Shalby Limited has informed the Exchange about Transcript of Earning Conference Call held on February 12, 2024
Shalby/SE/2023‐24/111
February 16, 2024
The Listing Department National Stock Exchange of India Ltd Mumbai 400 051.
Corporate Service Department BSE Limited Mumbai 400 001.
Scrip Code : SHALBY Through : https://neaps.nseindia.com/NEWLISTINGCORP/ Through : http://listing.bseindia.com
Scrip Code: 540797
Sub.: Transcript of Earning Conference Call held on February 12, 2024 for Unaudited Financial
Results for quarter ended December 31, 2023– Reg. 30 of SEBI LODR
Dear Sir/Madam,
Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we are enclosing herewith transcript of Post Earning Conference Call organized by Company on February 12, 2024, wherein unaudited Financial Results for quarter ended December 31, 2023 were discussed. The said transcript is also being made available in the Investors Section of our website.
We request to take the same on your records.
Thanking You,
Yours sincerely For Shalby Limited
Tushar Shah AVP & Company Secretary Mem. No: FCS‐7216
Encl.: Concall Transcript
“Shalby Limited Q3 FY2024 Earnings Conference Call”
February 12, 2024
ANALYST:
MR. GAURANG SAKARE – ELARA SECURITIES PRIVATE LIMITED
MANAGEMENT: DR. VIKRAM SHAH – CHAIRMAN AND MANAGING
DIRECTOR MR. SHANAY SHAH – PRESIDENT MR. AMIT PATHAK – CHIEF FINANCIAL OFFICER DR. NISHITA SHUKLA – CHIEF OPERATING OFFICER MR. DEEPAK ANANTHAKRISHNAN – GLOBAL CHIEF BUSINESS OFFICER MR. BABU THOMAS – CHIEF HUMAN RESOURCE OFFICER
Page 1 of 16
Shalby Limited February 12, 2024
Moderator:
Ladies and gentlemen, good day and welcome to the Shalby Limited’s Q3 FY24 Earnings
Conference Call hosted by Elara Securities Private Limited. As a reminder, all participant
lines will be in the listen-only mode and there will be an opportunity for you to ask questions
after the presentation concludes. Should you need assistance during the conference call please
signal an operator by pressing “*” then “0” on your touchtone phone. Please note that this
conference is being recorded. I now hand the conference over to Mr. Gaurang Sakare from
Elara Securities Private Limited. Thank you and over to you Sir!
Gaurang Sakare:
Thank you moderator. Good evening everyone. We welcome all the participants to the Shalby
Limited’s Q3 FY24 earnings call hosted by Elara Securities. Today we have with us senior
management representatives from Shalby. We will start with performance highlights from
Mr. Amit Pathak, CFO and Mr. Deepak Ananthakrishnan Global Chief Business Officer.
After that we will open the floor for Q&A for all the participants. I will now hand over to Mr.
Amit Pathak, CFO for important disclaimers regarding any forward looking statements that
may be made in today’s call and financial performance for Q3 FY24. Over to you Mr. Amit!
Amit Pathak:
Thanks Gaurang. Good afternoon everyone. I am pleased to welcome you all to Shalby
Limited’s third quarter FY2024 Earnings Call. Firstly we at Shalby would like to congratulate
Dr. Vikram Shah, Founder, Chairman and Managing Director of Shalby Limited who has
been awarded this very prestigious Healthcare Entrepreneur of the Year by Hurun UK in
January 2024 for his extraordinary commitment and incredible work in the field of healthcare.
This is again back-to-back well deserved recognition for Dr. Shah and Shalby Hospitals for
the tireless work that he and the entire team does every minute, every hour and every day
towards treating every patient with a smile. This indeed is a stupendous achievement that
makes everyone associated with Shalby be humbled with a lot of pride and gratitude.
Our earnings presentation is uploaded on the stock exchange website and our company
website shalby.org. We do hope that you have already had the opportunity to go through the
presentation. Please note that some of the statements made in today’s call may be forward-
looking in nature and may involve risks and uncertainties. Kindly refer to slide #44 of the
investor presentation for a detailed disclaimer. Now I will walk you through the financial
performance of your company for the third quarter FY2024. Consolidated revenue of Rs. 221
Crores in Q3 FY24 versus 207 Crores in Q3 FY23 grew by 6.8% Y-o-Y basis. EBITDA 47
Crores in Q3 FY24 versus 38 Crores in Q3 FY23 with margin of 21.2% and in Q3 FY24
versus 18.4% in Q3 FY23 and grew by 23.3%. PBT of 31 Crores Q3 FY24 versus Rs.24
Crores in Q3 FY23 with margin of 14% in Q3 FY24 versus 11.4% in Q3 FY23 grew by 31%
Y-o-Y basis and PAT of 19 Crores in Q3 FY24 versus 15 Crores in Q3 FY23 with margin of
8.6% in Q3 2024 versus 7.4% in Q3 FY23 grew by 25% Y-o-Y basis. The group continued
to maintain very strong balance sheet with a low gearing ratio of 0.14x and closed the quarter
with a net cash balance of 61 Crores at group level.
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Shalby Limited February 12, 2024
Now let me go through the standalone performance of the hospital business. Standalone
revenue of 200 Crores in quarter three FY2024 versus 180 Crores in quarter three FY2023
grew by 11.5% Y-o-Y basis. EBITDA of 48 Crores in Q3 FY2024 versus 39 Crores in Q3
FY2023 with a margin of 24.2% in Q3 FY2024 and 21.5% in Q3 FY2023 and it has been
grown by 25.5% on Y-o-Y basis. PBT of 38.5 Crores in Q3 FY2024 versus 28.6 Crores in
Q3 FY2023 with a margin of 19.2% in Q3 FY2024 versus 15.9% in Q3 FY2023 grew by
34.6% on Y-o-Y basis and PAT of 24.7 Crores in Q3 FY2024 versus 19.2 Crores in Q3
FY2023 with a margin of 12.3% in Q3 FY2024 versus 10.7% in Q3 FY2023 grew by 28.7%
Y-o-Y basis. Now at a standalone basis again we continue to maintain a very strong balance
sheet with a low gearing ratio of 0.02x and closed the quarter with a net cash balance of 177
Crores. With the operational leverage kicked in and doing this asset light approach our
standalone ROCE has improved to 20% in quarter three FY2024 on annualized basis.
On the operational side we have performed around 6476 surgery in quarter three FY2024.
ARPOB and ALOS have also shown excellent improvement at 37342 and 3.7 respectively in
Q3 FY2024 versus 36291 and 3.7 in the same period of the previous year. The number of
occupied beds increased by over 9% on Y-o-Y basis hence the occupancy level has reached
to 47% in quarter three FY2024 versus 43% in Q3 FY2023. The payer mix has been similar
with a proportion of higher self-pay and insurance patients in the third quarter of this year as
compared to similar quarter of the last year. At Shalby our undivided focus has been on
demonstrated our clinical excellence through successful execution of many diverse critical
surgeries in several of our hospital units, a few of them that I would like to mention here are
successfully operated first liver transplant at Indore Shalby. B/L TKR was done to a patient
with eight months old fracture due to arthritis for a complete cure at Indore, high risk P-
TEVAR treatment to 30 years old female patient suffering from arthritis and standford type
B dissection for more than a year in Shalby Naroda. We have also performed a live surgical
workshop organized by OLIF, a new technique for complicated spine injury cases at Shalby
Jaipur. We also took pride in sharing that we have successfully completed 31 transplants 18
kidney and 10 liver during the quarter and overall 275+ kidney and liver transplants at our
SG and Indore units till this quarter. We are also running the 20 active clinical trials across
all hospitals. We have also received Ethics Committee approval for six new trials during
quarter three FY2024 including 2 phase-1 oncology trials which are very first time in India
on humans for oncology drug study. Revenue from our international business remains at 1.7
Crores in quarter three FY2024. I am happy to mention that Shalby has grown its international
presence in other new geographies like UAE, Oman, Bangladesh and Nepal through foreign
partnerships to conduct regular OPD and healthcare camps and have plans to conduct
surgeries in these locations. We are very hopeful that these strategic locations will help us to
increase our international hospital revenue significantly very soon.
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Shalby Limited February 12, 2024
As a part of our social commitment, we continue to spread awareness about the importance
of health and wellbeing through various social media platforms and created 70+ healthcare
videos. We also conducted more than 315+ healthcare camps and 95+ healthcare talks across
all our units during the last quarter as a part of various community outreach programmes.
Shalby also takes pride in nurturing young talent through our Shalby Academy vertical with
1321+ students registered in various healthcare programmes during the current year. We
would like to inform that Shalby Academy has signed a memorandum of understanding with
Kaushalya, The Skill University of The Government Of Gujarat, At Vibrant Gujarat Global
Summit 2024 very recently in the presence of Union Minister, Mr. Pradhan and other
dignitaries. The memorandum of understanding signifies our commitment to colloborately
organize diverse healthcare skill enhancement initiative in upcoming year.
Now for our franchise business we have delivered additional performance in Q3 FY2024. We
have performed 362 surgeries at our SOCE unit in quarter three FY2024. The total revenue
from our FOSO business is around 1.4 Crores grew by 13.3% on Y-o-Y basis. The revenue
from FOSM business is like 0.74 Crores grew by 6.1% on Y-o-Y basis. We have generated
revenue of 5 Crores in FOSM and 2.8 Crores in FOSO with 56.5% and 28.7% growth
respectively on nine month basis. Our next SOCE unit at Rajkot is on satisfactory progress
and is expected to get operationalized tentatively by the end of this year or start of Q1 FY25.
We have been incredibly selective in our choice of potential partners from the many inquiries
we have received so far to maintain the reputation of our strong brand we follow a clearly
defined process and strict criteria when making these selections. Looking forward we have a
strong sense of optimism about seeing positive developments in the upcoming quarter of this
fiscal year. Our primary focus remains on utilizing our expertise and excellence in
orthopedics with the goal of establishing more than 40 Shalby franchise hospitals across India
within the next four to five years.
For our homecare business we have served 22045 patients in current year with a growth of
13% in patient count in similar period of last year. Revenue from homecare business is at 11
Crores in nine months FY2024 versus 7 Crores in nine months FY2023 with 52% growth
during the same period. Further we are happy to inform that we have acquired a majority
stake in Sanar International Hospital that is PK Healthcare Private Limited with a control of
87.26% equity stake by investing Rs.102 Crores as primary and secondary infusion. This will
help Shalby to accelerate its presence in the Delhi/NCR region with a vision to scale up
international business and also to consolidate its presence in northern part of India. This
facility is located at prime location of Golf Course Road Gurugram with a land parcel of 1.27
acres which has been taken on long-term lease with a total build up area of 125000 square
feet. The current capacity of facility is 130 beds and can be expanded to the level of 180 beds
with additional capex. At present the hospital generates around 68% business from
international market which comprises 43% from Middle East, 15% from Africa, 8% from
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Shalby Limited February 12, 2024
CIS and remaining from others catering to more than 60 countries. Sanar offers
comprehensive, advanced surgical care in the specialties such as cancer, heart, blood, marrow
transplant, kidney and liver transplant, bone and joint and neurosciences among other
specialties.
Now coming to our implant business, our implant business has delivered positive EBITDA
in third quarter of current year due to continuous improvement in operational efficiencies and
better procurement cost. The revenue is at moderate level of 21.5 Crores in quarter three
FY2024 versus 14.7 Crores in quarter two FY2024. Now it gives me immense pleasure to
introduce Mr. Deepak who has joined our group as Global Chief Business Officer on 9th
January 2024. Deepak holds a degree in engineering from Mumbai University, post graduate
diploma in general management from Narsee Monjee Institute of Management Studies and is alumni of INSEAD. Deepak has two decades of leadership at fields across industry including medical device, telecom, IT, education tech in a various leadership role. Prior to joining our
organization Deepak was working with various leadership roles in BYJU, J&J, Airtel, Tyco
Electronics, etc. As Global CBO, Deepak directly drives Company’s implant business
globally. Now I would like to hand over to Mr. Deepak, Global Chief Business Officer of
Shalby Limited to give an outlook on the implant business and their performance in more
detail. Thank you.
Deepak A:
Thank you Amit and good afternoon to everyone. Our implant business has delivered another
contributive quarter of positive EBITDA in quarter three financial year 2024 because of the
growth that we have seen in this quarter along with continuous improvement that is happening
through process improvement in the production shop floor, securing much improved
procurement prices from our multiple vendors and we now having a tight control on our
operational expenses. The revenue has been at INR.21.5 Crores in the last quarter which has
delivered a growth of 46% over the previous quarter. The supply challenges even though have
not been fully solved but we started to show some green shoots across portfolio. We have
seen a surge in our business across our UNI Knee, which is branded as TUKS both in the US
and in India. Unfortunately there has been delay in the launch of several new products
including a new total knee branded addition that is expected to be a blockbuster in India,
Indonesia, and the US market. We have also seen a delay in our TiNbN offerings for the CKS
knee and the TUKS UNI Knee. Our supply chain woes were compounded by further
unforeseen delays in producing many complicated engineering drawings for our implants and
instruments as well as providing quality approvals to many of our third party vendors through
qualified FDA auditors in outside US countries. The contribution in sales mix stands at US
contributing 43% of the business, India 53% and the others contributing 4% others
predominantly being Indonesia and Japan in the last quarter. We have also seen a surge in
our hip business that has contributed to our growth and the product mix stands at knee is
contributing 71% and hip is contributing to 29%. As a part of our continued initiatives to
Page 5 of 16
Shalby Limited February 12, 2024
educate our surgeons on our products and procedures in the last quarter we have trained more
than 40 surgeons across our TUKS and hip implant. The growth also came from additions of
new key opinion leaders, surgeons, and hospitals across geographies starting to use our
product. Our core leadership team at SAT have jotted down the top priority for execution in
the next quarter which are receipt of the full instrumentation of TUKS that would enable us
to go for a full commercial launch in India, Indonesia and the US that would help us recoup
sales for our UNI Knee, launching our TiNbN CKS in quarter four financial year 24 that
would be used in India along with a couple of tenders in US that would fetch out larger profit
for SAT.
Accelerating production of our lower cost implants and instruments across multiple vendors
that would help dramatically improve supplies to clear back orders in India and Indonesia.
Engaging our prospects to participate in various virtual and face-to-face training and
educational programmes and live surgeries by our designer knee and hip surgeons. We are
confident that this would help us tremendously in gaining surgeons’ confidence and support.
Our participation at the current AAOS conference in the US is a testament to the same, where
we have CME with 25 plus surgeons registered to understand TUKS, Hips and our future
pipeline and roadmap. We have added three engineers who will focus on growing our
engineering team with addition to our team members to accelerate the projects that are direct
contributors to our growth road map at SAT. We would continue to strengthen our sales team
and add more feet on the ground both in the US and India. Entering new territories like in
Malaysia, Argentina and Middle East countries by the end of this year. Continuous focus on
smart procurement and reducing operational cost on day-to-day basis to achieve the target of
being self-sustainable in due course of time. We remain confident enough to significantly
improve our implant business results through accelerating the launch of our new products,
winning new accounts, adding new territories, and new experienced salespeople,
continuously improving operational efficiency and furthermore substantially bring down our
procurement and day-to-day operational costs to add more towards operating profits. With
all these key strategies, relentless and ruthless execution will be the key to our success in the
near future with having the right people and leadership in place. This in turn will contribute
to the ongoing creation of sustainable value for all stakeholders at Shalby Limited. Thank
you.
Moderator:
Thank you very much. We will now begin the question and answer session. The first question
from the line of Pinaki Banerjee from AUM Capital Private Limited. Please go ahead.
Pinaki Banerjee:
Good afternoon Sir and thanks for the opportunity. Sir in slide 15 we see that the revenue
breakup from the previous year for arthroplasty was 43% it is now 38% while critical care &
general medicine was 9% now it has increased to 13% so can we fairly assume that now we
Page 6 of 16
are actually diversifying into other areas and in the coming time what is the ballpark
percentage we can expect to see in this division?
Shalby Limited February 12, 2024
Shanay Shah:
So it is a good question. In fact we have seen that some of the newer units like Jaipur, Naroda
as well as Jabalpur these have done extremely well and have demonstrated between a 20 and
35% kind of growth both on top and bottom line, so yes, we are expecting significant growth
to come in from these hospitals even going forward because there is lot of capacity unlocking
which is yet to be done in these units.
Pinaki Banerjee:
In the PL statement in the materials consumed and the other expenses have shown a year-on-
year decline so can you elaborate what are the reasons for this?
Shanay Shah:
So in this quarter compared to the previous quarter in the same year the medical work as a
percentage of the total work was more than the surgical work because of that the material
consumption has been slightly on the lower side, also there has been a significant exercise
carried out across the group level to kind of rationalize the supply chain and optimize and
bring in the efficiency both of these have contributed to 2.5% kind of EBITDA improvement
in this quarter.
Pinaki Banerjee:
Fine Sir. That is all from my end and all the best for the future.
Moderator:
The next question is from the line of Bino from Elara Capital. Please go ahead.
Bino:
Good evening. Couple of questions from my side. Sorry I could not understand completely
from your initial comments. What is the latest update on the franchise that is in Rajkot and
the newer facility in Nashik?
Amit Pathak:
So Rajkot we have mentioned that will come by the end of this quarter or start of the next
quarter and Nashik is in progress.
Shanay Shah:
For Nashik we are dependent on the developer who is the partner with us and there has been
a significant delay on their side to be able to deliver on the commitments they have made to
us and I think in one of the earlier calls we have mentioned that as soon as we receive the
building as is as it is expected from them based on the commitment we will take between
three to four months to operationalize the hospital but having said that at the moment we do
not have a timeline. We are expecting it to happen soon and we will not be able to give you
a timeline on that and also to add to that there is no capital employed from Shalby Limited or
any of its subsidiaries for the Nashik opportunity.
Moderator:
Thank you. The next question is from the line of Heet Van from Elara Capital. Please go
ahead.
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Shalby Limited February 12, 2024
Heet Van:
Sir my one question would be like in the implant business I am looking at a geographical
sales mix so for the previous quarters we used to look higher contribution from US but now
India is at 57-60% so any possible reason for it or it is a onetime impact?
Deepak A:
So I think there are two things that are happening. If you would have looked at it from a
growth standpoint you would see that from last year same time quarter to this quarter we have
US being flat and outside US contributing to a large percentage of this growth that has come
in. We have not lost anything but because of the implant issues there has been delay in our
growth so those surgeries we would be able to get back very soon.
Amit Pathak:
Just to add one more thing in terms of the revenue growth US have grown from 1.17 million
to around 1.66 million in this quarter compared to last quarter and outside US has grown from
0.6 to 1.16 so there is a growth in both the geography.
Heet Van:
Thank you Sir. Sir are we still alluding with a target with 100 million sales by FY2027 your
previous guidance?
Deepak A:
So I think from a vision standpoint we still stay committed. The way we look at it this is just
a delay the market is still growing and then it is just a matter of work that we would have to
put in lot more later to get the market share gaining and going forward so I do not think there
is any change in the vision that we want to achieve in the next five years.
Heet Van:
Secondly on the Sanar Hospital could you please like show some points like when are we
going to scale up fully and timeline and all?
Shanay Shah:
As we have kind of shared earlier it is 180 bed kind of hospital facility in terms of capacity
and we are already having about 130 beds which are operational there and it has some of the
high end specialties, in fact what is very unique about this hospital is that 70% of the topline
that is generated here is from international business, 30% is from domestic business. It does
some of the most high end treatments which are done in tertiary quaternary care hospital in
India. It does a lot of bone marrow transplants, kidney transplants; liver transplants and has
all the offerings that every other Shalby unit offers for a total comprehensive kind of care.
What we believe is that because of the ongoing run rate of that particular hospital in terms of
the revenue it has been generating we believe 120 to 150 Crores will be the right target for
this hospital for the next 12 months from now and given the kind of ARPOB that we are able
to generate over there which has been over Rs.1 lakh in the past. We believe that we will be
able to add significant topline to our existing hospital business through this hospital over the
next three to four years.
Heet Van:
Thank you Sir that helps. Thank you. That is it from my side.
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Shalby Limited February 12, 2024
Moderator:
The next question is from the line of Bino from Elara Capital. Please go ahead.
Bino:
I was asking about any further update on the Mumbai Santacruz plan?
Shanay Shah:
So the update there is that the trust had the obligation to kind of apply for charity
commissioners permission and kind of complete the other formalities before handing over
the premises to us so they have done the needful, the ball is in their court but we are hoping
and they have given us a timeline of the next three to four months by which they should be
able to hand over the property to us after which we will be completing the other formalities
like going for permission from the BMC and working closely with the architects to put up the
structure.
Bino:
Understood on this Sanar Hospital acquisition what is the debt on book of the company?
Amit Pathak:
So the long-term debt is close to around 38 Crores and the working capital outstanding is
around 7.5 Crores.
Bino:
So totally only 15 Crores?
Amit Pathak:
No, 45, (38 and 7).
Bino:
Understood. At a consolidated level what sort of PAT are we looking for this year and next
year?
Amit Pathak:
For the consolidated level if you are saying the funding what we have done for Sanar right
now that is from our internal accruals 102 what we have done. We are going with the debt
equity mix of 50:50 from the bankers and from our side so the 50 Crores of cash infused by
the company that will impact the net debt position of the company from the company side,
apart from that in the implant business in the next 12 months looking after the product what
we are going to launch CKS gold and addition maybe another 15 to 20 Crores of working
capital upside we are going to see, so around 70 Crores of cash utilization from the current
level will be there but on the other side the company is going to generate the cash into the
next 12 months so we are seeing that position will remain same or improve the net debt
position.
Bino:
Sorry my question was on corporate tax rate at the consolidated level?
Amit Pathak:
So the MAT we will get exhausted by the end of next year thereafter we will be in the regular
tax rate.
Bino:
Understood. Thank you very much.
Page 9 of 16
Shalby Limited February 12, 2024
Moderator:
Thank you. The next question is from the line of Shamira, an individual investor. Please go
ahead.
Shamira:
Good evening Sir. I have two questions. I was going through your investor presentation of
current quarter as well as the last quarter so I noticed the difference that earlier you were
guiding that the company will be opening 50 franchise but now the target has been
downgraded to 40 franchise is my understanding correct or am I missing something?
Amit Pathak:
No, your understanding is correct but we have changed slightly our strategy. In couple of
locations where we want to go with the franchise model like Delhi where we have come with
our own hospital so in that location we are cutting down some franchise. There are other
investment opportunities we are exploring so we have started coming in the form of our own
hospital then we will some reduction in the franchise business so we are seeing the 40 going
forward into the next four to five years.
Shamira:
Currently we have six operating franchises as of date?
Amit Pathak:
Yes six including Mumbai.
Shamira:
Sir that segment which has been presented in the investor presentation by the name of Shalby
Academy is this a complete social initiative or is this a part of our business segment?
Babu Thomas:
You rightly dwelt it. It is a social outreach and the platform to up skill youngsters for various
courses and skill in healthcare ventures and we are doing it for last seven years but we are
now in a very reputed stage. Every year we trains around 1500 to 2000 students and all of
them get job immediately after their training is completed or their course is completed and
currently we have also got affiliation and partnership with six of the universities in India and
two of the other healthcare education platform in Australia so the work is going on very well
but it is more or less reputation building and social outreach for our group.
Shamira:
So we do not count any of the revenues from this segment right?
Babu Thomas:
Not in a big way significantly but yes there are revenues getting created from this but we are
not getting very significant numbers.
Shamira:
Thank you so much and all the best for future.
Moderator:
Thank you. The next question is from the line of Surya Patra from PhilipCapital. Please go
ahead.
Page 10 of 16
Shalby Limited February 12, 2024
Surya Patra:
Thanks for the opportunity Sir. My first point in the Sanar Hospital obviously this is a
strategic move to acquire a hospital having presence in the NCR region and having a kind of
stronger revenue mix from the international customers or patients so do you anticipate any
kind of cross selling in terms of therapeutic presence and all that for Shalby so do you
anticipate any cross selling advantage from that hospital in terms of any specific strength that
is getting added and that can have a kind of positive impact to the overall chain of Shalby?
Shanay Shah:
So there will be a major impact of that because we see lot of synergies coming along. Shalby
has a huge clientele in the northern region including Delhi and NCR and we will be able to
address it a lot better with the Sanar Hospital now as part of Shalby Hospital so that will be a
major advantage and we will be able to see the changes on an immediate basis as we start the
integration.
Surya Patra:
In regards to our medical tourism opportunity for the group as a whole will this play a role
and how important and significant that could be going ahead because of this acquisition?
Shanay Shah:
In fact as I said earlier it already does 70% of international work. It has clinics in more than
10 international cities at present where they are conducting regular OPDs, we are consulting
patient doing telemedicine, so they will be able to use our network and Shalby will be able to
use their network now and across this 10 cities and Sanar will be able to use Shalby’s network
in Middle East and Africa over and above this, so overall there will be an advantage for both
Sanar as well as Shalby from the medical tourism standpoint.
Surya Patra:
In terms of the profitability of the acquired asset at what level they are operating in terms of
EBITDA and all?
Amit Pathak:
This hospital started close to 20 months back and in the hospital business if you can see the
first couple of years are EBITDA negative, they are operating at close to around 15%
EBITDA negative because the occupancy level even with 70% of business are not very high
they are close to around 20-22% occupancy but with the synergy and from the next year
onwards the occupancy will ramp up and we are firm that we are going to have a higher single
digit EBITDA in the next year and high double digit EBITDA in the year thereafter.
Surya Patra:
Second question is on the implant business so it seems that the business has really picked up
within India well, but if you can throw some light what is the sales performance in the US
market itself the home market and now you are kind of initiated to tap really practically in
terms of business, the Japanese and Indonesian market and other potential export markets?
Deepak A:
So if you look at it even from the US market standpoint we have grown significantly over the
previous quarter and we would continue to launch new products as well as gain new surgeons
in the United States by putting more people as well as increasing our distribution. The proof
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Shalby Limited February 12, 2024
of that is the testament of the fact that I said that this year one of the largest orthopedic
congress that happens in United States in February which is happening this week. We have
more than 25 surgeons who have registered to just know about our new products and engage
with us to understand so the kind of efforts that have been put across distribution channels as
well as through our own feet on street, which is giving us the fruits and on the other hand we
are also planning to increase our feet on street this quarter in the US, which should add in
addition to the growth in the US market. Coming to the other markets Indonesia is in the
similar stage of India, we have been able to kick start over there but the supply change is also
affected the Indonesian market in a large way so we are waiting for that to get resolved. On
the Japanese market you will see some action in this particular quarter primarily because of
reinitiating the market and we have done some changes, we have visited the market and
understood something, this quarter we have already started seeing so January and February
we have seen some movement in the Japanese market already.
Surya Patra:
Simultaneously you have mentioned also Sir about introducing new products so if you can
throw some light on that, nature of the products, the strategy behind introducing those and
how important those because you are anyway having a large basket of product?
Deepak A:
Correct so the way the market works is very different so one is about what we have so if you
look at it primarily how the orthopedic market is there is primary knee then there is UNI Knee
then there is primary hip and then also within primary knee the market keeps moving very
fast, so if you look at the large players in the orthopedic place each one of them only in the
primary knee portfolio would have minimum three to four brands so in our case currently
what we are looking at are two brands with two extensions to that product which is the CKS
being the primary knee with an extension of gold into it which will significantly add to both
topline and bottom line and ambition being the new age knee which is again a primary knee
with an extension of gold into it, so these are the two primary knees that we have and TUKS
being our uni-compartmental knee and then hips right now we have only brand at this juncture
which is our TaperSet and CS2, so how we are looking at the market is two primary knee is
important because knee is the largest market in the orthopedic space and having two primary
knees with two different products and specification depending upon the person’s choice is
important to have and that is how we are looking at it.
Surya Patra:
Just one last bit on the way forward for the implant business Sir so let us say while there is
well jotted down future plan for tapping newer markets and all that but with all your effort
and all that what visible business progress one should expect for this segment over next three
year period?
Deepak A:
So I think the five year vision stills stays the same making that into a three and four year is
going to be only a pathway towards that five, it is a journey towards that five so like I said
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Shalby Limited February 12, 2024
earlier we are committed to that five year mission and we still stay to it. It is a very simple
game of trying to get the supply in place at the right cost and demand for us so far has not
been such a large challenge with the right people, right leadership, right team on the front we
are very, very confident that we should be able to get our both topline and supply coming at
the right cost to us we should be able to deliver the bottom line too.
Surya Patra:
Sure Sir. Thank you and wish you all the best.
Moderator:
Thank you. The next question is from the line of Nishith Shah from Ambika Fincap
Consultants Private Limited. Please go ahead.
Dhruv Shah:
This is Dhruv here. Congratulations on a really good set of numbers. I have three questions.
First is on your implant business you had guided for 110 to 120 Crores of implant revenue
this year do you want to revise this downward considering first three quarters we have hardly
done around 50 odd Crores?
Amit Pathak:
We are committed to deliver at the same level where we are right now in the last year so Q4
is really aggressive task for us but looking after the plan what we have we are confident that
we are going to achieve the similar kind of revenue as compared to last year.
Dhruv Shah:
My second question is can you just guide us how much did Sanar did YTD till now, last year
they did 67 Crores. YTD what is the revenue they are clocking right now?
Amit Pathak:
They have done close to around 70 Crores in nine month of this year.
Dhruv Shah:
Last question is on your SOCE business how many franchise hospitals apart from Rajkot are
we planning to open next year?
Amit Pathak:
So as I mentioned earlier we are exploring multiple opportunities. We are working right now
on four or five opportunities and we are going through that DD process and business
evaluation so there are lot of opportunities which are on our desk and we have to decide which
one we have to chose, so we are continuously working towards that and we will inform once
we have the right opportunity towards the franchise business.
Shanay Shah:
We have made a list of 30 cities where we would like to have our franchise hospitals so in
these 30 cities we will be continuously evaluating different opportunities as and when there
is something that materializes we will be sharing it.
Dhruv Shah:
Sure Sir. Thank you so much and thanks for the opportunity.
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Shalby Limited February 12, 2024
Moderator:
Thank you. The next question is from the line of Rikesh Parikh from Rockstud Capital. Please
go ahead.
Rikesh Parikh:
Thanks for the opportunity and congratulations on good set of number. My first question is
on implant business if I look at it for the Q3 with Q2 the margins have declined substantially
probably it seems because of the mix more in India so how we should be looking at the
implant business as such?
Amit Pathak:
So if I am talking in terms of the performance for the current year, in current year even with
the lower sales we are able to maintain the EBITDA margins the first and second quarter with
high sale in US and low sale in India we are able to maintain the EBITDA and the breakeven
kind of thing. In Q3 definitely if we have more US sale as compared to the earlier quarter we
will have higher EBITDA but as the sales are high into India where the margins have been
separate but still we are maintaining the positive EBITDA framework for the implant
business.
Rikesh Parikh:
I just wanted to know what kind of EBITDA level we should be looking at going forward
next year also with even Indonesia and South East Asia coming in as such so how we should
be looking at this business?
Amit Pathak:
Looking at the kind of way we are projecting we mentioned earlier also next year will be in
the higher single digit margin we have EBITDA and down the line two to three years we will
be in higher double digit margin.
Rikesh Parikh:
Thank you that helps. Secondly on our growth strategy so two of our large Greenfield projects
in Mumbai and Nashik are facing inordinate delay as such so are we looking at acquisition
more as an opportunity or how one should be looking at?
Shanay Shah:
So we are looking at both opportunities right now because we were in a net cash position we
also pursued an acquisition strategy because we could work on something which is already
operational and would add to the top and bottom line straightaway. At the same time we have
Greenfield projects planned as well for example Mumbai is a Greenfield project for us and
we are looking at building it from scratch. It will takes three to four years from now to kind
of operationalize that facility so it will be a mix of both Greenfield, Brownfield as well as
acquisitions depending on the opportunity that we get as long as they are in the geographies
which are strategic in nature for us.
Rikesh Parikh:
Thank you that is it from my side.
Moderator:
Thank you. The next question is from the line of Dilip Rao, an individual investor. Please go
ahead.
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Shalby Limited February 12, 2024
Dilip Rao:
Thanks for the opportunity. I just wanted to understand what could be the occupancy levels
and the margin profile going forward in the next few quarters? Thank you.
Shanay Shah:
So if you see the occupancy this quarter has grown about 8% for us. If you look at the first
nine months growth the occupancy has grown double digit for us so we can expect that we
will be able to grow the occupancy level at an absolute level in the existing facility about 15
to 18% level with a ARPOB increase of 3 to 6% so overall 20 to 22% growth is what we
foresee. Having said that this growth will be higher because there will be inorganic
opportunity that the company may pursue like for example the Sanar Hospital deal that just
went through so in which case the inorganic growth and the new capacity additions will be
an addition to the number I mentioned.
Dilip Rao:
The margin profile do you see any improvement on that?
Shanay Shah:
I think the margin profile if you see the first nine months of this year compared to last year
the EBITDA margins now are at 25-26% kind of level in the hospital business and we are
still at 50-52% kind of occupancy level at some of these hospitals so there is a big factor of
operating leverage which will come in and play out over the next two to three years in these
facilities so you will definitely see a margin expansion.
Dilip Rao:
One more question. Apart from Sanar how many more beds would be operational anymore
beds from our existing facility would be operational in next year?
Deepak A:
I think the way Jaipur and Naroda, Surat as well as Jabalpur has done and performed, we will
shortly have to reassess and operationalize more beds in the existing facilities to be able to
meet the demand.
Dilip Rao:
Thank you so much for answering the questions.
Moderator:
Thank you. The next question is from the line of Rohan Vora from Envision Capital. Please
go ahead.
Rohan Vora:
What is the reason that our core business has grown by around 8% in this quarter so what
could be the reason for that?
Shanay Shah:
The surgeries which are usually planned we have seen that the growth in those planned
surgeries was not as we had planned and what usually is the case but we believe that and we
have seen this has been the case across all the hospitals so it is not something which is region
specific but the way we are seeing Jan and Feb going I think there has been a lot of spillover
from Q3 into Q4 of this year so I think it is more of that so the way I would look at it is in Q1
and Q2 20% on the hospital business, in this quarter the growth has been slightly on the lower
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side at 11% but on an annual basis we believe that this 18 to 20% growth will be definitely
achieved by the hospital business.
Shalby Limited February 12, 2024
Rohan Vora:
Understood. Thank you Sir.
Moderator:
Thank you that was the last question. I now hand the conference over to Mr. Amit Pathak,
CFO from Shalby Limited for closing comments.
Amit Pathak:
Thank you everybody for joining the call. We will connect again into the next quarter. Apart
from that if you have any questions you can reach out to our investor e-mail ID. Thank you.
Moderator:
On behalf of Elara Securities Private Limited that concludes this conference. Thank you for
joining us. You may now disconnect your lines.
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