Good afternoon, everyone, and thank you for joining us on this call to discuss the financial highlights of Apollo Hospitals for quarter 3 9 months of financial year 2021, which were announced yesterday. We have with
us on the call today
the senior management team comprising Mrs. Sunita Reddy, Managing Director Doctor. Harip Ratha, President of the Hospital's division Mr. A. Krishnan, Group CFO Mr.
Chandrasekhar, CEO of AHL Mr. Ujjal Reddy, CFO of the Pharmacy Business and Mr. Sanjeev Gupta, CFO of Apollo 24x7.
Before we begin, I would
like to mention that some of the statements made in today's discussions may be forward looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties, which is on Slide number 2 of the investor presentation that has been shared earlier. Documents relating to our financial performance have been shared with all of you, and these have also been posted on our corporate website. I would now like to turn the call over to Ms. Suneet Kaledi for opening remarks.
Over to you now. Thank
you. Good afternoon, everyone, and thank you again for taking time out to join our call, even on a Saturday. I believe that all of you have received the earnings documents that we shared yesterday. Calendar year 2021 has taken us on a very positive note with substantial breakthroughs achieved on COVID-nineteen vaccines. This pandemic, which created disruption to normal life in quarter 1 and quarter 2, has now started receding substantially in India.
As the impact of the pandemic swings, the economy in general and the health care industry is now gradually progressing towards normalcy. This recovery was evident in our performance in quarter 3 FY 2021, which witnessed an ongoing uptick in patient footfalls and occupancy across the network. We saw substantial improvement on all metrics. On a quarter on quarter basis, Healthcare Services revenue grew 17%. Surgical volumes grew at 54%.
Overall, IP volumes for the group increased by 21%, and occupancy improved to 63% from 56% in quarter 2. We had allocated 2,300 beds to COVID across the hospital network during the pandemic and have now reduced the allocation to 1500 beds as of December 2020. In quarter 3 FY 2021, COVID contributed to 15% of net revenues with a 25 percent share of occupied beds. COVID related healthcare services revenue has now begun to taper off and is being effectively substituted for non COVID revenue. However, since there has been limited resumption in the airline and rail traffic across the country, out of state and international business continues to be affected, especially on the OP front.
OP is at around 65% to 70% of normal levels, and we expect that progressive resumption of travel will bring back older levels of volumes and are in parallel investing additional efforts in strengthening local market share. Against this backdrop, let me walk you through the financials for the quarter. The company recorded stand alone revenues of INR 2,367 crores and consolidated revenues of INR 2,760 crores. On a like for like basis, revenue growth was 6%. The pharmacy platform as a whole reported double digit growth revenue growth of 17%, while Healthcare Services revenue dew by 4% during the quarter.
Our new hospitals recorded revenue growth of 7%, while Mature Hospitals revenue dew by 8% year on year. Margins in mature hospitals were strong at 20.6%, up from 12.3% in quarter 2, an increase of 8 30 basis points. I'm happy to share that our margins in new hospitals were 13.8%, a strong improvement from 8.81% in quarter 2 and more than 3 50 basis points on a year on year basis. The pre India's EBITDA for Q3 FY 2021
stood at
INR301 crores compared to INR 201 crores in the previous quarter, a growth of 50%. For this, Healthcare Services EBITDA was INR 229 crores, 101 percent growth compared to an EBITDA of INR 114 crores in 42 FY 2021. EBITDA, including effect to India 116 was at INR322 crores. Our comprehensive cost optimization initiated in quarter 1 FY 2021 continued into this quarter as well, and we recorded a savings of INR 40 crores. As guided earlier, we expect to sustain a cost saving of INR 100 crores to INR 125 crores in FY 2022.
As most of you closely to CMS are aware, the Frontline Pharmacy business was separated into Apollo Pharmacy's lipid in Q2 FY 2021 with effective date as first September 1, 2020. AHEL now has pharmacy distribution as its business segment continuing to hold 25.5% stake in Apollo Pharmacy Limited. The pharmacy platform that is including the front end retail portion delivered a strong revenue and EBITDA growth in quarter 3 FY 2021. The pharmacy platform reported a growth of INR 1440 crores in quarter 3 FY 2021, registering a 17% year on year growth. AHL, which continues to be the exclusive distributor for all of pharmacies, reported revenues of INR 1,126 crores in quarter 3 FY 2021 and INR 73 crores of EBITDA at 6.45 percent EBITDA margin.
THLL recorded EBITDA of 11 crores as compared to the 5.7 crores in quarter 3 FY 2020. The business has recorded a 6% year on year growth in top line. Net debt as of 31 December 2020 is INR 2,598 crores. We have a debt to equity ratio of INR 0.71. In January, A HEL has raised equity capital of INR 11.70 crores via QIP.
We are delighted with the response from marquee investors and pleased to share that the book was oversubscribed by 12.5 times. Part of this capital will be deployed towards acquiring the balance 50% stake in Apollo Glen Eagles Hospital in Kolkata. Additionally, the proceeds from the fundraise would also enable AHL to seek inorganic opportunities and further develop its digital platform, Apollo 34 B7. Our Board has approved the stream of amalgamation of our wholly owned subsidiaries, that is Apollo Home Care Limited and Western Hospice Corporation with its sales. The amalgamation of these two companies for the parent is expected to deliver significant synergies.
I'm happy to state that we have partnered with the government in the world's largest vaccination program and have commenced vaccination of healthcare workers in 27 Apollo vaccination centers across the country. To conclude, we believe that things are moving in the right direction, and this quarter has helped us to gain momentum on the inpatient and surgical front. We have been able to cement our position as the safest network of hospitals, providing world class care for our patients during these trying times. Our initiatives to optimize and streamline the business have placed us in a good position to capitalize on the future growth potential over the medium and long term. I now have Doctor.
Hadiprasad, Krishnan, Ujjain, Chandra and Sanjeev from 20 fourseven with me to take your questions. Thank you.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Neha Manpuria from JPMorgan. Please go ahead.
Thank you for taking my question. My first question is on the RFOB. Our RFOB continues to surprise on the upside seeing strong growth. While I understand the surgical volumes are going up, how should we look at the sustainable RFOB growth from the current levels? Or should we look at the current year as an elevated number which will normalize going forward?
The RCOB growth is clearly because the surgical volumes have gone up. And also because the COVID RCOB, which we showed in quarter 2, quarter 3 has come down. So this has been reflected in the RCOM, which is currently at 40,000. And next year, ma'am, would we be able to grow on this number as surgical continues to normalize, 40,000?
So two things which is important for you to understand is our new hospitals have been doing well also as you have seen. And the new hospitals at Orb has also increased well in this overall mix that you're seeing by cluster. We are aware that the new hospitals as a segment was around 32,000 ARPUB last year and that has gone to 36,000 now. So the new hospitals ARPUB and we all know that the COVID ARPUB is only around 28,000 or whatever that is, around that number. So clearly, the new hospitals ARPUB is continuing to do well and that we expect should be hence, it's a sustainable number going forward.
If you look at Tamil Nadu, etcetera, clearly, we still have ability to push the APO because we still don't have some of the high end surgeries and some of the international patients. We still have a potential to get Tamil Nadu higher and some of the other places like that higher as well.
And can the new hospitals get to 40,000 over time? Would that be possible?
We would probably for now look at it around 36 to 38. We are now at 36. We probably will look at 36 to 38 as the 1st milestone there. Okay. Understood.
My second question is on the cost side. Again, I know Ma'am mentioned that we will be able to sustain about INR 100 to INR 125 crores of cost savings in FY 2022. But what's the level that we've achieved in this quarter? Should we look at this INR 100,000,000 to INR 125,000,000 as incremental or this is the date on which our cost will increase? How should we look at the operating cost?
It will be based on the FY 2020 base when we said 100 to 125 growth. It will be based on the FY 2020 base. So clearly, it will be some of that is already baked into the numbers.
But there is incremental opportunity for cost savings since we received those E40?
No. So yes, broadly, if you ask me a bit of incremental opportunity is there for now. I wouldn't want to feel like there is significant opportunity. But 100 to 125 will be continued. So the current EBITDA is something that we would like to sustain and grow.
Let me put it like that.
Understood. Thank you so much.
Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
Yes. Hi, good afternoon. One clarity on the previous question. So When you see INR 40 crores savings in this quarter, right, which annualized is about INR 160 crores, you're actually saying that INR 100 to INR 125 of this sustainable in fiscal 2020.
Yes, of the INR 40 crores saving, there is also INR10 crores in Delhi, which is not getting consolidated in our results. So clearly, the INR 30 crores is the number that we have in the quarter, which is consolidated. So the annualized number of that is INR 120 crores and which we said we continue to pay INR 100 crores to INR 125 crores, which is why I said that the current EBITDA is something we can sustain and grow.
Okay. Very clear. And second clarity
on the ARPU numbers, even when you look
at mature hospitals, here I think the ARPU that you've done this time is the highest ever we have done. I just want to understand, is there a bigger sense of payer mix right now, the ARPU is significantly higher right now because this ARPU is highest ever and still includes a good contribution from COVID. So clearly something has gone different
in the
non COVID protocol.
So clearly the tertiary care work and the quaternary care work have kicked up And most of earlier, I think, a little bit of the COVID pandemic fear lingering on, people have not really come for all of the elective surgeries, which were lower ARPUB. For example, some of the orthopedic work and some of the general surgical work. But what we have done is to look at the intensity of the case mix. And this has really changed in terms of we're looking at more of transplants, we're looking at more of Onco and we're looking at more of the high end cardiac and high end neuro. So this is clearly shown this is clearly reflected in the ARCORB.
So you're saying that it was not the fair mix difference, it was largely the case mix difference which resulted in this? Yes. Okay. And just 2 key questions on the 4th and 7. When you have started this ProSells team, what exactly in layman's term it means, does it simply mean that it's going to be done for the teleconference competition platform rather than him choosing the doctor himself right now, the AI platform will help him suggest some of the options that doctors he can go for?
So, I think there's a little bit of confusion here. So ProHealth is our preventive healthcare checkup, which is along with the COEs we promote like Onco, etcetera, we believe that there's a potential to really reach 1,000 crores of revenue from preventive health itself. So the preventive health product has AI inbuilt into it. It also has gene sequencing and understanding doing a genetic analysis. It is coupled with AI.
It's a very high end product, which is focused on well-being. So it's preventive health care and well-being. And this is where we've launched it, and we believe that we can scale this up to about 1,000 crores of revenue in the next 36 months.
And this is part of 20 fourseven or is this the outset?
No, it's part of AHL. But 20 fourseven will be used to actually funnel patients into ProHealth.
It will be both.
Okay. And just one or two more questions on 20 fourseven. One is, you announced the HDFC Bank partnership. What's an experience there so far? I know it's early days, but still trying to get some experience from corporate partnership and any other partnership that you also done after that?
Sanjeev, you want to talk about the HDFC partnership? Yes. Thanks, IK. So thanks for the question. So HDFC partnership, yes, it is early days, but we are seeing a lot of momentum.
HDFC has got a very large customer database and HDFC Bank as a service on the website, we want to promote this amongst the entire user base. And we are seeing a good traction as of HDFC and Apollo 2 47 partnership is concerned. And apart from this, we are also in the dialogue with couple of more corporates, the corporates who have steradic tie ups. And with time, we will talk about that also. But at this stage, early, but we are seeing good results.
Results.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Is it possible to talk about the overall occupancy? How we should see this come forward? I think it was 63% now and pre COVID, it used to be 68%, 69% percent and especially with the COVID patients moving up?
So currently it is at 63%. And I think the main factor is that is that we mentioned earlier that travel had not yet opened up. So these are mostly it's a reflection of our increase in local market share. And we truly believe that when the road and air travel opens up completely, that the occupancies will move up significantly. We are seeing very healthy trends in all our new hospitals, some of which are in Tier 2, where health care has become localized and people are using these facilities.
Tire and mature hospitals are also starting to do well. But I think the reason that we believe that next quarter, we should be able to see a pickup in occupancy with travel and boats opening up.
Okay, great. Is it a possibility that COVID patient related revenues move out faster than the business? So quarter to quarter, we would actually trend down.
So 17% is the revenue from COVID. And I'm not talking about occupancy, but I think that this will be balanced when the international patients come in. And like I said, all the travel, etcetera, opens up. Last year, there's still a little bit of a lingering fear that we really need to go to a hospital for surgery. As I said, our ARCOB is a reflection of the intensity of test mix that we're getting.
So we'll also get the high margin secondary care work coming back. So occupancies net debt occupancies will go up.
Okay. Okay. Thanks for this. And great job on the cash flow and net debt management. So is it possible to talk a bit more on the QIP fund raise?
As to how do we break up between GeniGen and then how much you want to invest in 20 47 and other inorganic opportunities?
So we raised INR 1,170 crores. We will use INR 4.10 crores for Glen Eagles. Another INR150 crores has been allocated to for use for 24x7 and another INR150 crores for our diagnostics. So really, we are going to grow the diagnostics place in AHL. Currently, we have over 650 diagnostic centers.
And we believe that in the next 24 months, we must be the strongest diagnostic player in the South moving on to the East as well as the North. So we have end use for INR 700 crores. The balance will be used to reduce debt and then strengthen the balance sheet because when required, we will have the ability to do some bolt on acquisitions that we are looking at to strengthen our presence in certain markets.
Okay. Thanks so much. With your permission, one last question from my side. Apologu go ahead seems to be a great step Cesar. So, I think you can share on adoption.
I know you've given the revenue of INR 1,000 crores or next 3 years. But just on monetization, what's the revenue model? And are there any international benchmarks which we can use as case study?
So when we started out, we looked at iCAN. I don't know if you heard me, but it was a Chinese company that was doing these run of the mill checkups. So and the start was around 2 hours. But when we looked at what Apollo stood for, we said we just can't do these checkups. And if you look at a lot of these people who are checking blood, they are doing their own version a checkup.
So we said the APOLLO 1 has to be more meaningful. It has to have lifetime value. And keeping this in mind, we've created ProHealth, which is a package that looks after well-being. It looks at markers that include stress, anxiety. Besides the other things which are normal, the cardiac and the cardiac, it looks very closely at neuro issues.
Having said that, we've already since we launched it just last month, we have 12,000 people who have undergone that checkup. We have case studies where people have reduced weight and managed to keep their blood sugar at normal levels. So yes, I think the feedback has been very good. And we are getting ready to launch it on an all India basis. And especially at this time, when people are looking at OP and saying, your OPs have fallen away, I think this is something that will bring back the
Okay, great. Thank you so much.
Thank you. The next question is from the line of Nitin Agarwal from BAM Capital. Please go ahead.
Thanks for taking my question. Ma'am, on the Apollo of Leningdes Hospital, with the recent changes, their insurance team, which are West Bengal government has started, does it have any indications what implications do you think it has for the business over there? So this is something that is always there. It's a state insurance scheme which has always been there. If you look at the they have been pushing that point, but the funds available in the government, it is not as high as the push which is there from the government.
Some of this we'll have to look at it as pre election push. But we don't see that this is going to impact us negatively. We are fine and we are whatever is required to be done on the government cases, we continue to do that. So we should be able to navigate this well. This should not be a source of any potential concern around the it's a big problem.
No. No. Okay. Secondly, with the cost savings and all, you have to be introduced in the managed to achieve in the business. What should be a sustainable EBITDA margin for your mature hospitals now going forward?
Yes. So, Adi, Metro Hospital level, the first target is to get to 23, 24 in the next year. That is what we would like to get through. But clearly, the business needs to come back because some of the earlier businesses of international, etcetera, is also important for us. We definitely you are right, our cost effort that we have taken allows us to get that achieve that a bit faster.
If the business comes back at the same pace over the next 1, 2 quarters, we are hoping for the same because clearly there is some kind of comfort in the patients' minds and the consumers' minds to come back. We are seeing patients are also traveling from Bangladesh to Chennai. We have also seen patients traveling from Assam and Bengal to Chennai. So we have seen that all of that, in fact, 60% of our pre COVID levels even from out of Chennai has started coming back. So which is definitely good.
So if that comes back, you're right, we should be able to see beyond 'twenty four in the next 2 years. And lastly on this one, the new hospitals have also had a very spectacular improvement in EBITDA margins. So is this sustainable, the protein for clients in their EBITDA margin? Because this is the threshold in the level to really work with from here on? So we have been guiding that we should get to 15% in the next 12 to 18 months, if you will, right?
And this is what we continue to work on. And of course, this 13.8% is something that we have got for this quarter. Some of that is also enabled by high end surgeries. And as some of the other surgeries come, we will still think we should be able to get 20% to 15% next year.
And then just speaking of
the last one, you mentioned about a investment in the diagnostic platform. So what are the would be a 3 year goal for the business? Currently, it's like a 160, 170 crores analyzed business from a revenue perspective, from a net revenue perspective. Is that fair? And where do you see this thing business really heading to over the next 2 to 3 years?
With the fact that couple of the large Prime India players have become very aggressive in terms they make very large sales investments in in Southern India, which is our primary investment in this front line.
Chandrashika, would you like would you answer that?
Yes, ma'am. So our strategy will be to strengthen in our existing markets, which is essentially South and East and opportunistic entry into some of the larger markets. We are, as you rightly pointed out, we are tending to 170 to 184 for FY 'twenty one, and but we are hoping to have a significant growth in FY22 combined by very few new markets, but largely consolidating existing markets. We are looking at a 3 year horizon to top up 2 to 3 year horizon where we want to hit the 400 core mark. The next year's direction should be upward of 2 70.
And this is Shailesh, how do you view the increased competitive intensity in the market with the 2 large Pan India players really increasing their investments in this business? Is this area in a meaningful way?
So it is not new capacity creation. It is organizing the unorganized. So from that perspective, the pie in terms couldn't change much. Yes, corporate income could change with more corporate behavior. But I guess there is a from an industry perspective, it is still 85% unorganized.
So the headroom for growth for organized players is only going to continue to be bullish.
And the brand acceptance in
these markets of Apollo is very strong, especially in the southern markets, which as you said, someone is looking at consolidating and growing. We have a very strong brand acceptance in these markets, which we are already present in. So if Chandrasekhar has a plan to grow, which he has, clearly, we will see that we should be able to get the market share as well.
If you could
just push on that, does it lead to a meaningful escalation in pricing competition in this market in year over year, Adnan?
When unorganized moves to organized, I think price actually gets corrected upwards because the price from the unorganized is there, which is lower. So I guess it's a good place going forward for a few more years for the organized players even from a price perspective and a price consolidation perspective. I think I have not mentioned this, but we are definitely also starting to see significant amount of work that is starting to come by our 24 vessel. And certainly leading to diagnostics and diagnostics booking itself coming directly. As the digital platform ramps up, I think the ability to serve by our strong presence and good phlebotomist home collection capabilities is what we are focusing and bidding on.
We are very bullish about the future opportunity coming via digital as well.
That's it. Thank you very much and best of luck.
Thank you. The next question is from the line of Shanshin Mumbasu from SMIF Limited. Please go ahead.
Good afternoon and thanks for
the opportunity. I would like to know the COVID occupancy in Q3 and the non COVID occupancy in Q3.
Just can
break up your occupancy overall of the anticipated COVID?
So COVID occupancy, one second just let me. We have brought down the number of beds of COVID to 1600 levels in December and we have brought it down even further. The overall COVID S-three had actually justified. So now if you look at the COVID occupancy, out
of the 16 countries that we had,
in Q3, we were at 73% occupancy, which is 1173 that were occupied by COVID. And if you look at the non COVID occupancy, one second, non COVID occupancy was 60%.
60%, right?
60% for Q3. But again, if you got and since
you give if I give
you this color, in that 60%, December was 67% of non COVID. So clearly, while the quarter was 60% from non COVID, December has already gone to 67% on non COVID. And in the COVID, while quarter was 23%, December was 48%.
Okay.
So would it be right to
assume that we are inching close to the long term 69% mark? No, I think we'll probably talk about Q1 before we get back. It's not something that we can say because the number, if you look at the bit, we have a COVID bit also, right, which we will now start releasing and putting it back to non COVID, right. So it's also a factor of classification of those beds, right. Because once we recapitulate that and get that inventory back to non COVID, our occupancy overall will probably show a bit of a dip, but our revenues will still hopefully be okay as we get some of the non COVID revenues come back, which will be a bit higher ARPUB.
So I think to get back to that 67% 69%, we'll have to think of it as Q1, Q2. Okay, great. And what's the
number of COVID beds that you have currently in turn? Jan
is around 800 pence. Jan 800 bps. Inventories around 800 bps and the occupied debt is even lesser.
Okay, right, right. So it is coming down
drastically, right, around 1500 bps, 800 bps.
Yes. Dollars
Yes.
The next question is from the line of Prakash Agarwal from Axis Capital.
First question on this Apollo Capita.
So here, what I understand is the consolidation will start from February. But I'm trying to understand, our total increase already. When do we expect normalcy in occupancy? And how do we improve the margin from the previous 3 term? What is the management planning
to do here? If that
can be highlighted. So firstly, we won't consolidate that from February. It will probably be March or April because we're still not completing the transaction and we can consolidate it only after the transaction. So we will complete the transaction over the next 30 to 45 days. So it will probably be March or April.
Overall, Calcutta, if you look at FY 2020 levels, etcetera, we should go back in FY 2022. So 400 to 4.50 crores opportunity on revenue for the next year with at least a 75 crores to 80 crores EBITDA, which is what we should think we should be able to get in next year.
So I was trying to understand your medium term plans in order to optimize the margins. I mean, first goal obviously would be to achieve the older occupancy and margins. But how can we go beyond is what I wanted to say.
That is
correct. So let me
so what we've done is we've really recruited a few more surgeons and doctors. We are strengthening our centers of excellence. So in terms of cardiology, orthopedics, oncology and neuro, we have very strong offerings. And with this, I think we should see higher RCOs and better margins. We've already recruited these doctors.
You would have noticed that even Saurabh Ganguli chose to come to Apollo Gleneagles. So it's been positioned as a very high end clinical care center. Okay. Okay.
So we
are pushing it for a 40,000 hour drop in the next year itself.
Got it. Perfect. And secondly, for Medix Lucknow, I understand consolidation has already started. And would it come under the new hospital cluster? And would that be the reason for the margin spike in that segment?
Which one is it? Medics has not yet come. It's only going to come ahead going forward.
Going forward, okay. So this will further improve the margin levels?
Yes, it will. So there are going to be 3 areas which we seek significant margin improvement in the next year also even beyond this quarter. 1 is as you rightly said Calcutta. 2nd, Medix because Medix is also going to be a significant it's doing very well. They'll do over INR250 crores of revenue hopefully next year and will be at least INR 40, INR50 crores, INR 40 plus crores of EBITDA.
They already have a 10 crores run rate on EBITDA and don't have much of COVID impact, almost negligible COVID in Lucknow as we speak. And the third thing is, Croton is also something that we are quite excited about because we are seeing that Jan, we are seeing a good spike coming from patient inquiries. So we are already at a INR 100 crores run rate on Proton. If you look at the first if you look at Q3, that's at EBITDA negative and EBITDA breakeven. And we should see significant attrition in the overall EBITDA from Pluton as well into the next year.
Okay. May I ask something?
No, no. I said Lucknow is already at 18% margin. And the one the strength for us in Lucknow is the fact that we are probably one of the best sheathair hospitals. Our ICU beds, which are about 1 third of total beds, are at very high occupancy. So the potential to move to a higher ARPU objectively exists in Lucknow.
Understood. Fair enough. And last one from my side is on the pharmacy business. So I understand given the restructuring that Martin had a step down, but my understanding was step down would be about 100 basis points, VCs more than that. What is the outlook and the
reason for the same?
We have on a combined basis, if you see the account between AHP, AHP is only consolidated to back end results. On a combined basis, we are at the same level. Last quarter, we are at 6.4% of the EBITDA on the overall sales and this quarter is about 6.3%. As you know, when the demerger is expected, there is some cost adjustment between the two entries. And also the growth is about 17%, 18% in the overall sales against the previous quarter, 23%.
So there are some 20 fourseven costs also which are there, which is something which has been absorbed by the pharmacy business, as you know. And there is also otherwise, if you exclude that, maybe the like for like EBITDA margin to that is 7%, 6.8%. Okay. And what would be the outlook, sir, going forward next year?
We should be back with
the normal growth rates and then we have 20 fourseven growing up and then that will also contribute to the sales and margins. We will see that. And then that will be
But it
will move forward, right? I mean
the margin trajectory would inch up to 7% plus, Mark?
See, if you notice that we are at 6 0.4% now and we should be closing this anywhere around 6.5% to 6.6% and move 8% to 7%.
Okay, perfect. Thank you and all the best.
Thank
you. The next question is from the line of Samvini Kheraj from HSBC Securities. Please go ahead. Next question is from Pratik Mandana from Nomura. Please go ahead.
Thank you for the opportunity. So my first question is on a total 24% business. I just wanted to understand that the revenues that we say that
we will get from 20 fourseven. So will we
get dikemes 20 fourseven or is it
more of a concierge for like diagnostics and pro health as you said that they will funnel the patients into 20 fourseven and diagnostics, you will book diagnostics. So where will the revenue get booked? Will it be in HLL or ProHealth or the e pharmacy or teleconsulting? So just a bit on that. How will the revenues improve and how much of revenues do we expect?
No problem. So clearly, if you look at the pharmacy, we will ensure that the pharmacy business is the revenues is booked in the back end of 20 fourseven. So that's something that we will continue. Back end pharmacy business will still continue to be at Apollo 20 fourseven and we will start showing that eventually as Apollo 20 fourseven scales up. But on the other parts, whichever is diagnostics, etcetera, the way we are looking at it is that business will go to the it will get pushed on to the Apollo diagnostics for revenue booking and there will be a revenue share which will get as a margin or a commission which will get booked by Apollo 20 fourseven.
So there will be a we will once Apollo 20 fourseven starts scaling up, we will obviously have to figure out how we start reporting GMV, etcetera, so that the perspective of GMV of Apollo 20 fourseven is understood. But it is again something that we will plan in the next year.
Sanjeev, do you want to add anything?
Yes, I think, I mean, EK already gave you right answer. So the entire revenue accounting with respect to the pharmacy being delivered on the diagnostic services being offered by 2,247 or as a matter of fact, any other services. So those things will go to respective Apollo entities like AHL or AHL. And as far as the GMP part of it is concerned, I think we will work out some mechanism to also highlight that, so that there is a right perspective available with everyone.
Okay. And to add on to that, so again, there are multiple divisions. So what kind of contribution from each division can we expect into like the revenues of 3 47, diagnostics, cohealth, e pharmacy and consulting, if you could just highlight some?
It's early now. We will probably take it forward as we start doing it, but broadly, given your pipeline, I think 15% to 20% margin is what we expect to do on both Diagnostics and Teleconsists. Is that fine, Sanjeev?
Sorry, I think I was not able to convey my question clearly. So I was asking, sir, the revenue that, let's say, 100,000,000 will be the revenue of 20 fourseven, so how much of it do we expect to come from each division, like from diagnostics and teleconsulting and e pharmacy? So how much revenue contribution from each segment? Like which will be the biggest contributor to 20 fourseven? See, we have about 8 health products coming into the platform.
Some of them are short and go online. So, we'll have a better view going forward and we'll be back with those numbers in Q1 of next year. It's not a rough quarter.
But when we look at the target, we have been saying that when you get to the overall target split over the next 3, 4, 5 years, 50% of that will be coming from the pharmacy business. The other 50% will be a combination of what we see now, teleconsults plus diagnostics plus condition management and from insurance.
Got it. And then sir, any number you want to highlight currently how much what is run rate for 247 revenues, if it is I can highlight that? You have to know 1 or 2 products are in the same phase and we will be coming out specific numbers. Okay. And just one last question from my side, if I can ask that one on the number of pharmacies.
What is the number of different pharmacies that are now here? We have 4,000 pharmacies operational as of 31st December, and we have added about 2 50 stores during the year. But most of them were added in Q3. So, we are on track if there was delay in the schedule of opening because of the COVID abandonment. And we will be talking about 300 stores as usual, 300 plus.
The next question is from the line of Divyanshikalra from BHVADHWA GVenture.
So my question is, I just wanted to understand the breadth about inpatient and outpatient business from hospitals and what are the normalized levels and what was the result, what was happening in Q3, any update in Q3?
Thank you.
Can you get off line on this particular? We don't have the exact split of the OP and IP revenues as of now.
So normalized revenue historically would be fine, that's estimated. 20 is outages, 20 outages.
That's right.
Okay. And were we seeing any diversions in last
quarter? Yes, we
mentioned last quarter.
Outpatients, that's your opening increase in last quarter. Okay. Ma'am, you said something in your opening remarks that international business was very much affected. So was there something so would this contribute significantly in terms of international patients? So my question is, I'm just trying to break up domestic patients versus international patients.
So what was the ratio of inpatient and outpatient breakup for international patients?
So, Jess, you see that international is probably just definitely 10% of total volume. I think what was significant is that airlines were not we didn't get even within India, patients were not able to travel. And we believe that when that comes back, the OP will definitely pick up. But international is about 10% of that.
Okay. This is normalized level. 10% IP, OP and 90% IP is normalized level for international patients. Am I correct?
10%. 10% OP is correct.
The next question is from Hardik Damas from Spark Company.
Thanks for the opportunity. So I'm looking at the employee costs for the quarter. There's a 15% quarter on quarter decline and 26% YOY decline. So what's driving the sharp reduction? Is it the front end pharmacy transaction or is there any other reason for this?
Yes, the front end, as you rightly have as you know, the front end pharmacy business has been separated out and it has been put into whole of pharmacies limited. So the full quarter impact of that is clearly visible in the reported numbers. So that's what you can see. Of course, as we said, as Mr. Suneeta already said, the overall cost savings otherwise for the quarter was INR 40 crores 30 crores in the consolidated numbers for the quarter, which includes a bit of in the INR 30 crores embedded could be almost around INR 50 crores to INR 20 crores of manpower.
So otherwise, it is the Apollo Pharmacies Limited, which has got shifted out completely because last quarter you had only 1 month impact of Apollo Pharmacies Limited, whereas this quarter you have the 3 months impact of Apollo Pharmacies Limited.
Okay. And my second question is on AHL. So we've been in a consolidation phase over the last 18 months and that's reflecting in significant margin improvement over this period. So when we think of further network expansion here, what are our plans? You mentioned about diagnostics.
So on the other formats, can you give us some details on our next medium term expansion plan? Yes. So I think we have we spoke about diagnostics being the primary area of focus, and that's going to consume over 70%, 75% of our focus in terms of expanding within and consolidating within existing markets as well as some opportunistic expansion into other new markets. And importantly, the second focus will also be on going up the value chain in terms of our high end test menu. So that's the 2 areas for which we will make both investments as well as marketing efforts to get into more and more higher end test menu.
I mean to say areas of homogenomics and a few other areas that we have outlined. The growth primarily subsequently is in private sector network, will be on closer to communities is the initiative that we'll do. It will have ramifications also for diagnostics in terms of as we get closer to communities. So that's the 3rd area of network. We're not looking at growing the secondary network significantly barring a small growth that we will do to assess the regulatory tailwinds that seem to be emerging in such a space of IVF.
But that will be a small growth which we'll carefully plan because IVF as a space is attractive, but we are mindful of the fact that it is predominantly unorganized. There are some very good regulatory tailwinds that are likely to help organize play. So there is a small focus on growing that. Besides all of this, we're looking at some exercise growth models, including expanding our franchisee network in the primary care. Okay, got it.
Thanks for that. Last one on the process center, we are now clocking annualized revenue run rate of over INR 100 crores and we booked even at the EBITDA level. And this, I presume, is without much of international fishing volumes. So should we think of a significant ramp up going into FY 'seventy two once international fishing are back? So how should we think of something from here on?
Yes. Our hope is definitely to bet down on both domestic and international because even the domestic opportunity on Proton is high because there are now clearly, it is, as Mr. Linda has been always saying, it's now become a gold standard in radiation globally. It's been a lot of doctors have got comfort around embracing it and also suggesting this for patients and specific organs like head and neck, pediatric, etcetera, where we have seen significant help and support being given to patients. So we are quite hopeful that this should ramp up quite well in the next 2 years.
And we should see good ramp up in EBITDA as well because as you know, the EBITDA margins on this business is not a 40%, 50%.
Thank you. Next question is from the line of Sameer Vaishwala from Morgan Stanley. Please go ahead.
Yes, thanks for the follow on. Just a few more higher ARPUB. Was there any pricing action that was meaningful in the quarter, cash market, insurance and property No,
no, no.
Okay. Anything that you're planning over the next 3, 6 months?
Next year maybe not for
Yes, not insignificant this year.
Okay, great. And the second is for the digital platform 24x7, are you looking for any sort of equity dilution over there to either asset capital or to access patient access?
So we have said that we have plans for that and we have always been saying that at the right time, we will unlock value in the overall pharmacy business also. And so we are open for all options there and we will come back to you as we have later medical data on the same.
Okay, great. And how are we thinking about the K loss going forward? I think it's 1 of them 3.8 to now with 4.3, 4.4?
So 4.4, I think reflects the COVID occupancy. We can hope to see something below 4 in the next quarter and an improvement in the beginning of next year.
Okay. Great. One is finished and that's on the slide. Any thoughts on COVID vaccine being available on the private market?
Well, we have a plan on rollout. We have a cold chain logistics and everything prepared to roll it out. But we're just awaiting government approvals.
You think it can take up to 12 months
or longer or I think within maybe mid March, end of March for sure.
I see.
It's within March.
Okay, great. That's very helpful. Thank you.
Thank you. The next question is from Ayush Tansari from Abhikro. Please go ahead.
Hi. My question was thanks
for the opportunity. My question was, what is it like to like pharmacy revenue and EBITDA as to pre restructuring?
70% has been the growth overall for the pharmacy platform for the quarter. And the EBITDA margin, as Sohrab said, 6.3% to 6.4% in that range and what we have recorded on the back end is 6.5%. 78% is right? What is it? Sorry, I missed the number.
What is the truth number?
17%. Okay, okay. Thank you.
Thank you. The next question is from the line of Birish Bhakat from Goldman Sachs. Please go ahead.
Yes. Thank you for the opportunity. So on the pharmacy, the quarter's EBITDA growth is lower than the year to date growth. So any thoughts there?
Talking about which quarter, any reference, specific quarter?
So this
quarter, the like to like AMC
EBITDA growth is 20% and I think year to date is in the range of 30%.
We have a robust Q2 and that has contributed to the higher sales and higher EBITDA. This is overall in the same range in the last quarter, 6.4% in Q2 and 6.3% in Q3 and the 6.3% is coming on the back of absorbing some online BHANUPIC costs.
Okay. During the QIP meeting, we
had requested some more KPIs on 20 fourseven. So I was expecting probably this quarter to
see some metrics around that in terms of traffic, user engagement.
So when can we see that growth disclosure because typically your disclosures are very good?
We'll take a couple of quarters before setting that because there is a high level of competitive intensity around this business as you know and there's a lot of computer interest also. Unfortunately, all of them are unlisted and they are the only listed players. So we have to have keep that in mind also. We know that our transparency levels have been good and we will get back to that over the next few quarters shortly. The traffic increased quarter over quarter for your online pharmacy ordering or
the consults in QGP shared right now for this quarter?
Just on the teleconsult, let me say that we've already done 250,000 teleconsult. We are tracking about 2,000 a day. But more importantly, if you look at our telemedicine platform, etcetera, for the government, we go about 7,000, 8,000 a day. So we really believe that there is a potential to ramp it up. And just going forward, we will.
The reason that we're seeing a slight slowdown in telecoms are moving back to the offices. And that's the reason. But at the same time, 20 fourseven is increasing the number of doctors on this platform. It was 6,000 last month. And they have a plan to really double the number of doctors.
And with that, the teleconference will significantly increase. Plus, the adoption of teleconference by senior doctors will take a little bit more time. But definitely, there is a huge opportunity and the plan is there. We think that post our March quarter, we will be able to share numbers with you.
Anything on the monthly and daily active users you
can share? There are certain external app traffic monitoring sites where
we are seeing some decline in terms of the traffic activity?
No, no. So we said that with post COVID, slight decline because doctors have moved into their offices and started seeing patients. But we believe that generally, we pick up because we're onboarding more doctors and we're also onboarding senior doctors who have not been used to the telemedicine platform.
Okay. Last thing We also
do post the March quarter.
Okay. That will be very useful. Just one more housekeeping thing. So the
impact of AS-one hundred and sixteen,
it's seemingly lower this quarter versus
the last two quarters. So any asset that has gone out?
The pharmacy front end has been tested out. The pharmacy
front end has been tested out. The
Thank you. The next question is from Nitin Agarwal from BAM Capital. Please go ahead.
Hi. Thanks for the color. Ma'am, on the hospital business, now when you look at capital allocation over the next
So post the Calcutta acquisition, the way that we're thinking of growth is, one, is definitely a focus on existing assets and improving asset utilization. The second is to grow our clusters and definitely to have a presence in the Delhi market where we have one hospital. So yes, if you look at something in Delhi, we're looking at and the way that we will do that is through bolt on acquisition. We've not clearly looked at greenfield. We're not looking at greenfield.
We're also looking at revenue share options. So it's an asset light growth strategy.
And so is there any sort of firm capital number in mind in terms of is there is how we sort of approaching this because
I think that if you look at the debt EBITDA, it's we will keep it between 2 to 2.5. And debt equity currency at 0.71 coming down to 0.5. Our upward comfort level is 0.8. So I don't think we'll ever compromise the balance sheet nor will we impact the free cash flows that we hope to see. Some of the growth will some of the bolt on acquisitions will be funded by free cash flows.
And then the second one on HLS. We talked about the different aspects of growth on the business. But how are you looking at the 3 year picture on the business? I mean there are obviously the HLS businesses It's made up 2 very different 2, 3 very different pieces of businesses which have limited synergy to each other at some level. So I mean structurally, how are we looking at the business?
So when you take a long term view, how do we independently invest in growing the businesses? Because business is individual capital. Are there other opportunities to get individual capital for various segments?
Chandashikar? Yes,
ma'am. So there are opportunities on individual level areas of interest within the platform per se, but I think our preference is to keep the platform intact and seek investments at the platform level. Growth in a 3 year horizon, we are looking at growing year on year. In Diagnostics, specifically, we are trying to grow 30 gigabytes percent kind of growth rates, which we are factoring in organically. On the overall numbers that we're tending to see that at a platform level, we will reach about in 3 year time frame, we want to reach get above the region 1000000 crore and have a steady state of 12% to 14% to 13% to the margin.
Okay. Thank you.
The next question is from the line of Anubhav Agarwal from Credit Suisse.
Two three questions for me. One, in terms of COVID patients, the ARPU is low at $35,000,000 $28,000,000 But what would you say there is a price? My sense would be the margins should be higher here, like, continue to the next day?
Similar margins is what we have. We don't have the margins would not be lower. It won't be higher.
So you're saying 27, so 5.60 per bed per day, something like that? That's what you
It actually varies from state to state. So what we would say is that it's Jumazthiv also 14%
Sorry, so you're saying 14%
Yes, 14% what I said was that it varies from state to state. Governments are tapping on COVID prices. So it will not be more than 14%.
So you think INR 4,000 per day is very similar to the hospitals that you have right now?
Yes. But
it's diluted, which would be have a cohort in the major hospital, it's diluted? That's correct. Okay. Second question is on the CapEx for the 247. In the sense of that you're talking about QID money being there as part of
the 100 or 100 of
growth being used there. Can you talk about what you're going to do with that over there in terms of hard electric capital expenditures, which areas you're looking to strengthen over there?
Clearly, the 2 areas that we would like to spend more money on is, one is the teleconsults and second is the production management because these are two areas that we believe is going to be more long term sustainable and common. So clearly from our perspective, the way we look at it is we have to be the only platform or app that a patient should use. It's not about the pharmacy is not the differentiator. It is something that you will clearly use the app, provided you know that you have the ability to reach to the doctor, take care of your health and also ensure that you do condition management and we are able to manage diabetes, have a health counselor for you, stuff like that. So there is a lot that we are proceeding around that.
Many of that streams are already on. There is a separate tech team that is working on this. So it's you will see significant improvement in some of these over the next 6 to 9 months and not really quarter over quarter, which is why somewhere we are not able to give some of this quarter on quarter matrices also. But these are some of the plans which we have, which you will see showing up shortly.
So just a clarity on this, when you see spend more spend with telecom condition management. So as a user, what I
see I mean, what's happening?
Are we getting more cloud space when we are spending that incremental money here or using more AI here? So what is the stage here? 1 is trending of hardware advertising, second is in terms of user experience. 1 is
user experience. Sanjeev, you want to talk about that? User experience and AI and what are we building on those products specifically want to guide Sanjeev? Yes, I think. So typically the money which is going to be spent out is going to be on the technology front.
And when I'm talking about technology, we are talking about the AI and its growth in condition management and various bots that could help users experience while coming into the app as well as that could also help service them much better. So primarily, existing money that has been spent in 2% to 7% towards the technology build only. And I think a 3 quarter from now, you would see that technology enabled 2.7 app, which provides a very good user experience and actually explain out many problems in one, it provides solution across many problems in one app. So it's going to be technology based app than just a pharmacy kind of a thing. So we see that lot of AI and ML play in 2/47 app.
So primarily money is split towards technology.
Yes, thanks. That's helpful, Sandeep. If I can ask one last question on pro health initiative. Edwin, your target of 1,000 growth, I was just curious to
that because none of the
large even the large companies which are listed today in the diagnostic space, they do not have this preventive sales revenues more than INR 1,200 crores in front of them, which are getting INR 1,000 crores that one is a very should be
very steep target in 3 years. Secondly,
can you also talk about where are you targeting 1,000 crores from corporate individual segments? And what's the CapEx if, let's say, you wish to target 1,000 crores, what would have been taken there?
So yes, you're right. Currently, we're already at 2.62 crores in terms of what we are doing in terms of preventive health care. We do believe there's a large opportunity with corporates. We've tied up with many corporates to look after the health of their individuals. And as you know, COVID showed us that the importance of looking after your health, which is why we're very focused on launching this product.
The third part of it is most of the retail consumers who use these products on the app, they never really have a physical interface for the doctor. And well-being is all about not just taking blood markers, it's not just doing the exercise and following the diet, it's a combination of everything. And that's why we believe that ProHealth is something that is an offering that is differentiated from the rest. Finally, the layer of AI. With Microsoft, we have done a cardiac response.
So in that, we had many learnings on how we can improve cardiac health. Through sugar, we had looked at condition management for diabetes. So it brings in cardiac, it brings in condition management. Overall, it looks at improving the well-being, including things like sleep, reducing anxiety and the impact of it on your overall well-being. So yes, we really need to we have a plan to double the revenue 5 times.
But just think of Apollo, we have 70 hospitals. We have clinics, 200 clinics. We have 24x7 that will be acting as a funnel to allow people into this program. So I believe that we have the ability to do it. And this is really a space that we need to occupy.
And what CapEx,
Around INR 50 crores over the next 3 years.
Wow! So with INR 50 crores CapEx, we can almost take increment INR 750 crores and I'm assuming this will be at least 30% margin business?
Clearly, the existing assets are there is a lot of existing assets which will be sweated significantly on this as Mr. Suneet has said. The utilization of our labs in our hospitals, etcetera, are 50% today. So we have significant plans to spread existing assets which are if you look at the assets which are already there in the lab space within the hospitals, this is over INR 500 crores. So there is significant amount across our business which we will be using to increase the scale.
As this latest is a clinically designed product and it's not something which is just a diagnostic
product. Thank you very much.
Thank you. The next question is from the line of Krishna Prasad from Franklin Templeton. Please go ahead.
Yes. Thank you for taking my question. I have a few. First, you've mentioned the kind of growth you've seen in the home care segment. I assume part of it
is COVID-nineteen.
But can you talk about what kind of ambitions you have there and how you can scale up? So currently, we are home care is now clearly COVID has opened up the customers' minds in redoing transactions on home care. Earlier, it was a lot of nursing care that we were doing on the home care side. But with COVID, we were able to really manage a lot of people remotely. And that was a very strong product which was got accepted by the consumer.
This is something that we are now figuring out how we can use remote care to take care of the patients over using a product for the same like a weekly call, a monthly call, etcetera. So these are things that we are trying to do also, health counselors, etcetera, which we are also putting on the home care side of things. So it is already doing INR 60 crores of revenue per year now, home care. We believe that this time, what will happen is the handoffs from the hospitals to the home care will also start happening. We have to work on some of these over the next 1, 2 years.
But clearly, we are seeing that some of these opportunities will play out well where after an orthopedic surgery, we kind of say that we really are able to send home a patient in 2 days as opposed to really keeping them for an overall loss of 4, 5 days. So some of these will start lending itself and we are also started doing ICU management, especially with COVID. We were able to set up ICUs at home as well on although it is a handful of cases, maybe 2025, but still we were able to do that effectively. So it is lending itself to a lot of opportunities. We'll have to work on it.
Variables are also going to be important as we keep collaborating or keep classes open for collaborating on that front on many with some of the other players. People like Siemens, Philips, all of them are teaching of some of these and we will have a rollout planned over the next on some of these over the next 6 months. Sure. Thank you. And my second question is within AHL, I would assume that day care actually got a boost because of COVID, but I'm just wondering is that the
case at all? Anmichi Ka?
No, actually, the quarter 3 day care surgery work has come back. Quarter 1 and 2 was 34. But quarter 3, we are seeing the backlogs getting back.
Right. Finally, on the distributor side, I have a request. If you can provide the front end, is that free cash flow data on the front end on the pharmacy, that will be very interesting for us to assess these numbers? Sure, we will. Thank you.
Thank you, Anshakti.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
So thank you again for joining us. As we look ahead, we continue to focus on vaccination. We did have a challenging 3 quarters where were busy dealing with the pandemic. However, we believe that we actually emerge stronger in the sense that we've rationalized costs. We've created focus around improving occupancies.
We've created a renewed focus on asset utilization and more importantly, focus on clinical differentiation, which is really all about Apollo's DNA, how do we do clinically differentiated products for our people. And I think that all of this will result in better RFOBs as we move into the future. Our strategy on growing market share, as Bob and improving again, improving the offerings that we have from Apollo in terms of the verticals, which is for Health and Lifestyle, where we want to grow Diagnostics, improving pharmacy metrics, improving the hospital delivery and launching 20 fourseven in a way that is meaningful, things that we will focus on and we are so glad that you've been part of this journey. We look forward to your continued support. So have a great weekend.
Stay safe and stay healthy.
Thank you very much. On behalf of Apollo Hospital,