Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.
Thank you, Ray. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for the first quarter of fiscal year 2021, which were announced yesterday. We have with us on the call today the senior management team comprising Mrs. Suneeta Reddy, Managing Director, Mrs. Sangita Reddy, Joint Managing Director, Dr. Harip rasad, President of the Hospitals Division, Mr. A. Krishnan, Group CFO, Mr. C. Chandra Sekhar, CEO of Apollo Health and Lifestyle Limited, and Mr. Obul Reddy, CFO of the Pharmacy Business. 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. For the complete listing of such risks and uncertainties, please refer to 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. Suneeta Reddy for her opening remarks. Over to you, ma'am.
Good afternoon, everyone, and thank you for taking time to join our call. I trust all of you have received the earning documents. The last six months have clearly been one of the most challenging periods in our 36-year history, a period which placed unprecedented demand on the healthcare system. It has also been an exceptional and defining period for the sector, placing it at the forefront of the national narrative. While the impact for only a few days in quarter four of FY 2020 was felt last year, the first quarter of FY 2021 has withstood the peak of the lockdown and the containment measures. This has led to an impact on our operations in various ways. First, our outpatient volumes were impacted, both within the cities as well as outstation, due to the lockdowns and travel restrictions.
Second, there was a significant drop in the postponement of surgical volumes across both electives as well as mild to moderate medical conditions due to the fear of visiting a hospital in these times. The third, the need to take infrastructure modifications in our facilities across India to ensure complete safety for both our patients and employees, and to put in place protocols which ensure an iron curtain between COVID and non-COVID patients. This immense social and consumer responsibility, not to refuse patients needing care across our centers, while at the same time ensuring clinical preparedness to continue achieving best-in-class outcomes and recovery rates. Maintaining the morale and composure of the frontline warriors during this period. I'm very happy to state that we have treated 37,000 patients with COVID and have completed 1.3 lakh tests.
At Apollo Hospitals, we not only had to deal with the challenges thrown up by the pandemic, but also ensure the seamless continuation of delivery of essential health services during the outbreak. This meant we had to respond to specific patient categories like maternal, newborn, and child health prevention and management of NCDs, treatment of chronic diseases to avoid complications, and addressing emergencies. This has led to an increase in costs due to infrastructure modifications made from creating isolation beds, the PPE requirements for personnel, and for the upkeep of hygiene and sanitation norms, as well as financial. We have counterbalanced these with our efforts on cost savings. The pandemic has necessitated a strong financial and cash flow management. We initiated a slew of cost containment measures.
Our receivables team ensured that we collected dues on time. Overall, we were able to manage the cash situation with only a marginal adverse impact on cash flow and debt. While we have emerged as the safest network of hospitals providing world-class care for our patients during these times, we continue to contribute to the fight against COVID-19 in several ways under the umbrella of Apollo Kavach , the shield against COVID. Our joint Managing Director, Sangita Reddy, will be sharing a brief presentation on this after we speak about the numbers for about five minutes. Against this backdrop, let me take you through the financials of this quarter. The company recorded a decline of 12% in standalone revenue to INR 1,962 crores and a decline of 16% in consolidated revenue to INR 2,172 crores. SAP continued to report double-digit growth at 21%, while healthcare services declined by 42%.
IP volumes also declined by 45%, and overall occupancy across the group for quarter one FY 2021 was at 2,742 beds, or 38%, compared to our 66% in quarter one FY 2020. Our SAP verticals recorded revenue growth of 21% year-on-year, with an EBITDA higher by 37% against the same quarter at INR 80 crore. Network-wide EBITDA margins are at 6.3%, with those of our mature stores at 8.7%. SAP return on capital employed is 27% now, and sales from private labels has moved to 9%. The pre-Ind AS Q1 FY 2021 EBITDA stood at a negative of INR 18 crore, compared to a positive of INR 274 crore in Q1 FY 2020. Post-Ind AS EBITDA was at INR 40 crore. Within this, healthcare services EBITDA registered a loss of INR 99 crore, impacted by lower volume and occupancy due to COVID-19.
To offset the impact of the pandemic on the business, we launched a comprehensive cost optimization and productivity improvement project. We have been able to achieve INR 80 crores of cost saving in standalone, and over INR 100 crores of cost saving in consolidated accounts in Q1 FY 2021, which represents a 20% reduction in our costs over the last quarter FY 2020. AHLL recorded an EBITDA loss of INR 19 crores as compared to a loss of INR 4.7 crores in Q1 FY 2020. The business had demonstrated a 37% de-growth in top line, which includes the impact on clinics and its Spectra businesses due to COVID. Net debt as of June 30th, 2020, is INR 3,014 crores. We have a debt-to-equity ratio of 0.89. The debt-to-equity ratio has inched up this quarter due to the dip in revenues.
We expect it to return to a trajectory of reduced debt in the second half of the fiscal. We've secured final approval of the NCLT for the demerger of the front-end pharmacy division with effect from 1st September 2020. This reorganization sets up the platform for value discovery for the business at a future date in a regulatory compliant structure. The last six months have seen the rapid ramp-up of our digital healthcare platform, Apollo 24/7. At the six-month mark since its launch, the platform had 3.27 million registered users, the fastest by any Indian digital healthcare platform and faster than most global benchmarks. 15.7 million COVID scans have been taken on the platform. Partnerships with major telecom, banking, insurance, and technology players have already been entered into to provide Apollo digital health access to 100 million Indians.
Apollo 24/7 is creating a trusted, curated network of doctors for the best and highest quality virtual consultation experience in India. Over 3,500 Apollo consultants and partner doctors are currently onboarded. 13,500+ PIN codes are covered by the online medicine delivery service of the 24/7 digital platform. We are adding more PIN codes rapidly. Further, the team is building the fastest medicine delivery platform by leveraging our existing formidable pharmacy chain presence across the country. 40% of the Indian population are within 30-60 minutes of an Apollo Pharmacy store. Apollo overall has 39.6 million unique customers served over the last five years, out of which 2.3 million new customers have been served since the onset of COVID. Apollo 24/7 digital health will be offered to all these customers to create an enhanced lifetime value.
Looking ahead, we are witnessing positive traction in the Apollo Hospitals division in Q2. July and August have shown marked improvement in occupancy. Surgical volumes are also gradually picking up as the lockdown relaxations take effect across the country. We expect to see sequential movement improvements as we move ahead. For healthcare services EBITDA to move back into positive territory in Q2. This has been a challenging quarter, not just for our company, but for the country and for the world. We believe we have navigated these troubled times well and have emerged stronger in our strategic journey. We have moved closer to the consumer through Apollo 24/7, and we have used the six-month period to win new consumers and deepen our engagement with existing customers.
For now, that's it from me. Let me ask Sangita, our Joint Managing Director, to speak about the Kavach initiative . Later, our CFO, Krishnan, Hari Prasad, Obul Reddy, and Chandra Sekhar from AHLL will be there to take your questions. Sangita?
Can you hear me?
Yeah. Yes.
Yeah. Hello, and it's a pleasure to talk to you. Are you seeing the same slides? I'm on slide four.
No, they can't see slides, Sangita. They have the presentation.
Okay. They have the presentation. If you're using the presentation, ladies and gentlemen, you can refer to slide four, but I'm quickly shifting to slide five. As all of you know, the numbers across the world have been significant and continue to grow. In India, where we had thought that we're having a milder response, the numbers have not just crossed 5 million, brought us to among the top three countries in the world, but it has been fairly devastating in terms of numbers, yet the medical response has been very good. Leading this response, I think Apollo, in the last 200 days since we heard about COVID, went through a serious thought process in terms of what our response would be.
We first said that we must continue to serve our existing customers, so we would bring world-class protocols in COVID care, but we would do it in an isolated manner while continuing to treat emergency and other patients. We thought through a process of prevention, so we educated public and corporate customers, old patients, on prevention. We worked on early diagnosis. We facilitated quarantine and a methodology, went through a treatment so that we brought world-class treatment, and then are now working on rehabilitation. This integrated response literally encompassed every service and every capability of Apollo, starting from our round-the-clock helpline, a number which reflected our 1066 branding, so customers got recall value on that. We gave credible information. We stayed compliant with government guidelines. We were multi-channel in our approach, multi-stakeholder, and multi-language. We launched our telemedicine capability, fever clinics.
We started over 2,300 beds, ramped up our testing capability, enhanced our home care, and created a unique concept called Project Stay I, which was our methodology to keep people isolated. Recognizing that in India, many people did not have the facility to stay isolated at home and therefore needed a different strategy, we partnered with hotel rooms. OYO rooms for cost-effectiveness, Lemon Tree for the middle income, put a telemedicine layer on top of this, and enabled people to stay isolated while having medical supervision.
We also focused on education awareness. Apollo 24/7, that our managing director has spoken to you about, has had a tremendous impact during this period. The COVID Scan, which over 18 million scans have been taken during this time period, is an artificial intelligence-enabled risk assessment score, which has got a lot of credibility and impact for us. Just quick glance at the numbers.
We have over 2,250 dedicated beds in the Apollo ecosystem, and an additional Apollo Hospitals enterprise system, an additional 400 beds in the not-for-profit. We've completed over 1.5 lakh tests. We're currently doing an average of 4,200 tests a day. We've done over 12,000 admissions, 6,500 home care. In Stay I, 5,000+. We actually have served over 50,000 room nights and helped approximately 1 million COVID-positive patients. If you say that they could potentially have infected five people, this is an impact of prevention of over 5 million infections as well. On this 24/7 app, I just want to add two or three things. We are truly humbled by the response we've got, which is a reflection of the brand name and the deep user base that we have. We currently added 3.7 million registered users.
During this time period, we have worked not just with COVID response and pharmacy delivery, but we'll soon be rolling out multiple other services. I think it's important to summarize that if you look at any response to a protocol or a system or a treatment or an ecosystem, it's ultimately in the results. Our mortality rates, I'm thankful to our doctors, our nurses, and the tremendous team, which led us to not just become the go-to place for COVID management, as all of us have kept our phones on literally day and night because that was the kind of response we gave. We've treated the sickest patients with multiple comorbidities, and our outcomes today are a benchmark for the country. We presented in front of all hospitals, the union health secretary. We have a 0.35% mortality rate for people below 50 years of age.
This is among the best in the world. All our patients who succumbed had one to maybe three comorbidities. 40% of them had more than three comorbidities. The last leg of this significant journey, which we have traversed, where we've spoken to international doctors, we've built care protocols. We've traversed the journey from treatment from remdesivir to steroid therapy to favipiravir, and really optimized this treatment protocol and shared this treatment protocol with over 5,000 nursing homes, but handheld more than 150 of them. We've accelerated our eICU, enhanced our telemedicine capability, reached out to corporates with treatment protocols and had engagements with them for treatment. We're now moving into this significant phase of rehab because it's getting reported in scientific journals across the world that the residual comorbidities and complications of COVID are surfacing now, whether it's delayed stroke, cardiomyopathy, different conditions.
Apollo ProHealth will be our vehicle to work on rehab. My last point on this one is that Apollo Hospitals has always been equally committed to education. We have created 23 versions of our treatment protocol book, updating them every time with publications and information from across the globe. Just a data point. During the COVID-19 period, every hour, eight papers or published scientific papers came out on COVID-19. We've encapsulated this, brought the best of knowledge, put it into the COVID-19 Red Book, created a uniform care protocol pattern across the Apollo Hospitals ecosystem, and then shared this with others. Our handbook to corporates has been a guideline on how to create normalness and life after lockdown, and this has been multiply quoted, shared, and very well appreciated. This is an integrated overview of Project Kavach.
Just to summarize, this has been a part of our continued commitment to patients, our excellence in medical outcomes. It's a reflectiveness of our agility of response. We literally turned on a dime. Being a large organization, we were able to have the agility of a newcomer. Our technology preparedness enabled us to do this, and most importantly, this committed Apollo family has really given outcomes that the country can be proud of. Thank you. That's it from me.
That's it. We're ready for questions now.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask questions may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity and good afternoon to all. My first question is on the occupancy. If you see the occupancy clearly come down from 63% average in Q1 last year to now about 36%. I assume that's an average. How have you seen the monthly run rate and how are you seeing the July, August, September? If you could just give some color, that would be helpful.
Yes. Occupancies have definitely improved. July, we moved up to 47%. August, we were at 55%. I think September with the lockdowns in even in Tamil Nadu, we're crossing 60%.
This is like to like of 36%.
The like to like of 36% for the full quarter may be a bit lower by 2%-3%, because that's based on discharges, whereas this is based on the actual midnight occupancy that we track every day that Ms. Suneeta stated. So 38% may probably go for the full quarter, maybe by 50%-52%. As we close the quarter, we'll have to see.
Okay. Around 50%, 52% is the current run rate on a quarterly basis?
That's correct.
Okay, perfect. Great. Just some clarity on ARPOB. If you see that while occupancy as expected is down, surprisingly ARPOB is moved up YoY. Is it a function of Because COVID patients have lower pricing, if I'm not wrong, right? That piece has been increasing share. If you could help us, the COVID share, in terms of bed occupied as well as why this ARPOB has increased, that would be helpful. Thank you.
During the first quarter, the COVID patients were not as high. Because April was a complete lockdown. May was a lockdown. June we started getting a few COVID patients. Actually, July and August has seen a lot of COVID patients in our system because especially as the COVID has moved up the society, et cetera, we have seen that July and August has been significantly higher on the overall COVID patients as we speak. Point number one. Hence, it's not that Q1 doesn't show you the full impact of COVID being a bit lower. Second point is that even the payer mix was better for us because a lot of this CGHS and some of the government patients, et cetera, the flow was not there in Q1. Most of that was represented by cash and insurance patients because credit business significantly dropped down.
That's the second reason that it was this. In any case, if you look at even July and August, our acuity of our patients that we handle, the ICU patients, et cetera, are high. Which is why pretty much you will see that the overall ARPOB will hold on to similar levels, though COVID is a bit lower, as you said.
Okay, perfect. Last one, if I may. Have you closed or shut down one of the hospitals, as the number seems to be down on standalone basis when we compare the presentation.
A small hospital in Chennai in the cluster called Sowcarpet. It was having 30 beds.
25 beds.
25 beds.
Okay. That is now shut down.
Yes.
Maybe it was loss-making or something?
Yeah, it was, it was long overdue. With COVID and everything, we said there was no point in running that small hospital. It was there for a very long time. We've just shut it down for now. That's where it is. If required, we can start it later.
Okay, great. I have more question, I'll join back with you. Thank you.
It's a leased facility.
Okay, sir. Thanks.
Thank you. The next question is from the line of Gina Kim from Schroders. Please go ahead.
Hi. Thank you for this. I know you mentioned that, sort of perception now amongst patients has, I guess, improved now. I mean, post-COVID, people were fearful when COVID was really rampant. Are they coming back for sort of even elective procedures and what's the general sort of perception regarding healthcare now amongst patients in general? I mean, are they more interested in hygiene at hospitals? I mean, I know there were some issues at some public hospitals and some of the smaller private hospitals as well. I was wondering what you're seeing, any feedback from patients there. My second question would be on international patients. I know you guys were quite excited about the potential you have with international patients, especially with proton therapy, et cetera. Some of your peers have mentioned that international travel, I mean, essential medical travel has also started picking up again.
Are you seeing that as well?
Yes. To your first question on what is the perception. What we projected Apollo is that it's a safe environment, and this is clearly bringing back patients because they know that we've isolated the COVID facilities from the regular facilities. There's also this question of pent-up demand. There was a lockdown for three months, and many people couldn't come for elective surgeries, so they are now slowly starting to come back. This is definitely reflected in both our occupancy and the surgical volumes that we're currently seeing. Your third question was about international travel. Yes, I think the international travel, especially from the surrounding countries, flights have started, and we are seeing some patients coming. Most of what we have done as Apollo is to work with charter companies to arrange for these flights to come.
We are getting patients from Bangladesh, we are getting patients from Sri Lanka, and this will probably be something that we have to, a strategy that we will have to follow for the next six months till we see all of the internationals come back. The good part of it is that especially for proton, we were getting 40% of our patients were from overseas. Currently, what has happened is that Indians who go abroad for oncology treatment are all coming to Chennai for treatment. I think the runway for proton is definitely there. We will see some ramp-up happen in the third quarter.
Thank you.
Thank you. The next 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 occupancy. Ma'am, I understand you are at 60% occupancy, and I think Krishnan sir mentioned that we've seen a ramp-up in the COVID patients in the last few months. If I were to look at, let's say, our non-COVID occupancy, where would that be trending? How is this versus our expectation given we are still seeing numbers increase pretty sharply for COVID?
There has been an increase in the non-COVID patients as well, because if you look at the number of operating beds that we have across the system today now, it's over 7,200 operating beds that we have, of which 30% has been kept aside for COVID. 2,250 beds is what we have currently assigned for COVID. The COVID occupancy would be north of 65% currently of the 2,250 beds that we speak of. The non-COVID occupancy is also north of 55% as we speak. Adjusted for discharges, the way we compute later on, as I said, it will be in that 50%, 52% overall as a company. We'll have to see how it comes out, but broadly, the occupancy is going up for the non-COVID also. Dr. Hari, anything you would like to add here?
Yeah, I think we've seen a growth in the non-COVID patients, especially in this quarter, that is reflected in the growth in the number of elective procedures also. The number of COVID patients are more or less flattening out the occupancy, while the non-COVID is going up.
As we see a ramp-up in the non-COVID occupancy. Do you think this gets constrained by the fact that we might not be able to access the beds that we have allocated to COVID? Would that limit our occupancy into the second half, particularly if we see a strong pent-up demand?
Dr. Hari?
Yeah, not necessarily, because we have enough beds which are there. We are still at about 60% occupancy. We have another 40% beds still lying there. Even if there is a serious increase in the number of patients coming in on the non-COVID side, I think we have enough place for them. I don't see any constraint.
Okay. Understood, sir. My second question is on the cost-saving number that ma'am mentioned, INR 100 crores on the consolidated basis. Sir, if you could give some color on how much of this was because of lower occupancy or our efforts due to lower occupancy, which will come back, and how should we look at structural cost savings through the year?
None of this was on lower occupancy. If you look at the first quarter, there was some saving, which is probably not structural, had a huge impact, and this was guarantee money paid to doctors, rent reduction for six months, and some amount of salaries, which there was a saving on payouts to employees. These are the three things that is sustainable for the first six months. Going forward into the next six months, there is a reduction in HR costs, a significant reduction in HR costs. The second thing that we are doing is that we're keeping out all the consumables. All the surgical consumables are being kicked out, and in the process, there is a saving, which we believe is structural going forward. The third aspect is saving on electricity and power, fuel, and water. The fourth aspect is saving on travel and conveyance.
All of these are part of the structural saving initiatives that we are planning. We do expect to see a 20% reduction in costs.
The INR 100 crore number that you mentioned in the first quarter does not include the second part of the savings that you've talked about. All of this would start getting reflected.
Yeah, it includes the beginning of it, but the major part of the saving in the first quarter came from guarantee money, rent reduction, and salaries.
Okay, fair enough. Thank you. Thank you so much, ma'am.
Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
Yeah. Thank you. Good afternoon. Just checking, am I audible properly?
Yes.
Yes.
Great. One question to start on Apollo 24/7. You talked about partnerships and taking users to 100 million users. Just trying to understand the partnership there. Typically, what we have seen so far, the partnership with corporates largely is on the diagnostic test. Whereas as a platform, we have three services right now to offer. Can you just talk about what kind of partnerships are we talking about offering digital consultations as well through corporates, through employers, et cetera? Can you just take that too?
No. Yeah, that's true. The corporate relationships that we have for now is with large financial institutions, banks, as well as telecom companies that we are discussing, and one large telecom company that we are already in very advanced stages of discussion. The corporate relationships allow someone to do a teleconsult, as you rightly said, also pharmacy online. All of these. Slowly, we are also starting the services of labs, because first quarter, diagnostics was very low, but we are enabling even diagnostics on the online. Over a period of time, we will also do health management, health checkup. There is a slew of products which are going to be planned as we ramp this to 100 million over the next five years. There's a long plan that we have on the Apollo 24/7, and this is the start of what we are doing now.
You will hear from us as we keep moving forward on this.
Sure. That's helpful. Just as a benchmark, very roughly, let's say all goes well and the best case plays out for us. Five years, we have 100 million users. Roughly, what kind of revenues are we talking about here? Are we talking about, let's say, half a billion dollar revenue? Just some kind of range will be very helpful. Even that could be the max or a base case.
We would really not want to guide you towards that, but you are right. You can assume something like that number that you stated. Half a billion dollar plus is something that we can add in five years just using the digital.
Sure. Just one question on the hospital utilization. Actually, a couple of questions. One, when did we achieve breakeven? You mentioned 47% in July and 55% in August. Did we achieve breakeven on the hospital side in the month of August, or have we achieved in September?
August, yes.
Overall, quarter-wise, you said you'll be a bit of positive on the hospital side.
That's what we are hoping as of now, and we should be.
When you mentioned about 55% utilization for non-COVID beds, can you just roughly talk about in terms of different therapeutic areas or disease areas, how is the utilization for oncology, orthopedics, cardiac, et cetera? I'm not interested in numbers for each one of them. I'm just trying to understand the extremes here.
Hari, you can take this question.
Actually, as ma'am said during her opening remarks, there was a lot of pent-up demand in the community during the lockdown period where people could not come out.
We are seeing a lot of NCDs, non-communicable diseases, coming in, and then we are seeing a lot of emergencies coming in. Most of them concerning the non-communicable diseases like accidents, strokes, heart attacks, and cancer numbers are also going up. It was sad that during the lockup period, even cancer surgeries and chemotherapies were postponed by some people because of the scare of coming out or their inability to come out. Now all those patients are coming back. We are actually seeing an increase in the occupancy in terms of the non-communicable diseases on the non-COVID side.
Just to follow up, any vertical or any discipline where utilization is still below 40%, let's say?
Actually, elective orthopedics is probably less than 40% because a major part of it is because of joint replacement. People are still waiting and watching. Except that, we are seeing a comeback from now on all other fronts.
Okay. Thank you very much.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question, good afternoon. Just one on the clarity on the cost savings. You talked about 20% cost savings. This is on which line? Are we talking about fixed cost, variable cost? If you can clarify. Have you said that this is going to be now once we have done 20%, we are going to follow it up another 20% in 2Q? Can you just clarify just the cost savings bit for the full year, if I join you?
If you look at the variable cost, there will be some cost saving because we managed to renegotiate, and we've really cut the consumption. So there will be some cost saving in the variable cost w ith regard to consumables and some in guarantee money as well. The second part of it, in fixed cost, certainly there will be. This is where you will see the structural costs being reduced because we are saving in admin costs considerably. We are saving in manpower and the rest, the power, fuel, energy and saving in marketing. All this is structural cost, which should be about 20% of our total fixed cost.
Okay. Ma'am, do you think you can sustain this going forward in fiscal 2022 onwards as well, right? Whatever the savings, the structural part.
I think you cannot expect to see such a large number in 2022. There will be some savings that we will continue to make. For this year, INR 180 crore-INR 200 crore is something that is a one-off. Going forward, there will be some savings, probably half of that in the next year.
That's very helpful. My second question is on the EBITDA positive point. At 55%, which is where we were in August, you said you have broken even. Is this breakeven level contingent on all these cost savings? Do you think at some point of time, at 60% now, what could be some margin trajectory you're looking at? Is it well past the EBITDA that you're talking about?
Yes, this will be sustainable to answer your point. After August, we do think this should be sustainable as we move into the next month and quarter, and hopefully as some of the other revenues pick up, the non-COVID revenues pick up, which has higher ARPOB and higher margins as well at the gross margin level. It can actually start adding more to the EBITDA, hopefully from next quarter.
Got it. Thank you. My last question is on the pharmacy business. Growth has slowed down from 30% to 21%. Probably, maybe some of the stocking up effect we had last quarter has come down. Maybe some color on the kind of growth that you're seeing. In the entire Apollo 24/7 kind of a thing, and you talked about the pin codes as well. If you can help us understand how much of the fulfillment is today being done by your front-end stores versus the remainder channels that is there, any numbers. If I look at the pharmacy growth for this year, would there be any component of it coming from 24/7 at all?
Offline pharmacy, we look at independent of 24/7. First of all, the growth rate is not 30% versus 21%. It is about 24% versus 21%. Last year we ended at about 22.8% for the full year. Q4, which has a last COVID case in the last 10 days, was about 24%.
Got it.
Given that number, we are confident of currently growing our offline pharmacies in the same range of 22%-23%, which we have seen in the earlier years. As far as online revenues, sir, that is independent of this.
Okay. At this point of time, you're not quantifying any of this contribution?
At this point in time, we have not.
Got it. Last question is on the Kavach piece . I think there was an interesting comment around comorbidities and the whole patient awareness around comorbidities. Is this something that we can kind of tap into in terms of patient behavior once the pandemic goes away? Do you think this can be driven separately in terms of trying to make them aware and then trying to monetize that in some form or shape?
Should I take this?
Yeah.
Actually, we've already started it. If you remember in Suneeta's presentation, she talked about rehab. We have packaged it in a preventive and continued health cover package called ProHealth, where we are capturing all these people who have comorbidities, and we have created an annual program for each one of them where they are monitored and taken care of through the year to improve on the comorbidities and to reduce the possibility of complications through the year. We are actually using Apollo ProHealth to not just to keep the patient healthy, but also to make sure that there is continuity and an association that is built up with the organization, which will stand the organization in good stead as we move forward, especially when complications come up and acute situations come up.
Got it. Thank you, and all the best.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Thank you very much, and good afternoon, everyone. So, we have seen viruses actually spike up significantly in Q2 versus Q1, and yet the occupancy is going up sharply. It looks like the fear psychosis in the minds of people is sort of receding. Second is, how do you see the occupancy and virus trajectory beyond September over next three, four quarters?
I think many people are coming to terms with the virus, and the fact that they do not want to die of other comorbidities is what's bringing them into hospitals. This is a very real and present danger. How do we see it playing out in the future? As you know, India is the second highest country. No one expected that it would lead in terms of both cases and now even the number of deaths going up.
Clearly this is something that is not short-term. It's probably something that's here for a year. I think that the balanced approach that we have, in which we've segregated 20% of our beds, both physically and work-wise from the rest of our hospital premises has really geared our case mix towards 20% COVID and about 50%-60% non-COVID. Going forward, this is what we expect to see for the rest of the year.
Thanks. What I was also asking is, how do you see the overall occupancy from 50%-52% trend over next three, four quarters?
I would see a significant improvement in them, not only from the local, but now that transport is opened up, patients are coming from all across the state. Yes, there will be a significant improvement in occupancy.
Okay, great. The second question is on ARPOB. Krishnan mentioned about the reasons why there was a YoY growth. If I see between different clusters, the two clusters actually have 15%-20% spike in ARPOB. I think Hyderabad cluster and the Karnataka cluster. What's driving that versus all the other clusters being more or less flat?
Hyderabad clearly was the payer mix. As I said, it was significantly driven by cash and insurance as compared to earlier year. Of course, between Q1 and Q4 also, there has been a spike in Hyderabad if you would have seen over the last four quarters. Again, significantly Hyderabad was basically the fact that the payer mix was better. In Bangalore, I think it was a combination of the fact that the COVID didn't come into Bangalore. If you look at the impact of lockdown, it was pretty pronounced in the first quarter. It started in Chennai and Tamil Nadu, basically in April and May, where there was a very stringent lockdown. Bangalore, you saw it coming only in the latter half of that quarter.
Karnataka and Bangalore actually had a good two months, April and May, and then it impacted them only in the month of June. They really continued to do well all through that two months with regular cases itself. That was the reason for Karnataka, and then it had a very significant drop. It was not about payer mix in Karnataka, whereas Hyderabad was definitely about payer mix.
Okay, great. Thanks. One final question, with your permission. How do you see the EBITDA recovery going forward? When do you expect to get to pre-COVID level, say, pre-Ind AS of INR 300 crore-INR 350 crore a quarter?
Difficult question, honestly. I think we are aiming to get to at least INR 200 crore-INR 250 crore by Q4 if things go well. Again, it is all going to be contingent upon how the whole business pans out from now to the next. We are not seeing the flattening of the curve. Unfortunately, there is still high spike in the COVID. The first leg for us is to get to INR 1,500 crore of EBITDA, which is what we are first seeing how we can get to that INR 1,500 crore on the healthcare services itself. Pharmacy can continue to do well. Pharmacy is now at INR 80 crore. It can continue to do. Of course, there is still some one-off revenues even in this quarter and some margins in pharmacy, but INR 75 crore-INR 80 crore is something that we can sustain in pharmacy.
We can get to the INR 100 crores hopefully by the quarter after this, and then take it higher.
Okay, great. I presume you're saying Ind-AS 116 basis?
Yes. Ind-AS 116 is what pre-Ind AS 116 is what I mean.
Okay, got it. Great. Thank you so much.
Thank you. The next question is from the line of Nitin Agarwal from IDFC Securities. Please go ahead.
Hi. Thanks for taking my question. Sir, in your three different business segments which are there, what's your initial impression about structure and market share gains across businesses, which is hospitals, AHLL, as well as on the standard pharmacy business, given the way the operating market is playing out?
Well, this is a really large question, let's start with AHEL. AHEL, what we look for is, in a place like Chenna i where we have over five hospitals, we expect to have over 25% market share. We have an aspiration to do that in both Karnataka and also to build out in Kolkata as well as in Hyderabad. We're actually doing a strategic plan to achieve 25% market share in all of these regions. In the North, we do not have a significant presence to achieve this market share. I will say it is that all our hospitals across India, whether in the north or the west, are all now performing really well in terms of both EBITDA profitability and starting to show a return on capital employed. For something on pharmacy, I'll ask Obul to speak.
Yep.
Chandra Sekhar will speak about Apollo Health and Lifestyle.
The pharmacy today, unorganized retail pharmacy, is just about 6%-8% of the total retail pharmacy segment. There is a good opportunity. We should aim to double in the next three, four years on that segment.
The ROCE of the pharmacy is at 26% currently. Chandra Sekhar? AHLL?
Sorry. We are getting him back. He's dropped.
He's dropped.
Otherwise
We wait for Chandra Sekhar to come back on this, on AHLL.
Sure. No problem. Okay. Can we take the next question?
Yes, we move to the next question.
Otherwise, let me just in a few words just talk about.
Mr. Chandra Sekhar is also reconnected.
Okay. Chandra Sekhar?
Did you get a question?
The question was.
Go ahead.
What is your planned market share in the space that you're in?
We'll start with diagnostics. We are a late entrant. Compared to the larger players, our market share in our primary markets, we are aiming to be about 10% this year. It can't be seen as a national number. The more pure play pathology. In the cities we operate in boutique birthing centers, our market share would be upward of 25% in the organized boutique birthing center space. Apollo Spectra is a little difficult to establish exact market share because we compete with both the large format hospitals which conduct elective surgeries as well as smaller nursing homes. I'll avoid getting in there. The other major format out there we track our market share is obviously organized primary care. Organized primary care, we by far are the leaders. Much of primary care is still in the unorganized sector.
Oh, thank you very much.
Thank you. The next question is from the line of Alok Dalal from CLSA India. Please go ahead.
Yes, good afternoon. One quick clarification. The e-pharmacy service rollout will now be through the 24/7 app. Is that understanding correct?
Yes.
Okay. Sir, how many PIN codes are you covering here?
13,500.
13,500 PIN codes.
Krishnan, how are you looking at the debt levels now for FY 2021?
Currently, the gross debt is at the standalone levels, is at around INR 3,300 crores. The net debt would be INR 300 crores lower. INR 3,000 crores is what the net debt would be. The front-end pharmacy stake has happened at that SPV creation will be effective 1st of September 2020. The NCLT order has
We seem to have lost the line. Participants, please stay connected while we reconnect the management team. We have the line reconnected. Over to you, sir.
Yes, sorry. As I was saying that, the front-end pharmacy has been put into effect post the NCLT order from 1st of September. Our overall debt levels should stay at current levels or come down by end of the year. That's what the current projections that we have.
Okay. Thank you. Sir, last question is, will you move to the new tax rate? Is it in FY 2022?
Pardon?
New?
The new tax rate that is 25%.
Yeah, we should because we were expecting that we will move into that by FY 2022. As of now, we'll have to just see whether it's FY 2022, because clearly As of now, it's a loss year. We'll have to see how the losses are reducing and how much of the MAT is something that we are going to be using. There will still be pending MAT in FY 2021 end. It is possible that it goes beyond FY 2022 to FY 2023. We'll have to come back to you on that.
Okay. Thank you for taking my question.
Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Thank you for the opportunity. One clarification on cost saving. Ma'am, did you mention INR 180 crore-INR 200 crore kind of saving for FY 2021, most of which will be structural in nature?
Yes.
Okay.
I said the first quarter all of it is not structural, but INR 200 crore saving we expect to see for the year.
Okay. In the long term, 20% fixed cost saving is your goal, right?
Yeah.
Another question is regarding ARPOb. Earlier, again, you mentioned we should be holding up ARPOB despite some increase in COVID patients. Have you taken the tariff hike for hospital services or it's yet to be taken for this year which can help our ARPOB?
We have not taken any increase in the hospital we intend to take any price increases this year.
Sorry, I just missed. You don't intend to take any price hike for this year?
Yes. It's not something that's going to really add any material value for us. While, yes, the costs have gone up in the system because of PPE costs and COVID related costs, et cetera. This year, we're not wanting to do that because we are focusing more on getting our patients back, occupancy. That in itself is a big fillip that can come back.
Sure. My last question, I just missed a % of private label in SAP revenues. Can you quantify that?
It's 9% in Q1.
9%. What we are aspiring this label to?
Next two years, about 12%.
Okay. That's helpful. Thank you.
Thank you. The next question is from Aditya Khemka, from InCred Asset Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Suneeta ma'am, could you just talk a little bit about what kind of attrition have we seen in the doctors and the nurses? How has COVID impacted the HR side of things?
Thankfully, no attrition in the doctors. I think they've supported us. They've been behind us. Nurses, there are a few that really went back to their towns, and we've seen them coming back. I would not say any significant attrition that we should be concerned about.
Understood. On the hospital services side, you just mentioned that the costs have gone up and we don't intend to take price increases, and occupancy obviously is going to be a little challenging given the environment for the full year. On the hospital side, what are the levers aside from saving cost on the fixed side or on the variable side, rent negotiation, et cetera? Are there any other levers we have to improve our profitability in the near term?
Yes, we are working on several levers. I think the first is that using marketing, we are deepening our corporate connect. This COVID was a good time for us to establish relationship with corporates. I believe we've reached out to over 250 corporates who have signed on with us for COVID, and these relationships are definitely for more than a year. We do believe that beyond COVID patients, corporates will start sending patients to us. We've also tied up with local nursing homes. Again, local nursing home owners, doctors were being admitted in our facilities for COVID care, and now they continue to send us residents. Sadly, one part of the healthcare system in India is closed.
The demand-supply gap remains stronger than ever before because the nursing homes, many of which were unable to operate during the lockdown and are finding it difficult to live during these times. Those residents will start coming to us. The third is that we've now activated our marketing in the sense that we are conducting camps once again, moving outside of our towns into rental markets. We believe as always that this will increase the number of residents into the system. This is starting to play out in September. Yes, I think it's not business as usual, but definitely we're on track to get there by the fourth quarter.
Got it. Krishnan, just one clarification from your comment on the-
Yes. The most important part of our journey is, of course, the Apollo 24/7, which is a digital, where we do 2,000 teleconsults a day. Through this, we're able to convert into outpatients, convert into inpatients. Yes, there's a lot of traction. While physically, we were able to reach, we were defined by the number of beds we had. Because of Apollo 24/7, we do have digital, which enables consultations. We've also moved on the home care.
We have patients. Our number of home care patients have more than doubled in this quarter, and there's a significant rise in our home care offerings.
Understood, ma'am. Thanks for that. Krishnan, just a clarification on the comment you made on net debt. The net debt you see at this end of FY 2021 is your guidance INR 3,000 crores, and does that include the money you're going to receive from the front-end divestment?
Yeah, it can come down. As I said, it can come down a bit. The front-end divestment will first spike up our overall cash, and then with the payables which we will have and the receivables from the front end, there'll be some working capital deployment, which should happen because we continue to supply the pharmacy products and get the benefits of the margin in the back end. Potentially there could be a net reduction as I said. It will definitely not go up, and potentially there could be a net reduction in the debt by INR 150 crores-INR 200 crores.
Okay. Thanks on all those, guys.
Yeah.
Thank you. The next question is from Shantanu Basu from SMIFS. Please go ahead.
Hi, good afternoon. Well, contrary to what you have said, your gross profit margin on a consolidated basis has fallen to 44% compared to 52% in Q1 FY 2020, and the employee costs have also risen. Just wanted to know whether this trend would continue for the remaining quarters of the financial year.
Two points. One is when you're looking at the employee cost, which is the published results, you see the results including the Standalone Pharmacy. Standalone Pharmacies have been growing Q1 to Q4 of last year. There have been so many, 400 odd stores, which was added last year. The employee costs have risen from Q1 to Q4. Coming into Q1 of this year, in addition to the cost increase, there has also been COVID related costs because to get all the people to the stores, et cetera, they have had to pay incentives, conveyances, et cetera, which has increased the overall cost at the overall Pharmacy at both the employee cost and the admin cost level. Which is why you're not seeing that cost reduction in the published results as we speak.
Miss Suneeta spoke about the healthcare cost, which is what we are seeing the INR 100 crores reduction that we are talking of from Q4 of last year. If you look at healthcare alone, you will see that there is a reduction. The pharmacy cost has been higher versus last year to this year, even after that, they have come back with an EBITDA margin of 6.2%. They have managed it with higher sales and higher gross margin.
Okay. Can you give me the ARPOB for your COVID bed?
ARPOB for COVID-
INR 27,000.
INR 27,000?
Yeah.
For non-COVID beds?
38 is the blended average that we have achieved, so non-COVID would be a bit higher.
Okay, fine. Thank you.
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.
Thank you all for joining this call. As you know, this has been a very challenging quarter, not just for the company, but for the country and the entire world. We believe we have navigated these troubled times well and have emerged stronger in our strategic journey. We have moved closer to the consumer through Apollo 24/7, and we have used this six-month period to win new consumers and deepen our engagement with existing customers. We are clear that the way forward is about customer touchpoints and formats of engagement. The pandemic has solidified our belief that physical beds form the base of the pyramid for healthcare delivery and will have to be enhanced with multiple additional platforms to serve patients.
We believe this is the future of healthcare, and post-COVID, we will emerge stronger with a business model that fully aligns with this future and the aspiration of our customers. Thank you all for joining us on this call. We look forward to hearing from you and interacting with you. Thank you.
Thank you very much. On behalf of Apollo Hospitals Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.