Rainbow Childrens Medicare (NSE:RAINBOW) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Rainbow Childrens Medicare Limited Q2 FY 'twenty seven Earnings Conference Call hosted by IFL Capital. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Giovanni. Thank you, and over to you, sir. Yeah. Hi. Good morning, everyone. This is Rahul from IFL Capital. I welcome you all to the second quarter earnings conference call of Rainbow Hospitals being hosted by IFL. From Rainbow, we have with us today Kancharla, chairman and managing director, mister Abrar Ali Dalal, group CEO, mister Sudarshan Patodia, group CFO and Mr. Saurabh Bandari, Head of Investor Relations.

1:00 Over to you, sir, for your opening comments. Thank you, Rahul. So good morning, everyone, and thank you for joining us for Rainbow Childrens Medicare Limited earnings call for the quarter ended 09/30/2026. We have delivered another quarter of robust growth with healthy numbers from mature, emerging as well as new hospitals in inpatient volumes, outpatient footfalls as well as deliveries in a seasonally soft, soft quarter because of a luck monsoon. So revenue grew by 23% year on year to INR $5.48 crores, while EBITDA and FAT grew by 1411%, respectively.

1:50 During the quarter, we commenced operations at a newly acquired 70 bed hospital in Nelur and 50 bed brand new hospital in Guntur. These additions strengthen our presence across Coastal Ansaradesh, extending our network from Vishakhapatnam to Chennai. The Government of Ansaradesh has allotted two acres of land parcel to build a Pillar specialty hospital in Amaravati, the new capital city of Andhra Pradesh. So we plan to build this hospital in two phases with initial bed capacity of 150. Drilling on the projects, our approach to the capacity expansion remains disciplined with a focus on building the high quality hospitals with a clear division of spaces for pediatric specialties and obstetrics to have a seamless operations.

2:45 We have ten fifty beds in pipeline at various stages of construction right now. In indoor, we expect to commence clinical operations in Q3 and an adjacent plot, which is to be built for greenfield of 120 is to commence clinical is expected groundbreaking on the revalidate. The 100 bed brownfield hospital in Malad, Mumbai is in active construction phase. We are fast starting it to start clinical operations in the Q1 FY 'twenty eight. At Coimbatore, 130 bed greenfield hospital is likely to come for internal works in April 'twenty eight and is expected to be ready for operations in Q3 FY twenty twenty eight.

3:40 Coming to NCR, Gurgaon Hospitals, Sector 56 of 125 beds is near to completion of the Shell and is expected to complete its internal works and ready for operations in Q3 FY 'twenty eight and Sector 44, three twenty five bed hub hospital to be completed for clinical operations in Q1 FY 'twenty nine. Spok Hospital of 100 beds in Seagali, Bangalore and 150 bed Greenfield Hospital in Pune are in early construction phase and likely to be ready in second half of FY 'twenty nine. As we are going to become the world's largest pediatric specialty hospital group with a pan India presence, we have initiated a comprehensive clinical governance framework.

4:38 This initiative is called One Rainbow Model, which includes the protocolization to standardize the care and building robust and multidisciplinary teams in an inclusive environment. This will ensure the seamless quality care to deliver high quality outcomes across the group. The new HIS implementation has gone live successfully in our hub hospital, Hyderabad with a new generation EMR is being used 100% both in OP and IP by all the stakeholders. We expect to complete HIS rollout in four months' time. Coming to some clinical excellence, so Rainbow Childrens Hospital successfully performs a highly complex living related liver transplant surgery on a six week old baby weighing two point nine kilograms at our Banjara Hills Hospital Hyderabad.

5:43 This baby was diagnosed with a gestational autoimmune liver disease, a very rare condition rapidly progressed to liver failure, where the baby required an urgent liver transplantation. His mother the baby's mother donated a small segment of the liver, which was carefully reduced to the 62, the graft to suit the baby's size. The procedure was significantly surgically challenging and given the baby's extremely small blood vessels for anastomosis and a limited abdominal space. The postoperative course was equally challenging with the multiple complications of the respiratory and intestinal obstructions.

6:32 This baby sailed through very successfully and financially discharged in five weeks' time, both mother and baby very healthy with normal liver functions and growing very well. This surgical highlights this surgically highlights the depth of our pediatric surgical transplant capabilities and the strength of our multidisciplinary teams in delivering care in complex situations. As I look forward, I firmly believe that our established clinical model, the leadership capability and the disciplined capacity expansion will support our long term growth to create value for all the stakeholders.

7:17 With that, I would now like to introduce Mr. Sudarsan Prakuria, our group, our CFO, before Mr. Abdalla Ali Kerala, our CEO, takes an update on operational and financial performance of the quarter. Mr. Sudasan? Yes. Thank you, sir. Good morning, everyone, and thank you for joining us today. In my close to two decades of experience, I have worked in the FMCG, retail and health care industries. I have led finance and strategy roles, driving core finance, business and strategic finance and capital markets focused on long term value creation for all stakeholders. I'm excited to be a part of the Rainbow team, which is India's leading pediatric and perinatal health care chain.

8:08 Rainbow has now embarked upon a rapid scale up journey by enhancing its PAN India presence and tapping multiple levers of growth anchored on clinical excellence. I look forward to working with the Rainbow team to further strengthen its market standing and deliver desired organizational outcomes. Thank you once again. I would now like to hand over the mic to Mr. Abharat for an update on the quarter. Thank you, Sujeshan. Good morning, everyone. Firstly, I want to congratulate the entire staff of Rainbow, both clinical and nonclinical, for their unwavering support in delivering a revenue growth of 23% year on year during the quarter ended FY September 2027, which comes on the back of two solid performances in the last two trailing quarters.

8:56 Team Rainbow is all set to end FY 'twenty seven on a very high note. Over the last three quarters, we have been focusing on and driving the following broad levers that we have been talking about building during our earlier calls: people, technology, best in class clinical outcomes and growth initiatives like onboarding new clinical talent, focusing on community connect and digitization. We have augmented our organization structure, keeping in mind the growth we are driving. We have created structures to manage our facilities in hyper local and zonal structures to increase the speed of execution. Our managerial bandwidth at the corporate office is complete with the onboarding of the new CFO. Once again, keeping in mind our journey to 5,000 plus beds from the current 2,600 odd, we are transforming to a new HIS, which has already been rolled out in our flagship hospital at Bhanjara Hills, Hyderabad, and we have upgraded to SAP HS4 HANA.

9:55 This is to ensure we are in tune with the latest technology and building a tech architecture that is scalable and able to serve us as we increase our capacity multipole. Over the last two quarters, we have had many doctors join our growth journey. Many are in discussions with us. This reinforces the might of Rainbow's medical infrastructure, ethical clinical processes and the sheer strength of the brand, which attracts top consultants to associate with us. We have strengthened our outreach to the community by increasing hyper local activities, including the introduction of a loyalty card called Shield, which not only draws new patients by offering surgeon perks, but also offers Rainbow an opportunity to capture the lifetime value of the patient's journey, starting from the first OPD appointment right up to the delivery and subsequently to the vaccination and need treatment that the child might require going further.

10:51 Digital initiatives are playing an increasingly important role in our patient engagement strategy. We are expanding our digital presence across the spectrum of our services, supported by focused marketing initiatives and social media outreach. Our new CRM software further strengthened our patient conversion mechanisms in the hospitals, driving higher outpatient and inpatient volume as is evident from our reported numbers. We are gearing up to launch a new website and a new patient app in the next few months to corroborate with rolling out of our new HIS. This new website and the new app will provide the most advanced and best in class experience to the users. The whole idea is to provide a more integrated patient journey, right from booking an appointment to having reports and diagnosis at the click of a button.

11:45 Going to all the initiatives mentioned, our mature hospitals have driven occupancies north of 50% and robust revenue and EBITDA growth despite experiencing a soft monsoon and lesser seasonal diseases. Our new hospitals at Raja Mandiri AP and Mahadeepura at Bengaluru have progressed well. Both have achieved operational breakeven. HRBR in Electronic City, the other new hospitals at Bengaluru are fast nearing the breakeven milestone. All these hospitals are now fully integrated into the Rainbow operating model. The commencement of operations at Nellore and Guntur adds to a growing network in Andhra Pradesh. At the same time, we remain focused on the execution of our upcoming projects in Mumbai, Coimbatore, Indore, Grugram, Pune and Sigali in Bangalore.

12:33 As we expand our focus is on ensuring the new facilities are integrated effectively into the Rainbow operating model, supported by established clinical protocols, operating systems and management processes. Our priorities for the coming quarters remain clear. We will continue to drive patient volumes, improve conversion, strengthen capacity utilization and accelerate the operational maturity of our new hospitals. We remain focused on delivering sustainable growth through stronger execution. Thank you. Let me now brief you on the financial performance and the key developments of Rainbow hospitals for the second quarter and the first half of FY 'twenty six'twenty seven. Our operating revenue for the quarter stood at INR $5.48 crores, reflecting a growth of 23.2% compared to the corresponding quarter of the previous financial year.

13:28 For H1, our revenue stood at INR $10.18 crore, reflecting a growth of 27.6 compared to H1 of the previous financial year. Our EBITDA for the second quarter amounted to INR 170 crores, marking a growth of 14.2% compared to the last year same period. For H1, our EBITDA stood at INR 304.6 crores, reflecting a growth of 20.6% compared to H1 of the previous financial year. The EBITDA margin for the current quarter stood at 31%, while for H1, the EBITDA margin was 29.9%. Profit after tax for the quarter stood at INR 83.9 crores, reflecting a growth of 10.9% compared to the corresponding quarter of the previous financial year.

14:15 For H1, R PAT stood at INR 146.4 crores, reflecting a growth of 13.1% compared to H1 of the previous financial year. In terms of operational performance, patient consultations witnessed a growth of 19% compared to the quarter compared to the corresponding period last year. Deliveries grew by 20%, while inpatient discharges registered a growth of 15%. For H1, outpatient consultations, deliveries and inpatient discharges grew by 21%, 2221%, respectively, compared to the corresponding period of the previous financial year. Our payer mix continued to remain robust and balanced with 63.3% of the revenue coming from cash patients and 36.7 from insurance during Q2 FY 'twenty seven. For H1 FY 'twenty seven, the payer mix stood at 64.2% cash and 35.8% insurance.

15:14 I'm pleased to inform you that the company's balance sheet remains robust with cash equivalents, fixed deposits and mutual fund investments aggregating to INR 542.8 crores as of 09/30/2026. This provides us with adequate financial flexibility to support our ongoing expansion and capital expenditures. During the quarter, the company incurred a capital expenditure of INR 81.9 crores towards development and expansion of its hospital network and enhancement of existing facilities. With that, I would like to now open the house for questions. Thank you. The first question is from the line of Prithvi Raj from Unifi Capital. I have a question on your margins.

16:40 Given that from now on, every year, you will keep adding more number of new beds and that in the new city, it might take more time for you to reach late event. So how should we look at control margin profile going forward? Will there be a pressure every year because you keep adding new best today, or do you think you can maintain a stable margin? Yes. I think you see what we have the beds, which are distributed in our various stages. We have mature group and we have an emerging group, which is all kind of the hospitals which are nearing maturity. So of course, the new beds will take some time to kind of breakeven.

17:27 The block which is in the maturing hospitals, they are going to deliver the EBITDAs and along with the matured group. So we have been doing this last two years' time without much of margin pressure. We always say that margin pressures, what are the new benefits we are adding, maybe about quarter to quarter, maybe half a percent, nothing more than that. So that is how we've been disciplined in terms of executing our capacity expansion. It will remain to be the same. I mean, the last two years, we have demonstrated that without much of margin pressure, we were able to kind of deliver 30% EBITDA margin pre NDA is our 25% margin. Okay. Got it. And on the payer mix, historically, you have maintained certain payer profile.

18:20 But given that you will rent in new cities, should we expect a change in the payer profile? Or do you think you will continue only cash that insurance? I think that as far as the major city is concerned, which is like in Hyderabad, Bangalore, Pune, Mumbai, I think there is significant insurance penetration. So that's still productive 60%, 6560% of this one. When we have kind of a prior two cities, which will have kind of a less of insurance penetration, so blended together, blend, which we'll see about definitely about sixty-forty probably. Sir, my question is more from a government team patient. At any stage, will we consider or you would like to stick to only cash plus insurance?

19:07 Yes. I think it's a we don't for information, we don't do much of government. Our whole government business is less than 1%. I'm talking about cash and insurance, which is the private insurances. Even in prior to cities, what we have witnessed recently is that insurance penetration has significantly gone up. For example, places like Vijayawada, Raji Mandi, we are already witnessing about 30%, 35% of the insurance private insurance segment, the penetration. Thanks. That's all for me. The next question is from the line of from HSBC.

20:00 I have two questions on your 2Q performance. First, you reported ARPU growth of 15%. Again, I think very strong number. However, what we are looking at, I think, the broader industry level, continue moving from reporting ARPU to metrics like ARPC. According to you, which metrics should be the better representation of performance? And this 15% growth which you reported in 2Q, what kind of headroom you see ahead? That's my first question. The ARPU has been strong actually this year. I think ARPU is driven mainly by the case mix.

20:46 If you see our overall, our App Services business has grown significantly and also the addition of the 5% revenue addition of the from the fertility and also the case mix. These are the three components in the A loss, there's a significantly lower A loss. These are the components which actually pushed our top to the very healthy AARP. Normally, we do give up the guidance about 8% of 7% to 8% of AARP growth. So it does kind of happen sometimes when you have a kind of a better case mix and more of the doing it and the fertility adding it to them. And also, mind you that the children's hospital and women's hospitals, we do a significant outpatient as well. So that will add to the ARPU.

21:34 The ARPP, yes, ARPP is again is it only reflects on the inpatients year on year growth. So the ARPP growth can be a very steady and static sometimes because of how you negotiate your insurances. Sometimes it takes a long an extra year time. If we combine ARPP up to three years on average, it will be around about 6% to 7%. So broadly in the similar ranges what we foresee for R4, right? Either of them, somewhere 6% to 8%. Okay. Yes. And sir, in your presentation, we see more details, and thank you for that. So for the mature hospitals, we still see occupancy of 15... Sorry, 54%.

22:25 So because of your, you know, nature of business or mix, etcetera, what kind of, maximum occupancy you think is possible in your mature hospitals? Yes, we do look at our kind of our driving, what we can do maximum is about 60% occupancy. If you see our the mature hospital now, there is seasonal softness here. That's what gives you additional extra percentage because of the monsoons, delayed monsoon. I mean, we have literally not seen any of the seasonal business. In a way, I think I'd like to reiterate that without any much of season, we were able to deliver the numbers this quarter that signifies that we are significantly moving away from the seasonality.

23:16 Seasonality will always add for any healthcare institutions, more so with us, to additional occupancy and additional revenue, which gives us more comfort. But this is a quarter which has actually been last three quarters, we have seen that we have not witnessed any of the seasonal business. This is a pure play of kind of a pediatric and maternal care business. Okay. And my last question is, sir, now you have a plan to enter many more cities, newer cities as a part of your expansion. So just wanted to understand your thought on, you know, any kind of execution risk you see by entering into newer market and that too, and I think similar time frame, another like four to five years from now. So just want to understand your thoughts on entering so many multiple market over next few years and any education risk you might foresee here?

24:17 Yes. The main thing, we have built a strong project stream under the project director heading the teams. And we do kind of see that budget enough amount of time for these projects. Yes, sometimes, maybe the delays, I would expect to be in more than two quarters. But most of the times, we were kind of a plus or minus one quarter, we were able to deliver our the projects. So maybe in exceptional situations, we did not come across that huge delays. For example, Chennai, we've got some delay because of our reapprovals and those things. We have come back and communicated to there's about six months delay of Chennai. Now it is on track now. So it is important that now keep you updated on time lines of our projects.

25:08 I won't expect this time line delay is significantly high. So and these CapEx will be funded through mostly through your funds, right? Maybe there is not much reliance on borrowings, etcetera? I think we have a very healthy balance sheet. I mean, with the 1,000 plus beds what we have, we should be able to invest cash. The balance sheet generates enough cash plus the cash on the balance sheet should suffice. That's what we kind of are looking at to fund it. Okay, sir. Sure. Thank you. I'll get back in the queue. Thanks, Vamyanti.

25:54 Thank you. Before we take the next question, we would like to remind participants that you may press star in one to ask a question. The next question is from the line of Jyotish Vijayan from Board Financial Services. Please go ahead. Hi. Am I audible? Yeah. Please. Yeah. So this is from. So thanks team for the opportunity. And my first question is on the marketing spend. How am I right now? How much is your marketing spend as a percentage of revenue? And what channels do you opt for the marketing? And how it's going forward? Yes. So we would be a little more than 2% on our marketing expense, okay? We have significantly looked at marketing this year.

26:46 And we are looking at various channels, as said in my speech, one is we are really going close to the community in various ways. We have introduced loyalty cards. We have looked at looking at entering corporates, private corporates, increasingly coming there. I think all that leads to our marketing strategy. Another important step we have taken is digitization. If you look at Rainbow over the last three quarters, the digital footprint of our patients are increasing substantially. So more and more patients are now looking at Rainbow digitally and going to websites, looking at our apps, and that's how we are creating a patient funnel, led by a strong and robust conversion in the hospital. So it's a combination of above the line marketing, digitization and getting really, really close in community. And that strategy will go on and continue to build as the time goes on.

27:39 Okay. Got it. And as a group, your targeted occupancy will be 60%, right? Mature. Yes. For the mature hospitals, that will be the number. 60%. So so so you have seven hospitals in the emerging emerging cluster, and you have a five new hospitals also. When will the group... When will... As a group, when... Do you have any time time period target to get the occupancy to 60%? Do you have any kind of target by f eight... F twenty eight or f twenty nine like that? See, that's a it's very difficult to predict the time. I think we are doing everything right in terms of inputs. Whatever is required to drive occupancy that is increasing volume we are doing. Our throughputs are very high. Our A loss numbers are very, very strong.

28:31 We continue to target and recruit new doctors on board. We get closer to Community Connect. We keep on we rehashed our call center. We keep on strengthening our tech. So I believe all these inputs are in place. And without telling a time, I think we will be able to drive our occupancies to that number in appropriate time. That's the way I'll put it. Got it. Got it. I have one more question. So when you look at the speciality mix, are right now the IVF is nearly five percentage compared to three percentage in the last last quarter, FY twenty twenty six. So do you have any do you have any plans to increase the percentage to double digit, or do you have any kind of plan to increase IVF IVF need?

29:19 See, for our business, IVF is very, very in house. Okay? As our obstetric OPDs keep on increasing, okay, we will keep on driving patients into IVF. So as our obstetric business grows, our IVF will grow parallelly. Yes, we have two or three stand alone centers, which we have started some time back. But largely, the strategy remains driving our in house OPD consultations into IVF. And proportionately, it will keep growing along with the obstetric OPDs. Got it. Got it. Got it. Okay. Thank you. Thanks so much. That's all from my side. Thank you. And all the best. Thank you. You. Participants, you must ask questions. The next question is from the line of Shiv Karla from Asset Management.

30:12 Please go ahead. Thanks for the opportunity. So my question pertains to the ramp up of your Fortilite business and its potential contribution with the company's overall profitability. So could you please kindly share an update on the progress of the IVS business so far, particularly in terms of scale up and operating performance? And so if you could also share the current EBITDA margin separately for each of the three business verticals, which is the pediatric care, women and child care and fertility IVS. So it would be helpful in understanding the relative profitability of these businesses. Even as the fertility business cases and its contribution to the overall revenue mix increases, how should we assess its potential impact on the company's consolidated EBITDA margins over the medium term?

31:02 Okay. See, as I said earlier, we will keep on ramping the idea business through the growth of obstetric OPDs because that is the first port of call. As a patient comes to an obstetrician, it is largely the obstetrician who decides whether a fertility advice is required or not. If you see the growth of our current IVF business, it's largely in proportion to how our OPDs have grown. Yes, we have got two, three stand alone centers where we deploy various strategies to increase the business. So our IVF business will keep growing in two ways. One is proportionately to the OPD growth of obstetrics. And secondly, as we set and get set and get settled in our new centers and as our marketing strategies, which are largely digital, start piling. So this is how we look at IVO business. Of course, it will keep on contributing to the overall mix and profitability.

31:58 To define the three different profitabilities between specialties would not be appropriate on this call maybe. But if your question, the first question on how we plan to grow our IVF business, that's the answer. Got it. Thank you. Thank you. Thank you. The next question is from the line of Pavitra Jaivan from Private Investor. Please go ahead. Thank you for the opportunity. I this is with regards to the recent oncology drug right caps that are coming into force. I wanted to understand if and what sort of impact this would have on JINBOW? Okay. See, I'll just break up our cost.

32:46 Okay? So the the pharmacy cost currently for Rainbow is around 14%. Okay? Out of which, around 7% is vaccinations, which is no one extra drug cap. From the balance 7%, if you look at our business, only less than 0.5% would be oncology and drugs that may come under any scanner for price capping. So very, very clearly, and we said that before that for Rainbow, this price capping is almost insignificant. Thank you. The next question is from the line of Rahul Jivani from IFL Capital. Please go ahead. Yeah. Hi, sir. Thanks for taking my question.

33:38 Sir sir, in terms of, let's say, the the profitability profile between the various clusters, now while emerging hospitals are, let's say, at a lower occupancy profile than mature hospitals, we see that their EBITDA margins are broadly in line with the with the mature hospitals. So if you can comment in terms of what is helping us drive, let's say, fairly strong margins within the emerging cluster. And then a related question for that would be on... So for with the ramp up in, let's say, the new hospitals, what kind of an EBITDA margin trajectory you see for the new hospitals over the next two year period? Obviously, with, let's say, incremental capacity coming online, there would always be new hospitals which will get added to the new cluster. But as of now, whatever new hospitals are you operating, when do you hit the... Do you expect those new hospitals to, let's say, reach a steady state EBITDA margin profile of between 20, 25%?

34:47 Rahul, I think this classification is mainly then for the analyst sake, actually. So we have clearly a matured hospital, which are more than five years. We have another group of hospitals which are emerging hospitals under new hospitals. So the clearly to see that in emerging hospitals will also shows are the ones which are going to file are the ones which are going to contribute significantly better. And also, as we are actually adding more and more beds, after second year, they get into the emerging pool. So in an emerging pool, EPDs are fairly healthy. That's how we look at it. And also the new hospitals, it depends on where the new hospitals are done.

35:32 For example, with the new hospitals are done in a cluster like Hyderabad, and it's no brainer, it will do a positive within the first year. So and the Bangalore will take about in a year, fifteen months' time. Chennai will take about fifteen, eighteen months' time. So other places, whether we feel less than two years, most of our hospitals will be EBITDA breakeven. So this is what including a new geography. So this is how we have positioned ourselves. So therefore, we need to look at the mature hospital to see that what is contributing. Emerging hospitals are that how well that kitty is growing and also contributing significant revenue as well as EBITDA and also the occupancy level.

36:18 That's where the healthiest part of it is what we see. I think that's what it demonstrates in our presentation that the emerging hospitals are very early. So the third bit is that another new hospitals. If you see our new hospitals seen that there is numbers are good, but there is a 16% minus 16%. Those are all started in the last six months to eight months' time. Obviously, the operational losses will be in that account. It depends on how many hospitals we start. And also, when we start also. So if I start a couple of hospitals that were there in the block from Hyderabad, that could have been even better. So I think this split gives you a lot more in a way that for ourselves internally, for also analysts, gives a lot more clarity that how the block is moving because we have almost like a I mean, 100% beds, particularly about say 102,100,300 beds are going to come in the next three years' time.

37:20 This classification will give us a kind of a position us to understand our business better rather than clusters rather than this one. Aging is very important for hospitals, especially children's hospitals. Sure, sir. So you obviously referred to the fact that most of your hospitals would tend to achieve breakeven within a two year time frame depending on the markets where you you are commissioning those hospitals. Would you go have the same expectation for the Delhi NCR hub hospital as well that... How much time do you think that the Delhi NCR hub hospital would take for you to achieve EBITDA breakeven? And what kind of an EBITDA loss we showed the factor in our numbers, essentially, from the two Delhi NCR hospitals in FY 'twenty nine and FY 'twenty three?

38:15 I think it's very early to kind of talk about it. And probably, we would give the guidance probably six months or three months before commencing the hospitals because we have ambitious plans and recruitments and also how to drive these hospitals. Obviously, that we would look at drive these hospitals to EBITDA breakeven in two years' time. Okay. Sure, sir. And sir, with some of the sales and marketing investments, which we are doing this year, what we see is that there is an acceleration in our top line growth trajectory. So this quarter as well, we delivered a healthy 23% kind of a top line growth.

39:01 And in the past, we have guided about a 20% revenue CAGR for the business. So let's say with these incremental sales and marketing investments and the capacity pipeline which we have, do you think that potentially our growth could be higher than 20% which you have indicated in the past going forward? So Rahul, we have so we are working pretty hard in all these initiatives and growth initiatives. Having said that, we remain optimistic, but we'd still talk about high teens growth. But we will remain optimistic about higher growth in terms of top line. Okay. Sure, sir. I will join. I'll let you. The next question is from the line of Alankar Gurudev from Kotak Institutions.

39:57 Sir, for the mature hospitals as occupancy is in the can margins theoretically go up further? So we are already at a pretty best in class kind of margin in mature hospitals. So my comment here will be that, yes, we will keep on driving the top line, keep on trying to increase the efficiencies, occupancies and remain optimistic of a similar or slightly better maybe margin. And would there be a significant dispersion in margins across these 14 mature hospitals? Yes, there would be it would all again depend on the city that we're in and the levels of occupancy that we are at and what is the popularity of our brand in those cities.

40:46 Again, it's very, very related to top line. So it will remain variable, but not too far. It will not be a very big window of variability. Got it. Got it. The second question is, now without the seasonal benefit, volumes have picked up quite well across IPD as well as OPD. You have been speaking about the growth initiatives. Can you help us assess can you help us assess where are you in this journey? And have you more or less bridged the gap versus multispecialty hospitals when it comes to marketing, the digital initiatives, basically, the overall growth initiatives that you have been outlining? See, we have a very clear path. We have a proper plan, which is for these growth initiatives, which we have kind of spelled out to ourselves for the next one point five, two years.

41:36 If you ask where we are in that growth journey, we may be 50%, 60%. With the rollout of our new HIS, things will get strengthened. Having said that, again, I wouldn't compare with multi specialty, it's a very different business. Ours is more of a awareness and conversion led business, and we are working on that. So let's see how it goes. But yes, it will get better with time. Got it. Yes, think few quarters back, Abharat, sir, you had mentioned the gap is around 35% or you were 35%, 40% of where the multi specialty hospitals are. Right now, you're saying it's around 50%, 60%. Should we expect you to bridge the gap completely even though there is a difference in the model?

42:22 No, see, again, when you look at if you look at it qualitatively in terms of if you're measuring between with multi specialty, I said, we're getting there. We will get better. Let's see how it goes. It's a very dynamic changing market. Even marketing tools keep changing, revenues of marketing keep changing. So as we go on, we will obviously keep on trying to reduce the gap. And I think clearly, the volume growth signifies that we seem to be on the right track. So we'll continue and let's see how it goes. Got it, sir. And one final question. As you expand into newer cities, how will you ensure the hub and spoke model remains intact without experiencing any material delays in establishing the hub and spoke network?

43:08 I think what so far we were able to do very effectively in Hyderabad and Bangalore is actually now six hospitals, seven hospitals in between build. And in terms of bringing synergies and also trying to kind of see that the benefits of that, Abhin spoke, yes, we will see we have seen it very clearly. So now we're in the state of Andhra Pradesh. It's not a one large this is not a it's a very long stretch state. So we were there right from Vishakapatam to Chennai as a kind of every almost 200 kilometers, one hospital is there. So this is a network effect, which always will turn out positive to any hospital group. So for a complex patients and all those things will get referred automatically in all hospitals.

43:55 Delhi NCR, at the moment, what we have is we have two hospitals. And once we have the hub hospital over there, naturally, we have quite a big plan, ambitious plan about being a spoke hospital within the NCR as well as in the North. So the playbook plan is significantly towards North in the next three to five years' time. So that we are quite ambitious about it, and we are rightly ambitious about it. Just to understand this clearly, now when we are expanding in Hyderabad and Bangalore and Chennai, I mean around Hyderabad or around Bangalore, Chennai, relatively, it was three cities wherein and you are expanding the network out there. But when we talk about the current expansion plans, be it Mumbai or Indore, you have spoken about projects under discussion being in Lucknow, Jaipur, Bhunishwara, Chandigarh, etcetera.

44:55 Essentially, you'll have to establish that network across multiple cities. So that's why I had question as to would there be a delay in establishing the network because you can't possibly expand and have so many new hospitals coming in across so many different locations. Yeah. It's about three to five years journey, this one. So I think our focus has significantly changed in North. North is what we believe is an opportunity and also very underserved. And also these cities definitely need children's hospitals. I think that's been witnessed and seen by the multi specialty, in the birthing centers everywhere. We take multiple parameters, whether it's the birth rate, whether it's affordability index going up and also the number of players doing the projects in this domain is a signal. So that's why we see Nathi as a big opportunity for us.

45:53 And I'm sure someone like Rainbow with almost close to three decades of experience, we can play out very well in North. Yes, we do need to have a significant management teams. And the CapEx outlay is pretty clear about it, how to go about it. And once the law has to start, then and meanwhile, all these things, we'll put them in the framework, start working on it. Understood, sir. That's it from my side. Thank you and all the best. Thank you. Thank you. Thank you. The next question is from the line of Vinod Badipal from Lara Capital. Please go ahead. Hi.

46:40 Good morning, all of you. Just a follow-up on the previous question regarding the drug margin CapEx. When you say 14% is the pharmacy cost, do you mean to say that 14% of your revenue comes from pharmacy? Yes, that's 14% of net revenue is the cost, basic cost. Sorry, cost as in 14% of revenue? Yes. Yes, pharmacy is 14% of revenue. Okay. And just want to understand, right now, the price the margin cap is of the oncology. But if at all, it gets extended to all medicines, the margin cap, would that have a very serious impact on this 14%?

47:36 No, it would not. See, again, as I said, 7% is vaccinations, okay, which can only probably go up. Of the balance 7%, okay, the caps which are getting discussed, many of them are already implemented. And all this falls in our window only less than around 0.5%. So as I said before, it's very insignificant, even with these caps come. These caps are likely to come on high end antibiotics, so on and so forth, and on core drugs, as you rightly mentioned. So in our business, that is very insignificant. I'll just give you a little more medically clarify that. See, the drug's cost for the, for example, obstetrics is very minimal. In venetoclax, very minimal.

48:22 Drug's cost comes in IVF, oncology. Most of the antibiotics been almost whatever we use currently, antibiotics are already in 1 100 DPCO, okay? So we have done a deep dive and looked into it. I think the impact, whatever is being talking about it, is very insignificant. Some oncology drugs comes, the whole list of drugs comes, some to an extent of IVF drugs comes. Otherwise, we are fairly ring fenced. Overall, I'm not calculating how much EBITDA compression will come. I'm pretty sure that it will be much less than 0.5%.

49:09 Understood. And what do you say vaccinations will not get impacted? Is that outside of trucks price or margin controls? So most of the vaccinations are actually international brands. And I'm not sure how it's going to work because there are too many varieties of vaccinations are there. So vaccination is a patient's choice. And patients do come and ask because it is not we being a private children's hospital, and most of the times, parents do come and ask for, I want GSK, I want Sanofi, I want Merck, I want then obviously, it's a choice of the vaccine.

49:55 It is not something that an emergency or the disease. It is more of a kind of a lifestyle. People want to have a choice to get what they want to do. So very unlikely to be. Got it. Thank you, sir. Thank you. Thank you. The next question is from the line of Rahul Jivani from IFL Capital. Please go ahead. Yeah. Thanks, sir. So so, sir, beyond, let's say, the the disclosed projects in the pipeline, the presentation talks about ballpark around 1,100 beds getting commissioned across these new cities. Now what would be our approach in terms of expansion in these new cities? So would you would you look for m and a assets to enter some of these new cities, or our approach would be to largely expand organically within these new markets?

50:54 Some of them are organic and there are some opportunities also there, which probably may work out for us. Okay. And sir, in terms of M and A opportunity, what kind of valuation multiples you are seeing for some of these assets? If you can comment on that as well? I think that what we have done so far is about we have given EBITDA EVEBITDA multiples about 11 maximum. That's what we have done. Rahul, on the M and A front, again, so there won't be since we're a pediatric hospital, okay, there would be very like to like kind of opportunities for M and A in the market.

51:39 We wouldn't be looking at getting into adult acquisition and then how it wouldn't work out. So to that extent, it would be limited inorganic. Okay. So sir, do you have any number in mind in terms of, let's say, out of these 1,100 beds across these new cities, what proportion could come through from M and A? Very difficult to say at this point, Rahul. Though we are under lots of discussions, it would be we wouldn't be too short at this point. Sure, sure, sure, sure. And sir, just in terms of, let's say, some guidance around margins, now, obviously, this year, our margins are slightly under pressure because of these incremental sales and marketing spends which we have done.

52:27 So if you can comment in terms of where do you see your overall margins landing up for FY 'twenty seven? And then how do you see that playing out over the next two year period with the incremental capacity, which we which is going to come online for us? So again, Rahul, I think as Doctor. Ramesh said earlier that we will be looking at a red line of around 25%, 26 of P and A's EBITDA even after all the expansion. Currently, our margins, they're pretty healthy. And I think they'll remain robust because if you look at our the split between our three categories, it is faring pretty well. And as the new hospitals come in the profitable bracket or start burning less money, our margins will probably remain the same, get slightly better.

53:20 That's the way we will get it. Sure, sir. And let's say, there's ballpark 25%, 26% margin. Do you think that those margins can sustain with the Delhi NCR expansion as well? Let's say, for the first year when Delhi NCR would have some losses. So... Because, obviously, we we would see some expansion on our base business profitability. So with Delhi NCR, is it possible to sustain these 25%, 26% margins? See Rahul, how I would look at these, I would look at the growth as a balance sheet as a balance sheet, kind of expanding balance sheet, expanding the revenues And that is the trajectory now. And you are covering a lot of multi specialty hospitals, that's the same scenario, isn't it? There will be margin pressure probably a few quarters for a year time, maybe 10.5% to 1%.

54:12 But that will be absorbable. And because you are already kind of our EBITDA target to have 25%. So for us to ambitiously growing the network and building a larger footprint, that 05% to 1% EBITDA compression is not going to be a negative because Delhi hospitals are our own hospitals. I mean and also, we have ambitious plan how to ramp up these hospitals. And we have a plan to commence those hospitals stage wise, not to burn too much of moly. These are all things which are operational, how we want to do it, how we want to reduce the burn. Meanwhile, in your entire South is going to be a kind of a mature stage by the time Delhi comes.

54:59 Of the hospitals come into a mature stage, that will all start firing. So which is why that's a backdrop of us saying about we will continue to deliver about in and around 25% of the pre index EBITDA. I mean, maybe a margin pressure may come over five percent, 5% when there is too many bets come into the few quarters into the play. Yes, that's the reality. That's the truth of the story. I mean, I keep tracking of all of the hospitals. It's the same scenario for everybody. Perhaps we are in a better stage than many other people in terms of margin pressure. Yes, yes, obviously, sir, that as you rightly pointed out that despite, let's say, this 50% capacity addition for us for past two years, our margins have held pretty steady. So, yeah, my question was just from Delhi NCR because it's an it's an... It's a large hospital and a new market. So, yeah, yeah, sir, thanks for providing that clarification.

55:59 I will join back in the queue. Sure, Rahul. Thank you. Thank you. The next question is from the line of Shuk Karla from Asset C Mehta Investments. Please go ahead. Thanks again. So just a follow-up on my previous question. So without getting into specific segment level projects, would it be possible to indicate whether the EBITDA margins of each of the three verticals are higher or lower than the current consolidated EBITDA margin of around 51 post Indians? So the objective is to understand whether the increasing contribution of the IVF business is likely to be margin accretive or margin dilutive or similar for the company as it scales on a consolidated basis? Thank you. Pediatrics, Obstetrics and IVF margins separately, are they higher or lower than the EBITDA margins at the company level in the specialty wise EBITDA margins?

56:55 No, we're not looking so far specialty wise margins. And I think the pediatric and obstreks are both together hand in hand in terms of margin profile. And IVF is a small business at the moment. Still about it's grown well, about now it's reached to 5%. We'll have to start looking at differently now as we move forward. At the moment, it's not that significant for us to give a separate line item. Thank you. The next question is from the line of Prashar Raghadeh from Omaika Portfolio Advisors. Please go ahead. Thank you for the opportunity. I just want to know on the competition, the kids clinic.

57:44 We have another hospital in common with them for the Hyderabad, Bangalore, Chennai, Delhi. And in the upcoming pipeline also, they already have hospital in Pune, Mumbai, and Gurgaon. I just wanted to know, although we are better in terms of the margin profile and the ROE, ROC, I just want to know the pressure in terms of the competition from the Cloud9 chain. See, I mean, they've been there last twenty plus years and twenty five years almost. So, I mean, I think they've been operating in our competitive markets as well. So we are the largest player. We are not a mom and pop stores. We are not a up to six, and we are more of full time doctors driven long term institutional way of doing things and much larger 40. So we have seen them as a competitors like Reddell. Reddell has been there in Aparos one and significantly in Hyderabad for a long time, not able to do any impact on us. And the other motherhood has come and gone.

58:52 And many people there in the local chains as well. We continue to grow our obstetrics as well. There is a unique kind of some degree of competition companies only obstetrics. Otherwise, our children's play is much larger and that doesn't have much competition. We don't feel it's a competition. Okay. Sir, I just wanted to know whenever you start in the hospital, in how many years do we see that changing into a matured one? Some geographies, it will become a kind of matured hospital in three to four years' time. Some places may take a little longer than four, five, six years' time. It depends on the even the micro market.

59:42 It's the demand suppose spoke hospital in some micro markets, they do phenomenally well. By third, fourth year, they will kind of be reaching company EBITDA. Some of them will take a little longer, two more years. It's a very variable city to city and also micro market to micro market. And overall, what is our I mean, in Hyderabad, if we do any hospital, whether small or big medium, we'll breakeven in the first year. And the Bangalore will take about fifteen months' time, Chennai maybe about fifteen, eighteen months' time. This is how our trajectory been, whatever that's why I've been saying about moving to Delhi, whether the big hospital is small. I think we would should be able to kind of a breakeven in two years' time.

1:00:38 Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Yes. Thank you. Thank you, investors, for joining the conference call and giving your views and asking the thoughtful questions. Thank you very much for this. If you have any questions, you can reach out to Investor Relations team at the Rainbow Hospitals. Thank you. Thank you very much. Thank you. Thank you. Thank you. On behalf of IFL Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.