Jupiter Life Line Hospitals Ltd

Page 2 of 11 Ladies and gentlemen, good day and welcome to the Q2 FY24 Earnings Conference Call of Jupiter Life Line Hospitals Limited hosted by JM Financial.

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. Jainil Shah from JM Financial. Thank you and over to you, Mr. Shah.

Good morning, everyone. On behalf of JM Financial, we welcome you all to Jupiter Life Line Hospitals Limited Q2 and H1 FY24 Earnings Conference Call.

We have Dr. Ankit Thakker, executive director and CEO, and the senior management team with us. The Company's “Financial Results and Investor Presentation” have been uploaded on the Company's website and stock exchanges. We will begin the call with opening remarks from the management, followed by Q&A.

Before we begin, I would like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect has been included in the Earnings Presentation.

I would like to hand over the call to Dr. Ankit for his opening remarks. Thank you and over to you.

Thank you, Jainil. Good morning, everybody. Thank you for taking the time to join us on our call this Diwali week.

This is our first Earnings Call, and we are here to discuss the “Business Financial Performance” of Q2 and the First Half of FY24.

With me today are Mr. Anand Apte - Chief of Business and Strategy, and Mr. Anish Vyas and Mr. Prashant Pitale from our Finance team along with our IR Advisor SGA team.

So, being the first Earnings Call, I am going to take some liberties and address some of our philosophies and thought processes also, besides talking about numbers for the benefit of the wider audience who may not have had a chance to meet us during the IPO process.

But before we start, I would like to express my deep gratitude to all our shareholders, both in our previous private affair and now in the listed world as well for buying into our vision and work. I am also grateful to the bankers and the lawyers who helped us tell our story to the wider investor community. I am thankful to all our doctors, team members, partners, consultants,

Page 3 of 11 vendors who helped us to create this story in the first place and most importantly, I am humbled by the trust that all our patients have had in us for over 16 years now. It is for you that we exist and your well-being and interest are foremost in our minds at all times. And it is because of this focus on patient centricity, we have developed our business model the way we have, and coincidentally, we found that the interests of patients and investors largely overlap; we have taken a conscious call to have all our hospitals as custom designed and built because we realized that a well-planned infrastructure is essential to delivering good care.

We also own all our assets by buying land and owning the building, plant and machinery, we are able to avoid the future stress of inflation-linked and perpetual drain, that of the lease on our cash flows. We are not in this for the short term and we are happy to make peace with the reality that healthcare is a capital intensive business and in order to build a business that has strong fundamentals and which is sustainable over the long term, we will have to make bigger investments in the early phases. We have also chosen not to follow the hub and spoke model because we believe that spokes are incomplete facilities and we would want to focus our energies on building full service centers of excellence, which can not only provide the best care to our patients but also achieve economies of scale and generate good returns for our investors. We hope to continue walking on this path and we hope to keep growing and creating value for the communities we serve and our investors.

A lot of people told me during the IPO process that once you are listed, there will be a lot of quarterly pressure, but those of you on the call who I have met during the road shows will be able to vouch for me when I say that I have always maintained that we are in this for the long haul. Of course, the financials need to be reported on periodic basis, which we will do, but so far we have not and going forward, we do not intend to make decisions or take actions purely for short-term interest. In our private avatar, we were blessed to have shareholders who bought into the vision of long-term value creation and wholeheartedly supported the guiding principle of always doing the right thing. I am sure even in the listed world, we will find similar support.

To give you a brief introduction about the Group, for those of you who may not have a background about us, Jupiter started its first hospital in Thane in the Mumbai Metropolitan Region that is MMR in 2007, the second one was in Pune in 2017 and the third in Indore in late 2020. This is a 96 plus percent subsidiary. Thane and Pune hospitals are both around 375 beds each and were Greenfield projects, while the Indore Hospital was an acquisition that is planned for about 430 beds, but we are currently operating around 231. All our hospitals are full service independent hub hospitals, where we provide all services from childbirth and newborn care to cancer and organ transplantation services. As we speak, we are constructing a 500 bed hospital in Dombivli, which is also in MMR. The land is purchased, all permissions for construction received, the excavation is now complete and we have begun constructing upwards. The project is likely to be operational anywhere between 2 to 3 years from now.

We have a strategic focus on the healthcare market in Western India where we have a strong understanding of the regional nuances and believe there is a significant and growing demand for

Page 4 of 11 high quality health services. In fiscal 22, the penetration of health insurance in India was around 38%, but the average for the West Indian states that is Maharashtra, Gujarat, Goa and MP was about 78%. We believe that by developing our business model around the insured population, we will be able to address the affordability question in healthcare and generate strong demand for our facilities. Even now, we have over half of our revenues from the insured patients, with the government schemes only contributing around 1% of our revenue. Our aim for the next few years is to continue growing in Western India region and build more hub hospitals of between 300 to 500 beds, taking our groups strength to about 2500 beds. I realize I have gone on too long on an earnings call without talking about specific updates and numbers. The presentation has been uploaded and I am sure you would have gone through it, but let me enumerate some key developments.

In the current quarter, the Company has become fully debt-free by repaying all our loans with the fresh proceeds from the IPO. We are also left with a net cash of about Rs. 320 crores on our book, which we plan to use for future CAPEX and growth. Our hospital in Indore has now turned EBITDA positive; soon, we expect it to be positive even on PAT levels. We have completed empanelment with the insurance companies and going forward we believe this should improve the demand and the occupancy levels in Indore. In Pune, now we have signed rate revision contracts with the insurance companies and going forward, we believe these will help improve our ARPOBs and the hospital's margins. Eventually, the Company's financial performance should improve due to the insurance developments of Indore and Pune going forward.

In FY24 Q2, the total income stood at Rs. 264.2 crores, an 18.4% growth year-on-year. EBITDA for the quarter stood at Rs. 62 crores, representing a margin of 23.5%. EBITDA has increased 8.8%. PAT for the quarter stood at 33.7% representing a margin of 12.8%. PAT increased by 24.4% corresponding quarter year-on-year.

H124 revenue was Rs. 508.4 crores, showing an increase of 19.8% compared to H1 year-on- year. EBITDA for the half year stood at Rs. 116.1 crores, representing an increase of 8.4% compared to H1 year-on-year. EBITDA margin 22.8%, PAT for the half year stood at Rs. 87.7 crores. The average occupancy was 62.3% in H1 FY24 compared to 58.6% in H1 FY23. The ARPOB for the first half was Rs. 53,075 at the console level, and the ALOS stood at 3.89 days in the first half of this year.

So, with this summary, I am happy to talk to everyone, take questions, and look forward to talking to you. Thank you.

Thank you very much, sir. We will now begin the question-and-answer session. The first question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.

Page 5 of 11 Sir, my first question is basically on Thane and Pune, so with the insurance rate revision, which has happened, what is the positive impact on EBITDA that you are already seeing because of Thane and with the rate revision in Pune, how do you see the margins panning out for the near- term 3 to 4 quarters from here on? he rate revision in Pune was signed early this month and probably last week and will come into impact from this week onwards. So, we believe that the Pune rate revision of insurance companies should show you a positive impact for the last 4 to 5 months of this year. The rate revision should be in high single digits, I think, and that should give rise to ARPOB and revenue increase on a blended level because 100% is not insurance, on a blended level, the ARPOB and revenue increase should be around 4% or so.

Sir, second question is on Dombivli where you have constructed 500 beds, once Dombivli comes into or becomes operational, so how do you see Thane operations getting impacted, will there be any impact, first of all? And for Dombivli per se, are there any similar metrics like what you have in Thane achievable at this facility as well?

As I was saying in the opening remarks that Dombivli is in MMR region and our business model is predominantly in all the units, we have high insurance segment patient. So, the insurance reimbursements in MMR region everywhere should be similar. So, we have a feeling that of course first year or two, you do more of primary and secondary care work, the complexity of work includes only after year 2 onwards, but once it settles down then Dombivli and Thane should show similar metrics what we believe and as far as impact on Thane is concerned, I think it would have no impact because the population of that region itself is already very high and growing very rapidly, so I don't think that would have any ripple effect on Thane. The local demand itself is quite high to take care of Dombivli Hospital.

What I was asking basically is, are you providing any particular guidance in terms of your FY24- 25 revenue and EBITDA margins or just to have some bit of a flavor since Q2 has seen some bit of an improvement in your overall margin, so where do you see ending it up for the year ended or for next year as well?

No, honestly, we are not providing guidance as a thought process, and we will provide updates on what has already happened in each quarter. You could make assumptions based on what you have seen in the first half of this year, but we do not want to give future guidance.

Thank you. We will take the next question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Sir, just on this Pune Hospital, is the insurance and the self pay mix similar to the Company level or is it different?

Page 6 of 11 So, Pune and Thane both have a higher level of insurance. Roughly two-thirds of the patients are insured in Thane and Pune. Indore had a much lower number, and that is why at the console level I think you see some 52%-53% of insurance that was because Indore empanelment was not fully complete, and Indore also generally historically had lower penetration, which is now growing, but for those two reasons, Indore was dragging down the insurance as a payer segment on a console level. Pune and Thane have about two-thirds of insured patients, 65%.

Sir, secondly on ARPOB, while in first half FY24, the growth rate has been 4% when I compare with FY23 and the first half ARPOB and with this rate revision coming into picture, so any further other levers like case mix optimization which can drive ARPOB from here on?

So, case mix optimization potential is there in Indore. Thane and Pune have a fairly matured case mix. I don't think there can be dramatic changes in case mix in Thane and Pune. So, as an ARPOB driver, inflation is the ARPOB driver for Thane and Pune.

Thank you. The next question is from the line of Harsh Bhatia from Bandhan AMC. Please go ahead.

Just one or two clarifications, in terms of Thane asset, can you help us understand the OP/IP volume growth, we have given the combined H1 to H1 OP/IP volume growth, which is mid to high teens on an H1 to H1 basis, but purely from the Thane asset, if you can help us understand?

Thane, volume growth you want find out, I don't know if I have it immediately, but let me just try and look. Follow up question, so maybe we could answer that till someone looks it up.

And secondly, just to understand the cost structure from the quarter-to-quarter perspective, on a year-on-year basis, could you help us understand like what is the movement in the overall cost structure because Indore has now become EBITDA positive I think, in second quarter, but despite that there is a slight dilution at the margins purely from the cost perspective, gross margins are more or less stable, so where does the incremental cost coming from?

Some doctor costs because of some new hires, which we have done in some of the hospital, is an increase. The second contributor for increase in some cost is in Pune, because we have added beds in Pune just a few months back and the fixed cost associated with those beds has already come in, but obviously, they don't get occupied the day you commission them. So, for a couple of quarters, whenever we commission new beds, we see a little bit of increased cost and the revenue lags by a couple of quarters to fill up those beds. So, these are two factors. The third factor is Q2 and you are from Mumbai, so you know Q2 in this part of the world is infection and fevers are quite high. So, of your total occupancy, you have a larger percentage of medical management and for them, the ARPOB will be lower if you have a higher medical management.

So, these are a few factors which have played some role.

This is Anand Apte. With regards to your previous question, the Thane revenue grew by 14%, so OP volume was up by 3% and IP volume was up in terms of numbers by 11%. (The said statement was mentioned erroneously, it should be read as OP volume was up by 11% and IP volume was up by 3%).

So, IP 11% and OP 3% and right now the occupancies come around 71%-72%?

That is right. (The said statement was mentioned erroneously, OP volume was up by 11% and IP volume was up by 3%) Thank you. The next question is from the line of Anuj Suleja from Trulife. Please go ahead.

So, I just wanted to understand what is the seasonality like for Jupiter because we have a unique mix of say Western and also that is Indore, so can you give a sense on how H2 look, how it looks in front of H1 and if you could also provide some amount of guidance in terms of how should we be looking at occupancies and ARPOBs for the second-half of the year?

So, Q1 and Q3 are typically slightly lower because of lifestyle-related issues that is Q1 being summer vacations in this part of the world, there is both, at any given point, some of the doctors are always on vacation. Similarly, elective surgery is also the patients would like to push or pull a little bit for reasons which can be postponed, they choose to postpone it and again Q3, festivals and weddings, similar reasons where elective work kind of goes down a little bit, so Q1 and Q3 are slightly lower. Q2 is slightly higher because of a little bit of overflow from the Q1 elective procedures and also the infections which I was just talking about being much higher in Q2, so Q2 is higher in terms of occupancies and volumes and Q4 is kind of somewhere in the middle.

And in Q1, there was some amount of one-off because you had hired some new talent, right? Is that understanding correct? Yes.

So, on a steady state, the numbers that have come this quarter and the numbers that have come last quarter somewhere in the middle should be the ideal EBITDA margin for the business?

There should be something like that. So, honestly, I know you have asked a numerical quantitative question, but I want to give you a qualitative answer to that. How do we look at the business and how do we look at our approach to management. So, as far as we are concerned or as far as the revenues, if you look at it is a collection of each individual encounters between a doctor and a patient, right? So, whatever needs to be done for each patient needs to be done for that patient. You can't do more and you should not do less. This quarter, for example, you had more medical management patients, and the trend was that on average, medical management patients did not require as much of an ICU stay or had as many critical problems as they did last year. Now, how do you plan that forecast that or guide for that, you can't and if the patients don't

Page 8 of 11 require it, what do you do about it? You don't do anything, you don't give them that critical care.

As a result of that, will your ARPOB or margin get compressed by a few points? Yes, it will, do we get troubled or worried about it? No, we don't. Similarly, next year, if maybe there is more critical illness and there is a higher ARPOB associated with that, will we pat our backs and chest thump? No, we will not. So, we don't think that too much microscopic analysis in healthcare is doable, and even before the listing event, we had never looked at business in that fashion.

However, do we need to be attentive of which way things are going? Of course we need to be.

So, when we look at the overall utilizations, the occupancies, the number of procedures that we are doing, those kinds of things are more of a guidance for us, whether things are going in the right direction or not, and so far, I think they are going in the right direction.

Thank you. The next question is from the line of Sachin Shah from SS Securities. Please go ahead.

I have couple of questions, what are your views on ownership versus leasing model? And will you be considering leasing opportunity to reach 2500 beds?

So, we will consider everything at all times. We are not closed-minded or rigid in our attitude or approach. So, as far as consideration goes, we will always consider all opportunities that present itself, if they make sense, we will take them on, but broadly, what is our thought? Broadly, our thought is that ownership is a better long-term story. Suppose you are going to lease an asset to me. In that case, the lease will always be marked to market with the current inflation and economic conditions. The lease is going to escalate year-on-year, the lease is never going to go away. So, far pre-listing, we were debt funded, we funded all our assets with debt, the debt goes away in 8 to 10 years and then the asset is free on board. So, we believe that after the first 3, 4, 5 years, the lease model does not play out well, and the ownership model plays out much better year 5 onwards. So, for that reason, we have chosen to own the assets; however, if some interesting structure comes up or the very good opportunity comes up that is not available on ownership, and we think we can justify it, we will look at the lease option, but as a default parameter we prefer to work.

How do you think of expanding post your Dombivli facility?

We are currently looking for more land in Western India. We would like to buy two pieces of land which is our thought for now, and build up two more hospitals of this size; reaching that 300 to 500 beds is a sweet spot in terms of efficiency and of, operations and finances both. That is what we are trying to do that identical two parcels of land which we can buy and build upon.

Thank you. The next question is from the line of Bhagwan Chaudhary from Sunidhi Securities. Please go ahead.

Just in a broader sense, I have 2-3 questions, and this is regarding every hospital, so how should we look at it? The first question is from the Indore side, currently, it has 50% kind of occupancy,

Page 9 of 11 so going forward, what can be the maximum occupancy the second thing, how do we look in terms of the revenue mix, will that be more accretive towards the margin, some that patient mix change, or it will be the same which is going on now?

Whenever we design a new facility, our thought is that at the peak or the matured state, it should reach mid 70% occupancy, if we think mid 70% of what and that is how we will size the facility, whatever we think can be at 70% plus because if you think that you can't achieve that then better to have a smaller size, no point having a huge facility which you can't fill up, so eventually at a mature state, whatever we build should reach 70 plus percent in occupancy. That is the first factor. Second factor is specifics that currently, Indore is at 50% and we are updating 231 beds.

So, once the occupancy crosses 60%, 65%, we will add some more beds and then ramp those up and then add some more beds and ramp those up till we are saturating the entire capacity. So, that is the thought process of occupancy ramp up for Indore. On the ARPOB and margin level, last year was the second full year of operations in Indore, and we were almost at a breakeven level, with a very small few lakhs of negative EBITDA on Rs. 100 crore revenue. So, this year, we have turned EBITDA positive. Going forward in the next couple of years, EBITDA margins of Indore should also become high teens and then go forward, but at all times, we think that Indore margins might be 1% or 2% lower than those in the Mumbai region, because of the cost structure of Indore is lower and that leads us to believe that even though Indore can reach north of 20%, but it should be a little lower than that of Thane.

Will this margin expansion in Indore come from the occupancy, or will there be some contribution from the ARPOB as well?

Both case mix optimization-driven ARPOB growth and occupancy.

Secondly, in the same in the same line, if I look at the Thane hospital where your occupancy is 72%, what can we expect from here onwards in Thane, any improvement in the occupancy or will it be driven by ARPOB now onwards?

All plateauing lingering kinds of growth can be possible. So, realistically, I don't think any hospital can consistently operate above 80% occupancy. So, the mid to high 70s is what it can reach, but is there in my control any magic to make it 72 to 77 tomorrow, no, there is not, but yes, that slow little bit of lingering upward trend in occupancy can happen and the inflation- linked ARPOB growth will happen.

And the same comment on the Pune side as well because?

But has a lower percentage occupancy, so Pune occupancy will grow faster, and Pune has got 60% now. So, that has a 10%-15% ARPOB growth as well as occupancy growth. So, Pune will see both ARPOB growth as well as occupancy growth.

Page 10 of 11 And my last question on this Dombivli unit, by what time do you expect it to come be operational, in 26 or 27?

Yes, FY26, it should be operationalizing, end of 26.

Thank you. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.

Sir, at Indore, so now that the insurance empanelment has happened, how should we see the occupancy ramp up from here on and then some qualitative indicator if you could provide? And secondly, you talked about the high teen margins for the near term for Indore, so once there are close to 200 beds that you to operationalize here, so how soon you would be operationalizing them and post that, will there be any immediate impact on the margins of Indore as well?

Indore, how soon we will ramp up the occupancy; currently it is 50%, so once it crosses 60%, we will start planning for increasing the beds, and we generally, as a thumb rule, would like to keep playing between the 50% and 65% occupancy range. So, as a broad indicator, once we reach 65% occupancy, add enough beds to come down to 50% occupancy and then again ramp them up again and keep doing these 2x or 3x until you exhaust everything. So, that is how we plan to ramp up Indore and margins, yes, once the bed capacity goes up and those start getting occupied, then the high teen and eventually 20% margin is what we are expecting there.

And sir, last one on your further expansion beyond Dombivli, sir, if you could provide any flavor, have you already initiated docs for buying land or doing some M&A of already an established hospital chain, and what is the kind of ticket size you would be typically looking out for when you try and search for a potential acquisition candidate?

So, nothing concrete on the M&A or acquisition side, we have not found anything that looks very promising or aligned with our thought process and business model yet. So, I have nothing to say there. On the land side, yes, land being land, everyone in India understands that it is one of the most challenging things to acquire in the country's land and at the right location at the right value and free of litigation. So, that is where the challenge lies. So, we are currently engaged in several conversations about land. Still, till the time you don't sign anything, I don't think it is wise to engage in speculations on land discussion, but yes, we are talking to a few people for land, and as soon as we have anything to announce, we will make that announcement to everybody.

Thank you. The next question is from the line of Jigar Shah from AK Securities. Please go ahead.

I have just a couple of operational questions, how do you go about selecting location for building a hospital and what are the key criteria? The second one would be, what are the key therapies that you focus on at your hospital?

Page 11 of 11 The second question is very easy. I will do that first. We don't focus on any one or a few therapies. We choose to do everything in all our hospitals because we think healthcare and medical branches are interlinked with each other, and in order to excel in any branch of healthcare, you will have to excel in all of them. So, all the facilities are full service and independent, and we try to do everything everywhere and do it well. So, that is the second part.

The first part is the location selection. So, in Western India, where we operate, I think it is one of the more underserved markets as far as Healthcare is concerned, North and South have more penetration in general. So, plenty of locations are densely populated in prominent Tier 1 locations and don't have health facilities. So, we believe that instead of going and sitting next to an already established hospital in a more glamorous location, we would rather go to some such location where there are a lot of residential populations, million plus people and who don't have access to quality healthcare and as I was saying earlier, with the rising penetration of insurance, the affordability question is now slowly getting out of the equation. Lot of people, especially post COVID, are choosing to get themselves insured even if their employer does not provide them an insurance, a lot of employers also now are realizing that health insurance, like in the West is becoming kind of minimum prerequisite as a part of their employment benefit program.

So, in combination of all this, high insurance, making affordability easy, high population density and lack of other facilities wherever we find these kind of locations and plenty of them, we think that is a good area to set up a hospital.

And lastly, sir, our Dombivli hospital, once it gets operationalized, we would be the largest in the area, right? Yes.

Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

So, thank you all for taking time and attend the call and listening to us. I hope that the answers were clear and satisfactory. If there are any further afterthoughts or any further questions, which you may have at a later date, you could reach out to the SGA team. They are managing our IR activity and will happily put us in touch with you. Again, on behalf of all of us, Happy Diwali, have a great year ahead and talk to you again next quarter. Thank you.

Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.