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00:00Hello and welcome. You're watching the Small and Mid-Cap show. I am Mahima Vachrajani.
00:12The first talk that is in focus today is Subrose Limited which is an auto and player Subrose.
00:17Our colleague Puneet spoke to the CEO and whole time director Pramod Kumar Duggal about
00:23the company's quarter earnings and business outlook going forward. Listen in to a chunk
00:27of that conversation.
00:28Last two years we have been struggling due to post-COVID recovery period and during that
00:35time a lot of cost escalation in terms of commodity, in terms of logistics have impacted
00:41badly on material as well as other variable costs. So luckily these two aspects started
00:48softening now in the last year and we have seen improvement in them. Also we have very
00:54aggressively pushed cost down initiatives throughout the organization and which has
00:59resulted into improvement in margins. As you rightly said that top line growth of 9% in
01:05last year, 43% EBITDA improvement whereas profitability improvement by almost 98% what
01:12we realized in FY23-24.
01:16Now as you rightly said that commodity cost has been higher generally but this financial
01:21year has been slightly better. Now we have seen certain price increases start from at
01:29the end of March as well as April. Has that been the case for the industry that you operate
01:35in as well?
01:36Right, because of this geopolitical uncertainty also based on the Red Sea crisis there are
01:43signs of escalations now. But now we are more stabilized to absorb these escalations provided
01:51they are not extremely as high as year before. But still we will be watchful on all these
02:00moments and we will try to align to this.
02:04And any kind of price hikes that you have taken in Q4 or Q1 of 25?
02:08They are part of indexation, we have resetted the indexation also with our customer now
02:13so that we can be insulated with such escalation maybe partially not fully but in future.
02:20Understood sir. Now I want to talk a little bit more on capacity. Now what is the current
02:26capacity for the companies across the multiple plants that you have and what is the kind
02:32of utilization level that you have seen for Q4 and right now?
02:37So we are adjusting our capacities based on the volume indication by all the OEMs.
02:44So far industry is roughly 4 million plus first time. So we have capacity of around
02:502.4 million variably in different products between 2 million to 2.5 million. And as now
02:55industry is talking about 7 million mark by 2030 or 2031. So we are trying to align to
03:02this capacity expansion program based on our customer forecast and we will be investing
03:10now in next 2 to 3 years to take to the next level.
03:15And any kind of quantification that you could give on the current utilization?
03:19So utilization right now invariably in different product is ranging between 85% to 90%. That's
03:26the optimum level of realization of our capacity then that will give a benefit of coming up
03:32scale also. So that's where we are right now and now we are investing into certain
03:37bottleneck machine investments. So that would be over by mid of FY24-25 and we will be again
03:45increasing our capacity to meet the next year requirement.
03:49And what is the kind of capex that you have seen and you are going to see in this particular
03:53financial year and how much has the company done capex in FY24 as well? Could you give
03:58us some number please?
04:00So normally we are doing capex in the range of 100 to 120 crores per year. So that goes
04:06into certain investment for capacities, for technologies, for new product development.
04:12So this would be on every year we are keeping the same range for investment so that there
04:17is no very heavy load coming in one year for cash flow. So 100 crores to 140 crores is
04:24our range which we have been investing in last 3 years and which will be continuing
04:29in next 2 to 3 years also.
04:31Got it sir. Now like you rightly said now FY30 is what the companies have given some
04:38guidance of how the volume picture might be roughly 70 to 80 lakhs from the current 40
04:44lakhs. Now but the next 1 to 2 years we have seen that you know certain commentary from
04:49the players who reported results right now, certain commentary that FY25 is going to be
04:54a slightly softer because over the last 2 years we have seen tremendous growth in the
04:58passenger vehicle space and compared to the COVID lows it's almost doubled at that time.
05:04So how do you see the next 12 to 18 months for the company because we have seen softer
05:08commentary from the OEM players?
05:11It is true because always this industry faces a mountain valley situation. So now we are
05:16in a valley side. So this year it is projected to be very muted growth. That's what most
05:24of the OEMs have said in public domain. So we believe in that. But there will be certain
05:30incremental growth coming in because SUV per se within the passenger vehicle is growing
05:35faster than the smaller car. Same way BV growth will be proportionately higher as against
05:42because the base is very low. Truck market is going to be muted but again a very specific
05:48segment within the truck maybe N2, N3 category may have slightly proportionately different
05:53growth path. Bus market is, AC market which is more relevant for us may have better growth
06:00than overall bus market because AC penetration is increasing in public transport. So that's
06:05how it's a mix of that. We are also not assuming very excessive growth during FY25 but we are
06:14also keeping our growth target very moderate.
06:20Now like you rightly said the company has really strong market share in the PV space
06:23roughly 43%. In the truck space also you have upwards of 50% margins. How you seen the competitive
06:30intensity in this past year and going forward as well? Do you see a lot of competition domestically
06:37and I also want to check what is the kind of export percentage that the company has
06:42currently? So two questions. So answering first question, competition is always welcome
06:49because that gives us always a push to do better than them. So we always encourage that
06:56we benchmark ourselves against the competition. So domestically yes we have competition from
07:02various great suppliers. So we are aligning ourselves for our product roadmap for future.
07:11Second aspect on the export, we don't do direct export because we export through the OEM.
07:16So Rennovistan is exporting product to Brazil. So other OEMs are also selling the part to
07:23their transplants overseas. So right now our focus is to take care of the domestic market
07:29which is having a huge potential. Now I specifically want to talk about the truck market here.
07:35Now we are seeing some new regulations coming by the government to equip all future trucks
07:41that are sold in the country with AC. Now that is going to be a very huge opportunity for a
07:48player like you. Could you just guide us through what is the current industry, how big is it and
07:54how big of an opportunity this could be? Because we see that the truck replacement market hasn't
07:59kind of picked up yet. We've seen a lot of growth in the post-COVID but in this particular last
08:05year it was just flat volumes. So how are you seeing the market over a longer term maybe the
08:10next three to four years because the regulations are still some time away. So could you just guide
08:14us on how big of an opportunity this could be? So as you know this notification was active in
08:212019 and it was muted then at the time from AC mandate to a blower mandate. So we were
08:29in the product development stage for last four years and now all product development is almost
08:34now. A few customers already executed AC as an optional implementation not as a mandatory
08:43implementation and we have seen good result of growth in that particular space. So this market
08:50going forward based on FY25-26 is roughly N2N3 category between 275,000 to 350,000. That's the
08:59range of this N2N3 category is and this market size would be roughly 300 to 400 crores based on
09:06variable product and specification. So out of this 300-400 crore we are trying to take the maximum
09:15of share of business and that's our alignment with the customer right now. Well that was the
09:22management of Subros guiding us as to how the business is shaping up for the company but it's
09:27time to slip into a short break. On the other side we will be joined by the management of
09:32Yatharth Hospitals to talk about the company's fourth quarter earnings. Stay tuned.
09:49Welcome back you're watching the small and mid-cap show. I'm Ahima Vacharjani and with
09:53me is Harsh Saita. Well today the stock that is in focus is Yatharth Hospitals on the back
10:00of Q4 earnings and to break down those numbers for us we have with us Yatharth Tyagi, Director
10:06of Yatharth Hospitals who joins us now. Welcome to the show sir. My first question to you is that
10:13your Q4 we've seen that revenues have grown by 24 percent margins have taken a slight hit. So
10:20two questions why is that slight hit in margins and going forward what kind of top line growth
10:26and margin growth are you expecting? Hi good morning Mahima. So I think the good result that
10:33we're able to see in Q4 specifically as well as the you know the whole year-on-year fiscal is
10:38there's a good growth that we're seeing in terms of occupancy. So the whole year you know we are
10:42very close to 55-56 percent now compared to last year 45 percent. That has come primarily due to
10:47the increase in the occupancy of our newer hospitals that is the Nord Extension Hospital as
10:52well as the Jhansi Ram Raja Hospital where the occupancy has now touched 35 percent and for Nord
10:58Extension it is very much close to 50-50 percent. So that's you know helping us to achieve an
11:05overall higher occupancy of the result. Margins are concerned see just a percent here or there
11:11margins it's not that much of a significant you know dip because we still maintain one of the
11:16industry-leading margins are very close to 26-27 percent of EBITDA. So I think we are confident
11:21that those margins is quite sustainable. You know we have grown 35 percent year-on-year in terms of
11:27EBITDA and 29 percent year-on-year in terms of the top line. So we feel these existing growth is quite
11:32sustainable for next three to four years given the fact there's still much room for improvement
11:37in terms of the occupancy. There's still much room for improvement in terms of the average revenue
11:42occupied bed. So we do feel that the margin growth that we've shown this year is quite
11:46sustainable for the next few years to come. Got it. Thanks so much Mr. Satyagi. Harsh also joining in.
11:51I want to therefore try and understand that in terms of top line where should the FY25 number
11:57lie because your occupancy is definitely set to go up where those two hospitals are concerned
12:02Jhansi as well but also you have made an acquisition. So how does that contribute to
12:11top line as well. So one the first part of that question if you can give us the breakup
12:16of the current existing business on the existing top line what will the growth be like
12:21and what will the inorganic expansion the acquisition add to that. The inorganic acquisition
12:29that we have done is in the territory of Delhi NCR a city called Faridabad. It is technically
12:35it lies in the state of Haryana. So Faridabad we felt that's a 200 bed hospital that we started
12:39and we felt that this whole region you know it has a good healthcare market. The population is
12:45still growing when it comes to the greater Faridabad. So we feel that this hospital in the
12:50coming from the first year itself should ramp up quite well because we already have the existing
12:55health insurances and you know the government in Panama is required for the occupancy to ramp up.
13:00So we feel that the occupancy here should be very good and if I talk about the existing
13:06the overall growth excluding the new acquisition we are quite strong that you know overall combined
13:11I think we should be continuing to grow at a similar you know growth rate that we have shown
13:16in last two years. I think we should be continuing that so very close to you know above above 25%
13:21yearly growth is what you're expecting you know in the years to come as well. Understood. So Mr.
13:27Taghi I also want to understand that when you say that you know you'll be ramping up your occupancy
13:32level at present they are around 57%. So where does it grow from here I mean if you can just
13:38give us a number as to a target as to what you're aiming at. See I think when it comes to occupancy
13:44you have to look at hospital to hospital. So our more mature hospital that is the Noida hospital
13:48is running at an occupancy of 90%. You know this is the hospital we started in 2013. So 90% is a
13:54very you know high occupancy when it comes to a hospital and it's you know for a size of 250 beds
13:58we're able to maintain this occupancy. But when it comes to other hospitals like the greater
14:02Noida hospital, the Noida extension hospital which are 400-450 bedded you know running an occupancy
14:07I would say an optimized occupancy that those hospitals can reach is 70%. Beyond 70-75%
14:13becomes difficult to manage in a hospital which is close to 500 bedded. So we feel you know these
14:18two hospitals can definitely reach this level of occupancy in a couple of years and overall when
14:23it comes to group level occupancy I think the growth should also contribute to the
14:29overall occupancy at the group level as well. I take your point. Now with regard to Asian Fidelis
14:35in particular which is your latest acquisition 116 odd crore. What's the kind of occupancy
14:42expected there for FY25? You've mentioned in my first question that it's going to be healthy.
14:48So how healthy is that going to be if you can indicate a number? And with regard to RPOB as
14:55well as EBITDA as well as occupancy is it basically accretive to your current numbers or and how
15:03quickly will it be accretive to your current number? So 115 crores odd that we spend for this
15:08hospital plus you know we're going to add some new medical equipments there. So we've already bought
15:13surgical da Vinci robot. So overall you know we'll be spending around 150 crores for this hospital.
15:19So that's how much the acquisition is going to cost us. We feel that for a 200 bedded hospital
15:26you know given the fact that you know all the impoundments are there already and the huge
15:31market that Faridabad is. We do feel I think in the first year itself the occupancy should be very
15:38close to you know 20 to 30 percent somewhere between that because we feel that also the strong
15:44brand presence that we create in Delhi NCR we can leverage that brand presence in the region of
15:48Faridabad. As far as RPOB is concerned overall group level RPOB you know is very close to 29,000 rupees
15:54but when it comes to a newer hospital that is a Nord extension hospital the RPOB is very close to
15:5935,000 rupees there. So we feel the region of Faridabad should also be somewhere close to a
16:03Nord extension hospital RPOB. So we expect the new acquisition to have an RPOB which is
16:08higher than the average group RPOB. Understood. Mr. Taggi you know I'd like to shift focus to
16:14your cash and bank. You're sitting on a large cash bank of around 238 crores right now.
16:20So I'm trying to understand as to you know what will this cash be put to use for any kind of
16:25organic inorganic expansions you're looking at any greenfield expansions what's the plan?
16:30Yeah so we feel that you know the existing bed capacity that we have of 1600 beds in two and a
16:36half years to three years we are looking to double it to reaching somewhere very close to 3,000 beds
16:41and to do that you know we are planning to grow both organically as well as inorganically. So
16:46we're expanding our existing two hospitals as well as you know looking out for new acquisition.
16:50The plan is that each year each financial year we are looking to add one more acquisition.
16:55So last year we did for the Asian Fiddler's Hospital in Faridabad. In the coming financial
17:00year as well the new financial that has started we are looking to add one more acquisition and
17:04then obviously the organic growth that is expansion brownfield expansion by existing
17:08two hospitals. So that is where the large majority of the cash would be deployed and you know
17:13ramping up our capacity increasing beds both in terms of acquisitions as well as
17:18existing expanding the existing facilities. Okay also Yathar talk to us about your
17:28receivables number because that's gone up substantially versus FY23 close. Understand
17:35that a lot of this is government receivables as well. So give us the breakdown with regard to
17:39government versus non-government in your receivables number. What's the trend playing
17:44out between Q3 and Q4 and if you can talk to us about whether this is the kind of number
17:50that we can expect on your receivables in your balance sheet now going forward is this normalized
17:56at this level now? Is that the expectation? Yes so I think going forward the receivable
18:00numbers will definitely come down. In fact it has already started to come down for the new
18:05financial that has started. The reason for last year the receivable to have increased is the
18:11reason that because we started some new specialty especially oncology and in oncology the business
18:18that we did was a chunk was contributed to the government business. So that is why overall the
18:23government business increased. Now you have to understand the government rates that is the CHS
18:27rates that we have in oncology are quite as far as even the private cash rates. So the rates in
18:37terms of super specialized services like oncology and transplant are quite good when it comes to
18:43government. So that is why we are okay with doing a government business when it comes to these
18:47specialties and the reason the days the receivable days have increased is because of the increase in
18:52the government business. However we feel that you know it is a momentary thing you know due to
18:57elections and due to the other aspects. We feel the receivables were a bit less in the last few
19:03quarters. For the coming quarters ahead we are quite confident that this will significantly come
19:08down. Okay thank you so much Mr. Tyagi for breaking that down for us. Yathrat hospitals
19:13are up around a percent or so in trade today but that is a comprehensive breakdown.