In an interaction with Shanay Shah, President, Shalby Ltd

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Shalby Hospital
Opp. Karnavati Club, S G Road, Ahmedabad – 380015,
Gujarat 380015 

What is your outlook on the Indian healthcare and hospital services industry? What are the key emerging trends that you are witnessing in the post-pandemic world?

According to Niti Aayog 2021 Report on the huge investment opportunities in India’s healthcare sector, healthcare has become one of the largest parts of the Indian economy in terms of both, revenue and employment. It has been growing at a CAGR of 22 per cent since 2016, employing 4.7 million people directly. The COVID-19 pandemic opened up several opportunities for India to grow. It has opened the floodgates for Indian start-ups, many of which, have risen to the occasion and accelerated the development of low-cost, scalable & quick solutions. Furthermore, the pandemic is providing an impetus to the expansion of telemedicine and the home healthcare market in the country.

Shalby’s net profit for Q1FY23 stood at Rs 21.5 crore, up by 37.1 per cent from Rs 15.7 crore recorded in Q4FY22. What factors are responsible for your strong performance?

The increase in net profit in Q1FY23 is related to a robust rebound in elective procedures, which increased both, our core speciality revenues and profitability.

Shalby entered the orthopaedic plant business by acquiring manufacturing assets from US-based Consensus Orthopedics for USD 11.45 million in May 2021. What is your vision for the orthopaedic segment over the next 3-5 years?

This US implant acquisition is a strategic milestone in the history of Shalby and will enable us to diversify our core hospital healthcare service business into related as well as high-growth implant product offerings. The synergies between the businesses are compelling and will return immediate benefits of sourcing quality implants into India across our hospital group. This corporate development is fully in line with our stated strategy to grow our orthopaedic business.

Currently, we are selling implants to USA & Japan markets, and very recently, we have received the import licence for India to import those implants as well. We would like to cater to most of the geographies worldwide in a much-planned manner. In the first phase, we want to cater to India, South Asian countries like Nepal & Bangladesh along with South-easterncountries like Malaysia, Indonesia, Thailand, and Vietnam. In the second phase, we would like to enter Middle East countries like Dubai, Abu Dhabi & Sharjah as well as European countries. And, in the third phase, we want to cater to East African countries like Kenya, Ethiopia, Tanzania, and other Commonwealth of Independent States (CIS) countries.

During Q1FY23 (from April 2021 to June 2022), we recorded a revenue of $3.4 million. By the end of FY23, we hope to have $13 million in revenue and a positive EBITDA. In the next 5-6 years, we aim to be a $100 million implant business company.

Shalby has also appointed Sushobhan Dasgupta as the Vice Chairman and Global President of Shalby Limited. Previously, Dasgupta held the position of Vice President-Orthopaedics, DePuy Synthes for Johnson & Johnson Medical Asia Pacific. With over 30 years of experience in the field of healthcare, he has worked in several developed as well as emerging markets across several businesses & disciplines in the medical technology, orthopedics, and consumer health sectors. As Vice Chairman & Global President of Shalby, he will be responsible for managing the hospital business and all the business heads will be reporting directly to him. In addition, Sushobhan Dasgupta will be looking to expand Shalby’s implant business, both in India and internationally.

What are your key growth triggers?

The hospital business, in the next 3-4 years, would quadruple from its present level with the existing bed capacity and without the projected addition of additional facilities.Very soon, we will add two more new hospitals to our portfolio in Nashik & Mumbai (Asha Parekh), to be commenced by FY23 and FY26. Together, we will be adding more than 300 beds and both the new units will have a Capex to the tune of Rs 190 crore.

With two new product releases and an increase in production activities with a greater number of component manufacturers, the implant businessis expected to reach Rs 100 crore and positive EBITDA by the end of FY23. To become a $100 million implant manufacturing firm in the next 5-6 years, with the implant business accounting for about one-third of the overall group sales by that time. Currently, we have been catering to the US and also, started importing into the Indian market as well. We are also actively seeking Southeast Asian markets and have ambitions to expand into South Asia, the Middle East, Europe, and other CIS nations over the next 3-4 years.

In the form offranchise business, we want to launch a strategic effort with an asset-light business model, using 28 years of orthopaedic knowledge, and entering uncharted territory, mostly tier 2 & tier 3 cities, to construct 50 orthopaedic dedicated centres over the next three years.

Currently, what are your top three strategic priorities?

At present, our top three strategic priorities are:

Expanding hospital business by more than two digits to double hospital income with current bed capacity in the next 3-4 years.
Concentrating on production activities by increasing the number of components manufactured to meet the sales growth objective. Creating a strong distribution channel.
Increasing the number of orthopaedic facilities in the franchise vertical under the Shalby Orthopaedics Centre of Excellence (SOCE) brand, with an emphasis on the Franchise Owned Shalby Operated (FOSO) operating model.

Can you shed some light on your Q1FY23 results?

We have recently published our Q1FY23 numbers on exchanges and below are its highlights:

The hospitals’ Q1 sales of Rs 181 crore increased by 19 per cent quarter-over-quarter. EBITDA of Rs 42.8 crore jumped 32 per cent QoQ in Q1 of FY23. The EBITDA margins climbed from 21 per cent in Q4FY22 to 24 per cent in Q1FY23. First-quarter net income of Rs 21.4 crore surged 36 per cent QoQ. PAT margin increased from 10 per cent in Q4 FY22 to 12 per cent in Q1FY23. Bed occupancy levels rose 45 per cent in Q1 FY23 as compared to 40 per cent in Q4FY22. The number of patients in the first quarter of fiscal year 2023 soared 15 per cent from the previous quarter to 11,044. The overall number of surgeries increased by 30 per cent year-over-yearand stood at 7,211. The average revenue per occupied bed (ARPOB) was reported at Rs 35,304 compared to Rs 33,707 in the fourth quarter of the fiscal year 2022. Arthroplasty, critical care & general medicine, cardiac science oncology, orthopaedic, and neurology accounted for 84 per cent of the income. In Q1FY23, international revenue increased by 47 per cent quarter-over-quarter to 2.4 crore, with the bulk of patients flying in from Kenya, Tanzania, Uganda, Sudan, the United Arab Emirates, Nepal, and Bangladesh. The home care company generated 21.5 million rupees in sales, a 13 per cent increase from the previous quarter. Shalby Academy vertical also showed great acceptance with 578 students enrolled in various healthcare programmes during Q1FY23.