Healthy Q1 For Fortis Healthcare
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00:00Dr. Raghuvanshi MD and CEO who now joins us to talk about what business looks like and what the outlook is. Dr. Raghuvanshi
00:08Congratulations, you've
00:10Successfully turned the corner in literally just five years where you've changed the face the name of
00:16Fortis healthcare from a loss-making entity struggling with identity crisis to now a profitable one that you're managing
00:23Up until now, of course, everything was looking well until I realized that two weeks ago in a very recent development
00:29After trying very hard in the last few years
00:32Ageless is back on the books of Fortis healthcare your private equity investors are looking to check out
00:39I know you are looking to list this part of your business, but haven't managed to do so
00:43What does this do now?
00:45Do you go have you gone back to the drawing room because up until now the focus was to improve and increase the revenue?
00:51contribution from hospitals
00:52But now with each list back on the front
00:55For Fortis what happens?
00:59Thank you, thank you for having me and thank you for your kind words
01:04The organization has some innate strength in its and that is what has resulted in the recovery
01:10Which we have seen in the last five years now as far as when we come to agilis
01:15It's our contractual obligation to provide an exit to the three P's which is about
01:2231% of agilis Fortis does own a significant amount of
01:28Control over agilis by owning 54%
01:32So now we have to commit
01:36Sort of fulfill our commitment to buy back this in they have put the put option on us
01:45We could not list it and there were several reasons for it mainly commercial
01:50we felt that you know because of the brand change we had to do a lot of
01:56Marketing initiatives which was sort of lacking and that resulted in some optimal performance of the company for
02:04Last one one year or so
02:07July last year was when we changed the branding. So we are in the process of
02:14Completing this transaction. Of course, it is subject to the shareholder approval and other
02:21statutory approvals
02:23Post that we would want to
02:26consolidate this business, we believe that there is a lot of opportunity here and there is a
02:32lot of work to be done in order to get the performance at the level of the industry peers and
02:39We believe that the kind of presence geographical presence agilis has across the country we can
02:47Definitely create huge value for the shareholders over there
02:51And that is what is what we are doing now at the same time as you said that the hospitals are
02:58focus area and we continue to
03:01to expand on that front last year, for example, I will tell you that we spend about
03:08890 crores on the hospital side in Capex for upgradation and additional Capex for
03:16Adding beds, etc
03:17And we will continue almost in the same quantum for next three years or so
03:22So that funds are tied up with internal accruals. We will be able to achieve that growth in the beds
03:29So we are not going to be affecting our hospital segment growth
03:34because of this
03:36acquisition of the
03:38Remaining equity which we are planning to do. Dr. Raghuvanshi. Thank you for you know simplifying that for me
03:44But I mean the pool of money is limited and I believe you're gonna have to shell out close to 1,500 crores
03:50To honor that put option from your private equity investors first question. How do you plan to you know fund this?
03:58stake buy or buy back that you're doing for agilis and
04:02Second like while I said the pool of money is limited. Does that mean that?
04:07With this additional fundraise there may be a little bit of a delay on the expansion in hospitals
04:12I'm not saying that it won't happen
04:14But I would imagine that would get pushed back a little bit right and also how do you plan to fund this 1,500 crores?
04:21Yes, absolutely as you would see our balance sheet
04:24We have a very healthy balance sheet our EBITDA to debt ratio is only 0.39
04:30net debt of only about 308 crores, so we have a huge ability to
04:36Deliver it and
04:37We would definitely be doing
04:41This through a debt instrument
04:44The acquisition of this agilis equity and that will not impact the other
04:50Expansion which we have planned as you might be aware that we had planned about 2,000 beds of brownfield expansion
04:58so that is on stream most of the constructions are going on and
05:03In next three years, we would see continuously about this year
05:07We would see about 700 additional beds
05:09But in the following years, we will see about 400 and then followed by a slightly higher number the following year
05:16So that all is on track and that will be mainly taken care of through internal accruals
05:24Because of this we have confidence because this is brownfield acquisition brownfield expansion. So this would
05:33Be capacity will be absorbed rather quickly and will yield kind of
05:40Immediate returns and not like a greenfield facility. So we are pretty confident that the cash flows are
05:49Robust enough to support the expansion of the hospital as well
05:52Of course, if there is a large acquisition opportunity available on the hospital side, we will not shy from that
06:01Because
06:02At that point of time, we could think of some kind of a fundraise
06:07So in terms of now next steps right in this business
06:13What can we expect from you? When can this deal be closed out with agilis A, B
06:19I know that diagnostics is a tough business. We can't take that away
06:22I know there is conversation that you would be looking at rebranding
06:26Once this comes into your foray gives you a little more power to sort of move things around, you know re strategize
06:33Tell me what the plans are and how do you see it?
06:35And how much do you see it contribute to your revenue not immediately?
06:39But over the next two to three years because you've got to make good this like you have made good fortis in the last five
06:45years
06:46yes, so
06:48Essentially, you know, there are several operational things which we need to do compared to our peers
06:54you know our those spread is higher, but at the same time our lab to
07:00To the collection point ratio is slightly not very
07:06Sort of you know
07:08The way we would like it to be so a lot of rationalization on the operation side will be done
07:15At the same time we will have a lot of focus on specialized testing specially genomics, etc
07:21We have already got a division which is doing excellent work in that area
07:26And we want to expand on the specialized testing
07:30so we are not going to position ourselves as a run-of-the-mill the kind of
07:36Diagnostic provider but a specialized diagnostic provider which is
07:42addressing the needs of the clinical
07:44Fraternity more than then the wellness, of course, wellness will always remain a significant part of the business
07:51But essentially the focus would all be on specialized testing
07:57At the same time as far as the percentage of revenue for the overall
08:02Consolidated revenues concern. We expect it to go to about 25% of the total revenue over the next one or two years
08:10That makes sense rather than you know run of the mill blood tests, etc. Dr. Raghuvanshi. Good morning
08:17This is Tamanna here and good to speak with you after
08:20quite some time
08:21Let me come just to your hospital business for a minute because you know bulk of the revenues are also there
08:28I think margins were a little squeezed in q1 because of new hospitals. Give us the outlook here
08:36Your per bed revenues as well as where you see this boost coming from
08:41Yes, so as far as hospitals are concerned in the q1
08:45Typically there is a seasonality and the revenues are usually low in the first quarter
08:51So that's why if you compare the fourth quarter with the first quarter, there would be
08:56There was only a growth of about 4% in terms of revenue
09:00But if you compare to the last year, it was about 14% growth in revenue during this quarter
09:08Year on year. So we expect that trend to continue our occupancy in the first quarter was about 67%
09:16We expect that to go up to 70% in the running quarter
09:21And second quarter typically would be always better than the first quarter
09:27That is our expectation and since the
09:31Occupancy numbers have gone up. We expect that this momentum will continue through the year as well
09:37In in terms of you know, some of the turmoil we've been seeing in Bangladesh, etc
09:42Have you seen any impact at all? I think a fair number of
09:47Patients are also coming in from in and around India. What is the picture there?
09:53Absolutely, the international business
09:56In India is largely from Bangladesh and of course the Africa and Middle East as well
10:04So the Bangladesh business is certainly affected
10:07But overall in the larger scheme of things only 8% of our revenue comes from international patients
10:14And that is a kind of a mix of all the CIS countries
10:19Africa and other parts of the world. So it has not been affected in a major way
10:25But we are definitely seeing some degree of stress on the Bangladesh side of business
10:32But I don't expect that to last very long
10:36It is already sort of
10:38recovering that the
10:41Communication transport is already resumed and we don't expect that this will be a long-term
10:46However, when we talk about international business, though in absolute terms, it has grown
10:53But in relative terms, our India business has grown more
10:57And the percentage of international business has not really changed. It has remained about 8-9%
11:05over the years
11:06So we expect that this going forward also it is going to be like that
11:12All right. Thank you so much. Dr. Raghuvanshi for speaking to us
11:15CEO and MD of Fortis Health talking about the outlook and
11:19the current quarter, quarter two
11:21Expected to be better than quarter one, which is traditionally a little weaker for the hospital business