Greetings from another air veteran. Happy to go thru your inputs and concall details. A treat, of course!!!

NH Conall Notes Q2 FY24

Revenue Performance:

• Consolidated revenue for Q2 FY24: INR 13,052 mn (YoY growth: 14.3%, QoQ growth: 5.8%).

EBITDA and Margin Improvement:

• Consolidated EBITDA: INR 3,265 mn, with a margin of 25.0% (up from 23.2% in Q1 FY24).
• Margin improvement attributed to higher revenues, cost efficiencies, and realisations.

Financial Position:

• Strong balance sheet with over INR 8.74 billion in cash and liquid investments.
• Net debt-to-equity ratio steady at 0.03, providing room for expansion through a mix of borrowing and internal accruals.

Accreditations and Achievements:

• JCI Enterprise Accreditation: 1st healthcare group in India and 6th globally.
• Guinness World Record: Highest number of ECGs in a single day at a single place.

Clinical Milestones:

• Successful robotic cardiac surgeries, limb re-attachments, and complex clinical procedures.
• Continuous focus on adopting the latest technology for superior patient care.

Digitization and Business Transformation:

• Significant improvements through NH app and Patient Kiosks, reducing administrative workload by 36%
• Doctor app “aadi” reduces response time by 45%, and new app for nurses, “Namah,” aimed at reducing paperwork.

Cayman Units Performance:

• Highlights

  • Highest-ever quarterly revenue: USD 31.5 mn.
  • Positive contribution from the recently commissioned Radiation Oncology Block in Camana Bay hospital.
  • Outpatients increased from 7,609 (Q2 FY23) to 9,615 (Q2 FY24).
  • New hospital in Cayman on track for Q1 commissioning (April-June).
  • ALOS in Cayman (8.9 to 9.1 days) explained by serving as the national hospital; focus on longer-term care for chronically ill patients.

• Market Dynamics & Competition:

  • Competitive healthcare market in Cayman Islands.
  • Over 400 registered medical practitioners and 100+ practices.
  • Presence of government and private hospitals; active and competitive environment.
  • Limited awareness of potential competition from other Indian hospitals.

• New Hospital Phased Implications:

  • New hospital in the same location.
  • Expect reasonably fast ramp-up; initial phase with fixed costs and margin dilution until incremental revenues.

• Staffing for New Hospital:

  • Existing doctors’ output to increase.
  • Hiring additional doctors based on increased volume.
  • Nurses correlated with patient volume; utilizing existing sourcing routes for staff recruitment.

• Staff Tenure and Attrition:

  • Senior staff on longer-term relocation.
  • Junior staff with variable tenure based on career and personal plans.
  • Nursing attrition lower compared to India; some attrition to the U.K. due to post-tax compensation and partner opportunities.

• Education and Retention:

  • Attrition reasons not related to education costs.
  • Challenges in long-term citizenship; opportunities for spouses in Cayman.
  • Holistic factors like family and personal considerations influence retention decisions.

• Insurance Coverage:

  • Most U.S. insurers cover treatment during visits or holidays in Cayman Islands, especially for emergency cases.

• Elective Treatment Consideration:

  • Patients can apply to insurers for elective treatments.
  • Approval likely due to cost advantages in Cayman Islands compared to the U.S.

• ARPP and Outpatient Volumes:

  • Significant ARPP increase in Cayman Islands from ~$1000 to ~$1300 YoY.
  • Explained as a result of classifying radiotherapy patients as outpatients, causing a spike.
  • Anticipated stabilization around $1300.

• Outpatient Volume Increase:

  • Noted a substantial increase in outpatient volumes from 7,609 in Q2 FY23 to 9,615 in Q2 FY24.
  • Contribution from oncology, but majorly from reporting ENT services post-acquisition.

• Inpatient ARPP Drop:

  • ARPP for inpatients in Cayman dropped from USD 39,000 to 34,000 YoY.
  • Attributed to a seasonably high number in the same quarter last year.

Narayana Health Integrated Care (NHIC):

• Healthy growth in Q2, crossing Rs 52 mn in revenue with over 45,000 patient transactions.
• Continued focus on growth and improving health outcomes for customers.
• Patient Addition and Billing Trends:
  • Healthy patient addition in the current quarter compared to the previous.
  • Average billing decreased from 1,538 to 1,158.
  • Losses increased from 5.8 crores to 6.4 crores.
• Early Days and Experimentation:
  • Acknowledged the early stage of NHIC operations.
  • Emphasized ongoing experimentation with value propositions and products.
  • Anticipated fluctuations in financial metrics during the experimentation phase.
• Future Contribution and Stability:
  • Directionally aimed at stabilizing financial metrics over time.
  • Focused on learning from customer needs and refining services accordingly.
  • Expected to play a role in patient health management through clinics and subscription plans.
• Role of NHIC:
  • NHIC currently operates as a standalone entity.
  • Focus on building clinics and offering subscription plans to keep patients healthy.
  • Potential referrals to the main hospital in case of future medical needs but not the primary goal.

Operational Upgrades:

• Ongoing efforts to upgrade clinical and non-clinical operations.
• Focus on increasing throughput, building capacity, and investing in digital patient outreach.

Future Growth Strategy:

• Pursuing both organic and inorganic growth opportunities in India and overseas.
• Synergy-driven approach for maximizing value for stakeholders, with a close eye on return on capital.

Brownfield Expansion:

• Focus on Brownfield expansion in flagship locations, mainly Bangalore and Kolkata.
• Land acquisition in advanced stages in Kolkata, construction to start next year.

Bed Capacity Expansion:

• Operationalizing 110 beds in Howrah unit, Kolkata, by end of Q4.
• Construction work to begin in Bangalore Health City, adding 700+ beds in the next 3-4 years.
• Land acquisition in Kolkata for further expansion, updates expected in the next quarter.

Margin Expansion Strategies:

• Continuous focus on improving high throughput through technology investments.
• Emphasis on faster discharges, lab results, and seamless appointments.
• Penetration in cardiac and robotic procedures for efficient bed utilization.
• Aiming to reduce Average Length of Stay (ALOS) from 4.8 to 4.1, currently at 4.4.
• Addressing capacity bottlenecks by adding ICUs, OTs, diagnostics, and labs.
• Technology investments to enhance communication between doctors and nurses.

Challenges and Caution:

• Acknowledgment of significant headwinds from inflation and government actions.

Future Outlook:

• Confidence in meeting demand and growth aspirations with current and upcoming bed capacities.
• Ongoing projects in flagship locations, both greenfield and brownfield, to support growth.
• Continuous focus on leveraging technology and operational efficiency for higher revenues.

India Business Expansion:

• Revenue near INR 1000 cr, operating margins 18-19%.
• Without further investment, potential high single-digit revenue and margin expansion for a decade.
• Minor bed additions, focus on throughput, and new infrastructure planned for significant growth.

Sustainable Margins:

• Commitment to extreme value-based care, fair pricing, and treating as many patients as possible.
• Sustainably delivering the best within these principles.

New Hospitals Breakup:

• SRCC, Gurugram, Dharamshila combined revenue at INR 119 cr in Q2.
• SRCC Mumbai on track to reach flat EBITDA by year-end.
• Confidence in growth and improving margins in Mumbai and Gurugram through specialties and initiatives.

India Level Occupancy:

• Consistently above 65%, improvements seen across all units.
• Double-digit revenue growth for two consecutive years without significant bed additions.

ARPP Perspective:

• Acknowledgment of ARPP being a better metric than ARPOB
• Pricing not the primary lever for improvement; focus on efficiency.
• Modest price increases shown year on year, ensuring affordability for patients.
• Fluctuations in numbers over a short period due to various factors.

Utilization and Flagships:

• Flagship units continue to perform well, running at high utilizations.
• Ongoing debottlenecking processes to enhance throughput until capacity additions are completed.

Capex and Funding:

• Mentioned a pending capex of INR 394 crore for the year, part of a total budget of INR 1,137 crore.
• Indicated the ability to fund 50% of pending capex (around 250 crore) through debt.
• Assured a comfortable net debt to EBITDA ratio even with additional debt.

Cash Flow and Working Capital:

• Affirmed healthy cash flows, indicating strong underlying business performance.
• Minimal change in working capital, operating at almost a neutral position.

Tax Rate and Future Projections:

• Stated an effective tax rate of around 10% for the current year due to the new tax regime in India.
• Estimated an effective tax rate of around 25% for the following year in India.

@james_kerala

Thanks for putiing me on the SPOT
Disc: I am invested. My views are biased. I am NOT the best person to answer this query.

I am observing, questioning & learning from sugar specialists like Aman Sonthalia presentation at VP (everyone must DIGEST this first to come on the same page), and recording data points as we experience first-hand. So I will make an attempt.

Would request sugar veterans like @Mehnazfatima snd others to step in. correct as necessary, and educate us more.

A. Primary factor is Demand-Supply imbalance. When that is there prices rise, money is there to be made
B. Where Money is there to be made, depends on 3 aspects
a) Recovery Rate b) Inventory (low cost or not ) c) Crushing (in the district/near the mills, may vary across the state)
C. Highest Profits are likely to be made by Mill companies whose Production cost is lower – due to a) higher Recovery b) lower steam consumption (bagasse saving/reselling adds to bottomline c) more sugarcane availability/more crushing leading to higher economies of scale d) Low cost inventory sale (which probably gets liquidated in 2 months at start of SS like Sep and Oct (when ther is no crushing)

Having said that, let’s come to the specific query – India Shortfall impact for UP based MIlls

1. Sugar price always falls at season start (Nov/Dec) when there is adequate/abundant production.
   This year there is shortfall not only in Maharashtra but also Karnataka and TN. MH and KA the shortfall is like 40% lower this year, and TN is like 20%. UP production will be marginally higher this year. After UP, MH is the largest producer, and then KA. (will try to get us state-wise production figures for SS 22-23 and SS23-24E, soon)

2. ISMA is saying Production will be around 290 LT in SS 23-24 (matching yearly consumption pattern). Ground checks are telling us it will be more like 260 LT, i.e. a shortfall of 30 LT

3. Last year this time at the start of SS 22-23, sugr price was 35.50/kg
   Right now it is Rs 40-41/kg

4. With this kind of shortfall, sugar price probably will NOT fall at season start. Even if it falls by say Rs 1/ or 2/- now, it will be more than made up when CRUSHING gets over early in SS 23-24 (likely by Rs 5/-, so net Rs 3/). This is because

5. Crushing data points

• MH and KN – crushing continued till May/June in SS 21-22, SS 22-23 continued till Apr end,
• SS 23-24 KN likely to be over by mid Feb 2024; MH by mid March 2024
  The moment crushing gets over – India production figures will be public (will affect prices internationally, and domestically)

6. If indeed there is shortfall of 30 LT, then government will have to import to meet the demand. Prices internationally are at 60-62/- per kg; domestically it is at 40-41/- per kg; Sugar Specialists are saying 40/kg can go upto 45/- kg

7. The sugar specialists are also saying Sugar Price will probably NOT fall from these levels for 2 years now, because

8. Next year SS 24-25 a) El Nino is predicted to be more severe b) Dams don’t have much water, water table is drastically down c) Planting to be done from Dec to May – MH and KN have no water

9. Sugarcane plantation in MH is done of 3 types – 18 months crop, 12 months crop, and 9 months
   18 months “Adsali” plantation – for SS 24-25 season was to happen in July/Aug 2023 – when there was no water – so not done; 12 months crop – there is less water; 9 months crop – less water; this sugar season will see big shortfalls

10. Sugar Mills in States producing more will make more;, thus UP mills benefit

11. Inventory highest in Uttam and Awadh Sugar, and then Triveni Engg (inventory being sold now)

12. MSP (for Sugarcane) likely to be raised by 25% per quintal; Net impact will be ~2Rs/- higher cost

I think this isn’t the sales (Revenue or Topline), it is a pre-sales kind of sales

@Akashdeep I don’t track WPIL. Whether to invest in govt companies in view of upcoming elections is an individual call. There are no right or wrong answers for it. One has to go more by gut instinct.

@rjs391 I don’t track Jyoti structures.