Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Wazwani from CGR India.
Thank you, and over to you, sir.
Thank you, Lisan. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial highlights of Apollo Hospitals for Q2 and H1 of fiscal year 'twenty one, which were announced yesterday. We have with us on the call today the senior management team comprising Mr. Suneeta Reddy, Managing Director Doctor. Hari Prasad, President of the Hospital Division Mr.
A. Krishnan, Group CFO Mr. C. Chandrasekhar, CEO of AHL Mr. Obal Reddy, CFO of the Pharmacy Business and Mr.
Sanjeev Gupta, CFO of Apollo 24 BICEF. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties on Slide 2 of the investor presentation 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 Mrs.
Sumita Reddy for her opening remarks. Over to you, ma'am.
Good afternoon, good afternoon, everyone, and thank you for taking time out to join our call. I'd ask that all of you have received our earnings document, which we have shared yesterday. COVID-nineteen, which began in the Q4 of last financial year, has penetrated through a full fledged pandemic very quickly, unnecessary widespread government mandated lockdown and disruption to normal life. It had a huge impact on the hospital sector in quarter 1 FY 'twenty one. The impact of the pandemic continued into quarter 2 FY 'twenty one and affected the hospital sector performance.
Air and rail travel continued to be disruptive, which prevented people from traveling for their healthcare needs. However, a gradual recovery in volumes and occupancy was visible, especially towards the latter half of quarter 2. There was visible traction both in terms of COVID patient flow as well as volumes above the specialties. In Q2 FY 'twenty one, our total discharges showed an increase of 30% on a sequential quarter basis. Occupancy also improved to 56%.
And as we move along, in October, we have witnessed 65% occupancy and it seems to be gathering momentum in November. This compared to the 38% in quarter 1. Corporate revenues increased by 27%, saw an uptick in charges and discharges as well, which grew at 18% on a sequential quarter basis. COVID contributed to 26% of net revenues, a 36% share of the occupied debt. This quarter saw a very robust performance for new units.
While the new units have been gaining traction and posting a bit of even pre COVID, this quarter saw them record significant growth with revenues not just growing 55% on a sequential quarter basis, but also growing 5% in Q2 FY 2020. This further reinforces the strong strategic foundation that we have made in these units, which will help us shore up both revenues and profitability further in FY 'twenty two and beyond. The joint units continue to place an impact because of the restricted travel and new COVID recovery. The separation of Sunshine Pharmacy business into Apollo Pharmacy Limited was completed in this quarter effective September 1, 2020. AHEM now has a pharmacy distribution as its business segment, while continuing to have 25.5% stake in Apollo Medical Limited.
The combined pharmacy business, including the front end sales portion, delivered a strong revenue and EBITDA growth in Q4 'twenty one. The business reported a revenue of INR1474 crores in Q2 FY 'twenty one as compared to the revenue of INR1173 crores in quarter 2 FY 2020, representing a 25.7% growth. While overall EBITDA expanded to INR97 crores in quarter 2, in which here, which continues to be the importance of distributor for Apollo Pharmacies, recorded a 15% growth in revenues, INR 13.52 crores for quarter 2 and an EBITDA of INR 86 crores at 4 percent EBITDA margin. As of September month, revenue now in AHL reflects only the back end of the pharmacy business. As we have stated earlier, we expect AHCL to capture over 85% of its cash flow on the pharmacy business and around 80% of EBITDA as the exclusive supplier to APL.
Against such backdrop, let me walk you through the financials of the quarter. The company recorded a degrowth of 2% in standalone revenue since 200414 and a degrowth in 3% in consolidated revenues to INR 2,761 crores. Pharmacy reported a double digit revenue growth of 15%, while healthcare services improved by 18% during the quarter. According to FY 2021 EBITDA, 3 INDiA's 216 to the 201 crores, a swing of INDi219 crores compared to the previous offer. Urgenti's Healthcare Services EBITDA was INR 114 crores compared to a negative EBITDA of INR99 crores in quarter 1.
The Post India EBITDA was at INR248 crores. As already mentioned, revenues and EBITDA in our pharmacy vertical were at healthy levels this quarter. EBITDA higher by 22% against the same quarter last year. EBITDA margins at 6.4%. Sales for private label have moved to around 10%.
AHLN recorded an EBITDA of INR 5 crores as compared to the 3 crores of Q2 FY 'twenty. The business has recorded a 5% increase in top line due to the impact of premix and speech business due to COVID. So the combination of the strong performance in both Gradient and the diagnostic verticals has focused there has been a tight focus on cost control by the AHML management team, which enables a smart recovery of the overall business. The under our net debt as of 30th September 2020 was at INR 2,564 crores and consolidated net debt 1,837 crores, the debt to equity ratio of 0.80. Our Board has approved the acquisition of the balance 52.6% of Glenungars Hospital, Kolkata.
I joined the Asia Partner IHH for a consideration of INR410 crores. We expect to complete this transaction by the end of the month. This acquisition will further solidify our footprint in Eastern India, where we have a high degree of brand salience and the hospital is the largest in terms of both beds and venues in the city of Kolkata. We have plans to further enhance our penetration in the Eastern region, including Western Wall and Assam, both of which we believe are very promising markets for Apollo. The Board has also approved increasing our stake in Apollo Medics Lucknow to 51%, by which the company becomes the subject of AHL.
Apollo Medic reported a top line of INR 90 crores and an EBITDA of INR 15 crores for the first half of FY 'twenty one. We believe this development is in line with our strategic plans for the Northeast region. For funding the Concourse transaction as well as for further debt reduction and growth capital preparedness, the Board has also approved of an equity raise through preferential issue for qualified institutional placements of up to RUB1500. We will carefully determine the timing and quantum of the issue as well as the itemized end use in the upcoming week. This quarter saw us make significant progress in our objective to move closer to the consumer, whether it was by accelerating the adoption of our app, Apollo 24x7 or by our intensified efforts in both health, home care, we stay true to our philosophy for putting the consumer at the center of our work.
In just over 6 months, Apollo twenty fourseven, we have 5,000,000 registered users. Over 2,527 sales have been completed on the app every day. We are working to ensure that all 20 fourseven is evolved to become the nation's foremost integrated digital health care ecosystem with services and features that fulfill every health care requirement. Our efforts in the home care assessment enabled us to move into more than 17,900 homes, of which COVID care required 1,000 during H1 of this year and to provide medicines to provide home isolation services. We believe more and more home based services coupled with remote health threat and integrated IoT will be a defining trend and expand our service offerings and capability to meet good demand.
From a technology standpoint, we continue to invest in strong consumer facing medical test priorities. Toshiba Acelon 1PT scan machine, a 640 slide scanner with 3 20 detectors in general that is quick enough to take an image in between 2 hotspots with outstanding precision and quality and its best in class diagnostic mechanism which is available to both cardiac and stroke patients was installed in February. As you know, the Apollo Hospitals network performs the highest number of We are happy to report that another 30 of our best clinicians are currently undergoing robotic training and it will accelerate the growth of our robotics practice across the country. We have also established a countrywide practice in structuring and intervention cardiology within our cardiac COE, where we can see outstanding results. Before I conclude, I am happy to share the time health survey recognizing Apollo Hospitals Chennai as the best multi specialty hospital in the area.
3 of the top five of the 20 hospitals in the national rankings are part of the Apollo Hospital Group. I would like to thank our consumers for placing their seats in our hospitals for the last 77 years. This has inspired us to continually innovate and become better at what we do. So that's it for me for now. I have Doctor.
Hariprasag, Doctor. Krishnan Oberweddy, Chandra
Ladies and gentlemen, we will now begin the question and answer session. First question from the line of Akashat Agrawal from Axis Capital.
Just first question on the fundraise and Kolkata. So understand the breadth for the QIP, INR1500 crores, whereas Kolkata is INR10. So what is the plan ahead either to expand in Kolkata or the Eastern region or in India, how do we produce the remaining cash? And the second part is on Kolkata. If you see the first half FY 'twenty, FY 'twenty, EBITDA is 44 odd course.
That's the 3 OMA fees. So would the OMA fees change with this transaction? Or how should we think about the operating performance of Apollo going forward? Thank you.
So your first question was on the end use of the fund. We have not completed committed 2,500. When having said that, I want to say that 4.10 crores will be used for the calcified acquisition. We have set aside a portion of the money to invest into 20 fourseven on digital app. We are also preparing our balance sheet into which they are some bolt on acquisitions that come away and with the right price.
The rest of the money will be used to reduce our debt because we truly believe that this will enhance our profitability. And also, like mentioned earlier, we are looking at some bolt on acquisitions. So this will help to fund that. With regards to Calcutta, you asked about the OMA fee. We have from September onwards, from the whole year, in fact, we are not paying the OMA fee.
So even though the transaction was completed, will complete by the end of November, no OMA fees will be paid to either of the partners.
Okay. That helps. And lastly, on occupancy. So I missed your point on what was the exit run rate of September. And October, I believe you said about 65%.
Yes, you're right. The quarter, we gave up to 66% for the full quarter. September was around 60 over 60% for the number for September. And as we speak, in October, it's well over 60% as we speak. And we used to be breakeven at around 50%, if I'm not wrong?
That is correct. Around 50%, 50%. Yes, that's right. Okay. And we are currently upward now 60%.
That's right. So we have been above breakeven, right? It will affect Q2 also. We have to be our results are above breakeven. Yes.
Perfect. Great. I have no question. I'll turn this. Thank you.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Hi, good afternoon and thank you for taking my question. Just on the occupancy and the related margins again. If I look at Nature Hospitals for the Q1 to the Q2, you still have reported like low teens, low double digit margins. So what will it take us to get to the historical 21%, twenty percent margins in terms of occupancy, we have clearly seen. I can understand the mix, but just the second half in terms of recovery in the margins, especially in the mature hospital?
That's the first question. Mature hospitals, there is a as you know, some of the mature hospitals like Chennai and Hyderabad and Bangalore also, what I think is, they are all centers of excellence and they are all large multi specialty hospitals with also patients coming from out of stations, right? Clearly, that is one thing that should pick up. We have seen some pick up happening in out of station patients. We have also seen the 1 hour patients have now started coming back from Hyderabad and Assam to Chennai.
So it is picking up. We are seeing that September has seen a much better advance in both deals. I guess we will have to ensure that there is the biggest worry that we still have is this surge in cases which can happen beyond Diwali which people are a bit worried about, right? So I guess it's more about how the people are going to get more comfortable with the fact that COVID is not going to rise again. And once they see that, COVID will start coming back.
So if anyone gets to that, we get as we said, October month has been at least 20% better than the average of Q2. So hopefully, if that plays out, the quarter should be much better than Q2. But some of the mature hospitals, we'll have to wait for some of the outpatient, actually outpatient to return as well as the outpatient patients to return. Yes. Krishnan, just following up, 20% is revenue occupancy, sorry, is the 20% revenue?
20% is the increase that we
are seeing in revenue and occupancy of in October versus the Q2 average. Okay. That's helpful. Second question is on the SAP business, right, the standalone pharmacies. 85% is the economics.
You said in terms of revenue, 80% in EBITDA. Is that right? Am I hearing that right? So 80% is the so roughly around 80% would be the EBITDA that will be captured in AATL for now. Revenues will have to come back because it was the 1st month that we did the revenue.
So it depends on how the cost shifts from the back end to the front end. So if there is a bigger shift of cost from back end to front end, then the revenue number will accordingly shift. So more than the revenue number, I think the EBITDA number would be approximately 80% of the overall EBITDA of the pharmacy business. Got it. And just on the network expansion for the pharmacy, right?
I noticed that about 70 net new additions were there, like bulk of the first half additions. So what's the outlook here? And just from a who decides the network rollout? Is it Apollo? Is it the sub?
How should we understand the strategy for the network rollout for the pharmacies? Yes. This will be presented at the Apollo Pharmacy level going forward. But whatever is for the current year, the plan was envisaged and approved in the last year. Q1, we could not do because of the COVID restriction.
And Q2, we are back with the network expansion. Hopefully, we will continue in the next quarter given the situation unless the COVID comes back. So we are on track on that. And even the decision on the expansion will be at Apollo, Cognus' new entity level going forward. Yes.
And my last question is on Apollo 20 fourseven. So if you can some of the numbers are very impressive. But in terms of financial impact, either in revenue or profit contribution, if any, I know might be early, if you could share some numbers, please? As of now, it's a bit early for us to share any of these. I know we would like to it will take us a couple of quarters before we can share some of these numbers.
Thank you, Krishnan. All the best. Thank you.
Thank you. The next question is from the line of Anubhav Agrawal from Credit Suisse. Please go ahead.
Yes. Hi. Good afternoon. One, Krishnan, who wanted to get some clarity on this unknown pharma business. You have mentioned that you have done.
So when you reported like to like every quarter was about NOK 97 crores and the NPL approval is on the 1st September. And then in the what you record, the EBITDA after this event is changed. So the GAAP is INR11 crores, I just wanted to understand. So the GAAP is INR11 crores, does it correspond to 1 month, and it looks very high? I just cannot see the gap of 11 crores.
Any further understand that? Yes. For this, there was certain transition costs in this quarter also because there were costs related to the transition which was there in the books of the back end pharmacy, which is why you're not able to appreciate that overall number. But broadly, as we said, it will be around 80% of the overall EBITDA will get reflected in the back end as we move forward. Okay.
And second question was on 20 fourseven, so I appreciate this right now may not be very significant. The revenue and expenses, which segment are you reporting right now in the number? Where does it reflect? Part of pharmacies now. Both revenue and expense both are affecting But are you reporting all the expenses right now?
Or some of them are getting capitalized? All of them are getting reported. So the capitalization, which is related to a technology cost, will get capitalized. The non technology cost and the cost, which is not related to creation of the technology, is already part of our operating cost. Sure.
And last question I had was on growth CapEx. This year, of course, you've been talking about low numbers, understand it. But when you think about CapEx for next 2, 3 years, because now you're thinking about degree wave also. When you remember talking about you talk about organic CapEx being high, you are talking about on acquisition. What's the plan?
Just for organic CapEx, are we looking to, let's say, would we see any of the years there on CapEx total or will we be spending about more than $200,000,000 to $700,000,000 a year on the organic?
No, no, no, we won't.
So that's not the plan. So organic CapEx would not be over $200,000,000 to $54,000,000 That's what we have been guiding this year at the start, and then we brought it down to almost half. So organic CapEx was that. And inorganic bolt on, as Mr. Sridhar already said, we will look at opportunistic investments in the strategic markets that we want more presented.
Sure. But just one clarification on this. What was the pricing need of the tax?
So as I said
bolt on acquisition is one that we will have to wait and see how are the opportunities in select markets. Clearly, we have a focus on increasing our presence now further in North and East. Both of these are attractive markets for us from given that now with us present in having adequate investment now and East, we definitely see Eastern one that we can further look at enhancing our presence. There are good assets at good prices available, so we will look at it. Okay.
Thank you, everyone.
And I said up to INR 1500 crores. So it's only by the end of the next quarter that we'll decide the absolute amount.
Yes. Thank
you. Thank you. The next question is from the line of Tarang from Old Bridge. Please go ahead.
Two questions from my side. Is there any breakdown, the lending tools, whole hospital stuff? No, there aren't any gaps in the pool hospital, the remaining doors. Okay. The second question is, as a business comes short, once your hospital starts approaching maturity, what is the occupancy standard or the occupancy that you they were at almost 22 different ROCs and therefore has ROCs prior to COVID.
And specifically a new hospital, we would expect it to get through mid teens in at least 5 to 6 years from the time it starts operations. And occupancy for your portfolio, mature hospitals in a steady state without COVID? 67% to 6% of the overall occupancy without COVID.
The next question is from the line of Shantanu Basu from FMIFS. Please go ahead.
Hi, good afternoon. Thanks for the opportunity. Now if you can share with me the overall Q2 outlook and the COVID outlook and along with that the COVID test and the COVID test of 20% vintage. And I would also like to know whether with regards to the pharmacy restrictions and that which is reported in the settlement tightened, So first of all, your COVID ARPUB, our COVID ARPUB is approximately 20% lower than our overall ARPUB that we have reported. That's the first point that you wanted.
And our COVID occupancy is around 30% of our overall occupancy for Q2. That's the first point. And the point on pharmacy, is it? Yes. That is for the 1 month strategic account and 2 month combined account.
It is an aggregation of the total. So the pharmacy distribution segment, 36,118 lakhs, that is for the month of I'm talking with the revenue, that is only for the month of September? That's right. And the retail pharmacy is right and which is 89,070, that is for the full month, July and August. That's right.
Okay. But you're saying the overall growth reflects 15% because there is a reset in the way the accounting has happened from 1st of September. So you will keep this ablation for until 4 quarters till the time the like to like starts coming up and show it. But we will give you the combined revenue growth as an investor for you to get an understanding of how the pharmacy is doing. Great.
Okay.
Thank you. The next question is from the line of Nitin Ghoshar from Invesco. Please go ahead.
Yes. Hi, Tim. During the previous call, when we heard about the retail pharmacy, you had mentioned that 3% of the business account is a debt that's in the listed entity. Today, you focus around VITI. Has there been any change in the terms of PD or what are you missing right now?
No, I think 80 to 85 is
a number that we will still capture. 85, as of now, we sell 80, 80 because of the cost that are going into the frontier pharmacy, which has got shifted. But as the ramp up happens and as some of the business ramps up there, you will get it to 85% difference here with time. But around 80% to 85% is a number. So there have been some additional costs which have been shifted out there, which has to be borne there also.
So around 80% there's no difference, there's no major change in the business economics at least. And actually, if I may ask what has been the change over the last 4 years? What's the time period that you discussed between I and today? 85% of the cash will still come here. So at that time, it's obviously based on projections, right?
It was based on the predictions that we had in the books, etcetera. Now as we are rolling it out, it's more about there is a DSP adjustment, there is a cost of transfer which we have to do from here to there. So it's more about accounting, which is resulting in some of this. The intent is definitely, as we said, to continue all the work of the economics in AATM. That is what is the intent.
Okay. And when is the integration, can we get over a period of what time? I think over time, it's 1 to 2 years, we will get there, 20%. Okay. And second question was on bolt on acquisition.
The mark, as we all know, is heavily crowded to region when it comes to corporate hospitals. Is that area of the prime central relation for us?
So, Vijay, I didn't hear the last part of your question. But from what I heard about the north, I think what we've done now is to put a placeholder in all the senior market, which is what our Lucknow strategy was all about. We also have one coming in Kanpur. So clearly, this is something that has been part of our strategy. And the fact that these hospitals that now broke even within 18 months, it's proof that we did our investment have processed this particular H1.
In terms of Delhi, right now, it's too early to share anything, But locally, we will have a strong presence in Delhi at Kampala.
Okay. Yes. Thank you.
Thank you. The next question is from the line of Shriram Rathi from ICICI Securities. Please go ahead. Mr. Rathi, your line is in a short mode.
Please go ahead.
Yes. Am I open now?
Yes, please go ahead. Thank you. Sure. Thank you. Please pass
the question. Mainly, quickly, I mean, since in October, you have 3 different opportunities. So any comment you can provide, I mean, how is the traction patient coming to different tissues for a future hospital? I mean, as you see, you get that coming at first level of the COVID level.
I think the important thing to note here is that our local patients have grown dramatically. Only a 30% of the local has occupancy, only 32% of local patients. That's moved to 60%, which is a good thing because if anything happens in the future, we've created a stickiness within our local community. Having said that, there have the travel in India has opened up and we are seeing traction, pressure starts starting to come, which is why the higher November occupancy is changing towards 70%.
Okay. Got it. And secondly on the on the fuel and cost, there has been decline of 17% growth to this year. Any specific payment for this year? So as of now, we have been there has been an exercise where we have been ensuring that there has been productivity linked.
We have not increased some of the manpower who have been who have left us. So we have been ensuring that we manage the hospitals without that incremental cost. And that will continue into the next year also. Some of that will continue into the next year. We are hoping that the overall cost reduction, which should greater to FY 'twenty two, should be in the range of 120 to 150 gross.
Okay. Great. Great. That's Yes. Can you report it with the same magnitude to which we can take 9.
Okay. Thank you.
Thank you. The next question is from the line of Sameer Dasiwala from Morgan Stanley. Please go ahead.
Thank you and welcome everyone. Just on the extension that is green.
Sorry to interrupt, Mr. Vaishiwala. We're not able to hear you.
So I was asking if asset expansion is concerned, is Greenfield type expansion is strictly off the table?
Yes, for this time.
Okay. Okay. So this cycle is more about bolt on acquisitions. From that point, I mean, is it like 200 standard bed type acquisitions that you're looking, smaller, bigger, if you can just help us with that?
Yes, certainly smaller. So as we look at the reduction in alloys and the fact that Kolo is really focusing on increasing the surgical volumes, we're also increasing robotic utilization, which means that the alloys come down and the RCO goes up and the ID size would be somewhere around 300 in a big city and 200 in a smaller city.
Okay. And the second question is on the COVID business. Looks like it's roughly 25% of the total hospital business, if I'm not wrong. So what's the trajectory for this business going forward? And is there thinking that this continues to trickle down and the core business goes up, so let me say the overall growth doesn't come back as fast as we thought it will come back?
So you were right. This business will take down. Regular growth will come back. And but we feel in December, we need to keep a certain bid allocation for COVID in case it is a search for Tiga leap.
But as of now, as we said, the month of October, I mean, we are seeing credit results that increase versus Q1 Q2. So there is an overall increase traction in the overall business. So Q3 should be better than Q3. Okay, got it. And then final one, it looks like there's been a fairly significant quarter on quarter decline in net debt, roughly INR 400, INR 450 crores on a consolidated basis.
So what's
So this is a one time thing, which is the payment of 500 crores that came from the pharmacy. So we transfer the front end to Apollo Pharmacy. Thank
you. The next question is from the line of Neha Manthuria from JPMorgan. Please go ahead.
Thank you for taking my question.
My first question is on the ARCOM increase that we've seen particularly in our AP Telangana and the others. Given that COVID realization is 20% below This
is Manpiria and your voice is now being absent.
It is better.
A little better. Thank you. So
given that the COVID realizations are lower than average realization, what's driving our performance limit? Is it because we've seen only very high end work coming which could normalize as some recovery of the normalization happens in the market?
I think it's a combination of 2. One is that the severe COVID changes that we take is really does contribute to higher ARPU. Also, now that we've started with all the surgical work and we're really focused on the surgical work, The ARPUB has moved up. So it's definitely a combination of both.
Understood. And my second question is on ASLL. I think you mentioned when you're opening the mask, there has been an improvement as you know, I mean, safety and diagnostics have done well. I'm assuming there must be a good enough contribution from COVID test on the HLL business. So if I exclude that part of the revenue or EBITDA, EBITDA, how is the underlying performance for AHL?
Yes. I'll answer that. The overall contribution of COVID testing through AHL for the first half was 7% at HLS. So we would show a little bit performance that has happened as being a positive significant impact across all verticals. We said impact to near normal in ADS, which mentioned, etcetera and clinics, which were 34% in the Q1, are getting back to near normal.
It is 7% on a first half basis, which is the contribution of COVID revenue. In Diagnostics alone, that number would be roughly around 30%. Understood. So it has Okay, understood. Okay.
So, is this possible and below the normal level? Is that what you're trying to say? Yes, that's right. Okay. Understood.
And my last question is on the mature hospital possibility. Given that you are gaining share in local markets, at some point of time, what's the even if the arbitration session don't come back in its full anytime in the next able to see an improvement in the profitability, which I'm assuming the patients on the local market might not necessarily be surgical procedures or high end procedures not necessarily? Doctor. Hari, you want to keep that because the local market plan that we have? Yes, yes.
Can you hear me? Yes, yes. Yes. Already, we've seen a significant increase in the local market share in each of the major cities that we are present. And I think that's a great thing to happen because that's what is the sickness that we want, Geoff.
And second thing is, because of the experience that they've had with us, most of the patients who are admitted with COVID in the hospitals are local patients. And these patients are going to stick with us and their regular healthcare needs as they come about. And the third thing which we are noticing is a significant proportion of the patients who have recovered from COVID are lining up with post COVID syndrome, which includes major issues like heart attack or a stroke and stuff like that. And that is another thing which you're saying is, you see, the patients are running back and that is one of the reasons that we were the first to launch the RECOVER clinics for the post COVID patients. So all put together, we see a positive side for the local market share in improving the margins and increasing the occupancy levels.
Understood. Thank you so much.
Thank you.
The next question is from the line of Vamayanti Terai from HSBC. Please go ahead.
Hi, good afternoon. Thank you for the opportunity. I have three questions. So first, if you could provide some update on international patients, whether we are getting some queries at least from the major countries. Similarly, if you could provide update on the control facility utilization?
So that's my first question. So on international okay, why do
you want to say? On international patients, we are nowhere close to coming back to normal. But we have started the people have started in, especially from neighboring countries. We have seen patients coming in from blood vessels. And we're seeing some patients coming in from Myanmar into our facilities, particularly Delhi and Chennai.
But we're still a long way off from the procuring pre COVID levels of international patients. But with the travel opening up, we are hoping that they will come back sooner than later. That's about the international patients.
Okay. Because of COVID, there was definitely a decrease in utilization. The one thing that so all the foreign patients dropped off, and it resulted in a loss of frequency calls for the quarter. But once the international travel comes back, we believe that this will come back very quickly. The other thing that we're seeing is that now that the domestic travel has opened up, people are coming go to go abroad for cancer treatment and starting coming into our cancer care centers in June.
Okay. So So we are seeing improvement. It will broadly depend on normalization of international patient growth for Cordon, right? So we're quite sure that next quarter we'll see a better Okay. So EBITDA basically in the 3rd quarter or 4th quarter?
3rd. Okay, ma'am. Another question on cost savings. So you mentioned
100 and 30 crores to
100 and 50 crores kind of cost savings. So can you elaborate more on this what are the key levers which should help you to achieve this kind of cost savings given now costs are also normalizing with normalizing operations? Okay. On I think the first question is, of course, is that in variable costs, we've reduced the cost of consumables, and we've really done this in 2 ways. One is that we've looked at some of the local suppliers to see if we could replace the import.
The best thing that we've done is that In the credit part of it, Harry, you want to do it?
No, no. I just had to think also thinking about the conversion.
So the keeping that was done for surgical procedures is something that will effectively control utilization. The second part of it is impacted in fixed cost. We've looked at the key elements of fixed cost. Among them was HR cost, where we've really not we've rationalized our HR cost. Those that led to during COVID, we've really not we've not taken them back.
That is brought down HR cost. We've got this guarantee money, which we paid out last year. That is also the cash to write and reduce. The 3rd element of it is outsourcing. We've reduced outsourcing costs.
The 4th, of course, is all that has to do with marketing, travel. All of this, I think COVID has brought us many lessons, and among them is the fact that our expenditure has now moved to more of digital marketing away from the regular cycle advertising that we used to do. Travel, of course, has come down. So we've looked at every possible levers, including when to see where we can save money. And we truly believe that while we registered INR 180 crores of cost savings for the 1st 2 quarters, we believe that we will be able to achieve a structured cost savings going forward, which we intend to continue to think.
And first question, 3rd and final question, if you can share your thoughts on some of the government initiatives, which is currently undergoing for improved uptake of digital health adoption in India. So that is in context of your pick for Apollo 3 47. So any thoughts from your side would be helpful. So at this time, I have to Shobana, my sister, is part of the National Digital Health Commission. So since she's not here on the call, not able to elaborate.
But Sanjeet, do you have any insight?
Not, ma'am. In due point of time, I do not have anything on this.
It's also very early to comment on it because he's worked in progress and can look into this, maybe try to get this data privacy as we adjust. So next quarter, we'll give you more insight to
The next question is from the line of Anupolak Adwal from Credit Suisse. Please go ahead. Yes.
Thank you. Question 1 clarity. On the standalone pharmacy business, we used to spend about $78,000,000,000 earlier. Now on the new structure, what is the CapEx on the card books? Or will there be anything or everything will change at the same time?
And my question was on the petrochemical business. Excluding COVID, we are tracking right now working about RUB150 crores a year at the top line. Can you think this becomes about RUB500 crores business for us? Is it even tracking that you guys are expanding that Chandra, organically, we're looking at it 3 years from now. But we are keeping an eye on faster ramp up via inorganic programs.
But on a pure organic basis, it could be 2 to 3 years. And what would be the spread of that roughly 500 crores? Like how much East roughly? 70 30 or what? I think our largest ways we have invested and we have gone deeper are South and East.
So I think with gradual expansion in North and East, North and East could contribute North and West contribute only at 25%. Recall our consolidation in our regional segments continue in South and East where we are already committed and we have committed the network. In a close to a time frame, the North and West could be the region of 30% to 30% of this. Okay. And just last question was on the utilization for our 700 and February, September.
Tamil Nadu, as you know, in Chennai,
in particular, has to it will
take another 1 quarter to pick up because of the outpatient and the outpatient dependency, as I said. Otherwise, both the chapters outside of Chennai is doing well in Tamil Nadu, and Hyderabad is doing well. Okay. Thank
you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
Thank you, ladies and gentlemen, for joining us on this call. The last few months have been extremely challenging for all of us, and we have had to rapidly respond to unfitted on the future months. In the process, we have treated 22,000 COVID patients. We've done testing for over 2.5 lakh patients. I believe that the work you did during the COVID time was not about profitability, it was more about purpose.
And I would also like to congratulate my team for the incredible work that they have done. But I would also like to thank all of you for supporting us through 2 difficult quarters. What I can assure you is that going forward into the next quarter and the quarter after that, we will get back in terms of numbers, we will be back in terms of revenues. And I think the version of Apollo that you will see in 2021 will be a sharper version. By the end of 'twenty one, we'll be something that is a sharper version of ourselves, something that is more patient friendly, moving closer to the consumer and something that can face any challenge which we've learned to face during this period.
Beyond COVID, we have also strongly demonstrated our strategic focus by acquiring the balance sheet in our Kolkata asset and increasing our stake in Lucknow, which is in line with our intent to grow our whole Western delivery services in the Northern and Eastern regions. We have complete confidence in the future of the business. Therefore, we have obtained Board approval for all the strategic moves that we made this quarter. We look forward to further interactions to do during the quarter and the next quarter. Thank you again for your support.
I'm happy to talk to you and to all your families.
Thank you. Ladies and gentlemen, on behalf of Apollo Hospitals, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.