A few things to consider while comparing fixed asset intensity of HCG vs others:
- Oncology focused hospitals are more capital intensive than multi specialty hospitals as the investment required in PET CT and linear accelerator itself can be to the tune of 20 cr. So, even if the land and structure is on lease model, the investment in equipment is far higher. The good thing is that higher investment limits the competition from small clinics which makes onco hospitals a viable business proposition in tier 2 cities that most multi specialty hospital chains have found a tough nut to crack.
- For HCG, the overall FA turnover is 0.9x but if you split that between turns of mature and new hospitals, the picture is not as bad. Mature hospitals have FA turns of 1.3-1.4x, while the new ones are still operating at 0.3-0.5x. This is increasing for both new and old hospitals and should drive ROCE increase going forward.
- Occupancy for oncology hospitals is not always the right metric to track. Chemo and radiation therapies contribute to a meaningful proportion of revenue and these are out-patient therapies. That implies the bed occupancy is low but the linear accelerator might be fully or optimally occupied.
- For the same reason, ARPOB might look artificially inflated for onco hospitals as the revenue captures OP treatment revenue without the bed being occupied. Numerator is higher with no corresponding increase in denominator.
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