KIMS — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
MR. RAHUL JEEWANI – IIFL SECURITIES LIMITED
KIMS HOSPITAL · MODERATOR:
August 08, 2023
Kingsway, Nagpur. · A baby born in the seventh month was cured of a rare CMV infection after treatment for 90 days.
A baby born in the seventh month was cured of a rare CMV infection after treatment for 90 days.
He underwent multiple episodes of ventilatory days, lung infection and lung collapse, transfusion-related lung injury, feed intolerance, transient renal tubular acidosis, neonatal jaundice, and low platelets.
The doctor successfully treated the boy who was discharged after 90 days of neonatal intensive care unit stay.
Complex heart surgery, an emergency complex heart surgery within 30 hours of birth was performed successfully at Kim's Cuddles, Vizag.
It was technically a big challenge for surgeons to perform such a surgery on a neonate whose tissues of the heart are very fragile and tender.
Such a treat is one of its kind in the history of Vishakhapatnam.
After one month of discharge, the child is gaining weight and spreading joy.
KIMS HOSPITAL · MODERATOR:
August 08, 2023 Kidney and liver transplant to the same patient on the same day.
A 50-year-old patient suffering from liver cancer and chronic kidney disease was given a new lease of life by doctors at Kims Icon by transplanting both kidneys and liver.
Availability of the state of the art equipment and a dedicated team of doctors enable the hospital to perform more and more organ transplant surgeries.
A hydrated cyst of the kidney is a very rare condition with an incidence of 1 in 5 lakh population.
The surgery is difficult because if the cyst gets ruptured and the contents spill, it can lead to immediate anaphylaxis and the patient can die on the table.
The surgery was done free of cost under the Aarogyasri scheme at Anantapur.
A 36-year-old woman from Maharashtra came to the hospital with repeated shocks for ventricular fibrillation, which means it is a rapid heart rhythm leading to cardiac arrest.
She would experience as many as 30 shocks in a single day.
The doctors designed a special strategy and a two-hour-long procedure was performed.
The patient was able to walk on her own on the next day and she was discharged on the following day.
The kidneys of a brain in a dead baby were transplanted successfully to a 60-year-old woman.
This is the youngest kidney of all time in Kim's history and the second such successful transplantation in Telangana and AP states.
This is technically challenging in the view of pediatric donors.
The extraordinary task could not have been possible but for the kindness and selfishness of the donor family.
Their act of humanity exemplifies the power of organ donation and serves as a sterling inspiration.
A complex pancreatic surgery was performed laparoscopically on a 49-year-old patient.
It was done in a laparoscopic surgery, nose as the ripple procedure where the incision is very small.
It causes less pain and enables faster recovery.
The patient recovered quickly and was discharged within one week.
Due to its technical complexity and skill required, the procedure is done in very few centers in Hyderabad.
Better quality of life is also possible in these surgeries compared to open procedures.
This has been done in Kims, Kondapur.
The patient was suffering from a stiff neck and spine for over 5 years and was not able to walk, erect and bend or sleep properly.
A complex surgery called Pedicle Subtraction Osteotomy lasting 8 hours was done by the doctors and the patient at last is able to stand erect and regain his dignity.
The deformity is gone.
A 48 year old woman came to the hospital complaining of severe pain in urinary bladder.
There was a tumor and it tested benign.
However, before the surgery could be performed, the tumor first slipped down and blocked the urethra.
She stopped urinating.
Immediate surgery was done and tumor was removed.
When it was first sent for testing, it was found to be a rare type of inflammatory pseudotumor.
It is rare in medical history.
There are only about 100 cases worldwide to data.
Such a case was done in KIMS Hospitals Kurnool successfully and the patient was relieved.
August 08, 2023 Doctors at KIMS Kurnool treated a 19-old boy who was suffering from the rarest NORSE disease (New on-set Refractory Status Epilepticus) which is a rare devasting conditions that can abruptly occur in previously healthy people mostly children.
Awareness of this disease is a very limited even among our medical community.
The boy remained in the hospital for 6 weeks before he was treated and discharged he has also performed in Kurnool.
Doctors at KIMs Kurnool performed a complicated surgery on a 43-old women having a tumor like thing around her liver which is called hemangioma in a medical parlance.
There was swelling in the liver due to internal bleeding.
To arrest further bleeding all the blood vessels were blocked and next day surgery was done and tumor removed.
It was done free of cost under Aarogyasri scheme again from Kurnool Hospital.
An 8-day old baby successfully treated and discharged.
8-day old baby was put on peritoneal dialysis for 5 days continuously and successfully treated for renal failure and seizures.
The baby was discharged after 21 days of NICU the treatment was done free of cost under Aarogyasri scheme.
Let me now present the financial highlights for Quarter 1 FY23. Gross revenue at INR609 crores, a growth of 21.6% on year-on-year and a 4.9% on a quarter-on-quarter basis.
Operating EBITDA of INR160 crores, an increase of 12.4% year-on-year and a decrease of 4.7% on quarter-on- quarter.
EBITDA margin at 26.3% versus 28.5% in quarter 1 FY23 and 28.9% in quarter 4 FY23. PAT at INR87 crores in quarter 1 financial year 24 against INR79 crores and INR99 crores in quarter 1 FY’23 and quarter 4 FY23 respectively.
Conducted 3.83 OPD consultants, consultations in quarter 1 FY24 up by 18% and 0.4% in a year and quarter-on-quarter basis.
Bed occupancy in Q1 FY24 at 70.4% up 5% year-on-year and down by 0.4% and quarter-on-quarter basis.
The average revenue per operating bed increased to INR31,697 in quarter 1 FY’24 showing a 4% year-on-year and a 3.7% growth in quarter-on-quarter basis.
Cash and cash equivalents at INR178 close in Q1 financial year 24.
Net debt-to-equity ratio at 0.22.
Academics, I'm happy to share with you that recently KIMS Hospital is accredited by American Accreditation Commission International for having demonstrated compliance with the international accreditation standard for excellence and patient safety.
This is yet another feather in our cap as we dedicatedly continue our march in pursuit of excellence.
The events, the conferences that we have done in KIMS, a two day Annual Conference of Indian Neuro Gastroenterology and motility association was hosted by KIMS on 29th April, 2023, attended by several experts in the field from throughout the country.
The Department of Clinical Immunology and Dermatology, KIMS organized a Lupus ramp walk and Lupus awareness program on the world Lupus day on 10th of May 2023, participated by the local doctors and the patients who have been cured.
An exclusive inflammatory bowel disease clinic is inaugurated at KIMS Secunderabad and a workshop with wide participation was conducted on 27th April 2023 so that exclusively all the people who are suffering from inflammatory bowel disease will do get benefit out of this.
The Department of International Pulmonology conducted a THORACOSCOPY concern with diabetic lectures and hands on workshop on 28th May, 2023.
So, that with a minimal invasive
August 08, 2023 is enable to treat without operations of all the lung conditions.
Awards and Honours Dr. Raghu Ram our breast cancer expert surgeon was conferred honorable fellowship by American Surgical Association.
This is the highest recognition from ASA and there are only 99 honorary fellow from throughout the world under this.
Two studies of doctors in Euro Gynecology Department has been accepted for presentation International Continence Society Annual Conference 2023 at Toronto.
Our DNB students was awarded the best poster award in Euro-Asia Critical Care Conference by the European Society for Critical Care.
Our projects are moving a pace as per schedules.
This quarter we launched an exclusive single specialty hospital for gastro sciences, went to operation at Vishakhapatnam, Andhra Pradesh.
We launched KIMS Cuddles mother and child brand at Nagpur and Vishakhapatnam, both the places.
We have done well in Q1 and do hope the performance will be even better in the upcoming quarters.
Winston Churchill said, my tastes are simple, I am easily satisfied with the best.
We at KIMS too are satisfied only with the best and best in all aspects to the patients and investors.
Thank you for your continued trust and support.
We are open for questions.
Moderator · Conference Operator
Thank you very much.
We have a first question from the line of Dhara Patwa from Smifs Limited.
Please go ahead.
Dhara Patwa
Yes, thank you for the opportunity.
So I have two questions.
First is like, finance cost in this quarter has actually doubled.
So what was the driver for this?
KIMS HOSPITAL · MODERATOR:
August 08, 2023 And also there is a lot of margin expansion opportunity in the Andhra Pradesh cluster.
If you look at Telangana, it is at 31%, whereas in Andhra it is still at 22%.
There is an opportunity for us to improve that by at least 4% to 5% over a period of time.
Likewise, there is also opportunity for us to grow Sunshine Hospital, which we recently acquired a while ago.
But given there is some delay in the movement into the new facility, there is a delay in wrap-up.
But once that happens, there is more opportunity for growth there as well.
Dhara Patwa
So what I understand is the next level of growth, majorly in Telangana and AP would come from ARPOB, right?
If we are adding more specialties, it would fetch more ARPOB.
So will the occupancy go to like 80%, 85%, 90% or at occupancy of 80% we can expect some improvement in ARPOB going forward?
Moderator · Conference Operator
Thank you.
We have a next question from the line of Reshab Sisodiya from Sameeksha Capital.
Please go ahead.
Reshab Sisodiya
First of all, congrats on a good set of numbers.
I have a few questions, sir.
So first, on the AP assets that we have combined from this quarter, the reporting, so if I compare it on a like-to-like basis on a rough calculation, so I find that the margin improvement has slightly slowed down.
And is it also that because we added capacity in Vizag, if I'm not wrong, for Gastro.
Are those of the reasons that is why we see the margin trajectory has slightly slowed down in the AP assets?
KIMS HOSPITAL · MODERATOR:
August 08, 2023 on that.
And if I look at historic, so our orthopedics as a percentage of total share has grown from 5% to 15% in the last two years.
So any specific specialities that you are looking at that you want to grow those further, if you could get some sense?
August 08, 2023
Moderator · Conference Operator
Thank you.
We have a next question from the line of Nikhil Mathur from HDFC Mutual Fund.
Please go ahead.
Nikhil Mathur
Hi, good morning everyone.
KIMS HOSPITAL · MODERATOR:
August 08, 2023 operational one months, two months apart from each other.
So as far as Bangalore, we're pretty much on track in getting these facilities operational.
As far as Thane, we've started work.
We have, like we mentioned in the previous call, we are looking to bring an investor.
We have signed an SPA with the investor.
We are looking to close the transaction in the next 15 days.
When I say close the transaction, we are talking about transferring the money to [Anand Dhani 0:26:37] to completely acquire the asset.
The work on site has already started.
So by the end of first quarter and financial year, we should hopefully have that operational as well.
Nashik is something that will be operational by Q4 of this financial year or early Q1 of the next financial year.
So these are the four projects that we have currently, which are going to be operational in the next 12 months to 18 months.
And then beyond this, we have expansion that's happening in Andhra, which is adding oncology centers across five of our seven facilities, adding mother and child in five of our seven facilities.
And then you have the Kondapur expansion, which is an incremental 400 beds, which is slated to begin two years from today.
Yes, that's about the expansion.
Nikhil Mathur
Okay, so we are roughly adding almost 1,700 to 1,800 beds by end of FY ‘25, right?
KIMS HOSPITAL · MODERATOR:
August 08, 2023 next 12 months, but beyond, a lot of the beds are getting added to the Andhra and Telangana cluster, you will see a lot of these incremental beds.
Even there, 40% of the revenue growth will flow into the EBITDA.
Nikhil Mathur
Okay, sure.
And sir, one final question.
Now, a couple of Northwest hospitals have reported this quarter, and you have also reported.
It seems, they seem to be a bit done.
Moderator · Conference Operator
Sorry, we lost his connection.
We'll take the next question from the line of Dheeresh Pathak from Whiteoak.
Please go ahead.
Dheeresh Pathak
Yes, thank you.
So, this, you said the Telangana cluster, the EBITDA is lower because there is a higher cost of goods and there is corporate overheads.
So I would suggest that...
KIMS HOSPITAL · MODERATOR:
August 08, 2023 So in the month of July and in the month of August, we are seeing a good improvement in the revenue.
It will get reflected in Q2 performance.
So we believe over the next 24 months, 36 months, Gachibowli will hit a 70% occupancy.
All the doctors for us to be able to achieve that are more or less in place and the EBITDA margin correction is also is done.
So whatever incremental revenue happens in Gachiboli, almost 50% of that will flow straight to EBITDA.
There is one other contract that will end in October at Sunshine Hospitals, which is a contract with a third-party diagnostic vendor, where we are losing close to 2%- 3% margin because of that outsourced element.
That contract ends in the month of October.
After that contract ends, there is an opportunity for the margin to further expand.
As far as Begumpet is concerned, whatever margin correction we could do, we did.
And the reason we have not been able to scale that hospital is only because of the poor infrastructure that it currently has.
Once we move to the new facility, then we have already identified key departments that, we want to add and key doctors that we want to onboard.
So with moving to the new facility, we will start seeing growth happening there.
And as we speak right now, we are actually moving into the, we're starting OPD on August 9, and we will move completely into the new facility in the next 30 days-35 days.
So from Q3 and Q4, you will start seeing lot of growth in both revenue growth in Sunshine hospitals other than the margin growth.
Dheeresh Pathak
Understood, okay.
And in Bangalore, when you said, so just can you refresh the asset status like INR650 crores, INR80 lakh per bed, are we owning the real estate or we are leasing it?
If you could just explain that again on the two assets in Bangalore.
Moderator · Conference Operator
Thank you.
We have a question from the line of Nikhil Mathur from HDFC Mutual Fund.
Please go ahead, sir.
Mr. Nikhil Mathur, your line is unmuted.
Please go ahead.
Since there is no response, we'll move on to the next question from the line of Sagar Shah from Philip Capital PCG.
Please go ahead.
Sagar Shah
Yes.
Good morning, sir. and first of all congratulations for a healthy set of numbers.
Now my, I have just few questions actually on this.
First of all, my first question was related to your Sunshine Hospital.
Sunshine Hospital, we are facing almost delay in shifting our Secunderabad Hospital and finally, as we have said, we are moving the SKU to FY ‘24.
So first of all, you have already mentioned the key drivers behind the improvement and margins and occupancy and everything.
But I wanted to understand that, basically apart from this, will you be adding other specialties in this year itself to maybe to improve your occupancy at these levels?
KIMS HOSPITAL · MODERATOR:
August 08, 2023 And secondly, also Nagpur, what are the key strategies apart from hiring doctors that you are going to do to actually achieve scale in these two hospitals, which are actually one of the biggest growth drivers for us in the next two years?
That is my first question.
August 08, 2023 only oncology specialty there or have you changed the strategy and can you give certain number.
What is the bed capacity would be over there?
Moderator · Conference Operator
Mr. Shah, I request you to join by the queue sir.
Sagar Shah
Okay, sure.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Ashish Thavkar from 360 One AMC.
Please go ahead.
Ashish Thavkar
Yes, hi, thanks.
Just wanted to ask this, Mr. Rao's investment in Som Datt Financials.
If you guys could provide some color around that, it would be helpful?
Bhaskar Rao
Basically this is an NBFC, we have been taken for one of my cousins and because he's an young guy to grow and second important thing, he cannot able to acquire this because of his financial status and other things.
My involvement in that is not there at all, except because to get the permissions from the SEBI and the Reserve Bank, and I have little stake in that, and even my time investment in that is absolutely zero.
It is only to help that person and once it has been established and I know, there is a lot of regulatory things, when compared to the hospitals NBFC has, but we are going to put the total completely professionals on that.
They will run on their own.
Maybe over a period of time, once it is established on its own, I may able to step out of that as a Director also in that.
Ashish Thavkar
Yes, okay.
So this clarifies a lot of things.
Thank you so much.
Secondly, on this, so you mentioned about ARPOBs, right?
So you aim to be around 70%- 75% of the occupancies, but as far as the ARPOBs are concerned, so this time around it was 5% Y-o-Y growth.
On a longer term basis, or at least in the near term, FY ‘24, what kind of ARPOB growth are we building in?
KIMS HOSPITAL · MODERATOR:
August 08, 2023
Ashish Thavkar
Okay, fair enough.
And so in the longer run, so I guess so as far as FY ‘24 is concerned, so this fiscal, there are no issues, but since most of the capex starts sitting from next fiscal onwards, so how do we see, are we confident of maintaining EBITDA margin upwards of 35% or you feel at least for that one particular year, where 40% of the beds will get operational, margins could come down below 35%?
Is that a fair assessment?
Moderator · Conference Operator
Thank you.
We have our next question from the line of Harsh Bhatia from Bandhan Mutual Fund.
Please go ahead.
Harsh Bhatia
Yes, hi, Dr. Abhinay.
Good morning.
Just two or three quick questions from my side.
In terms of the mother and child care aspect that we are trying to bring in the AP and Telangana markets, if you could help us understand the initiatives in terms of the outreach, the awareness, because from an outsider, the patient pool is very different from the multi-specialty business and the pediatric specialty business.
So one would be in terms of your outreach and awareness, the initiatives that we're taking, how are we looking at the overall market dynamics for this particular segment?
And lastly, in terms of the talent pool availability in terms of specialty pediatricians, let's say an onco-pediatrician or a neuro-pediatrician, your thoughts would be helpful?
KIMS HOSPITAL · MODERATOR:
August 08, 2023 largest mother and child hospital and we've been able to do that in just four years or five years in spite of dominant standalone mother and child brands being there.
Now we look, after seeing the success there, we're looking to expand, those services to our rest of our hospitals.
And I the formula, we followed there was very simple to what we do in our adult hospitals.
We bring in the right clinical talent, who have some of whom who have practices, some of whom, who have great clinical capabilities to showcase.
So, we continue to bring and acquire these clinical practices, which are probably today in standalone hospitals or in nursing homes, who are willing to consolidate and move to larger facilities.
That's how, we're trying to focus and build our obstetric and pediatric brand.
And once we have the right clinical talent, branding and awareness is not going to play as much as a significant role as much as acquiring the right clinical talent.
And that's what, we have historically demonstrated and we believe is what will be helpful to grow the business.
Harsh Bhatia
Sure, would it be right to say that, doctor for specialty pediatric care would have or would not have any overlap with the multi-specialty business that you're already doing, the multi-specialty services that you're already providing?
So the medical department would be entirely different in that sense.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Reshab Sisodiya from Sameeksha Capital.
Please go ahead.
KIMS HOSPITAL · MODERATOR:
August 08, 2023
Reshab Sisodiya
Hi sir, thank you for the follow-up.
Just small detail on the payer mix.
So our government share has been reducing, it has reached close to 7%.
So is there anything specific, we are doing and the government?
Share mix or how is the margin and the data profile moved after the last price is taken by ECGS?
Moderator · Conference Operator
Thank you.
We have our next question from the line of Alankar Garude from Kotak.
Please go ahead.
KIMS HOSPITAL · MODERATOR:
August 08, 2023
Alankar Garude
Hi, good morning everyone.
So firstly on Sunshine, we have seen a sequential improvement in this quarter and now in the second quarter as you said, August OPD and then in the next 30-35 days, we will be starting operations and maybe we will have the full impact of the doctor additions in the third quarter and hence, the duplication of cost.
So overall should we expect a meaningful dip in the Sunshine margins from the current 23% for the next two quarters and after which, we should see an expansion.
So just wanted your thoughts on both the near-term trajectory as well as how should we look at margins for Sunshine in FY ’25, so for a quarter?
KIMS HOSPITAL · MODERATOR:
August 08, 2023 you will start seeing significant improvement in revenue.
We have already started seeing good improvement in revenue in the July and August months.
So that is after having two, three doctors on Board.
But I'm sure given more and more doctors on Board, the confidence in the local market, confidence in the hospital will only go up and then we'll start seeing an improvement.
By the end of the financial year, we should see at least 60%- 70% of the doctor on-boarding to be completed.
Alankar Garude
Thank you Dr. Abhinay, that's helpful.
And maybe just one final question, Dr. Bhaskar, what is the quantum of investment for acquiring that 64% stake in Som Dutt Finance and would that lead to any increase in pledging in KIMs?
Bhaskar Rao
No, it is only INR20 crores, INR22 crores total, both put together myself and my cousin and we have not taken any pledge from, we have not used any shares to raise this fund.
Alankar Garude
Understood sir.
Thank you and all the best.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Pallavi Deshpande from Sameeksha Capital.
Please go ahead.
Pallavi Deshpande
Yes, sir.
Thank you for taking my question.
Just wanted to understand in the Telangana cluster, what would be the number of doctors that were added additionally and what were the existing numbers since you mentioned that, there was margin pressure due to that?
KIMS HOSPITAL · MODERATOR:
August 08, 2023
Moderator · Conference Operator
Thank you.
We have our next question from the line of Bino Pathiparampil from Elara Capital.
Please go ahead.
Bino Pathiparampil
Hi, good morning.
Thanks for taking my question.
First, why have you stopped giving Andhra Pradesh assets mature and acquired separately and is this going to be the way you report going forward combined?
KIMS HOSPITAL · MODERATOR:
August 08, 2023
Moderator · Conference Operator
Does that answer your question, sir?
Bino Pathiparampil
Yes.
Thank you very much.
Moderator · Conference Operator
Thank you.
We'll take our last question from the line of Namit Arora from Indgrowth Capital.
Request you to ask two questions, sir.
Namit Arora
Yes, thank you for the opportunity and thank you Rahul for hosting this call.
My first question is to Dr. Bhaskar and Dr. Abhinay.
You clearly have a lot going on both in terms of organic and inorganic, and obviously there's been a lot of success, but do you feel the need to augment the senior leadership team at a group level, either as a chief operating officer or just augmenting the bandwidth, given that there is a lot going on, number one.
And then my second question was that going forward, would you be now in a phase of sort of digesting and integrating and executing all the initiatives that you've launched, or will you continue to look at acquisition opportunities selectively or new Greenfield organic efforts as well?
Will that process continue or do you think you already have enough on your plate?
Thank you very much.
Moderator · Conference Operator
Thank you.
As there are no further questions, I now hand the conference over to the management for closing comments.
KIMS HOSPITAL · MODERATOR:
August 08, 2023 Now with so much of consultations that are available in the district itself, we are trying to strengthen the existing hospitals by creating a high-end tertiary care, like advanced gastro, women and child, and oncology units and all those things that, we'll be able to do some growth.
And it's a continuous journey in the next three years to five years of going organic and inorganic growth.
That's why there will be a little bit of fluctuations on the EBITDA and all, but we'll expect a continuous growth on the top line and bottom line.
That is one.
And also, we are not very averts of the government schemes.
Our aim is to provide a good quality care to each and every person.
When there are many other small hospitals are coming and nearby to that government scheme patients, they will go there.
That's why the scheme is coming down.
And the other important thing is, as far as the organogram is concerned, I feel the entire health care is mostly driven by the doctors, the good, passionate doctors who are able to select.
Then the management will be not a very big issue.
The other important thing, a lot of concern on all of you as somebody has pointed out also, the finance company.
We have only invested about INR22 crores and that's all our personal to help one of my cousins.
And I have nowhere concerned spend any time on that.
The entire professional team, we are going to take it.
It is a slow growth on its own, so I don't need to spend much of our time and other things.
So to clarify more and more, there is nothing to do.
My entire dedication, passion, commitment for lifelong will be for the KIMs hospitals and whatever we do to improvise and with all these things of your investments in this company.
As I mentioned in the patient care small hospitals in type 2 and type 3 places, where we could able to provide a very good quality care otherwise not a many chains that can able to provide this type of type 2 type 3 that is a big satisfaction for you as well as for me, we are in this space.
Thank you very much for patient hearing and satisfied with all our answers.
Moderator · Conference Operator
Thank you, sir.
On behalf of IIFL Securities, that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
Questions and answers
“KIMS Hospital