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Apollo Hospitals EBITDA margin has almost doubled in Q2: Suneeta Reddy

After pharmacy restructuring and Munich stake sale, net debt will be at Rs 2,500 crore.

ET Now|
Nov 15, 2019, 02.14 PM IST
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We are also focussing on some cost- cutting activities. We do hope that the entire hospital margin moves up to 21-22%, says Suneeta Reddy, MD, Apollo Hospitals. Excerpts from an interview with ETNOW.

Could you break up your performance in the second quarter? It seems Apollo Hospitals continued to grow in double digits?
The overall standalone revenue grew by 18% to Rs 2,464 crore. Our EBITDA grew by 19% to Rs 308 crore. Mature hospitals, especially the Chennai cluster grew by 14% and EBITDA margins in the mature hospitals are now at 22.1%. On the whole, for healthcare services the margins were at 18.1%. We also dramatically improved the EBITDA margin for new hospitals to 8.4% from 4.7%.

What about margins overall because they also did well. Do you think that you will be able to continue with this kind of margin expansion probably for another 4 to 5 straight quarters?
Yes we do. It should get better because we are also focussing on some cost- cutting activities. We do hope that the entire hospital margin moves up to 21-22%.

At the end of Q1, the management had said that they expect mature hospital revenue growth of 10% and new hospitals to continue their growth momentum. Is this on track and what is the trajectory?
We have shown growth of 19% in EBITDA and that should be the guidance. Healthcare services growth of about 15%, pure healthcare services saw EBITDA growth of 15% to 18%.

Pharmacy is growing at 23%. We have added 111 stores and currently we have 3,611 stores. What is more important is that EBITDA has grown by 40%.

-Suneeta Reddy


Given that Apollo’s heavy expansion phase has ended now, how did the new hospitals do in the quarter? Was there a visible turnaround?
Very much visible. The EBITDA margin has almost doubled. It has grown by 200 bps. So, clearly, it has been a very good turnaround. All the hospitals are in positive EBITDA except one. Navi Mumbai for example has had occupancy of 200 on 230 beds and has come in this quarter with Rs 9 crore EBITDA. So the trend is looking very good.

Did the Navi Mumbai hospital continue to see positive EBITDA with better occupancy?
Currently on 230 open beds, we have an occupancy of 200. We have EBITDA of Rs 9.1 crore for this quarter alone. Going forward, we should close at a very healthy EBITDA and next year we can see an opening of another 50 beds. So, there would be a 25% addition of % capacity and asset utilisation and capacity utilisation should pick up. We have seen that happen over the group because we have actually moved to 70% occupancy from 68%. There has been a 10% increase in volume and this has been reflected in both revenues and margins.

What was the performance of pharmacy business? Do you expect better growth there as pharmacy has actually been quite a fast growing segment?
Of course. Pharmacy is growing at 23%. We have added 111 stores and currently we have 3,611 stores. What is more important is that EBITDA has grown by 40%. So, current margin has moved up from 5.4% to 6%. This has been driven mostly by the growth in private label which has almost reached about 8%.

Two events are unfolding as well -- pharmacy restructuring and the Apollo Munich stake sale. Once the closure happens, would net debt as well as ROCEs improve?
Certainly they will. Currently, we have about Rs 3,000 crore net debt. With the pharmacy restructuring and Munich stake sale, we should be at Rs 2,500 crore. That is a debt to EBITDA of 1:1.5.

What is the update on Ayushman Bharat? Is the sector as a whole likely to benefit?
We are picking up slowly. They have announced 262 new packages and discontinued about 300 packages. There has been some revision in the rates. We are actually waiting for quality council to certify the hospitals silver, gold and platinum. Once that is done, the reimbursement will be very attractive and volumes will certainly pick up.

I believe that the private sector is doing 50% of the current volumes in Ayushman Bharat, the average ticket size being Rs 17,000 and it is a huge opportunity for us to participate with the government and handle especially tertiary care procedures where we are very good with clinical outcomes.

Also Read

Promoter pledge to halve once money from Apollo Munich stake sale comes in: Suneeta Reddy, Apollo Hospitals

We have revamped organisation and should do better in FY19: Suneeta Reddy, Apollo Hospitals

No impact of Chennai floods on business: Suneeta Reddy, Apollo Hospitals

We expect better EBITDA margins and higher profitability for FY17: Suneeta Reddy, MD, Apollo Hospitals

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