Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Goswami 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 Q1 of fiscal year 2021, which were announced yesterday. We have with us on the call today the senior management team comprising Mrs. Sunita Reddy, Managing Director Mrs. Sangeetha Reddy, Joint Managing Director Doctor.
Hari Prasad, President of the Hospital's Division Mr. A. Krishnan, Group CFO Mr. C. Chandrasekhar, CEO of Apollo Health and Lifestyle Limited and Mr.
Ova 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.
Sunita 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 6 months have clearly been one of the most challenging periods in our 36 year history, a period which laid unprecedented demand on the health care system. But 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 4 of FY 2020 was felt last year, the Q1 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 within the cities as well as outpatient due to the lockdowns and travel restrictions. 2nd, 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 need to take 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 to 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 last tests. At Apollo Hospital, we not only had to deal with the challenges torn up by the pandemic, but also ensure the seamless continuation of delivery of essential health services during the outbreak. With NICE, we have to respond to specific patient categories like maternal, newborns and child health groups, 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 home 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, and 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-nineteen in several ways under the umbrella of Apollo coverage, the shield against COVID. Our Joint Managing Director, Phyllisa Reddy, will be sharing a brief presentation on this after we speak about the numbers for about 5 minutes. Against this backdrop, let me take you through the financials of this quarter.
The company recorded a degrowth of 12% in stand alone revenues to INR2962 crores and a degrowth of 16% in consolidated revenues to INR2122 crores. SaaP continued to report double digit growth at 21%, while Health Care Services grew degrew by 42%. IP volumes also degrew by 45%, and overall occupancy across the group for quarter 1 FY 2021 was 2,742 beds or 38% compared to our 66% in quarter 1 FY 2020. Our SAP vertical recorded revenue growth of 21% year on year with an EBITDA higher by 37% against the same quarter at INR 80 crores. Network wide EBITDA margins are at 6 0.3%, 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 Free India's quarter 1 'twenty one EBITDA stood at a negative of INR 18 crores compared to a positive INR 2.74 crores in quarter 1 FY 2020. Post India, EBITDA was at INR40 crores. Within this, Healthcare Services EBITDA registered a loss of INR99 crores, impacted by lower volume and occupancy due to COVID. 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 savings in standalone and over INR 100 crores of cost savings in consolidated accounts in quarter 1 FY 2021, which represents a 20% reduction in our costs over the last quarter FY 2020. AHLM recorded an EBITDA loss of $0.19 as compared to a loss of $4,700,000 in Q1 FY 2020. The business had demonstrated a 37% e growth in top line, which includes the impact on clinics and its Spectra businesses due to COVID. Net debt as of June 30, 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 secured final approval of the NCLC for the demerger of the Fontaine Pharmacy decision 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 compliance structure. The last 6 months have seen the rapid ramp up of our digital health care platform 20 fourseven.
At the 6 month mark since its launch, the platform had 3,270,000 registered users, the fastest by any Indian digital health care platform and faster than most global benchmark. 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 100,000,000 Indians. Apollo 20 fourseven 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 plus PIN codes are covered by the online medicine delivery service of the 20 fourseven digital platform, and 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 to 60 minutes of an Apollo Pharmacy store. Apollo overall has 39,600,000 unique customers served over the last 5 years, out of which 2,300,000 new customers have been served since the onset of COVID. Apollo 20 fourseven 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 quarter 2. July August have shown marked improvement in occupancy. Critical 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 and for health care services, a bit that to move back into positive currency in Portugal. 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 20 fourseven and we have used the 6 month period to win new consumers and deepen our engagement with existing customers. So for now, that's it from me. And let me ask Suneeta, our Joint Managing Director, to speak about the coverage initiative. Later on, our CFO, Krishnan, Hariprasad, Oberzedi and Janthashree Shekhar from AHL will be there to take your questions.
Yes. Yes. Hello. And it's a pleasure to talk to you. Are you seeing the same slides?
I'm on Slide 4.
Because I can't see slides, Suneeta. We have the presentation. Okay.
I have the presentation. So if you're using the presentation, ladies and gentlemen, you can refer to Slide 4, but I'm quickly shifting to Slide 5. As all of you know, the numbers across the world has been significant and continues to grow in India where we had thought that we're having a minor response. The numbers have not just crossed 5,000,000, brought us to among the top 3 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 series of 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 talked through a process of prevention. So we educated public and corporate customers, all 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 encompasses every service and every capability of Apollo, starting from our round the clock helpline, a number which reflected our 1066 branding for customers who have recall value on that. We gave credible information. We stayed compliant with government guidelines.
We were multichannel in our approach, multistakeholder and multilanguage. We launched our telemedicine capability, fever clinics. We started over 2,300 deaths, ramped up our testing capability, enhanced our home care and created a unique concept called PEI, 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, Oyu 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 agitation awareness 20 fourseven that our management has spoken to you about has had a tremendous impact during this period.
And the COVID scan, which over 18,000,000 scans have been taken during this time period, is an artificial intelligence enabled risk assessment score, which has brought 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 Hospital enterprise system, an additional 400 beds in the not for profit. We've completed over 1,500,000 tests. We're currently doing an average of about 4,200 tests per day.
We've done over 12,000 admissions, 6,500 home care. And in stay high, 5,000 plus, we actually have served over 50,000 room nights and helped approximately 1,000,000 COVID positive patients. And if you say that they could potentially have infected 5 people, this is an impact of prevention of over 5,000,000 infections as well. On this 20 fourseven app, I just want to add 2 or 3 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, but we currently added 3,700,000 registered users.
And 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 had 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 sector treats.
We have a 0.35% mortality rate for people below 50 years of age. This is among the best in the world. And all our patients who succumbed had 1 to maybe 3 comorbidities, 40% of them have more than 3 comorbidities. The last leg of this significant journey, which we have traveled, where we've spoken to international doctors, we've built care protocols, we've traveled the journey from treatment of from remdesivir to steroid therapy to fabulous peers 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. So ProHealth will be our vehicle to work on rehab. My last point on this one is that Apollo has always been equally committed to education. We have created 23 versions of our treatment protocol book, updating them every time with publication and information from across the globe. Just a data point during the COVID period, every hour, 8 papers or public scientific papers came out on COVID.
We encapsulated this, brought the best of knowledge, put it into the red book, created a uniform care protocol pattern across the Apollo 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 multiple quoted, shared and very well appreciated. So this is an integrated overview of coverage. And 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 turn 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, the committed Apollo family has really given outcomes that the country can be proud of. Thank you.
That's it from me.
That's it. So were there any questions now?
Thank you very much. We will now begin the question and answer The first question is from the line of Prakash Narwal from Axis Capital. Please go ahead.
Yes. Hi. Thanks for the opportunity and good afternoon to all. My first question is on the occupancy. So if you see the occupancy clearly come down from 63% average in Q1 last year to now about 36%, how are you seeing that would I assume that's an average?
How would 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. So occupancies have definitely improved. July, we moved up to 47%. August, we were at 55%. And I think September was a lockdown.
Even in Tamil Nadu, we're crossing 60%.
So this is like to like of 36%.
So what so the like to like of 36% for the full year 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 Mr. Sreedhar stated. So 38% may probably go for the full quarter maybe by 250%, 52%. As we close the quarter, we'll have to see.
Okay. So around 50%, 52% is the current run rate on a quarterly basis?
That's correct.
Okay. Perfect. Great. And just some clarity on ARPUB. So if you see that while occupancy as expected is down, but surprisingly RPAB has moved up Y o Y.
So is it a function
of because COVID patients have lower pricing, if I'm not wrong, right? And that increase has been increasing share. So if you could help us, the COVID share in terms of bed occupied as well as why this RCOB has increased, that would be helpful. Thank you.
So during the Q1, the COVID patients were not as high, firstly because April was a complete lockdown, May was a lockdown, June we started getting a few COVID patients. Actually July August, I've seen a lot of COVID patients in our system because especially as the COVID has moved up to society, etcetera, we have seen that July August has been significantly higher on the overall COVID patients as we speak, point number 1. So which is hence, it's not that Q1 is fully doesn't show you the full impact of COVID being a bit lower. 2nd point is that even the payer mix was better for us because a lot of this CGS sales and some of the government patients, etcetera, was the flow was not there in Q1. So most of that was represented by cash and insurance patients because current business significantly dropped down.
So that's the second reason that it was this. And in any case, if you look at even July August, our acuity of our patients that we handle, the IQ patients, etcetera, are high. So which is why pretty much you will see that the overall ARPUB will be will hold on to similar levels, though COVID is a bit lower, as you said.
Okay. Perfect. And last one, if I may. So one of the 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 Saukarpet, it was having 30 beds.
25
beds. 25 beds.
Okay. So that is now shut down? Yes. And maybe it was loss making or something?
Yes, it was and it was long overdue and the 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 lead facility. Okay, sir.
Thanks. Thank you. The next question is from the line of Gena Chimen from Sholoz. Please go ahead.
Hi. Hi. Thank you for this. I think it's it's Anita, I know you mentioned that sort of the perception now amongst patients has, I guess, improved now. I mean post COVID, people were fearful when COVID was really rampant.
And 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. Just wondering what you're seeing, any feedback from patients there?
And then my second question would be on international patients. I know you guys were quite excited about your potential you have with international patients, especially with proton therapy, etcetera. Some of your peers have mentioned that international travel, I mean, essential medical travel is also sort of picking up again. I mean, are you seeing that as well?
Yes. So to your first question on what is the perception, So there is 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. And there's also this question of pent up demand. So there was a lockdown for 3 months and many people couldn't come for elective surgeries.
So they are now slowly starting to come back. And this is definitely reflected in both our occupancy and the surgical volumes that we see currently seeing. Your third question was about international travel. Yes, I think international travel, especially from surrounding countries, is prices are starting have started, and we are seeing some patients coming. Most of what we have done at Apollo is to work with charter companies to arrange for these flights to come.
So 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 6 months till we see all of the internationals coming back. The good part of it is that especially for Proton, we were getting 40% of our patients from overseas. Currently, what has happened is that Indians who go abroad for oncology treatment are all coming to Chennai for treatment.
So I think the runway for proton is definitely there. It we will see some ramp up happening in the 3rd 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 there is 60% occupancy, and I think Krishnim sir mentioned that you've seen a ramp up in this COVID situation in the last few months. So if I were to look at, let's say, our non COVID occupancy, where would that be trending? And how is this versus our expectation given we're still seeing numbers increase pretty sharply for COVID?
So 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 to be 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. And the COVID occupancy would be north of 65% currently of the 2,250 beds that we speak of, and the non COVID occupancy is also north of 55% as we speak. So adjusted for discharges, the way we compute later on, as I said, it will be in that 50%, 52% overall as a company.
We believe we'll have
to see that how it comes out. But probably, the occupancy is going up for the non COVID also. Doctor. Hadi, anything you would like to add here? Yes.
I think we've seen a growth in the non COVID patients, especially in this quarter. And that is reflected in the growth in the number of elective procedures also. So the number of COVID patients are more or less flattening out the occupancy, while the non COVID is going up.
And as we see 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?
Doctor. Hari?
Yes, 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. And 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. So I don't see any constraint.
Okay. Understood, sir. My second question is on the cost saving number that Nayan mentioned, INR 100 crores on the consolidated basis. Sir, if you could get 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?
So none of this was on lower occupancy. Most of if you look at the Q1, there was some savings, which is probably not structural, had a huge impact, and this was guaranteed money paid to doctors, rent reduction for 6 months and some amount of salaries, which there was a saving on payouts to employees. So these are the three things that is sustainable for the 1st 6 months. Going forward into the next 6 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 kicking out all the consumables.
So 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 4th aspect is saving on travel and conveyance. And all of these are part of the structural saving initiatives that we are planning.
So we do expect to see a 20% reduction in costs. So the RMB 100 core number that you mentioned in the Q1 does not include the second part of the savings that you've talked about. All of this would start getting distorted. Yes. It includes the beginning of it, but the major part of the savings in the Q1 came from guaranteed money rent reduction and salaries.
Okay. Fair enough. Thank you. Thank you so much, Nava.
Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
Yes. Thank you. Good afternoon. Just checking, am I audible talking? Yes.
Great. One question to start on Apollo 20 fourseven. You talked about partnerships and taking users to 100,000,000 users. Just trying to understand the partnership there. Typically, what we have seen so far, the partnership with corporate is largely from the diagnostic set, whereas in the platform, we have 3 services right now to offer.
So can you just talk about what kind of partnerships are we talking about offering digital consultations as well through corporates, through employees, etcetera? Can you just take that
too? No, yes, 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, 1 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 Q1, we had the 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. So there is a slew of products which are going to be planned as we ramp this $200,000,000 over the next 5 years. There's a long plan that we have on the approval 20 fourseven, and this is the start of what we are doing now. So 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, 5 years we have 100,000,000 users. Rafi, what kind of revenues are we talking about here? Are we talking about, let's say, dollars 500,000,000 revenue? Just kind of some kind of range will be very helpful. Even that could be the max or base case?
Yes. We would really not want to guide you towards that. But you're right. You can assume something like that number that you stated. Clearly, dollars 500,000,000 plus is something that we can add in 5 years just using the digital.
Sure. Just one question on the hospital utilization. When we talk about so actually a couple of questions. One, when did we achieve breakeven data? So you mentioned 47% in July and 55% in August.
So did we achieve breakeven on the hospital side in the month of August or we achieved in September?
August, yes.
So overall, quarter wise, you said you will be a bit positive on the hospital side?
That's what we are hoping as of now, and we should be.
And when you mentioned about 55% utilization for non COVID beds, can you just simply talk about in terms of different therapeutic areas or disease areas, how is the utilization for oncology, orthopedic, cardiac, etcetera? So I'm not interested in numbers of each one of them. I'm just trying to understand the experience there.
Hari, you can take this question.
Actually, a lot of 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. So we're seeing a lot of NCDs non communicable diseases coming in. And then we're 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. And it was sad that during the lockup period that even cancer surgeries and chemotherapies were postponed by some people because they're scared of coming out or their inability to come out. Now all those patients are coming back.
So we are actually seeing an increase in the number of in the occupancy in terms of the noncommunicable diseases on the non COVID side.
And just a follow-up, any vertical or any discipline where utilization is still below 40%, that's it?
Actually, elective orthopedics is probably less than 40% because a major part of it is because of joint replacement. So people are still waiting and watching. So except that, we are seeing a comeback 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. Thanks for taking my question and good afternoon. Just one on the clarity on the cost savings. You talked about 20% cost savings. This is on which line?
And are we talking about fixed costs, variable costs? We can clarify. And have you said that this is going to be now 1Q, we have done 20%. We're going to follow it up on the 20% in 2Q. Can you just clarify just the cost savings for the full year FY 2020?
So if you look at the variable cost, there will be some cost saving because we've moved to we've managed to renegotiate and we've really cut the consumption. So there will be some cost saving in the variable cost with regards to consumables and some in guarantee money as well. The second part of it in fixed costs, certainly, there will be this is where you will see the structural costs being reduced because we are saving in admin costs considerably. We're 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. And ma'am, just keep in, you can sustain this going forward in fiscal 'twenty two onwards as well, right? What are the savings for structural part?
So I think you won't you cannot expect to see such a large number in 'twenty two, but there will be some savings that we will continue to make. This for this year, INR 180 crores to INR 200 crores is something that it's a one off. But going forward, there will be some savings, probably half of that in the next year.
Okay. That's very helpful. My second question is on the EBITDA positive point. So at 55%, which is where you were in August, you said you had broken even. So are we is this breakeven level contingent on all these stock savings?
Or do you think at some point of time at 60% now, what could be like 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 quarter. And hopefully, as some of the other revenues pick up, the non COVID revenues pick up, which has higher ARPUB and higher margins as well, the gross margin level, it can actually start adding more to the EBITDA hopefully from next quarter.
Got it. And the last question is on the pharmacy business. So growth has slowed down from 30% to 21%. Probably maybe some of the stocking up effect we had last quarter come down. So maybe some color on the kind of growth that
we are seeing. And in
the entire Apollo 20 fourseven 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? What is is there any other channel that is there? Any numbers? Can you find a kind of pharmacy growth for this year? Would there be any component of it coming from 20 fourseven at all?
Offline pharmacy, we look at independent of 20 fourseven. 7%. And 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.
And Q4, which has the last COVID test in the last 10 days, was about 24%. So given that number, we are confident of currently growing our offline pharmacies in the same range of 22% to 23%, which we have seen in the earlier years. As far as online revenues, that is independent of this.
Okay. And at this point of time, we are not quantifying any of this.
At this point in time, we are not. Got it.
Last question is on the coverage piece. I think there was an interesting comment around co morbidities and the whole patient awareness around co morbidities. Is there 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 of shape?
Should I take this?
Yes. Actually, we've already started it. And if you remember in Sangeetha's presentation, she talked about rehab. And we have packaged it in a manner 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. So we are actually using 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 with the organization in good stead as we move forward, especially when complications come up and acute situations come up.
The next question is from the line of Sameer Desirwala from Morgan Stanley. Please go ahead.
Thank you very much and good afternoon everyone. So, Seema, we have seen viruses and actually spike up significantly in 2Q versus 1Q. And yet the occupancy is going up sharply. So is it that the fear psychosis in the minds of people is sort of receding? And second is, how do you see the occupancy and virus trajectory?
Is it beyond September in over the next 3, 4 quarters? So
I think many people are coming to terms with the virus. And the fact that they do not want to die of other co morbidities is what's bringing them into hospitals. This is a very real and threatening danger. How do we see it going playing out in the future? As you know, India is the 2nd highest country.
No one expected that it would lead in terms of host cases. And now even the number of deaths going up. But clearly, this is something that is not short term. It's probably something that's here for a year. So 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, you basically has really geared our case mix towards 20% COVID and about 50% to 60% non COVID.
So going forward, this is what we expect to see for the rest of the year.
Thanks. And what I was also asking is how do you see the overall occupancy from 50% to 52% travel over next 3, 4 quarters?
So I would see a significant improvement in them, not only from the local, but now that transport has opened up, patients are coming from all across the state. So yes, there will be a significant improvement in occupancy.
Okay, great. And the second question is on IPOP. Krishnan, you mentioned about the reasons why there was a Y o Y growth. But if I see between different clusters, then the 2 clusters actually have 15% to 20% spike in the heart of, I think, Hyderabad cluster and Karnataka cluster. So what's driving that versus all the clusters being more or less flat?
So Hyderabad clearly was the payer mix. As I said, it was significantly driven by cash and insurance as compared to earlier year value. Of course, between Q1 and Q4 also, there has been a spike in Hyderabad, if you would have seen over the last four quarters. But again, the significantly, Hyderabad was basically basis the fact that there was the payer mix was better. In Bangalore, I think it was a combination of some of the the fact that the COVID didn't come into Bangalore as much as it came into deal.
If you look at the impact of lockdown, it was pretty pronounced in the Q1. It started in Chennai and Tamil Nadu basically in April May where there was a very, very stringent lockdown. And Bangalore, you saw the saw it coming only in the latter half of that quarter. So Karnataka and Bangalore actually had a good 2 months, April May, and then it impacted them only in the month of June. So they really continued to do well all through the 2 months with regular cases itself.
That was the reason for Karnataka, and then it had a very significant drop. So 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, simply in IS of INR 300, INR 350 crores a quarter?
Difficult question honestly, but I think we should we are aiming to get to at least INR 200, INR 250 crores by Q4 if things go well. But again, it is all going to be contingent upon how the whole business stands out from now to the next we are not seeing the flattening of the curve. Unfortunately, there is still high spike in the COVID. We are the first click for us is to get to INR 1500 crores of EBITDA, which is what we are first seeing how we can get to INR 1500 crores on the health care services itself. Pharmacy can continue to do well.
So Pharmacy is now at INR 80, it can continue to do as you know, of course, there is still some one off revenues even in this quarter and some margins in Pharmacy, but INR 75 crores to INR 80 crores is something that we can sustain in Pharmacy. So we can get to the INR 100 crores hopefully by the quarter after this and then take it higher.
Okay. And I assume you're saying NDA is 1.1.6 basis. Yes.
1.1.6 is what 3.1.1.6 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, on your 3
or 4, 3 different business segments which are there, what's your initial impression about structure and market share gains across businesses, which is hospitals, AHL as well as on the standalone pharmacy business given the
way the operating margin market is playing now?
Well, this is a really large question. So let's start with AHL. In AHL, what we look for is market like in a place like Chennai where we have over 5 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 Calcutta as well as in Hyderabad. So we're actually doing a strategic plan to achieve 25% market share in all of these regions.
We are less in the North, we do not have a significant presence to achieve this market share. But 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 Kobi to speak. And then Chandrasekhar will speak about Apollo Health and Lifestyle.
The pharmacy today, an organized retail pharmacy is just about 68% of the total retail pharmacy segment. So there is a good opportunity. We should aim to double in the next 3, 4 years on that segment.
And the ROC of the pharmacies at Prometix percent currently? Chandashikar, do you hear Chandash? You're currently in the bank. He's dropped. He's dropped.
He
So we wait for Tanushikar to come back on AHL.
Can we take the next question?
Yes. We move to the next question.
Otherwise, let me just in the queue, first, just stop.
Yes. Chandashikar is also reconnected.
Okay. Shamsikar? That is the question. The question was, what is your current market share in the space that you're in?
So in the we'll start with diagnostics. We are a late entrant. So compared to the larger players' market share in our primary markets, we are aiming to be about 10% this year. But it can't be seen as a national number and the more pure play pathology. In the cities we operate in booking centers, our market share would be up 4 of 25% in the organized boutique voting center still.
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. So I'll avoid getting in there. The other major format of where we track our market share is obviously organized primary care. And organized primary care, we by far are the leaders, but much of primary care is still in the unorganized sector. Okay.
Thank you very much.
Thank you. The next question is from the line of Mr. Alokhtaral from CLSA India. Please go ahead.
Yes, good afternoon. One quick clarification. So the e pharmacy service rollout will now be through the 24x7 app. Is that understanding correct? Yes.
Okay. And sir, how many pin codes are you covering?
13,500. 13,500 pin codes.
And Krishnan, how are you looking at the debt levels now for FY 'twenty one?
Currently, the gross debt is at the stand alone levels is at around INR 3,300 crores, and the net debt would be INR 300 crores lower. INR 3,000 crores is what the net debt would be. The pharmacy the front end pharmacy stake has happened that SPV creation will be effective 1st September 2020. The NCLT order
When we have the line reconnected, over to you, sir.
Yes, sir. So as I was saying that the front end pharmacy has now got has been put into effect post the MCLT order from 1st September. So our overall debt level should stay at current level. Those come down by end of the year. So that's what is this is the current projections that we have.
Okay. Thank you. And sir, last question is when you move to the new tax rate? Is it in FY 'twenty two?
Pardon? New?
The new tax rate, that is 25%.
Yes. We should because we were expecting that we will move into that by FY 'twenty two. As of now, we'll have to just see whether it's FY 'twenty two because clearly, this year has been as of now, it's a loss year. We'll have to see how the losses are reducing and how much of the math is something that we are going to be using. So there will still be pending math in FY 2020 one end.
So it is possible that it goes beyond FY 'twenty two to FY 'twenty three. We'll have to come back to you on that.
Okay. Thank you for taking my questions.
Thank you. The next question is from the line of Damyanti Kirai from HSBC. Please go ahead.
Hi. Thank you for the opportunity. One clarification on cost savings. So ma'am, did you mention 100 and 80 to 200 kind of saving for FY 2021, most of which will be structured in nature? Yes.
Okay. And in the long term, 20% fixed cost saving is your goal, right? Yes. My another question is regarding RPO. So earlier, again, you mentioned we should be holding up ARPU despite some increase in COVID patients.
So have you taken the tariff hike for hospital services or it's yet to be taken for this year, which can help our folks?
We have not taken any increase in the hospital price hike.
We don't intend to take any price hike this year.
Sorry, I just said you don't intend to take any price hike for this year?
Yes, it's not it doesn't it's not something that's going to really add any material value for us. Why is the costs have gone up in the system because of PPE costs and COVID related costs, etcetera, this year we're not wanting to do that because we are focusing more on getting our patients back occupancy. That itself is a big problem that can come back.
Sure. And my last question, I just missed a percentage of private label in SVP revenues. Can you quantify that?
It's 9% in Q1.
9%. And what we are expiring this label for?
Next 2 years, about 12%.
Okay. Okay. That's helpful. Thank you.
Thank you. The next question is from Aditya Khemka from Ingrid Asset Management. Please go ahead.
Yes. Hi. Thanks for the opportunity. Sunita, could you just talk a little bit about how many what kind of attrition have we seen in the doctors and the nurses? How has COVID impacted the HR side of things?
So 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. So I would not say any significant attrition that we should be concerned about.
Understood. And on the hospital services side, so 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. So on the hospital side, what are the levers aside from saving cost on the fixed side or on the variable side during conversations, etcetera? Are there any other levers we have to improve our profitability in the near term?
Yes. We are working on 7 levers. I think the first is that using marketing, we are deepening our corporate connect. So 24 hours, 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.
So 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 homeowners, doctors were being admitted in our facilities for COVID care, and now they continue to send us referrals. Sadly, one part of the health care system in India is closed. So 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 in this during these times, those restaurants are also going to start 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. And we believe, as always, that this will increase the number of vessels into the system. And this is starting to play out in September. So yes, I think it's not business as usual, but definitely we're on track to get there by the Q4.
Got it. Krishna, just one clarification from your comment on the Just
The most important part of our journey is, of course, the 20 fourseven, which is a digital, where we do 2,000 teleconsuls a day. And through this, we're able to convert into outpatient, convert into inpatient. So yes, there's a lot of traction. While physically, we were able to reach we were defined by the number of beds we had, now because of 24x7, we do have digital, which enables consultation. We've also moved on the home care.
So 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 offering.
Understood, ma'am. Thanks for that. Christian, just a clarification on the comment you made on net debt. So the net debt you see at this end of FY 'twenty one is your guidance INR 3,000 crores. And does that include the money you're going to receive from the front end divestment?
Yes. So it can come down. As I said, it can come down a bit. The front end divestment will also will first spike up our overall cash. And then with the payables, which we will have in the receivable from the front end, there'll be some working capital deployment which should happen because we are going to be continue we'll continue to supply the pharmacy products and get the benefits of the margin in the back end.
So there will be a net reduction of 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 to INR 200 crores. Okay. Thanks for all the rest guys.
Thank you. The next question is from Shantanu Basu from SMIFS. Please go ahead.
Hi, good afternoon. Well,
contrary to what Smith said, I mean, your gross profit margin on for consolidated basis has fallen to 44% compared to 52% in Q1 FY 'twenty, and the employee costs have also risen. So just wanted to know whether this trend will continue for the remaining quarters of the financial year?
So you wrote 2 points, right?
One is when you're looking at
the employee costs of the which has been which is the published results, you see the results including the stand alone pharmacies. Stand alone pharmacies continue to they have been growing Q1 to Q4 of last year. There have been so many 400 odd stores which was added last year. So the number the employee costs have risen from Q1 to Q4. Coming into Q1 of this year, in addition to the cost increase, which has there has also been COVID related costs because to get all the people to the stores, etcetera, they have had to pay incentives, conveyances, etcetera, 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, whereas Ms.
Suneeta spoke about the health care costs, 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 health care alone, you will see that there is a reduction. The pharmacy cost has been higher versus last year to this year. But even after that, they come back with an EBITDA margin of 6.2%. So they have managed it with higher sales and higher gross margins.
Okay. And can you give me the outlook for your COVID spend?
It was 27,000. 27,000. 27,000?
Yes. And for non COVID beds?
So 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.
So 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 consumers to follow 20 fourseven, and we have used the 6 month period to win new consumers and deepen our engagement with existing customers. We are clear that the way forward is about customer touch points and formats of engagement.
The pandemic has solidified our belief that physical beds form the base of the pyramid for health care delivery and will have to be enhanced with multiple additional platforms to serve patients. We believe this is the future of health care, 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.