Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.
Thank you, Nirav. Good afternoon, everyone, and thank you for joining us on this call hosted by Apollo Hospitals to discuss the financial results for the Q1 of financial year 2024-25, which were announced yesterday. We have with us today the senior management team, represented by Mrs. Suneeta Reddy, Managing Director, Mr. Krishnan Akhileswaran, Group CFO, Dr. Madhu Sasidhar, President and CEO of the Hospitals Division, Mr. Madhivanan, CEO of Apollo HealthCo, Mr. Sriram Iyer, CEO of AHLL, Mr. Sanjeev Gupta, CFO of Apollo HealthCo, Mr. Obul Reddy, CFO of the Pharmacy Division, and Mr. Ashish Maheshwari, CFO of AHLL.
Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties in our investor presentation. Documents relating to our financial performance have been circulated earlier. These have also been posted on the corporate website. I would now like to turn the call over to Mrs. Suneeta Reddy for her opening remarks. Thank you, and over to you, ma'am.
Thank you, Mayank. Good afternoon, everyone, and thank you for taking time to join this call. I trust all of you have received the earnings document, which were shared earlier today. We are delighted to report a strong start to fiscal year FY 2024-25, with our performance in quarter 1 FY 2025. We have seen robust performance across all of our business segments, despite the headwinds of election cycles and heat waves, culminating in strong revenue growth and improved profitability on a year-on-year basis. In prior quarters, we had indicated that efforts towards improving volumes by OP augmentation of medical teams, which are now demonstrating results. Against this backdrop, let me walk you through the financials for the quarter. Our healthcare services business witnessed a strong 15% year-on-year revenue growth to INR 2,637 crore.
Within this, the revenue from insurance patients saw a year-on-year increase of 17%. There is increased consumer movement towards high-quality providers, and we will strengthen this by deepening our partnerships with corporates and our retail outreach. IP volumes grew by 11% year-on-year, with growth across all markets. High-end tertiary care specialties like cardiac sciences, oncology, neurosciences, and gastro sciences, which are our areas of strength, grew at a healthy rate. Higher secondary specialties, too, witnessed robust growth due to patients preferring high-quality, organized sector care enabled by insurance products. Overall, occupancy across the group has risen to 68%, an increase of over 600 basis points on a year-on-year basis. ARPOB increased a little over 2% year-on-year to INR 59,073.
We believe that ARPOB growth will improve over the next few quarters, with stronger growth in surgical volumes and better case mix. Our consolidated revenue grew by 15% on a year-on-year basis to INR 5,086 crores. Revenues from Apollo HealthCo were at INR 2,082 crores in quarter one, growing at 15% year-on-year. Given the strong efforts for stock liquidation in the front-end stores, combined pharmacy business revenue grew by 16%. 44 new stores were opened this quarter. The election season resulted in lower store expansion due to a slight delay in approvals. We expect this pace to pick up in the subsequent quarters, which should also improve the growth momentum of the business going forward. The private label and generic business of the omni-channel pharmacy was at 16.1% of total pharmacy revenues. Our digital platform, 24/7, added 2 million new users.
The platform GMV was at INR 695 crore, representing a 9% growth over the same period last year. Revenues from Apollo Health and Lifestyle also grew by 15% year-on-year to INR 366 crore in quarter 1, FY 2025. Consolidated EBITDA was at INR 675 crore, registering a 33% increase year-on-year. Within this, the healthcare services EBITDA was at INR 622 crore, registering a growth of 15% year-on-year, and healthcare services margin was at 23.6%. Our investment in clinical talent, marketing costs, are helping to drive this double-digit volume growth. We believe enhanced volume growth, improvement in case mix and payer mix, and a focus on optimizing discretionary costs will drive margin expansion by 100 basis points over the next 3-4 quarters.
The offline pharmacy distribution in Apollo HealthCo recorded an EBITDA of INR 139 crore, representing a year-on-year growth of 11%. The digital platform cash losses, excluding ESOP, were at INR 97 crore, a significant reduction from INR 152 crore in the same quarter last year, demonstrating the company's effort to drive profitable growth. Apollo HealthCo has therefore reported an EBITDA of INR 23 crore, extending its trajectory of positive EBITDA. AHLL recorded an EBITDA of INR 31 crore, delivering 33% year-on-year growth and an improved margin of 8.4% compared to 7.3% in quarter one last year. Consolidated PAT was at INR 305 crore, growing 83% year-on-year within the healthcare businesses. The outlook for FY 2025 continues to be promising. We are dedicated to driving growth and enhancing profitability through a series of strategic initiatives.
In healthcare services, we are expanding our market ground feet and uncovering latent demand through better use of technology and business intelligence tools. We are intensifying efforts to increase surgical volumes at our centers of excellence, supported by an expanded medical team and advanced procedures like CAR-T cell therapy and ZAP-X. Our plan to operationalize four new hospitals, adding 1,500 beds in key markets, is progressing as planned. We anticipate operationalizing new facilities in Gurugram, Kolkata, Hyderabad, and Pune within the next five quarters. We are on track to achieve breakeven for Apollo 24/7 digital segment within the next six to seven quarters, supported by strong growth in GMV and optimum portfolio mix.
Transaction integration and healthy growth in offline pharmacy distribution revenues will drive Apollo HealthCo towards its stated strategic intent in the next three years. Our diagnostic business is also poised for strong, healthy growth, driven by investment in new capacity, expanded test menu, and improved margins. On that note, I would like to hand it over to our moderator and open the line for questions. I have our CFO, Krishnan, with me, Dr. Madhu, CEO of the hospital division, Sriram Iyer from AHLL, as well as Madhivanan, Obul Reddy, and Sanjeev, and Madhivanan, the CEO of Apollo HealthCo, who are all here with me to take your questions. Thank you.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity, and congratulations for a good start to FY 25. My question is on the volume side. We've seen a nice pickup in the inpatient volumes. At the same point, we are also seeing a sharp pickup in the insurance coverage. Like, in the last call, we called it out to 40%-43% is insurance cover. This time it's around 47%. So are they two in some ways linked, or this is more coming from our efforts to revive some of the smaller hospitals in Hyderabad and some efforts in Karnataka that we earlier talked about? That's the first question.
So I think, you know, we are seeing insurance growth actually happening across. You know, it's not necessarily connected only to the urban locations, et cetera. And we are seeing it across both Tier One and Tier Two locations as we speak. So what's happening with insurance clearly is that, you know, one, as you know, earlier, as we said, you know, we, we were getting... While we were getting most of the high-end cases earlier, we are also getting a lot of secondary care cases with the insurance business penetration.
And there has been a deliberate effort that we have taken to penetrate into corporates, et cetera, in most of the regions. So we are seeing that benefit, and that benefit is yielding in better occupancies. And some of that obviously has resulted in a bit of a lower ARPOB, but that's the more important thing for us is, you know, the benefit that's coming from occupancy, which is sustainable, and it's going to help us into the next few quarters as well.
Right. So whenever the understanding is correct, right, this insurance pickup of 200-300 basis points that we've seen quarter-over-quarter is whenever leading to better occupancy and at the margin, lower ARPOB. A link to that, you know, when we talk about ARPOB, 7% outlook for the year, and we've said that we do expect the case mix to improve in the coming quarter, is that already visible to us after the, as we are sort of getting out of this election season and moving out of, the monsoon season?
Yes, yes, yes.
July has been good, and I think we should be able to see better pickup in this quarter.
That's, that's great. And, and lastly, just on the diagnostic side, I do understand there's a little bit of seasonality in quarter one. Anything else you want to call out for, the sequential margin drop that we've seen in the diagnostic side?
Sriram?
Yeah. Hi, good afternoon. Yes, as rightly pointed out, it was a bit of a seasonal impact that we had. And, I think, we have also made certain investments on adding specialty manpower and focusing on, some of the segments that we are not present earlier. So certain investments have gone on those in the quarter one, and, starting this quarter, we'll be able to see a much higher growth rate, both on the revenue and on the margin front.
Great. Great. Thanks, team, I'll come back in the queue, and best wishes for the rest of the year.
Thank you.
Thank you .Participants, you may press star and one to ask a question . Next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. On the hospital business, ma'am, you mentioned 100 basis points margin expansion over the next 3 or 4 quarters. You know, plus the fact that, you know, it seems like increasing insurance penetration could be a headwind for ARPOB. So would this margin expansion essentially depend on our ability to improve occupancy from here, which we usually do see, given Q1 is seasonally slow? Is that the right way to sort of look at the margin expansion that you've talked about?
I think there are three levers for margin expansion. The first, of course, is payer mix, and we've spoken about that and how insurance has really helped us in this sense, contributing to not only volumes, but margins. And the second is, you know, over a period of time, we will be focusing on international and therefore better ARPOB. The third, of course, is case mix, where this quarter, you know, there was less of surgical volumes and electives, and we believe that in the next three quarters, we will see an improvement coming from that. And of course, there is tariff revision of 4% that will play out within the next four quarters. So all of this combined will give you an improved ARPOB. We're looking at an ARPOB increase of 7% for this year.
Okay, that's helpful.
Another point which we have to let you know is, you know, ARPOB is not a headwind for insurance. That's something that I think it's important that I should correct you here, Neha.
Okay.
Clearly, the average revenue per patient that we have from an insurance is equal to or higher than the average revenue per patient that we have from walk-ins. The reason being some of the insurance patients opt for higher category of rooms, as we have said in the past. ARPOB is just a derived number, which is a combination of both, you know, occupancies and ALRs. So I think from the perspective of the volume, you know, you're seeing the volume growth, and if it's volume into value, we are not going to be seeing any deterioration in our revenue pick up because of insurance. On the contrary, it will only be positive. So the ARPOB has to be seen in the context of medical, the case mix, et cetera. It's not because of insurance. It's not a headwind from, from insurance.
In this quarter, the lower ARPOB is essentially because of the lower surgical mix?
Yeah, it is, it is. Yeah, you can, you can say that, or you would rather say that better, higher medical mix. It's how you put it.
Yeah, today is,
Okay.
This quarter was higher medical.
Okay, understood. And my second question is on, you know, the 24/7. It seems like our GMV is sort of, you know, on a sequential basis, on a very slow growth. I understand we have tweaked the discount rates and that's probably, you know, impacting the GMV momentum quarter-on-quarter. How should we think about balancing how we get back GMV growth with the target of achieving breakeven? Because I thought, you also mentioned in your opening remarks that we need to see GMV growth to achieve that breakeven. So just trying to understand how we'll balance both and what we're trying to do to improve that GMV traction.
Madhivanan, you want to take?
Yes, ma'am. I hope I'm audible. Good afternoon to all of you. See, even in the last quarter, we had spoken about how our operating model was changing. The earlier GMV growth was being substantially driven by a very high percentage of marketing spend in acquiring new customers. Over the last two quarters, we have changed that operating model from a pure digital kind of an origination to a much stronger omni approach. We are studying it very well, and we realize that this works very impactful even in multiple geographies across the world. Our omni model is a very, very viable model for both our offline business as well as our online business. So this transition is in place. I just wanted to say that our number of new customers is slowly increasing.
Give us around another quarter or so for us to get back into a growth path. It's not that we have degrown, but our growth rate has been much, in the range of, maybe around, 4%-5%. We would expect it to be much bigger. You will see that happening in the next two quarters. In terms of, initiatives, we are working very strongly on our loyalty program because this is what again drives GMV in a big way. So a common loyalty program between both the offline pharmacies and the digital pharmacies is contributing substantially well, and our revenue from customers who operate on both sides is doing well. So I would, I would ask for forbearance over the next, maybe this quarter and the next quarter, before the growth story, starts picking up, in a sustainable manner.
So more like Q4 of fiscal 25 is when we should see a step-up in growth?
I can actually say maybe even in Q3, but yeah-
Okay.
From a safe point, Q4. But at the same time, even the operating expenses are being kept in check. So sixth quarter profitability, we should be on course.
What about the new businesses, sir? I think we talked about that also in the last quarter, you know, the new areas that we are focusing on. Is that gaining traction or?
Yeah, yeah. So two things. From a regulatory perspective, one of the big initiatives is going to be the insurance business, primarily health and term. But we are in the process of getting our approvals from IRDA. We expect it to happen by October. Till that time, we are approaching, the approach is more of a monetization module. So we are being experimental with multiple journeys. The moment we get the corporate agency, we should be able to launch the business in a very full-fledged manner. And the difference between people who sell insurance from the, in the rest of the industry versus us would be, it would be incorporated within our own existing customers as well as within the incremental flow. And we expect this to be, our cost of acquisition to be much lower, and the story should play out.
So insurance, expected, expect the licenses to come by October, and therefore the last quarter you'll start seeing some good traction, across 2-3 products. And, on the digital therapeutics, we have had a bit of a change in the model. We are working very closely with both the hospitals and the clinics, as against doing it purely digitally and help facilitate. So here again, the omni approach will be picked up. So we're doing 1 or 2 experiments, and, we expect that businesses also to pick up. In close collaboration within HCL, AHLL, and AHL, we work together.
So these are the two businesses that we are focusing. One more channel which we are going to be pushing, which will help us grow the GMV, is the corporate channel. Again, we are working in a very synergistic model with the hospitals group and the clinic group, and finding out how we can be the digital front end to maximize corporate business. So all the three areas, corporate, insurance, and digital therapeutics within the group will drive value for the digital business.
This is helpful, sir. Thank you so much.
Thank you very much. Participants, you may press star and one to ask the question. Next question is from the line of Kunal from Macquarie. Please go ahead.
Hi, good afternoon. Thank you for the opportunity. Just continuing on the GMV growth, I think we had earlier put out a guidance of around 50% growth. And since we are now expecting the growth to start from quarter three, quarter four, is there a revised guidance that we are putting out for this, GMV, for 24 months then?
Madhavan?
No, no, we are not putting... We are on course. It's just that we- see, originally we were expecting the Q2 closure will happen maybe a month here or so, but we are very much on, so we are not revising the guidance from our perspective. Unless if there is any other, input you have, both in terms of our operational, profitability as well as we are on course of whatever we have been committed. And if there is anything else you want to add in.
You know, I think, you know, you said it right. At this stage, we do not believe that, you know, we should be revising the numbers. I'm reminding you to the fact that we talked about 50% growth over INR 2,700 crore of growth of GMV that we did in the last fiscal year, which makes it to about INR 4,000 crore. I think at this stage, at least all of us, you know, strongly believe that, you know, there is no reason for us to, you know, revise the numbers.
Sir, which line, you know, of business do you expect to ramp up so fast out of, you know, 2, 3 lines that we have now, which would drive the growth? Is it still the pharma delivery would drive growth or any other line of business?
No. So pharmacy continues to be our flagship. So in fact, the last month we did one of the highest numbers ever. So that's why I feel the trajectory is back. While overall the industry from the digital side did not grow for overall pharmacy deliveries, the online part of it has not been doing in a big way. Because I think all players have been rationalizing the discounts and trying to build a sustainable model with, you know, breakeven being one of the primary targets. So pharmacy will continue to grow. Like I told you, both the corporate side of the business and the new customer acquisition will continue in a hybrid model. The second big area where we are seeing a very nice lift is our consult business.
From an average of around 100,000 consults, which we used to do, you know, the OPD consults, that for around the last quarter. This quarter we have been talking anywhere in the range of 150,000 to 170,000 consults. What this results in is a feeder into both the pharma business as well as the diagnostic business, because it's the recommendation that drives the story. And so these two businesses is also seeing an uptick. So diagnostic business being seasonal, like Sriram highlighted, we again saw very good numbers last month, and we expect the numbers to continuously keep growing forward as so. So primarily driven by pharma, supported by consult, and diagnostic following its way.
Sure, sir. Thank you. And one on the hospital business. You know, the volume growth is good this quarter, and it has also led to uptick in occupancy, but the same has not played out in terms of operating leverage, in terms of profitability. Right? So, and ARPOB has also been much lower, which we expect to grow faster now, and we've taken ASP. So, so two, three questions here. One is the ASP hike of around 4%, you know, that will be across channels, or is it just a cash patient or insurance patients? And, why has the higher occupancy not driven higher profitability? Thank you.
You know, I think, you know, higher occupancy not driven higher profitability will start playing out in the next few quarters. Like we said, we have absorbed a lot of, a lot of costs. The second thing that we had mentioned is that we had a lot of medical admissions this quarter, and therefore, you know, medical admissions resulted in an increase of ARPOB of only 2%. So moving forward, we think that, you know, you will see the benefit of operating leverage.
... And we did see the EBITDA margins, because, you know, you're looking at Q1 over Q1. Just to remind you, if you look at Q4 of last year, our EBITDA margins were at 23.1%. That is because we had added doctors and marketing costs. So from the 23.1, we are seeing it come to 23.6. So there is a, from a quarter-over-quarter basis, there is a 0.5%, improvement in EBITDA margin that we have seen. This is because of this operating leverage. You should, as we said, you know, we are looking at a 100 basis points increase, which should come over the next, you know, next few quarters.
We have also seen. We had said last quarter that we had seen some increase in our IT costs, you know, because we have increased, at least 0.25%-0.3%, have got impacted because of higher IT costs and cybersecurity, et cetera, which we have invested in. All of that has now gotten, you know, in the number that you have, it has got absorbed. So going forward, you should see that happen as well.
Yeah, Madhu-
If I could just give some color to what AK said, this is Madhu Sasidhar. We added about 102 doctors in the last quarter, in Q1, that we brought on board, with a very negligible attrition of about 3 or 4 doctors. The quarter prior to that, we added 84 doctors. So this has been a very active time of medical team expansion. Many of those doctors are starting to get more and more productive, so as Sunita said, we expect that operating margin to improve over the next few quarters.
Sir, is this hiring happening at a much higher level than in terms of senior doctors, et cetera? Because we have a base of 5,500 full-time doctor, right? So adding 100, 200 should not move our cost line items too much.
No, so you're right. So we are recruiting some of these doctors that are, you know, who are star doctors and leading providers in their space. These are not giving you junior doctor recruitment that we don't count that in the consultant recruitment numbers.
There's an incremental INR 50 crore difference in the doctor cost.
180 doctors that we have recruited?
Yeah.
Quarter to quarter, same we did last year. There's a difference of INR 50 crore.
50 crore is quarterly, so around 200 crore will be annual.
Yeah, and you should look at the volume growth, right? I think it's important to look at margin growth, which we have said, but you know, I think the important thing for us is you know, the volume growth. This is something that we are very happy about. The volume growth is more sustainable, and it will definitely you know, the margin through operating leverage as well, going forward.
The volume growth has been very intentional. We have driven that volume growth very intentionally. We've been intentional about the markets that we have driven that volume growth in, so that's why we believe it is sustainable as well.
Sure, sir. Thank you, and all the best.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Madhav from Fidelity. Please go ahead. Madhav, may I request you to unmute your line and go ahead with your question, please?
Uh, hello?
You're on.
Hello. Yes, yeah. I just had one question on the Apollo 24/7. So if you look at the pre-OpEx EBITDA margin at 13.6%, which you reported in Q1, that seems to be moving up steadily through the past few quarters. Should we think that this number kind of has more legs to improve as we go through rest of FY 2025? And if you could help us understand what are the key levers for that number moving up? Thank you.
Yeah, so from this side, so, two things, you know, one is that our mix on the pharmacy side is, better versus the last year. It is at about, 35%-36%, versus 32%, same quarter last year. That helps in, you know, this margin accretion, which is at 13.6 versus 10.9, same time, last year, same quarter last year. So, we expect this to, continue to, you know, move upwards. Would it be 25%? Can't say at this stage, but, you know, we are looking at to, hit a number closer to 20% in next, one to two quarters. And, apart from pharmacy, as we move into new, verticals, as, Mr.
Madhivanan talked about that we get into insurance, we get into you know digital therapeutics along with the hospitals. These are the two, and app monetization, which we just started. So these are very, very margin accretive to the business, and given it is a technology-driven services from that sense, you know the entire margin goes back to the EBITDA. So I believe those verticals, those new segments will also add on to this. So I think we should, we should expect in next 1-2 quarters to head this to around 18%-20%, and while pharmacy will continue to support this margin.
So you're saying the 13.6% has legs to move closer to 20% this year itself, as we move through the rest of the year?
Let's see that, you know, in the 2-3 quarters, how it pans out. But, you know, the goal post is to hit 20%, by the year end.
That is, that's quite helpful. And just on the OpEx cost as well, it's at about INR 150 crore, and we know we've controlled it a fair bit, so should we expect this to stay in the same for rest of the year?
I think, operating expenses, at current level, you know, would stay for a little while, depending upon the investment that we're doing into the new segments. We should expect a little bit of, you know, further cost optimization to the current levels of INR 150 crore. Depending upon the investment that we require in the new segments, and how much time do they take to start giving positive EBITDA. So that is how I would see that, you know, some reduction, but there will be a little bit of investment into the new segment also.
Okay. Got it, got it. Thank you.
Thank you.
Thank you. Next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity. Sir, just on the, if I look at the region-wise ARPOB growth, like except North, most of the other regions have been muted or, in fact, decline in the ARPOB. So, is this like sort of peaking out in terms of ARPOB growth? And then, so subsequently, the growth would be more driven by the volume, as is reflected in this quarter.
So, so two things, right? From our side, we would still like to believe that our, the inflation of 4%-5% is something that we will continue to do, and hence, that will start reflecting clearly. The other thing is the function of occupancy as well as ALOS, as I said. So here we know when we are focusing on higher volume growth, et cetera, across, and into using that to get secondary care cases as well as higher oncology, some of that reflects in a bit of a lower ARPOB, because oncology has been seen as stellar growth. We are the largest oncology operator in the country. It will help us get margins, you know, but ARPOB may not reflect the same.
Because if you look at a chemotherapy, the chemotherapy ARPOB is lesser than than the ARPOB of of of the of of hospital, of, you know, our surgical, et cetera. But what happens is the flow-through is visible for us. So, you know, ARPOB should not be looked at from the perspective of margin expansion. It's only, again, I'm saying that it is something that you should understand it more as a lever. But, if you look at the volume growth and the value growth, so long as it's it's there, and if you're seeing the volume growth, we have always guided that we should be looking at mid mid-teen kind of overall revenue growth, so long as that's visible, and we should see the margins expand.
Sir, I think it's important to recognize that in metros, our ARPOB is very healthy, averaging around INR 70,000. So clearly, it's because we also have Tier Two and some Tier Three, that you're seeing the average ARPOB, which is around INR 53,000. So clearly, you know, there is room for expansion, and we will continue to look at that. But please understand that this is an average of Tier One metros and Tier Two.
Understood. That's very helpful. And from a bed addition perspective, given the way the projects are going to pan out, it seems next four quarters at least, we'll have to have, you know, improvement in the occupancies on the existing beds, and then subsequently, the additional beds would help drive growth. Is my understanding correct?
Yes, yes.
That's correct.
That's correct.
Next year we are seeing good additions in some of our existing markets also, like Kolkata and Gurugram also is an existing market. In some way, for us, is an existing market, right? Because we have Delhi, which is not getting consolidated, but we know Gurugram very well, and, you know, that will also come next year. So we are quite, you know, I think next year will see us getting good number of bed addition.
So directionally, while we are, you know, improving the profitability at the existing sites, but these OpEx coming on in FY 2026, so, so if you could just help understand how the profitability would look, in hospital business for FY 2026.
We have a good lot, good big base of EBITDA now. So that is a very important thing that we should look at, because if you look at by end of the year, we should have significantly large EBITDA base. And, you know, hopefully by that time, we should have also seen the 100 basis expansion in margin that we have been guiding to have gotten into our books. From there on, you know, given that, you know, we are looking at relatively, you know, we don't think that the operating these losses will be significant. So we would think that 100 to 150 basis lower from that level is the maximum that we will see the EBITDA margin fall.
Understood, sir. On the offline pharmacy side, like we added 44 stores. This year, probably, what could be the run rate of store additions?
It will be around 500-550 this year as well as planned. The Q1 is lower because of the elections and other delays. Overall, it will be 500. We will be on track for that.
Q2 has already started to ramp up well.
Yeah.
Understood. And any scope of improving the margins for offline pharmacies from, like, 7.6%?
This is at the back-end Apollo pharmacy distribution level, that margin. That is a matured margin. As you know, Apollo HealthCo supplies only for Apollo Pharmacy's front-end business. So it has a fixed retail margin to be retained at this level. So that, if you notice, last eight quarters operated within a range of 25 basis points, as we see the margin expansion in the front end.
Understood, sir. Thanks a lot.
Thank you. Next question is from the line of Abhinav Ganesh from SBI Pension Funds. Please go ahead.
Good afternoon, ma'am. Thank you for taking my question. Just had two very brief questions. First one was, your occupancy is gone up 600 basis points year-on-year. So do... Can we assume similar kind of occupancy for the rest of the year?
Yes, yes, we can.
... It's not helpful.
Okay, that, that is really helpful. Second thing is, as a part of your opening remarks, you had talked about expanding in two locations like Pune and Gurugram. Which are the other locations that you had spoken about?
The first one is going to be Gurugram, then comes Hyderabad, then will be Kolkata and Pune. These are the four that we're focusing on. We also have brownfield expansion in Mysuru, which is 140 beds.
Okay. Okay, ma'am. That was all from my side. Thank you, and all the best.
Thank you.
Thank you. Participants, remember, press star and one to ask a question. Next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi, thank you for the opportunity. Just want to understand, like, what was the contribution from international patients during the quarter? And what kind of impact you're expecting due to change in Bangladesh, which I suppose is one of the largest market for you in terms of international business contribution.
Yes. So Bangladesh is about 30% in terms of our international, but as a percentage of our total revenue is about 2%. We've seen some throughout the Q1 and into this quarter, as a combination of elections and the more recent political issues, some drop in volume. We are hopeful that this will come back very quickly. We're just monitoring the situation very closely.
Okay. So very broadly, the 8%-10% kind of contribution from international patient is very much there for you?
Yes. And there are other markets that we are looking at as well. So, over the past year to 2 years, we've been actively exploring other international markets as well, which will continue to expand, during this time.
Sure. And, one, question on, your volume pickup, which we have seen during the quarter. So, I understand that your effort over the last few quarters is, giving this, strong volume pickup. But when I look at, AP-Telangana and Karnataka, there is very strong, pickup in the OP volume part. So can you explain if there is some, seasonal element there, or, like, it's, I guess, very strong, around 50% for Karnataka and then 40% for AP-Telangana in terms of OP volume pickup.
Yeah. So, okay, go ahead. So, you know, so these, these volumes are mostly on-site health checkup volumes in the outpatient volumes which has come in. Because we have been doing a lot of. As we said, as part of our insurance penetration, et cetera, that we have been planning, there has been a lot of corporate outreach or efforts that we have been making. And, you know, so one of the corporate outreach effects is, is for the corporate outreach has also been health checks, and we have seen good, increase in some of those health checks in the corporate. So that results in newer registrations into our system, which has been, which has been something that we have been focusing last year on both, Hyderabad as well as Bangalore and that whole region. Which is why you're seeing a higher increase in the outpatient volumes there.
Sure. So this could be feeding to, your IP volume pickup, right? So what, what kind of IP growth you are expecting, say, for this year? 11% in 1Q definitely is a strong number to look at, but, for full year, what are your expectations?
Yeah. So this, this sort of primary care outreach does feed into our inpatient volume. If you were to aggregate all of it together, roughly about 4% across the board is an inpatient conversion number that we see. So we will continue this level of outreach because, as you said, it is accretive to both our diagnostic volume, outpatient diagnostic volume, as well as our inpatient volume.
Sure.
We wouldn't be able to guide you for the overall volume growth, but I think, you know, we have said that we should be seeing good volume growth for this year. This year's focus is volume growth, and we are continuing to focus on that.
Sure. My last question is clarification on your EBITDA margins for next year. So with 4 units coming on board, did you mention from the level which, say, like, we will end up in FY 2025, there will be 100-150 basis points loss at max because of the new beds coming in?
Right. So existing should ideally improve the, as we said, 100 basis points in this quarter and this year by next three quarters, and hopefully go up a bit more in the next year. And then there will be some reduction because of the new one, new units coming in by 100 to 150 basis points.
Okay. That, that's all from my side. Thank you.
Thank you. Next question is from the line of Shyam Srinivasan, from Goldman Sachs. Please go ahead.
Hi, good afternoon. Thank you for taking my question. Just going back to the platform GMV growth of 9%, right? The pharma AOV has grown 15%. So is it the other businesses, like consultancy, right, or diagnostics that have declined? So what explains the slower growth?
I can take this question. So Sanjay Desai. Yeah, while the exact numbers of you know the pharmacy aggregate order value you know grew which is INR 1,072 versus INR 935 year back. I think Q1 has always been slight. You know, we are seeing that you know IPP transactions also fall down from, you know, the online side a little bit, during Q1. But, I think as far as the diagnostic and the other side of the business is concerned, they were okay. So, I think the drop is only with respect to the other side of the business, but otherwise, yeah, and that is the reason you will see a muted growth of about 9% in this quarter versus the last year.
Sanjay, what gives us the confidence that we can do 50%, 60%, 70%, 80% in the remainder of the year?
Yeah, I think, see, this is what Mr. Madhivanan also talked about. That one is that we strongly believe that the change of the model, you know, which resulted into moving to an omni acquisition of customers, a lower discount that is happening. You know, these two things had an impact on our pharmacy GMV for good five to six months in the past. But, you know, as we see July numbers have started picking up. And we believe that, you know, this change in the operating model, you know, whatever is impact, that will impact only until current quarter end or maybe some bit in the next quarter.
Yeah.
So this is one point. So pharmacy will start picking it up as we move forward. Second thing is that, you know, we also have play on the corporate and partnerships, you know, which is yet to kick in. As you understand that, you know, typically these partnerships take little bit more time to, you know, solidify. So I guess, you know, the some bit of growth will also happen in Q3, and so that is the second element. And apart from the fact that, you know, we've got the insurance and other segments to also kick in. And June has always been a muted quarter for us, even in the last fiscal year also, versus prior to that.
So I think we still have a confidence that, you know, the 50% growth over the previous year numbers is what we look at in the current year. And I think at this stage, as we also, you know, again, the answer to one of the questions on revising the guidance, if there is any, I don't think, you know, there is any worry at this stage. We've got many initiatives, you know, which are working in parallel, and we strongly believe that, you know, we'll come back on the growth side. And lastly on the EBITDA margin for the 24/7, 4-6 quarter, even just on that piece.
I'm sorry to interrupt you. We are losing your audio.
I meant that, for the quarter said there was a break-even guidance of 4-6 quarters. That was announced, I think, last quarter or maybe before. Are we sticking to just that piece, we are also breaking even?
Yeah, we are sticking to that, you know, guidance. And, if you notice in the past also, when, you know, prior to the digital segment, which we call it Apollo 24/7, we had suggested that the entire Apollo HealthCo will get break-even in Q4 of FY 2024, which, which happened in Q3, one quarter in advance.
Right.
And similar to that, we also gave the guidance in Q4 that digital business will get break-even in 6-7 quarters. We are sticking to our promise. The entire management team and down below is working towards that common goal. So at this stage, I think all of us need to believe to this point that digital segment will also break even in the next, you know, 6-7 quarters.
So if I can come in for just 30 seconds. We, we are reasonably confident that the combination of growth in a calibrated way, along with the break-even, goal that we have sort of given guidance to, we will stick to it. And that's where... And effectively, we are moving away from, like I told you, I'm just reinforcing the point again, from a very high cost of customer acquisition model into a much more stronger omni-channel combined with loyalty. So that is what will facilitate growth, not at an exorbitant operating expense model. So both on the EBITDA side as well as on the growth side, we are reasonably on course, and we expect this, this particular change took time, and we are seeing the positive result. So we stick to our numbers.
Understood, Madhivanan. My, my last question is just on the diagnostic piece.
While our network has grown 16%, our top line has grown 8%. You mentioned in the remarks about seasonality, but seasonality, YOY should not matter, I presume. But anyway, but if you could just tell me what happened in, for the slowdown, if I were to look at industry peers, we have seen them grow between 12% and 14%. And despite our network expansion, we seem to be growing slower. So thank you. That was my question.
Ashish here. So I will take it. In Q4, we had a few one-off gains, which led to a margin expansion as well and had improvement in margin, which was there. Two of those Q4 one-off gains were related to, one, of course, during the year-end closing, we had a reversal due to any kind of turnover-related discounts that were factored during the course of the year. And once the year-end closing happened, and when we knew the final numbers, then the margin accretion and the improvements and the reversals had an impact.
That was approximately around INR 2.6 crores-INR 3 crores, number one. Number two, we also had an impact due to the year-end reversal on account of any kind of leave encashment and PLI, which is on the accounting and the NDA side. Because during the course of the year, the accruals are based on the current manpower trends, and at the end of the year, there's actuarial valuation that takes place. That impacted up our almost like 1.5 odd INR crores. In case if we factor that in, our margins were almost in similar lines.
... secondly, the seasonality factor, which Sriram also earlier said during the call, and during Q, Q1, we have made some new, new expansions wherein, the revenue kind of potential that we expect, the costs are more versus the revenues are not quite there in the Q1, which we expect to come in Q2 onwards, and hence the overall impact is also factored in Q1, which was not there in Q4. This is the prime reason why we've had the decline compared to the last quarter.
Yes, thank you.
Thank you. Next question is from the line of Kunal from Equirus Securities. Please go ahead.
Hi, thank you for the opportunity again. Just one on the ARPOB growth, you know, just trying to understand a bit, you know, more. So we are seeing that the medical, you know, mix was higher in this quarter, but then quarter to quarter three, again, is a higher medical mix because of the overall monsoon seasonality, right? So just trying to understand that, you know, how confident are we in achieving that 7% ARPOB growth? And, secondly, the inflation hike of around 4-5%, is it in a particular channel? You know, is it for cash patient or is it for insurance patients? How should we think about it? Is it also, hospital focused more in metro, or non-metro? That would be helpful. Thank you.
Yeah, I think, you know, I would again want to repeat, you know, I think maybe I'm happy to do a call outside. You know, ARPOB is not as much a lever for our EBITDA growth, et cetera, because average revenue per inpatient is gone by 4%. Inpatient volumes have grown by 10%. Volume into value equal to revenue growth. ARPOB is just, you know, the perspective of how each of our beds... You know, what is the revenue per occupied bed? And so long as we get incremental volumes, and if the ARPOB of that incremental volumes is a bit lower, it shouldn't really matter for us. And that is exactly what I said when we are penetrating into corporates, we are penetrating into insurance, penetrating and getting more chemotherapy volumes into oncology, et cetera.
Some of that ARPOB is, you know, even if the ARPOB is bit lower, it shouldn't matter for us. You know, so we are... You know, the focus is not on ARPOB. You know, ARPOB is just a derived number. Let's see how it goes during the year. You know, it will be higher than the current levels, and I don't want to guide specifically for that 7% either, though we know that, you know, that is something that we will get over a period of time. So this year, I think it is a volume-driven growth, and we should continue to focus on that.
So, sir, when I, you know, look at the slightly larger picture across our segments, I think there has been talks about, you know, getting corporate business, you know, large accounts, et cetera. So is it fair to say that there has been some incremental, you know, allocation towards getting that B2B business? And would it have any impact on our cash patient over a longer run? Because this B2B business in any industry generally comes at a lower profitability, right? While it may increase, you know, the volumes initially, but then, it can actually counter the cash patients, et cetera. So, how should we think about this corporate piece, which we have been talking across hospital business as well as, online business as well?
Sure. When we say corporate, I think it's important that you understand that when we talk of corporate or private corporate for that matter, it is coming. We are. What increases for us is the insurance business. You know, people covered through private insurance, as you know, that's a market which is growing by 35%. We are seeing significant penetration in the overall coverages. And large. When we say corporates, we are talking of large corporates like HDFC, ICICI, the likes of all you know, the Big Four, et cetera, and the IT companies. All of their insured, all of them are covered through private insurance. So, but the outreach through corporates is more something that we outreach to the employees of the corporates.
The employees then come into our systems through their insurance coverages. So we don't see any risk on this at all. To the contrary, as I said, the average revenue per patient on an insurance patient is higher than some of the average revenue per patient on walk-ins today. Because walk-ins also, you know, because they are conscious about paying out-of-pocket, so they select for the lower bed categories like general ward, sharing, et cetera. But mostly when it comes to insurance and private corporates, we see them opting for single rooms and higher. So I don't think that's a worry at all. As I said, to the contrary, average revenue per patient on insurance is higher. So this is not a corporate that you should think in, like in the other businesses. This is a corporate which is getting channelized through insurance.
Sure, sir. Thank you, and all the best.
Thank you.
Thank you very much. Next follow-up question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi, thank you for the opportunity again. My question is 24/7. So you mentioned more cost-effective ways of, say, marketing, et cetera, has helped you to improve profitability, and lower customer acquisition cost is one of one of such costs. So can you, like, quantify a bit, like, what is the current customer acquisition cost for you compared to, say, a year back? And how different is it from your next competitor?
Okay, so let me highlight it from two perspectives. We used to spend anywhere in the range of INR 150-180 crores in terms of marketing expenses alone, which included customer acquisition through CRM, through prepaid, Google, et cetera, et cetera. That number, as we speak, we have brought it down to around INR 80 crores, both in plan, and we are in fact doing much better than we planned.
... So on a cost per acquisition, it depends on the different kinds of customers. And today, the new opportunities that we look at, which is through our omni-channel, et cetera, the cost can be as low as INR 250 bucks and can also go to the range of around INR 300-INR 400 bucks. So, so we are operating in that range. So that is one thing which has come. But, but typically, what happens when you go through a digital sourcing mechanism is you virtually pay for the same customer and again and again. In this case, we do the combination of originating customers through omni, attaching what we call as a subscription program called Circle, which ensures customer continuity. So both these combinations have given us very, very good numbers.
This advantage, I believe, is only available to the Apollo group because we already have 6,000 outlets, we have hospitals, so we have multiple sourcing points. What we are realizing is customers, in today's world, no customer is 100% digital. It's always hybrid, omni, and so that is what is helping us. Compared to this, some of the other competitors are primarily, in my mind, focusing more on the digital acquisition continuously. I think if we can get this model right, our growth story, we have enough of legroom for growth and at a reasonable calibrated cost without impacting our...
The second part of it is, we are exploring, you know, delivery to sort of combat, I wouldn't say combat, but to ensure that we are able to take care of our acute customers, which is people who buy in an emergency. We are experimenting with different models of delivering our medicines within a much faster timeframe, for which we will be charging. So that's another experiment which is also bringing us new customers in certain specific zones. So between both these put together, our cost of acquisition as well as cost per order on an ongoing basis is showing a downward trend.
Sure. That's helpful. My second question is also if you can update us on what kind of discount you are offering as of now on your pharmacy, online, offline channels, and compared to industry-
Which one?
Yeah, compared to industry, like, where do you stand?
Yeah. So in the, yeah, I guess from we decide. So, on the online side, we have anything between 13-13.5% as a discount, which happened in the last quarter. And, if I compare it against the, industry standards, industry standards could be, maybe 150-200 basis points, higher than, you know, what we offer at this stage. But there also there's, you know, there are a lot of cuts, you know, for the new customers and the repeat customers. But, we strongly believe that, you know, as always, you know, since last 3-4 years, we always have been, on the lesser side versus, versus the competition. On the offline side, discounts are, very much close to 11%.
Okay. So somewhere, on a blended basis, somewhere 11%-12% is a discount from your pharmacy segment?
Correct. Yeah, that's right. Yeah.
Thank you. That's helpful.
Thank you.
Thank you very much. I'll hand the conference over to the management for closing comments.
So thank you, ladies and gentlemen, for joining this call. As we conclude this discussion on quarter 1 FY 25, we are optimistic about the trajectory that we have set across all business verticals. With clear strategies in place for revenue growth, profitability enhancement and operational excellence, Apollo Hospitals is better positioned than ever to deliver unmatched value to our patients and our stakeholders. Our comprehensive and integrated healthcare offerings, supported by a robust pipeline of initiatives and expansion, will place us at the forefront of the industry. We appreciate your continued interest and support, and we look forward to sharing further progress with you in the coming quarters. Thank you, and good afternoon.
Thank you very much. On behalf of Apollo Hospitals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.