Suneeta Reddy, MD, Apollo Hospitals, states: “We added 1,000 pharmacies as part of a significant expansion last year. This year, we plan to add about 400 pharmacies, and as a result, we will see an increase in the revenue and EBITDA generated by our offline stores. Apollo Healthco’s revenues are currently growing by a healthy 22%, and due to the investment we made in pharmacies last year, this trend will intensify.
Although it hasn’t fully translated to EBITDA margins, your ARPOB (Average Revenue Per Occupied Bed) saw a healthy increase in the first quarter. Tell us what caused the growth and then why the margins slipped.
To 57,340, the ARPOB has increased by 11%. This is as a result of a change in our payer mix, which has been steadily improving. Volumes have increased by 10% recently, but the mix of insurance and retail payers has changed. Our business now consists 80% of insurance and retail, and we have seen a 20% increase in the payer mix, which has aided in the growth of ARPOB.
Beyond that, the CONGO specialties now account for 63% of our work. The CONGO specialties, which include cardiology, oncology, neurology, and a lot of surgical work, are partially to blame for the decline of 30 basis points in EBITDA margin. As a result, we will no longer be paying for the new surgeons and physicians we have hired. In actuality, we have welcomed 100 of them. With rising asset utilization volume and revenue, we should be able to cover this and margins will increase. We have already absorbed the cost.
The group’s overall occupancy was 62%, but you guided it to a 70% level. Will you keep to that and would you come close to hitting that number?
The fact that I believe the first quarter was very difficult in terms of being a holiday season, but travel was severely limited to the entire Chennai cluster due to rail and air issues, and it was partially muted as a result, will get us the closest. Additionally, July is expected to be very healthy moving forward. I believe we will eventually reach 67 to 68%.
Do you mean to say that you are now lowering the 70% guidance? Could we predict that it will be between 67 and 68%?
No, no, the percentage is almost at 70%. Although we have internal targets of 70%, I am confident that we will ultimately fall within that range.
I’ll also talk about Healthco, your healthcare platform. In the first half, you projected cost reductions of roughly Rs 45–50 crore. How far away are we from the fourth-quarter PAT breakeven point?
Therefore, the cost was reduced by Rs 6 crore. More significantly, the discount has been decreased. That strategy clearly worked because the EBITDA was only negative by Rs 53 crore as opposed to Rs 72 crore in the preceding quarter. As a result, they are bringing it down, and by the fourth quarter, they will be EBITDA neutral, making them the fastest-growing omni-channel company to reach this milestone in three years.
What are the plans for investment and store expansion in the pharmacy segment, and how can we expect it to grow in Q2?
We added 1,000 pharmacies in a sizable addition last year. This year, we plan to add about 400 pharmacies, and as a result, we will see an increase in the revenue and EBITDA generated by our offline stores. Apollo Healthco’s revenues are currently growing by a healthy 22%, and thanks to the investment we made in pharmacies last year, this trend will continue and pick up speed.
You claim to have made a wise choice to reduce your pharmacy discounts this quarter. Will you continue to adhere to this, and how do you perceive the GMV levels?
Therefore, you can be sure that there won’t be any deep discounts. The team will assess the marketplace with great reason. They will plan discounts with extreme caution. But we are on track to meet our GMV goal of Rs 3,000 crore.
Any new information on the Healthco fundraising efforts? When can we expect this to take place?
There was, as I said earlier, zero urgency. There was a time when it made sense to be cautious about bringing in new money given the state of the markets and the valuation we deserve. However, we do have access to outside funding. Depending on the situation, you might see some transactions in the third quarter.
The EBITDA of Apollo Health and Lifestyle has decreased. Can you explain why that occurred and how the margin profile will change going forward?
The good news for Apollo Health and Lifestyle is that its diagnostics division is on track to generate Rs 100 crore with a healthy 10 to 15% margin per quarter. A one-time expense caused the decline in EBITDA and profit. They are on track to perform significantly better the following quarter.
What rate of growth from current levels are you anticipating for your international revenues?
It is 5% right now, but by the end of the year, it will be 8%.
Suneeta Reddy discusses Apollo Hospitals plans for expansion and investments
