Greetings and gentlemen, good day, and welcome to Apollo Hospitals Limited Q1 FY 'twenty two Earnings Conference Call. 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. 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, Lisanne. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for Q1 FY 'twenty two, which were announced yesterday. We have with us on this call today the senior management team comprising Mrs. Shobhna Kamaneni, Executive Vice Chairperson Mrs. Sunita Reddy, Managing Director Doctor.
Hari Prasad, President of the Hospital Division Mr. A. Krishnan, Group CFO Mr. C. Chandrasekhar, CEO of KHF L and Mr.
Sanjeev Gupta, CFO of Apollo 2,007. 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 2 of the investor presentation that has been shared earlier. Documents relating to our financial performance have also been uploaded on the corporate website as well as the Stock Exchange website. I would now like to turn the call over to Mrs.
Sunita 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 out to join our call on a Saturday. I trust all of you have received the earnings documents that we shared last night. Quarter 1 FY 2022 was characterized by the devastating second wave of COVID in India. The intensity this time around was totally overwhelming on the health system in terms of availability of beds as well as availability of critical life saving equipment, especially oxygen.
There was also a wide gap between the needs of doctors, nurses and support staff across health systems. As a follow with the experience gained from the first phase, we had protected the method to achieve effective separation between COVID and non COVID patients by standardizing protocols across our hospital network without disrupting the regular non COVID care. Based on that, at the start of the 2nd race in the month of April, we dedicated 2,300 beds for COVID treatment, which was subsequently increased to 5,000 beds a week, including 1200 ICU beds, then tapered it down by the end of June. We mobilized our medical staff, nurses, technicians and doctors quickly and kept up the morale of our frontline workers during this period. The strict protocols and the training has to keep the infection of our frontline workers at extremely low levels.
Proper planning, execution, partnering and close coordination with our vendors ensured that we were able to arrange for the supply and replenishment of all essential equipment, consumables, medicines and oxygen at all our hospitals. We have treated close to 23,500 COVID inpatients this quarter. Our Home Care division handled 20,500 COVID isolations, while our CAI, our hotel isolation program, under 24,000 patient health. Apollo 24x7 has completed over 6 lakh consults till the end of this quarter. In parallel, we also embarked on India's largest private vaccination program using the advantage of our pan India network of 19 medicine supply hubs with cold chain facilities, 21 hospitals, 250 plus clinics and 500 plus corporate healthcare centers, along with on-site vaccination.
Cumulatively, we have completed 3,860,000 vaccinations till date. On the non COVID side, there was definitely an easing of demand on the outpatient and surgical side, given that people were struggling to deal with the 2nd wave and reach to lockdown. Transport and movement were restricted and therefore electric surgeries were postponed. However, better all round preparedness resulted in us being able to serve both the COVID and the non COVID patients effectively and report an accretive performance this quarter. In July, we have already witnessed a revival in patient profiles across our network.
Against this backdrop, let me walk you through the numbers. On a quarter on quarter basis as compared to quarter 4, FY 'twenty one, the company recorded growth of 24% in stand alone revenues to INR 2,995 crores. Pharmacy Distribution reported revenue of INR 1574, a growth of 35%, while health care services revenue grew by 15% during the quarter. Our new hospitals recorded revenue growth of 43%, while mature hospitals revenue grew 5% quarter on quarter. Margins in mature hospitals were strong at 23.1%, and I am happy to state that our margins in new hospitals continued to witness improvement, moving up to 16.3% for the quarter, registering a 69 basis points improvement on a quarter on quarter basis.
Quarter 1 FY 2022 stand alone occupancy at 3,282 beds or 66%. Stand alone post India's 116 EBITDA was at 391 crores, quarter on quarter growth of 16%. Pharmacy Distribution EBITDA was at INR 78 crores after absorbing marketing costs of INR 37 crores for Apollo 24x7. Without this change, pharmacy EBITDA was INR 115 crores with an EBITDA margin of INR 7.6 percent. Stand alone PAT was INR 150 crores as compared to INR 116 crores in quarter 4 FY 2021.
Net debt as of 30 June 2021 was INR1665 crores with a debt equity ratio of 0.48%. Consolidated 2,000. Our consolidated revenues grew by 31% quarter on quarter to 3,761. Healthcare services revenue grew by 26% to INR29.39 crores. Mature healthcare services grew by 20% to INR1268 crores, while new hospital revenues grew by 40% to INR 627 crores.
Group occupancy at INR 5,100 girls was 67%. The consolidated post India's 1 months fixed EBITDA for Q1 FY 2022 was INR 5.20 crores compared to INR 412 crores in the previous quarter. Within this, Healthcare Services EBITDA was INR394 crores compared to INR325 crores in Q4 FY 2021. The results of Apollo Menyx Lucknow and Apollo Monthly Specialty, VAS 3, Kolkata, have been consolidated in this quarter. AHLL recorded an EBITDA post India of INR48 crores as compared to INR 31 crores in the previous quarter.
Margins were 15.5%. The business has recorded a 47% quarter over year growth in top line. Consolidated tax is at INR 4.894. This includes a gain from the fair value gain remeasurement on existing share of the Calcutta asset. Without this effect, attributable PAT was at INR 195 crores compared to INR 168 crores in quarter 4 FY 2021.
Consolidated net debt is at INR1793 crores. We continue on our transformational journey towards creating India's largest omnichannel healthcare platform, Apollo 20 fourseven, which has deepened and strengthened our presence has strengthened its presence in this quarter. 10,000,000 unique users are registered on the platform. The platform has enabled neighborhood pharmacies to deliver over 16.5 plaque medicines from 17,000 PIM codes with order delivery within 2 hours of the order placed. The 6 lakh online consultation I mentioned earlier, spans 440 cities with 5,500 doctors across 60 specialties and delivering on the promise of consultant Apollo doctor within 15 minutes.
During the ongoing pandemic, diagnostic home sample collection demand surged, and we completed more than 70,000 COVID tests and delivered results within 24 hours. We have partnered with multiple corporates for doctor on call services, vaccination drives and StaySafe services. Shareholder approval for the slump sale announced last quarter to Apollo Health Corp has been sought by Coastal Ballot and is expected to be completed by the end of the day today.
To conclude,
while the 2nd wave of the pandemic did disrupt our overall performance and momentum over the last 18 months, the long term growth strategy and trajectory of the company remains in plateau. While our agility and resilience in handling these unexpected crises have only strengthened us as a team, we continue to be positive about the opportunities and potential to fly ahead for a well diversified health care delivery model. On that note, I would like to hand it over to our moderator and open the line for question and answers. I have with me Shubhna, Doctor. Hari Prasad, Krishnan, our CFO, Chandra from Apollo Healthcare Life Science and Sanjit from 20 fourseven to take your questions.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session.
The first question is from
the line of Deepak Malik from Bering Capital. Please go ahead.
The first question is from
the line of Deepak Malik from Verint Capital. Please go ahead. Deepak, your line is in the dark mode. Please go ahead.
As there's no response from
the current participant, we'll move on to the next. That is on the line of Damayanti Karai from HSBC Securities and Capital Markets. Please go ahead.
Hi, good afternoon. Am I audible? Yes. Okay. So ma'am, my first question is on your Apollo 20 fourseven platform.
Thank you for putting out details in the investor presentation. So in the presentation, it's mentioned that we have right now 6,500 doctors registered with the platform. So just to check, I remember last time you mentioned we had 7,000 doctors. Have you reduced this or how do we stand there? I'll take that question.
We have what we're looking at is active doctors now. At the beginning, you know, we must pass on to you. These are doctors that do at least 3 consults, 2 to 3 consults a week. So we still have an inactive base. All of all of all of all the doctors automatically have registered on to 247 that they have the app with them.
But these are the people who are actually doing consults. So I think we've been we're trying to make that very transparent. And we have a lot of doctor partners also. So the actual risk is very high. So this 5,500 doctors, it's just in house doctors or in house plus partner doctors?
These are a few partner doctors.
There are about 200 plus partners of doctors, but most of these are Apollo consultants and a few full time doctors that we have. Okay, ma'am. So with continuing on this platform, so ma'am, you mentioned you are looking to see 2 to 3 active consultations per week from the doctors who are currently there on the platform. So what is the current utilization of these doctors? I mean to say, right now we are doing 2,000 consults per day.
Yes. So it's the current utilization and what we're trying to do is like during the COVID time, we actually had more than 15,000 consults a day. And I think that this is something that we do think will start ramping up, especially with COVID. And I must say that these are all paid consultations. These are not free consultations like most other platforms offer.
The average value per transaction on this is around between INR 6 100 to INR 700. Okay, ma'am. That's very helpful. So all are paid doctors and then INR 600 to INR 700 in term fee per consultation, which we are seeing right now? These These are consultants.
These are Apollo consultants mostly. And these are so the fees that they charge are pretty much the same that they charge when people come to them for consultation for physical consulting. Okay, ma'am. And thank you for your response. My second question is on the operating cost.
So 1Q number broadly reflect our normalized cost? Or there are still scope to see incremental cost from here on? And like what about margins? How do we see margins moving on from current level to say next 2 to 3 quarters?
You're speaking about 20 fourseven or you're speaking about generally? B. Balaji:] The corporate level, corporate level. B. Balaji:] Corporate level, we do expect margins to improve.
Healthcare services, obviously, in this quarter, the vaccines were at a 15% margin that impacted our margin by at least 1% or 0.5%. We also had COVID incentives that we paid to employees, etcetera, of almost 1% of our revenues. That also has been as is part of our Health Care Services margins as you see it today. So as we move forward, we have guidance that we would be looking at Health Care Services mature to go to 20% and upwards. And the new hospitals should also go in the 15%, 16% range.
Overall, that's the guidance that we would like to give. Proton is, of course, doing well. And you will see that overall, the margin should start tending to improve with a combination of case better case mix outside of COVID and cost controls.
Sir, on the new cost, we are already at 16% margins, right? Is that the underlying margin or Yes, we should be able to get
that margin. We should be able to retain that margin.
Okay, okay. Thank you. I'll get back in the queue.
Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
Yes. Hi. Good afternoon. Just checking. Am I audible properly?
Yes. Yes, sir. Please go ahead.
Yes. Thank you. So, Krishnan, one question on the net debt increase. Can you just walk through that out of INR 6.54 increase in the consolidated quarter on quarter? How much was it to pay for the deal later stay?
How much rent is allocated, etcetera, some clarity we can take there?
So the debt almost on INR 400 crores, 500 crores of the debt is towards working capital increase. It should come back in the next 1, 2 quarters. INR 150 crores of vaccine is there and was there because we had to pay vaccines in advance to all the to secure the because as Mr. Sumitra said, we are the largest private sector vaccine providers, and we had to secure the vaccine doses in advance, which means that we had vaccines and even Regenron for the COVID care patients. Regenron also was an important treatment that we were able to secure in this way.
And there is almost INR 1.60 crores of that in our inventories as of June end. We all you would also have noticed that there has been a spurt in sales in the stand alone pharmacy business or the overall pharmacy business from Q4 to Q1, which was almost INR 250 crores of spurt aided by COVID stocking, etcetera. All of that meant that there was an inventory which was required to be kept in the front end stores also, including the back end. So that is another INR 3.40 crores. So almost INR 500 crores has been blocked in our system for inventories and working capital.
We expect that almost INR 400 crores should be getting released out of that over the next 3 months.
And just to add to that, INR 200 crores of this is against the new government policy on giving working capital to giving capital short term capital to hospitals at a cost of 4.5%.
Okay. So you guys took BRL204, okay. And so just a clarity here, so the debt that we paid out for being here, that was already paid out in Q4 or was it paid out?
Yes, yes. It's already paid. It's part of this. Now as you see, the current net debt has so to make it explicit, the current net debt that we see in the system, we expect this to come off by another INR 400 crores over the next 3 to 4 months. This has already been paid, INR410 crores for Apollo Clinical is already paid in full.
But that INR410 crores was paid in Q1 or 'fourteen? In Q1. In Q1. Okay. Thank you.
And just from the vaccinations, I'm just trying to get a very rough idea. So vaccinations at the EBITDA level would have contributed how much like would the rate be about INR 12, 15 crores or is it INR 14?
15% is what was contributed.
15%
of the overall INR 167 crores, which is INR 190 crores which is there excluding Delhi. With Delhi, we were at INR 225 crores. Without Delhi, because Delhi is not part of our revenues, without Delhi, it is INR 190 crores, including Apollo Health and Lifestyle, which has around INR 55 crores in their revenues. And this was all at 15% margin. So INR 119 crores into 15%.
Understood. And the second set of question on the overall 24% segment. I'm just trying to understand the what's the monthly run rate we are doing on the revenue side across all services that we do from there? Would it be a number like would we be doing more than INR 50 crores revenues there? Would we be doing like around INR 50 crores revenue?
Can we just get some range there? And can we end this year with more than INR 100,000,000 revenue revenue revenue there?
Shobhna, would you want to give some guidance on this at a broad level or is it
Sorry, I didn't get the question.
So, Abhi, can you repeat the question for Shobhna, please? Yes, yes, please.
So I was asking on 24x7 across services. Monthly run rate of revenue, what is the number right now? And can we end it here with more than $100,000,000 revenues for 24x7?
Can we what? See more than end the year with more than $100,000,000 of revenue? No, I think that we are the fastest in the country, you will see. And our run rate what we expect to finish the year with is closer to about $50,000,000 to $60,000,000 And this is actually the fastest rate for the 1st full year if you compare to others. And yes.
But let's see.
No, no, no. These are starting days, so the trends are good. I think that we're focusing more on the availability, the challenge of making sure that in 2 hours we deliver medicines, opening up more PIM codes, availability and many of these areas are being looked at as every day we keep improving our product. So consider this is early days, but the escalation is really the ramp up has been at super fast pace, especially during the COVID time. There were days that we got 45,000 orders a day.
And just one clarity on the online consults. Last quarter, you mentioned you have cumulatively have done 5 by consults. This quarter, you have mentioned 5.7 as a cumulative number. So only 70,000 consultants happened in such a heavy quarter of 2nd COVID days, which comes down to less than 1,000 consults per day. So I'm just trying to understand the number.
How many consultants is in the day?
So one thing I just want to remind you that last quarter call was in June end. So we have given you numbers more about numbers which are up to almost June end. Just that let's so as to be on the same page. I'll allow Ms. Shumna to respond on how many consults we are doing now.
But so this March 70,000, it's much higher than we did in the quarter because we had the call around June end for the March, if you remember. So we have given you mostly around the numbers up to June end. Anyway, on the daily consults, Nishudmak understands.
On the daily consults where we range anywhere between 3,000 to 5,000 consults, which are paid. But during the COVID times, we were doing even 20,000, some of them were free or some of them was from COVID that had prepaid us.
Thanks, Shushman. Can you also mention about in July how many diseases are happening, let's say, 4 months right now on the medicine related side?
I think you see that these results were for the last quarter, for Q1.
So when you're in
the Q2, I'm sure we'd be happy to share. But if you take June as
a month, can you give a sense of June as a month?
So you're asking for what in June?
On the medicine delivery side or the e pharmacy side, how many orders
are the deliveries per month?
So we are doing close to about like from in store and from the dedicated hub stores. Altogether we're at about 30,000 deliveries a day in June.
Thank you.
Thank you.
The next question is from the line of Prateek Madhana from Nomura. Please go ahead.
Hello. Thank you for the opportunity, ma'am. My voice is clearly audible, right?
Yes. Yes, it's audible.
Okay. So one thing on continuing from Anubhav's question on the 20 fourseven revenue, you expect to end with USD 50,000,000 to USD 60,000,000 of revenue, right? So from which divisions can we expect this revenue in 2,007? What can be the breakup?
So it will be a
combination of pharmacy, teleconsult and diagnostics, which is what we have said, right? And bulk of that to be pharmacy because we capture the entire value there in 20 fourseven as of including the back end, which is captured will be captured in Apollo
Health Co. B. Balaji:]
Okay. Okay. And then on the medicine delivery bit, so how much of our revenues from pharmacy currently are from online deliveries? Like the total INR 1500 crores which is the back end or INR 800 crores or almost INR 800 crores which is the front end revenue. So how much is the online revenue?
Sanjeet, can you take that?
Yes. So I think
as Manav has said that we are now building
up the entire design. So currently, it should be
in the range of about 5% of revenue coming in from the online side. Okay. And then so what was this like last quarter?
You mean to say Q4 FY 'twenty one?
Yes, yes.
Yes. So I think it was pretty less. It should be in
the range of about 2% to 3%. And I think major traction has happened last quarter.
So that is how the numbers are looking like at this point.
But we'd like you to put this in perspective. During this quarter, the Q1, we actually served from online and offline. We acquired 47 lakh new customers apart from the existing. And so there was quite a lot of pressure on the system. So these are the new customers that we've got with online and offline with 0 customer acquisition costs.
Got it. Got it. Okay. Okay. And then just one last question on this bit.
So what is our average revenue size from basically offline purchase on a pharmacy and online purchase, average billing size, if you have that data?
No, the data is actually is so different the way that we look at the customer. The lifetime value over like the same customer contracting is what we've seen is that if a customer is a regular customer in the pharmacy, he actually spends almost 25% more if he is online also. So the behavior patterns have changed. And that's why when you look at omni, it's going to be a little different. They might spend an average bill value in pharmacy might be 400, but then when they transact between both together, it goes up to 1200.
For the chronic customers, it's even higher. So these things, we're going to see a lot of varying. So looking at it, we're actually using technology to look at customers in a way more personalized view.
And you would also have seen that overall private label has also increased at 13.83% as an omni channel. If you today look at our private label sales, which are 9%, now it's at 13.8%. And you would have noticed that as part of the presentation.
Yes. So my next question was that, that what is like the peak that we expect from the private labels? Like where do we expect it to stabilize around? Is 13% a normalized thing or we expect it to come down or go further up in future?
It will keep slowly increasing. We understand what we are doing. We will be introducing more categories as you see. So it definitely won't go down. There was a surge for a lot of COVID related items, but we're making sure that it doesn't come down because we've introduced more categories which are more sustainable, including a few generic medicines and things like that.
So we've understood this category. We have people behind it and you'll see this continue to grow.
So, Usman, just just sorry one last question. On the generic medicines that you have introduced, are you manufacturing that yourself or getting outsourced to those?
We never manufacture. No one in the world manufactures their own. We go to the best in class and that's the difference. We'll make sure that we get it from the best in class and also keep us agile because we don't know manufacturing. We know the service industry better than anybody else.
Okay. Thank you. Thank you very much. That's all from us.
The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Thank you so much. Just a couple of questions on COVID. So what was your total contribution from COVID related hospitalization? And how do you see this unwind growth from Brainpower?
And second is, when have you captured vaccination linked volumes and revenues? Is it all in outpatient?
So yes. So overall, 25% of our revenues came from COVID. So that was almost if you exclude Delhi, which is not part of the consolidated revenues, INR 4.90 crores was the revenues which came from COVID, including vaccines and RT PCR. COVID vaccines is currently captured in outpatients.
And just adding to that, if we look at the IP volumes, 26% of our IP volumes came from COVID. In terms of revenue, 24% of 26% of total revenue in health care services came from COVID, looking after COVID patients.
Thanks. And how do you see both of these in 2Q, 3Q in the sense that would vaccines go up? And how about inpatient volumes and revenues?
Okay. Doctor, any vaccines, Ravi?
Yes. Vaccines, I don't see it going up. There is definitely a fall in demand for vaccination across the country. We were doing a peak of almost 100,000 vaccines per day. But now it's come down to about 25,000 to 30,000 per day.
And one of the reasons we're seeing that is because of the gap between the first and second dose of COVID-nineteen has been increased from 4 weeks to 12 weeks. So there is a longer time for that. We're seeing some amount of hesitancy in terms of vaccine. And third thing is people were very eager to get vaccinated when the COVID was at its peak. And as COVID came down, that eagerness also has come down.
So the multiple reasons for which the vaccine demand or requirement in the community has come down. But we are prepared to vaccinate as the demand requires. We have enough inventory in place and we're vaccinating across more than 200 centers across the country, both in metros and semi urban and semi rural areas. So but we don't see the same numbers happening in the 2nd quarter as happened in the Q1. Okay.
Thanks. But I
think approximately 50% to 60% of the Q1 volumes will come in approximately, right,
as we estimate now. Right. Right. As we estimate now.
But I'd like to add here two points. One is that Apollo has done almost 30% of all private vaccination in India. And for urban based, we've also gone out into rural areas and done this. And we worked with a lot of corporates to make this happen. And the second more important thing is I think we have to understand that adult vaccination is here to stay.
So in building up our cold chain and our capabilities, this will become an ongoing income for that will start taking accounted for.
And 8 ks, as we said, it will be 40% to 50% that we expect in this quarter because the second doses will come back somewhere towards the end of August beginning of September. Okay, great. Thanks. This is very helpful. And so the second question is regarding your core business, hospital services, where the current occupancy is, which is 67%.
I think earlier you had peaked at 69% pre COVID and where the margins are, which are again pretty high and we are not expanding volumes or capacity. So what's the outlook? What's the drivers for growth over the next 1 to 2 years?
So clearly, it is better asset utilization. I think like we said in this quarter, we were at 67% occupancy out of which 26% is COVID occupancy. COVID occupancy comes with an ARPUB of INR21,700, whereas our normal ARPUB is in excess of INR44,000. So with that, if we look at mature hospitals, our margins are at 23%. New hospitals are at 16.4%.
Keeping in mind, the ability to notice to 20% in within this year is something that we are looking at. And the way we plan to do this is definitely focus on centers of excellence where our RCOs are much higher. The ability to deliver on oncology, cardiac, orthopedic, neuro and transplant plus the emergency work. This will definitely increase our RCOs as well as our margin. The second is higher asset utilization.
We have seen the ramp up of our Tier 2 moving to 40% growth. And we believe that this is sustainable because that once that COVID comes down, there will be pent up demand to fill the boat. The third reason why we're optimistic about the future is that transport has started to open up. The airlines have opened up, and we believe that our patients will travel across geographies to come to our centers. Having said that, I think the decision to move into Tier 2 has clearly been a defining one that has resulted in a really good performance even during COVID.
Okay, great. Thanks. I've got more on 24.7. I'll come back in line. Thanks.
Thank you. We'll move on to the next question. That is from the line of Nitin Agarwal from Dham Capital. Please go ahead.
Hi, thanks for taking my question. Ma'am, just taking off on your last comment about the TAVR hospitals. In your assessment, what has changed in the dynamics in Tier 2, Tier 3 towns for a business? It should give you more comfort on this now or in follow-up?
So one thing is that Tier 3 is really not in our radar. Tier 2, I mean, we did implement we do have 2 hospitals in Tier 3 and both of them are contributing to a bigger. But the most significant thing that we realized is that people move to a category leader. So the fact that the Apollo brand is very strong and it's strong because of the clinical outcome. So we really managed to get very good doctors on board.
And this, I think, is something that maybe you're a little bit slow to do, so I took a little time to ramp it up. But now that we have all of the doctors in place, we believe that the occupancies will improve.
Okay. And secondly, now with the transaction which is there in Apollo HealthCo, incremental point infusion coming to immediate parent, there is now a significant amount of financial capacity which is there and the free cash flow business is pulling up in the hospital business. So from after this business transition process, how are you looking at only 8 to 3 years?
So first of all, your line is not clear. But if I understood the question correctly, you want to know about the free cash flow post Apollo HealthCom moving out. How do we use it? So how do we use it? We are looking at expanding our presence and consolidating our presence in the north.
There is one acquisition that we're looking at and we will use our free cash flow plus the fact that we've got INR500 crores to INR600 crores invested in mutual funds. So the company is adequately funded to make this acquisition. And we're also looking at something in the North Sea, which again, I think we are adequately funded to do that without having to add on more debt.
So I understand. So I completed
the point. So this would be these acquisitions or these target markets now that you're looking at are largely what Tier 2 towns, Tier 1, Mexico? Tier 1, Tier 1 and one which is Tier 2. Okay. And if I squeeze in a last one, on the pharmacy business, we've had a pretty
large increase in the product label contribution in the current quarter.
It hasn't quite reflected in the improvement in the EBITDA margin for the
business. So how do we wonder how is there anything specific? Is what some
of this private label business are not
this is contributing that we need
to be margin side? No, no. I think we said in our opening remarks that while the margins have actually improved to 7.6%, there were 37 floors that were used 4.24x7 for its customer acquisition and marketing costs, so which is why you are not seeing the margin improvement. So clearly, if you add back this amount to the INR 79 crores that we said, I think you will see that there is definitely an EBITDA margin improvement of at least 40 basis points. Okay.
Thank you.
Thank you. The next question is from the line of Anubhav Agrawal from Credit Suisse. Please go ahead.
Yes. Thank you. Just one clarity on the pharmacy business. I appreciate you just started the generic medicine business, but how large it is today? Like is it like 20% of the business, 34% of the business?
How large is it today?
Shubhna? We didn't start a day. It's not significant enough for us to really. It's like in the region of 90 crores.
And how do you see this? At some point of time, will it become like 10% of the business, let's say, if it takes 3, 4 years down the line?
It should. I think that this is our counter to this ramp in discounts that are actually not right. So I think that this is a much more intelligent way of customer play is to be able to give them a better product at the right price.
And one more question on the pharmacy business. If we look at this total business, how much is the portion which is coming from non medicines? For example, the private label of 13.5% plus FMCG put together, how much of that is non medicines?
FMCG FMCT was about 30%. So 30 plus is 43%.
Okay, sure. Thanks, Shubhrant. The second question is on the bed capacity. This quarter, we added about 90 beds in Tamil Nadu and 76 to the last year. So this 90 beds have been added?
Has they been added to the Green Bay Hospital? Which hospital has been added? And same question for the last year.
We've operationalized new beds in our existing facilities.
So, Mr. Ma, which facility? I mean, is there any large hospital with 50, 75 facility to 1 particular hospital? That's what I I
have. So Vyat, Chichy and also in new newborn days.
Okay.
Okay. So $90,000,000 you have added in terminal admin, that's
basically That's tricky. For maintenance.
And last question is on this HLS, which is in the cradle of the day care business, our revenues are higher sequentially, but our EBITDA is significantly lower. So what led there? Because last few quarters, we've taken out so much cost from the system. What happened in this program?
Chandeshi, sir?
Yes. I couldn't get that first part at this point. Can you just repeat?
Yes. On the cradle and
the spectral business, revenues are okay in this quarter, which are higher compared to the March quarter, but the EBITDA has significantly gone down because of yes, we have fixed software payouts, but it could not completely
do. And
the EBITDA margins are a little lower. So if you're comparing it to Q4, Kratos had 3.6 crore, that is 36,000,000 of EBITDA. And Q1, I thought 22, it's about 30,000,000. There are some year end adjustments that benefited the Q4, but primarily it is static. On Spectra, we had to take the we had a lower elective surgery.
The numbers you are seeing is also including the vaccines. They were also doing overall vaccines. At ASML, we did about 6 lakh, 80% of that number went came from clinics, 20% was Spectra. So that revenue is what is benefited the Spectra overall number. But we have guaranteed payouts on fixed doctors, which is hence, reduce the EBITDA.
But one doubt, Subhashish, on this is that our revenues are higher sequentially. So even if we had a fixed payout doctor, that would not have changed so dramatically from the March quarter. No. Allow me to just lay that out. Our revenues minus vaccine, actually, Inspector has gone down.
That's the reason, RMB620,000,000, RMB630,000,000 down to RMB500,000, But it looks like similar because of the vaccine addition.
The doctors that I'm
talking about are fixed off the chaos that will even out once we have resumption of elective surgery.
I think the perspective that you should take in this is that AHL is now focusing on diagnostics. And therefore, the increase that has come from RTCC test is part of our focus on diagnostics. So going forward, you will see a huge increase in the diagnostic business as well as in the clinics business?
Yes. Just last clarity on that. On the diagnostic business, we have about 847 as part of our network right now, and we added about 200 odd centers in last 1 year. So in next 1 or 2 years, how do we see the 847 as a number? Do we see this is like almost 2,000 as a number in next 2 to 3 years?
I'm just trying to understand that this. Yes. You're talking about the collection center network? Yes, correct. That's right.
The whole diagnostics is, Chamila, why don't you explain the whole diagnostics, please?
Yes. We are doing 2 things on the diagnostic piece. One is we are also ramping up our home collection capability. In the quarter 1 FY 'twenty two, we added over 3 50 Clubhouse across 7 to 8 Target Cities. Plus the collection center network, we've added, we continue to add thereabout the 200 to 300 per quarter ish where 100 that we are hoping to do in the saturated markets per quarter.
That's not actually because last full year, we added only 200. Yes. But we have this quarter, we added further we had pipeline of further addition. So we would reach in about a 2 year time frame, as you rightly said, up for up to 1,000 collection centers. Thank you, sir.
There will be a netting off. There will be some drop off. So that's why the addition to gross addition. Overall, from the 847, we should be about 2,000 in the next less than 3 years. Okay.
Thank you.
Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Yes, thanks for the opportunity. Just a couple of them. So one is understanding on the new CapEx requirement and the growth potential going forward. So what I understood was currently with the occupancy of 67, within that there is 26% COVID and you still have a long runway to have the non COVID patients still 67%, 70%. And so are there any plans for greenfield in the next couple of years?
So what do you think about greenfield expansion versus
the 2 acquisitions that you spoke about in Tier 1 and Tier 2?
We're not really looking at greenfield at this point of time. We are looking at, like I said, strengthening our presence in the north, which will be 2 brownfields.
Okay. Fair enough. And in terms of your margin journey,
I mean, the new hospitals have picked up quite a bit. What I'm trying to understand is you also mentioned the ARPUB of non COVID is 40 4% and COVID is 21700. Yes. Am I audible?
My line is not good. We can't hear
you. Hello?
Yes, ma'am. We're able to hear you.
Can you hear me?
Yes, sir. Yes, sir. Hello? Go ahead.
What was the question? Can someone repeat it? From the other, yes.
From the
other, yes. From the other, yes. From the other,
yes. Yes. Please repeat.
Okay. So I'm trying to understand the outlook on the margins. On the backdrop of you mentioned ARPUB for non COVID is 44,000,000 and COVID is 217,000,000 and we've already seen a good improvement in the new hospitals. So how do we see with obviously non COVID patients share increasing, we would have an upward trend. So how do you see this panning out over 21%, 23%, 24% for your margins?
I mean some of the competitors are reporting 25%, 29 percent.
So I just wanted to know your journey in that growth path.
So I think what is realizable is you will see the mature hospitals moving into that territory of 24%, 25%. New hospitals will move up to about 20%. So you'll see a blended margin of about 21% in the next 1 year. And this will come from higher asset utilization, focus on centers of excellence, which I think I spoke about earlier, where the RPOs are higher than the margins are earlier or higher and also from cost cutting. So these three initiatives, we believe, will help us increase our margins.
So we have an asset utilization. If you look at our we have added new hospitals. So potentially, some of those assets keep getting mature, and we take it to a higher much higher utilization. You will realize that we can also achieve higher margins. So look at complete term holdings, of course, I understand what you're saying.
If you look at our most mature assets like Chennai, we all know that we also are at 27% or 28%. It's just that we are we have added capacity. There is headroom for growth as some of that starts coming up. As Nishmita said, we have seen a very good uptake in our Tier II hospitals, in our new hospitals. All of this, we believe, will aid as well over the next couple of years.
Including Proton has started doing well.
Okay. Got it. And lastly, on Apollo Health Co. So you have talked about new pool of investor capital. So any rough time lines, A and B, in terms of whether you are looking at strategic or financial partner here?
Shobana? Hello? Shobana? Yes. Hi.
We are definitely it's imperative that one of the reasons for hiding this off also was to be able to chart a course that would create this competitive intensity to work in this environment. And at that stage, on one side, while we have strong partnerships with Airtel and HDFC Bank and they're not financial partners, On the other, we are creating a pool of capital that will help us grow and for that in the next 60 days we should come out with an announcement.
Mr. Birwal, are you done with your question?
No. I asked whether it would be more strategic or it would be more financial investor that you're looking at?
It would be a combination.
Okay, perfect. Great. Thank you and all the best.
Thank you. Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Thank you for the follow-up. And just talking about HealthCore a 20 fourseven platform,
your Can you hear us?
I can hear you. Can you hear me?
Hello, Mayank?
Yes, we can hear
you. Okay. The last question, I mean, sorry, question.
Operator, looks like management can't hear me, but I can hear him.
Okay. What is the question? We can answer now.
Okay, great. So the question is for the HealthCore 24x7 platform that your current doctors and the connect with the pharmacies is maybe under 1% of India's total. It just shows that it's a very, very light sort of underlying coverage that you have. So how will you fulfill the demand? And it's a digital platform, so at some point in time you will have autistic sort of people, patients coming on board.
And related to that is the competitive intensity. So 1 or 2 of large pharma companies have also launched their platform and they have a natural connect with lots of doctors and pharmacies. So just your thoughts on this.
Thank you. So A is we believe that customers are discerning for a pharma company to launch their app. One is that I think that just as we don't manufacture medicine because we don't understand that relevance. And I think that the pharma companies do need companies like ours to create it to retail. So to become competitors, I do not understand their logic.
I think that there but many more pharma companies are now coming to us and asking us to align with them to be able to help in patient engagement. And those are the interesting models that have existed in the West and that can only be done through a technology heavy platform like ours. And you'll see more of those partnerships. So I believe in those. The next question you asked is the capability or the ability to be able to ramp to India's demand.
I can tell you that we have not been that the very fact that we went from being doing 5,000 pharmacy deliveries to 30,000 pharmacy deliveries within 35 days clearly demonstrates the fact that we have the right supply chain. In these challenged times, people without supply chains are the ones that will really create a lot of that customer disconnect. So Apollo has the strongest supply chain available in the market today. There are certain markets that we have a huge market share in the major cities of NCR, Bangalore, Hyderabad, FISAT, Chennai. But apart from that, we also have the capability to be able to deliver with our 4,500 stores.
We continue to ramp up and open more than a store a day nowadays. And I think that this gives us the ability. If we do require, we have connections through our supply chain company with over 35,000 pharmacies And this is available for us to use another light model to be able to do supply. So with regard to doctors, Apollo, 7,000 of Apollo doctors being available, We believe that it's important to offer people the right quality. And the other doctors, again, we're investing heavily into technology.
We'll have the best clinical decision support system, which is currently being tested. Once we do that, you will find that the efficiency also will ramp up. So I believe that in we have a lot of the answers. I don't claim that we have all the answers, but as we get better and bigger, we will solve for these in a sustainable way without foregoing from the team. Just to add to what Shobhan has said, I think that 1% perspective is a very macro perspective.
So what we do is to look at relevant market share. And if you look at the Tier 1 cities and the Tier 2 cities and the Tier 3 cities where they're present, I think this is what we're especially in Tier 1 where we've created the whole ecosystem of hospitals, clinics, delivery centers, spectra, we look at relevant market share. And I believe that 20 fourseven and the pharmacy in particular, they had marked out 10,000 PIN codes. But if you look at the Q1, they've also they've already moved that to 16,000. And like Shobhuna said, it's come with the physical pharmacy format plus the logistics chain, the supply chain that we have, I think we will be the strongest player.
It's a strong combination of having an omni channel basis.
Okay. Great. Thanks. And just final, if I can, I know we have up on 1 hour? Sutha, how do you think about the best capacity?
Sorry, you're not able to hear it again. Hello?
Okay. So, Swinda, how are you thinking about your bed capacity? And I'd say that because at 67%, 69% utilization, occupancy, how much further can you go? And is it time to press a panic button to say that now, look, we need to add 1500 beds for the next 3 year, 4 years journey on it?
So if you look at 67% of fee, I think the first cut is that we've not operationalized all the beds. So we have 8,000 beds operationalized. We have the potential to operationalize another 2,000 beds by with at very little cost. The second part of it is that you must see us that we will have a calibrated expansion plan in place because this company must we will continue to show growth. And to show growth and to strengthen our market share in certain cities, there will be some brownfield acquisitions that we will make, which will increase that capacity.
But having said that, the second cut that you should look at is a decrease in all off, which means it gives us the potential to increase volume. And this, we will actually show post COVID because during COVID, we had an after 7 against the normal 3.5.
Okay, great. Thank you so much. Very clear.
The next question is from the line of Alok Dalal from CLSE India Private Limited. Yes.
Hi. Guys, can you hear me?
Yes. Yes. We can hear you.
Yes. Yes. Shrutin, just one clarification. What was the contribution of ALT PCR tests for the diagnostic reviews for the quarter? Shrutin?
Yes.
I'll answer that. In terms of volume, we did 6.6 lakhs RBC surface in the quarter, up from about 2 lakhs in the previous quarter. In terms of an avenue, the revenue contribution, we had a non COVID of INR 60 crores and the COVID revenue was INR 45 crores.
Okay. And sir, last quarter, you had given a guidance that diagnostics will be around INR 500 crores sales by FY 'twenty three. Just to clarify, is this all organic or there will be a component of inorganic or acquisition investment?
We have largely organic growth because we have mastered to saturate and some more potential.
Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Over to you.
Yes. I was answering the question on the component of inorganic. The way we are looking at is large organic growth, silicon opportunistic inorganic acquisitions in markets where we are not as strong and maybe in the market that we are continuing. But our primary focus will be on organic growth. There will be some component of inorganic, but that will be at, obviously, the right pricing and the right sizes that we will look at and especially in the new markets.
Sure.
And one last question. Sundaram, you had mentioned that you would look to bring down the Flexhare component below 20% by March 21. Any fresh timelines on that?
I think COVID is delayed, but like I said, by the end of the year, we hope to bring it down by 50%.
Okay. So that share will be down by 50% from that by the end of the year?
Yes. It's currently at 24%. We've already brought it down, but it will come down further.
Thank you for taking my question.
Thank you. The next question is from the line of Harit Ahmad from Spark Capital Advisors. Please go ahead.
Good afternoon. Thanks for the opportunity. My question is on the Pharmacy Distribution business. You've had a very strong quarter on quarter growth and then you've seen the growth as a content as well. And then you mentioned some stocking and other patients and some additional demand that you saw during the quarter.
So going forward, how should we think of this current run rate of around R1500 crores for the business? Will there be some softening as the stocking went well?
So 18% to 20% growth is what we have said. We have guided on that and we will continue to maintain that growth, which is how we should look at it.
Understood. And, Fitran, when testing on this back end pharmacy that we are moving to Apollo Health Corp. So does this entity currently procure for our hospitals as well? And just trying to understand what happens to the procurement of the hospital launches entity needs to a total of 4.
So it doesn't include the hospital procurement, which is part of health care services business completely. And this is just the procurement for the standalone pharmacies business. So the hospitals business is integrated hospital procurement is integrated with health care services completely.
The next question is from the line of Nitin Agarwal from Dham Capital.
Hello. And just a follow-up on the diagnostic business. Currently, the margins are on the lower side and you're looking to ramp up the growth. The peers said it's around 25% EBITDA margins in this business. By when do we see ourselves getting into the trend of 20%, 25% backdrop margin range?
So
I'll answer that, Christian. The current on a standalone diagnostics business, our margins currently are at 25% abated by some of the additional business from the COVID. On a steady state, the numbers are reaching there about the 20%. So I'm expecting us to expand and go up to 25 in the next 12 months.
Okay. So the 500 crores, even despite the revenue targets, which are being above 400 crores, we have about 30 crores revenue. So next year, we should be able to maintain a 25% margins in that account.
Yes. We are aiming to expand 24% as we reach that revenue objective. We don't come on. We are in a position to do above 20%, nearer to 20% now.
And Jamsikanth, where do we go from there? On Planet grows, we still are sort of pulling up a lot of the larger risk here. From that business, as you see the dynamics of the business, how big a business can really get to, say, over the next 3 to 5 years?
That quickly has a potential and there is also a need. As you can say, while we look at the size of the overall market, I think the size of the unorganized is consistent is pretty high. It's already 85,000 thereabouts. So I guess we're going ahead the time for organized businesses to continue to ramp up and the space is available. So we have 3 spaces.
1 is also to start also looking at gaining on clinical leadership, which is what Apollo as a brand stands for. So we will pursue that as an objective. In terms of overall number, I think the headroom to grow to the size of 4 figures and above, in the 1,000 core plus kind of revenue, this is an opportunity that we do have. And I guess that organic growth is our first lever. Inorganic will be opportunistic.
So we'll use these to to consistently look at growth.
And from a geography perspective, Pajesh, when we get to the final crore number, what proportion so it's going to be south dominated or it's going to
be a very easily spread out mix for us from
a revenue perspective? We are going to be we still have a mix in the 500 objective. We have a mix which is skewed higher on south and east. But I think we are making entry into the other markets in the west and there will be some components, but they'll be in their early days. So the percentage contribution from these new markets would be not more than 20% of overall.
Got it. And if
I could just squeeze on, Nishu, on the 24x7 platform, how
important
do you think are in our ability to get partner doctors on board? In terms of what role will they play going forward? And 2, what is the other competing platforms? I mean, what incrementing proposition do we offer to potential partner doctors?
As we've seen, the Aponvo experience for partner doctors doesn't isn't just about 247. Even though we're able to bring them more customers in their community, Like for instance, the vicinity of our pharmacies, it becomes easier for us to connect the doctor partners who are close by. And we've seen especially during the pandemic that's working well. But more than that, the reason that doctors would choose a premium platform like ours is the ability to hook into the Apollo ecosystem gives them higher access to CMEs, to learning, to second opinions, our superior CDSs that would help their technology and their clinical decisions. So it's a 3 60 degree package that we offer doctors.
Right. And in your assessment, how in this whole outpatient ecosystem that multiple players are looking to develop, I mean the most critical piece is what are affiliates, the online prescription or I mean multiple pieces of that, but is there a fair assessment that are ability to generate online prescription is actually the core of this proposition?
Online getting online consult done? Don't get me started on that. I think that getting a doctor on board to generate for a free consult to generate the prescription is actually unethical. And I don't think that's the way that it should be done. A doctor's service should be valued and should be paid for.
So unless we get that straight in India, then all else. So I think Apollo stands for bringing the highest standards. We do not give away free free consults to generate prescriptions. If we wanted to do that, I mean, we're not going to go down that road. So I declined from answering that.
Okay. Thank you, Vidaaswala.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Ms. Suneeta Reddy for closing comments.
Ladies and gentlemen, thank you for joining us on this Saturday afternoon call. This has really been a defining quarter for all of us, but we were able to live up to our ESG commitment where we demonstrated purpose as part by serving societies and our communities. And this has truly been Apollo's purpose, the ability to serve our patients and our communities. I believe we did so this time and we did so by putting weight of our infrastructure, our doctors, our nurses and our management towards looking after patients. And in the process, we looked after over 80,000 COVID patients.
While we remain prepared for the 3rd wave of COVID, we continue to be focused on innovation, on clinical efficiency and the agility of our institutions to serve larger communities and our consumers. Thank you again for joining this call and have a wonderful weekend. Stay safe. Stay happy.
Thank you. Ladies and gentlemen, on behalf of Apollo Hospitals, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.