In an interaction with Raj Gore, CEO of Healthcare Global Enterprises
As a leading comprehensive cancer centre chain in the country, we aim to pioneer research and development for the benefit of cancer society and continue our mission of adding life to years, affirms Raj Gore, CEO of Healthcare Global Enterprises
In Q1FY24, the company’s revenue surged by 13 per cent from last year’s same quarter to Rs 460.7 crore, while the net profit of the company zoomed 26 per cent on a YoY basis to Rs 7.6 crore. What were the contributing factors to the company’s performance?
HCG's performance for this quarter was great overall, we continue to maintain our trajectory of achieving Industry beating growth. There are multiple reasons attributing to this performance, largely a combination of increase in volume as well as value coupled with multiple other operational factors. Our occupancy levels increased from 61 per cent in Q1FY23 to 67 per cent in Q1FY24 while our ARPOB increased by 3.6 per cent from Rs 38,296 in Q1FY23 to Rs 39,686 in Q1FY24.
We recently undertook a value creation exercise which helped us to improve our operational efficiency. Additionally, our emerging centres continue to perform well, Kolkata centre which is one of our flagship centres has been on a turnaround trajectory and witnessed a 54 per cent jump in revenues compared to the same period the previous year while Mumbai centres also saw a good momentum.
How does the acquisition of SRJ CBCC Hospital fit into the long-term objectives of the company?
This acquisition would enable us to enter a new market – Indore. We have a strong presence in Maharashtra, Gujarat, Karnataka and in the Eastern region of India. This will give us a presence in Central India and will propel our growth in this part of the country, particularly with the hub-and-spoke model we use. SRJ has a strong surgical and medical oncology practice in Indore which is supplemented by AOSPL with its radiation oncology service. It is a 50-bed hospital with a capacity to add an additional 100 beds at a nearby location. With this acquisition, HCG would be the number 1 cancer centre in private space in Indore.
Can you shed some light on the capex plans of the company?
Currently, we have two capex in our pipeline. We are shifting our Ahmedabad hospital to a new and bigger location which will increase total bed capacity from 100 beds currently to 200 beds. We will be incurring around Rs 85 crore for the same and we expect to commission operations in Q1 of next fiscal year.
Secondly, we are adding around 25 beds at Bangalore Whitefield, which is an extension of our Center of Excellence. For this, we are incurring around Rs 25 crore with operations expected to commence in Q3 FY25. Going ahead, we will continue to do 1 to 2 acquisitions in the country which will match the offerings of HCG with regards to quality. Additionally, the company has a maintenance capex requirement of about Rs 60 crore per annum.
At the moment, what are your top 3 strategic priorities?
Our foremost priority is to elevate the performance of our emerging centres and to bring them at par with our mature centres in terms of size by enhancing their capacity, capabilities, and reach to provide advanced cancer care services. Secondly, our mature centres have been successful in establishing themselves as leading comprehensive cancer care centres in their respective regions.
We further look to optimise the operational aspects of these centres to maximize efficiency and profitability while maintaining quality care. Further, to increase our presence across the county, we will be looking for inorganic expansion by adding one to two quality acquisitions which fit in line with our expectations. Additionally, we focus on the asset-light approach, wherein we will continue to add Linac machines on a one of its kind Pay per use model in the industry. Lastly, Cancer as a disease has been evolving and continuous developments are required in terms of treatment and diagnostics.
As a leading comprehensive cancer centre chain in the country, we aim to pioneer research and development for the benefit of cancer society and continue our mission of adding life to years.
Your Matured Centers’ revenues have grown 1.7X in the last 9 quarters. What were the contributing factors for the stellar growth? Also, what is your outlook on the performance of Matured Centers for the next few quarters?
In the majority of cities, we hold a leadership position. At 13 out of 18 cities where we operate, we are the top private Comprehensive cancer centre. We are growing thanks to the successful implementation of the unique Hub and Spoke model. At HCG, every organ in the human body is covered by a specialist who specializes in that organ. This distinguishes us from other top multispecialty institutions where various organs are treated by a single oncologist.
Our established centres in Bangalore and Ahmedabad are recording the highest ARPOBs of Rs 75,000 for us and are operating at full capacity; we are currently adding more beds at both locations to further improve our services. Further, we are looking to develop daycare centres in Bangalore city so that patients who need chemotherapy sessions don't have to travel as far to our main hospital and may instead go to our daycare centre that may be closer to them, cutting down on their travel time. We'll keep trying to spread this paradigm to other major cities.
Your emerging centers’ revenues have grown 1.4X in the last 9 quarters. What were the contributing factors for the stellar growth? Also, what is your outlook on the performance of emerging centres for the next few quarters?
Our emerging centres are witnessing good growth, we have achieved the highest ever revenues for our emerging centres of Rs 113 crore with margins of 9 per cent. Prominent emerging centres Kolkata and Mumbai are doing well for us. We recently installed the 2nd Linac machine at our Borivali centre in Mumbai. Jaipur and Nagpur centres also witnessed high growth of 22 per cent and 18 per cent y-o-y respectively.
This growth is an outcome of our unique Hub and Spoke model and our patient-focused approach. We aim to upscale the level of our emerging centres to mature centres in the medium term by enhancing our medical talent, improving our offerings and providing clinical outcomes.
Can you shed some light on the company’s Average Revenue Per Bed? Also, how much can you scale it in FY24?
ARPOB is a combination of multiple factors which includes payor mix, for example, a higher share of government schemes may result in lower ARPOB. Share of high–end complex treatment and reduction in Length of stays also play a major role in driving ARPOB, an increase in ARPOB may not necessarily mean higher revenues, a Rs 2 lakh bill for a surgery over 3 days vs Rs 2 lakh bill for a surgery for 5 days will give better ARPOB.
At our prominent mature centres such as Bangalore and Ahmedabad, we are witnessing high ARPOBs in the range of Rs 75,000. Our emerging centres in Mumbai and Kolkata are clocking ARPOBs of Rs 60,000. On a company level, we saw an overall ARPOB increase by 4 per cent to Rs 39,686 and Emerging centres witnessed a high growth of 8.5 per cent to 35,800 y-o-y. Going forward, we aim to improve our payor mix and reduce our ALOS resulting in improved ARPOBs.
How does the acquisition of NCHRI fit into the long-term objectives of the company?
We already had a stake in HCG NCHRI. We entered into a Share Purchase Agreement with shareholders of NCHRI; Dr Ajay Mehta and Dr Suchitra Mehta for the acquisition of their Shares in NCHRI. Additionally, we also entered into a Partnership Transfer Agreement with Dr Ajay Mehta in HCG NCHRI Oncology LLP to acquire his partnership interest. With this, we are now holding 100 per cent in HCG NCHRI. Nagpur has been one of the best for us in terms of growth. With this acquisition, we can entirely consolidate the business operations in Nagpur, and this would result in a better financial and operating structure.
Can you elucidate on the debt reduction plans of the company?
The company’s Net Debt excluding capital leases is little less than Rs 200 crore. Most of our Institutional debts are in our subsidiaries and the parent company does not have any term debt. The debt at subsidiaries would be paid based on the stipulated schedule as per agreement. Most of the debts at subsidiaries are long-term in nature.