With the easing of the pandemic and in-patient volumes rising back to pre-pandemic levels, Apollo Hospitals is planning to add 400-500 new pharmacy stores in FY22 and FY23. The hospital chain will also add another 2,000 beds over the next three years across cities, while it expects to cross Rs 600 crore revenue run rate in diagnostics by the end of next year, the group’s chief financial officer Krishnan Akhileswaran tells Rajesh Kurup. Edited excerpts.
For Apollo Hospitals, Q3 net profit soared 75% and Ebitda rose 50%. Where is this growth coming from?
This quarter should not be compared with the corresponding quarter of the earlier year, when the sector was impacted by Covid-19. There were no one-offs or lumpy revenues in Q3 and our IP (in-patient) volumes are now at pre-Covid levels. We are generally seeing good buoyancy in overall volumes, aided by both self-pay and insurance patients. Healthcare services grew 41% on a year-on-year basis, surgeries rose by 52% and pharmacy distribution business grew by 16%.
Do you expect to maintain this momentum in Q4 and FY23?
We did not see much need for patients to be hospitalised in the third wave of Covid-19, as the infection was broadly mild. While there was an impact on normal patient flows to our hospitals due to hesitancy, that seems to have settled. The preference of patients for high-quality hospitals, supported by insurance, will hold us in good stead as we move into FY23. There is headroom for growth in both our mature and new hospitals as current occupancies are at 65% as compared to a potential occupancy of 75%, which we hope to get to in the next couple of years.
What are the expansion plans for the pharmacy business?
On the pharmacy distribution front, the year-to-date growth of 20% came in as a combination of same store sales and addition of about 400 new stores every year. We will be adding a total of 400-500 new stores in FY22 and FY23. We will continue to accelerate online pharmacy penetration through our digital healthcare platform Apollo 24X7. The offline pharmacy sales growth itself will continue at 18-20%, and 24X7 will be a significant addition to that.
What are the plans to add more beds across group hospitals?
As of December 31, we had 7,860 beds across the network, excluding Apollo Health & Lifestyle. We plan to add another 2,000 beds over the next three years between Mumbai, Delhi, Bengaluru and other locations, funded through internal accruals.
With Covid-19 almost behind us, how do you see the potential of diagnostics improving?
We have ramped up this business significantly over the last 18-24 months. Currently, on diagnostics, our revenue run-rate is at Rs400 crore a year, and with growth in Apollo 24X7 funnelling volumes, we intend to grow this by 50% CAGR. We are poised to cross Rs 600 crore run rate in diagnostics by the end of next year.
Apollo Hospitals is also betting big on tele-health.
On tele-health, we are focusing on tele-consultations in partnership with various state governments to provide high-specialty care to millions. There is an opportunity to work with a combination of artificial intelligence and machine learning technologies to understand disease patterns and symptoms, and develop intelligent clinical decision systems. Apollo 24X7 also offers virtual consults.
A major share of your revenues still comes from the southern states.
We were predominantly south-focused, but with our investments in the last four years we now have a pan-India network. We are also doing well in Mumbai and are further focusing on the north and the west, and Kolkata.
What about the plans to set up a 250-bed multi-specialty hospital in Jammu?
We are working with the government to identify land for the hospital. It will take us three years to construct the hospital.
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