Mumbai hospital to start by March 2017: Narayana Hrudayalaya

Narayana Hrudayalaya's 290-bed children hospital in Mumbai will be operational by March 2017, says MD & CEO Ashutosh Raghuvanshi.

Discussing third quarter results with CNBC-TV18, Raghuvanshi said the company saw a dip in business catering to rural areas hit by demonetisation.

The company posted 14 percent year-on-year increase in Q3 revenue to Rs 455.30 crore, while profit was up at Rs 17 crore from Rs 5.80 crore in year ago period.Below is the verbatim transcript of Ashutosh Raghuvanshi's interview to Prashant Nair and Ekta Batra on CNBC-TV18.Prashant: Nothing for the sector per se. would you agree with that or could you find something there in the Budget document?A: I think one should divide it into two parts. One is there is certain structural changes, which have been announced and in our view, those are very important. Yes, the financial allocation probably should have been much higher than what it has been done but I think some of the structural changes, which have been proposed especially in terms of the reforms in the medical education, medical council and also the increase in the number post-graduate seats, those are going to go very fast for the industry in general is concerned because the biggest challenge the industry faces is the skill manpower. I also see some of the other positives like the telemedicine etc.Other than these there is a lot of emphasis on controlling of the prices of consumable pharmaceuticals and implants etc, which has been talked about. That is another very important step for the industry in general. The impacts are going to be mixed and we have to see how it pans out. Yes. If the allocation was slightly higher for healthcare, that would have been even nicer.Ekta: Let us talk a little bit about your numbers. Revenue is up around 14 percent on a sequential basis quarter-on-quarter the revenue was down 6.5 percent, what was the impact of demonetisation that you felt?A: As it is Q3 being the festival quarter is usually supressed however still we see a sequential growth. This is the first time we are seeing a degrowth on quarter to quarter and a lot of it was contributed by demonetisation. We saw the impact in different regions of the country different that depended on the customer profile as we have said earlier that 60 percent of our business used to be cash business. So wherever we have essentially serving to the semi-urban and rural populations primarily we saw huge dip in that segment for the first couple of weeks. It was a result of -- one is the sentiment and also the unavailability of cash in the early part of this. That has started recovering. However, we did not see it recover as quickly as we would have expected because healthcare being a non-discretionary expense but still I am satisfied that on year-on-year we have shown an impressive growth of 17.6 percent in terms of revenue and 32 percent in EBITDA but this could have been much better if this additional bump of the demonetisation did not happen.I expect this to get normalised over the next quarter for sure.Prashant: What about operating profit margins? Could you break down the 150-200 bps compression that we saw?A: Yes, we have always maintained that our model fundamentally has been different because of two reasons. One is we try to give most of the treatments as close packages. So the patience have a transparency in terms of what they need to pay for a particular episode of wellness.That has two sides to it. One is when the topline grows, your margin grows disproportionately higher and similarly when the topline comes down for any reason then your margins get suppressed. So though we do have an element of variability in terms of consumables and medicines etc, so we did not see a very huge change but yes the margin was marginally depressed by about 30-40 percentage points in terms of consumption and the rest of the fixed cost remain the same.Ekta: What was your occupancy in Q3 and what is it tracking right now?A: Yes, the occupancy drafts in Q3 however there were two other factors also which need to be remembered, one is as you said earlier that there was an effect of demonetisation, we saw a drop happening both in the outpatient numbers as well as the inpatient numbers. So the occupancy dropped by about 2 percent. However, now the occupancy is coming back to the normal and showing the growth trend.Ekta: So around 66 percent is what you did in Q2, so it is back to those levels?A: It is going back to those levels.Ekta: Can you give us a sense in terms of when your paediatric hospital in Worli, Mumbai starts operations, how many beds will it have and what might the revenue share be for you all?A: This is a 297 bedded facility. Physically the facility is completely ready and fully equipped. As of yesterday we did a multi-faith prayer yesterday to commemorate the finishing of the project. Now we are waiting all the necessary approvals as soon as we have them in place. We would make this hospital operational. I expect the hospital should be operational by March of this year and this would be one of its kind unique tertiary care paediatric hospital in the country. So we expect that we will commission the hospital fully by middle of March at the latest. We get 99 percent of the revenue share. This is the arrangement with the trust which owns the hospital.