per occupied
08:53 bed?
08:54 So, you know, our average revenue per occupied bed has been traditionally lower compared
08:59 to these peers you talked about, because, you know, we have that specifically for two
09:03 reasons. First is, you know, when we started a chain, we intentionally kept the pricing
09:06 low. So pricing is, you know, roughly around 15 to 20% in that range, lesser than the likes
09:12 of the hospitals that you talked about. And as far as, you know, the ARCOP was lesser
09:17 because of the high end treatments that we recently started, we were not doing it, you
09:21 know, pre-COVID like the transplants and the oncology, which we're going to start, I mentioned
09:24 as soon as these starts, you know, that's where the really flavor of ARCOP comes in.
09:28 And I also mentioned international patients, which are usually higher ARCOP. So going forward,
09:33 this is the growth that in ARCOP is bound to happen in our group. And if you look at
09:38 even the last three years, you know, our ARCOP's growth has been significant as soon as we
09:43 started switching to high end super specialties, like so, so that that's what the growth in
09:48 the ARCOP should look like.
09:49 Give me a sense of how the margins are going to be because your margins are at 25.7%, but
09:55 it has declined over the last year. Is there a reason why it has declined? And will that
10:03 can you push your margin closer to 30% given that you will be able to pay off your debt
10:08 and, you know, leverage your capacity?
10:12 So I think I wouldn't say there's been a strong dip. There's been just a few percentage dip
10:16 in the margin, EBITDA margin that has been during COVID, you know, the margins were high,
10:21 even though the overall, you know, volumes were not much, but the margins for us in COVID
10:25 was higher because, you know, we were one of the largest COVID players, private players
10:30 in the region. You know, we did some good work during COVID in North India. So post
10:35 COVID, yes, the margins were less, but even right now we are, you know, operating at really
10:39 good margins compared to our peers. Going forward, we in fact, yes, you're right, the
10:43 margins should grow because not just the bank debt going down, but also the fact that, you
10:49 know, the growth is expected from our organic facilities. As I mentioned, our Nordic Extension
10:53 Hospital that is in the tune of around 30% occupancy. So there's a lot of growth that
10:58 is going to happen in occupancy there. In Jhansi-Orsha, you know, we are operating at
11:01 8% in these two hospitals, in Jhansi-Orsha hospital. So, you know, when there's growth
11:06 in your organic and existing facilities, as most of the doctors already kept their infrastructure
11:10 is already there. So margins are bound to increase in the years time.
11:16 In your opinion, how much time does it take for a hospital to become operating or to profit,
11:22 to be profit at the operating level?
11:25 So for us, we do it in the second year of operation, you know, and that is a very strategic
11:30 approach we have taken because, you know, what we do in the first year, we do a sort
11:34 of a soft launch, you know, we don't do a heavy expense in the first year, because if
11:38 you look at it the first year, most of the time for hospital goes into, you know, empowerment
11:42 of health insurances, government schemes, and, you know, getting your NABHS aggredations.
11:47 So once those come is when you see, you know, patients across the, you know, revenue segment
11:52 coming in. So because, you know, the second year is, you know, when you get all these
11:56 empowerments and second year is usually when our hospital is done, officially a bit positive.
12:01 So you know, the Ram Raja hospital, which is a subsidiary, which is the Jhansi-Orsha
12:09 hospital, right? You expect that to be profitable in FY24, given that last year it was loss
12:16 making?
12:17 I think, yes, it should be on the lines of that. But, you know, I cannot say a definitive
12:24 yes on that. But we are trying to make that happen.
12:25 I am just saying it on the basis of what you said, second year of operation. So, and you
12:30 started Ram Raja last year. So technically, FY24 should be a profitable one for it, right?
12:37 So that has been experienced in the past for all existing three hospitals. For our new
12:41 acquisition that is Jhansi-Orsha, we will try to do that in the year.
12:46 So you are currently in the NCR region and with Jhansi as the only hospital which is
12:53 outside the NCR region, what is the kind of expansion plan that you have? Because you
12:57 are raising some amount of 65 crores or for expansion plan as well, right?
13:02 Yeah, so, you know, we are looking in the territories of, you know, Delhi NCR. As I
13:07 said, I'm very bullish about the Delhi NCR market because areas of, you know, Noida,
13:11 Dehradun, Noida, Faridabad, Ghaziabad, these are ever expanding areas, a lot of urban populations
13:16 moving there, a lot of urbanization happening from rural parts of UP into these regions.
13:20 So we are looking for options there. And, you know, let's see, I think, if we, you know,
13:26 get this opportunity, we will be looking to acquire.
13:28 So you're not going to get into other northern areas like UP, you have Rajasthan, you have,
13:35 you know, Punjab, Haryana belt, which is also there, which many hospitals in the northern
13:42 region cater to.
13:44 So UP we are already operating in, so Noida.
13:46 So that's Noida and the Greater Noida, but that's part of the NCR region, I'm talking
13:49 of UP.
13:50 Yeah, yeah. If there are good options available, which are, you know, fitting the size that
13:55 we're looking for, and we are, if we are able to deliver the same margins that we have in
13:59 Delhi NCR, then yes, definitely we will be looking at those options.
14:03 Give me a sense of, you know, how do you see, because you're operating in the NCR region,
14:10 what is the kind of growth rate that you're seeing, because it has almost every major
14:15 hospital group operating out of that region, which is very hyper competitive.
14:20 And there is a brand, you know, also there, because you have a brand association also
14:28 there when, you know, patients go for that.
14:30 So you're targeting more of a Noida, Greater Noida and Noida Extension and the new one
14:37 in the Jhansi one.
14:38 Are you looking at tier two or tier three in any way to enter this market?
14:44 Yes, I think we are open for it.
14:47 You know, if as I earlier mentioned that if there's good opportunities, because even though,
14:52 you know, we are located in Delhi NCR, we have a lot of catchment coming from UP, you
14:55 know, we have a lot of patients who travel far regions of UP, especially what happened
15:00 during COVID with us, we were one of the largest COVID player, you know, in UP.
15:05 So a lot of patients pan UP came to us and post COVID, these patients sort of attached
15:10 to a brand in terms of the good experiences they have during the COVID.
15:13 So brand sees really spread across UP and yes, you know, there is demands we hear for
15:19 patients to come to those cities, we will be looking at that.
15:23 Just a final question, you're going to pay off your borrowings of your company and the
15:28 subsidiaries once the borrowings are paid off, will you be debt free completely?
15:34 Yes, that's the plan.
15:37 So the entire finance cost which is currently there in your P&L will come flow down directly
15:42 to your bottom line?
15:45 Yes.
15:46 Yes, sir.
15:47 Thank you very much for joining us today on BQ prime.
15:52 The IP opens on July 26, the price between 285 to 300 rupees, the company is raising
15:57 fresh issue of 490 crores and OFS of 196.6 crores.
16:03 Thank you very much for joining.
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