ETMarkets Management Talk | Growth will come organically as occupancy rises: Yatharth Hospitals

After Q2 EBITDA margin expanded by 40 bps to 26.6%, Yatharth Hospitals believes that the margins will be sustainable as growth will come organically as occupancy levels increase.

"Further, initiatives including induction of international business coming in, PET and radiation line becoming operational in the coming quarters, and more higher specialties coming in would support ARPOB improvement which in turn should give the impetus for profitability improvements," Yatharth Tyagi, Director, Yatharth Hospitals, said. Edited excerpts from an interview:

After reporting the highest ever quarterly revenue in Q2 with a robust YoY growth of 34%, what is the guidance for the rest of the financial year?
Yatharth Hospitals reported stellar performance over the last few years. In 2023, our revenue jumped by 30% to Rs 520 crore. Continuing on that, during the Q2FY24, profits after taxes went up by an impressive 70% compared to the same period last year and 45% compared to the immediately preceding quarter. This was driven by remarkable 34% year-over-year growth in revenue to Rs 171 crore during the quarter, with growth across our specialties and improvement in occupancy levels across all our hospitals. We have seen a remarkable improvement in our utilization, with Noida and Greater Noida hospital reported highest occupancy levels of 96% and 73% respectively during the quarter; Noida Extension hospital has received an occupancy level of 45% during quarter compared to 28% in Q2FY23, while our Jhansi Orchha Hospital is now at 20% compared to 5% in Q2FY23. Our profitability benefitted from the operating leverage and enhanced efficiencies.

We do see quarter-on-quarter growth as far as our top line is concerned for the coming quarters and years. We also expect occupancy levels to improve on a quarter-on-quarter basis.

Do you think EBITDA margins have enough scope to expand further?
ur EBITDA margin for Q2 expanded by 40 bps to 26.6% while for the half year margins expanded by 192 basis points to 26.7%.

Without giving any futuristic guidance/direction, we believe our EBITDA margins will be sustainable as our growth will come organically as our hospitals grow in occupancy. Further, initiatives including induction of international business coming in, PET and radiation line becoming operational in the coming quarters, and more higher specialties coming in would support ARPOB improvement which in turn should give the impetus for profitability improvements.

By and large, Yatharth is seen as a Noida hospital. How do you see this changing, especially with the acquisition of a hospital in Jhansi-Orchha region of MP?
Before 2022, Yatharth was considered as a regional player having presence in and around Noida. However, in May 2022, we acquired our fourth Hospital in Jhansi-Orchha in Madhya Pradesh, adding 305 beds to our capacity, aimed to expand into new geographies and improve our presence in the regional healthcare market. The addition of 305 beds has significantly bolstered our capacity, resulting in impressive quarter-on-quarter performance.

Looking ahead, our strategy remains focused on solidifying Yatharth Hospitals as a leading chain in North India.

What is your growth roadmap for the next 2-3 years? Do you intend to acquire more hospitals across geographies or consolidate presence in NCR region?
We have 3 strategic priorities outlined for the next 2-3 years’ timeframe:

Expansion of existing hospitals - We are continuously evaluating opportunities, both organic inorganic, and strategic partnerships and remain committed to expand our bed capacity in the coming years. In line with our Noida and Greater Noida Hospital, we expect our Noida Extension hospital to reach optimum utilization levels by FY2025. Thus, we have already acquired a land parcel adjacent to our Great Noida hospital and declared L1 bidder for a land adjacent to our Noida Extension hospital, which should support our organic expansion plans.

Growth through inorganic acquisitions - In addition to organic expansion, we are continuously evaluating inorganic opportunities, and strategic partnerships and remain committed to expand our bed capacity in the coming years. We're looking at the territories of Delhi NCR, Haryana, Uttar Pradesh, Madhya Pradesh and are open for both O&M model as well as equity purchase. We understand that inorganic growth is not merely about expansion but also about identifying synergistic opportunities that amplify our strengths, extend our reach and ultimately enable us to serve more patients with exceptional care.

Diversifying our specialty mix - Enhancing our suite of Oncology services, organ transplant surgeries, and medical tourism business is a key focus area for the coming quarters.