Ladies and gentlemen, good day, and welcome to the Q1 FY23 earnings conference call of Apollo Hospitals Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. 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, Margaret. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for the first quarter of financial year 2022-2023, which were announced yesterday. We have with us on the call today the senior management team represented by Mrs. Suneeta Reddy, Managing Director, Dr. Hari Prasad, President of the Hospitals Division, Mr. A. Krishnan, Group CFO, Mr. C. Chandra Sekhar, CEO of AHLL, Mr. Obul Reddy, CFO of the Pharmacy Division, and Mr. Sanjiv Gupta, CFO of Apollo 24/7. 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 on slide two of the investor presentation that has been shared with all of you earlier.
Documents relating to our financial performance have been circulated earlier, and 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.
Members of the management, please unmute your lines. Ladies and gentlemen, request you to please stay connected while we check the line for the management. Ladies and gentlemen, thank you for patiently waiting. We have the management connected now. Over to you, ma'am.
Good afternoon, everyone. Thank you for taking time to join our earnings call. I trust all of you have received our earnings documents which we shared yesterday. We have commenced fiscal year 2022-2023 on a very strong note. After two financial years marked by disruption, the start of this financial year is characterized by a more stable environment, leading to normalized economic activity. We have seen an increase in volumes and occupancies accompanied by the return of planned high-end surgeries. This has enabled the healthcare services business to register a strong recovery in quarter one FY 2023, with patient volumes and revenues higher as compared to quarter one FY 2022 and quarter four FY 2022. Quarter one FY 2023 occupancy across the group was at 60%. IP volumes increased 9% quarter-on-quarter.
The occupancy must also be viewed against the backdrop of ALOS of 3.38 days, down from 4.81 in quarter 1 FY 2022, where COVID dominated, and 3.57 in quarter 4 FY 2022. ARPOB also improved sequentially from INR 48,510 in quarter 4 FY 2022 to INR 51,999 in quarter 1, 2023, an increase of 7%. In a significant shift in payer mix, insurance revenue now contributes 41% of our overall revenue, up by 34% from pre-COVID times. Cash and insurance segments registered a quarter-over-quarter improvement of 15% in revenues.
Our focus on centers of excellence has resulted in a quarter-on-quarter growth of 7% in cardiac, 17% in oncology, 12% in neurosciences, 28% in orthopedics, 19% in gastro sciences, and 18% in transplants. Surgical revenue now is 68% of the total revenue, up from 60% during COVID times. We also have a promising uptick in the international patient volumes and revenues. We have reached 85% of our pre-COVID levels on volume and are at par on revenues. Against this backdrop, let me walk you through our consolidated financials for the quarter. Consolidated revenues 7% quarter-on-quarter to INR 3,796 crores. Healthcare services grew by 9% quarter-on-quarter to INR 2,023 crores.
Mature healthcare services revenue grew by 13% to INR 1,147 crores, while the new hospitals grew by 1% to INR 577 crores. Apollo HealthCo revenues grew 8% quarter-on-quarter to INR 1,479 crores. Within Apollo HealthCo, the digital business recorded a GMV of INR 215 crores for the quarter, which is a sequential growth of 21% and 34% on a like-for-like basis, excluding the Omicron impact in January 2022. 232 net new stores were opened this quarter, taking the number to 4,761 stores. AHLL revenues stood at INR 293 crores, a decline of 5% on a quarter-on-quarter basis.
This was primarily because the COVID and COVID allied testing revenues that increased during the Omicron wave in quarter four last year. Non-COVID diagnostic revenues, however, grew 12% quarter-on-quarter. Consolidated EBITDA stood at INR 491 crore, registering a quarter-on-quarter growth of 6%. Within this, healthcare services EBITDA grew 19% quarter-on-quarter to INR 484 crore. Healthcare services margins were at 23.9%, a 206 basis points improvement over the sequential quarter. Margins in mature hospitals were strong at 26.4%. Margins in new hospitals stood at 17.7% for the quarter. The pharmacy distribution segment in Apollo HealthCo recorded an EBITDA of INR 112 crore at a steady margin of 7.6%.
Operating costs at Apollo 24/7 came in at INR 135 crores. Therefore, AHLL EBITDA post Ind AS was 29 crores compared to an EBITDA of 37 crores in quarter four 2022. Consolidated PAT is at INR 317 crores after deferred tax liability reversal of INR 147 crores. Consolidated healthcare services PAT was at INR 222 crores as compared to INR 176 crores in quarter four FY 2022, a quarter-over-quarter growth of 27% in PAT for healthcare services. I am pleased to share that we recently acquired a hospital asset in Gurugram Nayati Healthcare for a consideration of INR 450 crores. The asset has the potential of 650 beds across 700,000 sq ft.
We are excited about strengthening our footprint in the National Capital Region and look forward to taking our unique brand of world-class clinical outcomes to the fast-growing and discerning city. We expect the facility to take pole position in attracting medical value travelers from around the world. In addition to building strong centers of excellence, we also plan to create a comprehensive ecosystem of care across pharmacies, clinics, day surgery, birthing centers, and primary care clinics in the region to complete our offering. The integrated healthcare complex at Gurugram is expected to be commissioned in a span of 24 months. We would also like to provide a few operating metrics on Apollo 24/7. The platform now has 17 million registered users and is completing 35,000 transactions per day, up from 25,000 a quarter ago.
The GMV run rate is now on track to deliver INR 1,500 crores for FY 2022-23 against the earlier guidance of INR 1,000 crores. To sustain the growth momentum, we do expect to incur 20% higher expenditure than guided earlier. We are already seeing a rationalization in loyalty costs and discounts and expect them to trend lower going forward. Overall, we are on track to become the number two digital player in the country during the current fiscal year. Looking ahead, we believe that the momentum in the healthcare services business will continue. Occupancy at a group level will improve from 60% to 70% over the next 12-15 months, an improvement of 15%. This will result in a revenue growth of 15%-20% and unlock an operating leverage which will lead to an EBITDA expansion of around 35%.
We have demonstrated our ability to actively optimize our payor mix and our case mix, and these efforts will continue to drive margin expansion up to 200 basis points. The diagnostic business within AHLL can scale to INR 1,000 crore top line within the next three years. The digital business within Apollo HealthCo has shown significant traction and is tracking faster than planned numbers. The pharmacy distribution business will continue to grow at 20% with our focus on private label products, complemented by an accelerated store expansion plan. We expect margins in this business to hold steady. The deep capabilities and mix of offerings that we provide to consumers through our omni-channel, multifaceted engagement model, which is differentiated across the value chain, is indeed very unique and forms the basis of our belief in our strong sustained growth potential.
We view the three verticals as engines of growth and remain committed to our core value system of building solutions and offerings that will deliver the best clinical outcomes and are integrated and meaningful for the consumer. We intend to deepen our relationships with them over a longitudinal timeframe and create lasting value for our stakeholders. On that note, I would like to hand over to the moderator and open the line for questions and answers. I have Dr. Hari Prasad with me, Krishnan, Obul Reddy, Chandra, and Sanjiv with me to take all your questions. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the 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 a question. We would also request participants to limit your question to two at a time. Should you have a follow-up question, please rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nitin Gosar from Invesco. Please go ahead.
Yeah, hi. Thanks for the opportunity. Wanted to understand the reason for the increase in operating cost in Apollo 24/7.
Sanjiv?
I think couple of important points that we need to understand as far as 24/7 is concerned. One is that you know, the last quarter we had only you know, 16 days of you know, numbers. If you pull it you know, the overall expenditure for the last quarter was in the range of about INR 100 crore. We took a conscious call to you know, keep the number two position in the country given the fact that there's a lot of traction from the customers. We are seeing a lot of you know, intake of you know, various services that we're providing to the customers. What we decided is that we pull a little bit of expenditure from Q2 or rather Q3 to Q1 and Q2.
What this helps us is to get not only the number two spot, but also it helps us to you know provide more services to the existing customers or the new set of customers. This is a conscious decision for Q1, and I do expect that a similar you know numbers will be there for Q2 as well. Beyond that, we don't expect you know expenditure to go up you know sequentially.
I think, the guidance would be that, you know, 50% growth overall in the year, you know, from INR 1,000 crore GMV to INR 1,500 crore GMV, which will place us to be number two spot in the country, would be managed within 20%, you know, overall increase in the expenses. Another two, three things that we're doing internally now is that, one is that the discount on the pharmacy vertical is tapering down. Some due to the external factors and some because of the kind of continuum of care that we provide in Apollo 24/7 already reduced by 1%. We do hope that another 0.5% to 0.75%, we should be doing it in current month.
Apart from the fact that we've got certain more, you know, optimization initiatives. I think, with this, I would only say that, you know, taking a second spot in the country is equally important. You know, we the companies, you know, which are there in this industry for last seven to eight years, and we've been only two years old and in, you know, one quarter down in third year. Taking that spot is not easy. You need lot of efforts. You need some bit of investment. I think this investment is what you see in Q1. This is slightly higher than Q4, but it is important.
Got it. Just wanted a thought process around this 24/7 cost structure. INR 400 crore was the earlier called out number, which is going to be the investment which will go through PNL. Now that number has gone up, and it may stay elevated for FY 2022-23. Incrementally as we progress, these numbers are going to stay elevated, keeping in mind especially the environment, which was very conducive for e-commerce until last year. The liquidity was high at that point of time, and liquidity is low at this point of time. It only allows people like us to, you know, sustain the business model with a lower cash burn.
How do we, you know, look through going forward on the cash burn, especially for incremental quarters post second quarter onwards?
As we said, you know, earlier, the last quarter we had, you know, we kind of provided the guidance about INR 450 crore of annual expenditure in digital business. I think, 20% higher is what we're looking at this stage. We strongly believe that, you know, we would be able to do a meaningful job, to get to the number two spot to deliver 50% higher volumes instead of INR 1,000 crore-INR 1,500 crore GMV and well within the guided numbers.
Okay. For FY 2023, this number should not be at INR 550. It should come down.
Yeah.
FY 2024.
All the-
My bad.
Yeah.
My bad. FY 2024, the number should be less than INR 550?
All efforts in that direction, sir.
Okay. All right.
Thank you.
Thank you. Request participants to limit your question to two at a time. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead. Damayanti Kerai, your line has been unmuted. Please go ahead with your question. Request you to unmute yourself and proceed with your question. Due to no response, we'll move to the next question, which is from the line of Lavanya from UBS. Please go ahead.
Hi. Thanks for the opportunity. Going ahead with Apollo 24/7, I just wanted to understand on the numbers reported in results mode. How the GMV will be different from the revenue reported from 24/7 digital, and the sale from through the online channel will be considered as part of pharma distribution? I just wanted some clarification here.
I think you gave the answer, you know, in your question itself. You're right. The entire online pharmacy, you know, GMV would be part of the, you know, the front-end and back-end sales. That will be the first part of it. The second, how GMV to revenue get reconciled is, you know, typically in the e-commerce companies, you know, GMV is the platform transactions that are done, and your revenue is the commission that you charge to the service providers. This entire GMV gets into various companies. For example, you know, the entire virtual consultation would be the revenue in, you know, Apollo Hospitals.
The entire pharmacy GMV would be part of the front-end, back-end, and the entire diagnostic services would be part of the AHLL.
Got it. The take rate for this each segment will be in the range of?
Take rates are different for different verticals and, you know, depending upon the kind of volumes that we have it. For example, on the virtual consultations, we have a take rate between 5%-10%, depending upon the specialty. On the diagnostic, we have a slab-based rate. Currently, we are at about 12%-13%. As volume goes up, there is another slab that kicks in, and accordingly, all these take rates are mark to market from that sense.
Okay. Got it. Thank you. On the hospital business, I have seen in the presentation that, excluding vaccination in the base quarter, the growth is 7% YOY. In the base quarter, they'd have COVID-related occupancy also, which would be impacting, if I understand right. I need some clarification here.
This quarter versus first quarter was at 13% if you exclude vaccines. Q1 versus Q1, excluding vaccines is 13%. Q1 versus Q4 is 9%.
Okay. Got it. Thank you. Thank you so much for the opportunity.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Thanks, and a very good quarter. Just on ALOS, what's really helping us drive it down so much? You know, excluding the COVID quarters. I mean, we used to be around four, now come down to three point four, and what's the outlook for this?
Sameer, what we've really done is to focus on really driving down the ALOS, recognizing two things. One is that we are using robotics and minimally invasive, and this enables us to discharge much faster. The second is that we really want to make it cheaper for the patient. Any extra day means that they would, you know, have to pay one more day room rent. For us, the earnings are higher in the first three days. We have taken clinical initiatives as well as operational initiatives to see that discharge happens much faster. We track these metrics on a month-to-month basis. Currently, you know, I think that, you know, we've really done well this quarter.
Considering that, you know, most of our work is now surgical, we can definitely look forward to keeping it at three point four. We've also introduced new procedures, which is TAVI as one of the cardiac procedures versus CABG. Also, in knee transplants, we also have robotics, and we have 20% of our business is now day-care with laparoscopic.
Okay, great. So this has released a lot of your capacity, so that's a good job done. The second question is on Gurugram project. Krishnan how much CapEx do you need to do, you know, for this project? My understanding is Gurugram is a fair bit competitive market, so how will you attract, you know, the best medical talent and, you know, can the road to profitability be a lot longer?
What we plan now is, you know, we paid INR 450 crores for 5.67 acres. We think, you know, there is a building that is existing there, so maximum we will invest another INR 350 crores. Taking the project cost up to INR 900 crore maximum. With regard to competition, I think that we have a clear plan on how to attract talent. We also bring talent from overseas. I'm sure that, you know, we spoke about an integrated network, so we will have a funnel. One funnel will be part the 24/7 consumers that will, you know, send patients to Gurugram. The second that we have is our relationship with corporates, which is really, really high.
I think the whole Apollo reputation in Delhi with what we started with in Indraprastha, you know, I think the trust in Apollo is very strong, and doctors continue to be very happy to join an Apollo facility. Finally, I have to say that, you know, we will get a lot of international patients because we are working on that channel, and Gurgaon is probably the best place to be in if you're focused on that channel. Really, I think for me, the most important thing is improving the clinical work that is existing now in Delhi, is to take it to another level and therefore attract both doctors and patients and make the right investments in infrastructure and in technology.
Okay, great. Thank you very much.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Am I audible?
Yes, you are audible now.
Yes. Thank you. My first question is on Apollo 24/7 spend. Sanjiv mentioned about some initial investment which you have taken to increase your standing in the market. Can you please elaborate a bit, like where is majority of spend happening, whether it's on the infrastructure, IT or on the discounts? If you can provide some better clarity.
Yeah. About 25% is the expenditure that is getting into the product and the technology side of it. You know, when I'm talking about the technology, it is the entire app experience, it's the entire web experience and the entire CDSS , CIE engine that we are working on. That is about 25%. We are also ensuring that the adequate capacity with respect to the knowledge and manpower is there pan-India at the right verticals at the right places. About 30%-35% is getting into the augmenting of resources. We have about 20%-25% of the cost, which is getting into some sort of a branding.
This is to ensure that, you know, the communication to the customers with respect to the various services that, digital line of the business, as well as the entire Apollo ecosystem, you know, gets communicated. About ten to fifteen percent expenditure is getting into user acquisition, and that is to ensure that, you know, we get new set of users, chronic users, specifically, and, you know, the digital spend is within this, 10%-15%. The remaining 8%-10% is towards the other infrastructure, primarily the support side of it.
That's helpful. What is the discount on the orders at this point of time compared to peers? You mentioned you have already taken some reduction, but where do you stand?
Yeah. Last quarter we saw discounts in the range of about 18%, and that was the whole of the entire Q1. July, we started tapering down the discounts and much of the things, you know, have to happen from, you know, how exactly the external forces are working. External forces in the sense the competition out there. Secondly, what is the mix of, you know, repeat customer, repeat cohorts and the chronic cohorts. Depending upon all this, we take the calculated decision. In July month we have reduced discount by 1%. I think, I also see another, you know, headroom for 0.5%-0.75%. Something in this range should happen during current month or maybe, by end of the next month.
Broadly, you will be standing at 16%-17% discount in near term, and then going ahead depending on how market evolves.
I think, yeah, that is the same, ma'am. I think 16.5%, or 16.75%, that should be the numbers that we can look out for Q2. You know, as far as the external forces or the environment is concerned, given the fact that, you know, we've got the very high Apollo internal base of customers, you know, we do not get much impacted as the competition out there is concerned. So, I think we should be able to hit this number of 16.5%-16.75%.
My last question is on ARPOB. Very strong growth, 27% year-on-year. Ma'am mentioned payer mix change obviously helped, but how much of contribution is there from price hike in this rise, and whether this should be sustainable going ahead?
Excuse me, moderator. I think the line is not very clear. I don't know if they're able to hear us.
We can hear you clearly, ma'am.
Yeah, ma'am, I can hear you. Yeah.
Okay.
Ma'am, my question was on ARPOB, very strong number. You mentioned, it was helped by the payer mix improvement. My question is, does it include a component of price hike and whether this kind of growth is sustainable?
Yeah. You know, ARPOB, you know, there was a small price hike of 2% that we have done, and it is inclusive of that. This is something, you know, the mix, the advantage. There are two, three levers on the ARPOB. One was the surgical mix. If you look at the surgical mix, it's rebounded significantly, and we are now at 68% of our revenues comes from surgeries. That's one important lever which has impacted our ARPOB positively. We are continuing to see also a good case mix, you know, aided by insurance and walk-ins. You know, insurance itself, which was around four0, which was 34%, has now become 42, 41%.
Clearly there are good levers that are helping us get the ARPOB and it is sustainable.
Okay. Thank you. I'll get back in the queue.
Thank you. The next question is from the line of Sumit Gupta from Motilal Oswal. Please go ahead.
Hello, am I audible?
Yes, sir, you are audible. Please proceed.
Yeah, hi. Congrats for the good set of numbers. I just want to know regarding the CapEx plan if any, like, and regarding the hospital segment, like where all do you plan to expand?
You know, our routine CapEx you're meaning or our project CapEx that you're asking?
Routine as well as projected, sir.
Routine CapEx, you know, this is part of our cash flows, et cetera, from our every year. It is approximately around INR 300 crores. That's the number that we have as routine CapEx at a consolidated level, and that will continue for now. The free cash flows even after that would be in the region of around INR 800+ crores, which is what is the CapEx, routine CapEx that we have. This free cash flows is what we are going to be using for deployment in new projects, et cetera. As you know, we already have free cash in our hand, and even, you know, the Gurugram asset acquisition happened in Q2, which is the INR 450 crores that we spent towards Gurugram.
Clearly the free cash flow plus the cash that we have in our hand of almost around INR 900 crore, even after, you know, is something that we can use towards some of our expansions. We have announced two expansions, one in Chennai and the other one which is in Gurugram. We have said that we are looking at Bangalore as well as we are looking at north. We are comfortable there's a combination of this, plus there is a receivable from Apollo 24/7 of INR 1,200 crore, which we hope that we will get over the next one year, if not in the coming round, the next round or whatever. That is the amount that will come to us.
Over the next three years, the free cash flow will be used, plus this Apollo 24/7 can help us in our expansions. Current expansions that we have announced is the Chennai one and the Gurugram one. INR 900 crore in Gurugram and maybe INR 800 crore in Chennai.
Understood, sir. Sir, regarding ARPOB, at the end of financial year 2023 and, like, 2024, what kind of ARPOB that you are targeting?
The ARPOB that we are targeting, is it?
Yes.
We don't have any specific targets, you know. I think, you know, this is a good ARPOB that we are focused on. You should appreciate that our ARPOB numbers that we give are net of fee-for-service doctors. So if you look at it, our ARPOB is really driven by, you know, not driven by price. It's driven mostly by case mix and ALOS and day surgery, et cetera. That is what we have been focusing on increasing our ARPOB. This is an ARPOB that we have, which is a combination of tier one and tier two, right? If you look at it, you know, we have the-
Right.
We have a lot of tier two hospitals across our system and network, and this is after that. If you actually gross up for the fee-for-service doctors, this ARPOB will actually go closer to INR 60,000, you know, from a gross ARPOB perspective. This is a good ARPOB. We will continue to focus on this ARPOB and grow from here.
Okay. Understood, sir. Thank you.
Thank you. The next question is from the line of Harith Ahamed from Spark Capital. Please go ahead.
Hi. Thanks for the opportunity. I'm looking at the combined pharmacy business. There's been a decline in EBITDA margin by around 180 basis points quarter-on-quarter, from 9.3% to 7.5%. When I look at the back-end pharmacy margins, it's been flat quarter-on-quarter. Can you help me understand this discrepancy?
Yeah. As you rightly said, you know, the back-end pharmacy margins remain the same at the earlier level. In the front-end retail pharma business, there are two to three developments that happened during the quarter which brought in one-time cost. Like, we have been working on aligning the Amazon systems for a pan-India operationalization of their deliveries and that online technology cost. We completed that online alignment and that cost have come into this quarter. Also, we have created necessary infrastructure for Amazon deliveries to enhance their numbers. We have created about 16 dark stores in Mumbai city alone, and about another 12 dark stores in other parts of the country to see that, you know, Amazon reaches the entire country with our network available in other states.
That we have now, you know, enhanced our rollover on the pharmacy. We have about 230-240 pharmacies open during the quarter against our normal run rate of about 140. All these one-time events brought about INR 25-30 crore additional cost. Out of that, about INR 20 crore is one time. We expect margins to come back to normal in the next quarter.
Okay. Got it. Next one's on the diagnostics business in AHLL. There's been a decline in revenues and margins over the last few quarters. I understand that they had RT-PCR revenues in the previous quarters. There's been a bigger margin decline for this quarter. It's at 5%, so the decline seems to be a bit sharp. Any one-offs that you would call out there?
Chandra Sekhar?
Yes. On the margins, yes, the COVID, the change in case mix has one part of our impact on the margin. Primarily the others are in the nature of investments that we are making in the beginning of the fiscal year. These are in the nature of tech investments, upgrading our abilities to serve digital logistics side. We also have seen a slight increment in consumable costs because of certain freight and other logistics-based inflation. We made a lot of investment, which leads to higher OpEx in upping our technical capabilities. We are moving into super specialized areas such as oncogenomics, reproductive genomics, and a few others.
This has called for both, enhancement of a doctor, infra, scientific sales force and product teams. This is something which we believe is going to even out as revenues start coming from these super specialized areas of work and is in the nature of investment. We should get back on a mature level to the EBITDA margins at a better level than we have. We also have lastly a cost overhang. This is on account of the large infra, doctors and technicians that we created for RT-PCR testing across the country. This cost overhang remained unutilized during this quarter. We are also going ahead of time in terms of our Phlebo expansion.
We are beefed up to cater to demand that is coming from home collection. This Phlebo expansion also leads to a higher level of investment and operating expense. All of this will get evened out in the coming quarters.
Okay. Last one from my side, with your permission. When I look at your SEBI disclosures, there's a revenue of INR 63 crore under 24/7 digital. Versus the GMV that you've disclosed of INR 215 crore, this is close to 30%. Seems to be on the higher side versus the take rates that you mentioned, 5%-10% for consultations and 12%-13% for diagnostics. Can you help me understand this revenue number that you've disclosed for 24/7?
Sanjiv would have to answer that. Sanjiv, you have to answer that.
I'm not too clear about the question. There was a little bit of disturbance.
I'm not clear about the question. Me too. You want to repeat that?
Yeah, yeah. In your SEBI filing, there's a revenue disclosed for 24/7 digital under the segmental disclosures. That's INR 63 crore. That's 30% of your GMV of INR 215 crore. It seems to be higher the take versus the take rate that you mentioned, which is around 5%-10% for consultation and 12%-13% for diagnostics. That's what the question is.
No, sir. You know, the number that you're reading is in INR lakhs. What you are reading as a 63 crore is actually 6.3 crores.
Okay, okay. INR 6 crore. Okay, okay. Got it, got it.
Point three.
That's all from my side. Thank you. That's all from my side.
Anything? Operator, can you hear us?
Hello? Are we off? Hello?
I can hear you, ma'am.
I can hear you, ma'am.
Yes, we can hear you, ma'am, but I think.
Mayank, are you there?
We could hear you.
No, he's not there, sir.
We'll just check.
Mayank is not there.
We'll call them offline. We'll just call them.
Just quickly call. I think he's calling.
Where is the operator? Hello. We are holding on.
The next question is from the line of Shaleen Kumar from UBS. Please go ahead.
Yeah. Hi. Thanks for the opportunity and congrats on a good set of numbers. Two questions. One, is it possible to get some sense on contribution from COVID vaccine at EBITDA level in a base quarter?
Only INR 11 crores of revenue in the first quarter. The EBITDA will be somewhere around 12%-13%.
Well, I mean, first quarter of last year.
For the base quarter it was INR 211 crore.
That's the revenue, right, sir?
That's the revenue. EBITDA would be around 15%.
EBITDA would be around 15%. All right. All right.
Yes.
Okay. To ma'am, you alluded, you know, that your external fundraise you're pushing by six months in the last call. Is the timeline intact for that? I mean, or which effectively means that you would be looking at fundraise in probably third quarter, or is there any change of plan over there?
No, no, we're on track to close for December.
Okay. By calendar year end, you should be able to close.
Yes.
an external fundraise.
Yes. Yes.
Okay. All right. All right, ma'am. That's it from my side. Thank you so much.
Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Yeah, thanks, good afternoon to all. On the hospital business, we have seen a good margin traction, and so is the case with the peers that reported so far. I'm just trying to understand, in our case, how do we see the margins tracking ahead, given that we are adding some hospitals. What is the margin trajectory in the hospital space that we expect over the next 1-two years? Pardon me if you already discussed. I joined a bit late, so we were on other call.
Yeah, sure. First point, you know, yes, you know, at the first level our occupancy is 60%, as you know, and we are looking at increasing this to 70% over the next twelve to fifteen months. That itself should give us a good kicker because a 60%-70% occupancy means a 15% increase in volumes, and that should increase our revenues by 25% and hopefully our EBITDA by 35%. That's what we are trying to work on. With that, you know, if that works, that should also ensure that our margins go from the current 24% to at least 26%-27%. That's at one level. The expansions that we are talking of will come after that, right?
Because all of our expansions, the Gurugram, which should be the first, which should come in, will be 24 months from now, followed by Chennai. Which is how we are looking at this. I guess, you know, we don't see any problems with the margins for now.
Okay, lovely. What about some other expansion plans? You talked about Mumbai. Is there any update there? You know, in the past calls, on the annual report, you talked about adding few more hospital beds. If you could update us, what's the plan there?
Continuing to work on them. These two together we started with 1,000 beds now, right? Between Chennai and Gurugram. 1,000 beds is something that is there. If Gurugram can, with phase two, go up to 650 beds, even if we started at 500. It can go to 650 beds potentially. This is 1,000 beds now that we are focusing on. You will hear from us. We are looking at the north for expansion. We are looking at Bengaluru. All of this, you know, will come within the next two, three years once we start. That's how we are looking at it. We are looking at bolt-on also. If there are any bolt-on acquisitions which come our way, we would look at it.
Sir, is there any update on Mumbai?
Working on it still.
Hello?
Still working on it. I don't think there is any further update that we have on Mumbai.
Okay. Moving to the 24/7, there is a change in guidance in terms of the investments that we plan to do. If you don't mind, if you already said, then if you could repeat the same, please. Why the change? What's the thought process? Are we seeing more traction or are we seeing less traction and we need to invest more?
Sanjiv, in fact, we are seeing very good traction and that's why we are investing, but Sanjiv will add on to it.
I think we are seeing very high traction into the business. In fact, we are, you know, almost there to become number two online player in the country. The INR 1,000 crore guidance that we gave the last quarter earnings call, I think we are well within there to reach a INR 1,500 crore mark. This is one side of it. As far as the overall investment into the company is concerned for the current year, which we assume to be higher by 20%, I think much of the investment is kind of, you know, investment ahead of sales kind of thought process. We are building up certain capacities.
Tech and infrastructure is taking some bit of expenses. Yes, very much, you know, we are looking at very high traction into the business as of now.
Okay. Any color on the pharmacy business? We have earlier guided for 15%-20% growth, and I see that we are flattish. Has the competitive intensity gone up? What are we feeling now, and what are we expecting for the remaining nine months?
We expect our growth for the year to be the range of 22%-22% for the offline network. Adding from the online, we expect to be anywhere about 27%+ growth for the current year. Q1 generally, as you know, we have you know Q4 around COVID impact, and then generally Q1 is a sluggish quarter with ESL May
Lesser sales. We are seeing the growth coming back, and we are on track for about 22% offline. Coupled with online, about 27%-28% growth for the year.
Last year, combined pharmacy business reported was around INR 6,800 crore, and the FY target is over INR 8,500 crore.
Okay. This is combined including the Amazon and.
Sorry to interrupt you. Mr. Agarwal, may I request you to rejoin the queue for follow-up questions then? There are several others waiting for their turn as well.
Can I complete this question, if you don't mind?
All right.
Please do.
Yeah, this includes the Amazon piece as well?
Yeah, includes Amazon, but that we expect to see the traction next year. Because we have set up the system integration and the infrastructure. We expect that to grow.
Okay. Thank you.
Thank you. Request participants to please submit your question to two at a time. The next question is from the line of Shaleen Kumar from UBS. Please go ahead. Shaleen Kumar from UBS, your line has been unmuted. Please go ahead with your question. It seems to have lost his line, so we'll move to the next question, which is from the line of Amit Ganatra from Invesco. Please go ahead.
Yeah. Just wanted to understand this entire, you know, long-term thought process on Apollo 24/7. Now, this year, you know, there is a GMV that is expected to be around INR 1,500 crores and there is a certain investments that you are planning to make. Now, next year if the GMV doubles and becomes INR 3,000 crores, how do we then, you know, view the investments? I mean, investments also, you know, keep on going up or they remain capped at whatever, you know, we are doing annually this year. How to, you know, link these investments to GMV from a long-term perspective.
Yeah. I think you know the way to look at this is that you know where exactly this investment is going on. You know in one of the previous questions I gave the answer that you know about 25%-30% is happening into the product and technology side. About 30%-35% is into the operations you know building of the capacity around operations. You know the other support 10%-12%. Essentially about 65%-70% is the investment that is getting into building up the company or the network or the capacities.
Now, obviously, you know, when you double the next year or two, three times, I don't need to, you know, kind of double or triple all these costs because your platform, you know, whether it is Android or iOS platform or the website, that wouldn't require same kind of investment, even if the traffic, you know, doubles or goes, you know, five times or 10 times. As we ramp up year on year, I don't see that, you know, our numbers or the expenses to go in the same fashion. In fact, we would get a large scale benefit across the expenses, as well as, you know, we have a lot of benefits with respect to the commission structure.
I think the way to look at this is that any commerce company, you know, once gets a substantial portion of the business or the transactions becomes substantial. In our case, we look at, you know, something like, you know, about INR 250 crore-INR 300 crore of a monthly GMV would be the gold spot, so to say. You know, until that, you know, whatever capacity that we have built up today is good enough for us to, you know, continue. I don't see that, you know, we'll be raising our bar as far as the expenses side is concerned. Some 10%, 12%, 10% 15% or 20% expenses will go up, but that is a natural phenomena year-on-year, but not a direct proportion.
Just to, you know, correct me if I'm wrong, what you said was that, till the time that you can reach INR 200-250 crores of monthly run rate, you are creating capacity for that kind of an outcome. Is that correct understanding?
Yes.
Okay. Understood. Thanks.
Thank you.
Thank you. The next question is from the line of Vihang Subramanian from Raba Capital. Please go ahead.
Yeah, hi. Thanks for taking my question. Just one from my side. The pharmacy distribution piece, if I'm correct, there's a lot of unorganized stores, right? Single stores, which are sort of losing their competitiveness. Instead of a store expansion strategy or in addition to a store expansion strategy, have you considered, you know, an acquisition strategy as well? Because there's a lot of regional familiarity that you can get by acquiring smaller stores, right?
Yes. I will ask Obul to answer.
We have our network partners, you know, doing the distribution bit for us, and we don't get into the pharma distribution acquisition. As far as the front-end network is concerned, we are aligned, you know, and our expansion is across the country.
Just to add some color to that, they did do an acquisition of Hetero, which happened four to five years ago. I think the team has become very efficient in starting their own stores. The cost of creating a new store is better than acquiring the small mom-and-pop stores.
Understood. Sure. Just another thing. On the Apollo 24/7, I think you had mentioned to an earlier participant about the sales and the GMV. I wasn't really clear on that. If the GMV is like INR 1,500 crores, I was under the understanding that that is sales plus GST, right? Sales should be like 70% of GMV, right? Is that wrong?
That's correct. That gets captured at the back end. This is the pharmacy distribution. That's what.
Got it.
Yeah.
Okay. Got it. Sure. Yeah. That's it from my side. Thank you.
Thank you. The next question from the line of Sumit Gupta from Motilal Oswal. Please go ahead.
Hi. Thank you again. Sir, just want to get a clarity on the Amazon deal. So, like, what kind of cost sharing is there between Apollo and Amazon? What kind of discount is borne by like Apollo takes all the discounts or what?
Yeah. I think you know on the second part first, you know, as far as the discount side is concerned, what you know has been agreed with you know Amazon is 15% discount. That is the benchmark that we are looking at it. But you know they are allowed to offer discounts with respect to, say, Amazon Pay or the third party you know financial you know instrument providers. It could be any bank offering say another 5% cashback so on and so forth. But those are such deals are in any case there in every commerce platform. I think that part is up to them to you know bring the right set of deals to the customers.
As far as the baseline discount is concerned, it is 15%. That is one. Secondly, the first question, you know, what are the economics between the two between the partners? I think both the companies are playing to their strength. Amazon is playing to the strength of the customer experience, the customer acquisition, you know, putting up the branding, marketing, and then the delivery side of it. Because Amazon has got a wide network and they can easily sell that. I mean, millions of orders they sell every day. So they are playing to their strength. Apollo is, we are playing to our strength.
Our strength is to have right set of assortment at the right place, the entire picking, packing, the billing, all that. This strength is being played at our end. This is how we have kind of constructed the entire deal.
Okay, sir. Thank you.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Good afternoon, everyone, and thank you for joining this call. I believe that at Apollo Hospitals we have always taken a long range view on financial and operating sustainability and value creation, and we believe that this is the only reliable path to institution building. As you have seen over the past years, we have created several verticals and all of which are growing, the hospital vertical, the pharmacy with the digital and Apollo Health and Lifestyle. I look forward to a continual engagement with all of you and thank you for joining this call.
Thank you.