Inventurus Knowledge Solutions Limited — Q4 FY25 earnings call

Our core has always been conservative from a capital deployment perspective. And I think relative to the type of capital deployments that are happening in healthcare IT today, like I said $45 billion over the last four years, you will find that we will continue to be fairly capital conservative over a period of time. ... our general thinking is that, one these constructs should generate greater growth and margins in our traditional care enablement platform business. And in addition to enabling that, the economics that it creates purely on the investment should always be in the range of our historical ROE that we've delivered. And that number historically has been, in fact, even north of 30%. But my thinking is that we definitely want those ROEs to be North of 20%.

Addresses investor concerns about capital deployment strategy and sets clear ROE expectations for the new investment model.

Asked by Ruchi Mukhija

One way to think about it is at the full manifest of the platform from any customer, like multi-specialty medical group customer, the IKS revenues tend to be somewhere between the say 10% to 12% range of the customer's revenue. ... But suffice to say that we structured the deal in a way where the full platform is manifest and obviously at a pricing between IKS and the MSO that allows for the realization of traditional IKS margins on P&L.

Provides a clear financial model for how IKS will generate revenue from the MSO beyond its ownership stake, indicating significant platform value.

Asked by Srinath V

That is a fair assumption. In fact, that's a very important construct for the deal, right? And so all applicable features, and I say applicable features because one of the features of the 16 for value-based care, which entails success in full risk, that feature might take some time to implement because they don't have any full risk contracts in value-based care yet. So as we build out full risk contracts, that feature might play out over a period of time. But the idea here is as fast as we can implement the entire platform, obviously, the doctors will be using that full platform.

Confirms the comprehensive adoption of the IKS platform within the MSO, which is crucial for maximizing value creation, with a nuance on value-based care features.

Asked by Srinath V

That's one of the reasons why we were very careful in structuring this, right? We structured this in a manner where we did not take on any clinical decision-making responsibilities in the MSO. It's an administrative support entity, call it a special purpose vehicle or something that has gotten created, and that's where we want equity. The medical group that is actually responsible for care delivery and clinical decision-making around care delivery, obviously, is the party that would be liable in situations like that. And they obviously carry the medical malpractice liability insurance to cover themselves appropriately from that perspective.

Clarifies the legal and operational separation of clinical liability from the MSO, mitigating a significant potential risk for IKS.

Asked by Srivathsan

I think in the end, the fundamental difference is that one, as a part of this, they are already committed to all the features of the platform that are applicable, number one. And number two, the only difference is earlier, there was one set of economics that we would get from it, which is the economics we get from the implementation of the platform, the revenue that IKS gets from it and the margin that IKS creates in it. Now, we get to participate in a second set of economics, which are around the value that the platform creates on their P&L. And we have the opportunity to participate in about 62.4% or whatever that number is of that value through the MSO.

Explains the enhanced economic participation and commitment to platform adoption through the JV model compared to traditional client relationships.

Asked by Nilesh Jain

So it's a good question, Ruchi. And I think, this is just a moment in time. I would not rule out the possibility of IKS eventually having a majority stake. Just know that we structured the governance of this deal in a way where we have protective rights for all what we call important decisions, right? So even though we don't own majority right now for anything that is materially consequential, we have those protective rights as a 48% shareholder.

Addresses concerns about control, indicating that IKS has significant protective rights despite not holding a majority stake, with potential for future majority ownership.

Asked by Ruchi Mukhija

The immediate use is physician growth. So we obviously want to increase their primary care physician base because that primary care physician base then becomes more of a feeder to the specialists in a fee-for-service model and then actually allows us to take on more value-based care constructs or contracts from Medicare Advantage and the like. So primary use of capital is in physician growth. And then associated with physician growth, there will always be capex associated with expanding clinic facilities, etc.

Clarifies that the $17 million investment is primarily for growth initiatives (physician recruitment, clinic expansion) within the MSO, directly contributing to top-line and bottom-line expansion.

Asked by Ruchi Mukhija