Margins may take a hit on 12 new centers: Healthcare Global

Healthcare Global reported good fourth quarter earnings with a 16.3 percent rise in revenue to Rs 154 crore and profits came in at Rs 3.6 crore as against a loss of Rs 25 lakh in year-ago period. The operational efficiency improved by 48 percent to Rs 26 crore. Speaking to CNBC-TV18, BS Ajaikumar, Chairman and CEO of the company says that growth is now visible in the eastern part of the country, especially Ahmedabad and also Bengaluru. He expects margins to sustain at the same levels in FY17. A majority of company revenue came from cancer centres and only 8 percent from the fertility centers. The company is in the process of opening 12 new centers across India, which will slightly impact margins initially, Ajaikumar says.The company brought down its bank servicing cost by Rs 180 crore and has been reducing its debt from the initial public offering (IPO) proceedings. Debt, he says, will remain at same levels in FY17. Below is the verbatim transcript of BS Ajaikumar's interview with Reema Tendulkar and Nigel D'Souza on CNBC-TV18.Nigel: There was a bit of an improvement that we saw in your numbers. You reported a profit number as well. So things are looking quite good. Give us a sense of what exactly could be your revenue trajectory going ahead. Rs 150 crore or thereabouts, should we brace ourselves for that? Also margin improvement at around 17 percent, is it sustainable?A: For us, last quarter when you compare it to quarter-to-quarter, our revenue has been strong growth from Rs 132 crore it has gone to Rs 153 crore. A good 16.3 percent increase in the revenue and also our EBITDA has increased significantly from Rs 17 crore to Rs 26 crore in the last quarter, so 48 percent increase.The margin has increased to 16.9 from 13.2. So it has been a strong growth and we have seen a growth both in the revenue as well as in the EBITDA as well as the margin.Also we are now profit after tax (PAT) positive. In the last quarter our PAT was Rs 3.64 crore.So overall we have seen improvement and going forward, I cannot comment on the future guidance but we are seeing a growth in various clusters we have including primarily in the eastern part of India and Ahmadabad and our mixes also increased significantly in the centre of excellence in Bangalore.Reema: Will margins at 17 percent that you saw in Q4 be sustainable? How do you expect the margins to trend in FY17?A: Our margins we think will sustain for the existing centres. We have number of new centres coming and initially we will incur some loss from the new centres. That will affect the overall margins but we do believe that the margins will maintain for next year even with a new centres coming because of the strong growth happening in our existing centres.Nigel: You were telling us about the topline being at about Rs 150 crore, could you break that up for us, how much is coming from the cancer centres as well as fertility space?A: Majority is coming from the cancer centre. Only 8 percent of it is contributed by the fertility centre.Reema: You said that your core margins of your existing centres will stay at 17 percent but for the new ones, what will they be in FY17?A: I cannot comment on the new ones. We have rolled out two new centres in Vizag and in Baroda. We have other number of new centres we are rolling out rest of this year. So it takes time for these to ramp up. So we are expecting a good growth happening even with new centres. We are seeing some promising results in Baroda and Vizag already.Nigel: Your numbers are looking good. You have moved into a positive number on the bottomline, so you are giving us a profit number but your finance cost has not changed too much and you have indicated earlier that you are going to bring down their debts. So could you tell us what exactly was your debt, how much have you brought it down by, by when will you bring that down if you are going ahead?A: We have brought it down significantly nearly Rs 180 crore of the cost has been brought down. Most of the cost, which has been brought down is the bank servicing cost that has come down. What you see is the new project coming down as you know we have the vendour financing, which is a deferred so that will be there because of new centres coming, that is mostly capex related. That was already factored in when we looked at FY16-FY17 budget so it is within our budget and it is going according to the plan even the fact that we have brought down their serviceable debt significantly, it is according to the plan as we used proceeds of the IPO for that.Nigel: Can you give us the guidance going ahead, what exactly will your topline look for the next year, what exactly will your margins look like, also by the end of FY17, where do you target to bring your debt down to?A: Our debt will be more or less at the same level. As I said because of the nearly 12 new centres which are rolling out between this year and next year, naturally they will be capex related but most of the debt will be with a three-year deferred scheme. So that will be serviced only after three years but our bank servicing debt will remain stable. At present we have very minimal bank servicing debt and as a policy of our company, we are not giving any future guidance.