Please note that this conference is being recorded. I now hand the conference over to Mr. Devarishi Singh from CDR India.
Thank you and over to you, Mr. Singh.
Thank you, Nirav. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for Q4 FY 2021, which were announced yesterday.
We
have with us on this call today the senior management team comprising Mrs. Sunita Reddy, Managing Director Mrs. Sangeeta Reddy, Joint Managing Director Mrs. Shobhanar Kameni, Executive Vice Chairperson Doctor. Hari Prasad, President of the Hospital Division Mr.
A. Krishnan, Group CFO Mr. C. Chandrasekhar, CEO of AHL Mr. Obol Reddy, CFO of Pharmacy Business and Mr.
Sanjeev Gupta, CFO of Apollo 20 Fourseven. 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 number 2 of the investor presentation shared earlier. Documents relating to our financial performance have been shared with all of you earlier and these have also been posted on our corporate 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. Good afternoon everyone and thank you for taking time out to join our call. First of all, I hope you and your families are safe and healthy in these difficult times. I trust that you have received the earnings document, which we shared yesterday. We profited this year on a positive note caused a slowdown which the country had witnessed due to the 2nd wave.
The economy would witness a cyclical recovery in the subsequent quarters. Coming specifically to Apollo Hospitals in quarter 4 of FY 2021, we witnessed a revising in patient footfalls in non COVID occupancy across the network, which translated into a strong financial performance. Overall, the quarter witnessed reduced COVID admissions. Just to give a perspective on this, COVID discharges in quarter 4 FY 2021 stood at 5,450 as compared to 14,616 in the prior quarter. Additionally, COVID occupancy reduced to a mere 4.26 beds compared to 1173 beds in quarter 3 FY 2021.
In quarter 4 FY 2021, surgical discharges continued to gain momentum and grew at a rate of 32% on a sequential quarter basis. The non COVID discharges during quarter 4 FY 2021 registered a 21% quarter on quarter growth. Sequential quarter growth in IP volumes was at 9% with mature hospital volumes growing at 12%. Against this backdrop, let me walk you through the financials of the quarter. Stand alone quarter 4 FY 2021 revenue grew by 2% quarter on quarter to INR 2,410.
Healthcare services grew by 4% to INR 1291 crores. SaaP revenue grew by 1% and was at INR 11.19 crores. Our new hospitals recorded revenue growth of 16% year on year and 1% on a quarter on quarter basis, while mature hospitals revenue grew by 2% year on year and 5% on a quarter on quarter basis. The Post India's 1.1.6 percent EBITDA for quarter 4 FY 2021 to the INR 336 crores compared to INR321 crores in the previous quarter and this after taking a charge of INR25.2 crores on account of marketing costs for Apollo 24x7. Without this cost, EBITDA growth was at 12% quarter on quarter.
Healthcare Services EBITDA was at INR 280 crores compared to an EBITDA of INR248 crores in quarter 3 FY 2021, a growth of 13% quarter on quarter. Margins at mature hospitals were strong by 24.2 percent, 234 basis point improvement on a sequential quarter basis. Margins at new hospitals stood at 15.7% for the quarter. Our comprehensive cost optimization initiatives resulted in a saving of INR 343 crores, which were realized in FY 'twenty one. Going forward, we expect to sustain a cost savings of around INR 100 crores to INR 125 crores in FY 'twenty two.
SaaS to big cap post India was at INR 81 crores at a margin of INR 7.3 compared to INR 6.6 on a sequential quarter basis. On a combined basis, the Pharmacy platform EBITDA was at INR 93 crores at a margin of 6.6%. 180 new stores were opened in the quarter, bringing the total to 4,118 stores. Moving on to consolidated results. During the quarter, we have completed the acquisition of a majority stake in Apollo Medic Lucknow.
Results have been consolidated in Q4 FY 2021. We have also completed the acquisition of the balanced 50% stake in our Calcutta Hospital, renamed Apollo Multispecialty Hospital Limited. The results of this hospital will be consolidated from Q1 FY 2022. Consolidated revenues grew 4% on a quarter on quarter basis to INR 2868 crores. Healthcare Services grew by 7%.
Consolidated EBITDA is INR 412 crores, a growth of 6% on a quarter on quarter basis. Healthcare Services EBITDA grew by 13% and Healthcare Services margins were 21.1%. Consolidated part was at INR 168 crores. This includes an exceptional item of INR 25 crores pertaining to the Apollo Mobic Lucknow consolidation. AHLI recorded an EBITDA post India of INR 31 crores as compared to an EBITDA of INR 16 crores in quarter 4 FY 2020.
The business has recorded a 26% year on year 7% sequential quarter growth in top line. Net debt as of 31st March 2021 is INR 9.22 crores. We have a debt to equity ratio of 0.44. The Board yesterday approved the formation of Apollo Health Co, AHL, in our transformational journey towards creating India's largest omnichannel health care platform. This will be done through a slump sale of identified businesses undertaking, including a) AHEL's back end offline pharmacy business, excluding hospital based pharmacies b) AHEL's digital healthcare platform 20 fourseven c) AHEL's investment in retail pharmacy business, Apollo Medical Private Limited and the Apollo 20 fourseven brand, the Apollo Pharmacy brand and private label into AHL's 100% subsidy, Apollo Health Co.
Limited. This proposed reorganization from the protects the economic interest of all AHL shareholders and sets the platform for tapping new pools of invested capital that will enable a rapid scale up of the digital healthcare platform. At the time of capital raise, AHL valuation will reflect current and future growth potential. Now to present this product and the plans for the future in detail, we have Shobhna Kamineni, Executive Vice Chairman and Puneetha Reddy, Joint Managing Director, who will walk you through the features of Apollo Health. Shobhna and Sunita, over to you.
Thank you, Sunita. And I think you clearly articulated what HealthCo is. I will spend the next 5 minutes answering 7 FAQs that we've been hearing and maybe it would put everything in much better perspective. So the first thing is everyone says, why is Apollo doing this? Why did they create it?
And why should Apollo do it? And what are the promoters going to make out of this? So our Chairman, very early, if you see our mission statement, really talks about bringing international care, affordable care within the reach of every Indian. So it doesn't matter how many hospital beds. This is something we went and introspected and said it doesn't matter how many hospital beds we put that we'll never be able to satisfy what's required.
And is it even necessary in this digital day and age where everything is transforming, everything is being disrupted? And Apollo is, let me tell you, the only entity, not just in India, but we can be proud say in the world, that is in every point of care for the customer. Like as Sunita explained, we talk to you every quarter about hospitals, about clinics. We used to talk to you about insurance, but we still have the TPA. We talked to you about pharmacies.
We talked to you about some of the brands we have, the private label brands we have, about different formats of diagnostics. It's all there, the most awesome collection of doctors. So it's all there. We said, what can we do to move this out and make choice so simple for you? Because that's something that we saw.
Choice and access was something that we really saw lacking, no point in time as much as during this pandemic with that. The day the first wave struck, almost 3,000 doctors of ours were just sitting at home
with
this. Patients had no access to them and at many times, it was tough for them to come to the hospital. What happened at that during that first wave, I think it was one of the most fortuitous things that Apollo had already launched Apollo 2 47, which digitally enabled in 45 days, 3,500 doctors were on a digital platform that could touch people every day. We had put out a product of the first corona health check that health self assessment scan. 11,000,000 people took it in 2 weeks.
So this really gave us a validation that we understood tech, we were agile and we knew how what the customer needed to simplify choice. You've
got a
slide up there because sometimes it just defies logic that when your car is spoiled, you don't tinker with it yourself or YouTube or Google it. You take it to a mechanic. If you need anything fixed at home, you need to call a plumber or a legal problem, call a lawyer. But with help, there's so many torturous ways that we go before we actually come to the right solution. 247 is to simplify that and bring within 15 minutes, can you imagine, I'm not offering you 100,000 doctors, we are offering you 7,000 Apollo doctors 20 fourseven available in 15 minutes.
And I think that leaving that proposition, we also are the only people who are able to offer you And this is something that even Amazon or nobody can do this around the world. In 2 hours, you will get the medicine you need because we realize what is the point in giving in if a person needs a medicine, an acute medicine, the next day, it's pointless. They can just walk to their nearest pharmacy. So availability and the fact that you can get it in 2 hours. So we realized we have the capability to be the best omni channel.
Apart from that, the diagnostics capability of having an army, literally an army of phlebotomists who can go to the house now, you do not remember how frustrating it was to get up on an empty stomach and go to a hospital to get your test or to think that you call another service that you know of. Now you can get an Apollo service at your house. And I think these 3 phenomenal propositions put together with the only health stack, which is backed by data. Just to give you an example, the clinical decision support system that I'm going to ask Sangeetha to talk about in just in once I finish the FAQs, she's put this together. It didn't happen in 1 year or 4 years or 5 years.
This is 30 years of data which gets put together to bring the right solutions and the right answers. So that's why the timing is right for something like this. Financial services have been disrupted. E commerce, shopping has been disrupted. We think that healthcare is the one that actually the customer needs most and Apollo is the one that they give it to them.
And so what's the potential of this? All we can tell you is that so far in the last 500 days, we have served through our pharmacy network and Digiti, we have served 270,000,000 people to help them through this pandemic. And I think that is serious capability. In the 1st year in the 1st 16 months of our operation, this is what we were called upon to do. But the potential for this is really that there will be 100,000,000 Indians in over 700 cities in India and in towns and places where they would have just heard of Apollo and thought it's so aspirational, but now it's available on their phone.
So this is the potential of what a healthcare what a digital healthcare like we are planning to give is there for 100,000,000 Indians. And this is the potential of that what we believe in 5 years. And thank you for saying that there are many forward looking statements, but the revenue potential is close to $2,300,000,000 And we can assure you that every one of those because the pharmacy is within this, you have been tracking pharmacy closely. You'll be very disappointed and our shareholders who own this company will be disappointed if we don't have the stellar performance that we bring to you every year. We continue that.
That's a promise that we'll grow that business 18% 20%. We'll grow it with the margins that you all expect. But on top of that, we've create this layer of digital business that will create a hockey stick growth. That is what a digital company can do. And that's why Apollo decided, so many people asked us, why did you put this into a separate company?
And the reason that Apollo took as it's not at all a calculated risk, but it is the most intelligent decision. Because at this point, you have to see, are you an Amazon and just put digital somewhere or are you a Walmart? And then we realized that actually both are the same. There is this is the age of omni. Unless you can back digital with physical, there is no future or path to profitability.
And I think as a public listed company, we have responsibility to many shareholders and diversing investors. And this is something that we took seriously. So we do expect by year 3, year 4, we will have EBITDA. By year 5, the EBITDA will be significantly higher than if we were just a stand alone pharmacy or doing just stand alone concise or digital. So I think that it became a very interesting point for us.
Another slide that you have available with you is about the physical assets of Apollo. And you will see that this gives you why we'll succeed. Please tell me if anyone, now that we're convinced that omni is the way to go, there is no other player that has the breadth and strength of physical assets with the brand in terms of hospitals, 70 or 10,000 beds, 4,000 pharmacies, 500 diagnostic centers, 200 plus clinics. The capability of 30,000,000 IPOP that we've managed every year and the digital that we do in managing 5,000,000 plus insurance lives, we know the story. And for anyone to create the same footprint, physical footprint, if it was even possible, would cost them so much that they would be that they knew it can never happen.
But this is available for this company, for Apollo HealthCo. We'll take all of that and layer the digital on top of it. So I think that our business model is superior that and we have the capability and many partners that have already signed up and are working with us, whether Airtel is one of them, HDFC Bank, the SBI Bank. So we have serious partners who we will be taking along this journey to make sure that we can service the customer to whatever he wants. This is a new age of digital customer.
And this is the platform that you will see that pharmacy was 7% today has a 7% market share of pharmacy retail. In the next 5 years, we expect that to be close to 30%. So in every one of these segments, whether it's the Diagnostics segment, whether it's the Telemedicine segment, which were already the largest as we say. And today, we're even larger than 1 mg in terms of the number of deliveries we do every day. So whether it's digital, whether it's physical, I think that this is the that this will be the defining digital health network, not just for this country, but probably it will immediately stand out in the world as the most valuable.
So Sangeetha, would you be able to explain a little more about the technical part, just the CDSS? Or shall we wait for questions? Whichever way is fine. Srinita, please go ahead, Srinita. Okay.
I'll take a brief minute just to say that this transformational journey is grounded on the concept of serving the customer in the most integrated manner of bringing together the assets that we have but enhancing the capability and the access to those assets using a digital first approach. So I think most importantly, every touch point, physical, online, website, call center will stem from a consolidated user profile. This consolidated user profile, which is grounded in a common unique health care identifier, is also collating all data points into a personal health record. This is a journey we've been following for a few years now, which is significantly enhanced by the digital and the combination of the pharmacy retail coming into the hospital database as well. So this combination and these touch points will evolve into a SimsimJet AI and ML enabled platform of the clinical intelligence engines.
This engine has a consumer facing side as well as a doctor facing clinical decision support. And in one line, I will just say that this will enable the latest and the best of health care knowledge and information to be available at the touch of a button to all our doctors and all customers who seek care and this consolidated data point will be available for us to help the user profile get the best possible medical care. I'll stop with this because I'm sure you have a lot of questions. And I'll end also by saying that all these are really grounded on the best technology stack. We have some of the most powerful engineering brains.
We validated our path forward with global expertise and whether it's the platforms we're using from Mongo to Postgres to our ability to use React Native for our app and Snowflake for our cloud data warehousing with all security layers as well as international standards in terms of HIPAA for patient privacy and confidentiality. That's it for me. So thank you. Right now, we'll open the line for question and answer. Of course, I have Doctor.
Hariprasad, Fishman, the entire team with me and the team from 20 fourseven. Shubhna and Sangita will also be here to take all your questions.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Saiyantan M from Credit Suisse. Please go ahead.
Yes, thank you. I have two questions. So first one is on COVID vaccine administration. So how many vaccines did be administered for Q21? And what is the cutting trend?
Also the AHL and primary care segment consisting of Phoenix, it produced a strong margin expansion in the quarter. Is it because of the vaccine administration? Or are there any further reasons, I think?
So Hari and Chandra, please take that.
Yes. Actually, we've, as of now, administered more than 2,000,000 vaccines in the last couple of months. And it's been a seamless integration between the different entities within the group, starting from 20 fourseven to the clinics to the home health care, which will be an administrative vaccine because we believe it's the responsibility of the group as the largest provider. And we are already the largest private health care provider in terms of the number of vaccinations that we've done. And we have line of sight of enough vaccines for the next couple of months, the existing vaccines.
And
we aim to
vaccinate about another 8,000,000, that is a total of 10,000,000 people in the next couple of months as we move forward. And we are looking at this as a very important tool in the control of the pandemic and in prevention of the possible 3rd or 4th place that are on their way. And it is adding to the top line and we've not added any other additional fixed costs to the vaccination initiative. The staff and the infrastructure is all from within the existing system or is it being provided by partners so there is no additional cost? So despite the capping which has been done by the government, there will be a margin on the vaccination program.
Tanmay, you want to take the same part of it?
Yes. I would like to add that Apollo has done more than 45% of all private vaccination in the country. So it's actually significant.
Yes, ma'am. On the question on AHL, which I will answer. The Q4 did not have much of vaccine income. So that doesn't change the profile. It was more of return back to normalcy and the pent up demand coming back, especially in electives and also in the primary care segment.
And we continue to hold our growth in the other important segment in diagnostics. So this is a natural growth. We do not have much of vacciners as trigger for a significant growth in the quarter 4.
And I hope all of you are vaccinated. And if you're not vaccinated, please walk into any of the Apollo centers and get vaccinated quickly.
Sure. Thank you. My second question is on Apollo 20 fourseven operating expenses of NOK 25 in 4Q. And so is this a run rate that we can expect going ahead in FY 2022 as well?
I think that it's a starting run rate. All I can tell you is that and it comes also from the competitive pressure and as we continue to grow. But what we're looking at is that our cost of acquisition and then the people that really engage within the app are much higher than what we expected. So we're running at about 70% of our expenses. And I have Sanjeev Gupta here, who's the CFO of 247.
Sanjeev, can you come in with a little insight on some of those figures? Yes, ma'am.
So I think what we are looking at is that as we ramp up our business and the traction that we're seeing and almost we are seeing the users coming in and then giving more and more transactions across all the business segments, we may expect slight upward movement on the expenses. Could that extend the revenues also match? And on overall basis, the unit economics are getting better month on month.
Okay. Thank you so much. Thank you.
Thank you. The next question is from the line of Ankit Agarwal from UTI Mutual Fund. Please go ahead. We are unable to hear you. May I request you to unmute your line from your side and go ahead with your question?
Meeting no response, we move on to the next participant. The next question is from the line of Mandan Gopal from Sundaram Alternate Assets. Please go ahead.
Good evening to the team and thanks for taking my question. First of all, congrats on the excellent platform that you have created. I've used myself and found it really useful, the Apollo 20 fourseven. My first question is on how do we see this unit economics of this platform? Because the consultancy, how do we so what we pay to the doctors, How is the revenue model for the 20 471 is going to be?
If you can explain that, it will be helpful. Thank you. For the diagnostic.
Yes, I can take this question.
Yes, yes.
Okay. So I think there are 2, 3 things that we should be talking about on this. One is that the platform is acceded to various other entities of Apollo Group. So be it working constitution, diagnostic as well as the pharmacy line. All these ones would support the entire Apollo ecosystem.
So this will be going to be an incremental business for all the units of Apollo. That is point 1. And second, as far as 2/47 entity revenue side is concerned, so this
is going to be
the commission or the fees that would be charged on every transaction that is typically e commerce platform does. And so we would be having arm strength pricing and so that would take care of the commission and the facilitation fees that the 247 company will be charting across the group entities. And you also referred about the unit economics. I would say that at this stage, we are positive across all the business segments on the contribution margin level. Okay.
Can you elaborate a bit on how does it look for in terms of per user, the revenue potential or where we are right now or is it too early to discuss on? This is too early, sir, but I think maybe in 1 or 2, 2 of us, we'll come back to you with more details on this. Okay. Certainly, and a very good question. Today, how many people have really used 20 fourseven so far?
And we have a hospital database. We have a pharmacy database. And we have given that in year 3, we will be probably seeing an EBITDA neutral sort of scenario. So how much this number of users is likely to grow in your opinion in your models in the next, say, 3, 4 years?
So
what we believe is that we should be able
to hit 100,000,000 users by FY 2025. And we have seen a lot of participation from the customers who have been coming into various entities of Apollo Group and they have now started using Apollo 2/47 for various services. So obviously, as we stand today with 10,000,000 customer base for 2/47, many of them have coming from the Apollo system and many of them have come from outside ecosystem. So I think from the growth potential, we should be able to hit anything between around 80,000,000 to 100,000,000 customers or the users by FY 'twenty five. Current number is 10,000,000.
10,000,000, am I right? Okay. Thanks.
So this is in the last 500 days that we've got 10,000,000 registered users.
Thank you. Thanks, Amit.
Thank you. The next question is from the line of Neha Manapuria from JPMorgan. Please go ahead.
Yes. Thank you for taking my question. My first question is on the 7,000 uploaded vessels that were available as a platform. So that I understand from the previous conference calls, we were also planning to induct non Apollo doctors to sort of to get to the 80,000,000 to 100,000,000 users or to pass into the non Apollo customer base. Are we seeing traction in that?
Is that do you think that could be a challenge getting the non Apollo doctors to probably get on to their platform to consult and generate transactions? Actually, we found them quite eager. So there are 3 cohorts of doctors we have. 1 is the Apollo doctors and the next is that we have a lot of junior doctors who are available also for during this COVID time, we actually set up we have to set up because of the volume. So we have that.
And the last part is the partner doctors. Over the years, pharmacy and Apollo has had has built relationships with doctors around the country. So about 35,000 of them, I think we have that as a pool for us to access as and when it is about every time we put it out there on this app, it's the quality which is important and then and to make the choice simple. So we'll use that 15 minute parameter, and we'll keep adding capacity. And also, we'll match it to locality.
So it might be that in certain localities, they like that local doctor who is also a partner doctor. These are the kinds of this is the business rationale that we're using in terms of bringing it to what the customer needs. Currently, ma'am, what will be the proportion of the partner doctors? Currently, it's largely the Apollo doctors that are there on the platform? Because we're able to meet demand.
And I think that it's really the 15 minute and having the right choice and having excellent capabilities. So the it could become very, very large when we want if we're going to get 1,000,000 consults a day, like if you look at the only comparable Teladoc or Ping An, we have a huge pool of doctors. And we're getting smarter in terms of using technology also. Sangeetha had explained the CDF-four system and the way that we can actually bring the old patient records and bring them together in a cohesive way, all that is part of the experience. Understood.
And my second question is, you mentioned a $2,300,000,000 revenue potential. I think you look at is that pharmacy plus digital plus diagnostic, teleconsult, what does that include? And a second clarification is the year 3, year 4 EBITDA, is that the EBITDA for the new entity that is AHL or are you talking just about the digital piece? No. It's HealthCo that we're presenting to you as a whole.
And HealthCo includes all the assets that Sunita had explained that we're moving into this. And that is the ability for us to give a powerful EBITDA in the shortest time possible. So yes, that's what it means. And it also means that with revenue, $2,300,000,000 is the revenue of all. It's not GMV type figures.
It's like you're actually getting revenue into the company and what this market has been made. And this is by FY 2025? Or is there a time line for this target? Sorry,
off line pharmacy piece is different. So what the overall potential is $2,000,000,000 that Ms. Shobhna said was the overall potential of the digital business that we have. On the
back end, Krishnan, digital and back end, it's HealthCore. It's HealthCore's business model is 2,500,000,000 in year 5. Understood. Okay. Thank you so much.
Thank you very much. The next question is from the line of Sameer Baysaywala from Morgan Stanley. Please go ahead.
Thank you so much and good afternoon everyone. Before I go to Helppo, just outlook for your core business, which is with the hospital business. What's the outlook for fiscal 2022? And specifically, when do you expect the outpatient and inpatients to recover?
So Kamir, we have
had a good Q1 as we speak because, obviously, Q4 was the best quarter for us. And we saw that with the opening up and with non COVID patients coming in, we saw a good realization on the per patient as well. But with Q1, of course, we had a good occupancy where occupancy went all the way to 68% and then 70% 71% in the month of May. But as you know, COVID realization is a bit lower for us compared to the non COVID realizations that we had across. So to that extent, a bit there would be a bit of a drop in the overall realization per patient.
But we have done well. We continue to do well. And I think it's going to be the Q2, we hope COVID doesn't come back. We hope that Q3, the 3rd wave is probably a bit away. So we didn't guide you specifically, but we definitely
want to believe that
we would do much better than the Q3 than what I in this year.
I think the important learning here is that we've learned how to repurpose our beds. So that while we have we are looking after COVID patients, we are also looking after the regular patients and therefore, the higher occupancy at 71%. And I think this is the learning for this year, how do we repurpose, create the separation of COVID beds and continue with the regular work by creating the bio bubbles that we have done.
Okay, great. Thanks. And the question on HELPFUL is, I just put 1 or 2 sub parts together. So is it the way to think about all the products that you're offering, I. G.
S is also there in PharmEasy or 1 MG. So it's a much bigger, broader version of that with a lot of resources that you already have. 2nd is on journey to take from 10,000,000 registered people right now to 100,000,000. Where would you get all these people from? What is where will be your funnel for this?
And third is in terms of monetizing the entity, given the strong balance sheet and internal, would you rather wait 2, 3 years to build it out and then look for big ticket monetization or you are thinking differently? Thank you.
So if I can come in and answer, one is that if you look at the names that you mentioned, all those names are now adding on different revenue streams because they lead from a discount model. And I don't think in the long term that's sustainable. So you will see that they're going through their own challenges. But having said that, for Apollo, the funnel, the funnel is the people having the single UHIV that Sangeetha spoke about. So anyone that has been anywhere in the Apollo universe now will have a single ID that can just populate on this 247, so you can access your records.
So I think it allows the funnel to open seamlessly and also much larger. If you see the traction today of 10,000,000 in the last 500 days, If there's probably only Ping An that can match that velocity. There is no other Indian there's no Indian comparable that has been able to do this in such a short time. And it's full credit to Apollo, the strength of the name. The strength of the name also has brought us serious partners.
So you ask where you'll get the 100,000,000 from. I would think that the 100,000,000 there may be 2 or 3 good banks that have good 100,000,000 digitally savvy customers. There are only 2, 2.5 telecom players. 1, of course, is on their own journey. The other one has chosen us.
So if you look at the Airtel banks, you'll find Apollo and they are huge proponents of our loyalty program, the Apollo also. So I think that's a serious partnership that will definitely give us the long legs to be able to get to the finish the marathon at 100,000,000 dollars And I think at the end of the day, it's really about serving the customer. If we do good job is and I think that during this time, we've done pretty nice job. Customers will find other customers. Samblis will join us.
And I think the whole health proposition of what Apollo has done will just get multiplied in terms of the name, in terms of the trust.
Thank you. And the last part on monetization?
On monetization. So that's what you see. If you just take the example of the VC, everyone else has been doing free consults. I mean, please don't let me get started. I think that's one of the worst things you can do.
But you give free consults so you can sell your medicines. Apollo will never do that. It borders on being unethical. We so people actually pay for almost the same price as the physical consult. If you see today, our average is between INR 600 to INR 700 for a consultation.
So I think these are the kind of platforms and monetization. So whether we have an insurance product that we've got with a partner that is currently being filed in IRTA. So we have the ability to be one of the products Fortunately or unfortunately, we come from a parent that reports to shareholders. So we won't be prolific in spending money, but a large amount of money. So we will match dry powder and that dry powder will possibly come that we look for investors.
But I think that this entity is so large in itself already that it gives our options. Our options are actually enormous of what we can do, but we will match the competitive intensity to grow.
Okay. Thank you so much.
Thank you. The next question is from the line of Damiani Karai from HSBC Securities and Capital Markets. Please go ahead.
Hi. Thank you for the opportunity. My question is for target revenue of $2,500,000 for Apollo HealthCare in next 5 years. What kind of investments has been done so far? And what are you looking to invest in near to medium term while we wait for external investors to join?
Shudhna or Sanjeev, can you take that?
Yes. I thought it is you wanted to give answer for this question?
Yes. So I want to know like what you have invested so far in the digital platform and what additional investment could be required to reach the revenue target of RMB 2,500,000,000, which Ma'am has indicated earlier?
The two points, so we can't obviously the second point to your question, we can't answer it upfront now. To your first point, clearly, we have invested INR 200 crores thus far on the product, and we have a plan to invest another INR 100 crores INR 150 crores in the short run. You will see that we as Shubhna already said, we have a plan to get large investors, external investors, etcetera, into the into Apollo HealthCo as a platform, and we will take this gradually up. We know that we have a plan to maturity in the next 3 years, and you will see that we will definitely continue to own dominant majority of that HealthCo even when we get the investors. So I think some of that investments, I think you'll have to defer it for a later date.
Namianti, do we have any follow-up questions?
Yes. Sorry, I was in mute. So sir, I was just clarifying, INR 200 crores investment done so far and another INR 100 crores, INR 200 crores, which you might do in the short term, right?
That is correct.
Okay. My second question is Apollo backend distribution is one of your key strength, which is supporting this Apollo Health Co. So can you talk about what kind of scale and reach you have there on the back end distribution side?
As you see that we have almost annual revenue of about INR 5,000 crores as of now, now and we expect them to grow at about 18% to 20%. And
they were
in EBITDA over 6%, which will be moving into the 2 entity and then that will finally be a sales growth expansion as well.
Okay. But ADT on the back end side, maybe in terms of, say, your network procurement channels and all?
That's a part of the undertaking that we are transferring. This is a economic interest moving to the Apollo Health Corp, which will serve the front end retail business after the other supply chain entity.
Okay, sir. Thank you. I'll get back into queue. Just to give you a data point, during this pandemic, I think that we are the only group online and offline that continue to supply almost at 90%. We were serving 700,000 people a day.
Online, offline, it's because of the back end that we were able to create over the last 30 odd years.
Thank you very much. I request to all the participants. Please restrict to 2 questions per participant. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Just the first one on the combined pharmacy The growth for Q4 was 4% y y. So just trying to understand why the slowdown in the growth and just linking to the previous guidance of 18% to 20%. So how should we look at that?
The
Q4, if you have to see the like growth, you have to see what happened in the last year March of the lockdown announcement. We have seen about INR 100 crores of sales coming in, in the last 15 days of March. If I take out that in the corresponding Q4 of last year, the growth is about 10.5% to 11%. That is the first one. But overall, there is a slowdown in the demand coming back in the market, not only for for us in the overall market, but the three factors that we have seen in our Q4 is on the number side is about 150 stores, which we operate in airports and in house corporate premises that have not seen fully back into the regular level of sales.
And then we have something roll out. We generally close substantial part of our rollout by December, which will contribute to the Q4 growth. This year, because of 1st 6 months, we could not roll out these stores. That rollout happened and traveled into the year end, and these are only 2, 3 factors. But certainly, we are there, and we'll come back on the growth numbers.
Got it. Sure. What is your network? What is your network? For fiscal 'twenty two?
For
1,118 operational closure on 31st March.
No, no, I meant what is the outlook? How many are you potentially adding in fiscal 'twenty two?
Really, See, in the last 2, 3 years, if you see, notice that we are adding about 300 to 350 stores. We will continue to add that and maybe we will with 20 fourseven, we will look at new geographies and figure out that number slightly.
Got it. Second question is on some of the metrics for 20 fourseven. So if you look at the annual report you put out last year, just reading out some of the numbers and we if you are in a position to share them as we are today. So we had 1,000,000 weekly active users. We had 2,300 and teleconsult per day.
We had 3,700,000 registered users, which you said have got to 10,000,000. But if you could share some of the active users and related entities, that would be helpful.
It might be tough for us to share exact numbers, but I just want to tell you that these figures have actually gone up. During the pandemic, they went up almost 10x. There was a day that we were doing something like 30,000 orders. And now it is settled at about 5x to 6x the number or 5x the number that you saw, little more than that, 6x. So we're tracking smartly with the 5 year plan that we've given.
And the last checkpoint question, CapEx, what is the CapEx planning for 50,000,000? Thank you.
Sorry, for which one is it? Which business?
So all businesses, Krishnan, yes. If you still 22, what are we looking at KPIs?
So at Apollo, the hospital level,
we are looking at a CapEx of
INR 200 crores to INR 250 crores, which
is our routine INR 250 crores to INR 200 crores, which is our routine CapEx for the year. That is what
we are looking at. And as we have said, we have
been open for acquisition opportunities. Given that we have cash with us, etcetera, at the appropriate time, we'll come back on the right acquisition opportunity that we are looking at. This is a bolt on acquisition in the markets of our interest. On the HealthCo, we
said that the near term CapEx requirement is around INR 200 crores.
Thank you. And I will discuss that. Thank
you. Thank you very much. The next question is from the line of Shaveen Kumar from UBS Securities. Please go ahead.
Yes. Thank you so much for the opportunity. All my questions have been answered. In terms of your new HoldCo, do you have any preference towards a strategic partner which can come up with more of our digital capabilities and logistics capability or would you prefer a financial backer? Or you haven't and there's no preference?
No preference except the quality of what will be best for the consumer and for this company.
And see, again, you will be competing against broad based e commerce guys and now like and big, big corporate houses like the definition of 1 MG. So any sense what kind of quantum you think would be needed for this business to begin with at least, right? What kind of a capital pools you think you would be comfortable with?
It's more speculative. Too speculative. Unfortunately, we're not able to reveal that at this time.
Understood. And answering the previous pipeline question, the diagnostic business, right, we were talking about during our last call. So there will be a kind of investment also towards that or will it be part of the senior entity?
Sorry, Diagnostics is part of Apollo Health and Lifestyle, as you already know, and we are ramping up the Diagnostics business independently as well as with the digital leads coming from 20 fourseven. And as Sanjeev already said, 20 fourseven will be funneling in patients into Diagnostics as well as the portal hospitals independent of themselves doing the virtual consultation as well as the pharmacy. So that business will strengthen into the diagnostics, which is part of Apollo Health and Lifestyle as of now. And that's how it is intended to continue. So
will there be any additional CapEx towards that? Or will it be sort of back on now? Like is it becoming a part of hospital? Or there will be a reach for something which you will be doing towards it?
So if there is any if there is Chandra, you want
to answer about the growth of
the diagnostics business and how we are looking at it?
Yes. I think a primary emphasis on the Diagnostics growth, we gendered nearly about 180 core revenue last year. We hope to hit a clear core mark this year, but we also are ramping up demand that is coming via the 24x7 platform and to be able to service it, towards which I think the growth will be largely organic. The CapEx requirements are minimal except for some regular CapEx as of now. Interesting in organic opportunities, we are both are in the light but at the right valuation.
So we will be looking at that only when we believe that there is value ahead once we acquire. And it fits in strategically fits in appropriately into our own ramp up and growth plans. So we will be opportunistic on that part with respect to inorganic CapEx requirement. But organic growth is underway and at a prolific pace.
Understood. And if I can squeeze in last question on the proton deck.
When do you think you will be able to achieve
cost of capital on that? Or what kind of return on capital do you foresee on a steady state basis on that? And how far is it?
So we think that is our F5 ks. So we would ideally have to have achieved that this year itself. But because of the pandemic, one is the medical value trend, the tourism is not happening and even people within the country are not traveling so much. We have broken even, as you know. We would ideally want the business to get to at least INR 100 crores of EBITDA next year.
That is the plan. This is FY 2023. FY 2022, we would definitely want the business to give us at least
INR 50 crores EBITDA, which is
what we are targeting and hopefully we will achieve.
So just to add to that, I mean, I think we should not look at proton in isolation. What we have done is to create oncology as a vertical, and we are looking at the growth of the entire vertical, which is we're looking at probably a 2,004 revenue at the margin of 30%. And this will include revenue from Proton and that's the way to look at it, not as an isolated one machine.
Thank you very much. And sorry to interrupt you, Charlene. I'll request you to come back in the queue for a follow-up question. The next question is from the line of Hitesh Sathur from Nippon India Mutual Fund. Please go ahead.
Yes. Hi,
everyone. You mentioned you have
invested INR 200 crores in the digital business and you're planning of INR 150 crores. Can you elaborate what are the areas which you have invested till date and which areas you plan to invest for me?
Adi, Vandi?
Yes. Essentially, the investment is
towards the technology side of the business.
The infrastructure as well as the fixed people are broadly expensive towards the site.
Okay. And is the platform in house developed or this is some third party platform you have taken and you have worked upon it?
This is in house, yes.
Okay. And who are your technology partners?
So we've got a couple of vendors working with us, but it seems
Can I see it, please? Yes, Phendhita, please do. Yes. So for the platform basis and a platform that we had originally created in
a
standalone company, where the PHR was consolidated and conceived as a federated model where many players can come in. The THR is the core. There are other building critical building blocks and pieces that have been developed by a core technology team. 80% of the work has been done by this core team. This includes people from IIT, those who have returned from Silicon Valley, somebody like that heads the team.
We've also had one small external vendor to do small pieces of it to accelerate the pace of development. But the integrated concept and design is very much part of creating this integrated user experience. We are on a Microsoft platform in terms of CRM. However, the rest of the stack is all Google. So we are bringing this together, like I said in the beginning, using Mongo for the documents, other related platforms, which are best in class, and we have this validated also by international experts.
Okay. That's helpful. Maybe on the
future investment, you mentioned that you match up to the competitive intensity of these peers or the competitors. What's your current customer acquisition cost? And what kind of your willingness to spend in terms of future personal acquisition cost? And is that number, 1.52, you mentioned, is that linked to this thing or that's an independent number for future technology business?
I don't want to get into specifics in terms of CAC because one is that it's you must understand that our cost of acquisition is possibly the lowest. Please figure it out. No one has ever got if you do the math, no one has ever got 10,000,000 registered users spending, including technology, only INR 150 crores. So but having said that and going forward in future, we do understand and we've done several experiments in different channels. And those channels that we've learned and failed fast, fixed fast, tried new things, have been able to get us have been able to give us new avenues of growth and opening the funnel.
So going forward, we think that the customer acquisition cost will always remain about anywhere between 30% to 40% of competition, but we will be spending for sure on this. And we'll find many adjacencies, but I cannot give you exact figures.
And then you mentioned 1.50 crores of your revenue?
It included marketing.
Thank you very much. I request all the participants. Please proceed to 2 questions per participant. The next question is from the line of Prakash Aggarwal from Axis Capital Limited. Please go ahead.
Yes. Hi. Thanks for the opportunity. Question is on the structure. Just trying to understand, there's a comment on the presentation, which talks about slum sale consideration of INR 12.10 crores will be received by AATL.
So this is subject to an external capital raise whenever it comes. So what is the assumption here in terms of valuation and what percentage stake sale is being considered?
I think valuation is not something that we can share for now, but I guess all of you analysts know that the pharmacy business itself is a significantly valued business today. Even if you take 30 times EBITDA for 523, you can also figure out what is the just the offline pharmacy valuation on top of that. You have the online pharmacy. On top of that, you have the digital business that we are planning. So I guess you can definitely figure out that the valuation is going to be quite a good one when we as and when we do it very soon.
So we will get this money over the next 3, 6 months.
But here you assume some stake sale, right?
Sorry, what is it? Yes, so 3 to 6 months is what we are expecting the money to come in. And yes, there would be a there would not be any stake sale, right, because we are only doing a plump sale of the business there, and we would be getting the money which is due to Apollo Hospitals Enterprise Limited. And there is a money which is coming in that will be primary infusion. And hence, there will be a
That's correct.
Okay, understood. And we'll have to probably pay some tax. That's fine. Okay. And second one is on the vaccine run rate.
You mentioned as of now, we did about INR 2,000,000 plus. What is the current weekly, monthly vaccine run rate you are expecting for June, July?
In June, as I said, we did about 1,500,000. And we with more government vaccination programs opening up and stuff like that, despite that, we are looking at, as I said, a couple of 8,000,000 further in the next 2, 3 months.
Next 2, 3 months. And do you
expect this to be a 2, 3 month kind of thing by December, a large part of vaccination should be done? Or do you expect this to
be a long ended one? I mean, it is very unpredictable, right? We really do not know whether a booster dose is required, whether a new strain will come in and new vaccines will come in. So it's all very uncertain. But I guess with the knowledge that we have now, I think by December, for the current pandemic, the vaccination for the country would be on a good platform.
Okay, perfect. And we are targeting 150 now versus 300 also?
That is a cap. Whatever is the cap prices,
by the government, we're charging that. Perfect, great.
Okay. Thank you.
Thank you very much. My next question is from the line of Srian Mukherjee from Nomura. Please go ahead.
Yes. Thanks for taking my question. And just on 20 fourseven, we increase the number of customers. And one of the key differentiators which you mentioned is the entire backend that is available with Apollo. Now if you have 10 crore people on the platform, what do you think about the back end infrastructure?
Like how many pharmacies would be needed? How many diagnostic centers? How many hospital beds? If you can throw some light, in order to match this growth, how much expansion is needed in the Apollo SCO business?
That's an interesting question. And I think I answered it in what Chairman said that create access for all Indians affordable health care. And it could never be done physical, but the fact that we are matching physical and digital. So just to give you an example, my stores have now the capability of doing almost 30% more because they're also doing online. So I think that if so there are different metrics for different stores depending on sizes and growth.
So I don't we don't need for 100,000,000 customers, we don't need the same number of stores that we had earlier to be able to service them. It can be done as more and more go digital, we can cluster stores, cluster pin codes and be able to send this out very intelligently. It's just with video consult, it's even easier, where they can be anywhere and they can consult in the most remote location. And this can be done with a variety of different diagnostics also. As and when we get more into connected devices.
So I think that Apollo itself is very cognizant. Sangeeta has given you the framework that we have the best of technology. And as we keep ramping technology, we'll find that we can be more and more asset light. And if I can just add one line to that, I think that what is important in this whole initiative is the fact that we are creating a strong digital presence, which is centered around the customer and on strong technology and that the models are going to keep evolving. And we are prepared and ready for this transformation of health care, which is coming around the corner.
Right. Right. So ma'am, this could also mean that you could tie up with pharmacies which are not part of your network or hospitals which are not part of your network. I mean, that's also an option to service a large number of customers.
I think in Apollo Health Co, the journey over 100,000,000 customers and giving them what they want will give answers to many of these questions.
Okay.
Yes. Just to add, I think Apollo has headroom for growth. In terms of just the number of beds, there is more than 50% availability. We moved into Tier 2. We are also in Tier 3.
We continue to grow the managed beds, which is one way of making sure that the Apollo quality is delivered across the system. The second is with the creation of Apollo Health and Lifestyle, we've developed new formats of care. So day care, surgery, clinic and the birthing centers. So they are new formats of care, which is in a way low CapEx asset like. And with this, with the current infrastructure that we have, we can certainly grow it to serve 100,000,000 consumers.
Okay. Ma'am, if I can ask one question, one more question. This is just on the numbers for this quarter. You have separated out the 20 fourseven operating cost. Now this cost would have been there in the previous quarters as well.
So are we I mean, to that extent, the cost must be sitting in pharmacy and hospital, which is now separated out. Is that the right thought process here? And that might have expanded your reported margins for this quarter for these segments?
No. The earlier quarter costs were very low. It's only from Q4 that we really started showing the high spending higher on marketing, etcetera. And this is why we decided that it's important that we start showing that separately. And so that going forward also it's available for you as a separate number.
But Q3, Q2 and all is a very small number. It was in the region of single digits. It was more CapEx than the Q2 and Q3. It was only from Q4 that there are more marketing costs and Q1 has a bit more higher.
Okay. Thank you.
Thank you. The next question is from the line of Nitin from Dhan Capital Advisors. Please go ahead.
Good morning, Krishna. Just two questions. One is on the diagnostic business. One is the diagnostic essentially being at the element 24x7 and our diagnostic presence right now being relatively limited in-depth for footprint. How are we I mean how are we looking at bridging this potential demand and the full demand that can come from all this business?
Chandra can answer that.
Yes. So on the diagnostic business, I think in terms of what we are mapping our own PINKO journey and Black Longyearby along with what 21st of by 'seventeen does. So we work very closely. Our expansion, we are very well present in South of India, East of India, parts of Central. Our presence in pockets of West and North are what we have already begun to do.
We could have done it faster, but for the pandemic across the last year. That's why I think the second area, which is very key and we are ramping up in a very significant way, literally an army, as Mr. Shobhad mentioned in our earlier area, is to also build our home collection capability, which will be the demand that will come from 24% and that's something that we are ramping up. Lapped capacities in most of the currently planned mapping codes are well in place. Some ramp up required, but that is something part of our organic growth plans.
It will not require any significant ramp up. 3rd area where we are constantly constant is on hospital lab management, which is a very known model of diagnostics business, asset light model of diagnostic business. So we are actively ramping up our hospital lab management contracts, thereby we acquire not just the capital build of the hospital, but also have a provision to use the lab to service our other customers from outside. So these two strategies. 3rd, I mentioned very clearly that there will be we'll keep our eye open for attractive inorganic strategic fit to come into our play as and when the demand requires us to and such opportunities arise.
And Chumba, can you probably you did mention a number earlier. What is the growth number that we indicated that we are on organic growth number we're thinking over the next couple of years for the business?
So we have reached about INR 180 crores, which was the guidance for the FY 2021. We are nearly there, INR 179 odd for the year. We are hoping to reach INR 300 crores in the current year, that is FY 'twenty two. And our move to FY 'twenty three will be targeting to at least to a final core business. And that's the number that we are aiming to do.
And there will be some bonds, so we will not yet reach the steady state EBITDA. But then because we'll have consistent growth related burn. So we're looking at covering about 5 and 4 in the next the following financial year.
So yes, shall we just
push on that? Yes, so let me just push on that. FY 'twenty, we were 1.20 crores, so we should be
talking about 4x
revenues in a period of 3 years.
Sorry? Can you repeat that?
I'm sorry, we were 120 crores of revenues in FY 'twenty. So in a period of 3 years, we're talking about the 24x revenues in the diagnostic business.
So we are clocking, so we should not see the whole cumulative INR 180 crores as the number. If you were to clock the March run rates and the quarter 4 run rates, we are well poised for INR 300 crores for the next year. And on the back of that, we have plans for expanding it to INR 500 crores the following year. And the second area, we definitely will gain a lot from this digital push that the group has taken via 24x7. Our current ability to serve only need to be ramped up.
So I think the growth projections are quite realistic.
Got you. And just one more question on the value unlock in the HealthCo business. Now so the intent of the value unlock or the topic, the primary trend that will happen in the business would be towards warring sense. From whatever the discussions we've had so far, it doesn't seem to be a business that will take too much capital. So what are we looking to achieve by doing the value unlock at this top line and funding in the business as you say?
So there will be so if you look at it, there will be ramp up costs which are going to be there on the digital business as Shubhna already said. So what we spoke to you about the CapEx was the CapEx which is going to be there for the near term and which will be until the investors come over the next 6 months. But there will be ramp up cost on the digital over the next 3 years before it eventually becomes profitable, as Shobhna said. 2nd, we will also be looking at acquisitions, etcetera, as we on the tech space.
If I can just add a line in that, I think it's to do a capital structure which is appropriate for the type of digital company which is evolving.
Okay, man. Good product. Thank you.
Thank you very much. Ladies and gentlemen, we'll take the last question from the line of Abhishek Sharma from Jefferies India. Please go ahead.
Yes. Am I audible?
Yes, sir. You are. Go ahead.
All right. Thank you. So basically on 20 fourseven, I just had a basic question. So I want you to understand in teleconsultation, will 20 fourseven have its own doctors or will it only rely on Apollo doctors as well as health body doctors? And similarly, in diagnostics, will you rely on health body labs or will you just use Apollo Labs only?
And similarly, in e pharmacy, order fulfillment will be only from Apolol Pharmacy or will you be using other pharmacies?
Thank you.
Hello. Like I had said earlier, I think it is a very consumer this is a very consumer led question. What we are creating is the best of the follow that everything that we have has requires the stamp of the follow for quality. And if it so happens that right now we have the full diagnostic capacity and they'll continue to scale. So what they have, I would think that even the pharmacies in SIM codes where they're not available might have partnerships, diagnostics might have partnerships, but the underlying guarantees of quality and availability have to be from the service provider.
247 is an agile network that will serve the customer.
Understood. And on teleconsultation, am I understanding,
consider?
Well, we do have our own doctors. We have our own doctors, but of course not the level of specialists and super specialists that Apollo has.
So how many doctors will 20 fourseven have out of the 7,000 that you have onboarded?
At this point, we have about 150.
And how would that number ramp up, man, as we go forward to that?
It would be very difficult to speculate on that. It truly depends on how this will move. But if you look at Ping An today, they have 5,000 of their own doctors.
And for you, the 150 doctors they serve as gatekeepers who can channel
the referral?
We do that. Record? They do that also. They do that also, double happening. The importance is for them to be able to give experience in 15 minutes quality experience in 15 minutes.
Got it. Got it. Thank you.
Thank you.
Thank you very much. I'll now hand the conference over to the management for closing comments.
Thank you, ladies and gentlemen, for taking time out for this call. FY 'twenty one has largely been regarded as a period of disruption caused by COVID-nineteen. But I'm truly proud that our team has risen to the occasion. We used this time to launch a well curated omnichannel offering, moving closer to the consumer and delivering value to all our stakeholders as well as our shareholders. Thank you for taking time again for this call, and we look forward to interacting with you next quarter.
And for those of you who would like to have a meeting with the team, please reach us through Krishnakumar. Stay safe. Stay healthy.
Thank you very much. On behalf of Apollo Hospitals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.