Cancer care specialist hospital chain HCG to expand its footprint

In India, there is a big demand-supply gap for cancer care. Around 4-5 years prior to COVID, we went on an aggressive expansion plan. We set up seven new greenfield projects in cities like Mumbai, Kolkata, Baroda, Nagpur and then in last 3-4 years, we have been focused on driving growth of these new centres, consolidating the business post COVID and creating an execution discipline and operational rhythm to deliver consistent performance quarter after quarter. But now that we feel that there is a certain performance track record, it’s time to look at how we drive growth in future and that’s the background of this expansion agenda.

Currently, the Ahmedabad unit is a 100 bedded centre and we have embarked on a new 200 bedded project with modern and advanced technology here. We’ve made great progress. By end of the first quarter of this new financial year, we will be moving into our new facility.

In Bengaluru, currently we have two facilities and we have also started 3 daycare centres in Kalyan Nagar, Malleshwaram and Banashankari. Cancer treatment, unfortunately, is not just one episode - patients have to go to and fro to the hospital for repeated treatments like chemo. In a city like Bengaluru with its traffic situation, we believe that day care centres are one way of taking HCG care closer to patients.

We are fine tuning our daycare centre model. That’s another vertical that we’re going to pursue going forward. We had announced two comprehensive cancer care projects: one in Whitefield of 25 beds mainly focusing on women’s cancer, and another in North Bengaluru with around 100 beds. The construction is on and we should be able to commission both by first quarter of next year.

The current capacity is about 2,200 beds. We have added about 100 beds this year so far in few of our hospitals.

In Ahmedabad and Bengaluru, we are adding another 225 beds with the three projects that I mentioned earlier. In Indore and our other locations, we will add another 250 beds. So, between, Ahmedabad, Bengaluru and brownfield expansion across some of our other hospitals, we will be adding about 475 beds in the next three years.

In India, northern, central and eastern States have low density of comprehensive cancer care centres. In the southern States, there is one comprehensive cancer care centre for about 16 to 18 lakh population. In northern, central and eastern States, we have one comprehensive cancer care centre for almost 45 to 60 lakh population. So, there is this vacuum that we definitely will be addressing going forward through mergers and acquisitions (M&A).

We’ve already taken first step by entering Madhya Pradesh market six months ago by acquiring a 50-beded comprehensive cancer care hospital. We are currently integrating and upgrading it to bring it to HCG standards. At that same time, we also announced one more project in Indore, where we want to set up an 80-100 bedded new facility - again a comprehensive cancer care centre.

So, we will definitely move from 50 beds to 130-150 beds in Indore in the next 2-3 years. Greenfield projects have longer lead time to enter into a new market. Hence, we feel that M&A is a better approach for us to enter into some of these states. We are evaluating some acquisition targets in exactly these states and as and when we take some concrete steps, we’ll be happy to announce it.

Capex for Ahmedabad and Bengaluru will be about ₹200 - 220 crores between the three projects for total 325 beds, rest of the capex we’re working out and will share in due course.

We have been a free cash flow generating company for last few quartersand will be largely funding it through internal accruals and some through debt.