Apollo Hospitals Enterprise Ltd
NSE:APOLLOHOSP
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Apollo Hospitals Enterprise Ltd
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Ladies and gentlemen, good day, and welcome to Apollo Hospitals Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh from CDR India. Thank you, and over to you, Mr. Singh.
Thank you, Nirav. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for Q4 and FY '21, which were announced yesterday. We have with us on this call today, the senior management team comprising: Mrs. Suneeta Reddy, Managing Director; Mrs. Sangita Reddy, Joint Managing Director; Mrs. Shobana Kamineni, Executive Vice Chairperson; Dr. Hariprasad, President of the Hospital division; Mr. A. Krishnan, Group CFO; Mr. C. Chandra Sekhar, CEO of AHLL; Mr. Obul Reddy, CFO of Pharmacy Business; and Mr. Sanjiv Gupta, CFO of Apollo 24/7.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 on Slide #2 of the investor presentation shared earlier. Documents relating to our financial performance have been shared with all of you earlier, and these have also been posted on our 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.
Thank you. Good afternoon, everyone, and thank you for taking time out to join our call. First of all, I hope you and your families are safe and healthy in these difficult times. I trust that you have received the earnings document which we shared yesterday. We started this year on a positive note, post the slowdown, which the country has witnessed due to the second wave. The economy would witness a cyclical recovery in the subsequent quarters, coming specifically to Apollo Hospitals in quarter 4 of FY '21. We witnessed a revival in patient footfall in non-COVID occupancy across the network, which translated into a strong financial performance. Overall, the quarter witnessed reduced COVID admissions. Just to give a perspective on this, COVID discharges in quarter 4 FY '21 stood at 5,450 as compared to 14,616 in the prior quarter. Additionally, COVID occupancy reduced from near 426 beds compared to 1,173 beds in quarter 3 FY '21. In quarter 4 FY '21, surgical discharges continued to gain momentum and grew at a rate of 32% on a sequential quarter basis. The non-COVID discharges during quarter 4 FY '21 registered a 21% quarter-on-quarter growth. Sequential quarter growth on IP volumes was at 9%, with mature hospital volumes growing at 12%.Against this backdrop, let me walk you through the financials of the quarter. Standalone quarter 4 FY '21 revenues grew by 2% quarter-on-quarter to INR 2,410 crores. Healthcare services grew by 4% to INR 1,291 crores. SAP revenues degrew by 1% and were at INR 1,119 crores. Our new hospitals recorded revenue growth of 16% year-on-year and 1% on a quarter-on-quarter basis, while mature hospitals revenues grew by 2% year-on-year and 5% on a quarter-on-quarter basis. The post-Ind AS 116 EBITDA for quarter 4 FY '21 stood at INR 336 crores compared to INR 321 crores in the previous quarter, and this after taking a charge of INR 25.2 crores on account of marketing costs for Apollo 24/7. Without this cost, EBITDA growth was at 12% quarter-on-quarter. Healthcare services EBITDA was at INR 280 crores compared to an EBITDA of INR 248 crores in quarter 3 FY '21, a growth of 13% quarter-on-quarter. Margins in mature hospitals were strong at 24.2%, 234 basis points improvement on a sequential quarter basis. Margins at new hospitals stood at 15.7% for the quarter. Our completed fixed cost optimization initiatives resulted in a saving of INR 343 crores, which were realized in FY '21. Going forward, we expect to sustain a cost savings of around INR 100 crores to INR 135 crores in FY '22. SAP EBITDA post-Ind AS was at INR 81 crores at a margin of 7.3% compared to 6.6% on a sequential quarter basis. On a combined basis, the pharmacy platform EBITDA was at INR 93 crores at a margin of 6.6%. 118 new stores were opened in the quarter, taking the total to [ 4,188 ] stores. Moving on to consolidated results. During the quarter, we have completed the acquisition of a majority stake in Apollo Medics Lucknow. Results have been consolidated in Q4 FY '21. We have also completed the acquisition of a balanced 50% stake in our Kolkata hospital, renamed Apollo Multi-Specialty Hospital Limited. The results of this hospital will be consolidated from Q1 FY '22. Consolidated revenues grew 4% on a quarter-on-quarter basis to INR 2,868 crores. Healthcare Services grew by 7%. Consolidated EBITDA is at INR 412 crores, a growth of 6% on a quarter-on-quarter basis. Healthcare Services EBITDA grew by 13% and Healthcare Services margins were at 21.1%. Consolidated SAP was at INR 168 crores. This includes an exceptional item of INR 25 crores pertaining to the Apollo Medics Lucknow consolidation. AHLL recorded an EBITDA post-Ind AS of INR 31 crores as compared to an EBITDA of INR 16 crores in quarter 4 FY '20. The business has recorded a 26% year-on-year and a 7% sequential quarter growth in top line. Net debt as of 31st March 2021 is INR 922 crores. We have a debt-to-equity ratio of 0.44. The Board yesterday approved the formation of Apollo HealthCo, AHL, in our transformational journey towards creating India's largest omnichannel health care platform. This will be done through a slump sale of identified businesses undertaking, including: A, AHEL's back-end off-line pharmacy business, excluding hospital-based pharmacies; B, AHEL's digital health care platform, 24/7; C, AHEL's investment in retail pharmacy business, Apollo Medicals Private Limited; and D, the Apollo 24/7 brand, the Apollo Pharmacy brand and private labels into AHEL's 100% subsidiary, Apollo HealthCo Ltd. This proposed reorganization fully protects the economic interest of all AHEL shareholders and sets the platform for tapping new pools of invested capital that will enable a rapid scale-up of the digital health care platform. At the time of capital [ base ], AHEL valuation will reflect current and future growth potential. Now to present this product and the plan for the future in detail, we have Shobana Kamineni, Executive Vice Chairman; and Sangita Reddy, Joint Managing Director, who will walk you through the features of this, of Apollo Health. Shobana and Sangita, over to you.
Thank you. Thank you, Suneeta, and I think you clearly articulated what HealthCo is. I will spend the next 5 minutes answering 7 FAQs that we've been hearing and maybe it will put everything in much better perspective. So the first thing is everyone says, why is Apollo doing this? Why did they create it? And why should Apollo do it? And what are the promoters going to make out of this? So our Chairman very early if you see our mission statement, where he talks about bringing international care, affordable care, within the reach of every Indian. So it doesn't matter how many hospital beds. This is something we went and introspected and said, it doesn't matter how many hospital beds we put. That we'll never be able to satisfy what's required. And is it even necessary in this digital day and age where everything is transforming, everything is being disrupted. And Apollo is, let me tell you, the only entity, not just in India, but we can be proud to say in the world, that is in every point of care for the customer like, as Suneeta explained, we talk to you every quarter about hospitals, about clinics. We used to talk to you about insurance, but we still have the TPA. We talk to you about pharmacies. We talk to you about some of the brands we have, the private-label brands we have about different formats of diagnostics. It's all there, the most awesome collection of doctors. So it's all there. We said, what can we do to move this out and make choice so simple for you because that's something that we saw. Choice and access was something that we really saw lacking. No point in time as much as during this pandemic with that. The day the first wave struck, almost 3,000 doctors of ours were just sitting at home with this. Patients had no access to them. And at many times, it was tough for them to come to the hospital. What happened is that during that first wave, I think it was one of the most virtuous things that Apollo had already launched Apollo 24/7, which digitally enabled in 45 days, 3,500 doctors who are on a digital platform that could touch people every day. We had put out a product of the first corona health check, that health self-assessment scan. 11 million people took it in 2 weeks. So this really gave us a validation that we understood tech, we were agile, and we knew how -- what the customer needed to simplify choice. And you've got a slide up there because sometimes, it just defies logic that when your car is [ point ], you don't think of it yourself or YouTube or Google it. You say, take it to a mechanic. If you need anything fixed at home, you either call a plumber; or a legal problem, call a lawyer. But with health, there's so many torturous ways that we go before we actually come to the right solution. 24/7 is to simplify that and bring -- within 15 minutes, can you imagine, I'm not offering you 100,000 doctors. We are offering you 7,000 Apollo doctors, 24/7 available in 15 minutes. And I think that -- leading that proposition, we also are the only people who are able to offer you. And this is something that even Amazon or nobody can do this around the world. And through us, you will get the medicine you need because we realize what is the point in giving -- if a person needs a medicine, an acute medicine, the next day, it's pointless. They can just walk to their nearest pharmacy. So availability and the fact that you can get it in 2 hours. So we realized we have the capability to be the best omnichannel. Apart from that, the diagnostics capability of having an army, literally an army of phlebotomists, who can go to the house now, you do not -- remember how frustrating it was to get up on an empty stomach and go to a hospital to get your test or to think that you call another service that you know of. Now you can get an Apollo service at your house. And I think these 3 phenomenal propositions put together with the only health stack which is backed by data. Just to give you an example, the clinical decision support system that I'm going to ask Sangita to talk about in just -- once I finish the FAQs, she's put this together. It didn't happen in 1 year or 4 years or 5 years. This is 30 years of data, which gets put together to bring the right solutions and the right answers. So that's why the timing is ripe for something like this. Financial services have been disrupted. E-commerce shopping has been disrupted. We think that health care is the one that actually the customer needs most, and Apollo is the one that can give it to them. And so what's the potential of this? All we can tell you is that so far, in the last 500 days, we have served through our pharmacy networks and digitally, we have served 270 million people to help them through this pandemic. And I think that is serious capability. In the first year -- in the first 16 months of our operation, this is what we were called upon to do. But the potential for this is really that there will be 100 million Indians in over 700 cities in India. And in towns and places where no -- where they would have just heard of Apollo and thought it so aspirational, but now it's available on their phone. So this is the potential of what health care -- what is digital health care like we are planning to give, is there for 100 million Indians and this is the potential of that, what we believe in 5 years. And thank you for saying it, that there are many forward-looking statements. But the revenue potential is close to 2.3 billion. And we can assure you that every one of those because the pharmacy is within this, you have been tracking pharmacy closely. You'll be very disappointed, and our shareholders who own this company will be disappointed, if we don't have the stellar performance that we bring to you every year. We'll continue that, that's a promise, that we'll grow that business 18% to 20%. We'll grow it with the margins that you all expect. But on top of that, we create this layer of digital business that will create a hockey stick growth. That is what a digital company can do. And that's why Apollo decided -- so many people asked us, why did you put this into a separate company? And the reason that Apollo took as -- it's not at all a calculated risk, but it is the most intelligent decision. Because at this point, you have to see are you an Amazon? And just for digital somewhere? Or are you a Walmart? And then we realized that actually, both are the same. There is -- this is the age of omni: unless you can back digital with physical, there is no future or path to profitability. And I think as a public listed company, we have responsibility to many shareholders and diverse investors. And this is something that we took seriously. So we do expect, by year 3, year 4, we will have EBITDA. By year 5, the EBITDA will be significantly higher than if we were just a stand-alone pharmacy or doing just stand-alone consults or digital. So I think that it became a very interesting point for us. Another slide that you have, another slide that you have available with you is about the physical assets of Apollo. And you'll see that this gives you why we'll succeed. Please tell me if anyone -- now that we're convinced that omni is the way to go, there is no other player that has the breadth and strength of physical assets with the brand in terms of hospitals, 70 -- or 10,000 beds, 4,000 pharmacies, 500 diagnostic centers, 200-plus clinics, the capability of 30 million IP/OP that we've managed every year and the digital that we do in managing 5 million-plus insurance lives, we know this story. And for anyone to create the same footprint, physical footprint, if it was even possible, would cost them so much that they would be -- that they knew it can never happen. But this is available for this company. For Apollo HealthCo, we'll take all of that and layer the digital on top of it. So I think that our business model is superior, that -- and we have the capability and many partners that have already signed up and are working with us, whether Airtel is one of them, HDFC Bank, the SBI Bank. So we have serious partners who we will be taking along this journey to make sure that we can service the customer to whatever he wants. This is the new age of digital customer. And this is the platform that you will see that pharmacy was 7% -- today has a 7% market share of pharmacy retail. In the next 5 years, we expect that to be close to 30%. So in every one of these segments, whether it's the diagnostic segment, whether it's the telemedicine segment, which we're already the largest, as we say. And today, we're even larger than OneMD in terms of the number of deliveries we do every day. So whether it is digital, whether it's physical, I think that this will be the defining digital health -- the digital health network, not just for this country. But probably, it will immediately stand out in the world as the most valuable. So Sangita, would you be able to explain a little more about the technical part? Just the CDSS. Or should we wait for questions?
Whichever way is fine.
Can you start, please, go ahead, Sangita.
Okay. I'll take a brief minute just to say that this transformational journey is grounded on the concept of serving the customer in the most integrated manner, of bringing together the assets that we have, that enhancing the capability and the access to those assets using a digital-first approach. So I think most importantly, every touchpoint -- physical, online, website, call center -- will stem from a consolidated user profile. This consolidated user profile, which is grounded in a common unique health care identifier, is also collating all data points into a personal health record. This is a journey we've been following for a few years now, which is significantly enhanced by the digital and the combination of the pharmacy retail coming into the hospital database as well. So this combination and these touchpoints will evolve into a [ simple but ] AI and ML-enabled platform of the clinical intelligence engine. This engine has a consumer-facing side as well as a doctor-facing clinical decision support. And in one line, I will just say that this will enable the latest and the best of health care knowledge and information to be available at the touch of a button to all our doctors and all customers who seek our care. And this consolidated data point will be available for us to help the user profile get the best possible medical care. I'll stop with this because I'm sure you have a lot of questions. And I'll end also by saying that all these are really grounded on the best technology stack. We have some of the most powerful engineering brains. We validated our path forward with global expertise. And whether it's the platforms we're using, from Mongo to Postgre to our ability to use React Native for our app and Snowflake for our cloud data warehousing, with all security layers as well as international standards in terms of HIPAA for patient privacy and confidentiality. That's it for me.
So thank you. Right now, we'll open the line for question and answers. Of course, I have Dr. Hariprasad, Krishnan, the entire team with me and the team from 24/7. Shobana and Sangita will also be here to take all your questions.
[Operator Instructions] The first question is from the line of Sayantan M. from Credit Suisse.
I have 2 questions. So first one is on COVID vaccine administration. So how many vaccines did we administer in 4Q '21? And what is the current run rate? Also, the AHL and primary care segment consisting of Helix, this business had strong margin expansion in the quarter. Was it because of the vaccine administration? Or are there any other reasons?
So Hari and Chandra, please take that.
Actually, we've as of now administered more than 2 million vaccines in the last couple of months. And it's been a seamless integration between the different entities within the group, starting by -- starting from 24/7 to the clinics to the home health care, which has been administering vaccines because we believe it's the responsibility of the group as the largest provider. And we are already the largest private health care provider in terms of the number of vaccinations that we've done. And we have line of sight of enough vaccines for the next couple of months, the existing vaccines. And we aim to vaccinate about another 8 million [ and there's ] a total of 10 million people in the next couple of months as we move forward. And we are looking at this as a very important tool in the control of the pandemic and in prevention of the possible third or fourth waves that are on their way. And it is adding to the top line and we've not added any other additional fixed costs to the vaccination initiative. The staff and the infrastructure is all from within the existing system or it is being provided by partners, so there is no additional cost. So despite the capping which has been done by the government, there will be a margin on the vaccination program. Chandra, you want to take the next part of it?
Yes.
Hari, I would like to add that Apollo has done more than 45% of all private vaccination in the country. So it's actually significant.
On the question on AHLL, which I will answer. The Q4 did not have much of vaccine income, so that doesn't change the profile. It was more of a return back to normalcy and the pent-up demand coming back, especially in electives and also in the primary care segment. And we continue to hold our growth in the other important segment, in diagnostics. So this is a natural road. We do not have much of vaccine as a trigger for a significant growth in the quarter 4.
And I hope all of you are vaccinated and if you are not yet vaccinated, please walk in to any of the Apollo centers and get vaccinated quickly.
Sure. My second question is on Apollo 24/7 operating expenses of INR 25 crores in 4Q. And so is this a run rate that we can expect going ahead in FY '22 as well?
I think that it's a starting run rate. All I can tell you is that -- and it comes also from the competitive pressure and as we continue to grow. But what we're looking at is that our cost of acquisition and then the people that really engage within the app are much higher than what we expected. So we're running at about 70% of our expenses. And I have Sanjiv Gupta here, who is the CFO of 24/7. Sanjiv, can you come in with a little insight on some of those figures?
Yes. So I think what we are looking at is that as we ramp up our business and the traction that we are seeing and almost -- we are seeing the users coming in and then given more and more transactions across all the business segments, we may expect a slight upward movement on the expenses. To that extent, the revenue would also match. And on overall basis, the unit economics are getting better month-on-month.
The next question is from the line of Ankit Agarwal from UTI Mutual Fund. Ankit Agarwal, may I ask you to unmute your line and go ahead with your question?The next question is from the line of Madanagopal from Sundaram Alternate Assets.
First of all, congrats on the excellent platform that you've created. I have used myself and found it really useful, the Apollo 24/7. My first question is on -- how do we see this unit economics of this platform? Because the consultancy, how do we -- so what we pay to the doctors, how is the revenue model for the 24/7 is going to be? If you can explain that, it will be helpful.
Sanjiv?
The diagnostic -- yes, I can take this question?
Yes. Yes.
Okay. So I think there are 2, 3 things that we should be talking about on this. One is that the platform is a feeder to various other entities of Apollo group. So be it working constitution, diagnostic as well as the pharmacy line, all these ones would support the entire Apollo ecosystem. So this will be going to be an incremental business for all the units of Apollo. That is point one. And second, as far as 24/7 entity revenue side is concerned, so this is going to be the commission or the fees that would be charged on every transaction. That is what typically e-commerce platform does. And so we would be having arm's length pricing, and that would take care of the commission and the visitation fees that the 24/7 company would be charging across the group entities. And you also referred about the unit economics. I would say that at this stage, we are positive across all the business sectors on the contribution margin level.
Okay. But can you elaborate a bit on how does it look for -- in terms of per user, the revenue potential or where we are right now? Or is it too early to discuss on...
This is too early, sir. But I think maybe in 1 or 2 quarters, we come back to you with more details on this.
Okay. Certainly. And related question, today, how many people have really used 24/7 so far? And we have a hospital database. We have a pharma -- pharmacy database. And you have given that in year 3, we will be probably seeing an EBITDA neutral sort of scenario. So how much this number of users are likely to grow in your opinion in your models in the next, say, 3, 4 years?
So what we believe is that we should be able to hit 100 million users in -- by FY '25. And we have seen a lot of participation from the customers who have been coming into various entities of Apollo group. And they have now started using Apollo 24/7 for various services. So obviously, as we stand today with a 10 million customer base for 24/7, many of them have come in from the Apollo system and many of those have come from outside ecosystem. So I think from the growth potential, we should be able to hit anything between around 80 million to 100 million customers or the users by FY '25.
Current number is 10 million, you said. 10 million. Am I right?
Yes.
So this is in the last 500 days that we've got 10 million registered users.
[Operator Instructions] The next question is from the line of Neha Manpuria from JPMorgan.
My first question is on the 7,000 Apollo doctors that you have available on the platform. From what I understand from the previous conference calls, we were also planning to induct non-Apollo doctors to sort of to get to the 80 million to 100 million users, or to tap into this non-Apollo customer base. Are we seeing traction in that? Is that -- do you think that could be a challenge? Getting the non-Apollo doctors to probably get on to the platform, the concerns and [ generating vaccines ]?
Actually, we found them quite eager. So there are 3 cohorts of doctors we have. One is the Apollo doctors. And the next is that we have a lot of junior doctors who are available also for -- during this COVID time, we actually set up -- we had to set up because of the volume. So we have that. And the last part is the partner doctors. Over the years, pharmacy and Apollo has had -- has built relationships with doctors around the country. So about 35,000 of them. I think we have that as a pool for us to access as and when -- it is about -- every time we put it out there on this app, it's the quality which is important. And then -- and to make the choice simple. So we'll use that 15-minute parameter, and we'll keep adding capacity. And also, we'll match it to locality. So it might be that in certain localities, they like that local doctor who is also a partner doctor. These are the kinds of -- this is the kind -- this is the business rationale that we're using in terms of bringing it to what the customer needs.
Currently, what could be -- [ in the namy ], what would be the proportion of the department doctors? Currently, it's largely the Apollo doctors that are there on the platform.
We're able to meet demand. And I think that it's really the 15-minute and having the right choice and having excellent capabilities. So the -- it could become very, very large when we want -- if we only get 1 million consults a day, if you look at the only comparable Teladoc or Ping An, they have a huge pool of doctors. And we're getting smarter in terms of using technology also. Sangita had explained the CDSS system and the way that we can actually bring the old patient records and bring them together in a cohesive way. All that is part of the experience.
Understood. And my second question is you mentioned a 2.3 billion revenue potential. [ Thinking across ], is that pharmacy plus digital plus diagnostic or teleconsult? What does that include? And a second clarification is the year 3, year 4 EBITDA, is that the EBITDA for the new entity that is AHL? Or are you talking just about the [ basic entity ]?
No. It's HealthCo that we're presenting to you as a whole. And HealthCo includes all the assets that Suneeta had explained that we're moving into this. And that is the ability for us to give a powerful EBITDA in the shortest time possible. So yes, that's what it means. And it also means that with revenue, 2.3 billion is the revenue of all. It's not GMV-type figures. It's like you're actually getting revenue into the company and what this company [ will need ].
And this is by FY '25? Or is there a time line considered for this?
Sorry. Offline pharmacy piece is just different. So what -- the overall potential is 2 billion. That shows what the overall potential of the digital business that we have. These offline pharmacies...
And back end, Krishnan. Digital and back end. It's HealthCo. It's HealthCo's business model is to -- is 2.5 billion in year 5.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Before I go to HealthCo, just an outlook for your core business, which is with the hospital business. What's the outlook for fiscal '22? And specifically, when do you expect the outpatient and inpatients to recover?
So Sameer, we have had a good Q1 as we speak because, obviously, Q4 was the best quarter for us. And we saw that with the opening up and with non-COVID patients coming in, we saw a good realization on the per patient as well. But with Q1, of course, we had a good occupancy where occupancy went all the way to 68% and then hit 70% -- 71% in the month of May. But as you look, COVID realization is a bit lower for us compared to the non-COVID realizations that we have across. So to that extent, there would be a bit of a real drop on the overall realization per patient, but we have done well. We continue to do well. And I think it's going to be -- the Q2, we hope COVID doesn't come back. We hope that Q3 -- that the third wave is probably a bit away. So we don't guide you specifically, but we definitely want to believe that we will do much better than the run rate annualized in this year.
I think the important learning here is that we've learned how to repurpose our beds. So that while we have -- we are looking after COVID patients, we are also looking after the regular patients, and therefore, the higher occupancy at 71%. And I think this is a learning for this year, how do we repurpose, create a separation of COVID beds and continue with the regular work by creating the bio bubbles that we have done.
Okay. Great. And the question on HealthCo is, I'll just put one or 2 subparts together. So -- is this the way to think about all the products that you're offering? I guess, it's also there in pharmacy or OneMD, so it's a much bigger broader version of that with a lot of resources that you already have. Second is on the journey to take from 10 million registered people right now to 100 million, where would you get all these people from? What is going to be your funnel for this? And third is in terms of monetizing the entity, given the strong balance sheet and internals, would you rather wait 2, 3 years to build it out and then look for big ticket monetization, or you are thinking differently?
So if I can comment and answer. One is that -- if you look at the names that you mentioned, all those names are now adding on different revenue streams because they lead from a discount model. And I don't think in the long term that's sustainable. So you will see that they're going through their own challenges. But having said that, for Apollo, the funnel is the people having the single usage ID that Sangita spoke about. So anyone that has been anywhere in the Apollo universe now will have a single usage ID that can just populate on this one 247, so you can access your record. So I think it allows the funnel to open seamlessly and also much larger. If you see the traction today of 10 million in the last 500 days, there's probably on [ big ] Ping An that can match that velocity. There is no other Indian -- there's no Indian comparable that has been able to do this in such a short time, and it's full credit to Apollo, the strength of the name. The strength of the name also has brought us serious partners. So you asked where you will get the 100 million from. I would think that the 100 million, there are maybe 2 or 3 good banks that have put 100 million digitally savvy customers. There are only 2.5 telecom players. One, of course, is on their own journey. The other one has chosen us. So if you look at the Airtel banks, you'll find Apollo. And they are huge proponents of our loyalty program, the Apollo Circle. So I think that's a serious partnership that will definitely give us the long legs to be able to get to the -- finish the marathon at 100 million. And I think at the end of the day, it's really about serving the customer. If we do a good job -- and I think that during this time, we've done a pretty nice job -- customers will find other customers, families will join us. And I think the whole health proposition of what Apollo has done will just get multiplied in terms of the name, in terms of the trust.
And the last part, on monetization?
On monetization. So that's what you see if you just take the example of the [ VC ]. Everyone else has been has been doing 3 consults, I mean the -- please, don't let me get started. I think that's one of the worst things you can do, but you give free consult so you can sell your medicines. Apollo will never do that. It borders on being unethical. We -- so people actually pay for almost the same price as a physical consult. If you see today, our average is between INR 600 to INR 700 for a consultation. So I think these are the kind of platforms and monetization. So whether we have an insurance product that we've got with a partner that is currently being filed in IRDA. So we have the [Technical Difficulty] [ ability one-off ] product. Fortunately or unfortunately, we come from a parent that reports to shareholders. So we won't be profligate in spending money. But a large amount of money. So we will match dry powder, and then dry powder will possibly come that we'll look for investors. But I think that this entity is so large in itself already that it gives our options. Our options are actually enormous of what we can do, but we will match the competitive intensity to grow.
The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets.
My question is, for target revenue of 2.5 billion for Apollo HealthCo in the next 5 years, what kind of investments have been done so far? And what you're looking to invest in near to medium term, while we wait for external investors to join? [Technical Difficulty]
[ May I ask you to unmute your line from your side, please?]
Shobana or Sanjiv, can you take that?
Yes. I thought it is early. You want me to give answer for this question?
Yes. So I want to know like what you have invested so far in the digital platform. And what additional investment could be required to reach the revenue target of 2.5 billion, which ma'am has indicated earlier?
So 2 points there. So we can't -- obviously, the second point to your question, we can't answer it upfront now. To your first point, clearly, we have invested INR 200, [ into ] 200 crores thus far on the product, and we have a plan to invest another INR 100 crores, INR 150 crores in the short run. You will see that we -- as Ms. Shobana already said, we have a plan to get large investors, external investors, et cetera, into the Apollo HealthCo as a platform, and we will take this gradually up. We know that we have a plan to maturity in the next 3 years. And you will see that we will definitely continue to own dominant majority of that Healthco even when we get the investors. So I think some of that investment, I think we'll have to defer it for a later date.
Damayanti, do you have any follow-up questions?
Yes. Sorry, I was on mute. So sir, I was just clarifying, INR 200 crores investment done so far and another INR 100 crores to INR 150 crores, which you might do in the short term, right?
That is correct.
Okay. My second question is, Apollo back-end distribution is one of your key strengths, which is supporting Apollo HealthCo. So can you a bit talk about what kind of scale and reach you have there on the back-end distribution side?
As you see that we have almost annual revenues of about INR 5,000 crores as of now. And we expect them to grow at about 18% to 20%. And we were an EBITDA of over 6%, which will be moving into the [ twain ] entity and then that will fund the HealthCo expansion as well.
Okay. But sir, anything on the back-end side, maybe in terms of, say, your network procurement channels and all.
That's a part of the undertaking that we are transferring [Technical Difficulty] see that economic interest move into the Apollo HealthCo, which will serve the front-end retail business [Technical Difficulty] [ the front end of the ] supply chain [ now ].
Just to give you a data point, during this pandemic, I think that we are the only group online and offline that continue to supply almost at 90%. We were serving 700,000 people a day, online, offline. It's because of the back end that we were able to create over the last 30-odd years.
[Operator Instructions] The next question is from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one on the combined pharmacy platform. The growth for Q4 was 4% Y-o-Y. So just trying to understand why the slowdown in the growth? And just linking to the previous guidance of 18% to 20%. So how should we look at that?
The Q4, if -- you have to see the like-for-like growth, you have to see what happened in the last year March, after the lockdown announcement, we have seen about INR 100 crores of sales coming in, in the last 15 days of March. If I take out that in the corresponding Q4 of last year, the growth is about 10.5% to 11%. That is the first one. But overall, there is a slowdown in the demand coming back in the market, not only for us, in the overall market. But 2, 3 factors that we have seen in our Q4 is -- on the number side is about 150 stores, which we operate in airport and corporate -- in-house corporate premises that have not seen fully back into the regular level of sale. And then we have something rollout. We generally close substantial part of our rollout by December, which will contribute to the Q4 growth. This year because of 6 months, we could not roll out these stores. That rollout happened and traveled into the year-end and these -- around the 2, 3 factors. But structurally, we are there, and we'll come back on the growth numbers from this.
Sir, what is your network for fiscal '22?
Sorry?
4,118.
4,118 operational stores as on 31st March.
No. No. I meant what is the outlook, how many are you potentially adding in fiscal '22?
If you see these last 2, 3 years, if you see -- noticed that we are adding about 300 to 350 stores. We will continue to add that, and maybe we'll -- with 247, we will look at new geographies and speed up that number slightly.
Got it. Second question is on some of the metrics for 247. So if you look at the annual report you put out last year, just reading out some of the numbers. And we -- if you are in a position to share them as you are today. So we had 1 million weekly active users. We had 2,300 teleconsults per day. We had 3.7 million registered users, which you said had got to 10 million. But if you could share some of the active users and related entities, that would be helpful.
It might be tough for us to share exact numbers, but I just want to tell you that these figures have actually gone up, during the pandemic they went up almost 10x. There was a day that we were doing something like 30,000 orders. And now it is settled at about 5 to 6x the number -- 5, yes, 5x the number that you saw, little more than that, 6x. So we're tracking smartly with the 5-year plan that we've given.
Okay. And the last one question, CapEx outlook. What is the CapEx you're planning for the fiscal '22?
Sorry. For which one you said, which business?
Sir, all businesses, sir Krishnan. Fiscal '22, what are we looking?
At Apollo, the hospital level, we are looking at a CapEx of INR 200 crores to INR 300 crores, which is a routine -- INR 250 crores to INR 300 crores, which is the routine CapEx for the year. That is what we are looking at. And as we have said, we have been open for acquisition opportunities, given that we have cash with us, et cetera. At the appropriate time we'll come back on the right acquisition opportunity that we are looking at. This is a bolt-on acquisition that's in the markets of our interest. On the HealthCo, we said that the near-term CapEx requirement is around INR 200 crores.
The next question is from the line of Shaleen Kumar from UBS Securities.
Yes. Thank you so much for the opportunity. Most of my questions have been answered. In terms of your new holdco, do you have any preference towards strategic partner which can come up with more of a digital capabilities and logistics capabilities? Or would you prefer a financial backer? Or you haven't -- there's no preference?
No preference except the quality of what will be best for the consumer and for this company.
And see, again, you will be competing against a broad-based e-commerce guys and now like -- and big, big corporate houses like with acquisition of 1MG. So any sense what kind of quantum you think would be needed for this business to begin with at least, right? What kind of a capital pool do you think you would be comfortable with?
That's too speculative. Too speculative.
Unfortunately, we are not able to reveal that at this time.
Understood. Understood. And in answering the previous participant question, the diagnostic business, right? We were talking about during our last call. So there will be a kind of investment also towards that? Or will it be part of the new entity?
Sorry. Diagnostics is part of Apollo Health & Lifestyle, as you already know. And we are ramping up the diagnostics business independently as well as with the digital leads coming from 247. And as Sanjiv already said, 24/7 will be funneling in patients into diagnostics as well as Apollo Hospitals, independent of themselves doing the virtual consultation as well as the pharmacy. So that business will funnel into the diagnostics, which is part of Apollo Health & Lifestyle as of now. And that's how it is intended to continue.
So that -- and sir, will there be any additional CapEx towards that? Or will it be [ something like ] is it becoming a part of hospital or there will be additional something which you will be [ doing towards ] it?
So if there is any -- if there is -- Chandra, you want to answer about the growth of the diagnostics business and how we're looking at it?
Yes. I think a primary emphasis on the diagnostics growth, we generated nearly about INR 180 crore revenue last year. We hope to hit a INR 300 crore mark this year, but we also are ramping up demand that is coming via the 247 platform and to be able to service it, towards which I think the growth will be largely organic. The CapEx requirements are minimal, except for some regular CapEx as of now. Interesting inorganic opportunities, we are open in the light, but at the right valuation. So we will be looking at that only when we believe that there is value ahead once we acquire. And it fits in -- strategically fits in appropriately to our own ramp-up and growth plans. So we are -- we'll be opportunistic on that part with respect to inorganic CapEx requirement, but organic growth is underway and at a prolific pace.
Understood. And if I can squeeze in last question on the Proton bid. When do you think you will be able to achieve cost of capital on that? Or what kind of return on capital do you foresee on a steady-state basis on that? And how far is it?
So we think that -- so we would ideally have to -- have achieved that this year itself. But because of the pandemic, one is the medical value track, but tourism is not happening and even people within the country are not traveling so much. We have broken even, as you know. We would ideally want the business to get to at least INR 100 crores of EBITDA next year. That is the plan, which is FY '23. FY '22, we would definitely want the business to give us at least INR 50 crores EBITDA, which is what we are targeting, and hopefully, we will achieve.
So just to add to that, I mean, I think we should not look at Proton in isolation. What we have done is to create oncology as a vertical. And we are looking at the growth of the entire vertical, which is we're looking at probably a INR 2,000 crores revenue at a margin of 30%. And this will include revenue from Proton. And that's the way to look at it, not as an isolated one machine.
The next question is from the line of Ritesh Rathod from Nippon India Mutual Fund.
You mentioned you have invested INR 200 crores in the digital business and you're planning of INR 150 crores. Can you elaborate what are the areas which you have invested to date? And which areas you plan to invest further?
Sanjiv?
Sanjiv?
Yes. Essentially, the investment is part of the technology side of the business. The infrastructure as well as the [ part digital ]. But broadly, the expenses are towards this side.
Okay. And is the platform in-house developed? Or this is some third-party platform you have taken and you have worked up on it?
This is in-house, sir.
And who are your technology partners?
So we've got a couple of the vendors working with us, but [ I can't ][Technical Difficulty]
Hello?
Can I take this?
Yes. Sangita, please do.
Yes. So the platform is based on a platform that we had originally created in a stand-alone company, where the PHR was consolidated and conceived as a federated model where many players can come in. The PHR is the core. There are other buildings -- critical building blocks and pieces that have been developed by a core technology team. 80% of the work has been done by this core team. This includes people from IIT, those who have returned from Silicon Valley, somebody like that heads the team. We've also had 1 small external vendor to do small pieces of it to accelerate the pace of development. But the integrated concept and design is very much part of creating this integrated user experience. We are on a Microsoft platform in terms of CRM. However, the rest of the stack is all Google -- So we're bringing this together, like I said in the beginning, using Mongo for the documents, other related platforms which are best-in-class. And we've had this validated also by international experts.
Okay. That's helpful. Maybe on the future investment, you mentioned that you will match up to the competitive intensity of these peers -- the competitors. What's your current customer acquisition cost? And what kind of-- your willingness to spend in terms future customer acquisition cost? And is that number, INR 150 crores you mentioned, is that linked to this thing or that's an independent number for future technology investments? Hello? Am I audible?
Sanjiv, will you take that?
I don't want to get into specifics in terms of cap because one is that it's a -- there's a -- you must understand that our cost of acquisition is possibly the lowest. Please figure it out. No one has ever got -- if you do the math, no one has ever got 10 million registered users spending, including technology, only INR 150 crores. So -- but having said that and going forward in the future, we do understand, and we've run several experiments in different channels. And those channels that we've learned and failed fast, fixed fast, tried new things have been able to get us -- have been able to give us new avenues of growth and opening the funnel. So going forward, we think that the customer acquisition cost will always remain about anywhere between 30% to 40% of competition, but we will be spending for sure, on this and we'll find many adjacencies. But I cannot give you exact figures.
And when you mentioned INR 150 crores, it's an exclusive investment?
It included marketing.
[Operator Instructions] The next question is from the line of Akash Aggarwal from Axis Capital Limited.
Question is on the structure. Just trying to understand, there's a comment on the presentation which talks about slump sale consideration of INR 1,210 crores. will be received by AHEL. So this is subject to an external capital raise whenever it comes. So what is the assumption here in terms of valuation and what percentage stake sale has been considered?
So I think valuation is not something that we can share for now. But I guess all of you analysts know that the pharmacy business itself is a significantly valued business today, and if you take 30x EBITDA of FY '23, you can -- you also will figure out what is the -- just the off-line pharmacy valuation on top of that, you have the online pharmacy on top of that, you have the digital business that we are planning. So I guess you can definitely figure out that the valuation is going to be quite a good one when we -- as and when we do it, very soon. So we will get this money over the next 3, 6 months.
But here you assume some stake sale, right?
Sorry, what is it?
Stake sale.
Yes. So 3 to 6 months is what we are expecting the money to come in. And yes, the -- there would not be any stake sale, right, because we're only doing a slump sale of the business there. And we will be getting the money which is due to Apollo Hospitals Enterprise Limited, and that is the money which is coming in as the primary infusion. And hence, there will be a primary capital which should come in. And which should be -- part of that would be used to pay down this INR 2,100 crores -- INR 1,200 crores, sorry.
This INR 1,210 crores will come to the main parent company?
That's correct.
Correct.
Okay. Understood. And we'll have to probably pay some tax, that's fine. Okay. And second one is on the vaccine run rate. You mentioned, as of now, we did about 2 million plus. What is the current weekly, monthly vaccine run rate you are expecting for June, July?
In June, as I said, we did about 1.5 million, and we -- with the more of government vaccination programs opening up and stuff like that. Despite that being -- we are looking at, as I said, a total of 8 million further in the next 2, 3 months.
Next 2, 3 months. And do you expect this to be a 2-, 3-month kind of thing by December, a large part of vaccination should be done? Or you expect this to be a long-ended one?
I mean, it is very unpredictable, right? We really do not know whether a booster dose is required, whether a new strain will come in and new vaccines will come in. So it's all very uncertain. But I guess with the knowledge that we have now, I think by December, for the current pandemic the vaccination for the country will be on a good platform.
Okay. Perfect. And we are charging INR 150 crores now versus INR 300.
That is a cap, that is a cap. Whatever is the cap prices by the government, we're charging that.
The next question is from the line of Saion Mukherjee from Nomura.
Let me ask on 247 as we increase the number of customers. And one of the key differentiators which you mentioned, is the entire back end that is available with Apollo. Now if we have 10 crore people on the platform, what do you think about the back-end infrastructure, like how many pharmacies would be needed? How many diagnostic centers, how many hospital beds? If you can throw some light: in order to match this growth, how much expansion is needed in the Apollo's core business?
That's an interesting question, and I think I answered it in what Chairman said, that create access for all Indians affordable health care, and it could never be done physical. But the fact that we are matching physical and digital. So just to give you an example, my stores have now the capability of doing almost 30% more, because they're also doing online. So I think that if -- so there are different metrics for different stores depending on sizes and growth. So I don't have -- we don't need -- for 100 million customers, we don't need the same number of stores that we had earlier to be able to service them. It can be done as more and more go digital we can cluster stores, cluster pin codes and be able to send this out very intelligently. It's -- with video consult, it's even easier where they can be anywhere and they can consult in the most remote location. And this can be done with a variety of different diagnostics also, as and when we get more into connected devices. So I think that Apollo itself is very cognizant, Sangita has given you the framework, that we have the best of technology. And as we keep ramping technology, we'll find that we can be more and more asset-light.
And if I can just add 1 line to that. I think that what is important in this whole initiative is the fact that we are creating a strong digital presence, which is centered around the customer and on strong technology and that the models are going to keep evolving. And we are prepared and ready for this transformation of health care, which is coming around the corner.
Right. Right. So ma'am, this could also mean that you could tie up with pharmacies which are not part of your network, or hospitals which are not part of your network. I mean that's also an option to service a large number of customers.
I think in Apollo HealthCo, the journey of 100 million customers and giving them what they want, will give answers to many of these questions.
Yes. Just to add, I think Apollo has headroom for growth. In terms of just the number of beds, there is more than 50% availability. We moved into Tier 2. We are also in Tier 3. We continue to grow the managed beds, which is one way of making sure that the Apollo quality is delivered across the system. The second is with the creation of Apollo Health & Lifestyle, we've developed new formats of care. So daycare surgery clinics and the birthing centers. So they are new formats of care, which is, in a way, low CapEx, asset-light. And with this, with the current infrastructure that we have, we can certainly grow it to serve 100 million consumers.
Okay. Ma'am if I can ask one question -- one more question. This is just on the numbers for this quarter. You have separated out the 247 operating cost. Now this cost would have been there in the previous quarters as well. So are we -- I mean to that extent, this cost must be sitting in pharmacy and hospital which is now separated out? Is that a right thought process there, and that might have expanded your reported margins for this quarter, for these segments?
No. The earlier 2 quarter costs are very low. It's only from Q4 that we really started showing the high -- the spending higher on marketing, et cetera. And this is why we decided that it's important that we start showing that separately, and so that going forward also it's available for you as a separate number. But Q3, Q2 and all were very small number. It was in the region of single digits. It was no CapEx in the Q2 and Q3. It is only from Q4 that there are more marketing costs, and Q1 has a bit more higher.
The next question is from the line of Nitin from DAM Capital Advisors.
Just 2 questions. One is on the diagnostic business. One is [ a that ] with the diagnostic essentially being at the element 24/7 and our diagnostic presence right now being relatively limited in terms of footprint, how do we -- I mean how are you looking at bridging this potential demand and the full demand which can come through on this business?
Chandra can answer that.
Yes. So on the diagnostics business, I think in terms of what we are mapping our own pin code journey and [ backlog ] journey along with what 24/7 team does. So we work very closely. Our expansion, we are very well present in South of India, East of India, parts of Central. Our presence in pockets of West and North are what we have already begun to do. We could have done it faster, but for the pandemic across the last year. That's why I think the second area, which is very key, and we are ramping up in a very significant way, literally an army, as Ms. Shobana had mentioned in our earlier area, is to also build our home collection capabilities, which will be the demand that will come from 24/7. And that's something that we are ramping up. Lab capacities in most of the currently planned map pin codes are well in place. Some ramp-up required, but that is something part of our organic growth plans. It will not require any significant ramp up. Third area where we are consistently constant is on hospital lab management, which is a very known model of diagnostics business, asset-light model of diagnostic business. So we are actively ramping up our hospital lab management contracts, whereby we acquire not just the capital business of the hospital, but also have a provision to use the lab to service our other customers from outside. So these 2 strategies. Third, I mentioned very clearly that there will be -- we'll keep an eye open for attractive inorganic strategic fit to come into our [ plate ], as and when the demand requires us to and such opportunities arrive.
And Chandra, can you just probably -- you did mention a number earlier, what is the growth number that you indicated for this year, on organic growth number we'll be seeking over the next couple of years for the business?
So we have reached about INR 180 crores, which was the guidance for the FY '21. We are nearly there INR 179-odd crores for the year. We are hoping to reach INR 300 crores in the current year, that is FY '22. And our move to FY '23 will be targeting to at least do a INR 500 crore business. And that's the number that we are aiming to do. And there will be some burn so we'll not yet reach the steady-state EBITDA. But then -- because we'll have consistent growth-related burn. So we're looking at targeting about INR 500 crores in the next -- the following financial year.
Yes. So I will just push on that. FY '20 with INR 120 crores, you're literally talking of 4x revenues in the period of 3 years.
Sorry. Can you repeat that?
I'm saying, you were INR 120 crores of revenue in FY '20. So in a period of 3 years, you're talking of literally 4x revenues in the diagnostics business.
So we are clocking -- so we should not see the whole cumulative INR 180 crore as the number. If you were to clock the March run rates and the quarter 4 run rates, we are well poised for INR 300 crores for the next year. And on the back of that, we have plans for expanding it to INR 500 crores the following year. And the second area, we definitely will gain a lot from this digital push that the group has taken via 24/7. Our current abilities to serve only need to be ramped up. So I think the growth projections are quite realistic.
Got it. And just one more question. On the value unlock in the HealthCo business. Now -- so the intent of the value unlock or the primary fund raise that will happen in the business would be towards [ war in tech ]. From whatever discussions we have so far, it doesn't seem to be a business that would be taking too much capital. So what are you looking to achieve by doing a value unlock at this or planning fund raise in the business at this stage?
No. So there will be -- so if you look at it, there will be ramp-up costs, which are going to be there on the digital business as Ms. Shobana already said. So what we spoke to you about the CapEx was the CapEx is going to be there for the near term and it will be until the investors come over the next 6 months. But there will be ramp-up costs on the digital over the next 3 years before it eventually becomes profitable, as Ms. Shobana said. Second, we will also be looking at acquisitions, et cetera, as we -- on the tech space.
If I can just add a line in that. I think it's to do a capital structure which is appropriate, for the type of digital company which is evolving.
Ladies and gentlemen, we'll take the last question from the line of Abhishek Sharma from Jefferies India.
Am I audible?
Yes, sir. You are. Go ahead.
All right. So basically, on 247, I just had a basic question. So I wanted to understand in teleconsultation will 247 have its own doctors or will it only rely on Apollo doctors as well as third-party doctors? And similarly, in diagnostics, will you rely on third-party labs or will you just use Apollo labs only? And similarly, in e-pharmacy, order fulfillment will be only from Apollo Pharmacy? Or will you be using other pharmacies as well?
Hello? You see like I had said earlier, I think it is a very consumer -- this is a very consumer-led question. What we are creating is the best of Apollo that everything that we have has -- requires the stamp of Apollo for quality. And if it so happens that right now, we have the full diagnostic capacity, and they'll continue to scale. So what they have I would think that even the pharmacies, in pin codes where they're not available, might have partnerships, diagnostics might have partnerships, but the underlying guarantees of quality and availability have to be from the service provider. 247 is an agile network that will serve the customer.
Understood. And on teleconsultation. Am I -- is my understanding correct there?
No. We do have our own doctors. We have our own doctors, but of course, not the level of specialists and super specialists that Apollo has.
So how many doctors will 247 have, out of these 7,000 that you have onboarded?
At this point, we have about 150.
And how would that number ramp up, ma'am, as we go forward to this...
I'm -- it would be very difficult to speculate on that. It truly depends on how this will move. But if you look at Ping An today, they have 5,000 of their own doctors.
And for you, these 150 doctors, they serve as gatekeepers who can stand in the rest of the [ who are ]...
They do that. They do that also. That will happen. The importance is for them to be able to give an experience in 15 minutes. A quality experience in 15 minutes.
I now hand the conference over to the management for closing comments.
Thank you, ladies and gentlemen, for taking time out for this call. FY '21 has largely been regarded as a period of disruption caused by COVID-19. Looking back, I am truly proud that our teams have risen to the occasion. We used this time to launch a well-curated omnichannel offering, moving closer to the consumer and delivering value to all our stakeholders as well as our shareholders. Thank you for taking time again for this call, and we look forward to interacting with you next quarter. And for those of you who would like to have a meeting with the team, please reach out to Krishnakumar. Stay safe. Stay healthy.
Thank you very much. On behalf of Apollo Hospitals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.