Ladies and gentlemen, good day and welcome to 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 then 0 on your touch-tone 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, Rutuja. Good afternoon, everyone, and thank you for joining us on this call hosted by Apollo Hospitals to discuss the financial results for the fourth quarter and full year of FY 2026, which were announced yesterday. We have with us today the senior management team represented by Mrs. Suneeta Reddy, Managing Director. Mr. Krishnan Akhileswaran, Group CFO. Dr. Madhu Sasidhar, President and CEO, Hospitals Division. Mr. Madhivanan Balakrishnan, CEO of Apollo HealthCo. Mr. Sriram Iyer, CEO of AHLL. Mr. Sanjiv Gupta, CFO of Apollo HealthCo, 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, which is on slide 2 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.
Good afternoon, everyone, and thank you for joining us for today's earnings call. I trust you have had the opportunity to review the earnings material that we had circulated yesterday. FY 2026 has been a strong year for Apollo, marked by healthy growth across all three verticals, healthcare services, Apollo HealthCo, and AHLL, alongside steady progress in our expansion agenda. During the year, we also announced a strategic restructuring of the omni-channel pharmacy and digital health business, an important step towards sharpening focus on unlocking long-term value across our integrated healthcare platform. The NCLT convened meeting of the shareholders is now being called for on June 24th to obtain the requisite shareholder approval, consequent to which we are hopeful the demerger process is completed by quarter four FY 2027 as planned earlier.
In terms of financial milestones, I am pleased to share that our consolidated revenues crossed INR 25,000 crores for the first time, reaching INR 25,229 crores. Apollo HealthCo also surpassed INR 10,000 crores in annual revenues for the first time, following a similar milestone achieved by our healthcare services business in FY 2025. These achievements underscore the scale, the relevance, and the growing strength of Apollo's integrated healthcare ecosystem. Turning to our performance for the fourth quarter, consolidated revenue grew by 18% year-on-year to INR 2,605 crores in quarter four FY 2026. Within this, the healthcare services business reported revenues of INR 3,268 crores, up 16% year-on-year. This performance was driven by a balanced mix of 7% volume growth, 5% case mix, and the remaining 4% from price revisions. Surgical volumes grew by 7%, supported by a continued focus on combo specialties, cardiac, oncology, neurosciences, gastro, and orthopedics.
These specialties remain key growth drivers for the business, delivering strong revenue growth of 22% year-on-year in Quarter 4 FY 2026. Group-wide occupancy stood at 68% during the quarter, with established hospitals now at 69% and hospitals in metro at 71% occupancy. This performance should also be viewed in the context of continued improvements in clinical productivity and operating efficiencies. The average length of stay reduced to 3.19 days from 3.3 days in the corresponding quarter, a decline of 3.3%. The reduction was driven by significant adoption of robotics, minimally invasive surgeries, enhanced recovery and discharge protocols, and stronger clinical pathway standardization across the network.
Importantly, the improvement in ALOS has been achieved by contributing to manage higher acuity and complex case mix, reflecting Apollo's alignment with global benchmarks in tertiary and quaternary healthcare delivery, where shorter hospital stays are enabled through technology-led interventions, evidence care-based protocols, and superior postoperative outcomes. Insurance and self-pay patients continued to account for 83% of inpatient revenues in quarter 4 FY 2026. Insurance revenues grew by 21% year-on-year, while self-pay revenues registered a growth of 13%, reflecting sustained demand across both segments. Average revenue per patient stood at INR 1,87,208 in quarter 4 FY 2026, an increase of 9% year-on-year, driven by an improvement in underlying clinical mix. Within the healthcare services business, we delivered an ROC of 25.4% for the year, supported by balanced performance across our networks spanning metro, Tier 1, and Tier 2.
Apollo HealthCo reported revenues of INR 2,848 crore in Q4 FY 2026, representing a strong year-on-year growth of 20%. Revenues from Apollo Health and Lifestyle grew 24% to INR 489 crore. Consolidated EBITDA for the quarter stood at INR 1,011 crore, registering a robust growth of 31% year-on-year. Within this healthcare services, EBITDA was at INR 781 crore, reflecting a 14% growth, while margins remained strong at 23.9%. Established hospitals, however, grew the EBITDA margin to 20.5%, and EBITDA losses from new units in Q4 FY 2026 came in at INR 41 crore.
Within the Apollo HealthCo, the pharmacy distribution business reported EBITDA of INR 195 crore, an increase of 20% year-on-year. Within the online business, cash losses declined sharply to INR 16 crore compared to the INR 80 crore in Q4 FY 2025. Consequently, Apollo HealthCo reported EBITDA of INR 156 crore in Q4 FY 2026 versus INR 36 crore in Q4 FY 2025. A significant improvement in operating leverage and business efficiency.
AHLL delivered a margin of INR 75 crore, representing a strong 58% year-on-year growth, with margins improving to 15.3% from 12% in Q4 last year. Platform GMV of Apollo 24/7 was at INR 528 crores in Q4 FY 2026, a growth of 20% year-on-year. Digital revenues grew by 29% during the quarter on a like-for-like basis after excluding the closure of the Amazon corporate partnership. We reported consolidated PAT of INR 579 crores, higher by 36% year-on-year, with significant improvements in PAT across all three verticals. For the full year FY 2026 performance, our consolidated revenue was at INR 25,229 crores, representing a 16% year-on-year growth. Consolidated EBITDA was at INR 3,769 crores, reflecting a 25% year-on-year growth, while consolidated PAT grew 34% year-on-year to INR 1,942 crore. This strong performance for FY 2026 is despite the lower seasonal medical admission alongside moderation in international patient volumes, particularly from Bangladesh.
Performance reinforces our ability to sustain growth momentum while maintaining financial discipline and operating discipline. As an important development, we announced yesterday that Apollo Cradle and Fertility and Cloudnine will combine to create one of India's largest integrated maternity and fertility care platforms. AHLL's mother and child fertility business are valued at INR 1,550 crores through a combination of cash and 9.9% equity stake in the combined entity.
AHLL will become the largest non-financial shareholder in the combined platform and will have board representation in the combined entity through a nominee director. Revenue of the Cradle and Fertility verticals was at INR 450 crores in FY 2026 with an adjusted EBITDA of INR 45 crores. Therefore, the transaction has been concluded at a multiple of 35x the EBITDA. Spectra and the other assets of AHLL are not part of this transaction and will continue to remain in Apollo Health and Lifestyle.
This collaboration will accelerate access to premium maternity, fertility, neonatal, and pediatric care while raising the bar on outcomes, experience, and continuity of care. Apollo will bring its deep experience in this space to the combined entity to contribute to its growth. Apollo remains deeply committed to expanding end-to-end.
Ladies and gentlemen, please stay connected. Ladies and gentlemen, thank you for patiently holding. We have Ms. Reddy connected. Please go ahead, sir.
Apollo remains deeply committed to expanding the end-to-end women and child healthcare platform, from prevention to high-risk pregnancy, neonatal intensive care, pediatrics, and lifelong wellness through its own integrated healthcare ecosystem across geographies. During FY 2026, our expansion initiatives progressed well. We operationalized four new hospitals, Apollo Athenaa in NCR, Pune, Financial District in Hyderabad, and Narendrapur in Kolkata with a combined potential operational capacity of 855 beds, which we are commissioning in a phased way with 185 beds now operationalized, the remaining 670 beds planned over the next 12 months. As these hospitals continue to ramp up operations and scale specialties and clinical programs, we are also poised to commission two more hospitals, one in Sarjapur and the other in Gurgaon, in the next two quarters. In total, these additions are approximately 1,400 operating beds, all in key metro markets.
This will position us strongly as we move into FY 2027, later they represent nearly 25% capacity addition in these markets. Alongside capacity expansion, we continue to deepen our clinical leadership through investments in high acuity specialties, oncology, robotics, and advanced care pathways. Consumer engagement and technology adoption across physical and digital formats has also continued to improve with increasing integration across hospitals, pharmacies, diagnostics, and digital platforms, reinforcing the strength of the wider Apollo ecosystem. On this note, I would like to hand it over to Krishnan, our CFO, Dr. Madhu Sasidhar, CEO of the hospitals, Madhivanan, CEO of Apollo HealthCo, Obul Reddy and Sanjiv from Apollo HealthCo, and Sriram Iyer from Apollo Health & Lifestyle. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please limit your question to two per participant, and also to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. This first question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, team. Congrats on good set of numbers. My first question is just the two points that.
Sorry to interrupt you, Mr. Singh. May I request you to please speak a little bit louder.
Yeah. Hi, team. Thanks for the opportunity. My two questions are, firstly, on the hospital losses that we had talked about, INR 150 crore. If you could update us on are we tracking on to that number, which is the quarter where we see the most hit. The second question is on the digital break-even. Are we on track to deliver that in Q1? Thank you.
On the first one, yes, I think we are sticking to our assumption that we will have INR 140 crore loss. Most of this will actually happen in the fourth quarter, where we would have opened out all of the facilities. For the second question, let me pass it on to Madhivanan then.
Thank you, ma'am. Good afternoon, everyone. Yes, as we speak, we finish this quarter pretty well, and we believe that our growth story when it comes to GMV will continue both on the pharma side of the business and the diagnostic side. On the hospital consults also, the trends have been positive. While Q1 would be a slightly more seasonal quarter for us, we expect that we should be very close to break-even or break-even very soon, so in Q1 itself. We are on course.
Thanks for that, team. Secondly, in the opening remarks, we talked about 1,400 beds, 185 already operational. Could you give us a little bit of a roadmap that by mid of this year, by end of this year, how many beds will start adding to the revenue bit? That's it. Thanks.
Yeah. Krishnan, take that.
Binay, as we speak, you know that this will be ramped up over the next 12-18 months, as we have said. As of now, it's 185. We are hoping that by mid of this year, we will at least get this to 500-600 beds. Before we even start Gurugram which will be a higher number. The way you should look at it is because Gurugram will start more towards the end of Q2, and the hospital in Bengaluru will actually start in Q1 as well. We will be operationalizing most of this in the next 12-18 months, as we have said. By mid of next year, think of it as at least around 500-600 beds operationalized.
Thanks, team. I'll come back in the queue. Thanks.
Thank you. The next question is from the line of Neha Manpuria from BofA Securities. Please go ahead.
Thanks for taking my question. My first question is in the hospital growth. The established hospital growth has improved to about 13%-14%, if I were to strip off the new hospitals. Should we assume that this growth improves given that we had low seasonality, the Bangladesh impact in FY 2026? Post the margin expansion that we've seen in the established hospitals, is there scope for more improvement from the 25%, 25.5% that we have done in the last two quarters?
I think for the established hospital. Let me just come in. In terms of seasonality, there was a little bit of seasonality. Moving on to the next quarter, you will see an increase in occupancy. In terms of, I think just moving forward, there will be an improvement in established hospitals margin. This will come from higher asset utilization as well as some cost reduction. Madhu, you can add to that.
Thank you, Ms. Suneeta. As Ms. Suneeta has indicated, the lack of dependence on seasonality is a fact that a lot of the growth has come from our investments in clinical program building and recruitment, and they are spreading geographically across the board. Every one of our broad markets has performed very well. It has been a very strong performance, especially in our Tamil Nadu market for Chennai and the rest of Tamil Nadu. As an example of the high complexity work and the program building that we have done, in the fourth quarter, cardiac sciences grew by 19%, and so did orthopedics by almost 20%, 19.9%. I think this is a strong flywheel. It gives us momentum, and these are not one-offs or seasonal.
We also had some improvement in Bangladesh revenue compared to last year, as well as some diversified income from some new markets in Africa as well as in Asia. I think to your question regarding EBITDA, the strong performance in Tamil Nadu is very helpful. Those are hospitals with very strong performance when it comes to EBITDA. While we have improved EBITDA margins in our established hospitals, we think there is scope for continued improvement. We have improved our operating leverage, especially when it comes to some of the big cost hits.
Would you like to quantify how much more improvement we can bring through in established hospitals?
We don't guide. I think there is an opportunity. I'll hand it over back to Ms. Suneeta.
I think, AK, do you want to comment on that?
We have been saying that at least INR 100-125 crores, in fact, is further possible. That is going to be something that we are working on both costs as well as operating leverage.
Understood.
We think that the margins can sustainably get to, as of now, if you look at the Q4 margins, it is at 25.5%, and we are hoping that we should be able to sustain that for the year.
Understood, sir. That's very helpful. My second question is on HealthCo. We exited, I think, FY 2026 margins are at 4.3%, and I see the slide now mentions 6.5%-7% as the exit margin for 2027. Other than the digital breaking even and possibly having positive EBITDA, could you just help us understand how we get to that? I mean, what would be the key drivers to get to the 6.5%-7% margin for fourth quarter? Thank you.
Madhu, do you want to take that?
Sanjiv will take that. Yeah.
Yeah. Thanks, Madhu. Good afternoon, everyone. I think this is what we have been discussing last couple of earnings call. We have a growth potential in private label coming out of the store front, which is the Apollo Pharmacy store. We strongly believe that further headroom is available on the private label, and that would be a bit accretive. Similarly, on the expenses side also, you would see that digital also has started coming down on the losses. We continue to believe that Q1 we would be very close to the breaking even. Apart from this, the growth itself would provide a decent flow through to EBITDA. We strongly believe that all these things put together and various other initiatives to increase sales and other things should help us to achieve what we have been guiding the streets in the last two, three quarters.
Sanjiv sir, out of the 250 basis points margin improvement that we are expecting, bulk of it would be from the digital losses and the rest would be private label and pharmacy costs, the integrated costs coming down. That's a fair assumption?
That's a fair assumption.
Thank you.
Okay.
Sorry to interrupt you, Ms. Manpuria. May we request you to please rejoin the queue. Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi, good afternoon and thank you for the opportunity. First one on the hospital business. We continue to guide around INR 140 crore drag from the new hospital, and we are also suggesting that the drag is the most in this quarter with almost INR 41 crore. If most of the operating expenses are already there in our number, then what is keeping us from commissioning the rest of the 670 beds, and why are we kind of waiting till the next 12-18 months?
No. Two points. I think it's important that we're not saying that this INR 40 crore is the maximum. Please let's appreciate that the peak can go up a bit, especially in Q2, et cetera, then it can come down, Gurugram will also get open. We are guided for the full year at INR 150 crore. After all, we'll have to see how each of the hospitals ramp up, and we are quite aligned to the fact that for the full year, we should still be around that INR 150 crore number. The peak in a quarter can go up. We will operationalize some of these as we see ramp up. Some of these have only been soft commissioned. Let's appreciate that while we have done 185 beds, barring Pune, which is 75 beds, which we have already commissioned. Calcutta has just got soft commissioned.
It is going to be fully commissioned in Q1. The Hyderabad was only recently commissioned, and so is Delhi, just around a quarter back. We will have to wait for some of them to commission fully because these are all preoperative costs that you are also seeing, and the business will ramp up over the next Q1 and Q2 periods.
Sure. Thank you for that. The second question for ma'am on the deal that we have announced for Apollo Cradle. My understanding was that we were doing quite well, given that in this format we have presence in our key markets. Beyond, let's say, merging and achieving the number one scale, what do you see in this deal? Is it the valuation that we are getting? Was it non-core for us, we didn't see a lot of value? How have you looked at this?
I think it's a combination of factors. One is the valuation, which is clearly key. To get a valuation of INR 1,500 for an EBITDA at a multiple of 35 in this market is something that you cannot ignore. Second, the format that fits Apollo is the deeply integrated mother and child platform, which we will continue to grow in key markets. That is the format that we will grow.
Hello.
Ma'am, you may please go ahead.
Yeah. Not going. Hello.
Yes, please go ahead, ma'am.
Ma'am, we lost you at the format thing.
What is our format? The mother and child format like we have in Chennai, which looks after the entire requirements of the mother as well as the child, and is deeply clinical in terms of we look after the child up to the age of 16. There is a huge difference in terms of the value that you get from that, the revenues, the margins. There is a huge difference in all of these parameters. We will continue with that approach to mother and child. The third is that, of course, that cash that we get, INR 750 crores, will be deployed in primary care. We have already built out a primary care platform that has clinics and diagnostics.
We believe that we have to be leaders in this platform because this will be the funnel to Apollo, and it will look after patients who are currently not in our system and who are not very sick. It is part of our strategy for preventive, for looking after all the requirements of all of our customers.
Just lastly, ma'am, will our clinics still continue to carry Apollo brand name or their brand name will change?
Yes. The clinics, everything else is Apollo brand name. Only the Cradle will carry that for one year, and then it will become Cloudnine.
Okay. Sir, I have one question. I'll join back.
As to be on the same page, the AHLL business, as you know, is an INR 1,865 crore revenue business for this year. INR 450 crore is the Cradle number that has got Cradle plus fertility number. Out of this INR 165 crore, this is what has got transferred and combined into Cloudnine. It's only the Cradle and IVF business. All others continue. We are going to be doubly focusing on Apollo primary care and diagnostics, as well as other specialty cares, as Mrs. Suneeta Reddy already said, which is the Spectra dialysis and the others.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Thank you for taking my question. Karan here. First question is with respect to the pharmacy business. Is it fair to assume that, I think we've mentioned this, but just double-checking. The private label contribution going up is the primary or the sole reason why our offline pharmacy margins have been as strong? That's one. The second sub-part would be for the Apollo 24/7 reported breakeven. While cash breakeven we are on track, any color on reported breakeven timelines will be helpful. Yeah.
Over to you, Sanjiv.
Maybe let me just take the digital portion first, ma'am, and then Obul can talk about the offline business. In the last earnings call also, we guided that the first milestone would be to have Q1 breakeven without ESOP costs. That should happen in Q1. We also suggested that by Q3, we should be able to breakeven including the ESOP cost. That's the second milestone we're looking at it. From there upon the journey is to make sure that we increase our EBITDA in absolute terms quarter on quarter. I think with that in mind, I think we should wait for these two milestones to hit first, and then thereupon we can further discuss about to what an extent digital business will add on to the absolute EBITDA on the AHLL.
Yeah. The pharmacy offline business, as you know, we have been seeing continuously margin expansion, driven by the higher private labels. We are also working on the entire spectrum of purchase level margins and cost management. We could see that improvement continues going forward.
Okay. Also, where does this settle? What could the normalized or the more steady state margin look like? Is it 8%? Is it 9%, 10%? Any color there?
At a more matured stage with high level of private label, we could see somewhere between 8% and 9%.
Okay, got it. Do we have any GLP-1 related benefit in our pharmacy business?
We are working on some two, three focus areas, and that will be 1 area to work now. We have some specific focus on those areas. We will update you later.
Okay, got it. Helpful. Thank you.
Thank you. The next question is from the line of Bansi Desai from JP Morgan. Please go ahead.
Yeah, hi. Thanks for the opportunity. Firstly, just reconfirming, in terms of beds that will get commissioned over the next two years, should we assume most of the 1,400 beds which are yet to get operationalized, all of those will get operationalized by fiscal 2028?
Yes, that will fully get operationalized by FY 2028. All of these. Let me reemphasize that the structure is all getting constructed, it will all be ready as we commission it. Some of them other than the phase 2 of Pune where the construction is on, all of these construction will also be ready by Q2 or beginning Q3 of this coming fiscal. There is no reason for us to not open all these up by FY 2028.
Therefore, if one has to think about losses, fair to assume then, by fiscal 2028, your cumulative losses, you could actually see breakeven or probably much lower number of loss?
Yeah, at least a breakeven to begin with by FY 2028.
All right. Secondly, when I look at AHLL performance, obviously it has been very strong. Within that, diagnostics particularly has done very well. If you could tell us what has driven this very strong growth, and is this sustainable? Secondly, also on margins of AHLL. 15% margins that we've seen, it's a very strong up move. Any one-off element here, or is this the new base?
Sriram?
Sriram? Sriram, are you on the call, AHLL? No. AK, you take the AK.
I think we have seen that there has been a structural shift that we have seen in the overall diagnostics because they are looking at increased lab utilization as we speak. Also within each of the markets, they are seeing how they can work on B2B business also along with the B2C that they are focusing on, which is why the growth is something that they have been able to show, and it will be sustainable.
We'd alluded in the past that we've been reinvesting in this business. Fair to assume that we are towards the end of it, or do you still see us reinvesting or growing the diagnostics business?
We definitely plan to grow the diagnostics business. We are amongst the top four players now in the country. The potential on diagnostics is significantly higher. Having bought out IFC at the first stage and now with combining the Apollo Cradle business with Cloudnine, there is a strong intent to double down on the primary care and diagnostics in each of the metro markets and the non-metro markets as well, because it's also a strong outreach for the Apollo brand, and you will see us accelerating on this front.
All right.
Thank you. Mr. Sriram Iyer is reconnected back, sir. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Thank you for the opportunity. Two questions. First, in your new hospital, which you have started in last few months or so, what has been your experience in terms of onboarding insurance partners? I think what we have heard from few of your peers are the negotiations, et cetera, are taking longer. What has been your experience there?
Just to answer that, I think we've been quite fortunate in onboarding insurance partners, which is why we are seeing some traction. Of course, with the way that things are, it takes a little bit more time. Apollo Athenaa has six high volume insurers already supporting it. Our Pune hospital has three of them. We've just closed out Star Health. In Kolkata also, we've got six high volume insurers. Hyderabad has four high volume, and we're just closing out Care and Star, so it will be 6. Including Bangalore, we have 3 of the top 8. We're all set in terms of partnership with insurance companies.
There has been no issue, unlike faced by some of other players. You said you have been very successful in onboarding these insurance companies in an exclusive manner.
I believe we have good partnerships, and we will continue to strengthen them.
Okay. That's good to hear. My second question is on your Apollo 24/7 business. While digital losses continue to reduce and you'll likely achieve breakeven very soon. If you can comment on the gross merchandise value trends, I think on quarter-on-quarter basis, again, it's more or less similar to what we saw last quarter. Then, if you can share some updates on the recent services there like Apollo Connect, insurance, et cetera, that will be helpful. Thank you.
Madhi, please take this.
Yes, ma'am.
Hello.
Yeah. Can you hear me?
Yes.
Yeah.
Yeah. This particular current year was driven primarily on a operating model change, which was effectively not to depend on paid marketing from a customer acquisition perspective. I think we have been able to establish that engine wherein we are able to get new customers between 20% and 30% without actually spending too much of marketing money. That's an area which has got established on the pharma side of the business, which is our primary mainstay. On the diagnostic side again, I think both from a cross-pollination perspective, as well as our ability to use what we call as an omni asset, has helped our diagnostic business, what we do through AHLL. Again, we are around 25% to 30%, and we believe both these engines are sustainable. Without spending too much of the marketing money, we will continue.
While we might not grow at 80% and 90%, between 25%-35% is a growth in terms of new business we are confident of. On the consult, doctor consult business, we have a much stronger framework within which we've put the hospitals and the clinics, and that's also an engine which is building up slowly. While this year the growth was not very huge, we are reset it and that should also play out in the coming year. On the cost front, while we have almost fixed the base, we still feel there is a certain amount of efficiency which we will wring out. As we go towards as a combined entity by the end of this year, there will be some more cost elements which we'll bring in.
Both in terms of growth and in terms of EBITDA to the bottom line level, it would be what I would call as a calibrated business. There is one area, actually two areas in which we continue to invest and that they could be a bit of a drain because we treat all of them more as OpEx. One is the insurance business, which we have started off with on a good footing on the healthcare. Like I told last quarter, there was a bit of a change in the way the numbers figure out. Some of our revenue has got staggered to the back end. We believe in the next two quarters, that model will also stabilize. Second area is we continue to invest in our technological assets, PHR, Ask Apollo, which is integrating with multiple partners.
That also remains a cost, but both of them are costs which will help us in the long run. That's the broad commentary in the way we expect the FY 2027 to happen. Happy to clarify any questions.
Yeah. That's very helpful. Just I think a follow-up. How much more investment you look for these areas? You mentioned insurance and technology. Any numbers which you can share?
Sanjiv, if you can just say what has been our cost structure that we have been investing on. It's continuously coming down, but there is still a little bit of investment. Sanjiv, if you can just throw some light on it, please.
Yeah. I think, if you are referring to our investment into AI technology as well as on the insurance side of it is concerned.
Yeah
we estimate. Yeah, sorry.
Yeah, that was the question, Sanjiv. Thanks.
Okay, no problem. Yeah. We are expecting roughly between INR 6-7 crore on a quarterly basis. That also is helping us a lot in reducing our costs. By the way, AI tools in the customer call center helps us to improve the productivity and reduce our expenses. Broadly speaking, I think that is the level of expenses that we are looking into these two sides of the business. You also checked on one point related to the margins, to what an extent margins can go up in Digital. I think it's too early to specify a particular percentile, but I think the way insurance business is increasing more of diagnostic business.
We saw a very high growth in diagnostic business last year. If we continue to do with that a better diagnostic mix, high insurance and more Circle programs and ad monetization, we only strengthen the existing margin profile. A little too early to say that how we end up current fiscal year. I think where we are standing today, we should be in a better place as you see quarter-on-quarter with respect to our numbers. Thank you.
Thank you. The next question is from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah. Thank you for taking my question and congrats on the good numbers. The first question I have on Tamil Nadu region. This quarter, also for full year, it has performed well. Going into next year, there is limited bed addition or no bed addition basically. Occupancy is already at 68% for the region, plus the volume growth for this year has been pretty tepid. That average revenue per patient will remain the sole growth driver for this region going ahead. Is there a scope for the asset mix or case mix to improve?
No, Madhu, let me take this first. First, in terms of headroom for growth, there is definitely an additional 6%-7% headroom for growth. Hello.
Suneeta ma'am, please go ahead with the question.
Sure. I said in terms of headroom for growth, there is definitely additional capacity, not just in our main hospitals, but in the other hospitals in the Chennai region. There's another 7% uplift that can come from pure occupancy. With regard to case intensity and improving ARPP, we will continue to focus on that. We have very high-end clinicians and probably the finest technology in the world in this region. You could see an improvement in ARPP and case mix. I think both on asset utilization, headroom for growth, and ARPP, there will be continuous improvement.
Sure, ma'am. Thank you so much. The second question I have, if we can provide the OCF and FCF generation for hospital services segment for FY 2026, and also the CapEx, which we have given INR 1,980 crore for 1,000 beds for FY 2027. Should we assume that the entire CapEx for FY 2027 or some of it is already been spent? Thank you so much.
AK, take that please.
The operating cash flow before dividend that we have generated this year is, before the dividends, is approximately around at the consolidated HCS level alone, it would be in the region of INR 1,850 crores. That is before the dividends. After the dividends, it would come in the range of INR 1,550 crores, which means that is after our recurring CapEx, which is used for hospitals, which continues at around INR 550 crores. This also includes our taxes paid during the year as well as the working capital. It is after all of this, which means the entire INR 1,550 odd crores is really redeployable for growth CapEx fully. This is the number that we are quite comfortable continuing into the coming year also. We do not think that our number would be significantly higher than this number in the coming year for growth CapEx.
Thank you. The next question is from the line of Kunal Randeria from Axis Capital. Please go ahead.
Hi. First question on the financials. On a quarter-on-quarter basis, I see it moved from net cash to net debt. The difference is almost INR 1,200 crores. I guess INR 400 crores would be a new CapEx. What would account for the remaining INR 800 crores?
We also paid off IFC this quarter. This was a INR 1,250 crores payout that we had in this quarter, just to remind you. This came out of the healthcare services balance sheet. We did pay INR 1,250 to buy out IFC at AHLL, just to remind you. That was one of the reasons for the spike in this quarter. Otherwise, now it will get normalized to the projects.
Got it. Just one clarification. You said you will break even in FY 2028 on the new beds that have been commissioned. The remaining 670 beds will be spread over a period of 18 months. I'm just wondering when 855 more beds will be commissioned or could be commissioned sometime in the next couple of years. Just want to understand the assumptions behind this.
Typically, at a 50% occupancy level is what, 50%-55% occupancy level on the entire stock of 1,500 beds is what we would be breaking even. In each of the hospitals at those levels of occupancy, we expect to break even as we speak. Given that each of these hospitals are going to be staggered in their expansions, and there are certain hospitals which will get mature by Q4, not mature, I'm saying they will probably become break even by Q4 of the coming fiscal, and some will be still in that burn mode. In FY 2028, as of now, we believe that all the hospitals put together should be break even. There will be positives and negatives in that. A few negatives and a few positives. Overall, as a new hospital cluster, we would expect FY 2028 to be break even.
That includes Gurugram, Sirsa, all these hospitals that are going to be commissioned in FY 2027?
Yes, which includes that. As I said, Gurugram itself may probably be in a bit of a loss position, but some of the others will become positive soon. Let's also appreciate that Sirsa and all are good markets for us. Existing markets in Bangalore, so is Gurugram and a market that we know of with good doctors. Hyderabad also is a market that we have already hired the right set of doctors, and we are quite confident that the overall ramp-up should be good over the next two, three quarters.
Ladies and gentlemen, if you could excuse me, I have a bit of an emergency. I will hand over this call to AK to answer any remaining questions. We commit to stay connected with you. Feel free to reach us either by email or Zoom. The team remains committed to answering all of your questions. Thank you for your patience. I look forward to our next call. AK, I'm handing it over to you.
Sure. We will take it forward. Thank you so much.
Operator, carry on, please.
Thank you very much. We'll move to the next question, which is from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi. Thank you for the follow-up. AK, sir, can you kind of consolidate all the outlook that we have provided business segment-wise for FY 2027 in terms of revenue growth and profitability?
That will be offline because clearly each of the businesses are on different growth rates. As we said, at least at the highest level, we have said that the hospitals businesses, we should look at a mid-teen growth into FY 2027. We have shown a good quarter in. Into the coming year, you should see a gradual acceleration of the revenue with all the new hospitals contributing, as we said. We have guided that the overall healthcare services margin should still improve from the current levels by at least 100 basis points into next year, which is the established units. We have guided you that INR 150 crores is what we would, for now, look at for the overall hospitals business next year as the EBITDA loss.
AHLL, we are continuing on the growth momentum and Apollo HealthCo, we have already given an overall guidance on the pro forma basis, which Madhi can reaffirm that we have said that by the pro forma basis, which we have seen INR 19,000 crores of revenue. For the pro forma basis, including distribution, we have said that we would be getting to a INR 25,000 crores run rate by Q4 of FY 2027 with a 6.5%-7% EBITDA margin. Madhi, you can confirm that as well.
Yes. I think we'll reconfirm that. We are very much on the task. Like last year, we grew between 19.5%, reasonably confident of growing at 21%. With the integrated, on the top-line bit, we are on course to be going to INR 25,000, whether it be opening new outlets in our distribution side. Some of our new stores maturing up. The trend is visible. I think the biggest lift will come the moment the digital business breaks even and then starts contributing to the EBITDA story. If you look at the cost structure, that is something which is reasonable, and this growth should be able to sustain that. We would be sort of reconfirming that we are on course on the pro forma side that we established.
Sir, a follow-up. Can you update us on the timeline for this entire transaction on AHLL and when will the new company will come into existence, and when will the separation or the de-merger will happen?
As we said already that the shareholders, this call is scheduled for June 24th, which is the NCLT convened process. Once we get the shareholder approval of AHLL, we would go back to NCLT, then the NCLT process should take it to some three, four months to close. Hopefully by Q4 FY 2027, end of December or early Q4 FY 2027, is when Apollo HealthCo should get de-merged and listed. That's the plan. That company, when it gets listed, you should be in a position to see that INR 25,000 crores of revenue by that quarter. Annualized revenue.
Thank you. The next question is from the line of Lavanya from UBS Securities. Please go ahead. Lavanya, please go ahead with your question.
Sorry, could you hear me now?
Yes, we can. Please go ahead.
Yeah. Thank you for the opportunity. Just a clarification on 24/7 when you mentioned Q1, Q2 reported profit, including and excluding ESOP, what is the run rate of ESOP expense that we are looking at for next one year?
Yeah, I can take that.
Can I take that?
Yeah, I'll give the answer. Roughly in the range of about INR 50 crore is what we're looking at the overall ESOP cost for the current fiscal year. You might experience about INR 22 crore-INR 23 crore for Q1, but after that it'll start tapering down. Overall for the year should be in the range of about INR 50 crore. Thank you.
Okay, got that. Sorry if I missed, but I just wanted to check on this Cloudnine transaction, when are we expecting it to be completed and in terms of reporting, when should it be reflective in our AHLL numbers?
Sorry, what was that question? We didn't quite hear it here. Was it for 24/7?
It was for AHLL and the Cloudnine transaction. Post this transaction, when are we expecting it to be reflective in AHLL numbers?
It should be consummated. Sriram, are you there?
Yeah, I'm here. As the deal has just got concluded yesterday, I think as next steps we'll have to go and apply it, and once we get the approvals, which we expect to come in next couple of months, after that, the formal commercial transaction will happen.
Maybe by end of one more quarter. We expect the CCI approval to come in place, and then the whole transaction should get consummated. By in Q2, we should have that reflected, sometime in Q2.
Yes. Sometime between August, I believe. August or September. Yeah.
Got it. This is really helpful. Thank you so much.
Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks for taking my question. Sir, on the 24/7 platform, can you give me the sense of some of the operating metrics which are there on user metrics? How does this compare with some of the other larger digital platforms? Like in the number of online transactions, number of users on a daily basis.
Let me take the question. Typically, there are two peers that we compare ourselves with. One is the quick commerce, especially when it comes to the medical part.
I'm sorry to interrupt you, sir, but your voice is breaking.
Can you hear me now better?
Yes, please go ahead.
Okay. The most important thing that we look at is the new customers that we are acquiring on a month-on-month basis, and we compare it with some of our peers like Tata 1mg and PharmEasy. Again, like I told you earlier, what is important is not just the growth which is coming through new customers, but at the CAC at which we are acquiring it. We are in a good position. We are able to do around 200,000-220,000 on a month-on-month basis. We expect this number to go up as we are building some very strong synergies with our 7,500 outlets, both in terms of originating the customer as well as building the proposition of delivery. First is the CAC and the number of customers that.
The second big thing is our ability to deliver at least 90% of our orders in the same day. We follow 2 metrics, one which is called the same-day delivery, which is 90%, and the insta delivery, which runs between 19 min to let's say one hour. That's another metric. We try to bring it down. We try to target bringing it in the range of around 50%-55%. All this needs to happen with the cost of delivery on a constant downward trend. Again, we are reasonably on par with some of the peers. It's been showing a downward trend, and that's our unit economics as becoming more and more positive. The final thing that we usually track is also the number of markets in which we have been able to provide our insta business.
Suffice it to say, the 30% growth that we have been establishing is primarily coming from our top five markets. The top six metros minus Mumbai. These are the numbers. Once this model gets established, we have enough potential to roll it out into new markets and then play it out as we go along. In all this, unlike growth at any cost, we are very much focused on a sustainable model wherein we will be able to disperse. These are some of the broad metrics that we look at. Our AOV, which is average order value, et cetera, are on par with the industry, sometimes even better. Given the fact that a big base of our customers is chronic customers. Yeah. I'll stop here.
There are enough other metrics which we track, but these are the ones which would be fair enough to give a directional position.
Just to sort of build on that, on the daily consultation that you talked about of 15,000 or thereabout, how has this number trended and how do you see this playing out and how big a funnel is it for your medicine orders and sample collections?
That's what I was highlighting. Two things. One, the digital consult, where we compare ourselves with people like Practo, that business has been growing at a reasonable speed, say around 15%-20% growth. I think the bigger story will play out as we go along for the physical appointments that we help facilitate for our hospitals and clinics. That number has started showing some very positive trend in the last one to two months. We expect that engine to drive further. The diagnostic business, however, derives more from our pharma business cross-pollination. People who are already very core customers of ours on the pharma business, we try to track them on the basis of the cross-pollination between pharma and digital. Both on the omni side, which is both digital and offline, that number is also showing a trajectory.
In fact, last year we had a very big jump. We expect a similar jump along with AHLL to build that agenda as we go along.
Sir, on the point on diagnostics, is there a number. Give a gross sales number, but how much would that be captive sales to the Apollo Hospitals group, and how much would be net sales to third parties? I mean, outside of the whole network.
We don't do third party at all. Our business is primarily driven by AHLL. Most of our business, 100% of the business is exclusively delivered through AHLL on the diagnostic side and the hospital consult through both clinics of AHLL and the hospital. We don't have any third party business. The entire core business is driven by the Apollo ecosystem.
Thank you. The next question is from the line of Mitesh from Aditya Equity. Please go ahead.
Hello. I had a question regarding the associated company, Indraprastha Medical. There is a legal case which is going on with the company, with the Delhi government. Does it have any implication on our holding in Indraprastha Medical, whether the case goes in our favor or goes against?
No. We have taken this up with the government as well because even whatever they have said, we are quite confident that we should be in a position to take this to a logical conclusion because the lease is automatically renewable there and the free bed obligation has also been done by the company also. The shareholding anyway continues.
Okay. Any possibility of increasing, taking Delhi government stake of 26%?
No, nothing as of now. Nothing for now.
Okay. Thank you, sir.
Thank you. The next question is from the line of Meghna Agarwal from Mount Intra. Please go ahead. Ms. Agarwal, please go ahead with the question. Your line is unmuted.
Hello. Good afternoon, sir. Hello.
Yes, please go ahead, ma'am.
My questions are answered. Thank you.
Thank you. Ladies and gentlemen, as that was the last question for today, I now hand the conference over to management for closing comments.
Thank you so much everyone for the call. As we commence FY 2027, we believe we are entering the next phase of growth with very strong fundamentals across all the three lines of businesses, a visible expansion pipeline, and continued progress in clinical excellence, technology, and digital health. Our focus remains on keeping the consumer at the center, delivering superior clinical outcomes, improving access to quality healthcare across formats, and creating sustainable long-term value for all stakeholders. If you have any questions, please reach out to us and we're happy to answer any of them. Thank you again.
Thank you. Ladies and gentlemen, on behalf of Apollo Hospitals Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Thank you.