Ladies and gentlemen, good day and welcome to the Apollo Hospitals Limited earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. 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, Sagar. Good afternoon, everyone, and thank you for joining us on this call hosted by Apollo Hospitals to discuss the financial results for the first quarter of FY 2025-2026, which were announced yesterday. We have with us today the senior management team represented by Mrs. Suneeta Reddy, Managing Director, Mr. A. Krishnan, Group CFO, Dr. Madhu Sasidhar, President and CEO of the Hospitals Division, Mr. Madhivanan Balakrishnan, CEO of Apollo HealthCo Limited, Mr. Sriram Iyer, CEO of A H L L, Mr. Sanjiv Gupta, CFO of Apollo HealthCo 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. Please note the disclaimer mentioning these risks and uncertainties on slide two of the investor presentation shared with all of you earlier.
Documents relating to our financial performance have been circulated earlier, and these have also been posted on the corporate website. I would now like to turn the call over to Mrs. Suneeta Reddy for her opening remarks. Thank you, and over to you, ma'am.
Thank you, Mayank. Good afternoon, everyone, and thank you for taking time to join this earnings call. I believe you would have received our earnings documents, which we shared earlier yesterday. We are pleased to start FY 2026 on a strong footing with a healthy momentum and double-digit growth across all three verticals: Healthcare Services, Apollo HealthCo, and Apollo Health and Lifestyle. The performance in Q1 reflects consistent execution across key geographies and business segments, resulting in broad-based growth, resilient operating metrics, and improved profitability. Consolidated revenue grew by 15% on a year-on-year basis to INR 5,842 crore. Within this, Healthcare Services business has delivered 11% year-on-year revenue growth to INR 2,935 crore. Revenue from insurance patients saw a year-on-year increase of 13%, while revenue from cash patients grew by 16%. Collectively, these segments accounted for 84% of our inflation on average revenue. Surgical revenues grew by 14%.
Our focus on specialties: cardiac, oncology, neurosciences, gastro, and orthopedics, which is CONGO, maintained a strong momentum, growing revenue by 15%. Group wide occupancy stood at 65% in quarter one, FY 2026. This quarter, we are announcing a change in our reported metrics. We have traditionally reported average revenue per occupied bed. From this quarter, we propose to discontinue this metric from our report. ARPOB blends pricing, length of stay, and occupancy into one figure. Higher ARPOB can sometimes reflect higher operational efficiencies like higher acuity mix and better bed turnover rather than fewer patients' revenue. Growth in ARPOB can result in due to reduction in ALOS or increase in occupancy, which are purely operating metrics and are not related to realization per patient. Unfortunately, health sector stakeholders were sometimes misrepresenting ARPOB growth as price or tariff growth to consumers and the public at large and implying that hospital inflation is higher than it actually is.
This narrative ignores the impact on cost of advancements in technology, therapeutic procedures such as robotics and minimally invasive procedures, which significantly improve patient outcome. Instead, we draw your attention to average revenue per patient, ARPP, which we believe is a more accurate measure of our realization. It isolates what we are able to realize per patient, irrespective of how long they stayed or how efficiently beds were used. It reflects true pricing power and case mix strength. More complex cases lead directly to more ARPP. ARPP in quarter one, FY 2026, was INR 172,282 and grew by 9% through a combination of better institutional tariffs, case mix, and regular tariffs increased for inflation. Moving ahead, Apollo HealthCo reported revenues of INR 2,472 crore, marking a 19% year-on-year growth. Apollo Health and Lifestyle revenues increased by 19% to INR 435 crore during the quarter.
Consolidated EBITDA was at INR 852 crore, registering an increase of 26% year-on-year. The Healthcare Services EBITDA was at INR 718 crore, registering a growth of 15% year-on-year. Healthcare Services margins remain robust at 24.5%, a year-on-year increase of 88 basis points. The pharmacy distribution business in Apollo HealthCo recorded an EBITDA of INR 167 crore, as against INR 139 crore, higher by 20% year-on-year. Apollo 24/7 EBITDA losses were at INR 73 crore, significantly lower than INR 116 crore in quarter one, FY 2025. This is a result of conscious work on cost management and closely tracking unit economics in each line of service. As a result, Apollo HealthCo reported an EBITDA of INR 94 crore in quarter one, FY 2026, up from INR 23 crore in quarter one, FY 2025.
This is an excellent outcome, and we are well on track to achieve breakeven in the digital business by the end of this fiscal. Apollo Health and Lifestyle delivered an EBITDA of INR 40 crore, representing 31% year-on-year growth, with margins improving to 9.3% from 8.4% in quarter one last year. Consolidated PAT was at INR 433 crore, growing 42% year-on-year. Within Healthcare Services business, we have delivered an ROC E of 38.4%, with balanced ROCE across our geographies: the metro, Tier-1 , and Tier-2 . Private label and generics revenues were at 14.6% of total pharmacy revenues. Our digital platform Apollo 24/7 added 1 million new users. Our platform GMV was at INR 682 crore, representing a growth of 23% over the same period last year. We are making good progress on our hospital capacity expansion plans.
Our dedicated women's oncology center in Delhi, multi-specialty hospital in Pune, acquired hospital in Bangalore, and our multi-specialty hospital in Kolkata will be operational in FY 2026, a capacity addition of 700 beds. Plans on others are ongoing projects to remain on track with phased operationalization in the coming quarters. The strategic reorganization of our omnichannel pharmacy and digital health business is proceeding as planned, and we expect to complete all steps within 18- 21 months, a timeline that we had earlier announced. The scheme is expected to conclude by the end of FY 2027, by which time the business is expected to achieve a run rate of INR 25,000 crore with a revenue of 7% EBITDA margin on a combined basis. Our quarter one, FY 2026 performance underscores the resilience and agility of our integrated healthcare ecosystem.
We have continued to advance our strategic agenda, deepening our leadership in core healthcare services, scaling our digital retail platform, and further enhancing patient outcomes through clinical excellence and innovation. We are well poised to capture the emerging opportunities and sustain our growth momentum through FY 2026. Our unwavering focus remains on delivering long-term value for patients, partners, and shareholders. On that note, I would like to hand over to the moderator and for questions. I have with me Krishnan, our CFO; Dr. Madhu Sasidhar, CEO of the Hospitals Division; Sriram Iyer, CEO of AH L L; Madhivanan, CEO of Apollo HealthCo; Obul Reddy and Sanjiv from Apollo HealthCo with me. Here to take of all of your questions. Thank you.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star, then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. Our first question comes from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Thank you for the opportunity and congratulations for the good set of number. My first question is on Apollo 24/7, where we have seen significant improvement in profitability. As we can see, operating costs, excluding ESOPs, were down almost 16% quarter- to- quarter, and I believe that's the key reason for better profitability. At the same time, when we look at GMV for the platform, it's down around 14%. How should we look at your GMV growth ahead? You mentioned you will be cost neutral by the end of this fiscal itself. I just want to have more clarity on how should we look at the GMV for the Apollo 24/7 platform. Additionally, if you can update on some of the newer services which were added to the platform, like insurance and the corporate tie-ups, et cetera. Thank you.
Can I take the question ma'am?
Yes, Madhi, please. Madhi, please take that question.
Okay. Thank you for the question, Damayanti. Two things. Your assumption is correct. On the cost front, one of the biggest things which was driving cost was our unit economics, which is a combination of our customer acquisition charges, the kind of discounts and the lifecycle cost that we incur, and the cost of delivery. At a broader CM1 marginal contribution, we are almost at breakeven for pharmacy, and this is what contributes to the biggest. A big chunk of the cost that you're seeing, cost reduction that you're seeing, is coming from there, which is helping us. Over the next two quarters, our pharmacy would be way above the line in terms of unit economics, and therefore, we will be in a much better position. On the GMV question that you raised, and this trajectory continues, we continue to keep spending less on marketing.
Our customer acquisition is growing at a good, healthy pace of around 200,000 new customers coming to the portfolio, and we are able to retain our customers who come in through our very strong circle program and the constant improvement in service. Specifically on the GMV bit, if you were to notice, our GMV is contributed by three lines of business. The first one, driven by pharmacy; the second, diagnostics. In both these cases, the correlation between GMV, revenue, and margins is very straightforward. However, in the business that we drive for the hospitals, which is both the IPOP business as well as the various consult business, compared to last year, we had a redefinition of how we generate GMV. That's why we have restated some of the GMV numbers, which we can explain in detail.
What it has effectively done is earlier, we used to take the total GMV which was contributed by Apollo 24/7. Incrementally, from this year onwards, we are focusing only on the new customer business that we're generating. That's how our revenue structures are aligned. To all the investors and the analysts, I would request that we focus a little bit more on the revenue drive as far as hospital is concerned, the hospital IPOP is concerned, both hospital as well as clinics, and for diagnostics, and the GMV business will continue. The restated numbers ensure that we will basically indicate that we have grown on a sequential basis at an 8%, whereas, on a year-on-year basis, we have mov ed on to 2 3%. It is a simple technical readjustment. The underlying business assumptions remain the same.
From a future perspective, earlier we used to say that INR 800-INR 900 crore of GMV is what will sort of take us to a breakeven. That number may be around by another INR 50-INR 100 crore. I would say maybe the day we start touching INR 800 crore, some of these things will start playing out because of this readjustment.
Okay. Just to clarify, you mentioned pharmacy, diagnostic, no change in how you book the numbers, but it's the IPOP, the hospital consult, et cetera, where there was some adjustment, and now we should look at the incremental delta which will come in this part of the business, right?
Yes, yes, yes. We have reinstated both last year. When we talk about the growth numbers, we reinstated accordingly. It reflects the growth in a much more stronger manner.
The reflected number is on a like-for-like basis, what we are seeing there?
Yes.
Okay. My second question is, you know, some of the e-com platforms, I believe they have gone very aggressive in the last few months in terms of stepping up their presence in not only the OTC wellness products, et cetera, but on the prescription medicines supplies also. How do you see competition in this space from some of these e-com players where I see, I guess, a lot of aggressive push coming in the last few months?
I wouldn't say last few months. All this action has started just around from this month onwards, which is two quick commerce players jumping into the prescription business. We will watch. In my mind, this is actually a better development for the overall industry. Today, the digital part of the business in the markets that we operate in, especially for pharmacy, if I have to take that as a benchmark, operates at around 12%- 15% of the offline pharmacy business. We genuinely believe as the market matures, this number should settle at around 25%- 30%. Incremental players coming in with aggressive strategies, in my mind, will expand the digital market and give a greater amount of trials. I think Apollo, given its very strong trust, very strong supply chain capabilities, and the ability to offer always good quality, trusted medicines, should hold on in the long run.
We are not going to be in this war for acquiring customers at any cost, but build a much more stronger, sustainable business, under the direction of our board.
Sure, very important.
If I look at this as market expansion.
Yeah, this is good for the industry, and you believe you are in a better, or you have a winning proposition in this space despite entry of more competition?
Yeah. Our operating model is to build a sustainable model wherein at a unit economics level, growth will happen. This is where the advantage of having an offline pharmacy of almost 6,500+ outlets in sync will work much better. We constantly reorganize our supply chain network. We believe there is a lot of growth still available in the Tier-2 and the Tier-3 cities, and we are focusing on that as we go forward, as we walk towards our end-to-end breakeven.
Sure. Thank you. I'll get back in the queue.
Thanks.
Thank you. Our next question comes from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi. Good afternoon, and thank you for the opportunity. The first one on the average revenue per patient growth of 9%. Year-on-year , if you could provide the growth drivers for this in terms of case mix, payer mix, and pricing creep, if you can split this 9%?
I'll hand it over to Madhu, our CEO.
Yeah. If you were to average out the tariff, which is the price mix, I think you referred to, the land effect is probably in the 4%- 5% on a year-on-year basis. The remaining comes from a combination of case mix, primarily on case mix, and most of this has been driven by our CONGO specialty. By CONGO, we refer to the cardiac, oncology, neuro, gastro, and orthopedics. They have independently contributed to that delta, especially gastro sciences and orthopedics, which have grown at about 16% and 17% on a revenue basis year- on- year. Even within the CONGO specialties, when we look at each one of the specialties, the average price per, the average revenue per patient, which is an indication of the severity and complexity of the case, that has grown in healthy double-digit numbers across each one of our CONGO specialties.
Basically, half and half, it is a way to put it?
At least half and half, yes. On a volume basis, most of our volume growth, almost all of it, I would say, in this quarter has come from the CONGO specialties.
Sure, more cash as well, right, which is typically slightly higher in terms of as compared to insurance?
Payer mix growth has been higher in insurance on a volume basis. It's about 7.8%, followed by our cash, which has also grown by about 5%.
Thank you for the clarity. Ma'am, this said that we will be operationalizing around 700 beds, is that the correct understanding of the 1,577 beds that we are slated to add this year?
Yes, yes.
Okay, ma'am, when would the next tranche of, let's say, 800+ beds shall be expected to be operationalized?
The following year .
FY 2027. Okay.
Yes.
Sure. The last clarification from my side on this GMV change. In Q4, we had guided for revenue to GMV ratio of around 45%- 46% per full year versus 36% in FY 2025. With this redefinition, is there an update to the guidance or that guidance being in the redefinition of the IPOP GMV revenue conversion?
No, I wouldn't change that. I think you can go with more or less that kind of a tracker. Like I told you, we are focused more on the revenues. The revenues will have been, there is no change in the definition of the revenue. In fact, it will continue to grow. I wouldn't make any changes to this. And continue with that.
Breakeven is, you said, INR 800 crore-INR 900 crore revenue?
As a GMV revenue, we should be able to, on the digital side, we will be hovering between INR 90 to 100 crore. Once we touch that number, that's right.
What I spoke about, INR 800 crore is a GMV. That's a good indicator.
Sure. Thank you and all the best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two each per participant, and you may rejoin the queue for follow-up questions. Our next question comes from the line of Neha Manpuria from Bank of America. Please go ahead.
Thanks for taking my question. The first question in the hospital business, now that the Bangladesh patient flow disruption is in the base, is it fair to assume that the hospital growth rate, which has been in the 10%, 11%, will inch up to the mid-teens along with the bed expansion? Just trying to understand when we go back to the mid-teen growth that we're used to seeing in the hospital business.
Yes, Neha, it will certainly go up. I think you will see also an improvement in existing assets as well as the addition of new hospitals.
This is because if I look at the occupancy, the occupancy does not seem to be showing an improvement. Obviously, we have also seen a decline in ALOS . I'm just trying to understand how much of it would be, you know, how would it be reflected in terms of operating metrics of occupancy? How should I look at that for the existing network?
I think it will go for the existing delivering close to 13%, 14%, and an additional 10% coming over a period of three years from the new facilities because there's headroom for growth in the existing. Definitely, you know, we can look at 13% to 14% on existing and additional 10% coming from new beds in the next two to three years.
Understood. The margins on these, like you had mentioned before, is there is still room for margin expansion on the existing network before we, you know, which is also, I mean, we'll have losses?
Yes, yes. I think there's room for margin expansion. We have a plan to move it to 25%. As we look at the losses from new hospitals, total impact over a two-year period could maximum be around INR 150 crore. The reason why the impact will be minimal is that we do have huge cash, large cash flows as opposed to earlier when we did our expansion. Strong operating cash flows and margins coming from existing and with some losses, but no huge impact on EBITDA.
Understood. My second question is on the digital business. What would be the GMV for the full year based on this rebasing that we have done? Also, if you could give us some color on the new businesses, how they're tracking GAAP monetization and insurance, how they've been tracking?
Sanjiv?
Yeah.
Sanjiv, can you give the projected GMV?
Yeah, thanks, Madhi. I'll take the first question, you know, which is, we closed Q1 with INR 682 crore. We strongly believe that, you know, we should be hitting a number of about INR 3,000 crore-INR 3,200 crore for the full year as well as the new way of looking into the GMV. This should represent roughly 25% to 30% growth versus the previous year. Thank you.
Thanks for that. We will continue to grow at between 25% to 30% growth, and we have seen our first quarter on schedule. There are certain businesses which we are tightening to ensure that our revenues are on the upswing. Specifically, on the new businesses, insurance business, which I had spoken to you about, has started getting some legs. For this quarter, we finished with an INR 5 crore number as against we had targeted actually to do around INR 7 crore. We did INR 5 crore because some of the technological integrations with the partners are still in process. As this is the first time that we are building it, it's taking a little bit of time. A very encouraging sign is that we are getting a reasonably large number of digital customers who are buying very strong products from partners like Niva Bupa and Care and Star Health.
We have started off with Health. Life and the other two will progress. Various other corporate partnerships, we are working together as a one Apollo story, wherein as one full entity, we are approaching larger corporates to build a much stronger story. The SBI story has started off in the right earnest. We are in very early stages again. It's giving us good quality customers on a repeat basis. We will continue to build on these lines of businesses. The insurance business will continue to take a little bit more investment, both in terms of people and technology, but we are reasonably confident by the end of the year, it will not take away from our breakeven objectives.
What about the app monetization?
Oh, yeah. That's also going as per track. While it might not be on the lines of quick commerce, given very, very specific, we are working in line with, you know, people with whether it be the weight loss drugs, some of the other mega pharmacy brands, very strong FMCG brands who are a part of the mix. That story is also picking up nicely. We should be on course for monetization.
Okay, that is helpful. Thank you so much.
Thank you. Our next question comes from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Good afternoon. Thank you for taking my question. The first one in the hospital business, when you guide for organic growth of about 13% to 14%, we did 11% for this quarter. I just want to understand what should change, you know, is the ARPP growth going to remain as high, or are you going to see better volume growth in the path forward? If I were to look at your occupancy for this quarter and when I compare to the peers, I know there could be a geographical difference, but it's one of the weaker numbers. I just want to understand for the path forward, how are we looking at even utilization improvement, and what should help us get back some of the growth? I know you talked about CONGO, but maybe still, does it mean we have lesser occupancies when we do more CONGO?
I'm just trying to see, is the business model changing?
No, no. I think that there is a huge focus on volume. We have focused on CONGO. I think that we, you know, having a, you know, a network that is all over India, we will also focus on secondary care, and therefore, the volume should improve. As you consider payer mix, I think we are strengthening our alignment with the local markets as well as with corporates, with PSUs, and hope to see an uplift in international patients coming in in the second and third quarter as we found new markets. All of this should contribute to higher occupancy, which you will see in the second quarter and continue to grow in third and fourth.
Shyam, also, I would like to quickly let you know that clearly there has been an uptake in our overall robotic surgeries that we are doing in the system, you know, minimally invasive work, et cetera, that we have continuously focused on, which is why if you look at the ALOS. ALOS is down by 6%, right? Clearly, it's a large number compared to a three point, you know, and that number clearly, you know, versus 3.23 of Q4, we are now at 3.06. Clearly, the ALOS is one of the reasons for the occupancy, which is why the ARPP is good. The margins are good. It gives us headroom for growth also in our existing metros, which is good till the time some of the new hospitals come in. That is something that we are quite committed to.
Volume growth, while you are seeing headline volume as 3%, as we said, insurance and walk-ins are at 5% and 7%, and 3% is also because of the IPS. If you adjust for the Bangladesh, it would have been at 5%. Clearly, yes, there are reasons for our particular for this quarter, but going forward, we should go back into that team growth is what we have committed to.
If I can just add to that, add to what Ms. Suneeta and Krishnan said, a lot of the occupancy number that you see has been intentional. It's a 6% reduction in length of stay, which is almost like adding 550 or 600 beds, right? What this gives us is the extra capacity in our chassis to focus on supply side. To your question as to where will this volume growth come from, we are being very closely paying attention to that supply side, which is adding clinical talent. You will see some of that coming to bear, especially in our metro market, driving that volume growth. It will be in the high complexity care mostly, but it will be driven by some addition on the supply side.
Yeah, very helpful. Just the second question on AH L L, you know, it's kind of all over the place if I can use one word, right? We have top line growth, but no EBITDA growth in some, and we have, so maybe diagnostics is one I noticed, which is looking odd. Also, I think primary care, and only where we have seen EBITDA margin expansion is specialty. Maybe just a summary on A H L L, please.
Sriram, please take that.
Yeah, hi. I think, see, our focus has been to drive. We have seen a very good growth on diagnostics on volume. When you look at the diagnostic margin on quarter one, I think I just want to inform that we opened the central reference laboratory in Chennai on 30th April . This is state of art, fully automated DigiLab spread across 45,000 sq ft. We obviously had certain one-off validation cost, which is there on the EBITDA that is baked into quarter one. If I normalize that, my EBITDA margin is about, in diagnostic, is at about 10.3%. That's the number. Obviously, since we went live, there were these one-off costs that typically happen when we go live, which is more for making the lab live and the controlling calibrations.
Having said that, yes, we have seen a good increase in margin of specialty, and even on primary care, there has been a focus to grow revenue, and the margins will come in the coming quarters. We are confident about sustaining these growth rates further as well. Hope that clarifies.
Thank you. Thank you and all the best.
Thank you. Our next question comes from the line of Raman KV from Sequent Investments. Please go ahead.
Thank you for the opportunity. I have two questions. I just want to understand, this is with respect to the Apollo 24/7 pharmacy business. There was a strong uptick in terms of the margin, pre-operating cost, Apollo 24/7, pre-Apollo 24/7 operating cost with respect to the online pharmacy distribution segment. I just want to understand what drove this strong uptick in terms of margin? Can you give any guidance for Apollo Healthcare from perspective in terms of revenue growth and margin improvement for the next one, two years?
Madhi and Sanjiv?
Maybe I can take the first question, ma'am. This is Sanjiv this side. Our margin for the quarter one has been 15.4% versus Q4 of 12%, which is about 340 basis points up. Usually, this is on account of the, you know, one, the renegotiated rates with all the service providers, which is across, you know, diagnostic and on the healthcare services IPOP. Second, also, because of the better unit economics on the pharmacy side, the margin rates have been better. Plus, Q1 also saw insurance uptake, which Madhi and I talked about that in Q1, we had almost INR 5 crore of insurance, while in Q4, it was roughly INR 1 crore-INR 1.5 crore. Higher upside on the insurance commission also boosted the margin, apart from the fact that the monetization also helped us. All in all, all the revenue segments had a better margin profile for Q1 versus Q4.
The sum total of that is what you're seeing is about 340 bps higher in Q1 versus Q4, sir. Thank you.
And the growth guidance part?
The GMV of 3,200 that we spoke about, we continue to be on course. Like I told you, in our first quarter, we are very much as per our AOP target. Typically, our new customer acquisition continues both for pharmacy. As far as our diagnostic business is concerned, we are at a new normal. That business has also picked up. This quarter should be good. We are on course for our breakeven on Q4. I would not want to look beyond that at this point of time as we look at various other lines of businesses.
Okay.
My second question is with respect to the demerger. Currently, under Apollo Hospitals Enterprises , there are three segments. One is the hospital business, another one is Apollo HealthCo, which is the pharmacy business, and the third one is AH L L, which is with respect to diagnostics, specialty health, and primary care. My understanding is you are demerging the pharmacy business into a new entity. Is that correct? Can you also explain how the merger with Keimed Health will be beneficial in terms of synergy for the pharmacy business?
That's correct. You're right in your understanding. What will happen is Apollo HealthCo, as you are seeing in the current form, is what is going to be demerged and will be listed separately by Q4 of FY 2027. By the time it will be listed, the NCLT process of merging Keimed into this business would also have come into play. Clearly, we have a proforma P&L. You can see the proforma P&L, which has been shared as part of the investor relations earnings there. You would see that this current year, current quarter, we are at INR 4,430 crore of combined revenue, including Keimed. Keimed supplies to 6,000 odd pharmacy stores apart from supplying to Apollo as well. You will have a combination of a consumer-focused business, which is the entire pharmacy, which we are doing with the 6,500 stores, the online digital, as well as the Keimed business.
All three will be part of this number. Run rating currently at INR 17,000 crore of revenue, which is what we have said that by Q4 of next year, FY 2027, by the time that this will also get listed, we should be run rating at INR 25,000 crore of revenue with a 7% EBITDA margin. There are synergies of the Keimed business, which I will allow Madhi to chime in.
Okay. Thank you. You want me to continue? We're okay?
Yes.
The hospital-based pharmacies continue as part of hospitals, which I'm sure you know. Remember, what we are spinning out is only the retail pharmacies and the online out of that.
Okay. Very quickly on the synergies, see, while as the digital business becomes unit economics positive, and with this merger, we actually believe Keimed, besides, you know, being a part of the physical distribution business through us, there are a lot of integration synergies that we believe, whether it be in technology, whether it be in people, whether it be in cost. What typically e-commerce and quick commerce players build on the dark stores. Today, we have 22 dark stores. Once Keimed comes into the picture, we have the ability to find more synergies of setting up more economical dark stores across the country. Our expansion beyond the top six cities to the next 10 and to the rest of India can become much more smoother with a greater integration between the two entities.
On the product side, we believe our abilities, like somewhere in the results we spoke about, a 14.6% for PL in generics, there is a huge scope available to drive that number, not just within the Apollo chain as well as Apollo Digital, but also across the various Keimed franchises. Technology, data, people, and product categories, all the four synergies should start playing out as this merger comes in place.
My understanding is this demerged entity by.
Sorry to interrupt. Raman, sir, may we request you return to the queue for any follow-up questions? Thank you.
Sure.
Our next question comes from the line of Avnish Burman from Vaikarya. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. I just have a question on Keimed. You mentioned that the HealthCo plus Keimed would reach about 7% EBITDA margin by the end of FY 2027. Keimed margins, as I understand, is about 3.2% for the full year of FY 2025. I just wanted to know how much increase in Keimed EBITDA margins are you baking in when you drive for 7% for these overall margins by full year?
Yeah. Can I give the answer? Yeah. It would be roughly 40 basis points, sir. 3.1% should go up to 3.5%.
Okay. The lever for the 40 basis point, is it coming mostly from the gross margins or operating leverages?
I think the majority of this will come through the scale. That means it will come from the, you know, margin side. We do have the operating cost leverage as well as, you know, certain efficiencies that would come in. There should also be some benefit out of from there also.
Okay. If I understand this correctly, 40 basis point improvement in Keimed margin is coming from, you're saying, both gross margins as well as the scale benefit?
That's right.
Okay. Thank you. That was my only question. Thank you.
Thank you.
Thank you.
Thank you. Our next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah, thanks for the opportunity. Just one clarification on the GMV aspect. You said there's redefining of GMV, and these are new customers to be taken into consideration. Practically, if the same customer is coming for newer indication, then effectively, that will not be counted for GMV. How do you think about it ?
Correct. Correct. I think you hit it right. Just let me give you an example. Last Q1, we reported a GMV of INR 695 million. That number stands at INR 553 million. Is it because roughly 50% of the GMV that we drive for the hospital business is from existing customers, and the balance 50% is from new customers who we bring to the overall Apollo group, either through pharmacy or any other mechanism? Earlier, we used to get the revenue understanding was on the overall basis. Given the new business framework arrangement and the new agreements, our emphasis on maximizing businesses for the new customers, that's why that's the GMV that we are reporting. For the other customers, which are our existing customers, we have a service in charge, which is much more predictable. This is the model that we are following. That's why the numbers.
The GMV comes down, but the revenue story remains intact and keeps hopefully growing at what we are presenting.
The GMV will comprise any, which is both, right? Either you put it as a share or you put it as a new customer?
For this statement purposes, because we would like to have a direct correlation between the incremental revenue, we have restated the requirements. The new one primarily focuses on the new customers.
Only that new customer-related share would reach out to HealthCo from Apollo Group, is that?
From a GMV perspective, yes, revenue is all encompassed.
The percentage, yeah, GMV overall, combining the other aspects of GMV, the GMV to revenue ratio is 45%- 46%.
It will slightly, yeah, we can maintain it. That's how we intend to break down our costs. We are not making any guidance change in that.
Okay. Secondly, on the offline pharmacy, the margins have been pretty stable at 7.7%. Any way on a long-term basis, increasing private label or, let's say, the non-pharma product would drive, but anything further to, you know, any scope to further scale up this EBITDA margin?
Obul, sir, you want to take that?
Yeah. This is, you know, at HealthCo level, it operates on a fixed model because we help to the franchise in the business on a cost-plus basis. On a combined basis, it is fixed this quarter. It is about 25%, 25 basis points more than last quarter. We should see that increase happening with the volume and scale. What we're trying to observe last two quarters, there are stable private label numbers because of the repositioning of some products and introducing the new products. We have a separate head coming as an, you know, to try that as an initiative. We should see this margin expansion in the coming quarter.
Got it, sir. Just lastly, on Apollo 24/7.
Tushar, sir, may we request you return to the queue for a follow-up question, please?
Okay.
Thank you. Our next question comes from the line of Vivek Agrawal from Citig roup. Please go ahead.
Yeah. Thanks for the question. This is related to hospital margins. Given that there is an expectation of around INR 150 crore of losses in the new hospitals put together over the next couple of years, does the company have enough room to absorb the entire losses? I'm just trying to understand how to look at the company's overall hospital margins since 2026 and 2027, whether they can remain stable, can move up or down. If you can help us understand?
I think with INR 2,700 crore of absolute EBITDA, INR 150 crore impact will not be significant. AK, if you want to elaborate.
Yeah. We are already, as you have seen, the EBITDA of the quarter, we are at INR 700 crore. We are averaging at INR 2,800 crore as we speak. It will only go up from here. On that scale of EBITDA of INR 2,800 crore, having INR 100 crore, INR 150 crore EBITDA would not be a big number. Most of these are in existing markets. We have clear plans and visibility of doctor additions, clinicians that we want to join, we are already targeting, et cetera. We will be breaking even in 12 months, as we have said, in most of these locations. You should see good growth coming and also, you know, very quick ramp up to double-digit margins after the 12 months also.
Yeah, that I can understand, right? I'm just trying to understand overall margins in 2026 and 2027, right? Whether that can remain stable or you're expecting a marginal dip?
It will be a marginal dip, right? 100 basis points marginal dip. You know, we will see expansion as, as Ms. Suneeta said, you know, the 24.5% EBITDA margins that we have reported, we hope to take it higher to 25% or 25% plus number. From there, you will see a dip of 100 basis points. You know, overall growth will be visible after that.
Understood. The second question is related to international markets, right? First, on the Bangladesh patient, are you expecting any of the patient flow coming back? Secondly, would you like to highlight which are the other markets that you are working on that can pick up and drive this international patient number? Just trying to understand how to grow international patients?
Sure. No, thank you for the question. With respect to Bangladesh, the lowest volume was somewhere between November and December to early January. Since then, we've seen some increase in the volume, but it is nowhere close to the volumes that we used to see same time last year. Having said that, the complexity of cases, the sicker patients are coming to us. If you look at it on an ARPP basis, the value is higher per patient than what we used to see last year. We are actively engaged in that market, and we expect that the numbers will go up. Outside of Bangladesh, we are very closely engaged in the markets in Africa as well as in the Middle East. We also have a strong presence and will continue to develop the markets in the CIS countries. I think Southeast Asia and further great interest to us.
You know that we are partnering with a project in Asia to build a hospital. They're actively engaged in discussions in various countries, including Malaysia, in Brunei, as well as offering services in the Philippines. Broadly, these are the markets where we expect to see significant volume through the remaining part of this fiscal year.
I just want to add to that that we've developed a new market, which is Iraq, and this is contributing to the growth of international patients with good healthy margins. Currently, most of these patients are now going to Hyderabad, but there are some also coming to Chennai.
Understood.
Those are the markets, yes.
Yeah, understood. Just last question, what is the current contribution of international patients in the hospital revenue?
Currently, it's 5% of revenue. We hope that we'll be 7% of revenues by the close of the year, targeting 10% of revenues for the next year.
Thank you, ma'am. That's from my side.
Thank you. Our next question comes from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thank you for taking my question. On the digital business, you know, we're talking about a breakeven by the end of 2026. In your assessment, on a steady basis, once the business sort of gets into steady profitable distribution, what's the kind of profitability the business can do?
Madhi?
I don't want to hazard a guess. Like you said, given that at this point of time, our primary focus is to break even and build a sustainable model. We are typically seeing on a month-on-month basis anywhere between 2% to 3% growth because, like I told you, our operating model does not believe in spending too much money on customer acquisition. We still have a huge industry as a whole, especially the digital side, spends anywhere in the range of 15%- 17% as discounts, which the offline industry does not, which the offline sector does not drive. That's a second rationalization. The third bit is there is always this challenge of increasing the average order volume to be in the range of around $ 1,200 so that the cost of delivery is maintained.
I expect the growth to, on a year-on-year basis, to be in the range of 20%- 25%. Please do not expect astronomical growth. If this unit economics comes through and we are able to keep our overheads at a constant level, which we are very, very bullish about as the merger plays out because we will be able to rationalize quite a bit of our costs, we should be able to continue to grow on a positive basis on the top line on a 25% to 30%. The revenue will be a little bit more muted, at least for one more year because we also continuously invest in a lot of digital assets, which we will reinforce ourselves, whether it be our patient health records, whether it be our Ask Apollo, which is our AI component.
I would go a little bit muted on the revenue side, but we will remain profitable. Sorry, I don't want to go too deep.
No, that's understandable. Thank you so much. On the offline business, if you just give us a sense of how many pharmacies do we have and what's the kind of growth rate we preserve for annual growth rate addition that we're looking at going forward?
Obul, sir, you want to take it?
We are adding about, hello?
Go ahead.
We have during the quarter added about 120 stores. As informed earlier, we are always planning for adding about 600 stores. Revenue growth of 17%, 18% is something that we can expect with the expansion plans in place.
Over the years, and as you planned, is there any specifics due to such a particular geography that you're looking to build out more versus what is the current network?
We are going to move to Central region and, you know, South. The Central region, we have a lesser number of stores. We are focusing on that area. South is always our best bet to go into the next level though.
Okay, sir. Thank you so much.
Thank you.
Thank you.
Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you, ladies and gentlemen, for joining us on this call. As we close our discussion on quarter one, FY 2026, we are encouraged by the strong start to the year and momentum for support in emerging businesses. Our integrated healthcare system, spanning hospitals, diagnostics, pharmacies, and digital, continues to deliver balanced growth alongside operational efficiency. Looking ahead, our priorities remain anchored in deepening our leadership in clinical excellence, enhancing operational performance, and capitalizing on new growth opportunities. We appreciate your continued interest and your support and look forward to updating you in the next quarter. Thank you.
Thank you. On behalf .