Apollo Hospital to look at raising tariff next yr

“We have done about 48,000 transactions per day, with 2 million users added and total user base of 30 million,” says Suneeta Reddy, MD, Apollo Hospitals.

Let us start by talking about your health company business that has broken even at the EBITDA level. And this is what you guided for in Q3 as well. So what has led to this growth? Where do we see it headed from here?

Yes, I think Health Co did do very well, 17% growth, 15% growth in offline and 27% growth in online so definitely good growth. What led to the growth is clearly, it is increasing the pharmacy business is now with 5,700 stores and we have opened 112 stores, definitely volumes and transactions are increasing.

We have done about 48,000 transactions per day, with 2 million users added and total user base of 30 million. So there is definitely a volume story. Added to that, is the fact that there has been some rationalization of cost in terms of both manpower and marketing cost and discounting. So with this combination of both has led to an EBITDA of 16 crores and if you take out the ESOP charge of 14, a net EBITDA of positive 2 crores. So clearly we have broken even a quarter ahead, a combination of both revenue and cost cutting.

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Just a continuation to that, but what about the break even at the PAT level now and the expansion for online as well as online versus offline?

So both are doing very well, like I said, online has grown by 27%, offline by 15%. And I think store on store growth is improving consistently. So when are we going to break even, I think we have assured all our investors that within the next six quarters, we will break in on the whole, with both online and offline, both of them showing profitability.

I wanted also to talk to you about, of course, the hospital business, which is the mainstay. Could you talk to us about what was the volume led growth versus the price led growth? And what is the expectation with respect to ARPOB and occupancy levels going forward? Because the last time I spoke, you were targeting that 70% plus mark on occupancy.

If you look at healthcare services, we came in with Rs 2,464 crores of revenue representing a growth of 12%. In that, 6% came from volume and the others was case mix and some rationalization. Going further, we are at occupancy currently of 66% and this was really not a good season where we expected high occupancy because of many holidays and of course the cyclone.

But going forward, we hope to improve that occupancy. Plus, there was some rationalization in our mix where there was a pruning of some of the institutional business.

So if you add back the institutional business, it would have been an 8% growth that you would have seen and in terms of volume. So there was also an improvement in ARPOB our form of about 5%. And this is all because of case mix. We have not done tariff increases and we believe going into the next year, we will look at some tariff increase.

So there are tariff increases which are impending. What could be the quantum of that tariff increase if I can ask you and also update us on the expansion because you had a slew of hospitals that are going to come up?

If you look at in tariff increase, I think the first thing we do is to absorb inflation, which is currently at about 5.4%. So you will see tariffs moving up at least 5.4% going forward. The second part of it in terms of expansion, we are adding 2000 beds and these beds will be on stream in the year 2025 to 2026, moving into the first quarter of 2026. We have Hyderabad land at 300 beds in Gachibowli. We have Kolkata 225 beds, which we hope will be 2025-2026. And then we have Pune, which will be in the first quarter of January, February of 2026, where we will have 400 beds and of course, Gurgaon in the same year.

If you could also just highlight in terms of how has the progress that is going on in terms of the diagnostic business and are you still on that run rate of 500 crores then for the business?

The diagnostic business, we did about Rs 120 crores of revenue for the quarter, representing a growth of 19%. And margins have significantly improved. We had an EBITDA of Rs 54 crores in that business. Margins are moving up from nine to 15%. And you will see this by the end of the year.

A word on the margins as well at the consolidated level, if I have it right, they stand at between 12 to 13% thereabouts. Going forward, what will be the trajectory?

Overall, we are currently at 12.7. And I think that this is with the improvement in margins, I mean, with the Health Co turning positive, AHLL reporting better diagnostic revenues, I think, definitely margins across the consolidated Apollo Hospital space will grow up.

The second is that in healthcare services, we are down 94 basis points but this is only temporary. We think that there is a catch up that we will make in the next quarter and the preceding three quarters.

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William Murphy

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