Ladies and gentlemen, good day and welcome to Apollo Hospitals Limited Q1 FY 2022 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir. Thank you, Lizann. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for Q1 FY 2022, which were announced yesterday. We have with us on this call today the senior management team comprising Mrs. Shobana Kamineni, Executive Vice Chairperson; Mrs. Suneeta Reddy, Managing Director; Dr. Hari Prasad, President of the Hospitals Division; Mr. A. Krishnan, Group CFO; Mr. C. Chandra Sekhar, CEO of AHLL, 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 two of the investor presentation that has been shared earlier. Documents relating to our financial performance have also been uploaded on the corporate website as well as the stock exchange websites. I would now like to turn the call over to Mrs. Suneeta Reddy for her opening remarks. Thank you. Over to you, ma'am. Thank you, Mayank. Good afternoon, everyone, and thank you for taking time out to join our call on a Saturday. I trust all of you have received the earnings document that we shared last night. Q1 FY 2022 was characterized by the devastating second wave of COVID in India. The intensity this time around was totally overwhelming on the health system in terms of availability of beds as well as availability of critical life-saving equipment, especially oxygen. There was also a wide gap between the needs of doctors, nurses, and support staff across health systems. At Apollo, with the experience gained from the first wave, we had perfected the method to achieve effective separation between COVID and non-COVID patients by standardizing protocols across our hospital network without disrupting the regular non-COVID care. Based on that, at the start of the second wave in the month of April, we dedicated 2,300 beds for COVID treatment, which we subsequently increased to 5,000 beds a day, including 1,200 ICU beds, then tapered it down by the end of June. We mobilized our medical staff, nurses, technicians, and doctors quickly and kept up the morale of our frontline workers during this period. The strict protocols and the training helped to keep the infection of our frontline workers at extremely low levels. Proper planning, execution, partnering, and close coordination with our vendors ensured that we were able to arrange for the supply and replenishment of all essential equipment, consumables, medicine, and oxygen at all our hospitals. We have treated close to 23,500 COVID inpatients this quarter. Our Home Care division handled 20,500 COVID isolations, while at Project Stay I, our hotel isolation program, handled 24,000 patient nights. Apollo 24|7 has completed over 6 lakh consults till the end of this quarter. In parallel, we also embarked on India's largest private vaccination program using the advantage of our pan-India network of 19 medicine supply hubs with cold chain facilities, 71 hospitals, 250+ clinics, and 500+ corporate healthcare centers, along with on-site vaccinations. Cumulatively, we have completed 3.86 million vaccinations till date. On the non-COVID side, there was definitely an easing of demand on the outpatient and surgical sides, given that people were struggling to deal with the second wave and regional lockdowns. Transport and movement were restricted, and therefore elective surgeries were postponed. However, better all-round preparedness resulted in us being able to serve both the COVID and the non-COVID patients effectively and report an accretive performance this quarter. In July, we have already witnessed a revival in patient footfalls across our network. Against this backdrop, let me walk you through the numbers. On a quarter-on-quarter basis as compared to Q4 FY 2021, the company recorded growth of 24% in standalone revenues to INR 2,995 crore. Pharmacy distribution reported revenue of INR 1,574, a growth of 35%, while healthcare services revenue grew by 15% during the quarter. Our new hospitals recorded revenue growth of 43%, while mature hospitals revenue grew 5% quarter-on-quarter. Margins in mature hospitals were strong at 23.1%, and I am happy to state that our margins in new hospitals continue to witness improvement, moving up to 16.3% for the quarter, registering a 69 basis point improvement on a quarter-on-quarter basis. Q1 FY 2022 standalone occupancy at 3,282 beds was 66%. Standalone Ind AS 116 EBITDA was at INR 391 crores, quarter-on-quarter growth of 16%. Pharmacy distribution EBITDA was at INR 78 crores after absorbing marketing costs of INR 37 crores for Apollo 24|7. Without this change, pharmacy EBITDA was at INR 115 crores with an EBITDA margin of 7.6%. Standalone PAT was at INR 150 crores as compared to INR 116 crores in quarter four FY 2021. Net debt as of 30th June 2021 was at INR 1,665 crores with a debt equity ratio of 0.48%. Consolidated results. Our consolidated revenues grew by 31% quarter-on-quarter to INR 3,760 crores. Healthcare services revenue grew by 26% to INR 1,939 crores. Mature healthcare services grew by 20% to INR 1,268 crores, while new hospital revenue grew by 40% to INR 627 crores. Group occupancy at 5,100 beds was at 67%. The consolidated IND AS 116 EBITDA for quarter one FY 2022 was at INR 520 crores compared to INR 412 crores in the previous quarter. Within this, healthcare services EBITDA was at INR 394 crores compared to INR 325 crores in quarter four FY 2021. The results of Apollomedics Lucknow and Apollo Multispeciality Hospitals, Kolkata have been consolidated in this quarter. AMHL recorded an EBITDA post Ind AS 116 of INR 48 crores as compared to INR 31 crores in the previous quarter. Margins were at 15.5%. The business has recorded a 47% quarter-on-quarter growth in top line. Consolidated PAT is at INR 489 crores. This includes a gain from the fair value gain remeasurement on existing share of the Kolkata asset. Without this effect, attributable PAT was at INR 195 crores compared to INR 168 crores in Q4 FY 2021. Consolidated net debt is at INR 1,793 crores. We continue on our transformational journey towards creating India's largest omni-channel healthcare platform, Apollo 24|7, which has deepened and strengthened its presence in this quarter. 10 million unique users are registered on the platform. The platform has enabled neighborhood pharmacies to deliver over INR 16.5 lakh medicines from 17,000 pin codes, with order delivery within two hours of the order placed. The INR 6 lakh online consultations I mentioned earlier span 440 cities with 5,500 doctors across 60 specialties and delivering on the promise of consult an Apollo doctor within 15 minutes. During the ongoing pandemic, diagnostic home sample collection demand surged, and we completed more than 70,000 COVID tests and delivered results within 24 hours. We have partnered with multiple corporates for doctor on-call services, vaccination drives, and stay safe services. Shareholder approval for the slump sale announced last quarter to Apollo HealthCo has been sought by postal ballot and is expected to be completed by the end of the day today. To conclude, while the second wave of the pandemic did disrupt our overall performance and momentum over the last 18 months, the long-term growth strategy and trajectory of the company remains intact. While our agility and resilience in handling these unexpected crises have only strengthened us as a team, we continue to be positive about the opportunities and potential that lie ahead for a well-diversified healthcare delivery model. On that note, I would like to hand it over to our moderator and open the line for question and answers. I have with me Shobana, Dr. Hari Prasad, Krishnan, our CFO, Chandra from Apollo Health and Lifestyle Limited, and Sanjiv from Apollo 24|7 to take your questions. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Deepak Malik from Baring Capital. Please go ahead. The first question is on the line of Deepak Malik from Baring Capital. Please go ahead. Deepak, your line is in the talk mode. Please go ahead. Mr. Deepak Malik, your line is in the talk mode. Please go ahead. As there's no response from the current participant, we'll move on to the next. That is on the line of Damayanti Kerai from HSBC Securities and Capital Markets. Please go ahead. Hi. Good afternoon. Am I audible? Yes. Ma'am, my first question is on your Apollo 24|7 platform. Thank you for putting out details in the investor presentation. In the presentation, it's mentioned that we have right now 5,500 doctors registered with the platform. Just to check, I remember last time you mentioned we had 7,000 doctors. Have we reduced this or how do we stand there? I'll take that question. What we're looking at is active doctors now. Where at the beginning, we would pass them through. These are doctors that do at least two to three consults a week. We still have an inactive base. All Apollo doctors automatically have registered onto Apollo 24|7, that they have the app with them. These are the people who are actually doing consults. I think we're trying to make that very transparent. We have a lot of doctor partners also. The actual list is very high. These 5,500 doctors, it's just in-house doctors or in-house plus partner doctors? These are a few partner doctors. We have about 200+ partner doctors, but most of these are Apollo consultants and a few full-time doctors that we have. Okay, ma'am. Continuing on this platform. Ma'am, you mentioned you are looking to see two to three active consultations per week from the doctors who are currently there on the platform. What is the current utilization of these doctors? I mean to say, right now we are doing 2,000 consults per day. It's the current utilization. What we're trying to do is, during the COVID time, we actually had more than 15,000 consults a day. I think that this is something that we do think will start ramping up, especially with corporate. I must say that these are all paid consultations. These are not free consultations like most other platforms offer. The average value per transaction on this is around between INR 600-INR 700. Okay, ma'am. That's very helpful. All are paid doctors and then INR 600-INR 700 is the fee per consultation which we are seeing right now. These are consultants. These are Apollo consultants mostly. The fees that they charge are pretty much the same that they charge when people come to them for consultation, for physical consultation. Okay, ma'am. Thank you for your response. My second question is on the operating cost. 1Q numbers broadly reflect our normalized cost or there are still scope to see incremental costs from here on? What about margins? How do we see margins moving on from current level to, say, in the next two to three quarters? You're speaking about 24|7 or you're speaking about generally? Just broadly as a corporate level. Corporate level, we do expect margins to improve. Healthcare services, obviously, in this quarter with vaccines were at a 15% margin that impacted our margin by at least a% or half a percent. We also had COVID incentives that we paid to employees, et cetera, of almost a percent of our revenues. That also is part of our healthcare services margins as you see it today. As we move forward, we have guided that we would be looking at healthcare services mature to go to 23% and upwards, and the new hospitals should also go in the 15%-16% range. Overall, that's the guidance that we would like to give. Proton has also started doing well, and you will see that overall the margins should start tending to improve with a combination of better case mix outside of COVID and cost controls. Sir, on the new hospitals, we are already at 16% margins, right? That's the underlying margin? Yes, we should be able to get that margin. We should be able to retain that margin. Okay, sir. Thank you. I'll get back into queue again. Thank you. The next question is on the line of Anubhav Agarwal from Credit Suisse. Please go ahead. Yeah. Hi, good afternoon. Just checking. Am I audible properly? Yes, sir. Please go ahead. Yes. Thank you. Krishnan, one question on the net debt increase. Can you just walk through that out of INR 650 crore increase in the consolidated quarter-on-quarter, how much was used to pay for the Gleneagles stake, how much went to capital, et cetera? Some clarity you can give there. The debt, almost around INR 400 crores-INR 500 crores of the debt is towards working capital increase, which should come back in the next one, two quarters. INR 150 crores of vaccine was there because we had to pay vaccines in advance to secure the. Because as Ms. Suneeta said, we are the largest private sector vaccine providers, and we had to secure the vaccine doses in advance, which meant that we had vaccines and even REGEN-COV for the COVID care patients. REGEN-COV also was an important treatment that we were able to secure in this wave. There is almost INR 160 crores of that in our inventories as of June end. You would also have noticed that there has been a spurt in sales in the standalone pharmacy business or the overall pharmacy business from Q4 to Q1, which was almost INR 250 crores of spurt, aided by COVID stocking, et cetera. All of that meant that there was an inventory which was required to be kept in the front-end stores also, including the back end. That is another INR 340 crores. Almost around INR 500 crores has been locked in our system for inventories and working capital. We expect that almost INR 400 crores should be getting released out of that over the next three months. Just to add to that, INR 200 crores of this is against the new government policy on giving short-term capital to hospitals at a cost of 4.5%. You get INR 200 crores there. Also, just clarity here. The stake that you paid out for Gleneagles, that was already paid out in fourth quarter, or was it paid- Yes, it's already paid. It's part of this. To make it explicit, the current net debt that we see in the system, we expect this to come off by another INR 400 crores over the next three to four months. This has already been paid. INR 410 crores for Apollo Gleneagles is already paid in full. That INR 410 crores was paid in Q1 or Q4? In first quarter. In first quarter. Okay, thank you. Just from the vaccination, I'm just trying to get a very rough idea. Vaccination at the EBITDA level would have contributed how much? Would the range be about INR 12 crore-INR 15 crore or wouldn't contribute at all? 15% is what was contributed. 15%. That would be 15% of the overall INR 167 crores. This is INR 190 crores, which is there excluding Delhi. With Delhi, we were at INR 225 crores. Without Delhi, because Delhi is not part of our revenues, it is INR 190 crores, including Apollo Health and Lifestyle, which has around INR 55 crores in their revenues. This was all at 15% margin. INR 119 crores into 15%. Understood. The second set of question on the Apollo 24|7, I am just trying to understand what is the monthly run rate we are doing on the revenue side across all services that we do from there. Would it be number like we be doing more than INR 50 crore revenue there? Would we be doing right around INR 70 crore-INR 50 crore revenue? Can we just get some range there? Can we end this year with more than $100 million revenue there? Shobana, would you want to give some guidance on this at a broad level or is it? Sorry, I didn't get the question. Anubhav, can you repeat the question for Shobana, please? Yes, please. I was asking on 24|7 across services, monthly run rate of revenue, what is the number right now? Can we end this year with more than $100 million revenues for 24|7? Can we what? End the year with more than $100 million of revenue. No, I think that we are the fastest in the country, you'll see. Our run rate, what we expect to finish the year with is closer to about $50 million, $50 million-$60 million. This is actually the fastest rate for the first full year if you compare to others. Okay. Yeah. Just keep going. No, these are starting days, so the trends are good. I think that we're focusing more on the availability, the challenge of making sure that in two hours we deliver medicines, opening up more pin codes, availability, and many of these areas are being looked at as every day we keep improving our product. Consider this as early days, but the escalation is really the ramp-up has been at a super fast pace, especially during the COVID time. There were days that we got 45,000 orders a day. Just some clarity on the online consult. Last quarter you mentioned you have cumulatively have done INR 5 lakh consults. This quarter you have mentioned INR 5.7 lakh as a cumulative number. Only 70,000 consults happened in such a heavy quarter of second COVID wave, which comes down to less than 1,000 consults a day. I'm just trying to understand the number, how many consults you're doing in a day? One thing, I just want to remind you that last quarter call was in June end. We are giving you numbers, more about numbers which are up to almost June end. Just so as to be on the same page. I'll allow Ms. Shobana to respond on how many consults we are doing now. It's not 70,000. It's much higher that we did in the quarter because we had the call around June end for the March, if you remember. We have given you mostly around the numbers up to June end. On the daily consults, Ms. Shobana can respond. On the daily consults, we range anywhere between 3,000-5,000 consults, which are paid. During the COVID time, we were doing even 20,000. Some of them were free or some of them was from corporate that had pre-paid us. Thanks, Shobana. Can you also mention about in July, how many deliveries are happening, let's say, per month right now on the medicine delivery side? I think these results were for the last quarter, for Q1. When you're in the Q2, I'm sure we'd be happy to share. If you take June as a month, can you give a sense of June as a month? You're asking for what in June? On the medicine delivery side, on the e-pharmacy side, how many orders are you delivering per month? We are doing close to about, from in store and from the designated hub stores, all together we're at about 30,000 deliveries a day in June. Thank you. Thank you. The next question is on the line of Prateek Mandhana from Nomura. Please go ahead. Hello. Thank you for the opportunity, ma'am. My voice is clearly audible, right? Yes. It's audible. Okay. One thing on continuing from Anubhav's question on the Apollo 24|7 revenue you expect to end with $50 million-$60 million of revenue, right? From which divisions can we expect this revenue in Apollo 24|7? What can be the breakup? Should be a combination of pharmacy, teleconsults, and diagnostics. This is what we have said, right? Bulk of that could be pharmacy because they capture the entire value there in Apollo 24|7 including the back end, which will be captured in Apollo HealthCo. Yes. Okay. On the medicine delivery bit, how much of our revenues from pharmacy currently are from online deliveries? Like the total INR 1,500 crore, which is the back-end revenue or almost INR 1,800, which is the front-end revenue. How much is the online revenue? Sanjiv, can you take that? Yeah. I think as ma'am already said that we are now building up the entire distance. Currently it should be in the range of about 5% of revenue coming in from the online side. Okay. What was this like last quarter? You mean to say Q4 FY 2021? Yes. Yeah. I think it was pretty less. It should be in the range of about 2%-3%. I think major traction has happened last quarter. That is how the numbers are looking like at this quarter. We'd like you to put this in perspective. During this quarter, the Q1, we actually served from online and offline. We acquired 47 lakh new customers apart from the existing. There was quite a lot of pressure on the system. These are the new customers that we've got with online and offline with zero customer acquisition costs. Got it. Okay. Just one last question on this bit. What is our average revenue size from basically an offline purchase on a pharmacy and an online purchase? Average billing size, if you have that data. The data is actually so different the way that we look at the lifetime value of the same customer transacting. What we've seen is that if a customer is a regular customer in the pharmacy, he actually spends almost 25% more if he's online also. The behavior patterns have changed, and that's why when you look at omni, it's going to be a little different. They might spend an average bill value in pharmacy might be INR 400, but then when they transact between both together, it goes up to INR 1,200. For the chronic customers, it's even higher. We're going to see a lot of varying. Looking at it, we're actually using technology to look at customers in a way more personalized view. You would also have seen that overall private label has also increased at 13.83%. As an omnichannel, if you today look at our private label sales, which were 9%, now it's at 13.8%, and you would have noticed that as part of the presentation. Yes, sir. My next question was that, what is the peak that we expect from the private labels? Where do we expect it to stabilize around? Is 13% a normalized thing, or we expect it to come down or go further up in future? It will keep slowly increasing. We understand what this is. We'll be introducing more categories, as you see. It definitely won't go down. There was a surge for a lot of COVID-related items, but we're making sure that it doesn't come down because we've introduced more categories which are more sustainable, including a few generic medicines and things like that. We've understood this category. We have people behind it, and you'll see this continue to grow. Sorry, one last question. On the generic medicines that you have introduced, are you manufacturing that yourselves or they're getting outsourced? We haven't manufactured. No one in the world manufactures their own. Okay. We go for the best-in-class, and that's the difference. Okay. For our generic, we'll make sure that we get it from the best-in-class and also keeps us agile because we don't know manufacturing. We know the service industry better than anybody else. Okay. Thank you. Thank you very much. That is all from my side. Thank you. you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Thank you so much. Just a couple of questions on COVID. What was your total contribution from COVID-related hospitalization, and how do you see this unwind going forward? Second is, where have you captured vaccination link volumes and revenues? Is it all in outpatient? Yes. Overall, 25% of our revenues came from COVID. That was almost, if you exclude Delhi, which is not part of the consolidated revenues, INR 490 crores was the revenues which came from COVID, including vaccines and RT-PCR. COVID vaccines is currently captured in outpatient. Just adding to that, if you look at IP volume, 26% of our IP volume came from COVID. In terms of revenue, 26% of total revenue in healthcare services came from COVID, looking after COVID patients. Thanks. How do you see both of these in 2Q, 3Q in the sense that would vaccines go up? How about inpatient volumes and revenues? Dr. Hari. Vaccines have been- Yeah, vaccines, I don't see it going up. There is definitely a fall in demand for vaccination across the country. We were doing a peak of almost 100,000 vaccines per day, but now it's come down to about 25,000 to 30,000 per day. One of the reasons we're seeing that is because of the gap between the first and second dose of COVISHIELD has been increased from four weeks to 12 weeks. There's a longer time for that. We're seeing some amount of hesitancy in terms of vaccine. Third thing is, people were very eager to get vaccinated when the COVID was at its peak. As COVID came down, that eagerness also has come down. There are multiple reasons for which the vaccine demand or requirement in the community has come down. We are prepared to vaccinate as the demand requires, and we have enough inventory in place, and we are vaccinating across more than 200 centers across the country, both in metros and semi-urban and semi-rural areas. We don't see the same numbers happening in the second quarter as happened in the first quarter. Okay. Thank you. Approximately 50%-60% of the Q1 volumes will come in approximately, right? As we estimate now. Right. As we estimate now. I'd like to add here two points. One is that Apollo has done almost 30% of all private vaccination in India. For an urban base, this thing, we've also gone out into rural areas and done this, and we work with a lot of corporates to make this happen. The second more important thing is, I think we have to understand that adult vaccination is here to stay. In building up our cold chain and our capabilities, this will become an ongoing income that will start getting accounted for. AK, as you said, it will be 40%-50% that we're expecting this quarter because the second doses will come back somewhere towards the end of August and beginning of September. Okay, great. Thanks. This is very helpful. The second question is regarding your core business, hospital services, where the current occupancy is, which is 67%. I think earlier you had peaked at 69% pre-COVID, and where the margins are, which are again pretty high, and we are not expanding volumes or capacity. What's the outlook? What's the drivers for growth over the next one to two years? Clearly, it is better asset utilization. I think, like we said in this quarter, we are at 67% occupancy, out of which 26% is COVID occupancy. COVID occupancy comes with an ARPOB of INR 21,700, whereas our normal ARPOB is in excess of INR 44,000. With that, if you look at mature hospitals, our margins are at 23%. New hospitals are at 16.4%. Keeping in mind the ability to move this to 20% within this year is something that we are looking at. The way we plan to do this is definitely focus on centers of excellence where our ARPOB are much higher. The ability to deliver on oncology, cardiac, orthopedic, neuro, and transplants, plus the emergency work. This will definitely increase our ARPOBs as well as our margins. The second is higher asset utilization. We have seen the ramp-up of our tier 2 moving to 40% growth. We believe that this is sustainable because once that COVID comes down, there will be pent-up demand to fill the beds. The third reason why we're optimistic about the future is that transport has started to open up. The airlines have opened up, and we believe that our patients will travel across geographies to come to our centers. Having said that, I think the decision to move into tier 2 has clearly been a defining one that has resulted in a really good performance, even during COVID. Okay, great. Thanks. I've got more on Apollo 24|7. I'll come back in line. Thank you. Thank you. We'll move on to the next question. That is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Hi. Thanks for taking our question. Ma'am, just picking up on your last comment about the tier 2 hospitals. I mean, these two hospitals took their own time to get started, and there were question marks around these other private hospitals expanding much in what we are sort of opting for expansion in these times. In your assessment, what has changed in the dynamics in tier 2, tier 3 towns for the business? It gives you more comfort on the risk now going forward. One thing is that tier 3 is really not in our radar. tier 2, we did implement. We do have two hospitals in tier 3, and both of them are contributing to EBITDA. The most significant thing that we've realized is that people move to a category leader. The fact that the Apollo brand is very strong, and it's strong because of the clinical outcomes. We really managed to get very good doctors on board, and this I think is something that maybe we were a little bit slow to do, so it took a little time to ramp it up. Now that we have all of the doctors in place, we believe that the occupancies will improve. Okay. And secondly, with the transaction which is there in Apollo HealthCo, incremental fund infusion coming through in the parent, there is now a significant amount of financial capacity which is there with the free cash flow building up in the hospital business. From a hospital business expansion perspective, how are you looking at over the next three years? First of all, your line is not clear, but if I understood the question correctly, you want to know about the free cash flow post Apollo HealthCo moving out. How do we use it? How do we use it? We are looking at expanding our presence and consolidating our presence in the North. That is one acquisition that we're looking at. We will use our free cash flow, plus the fact that we've got close to INR 500 crore invested in mutual funds. The company is adequately funded to make this acquisition. We're also looking at something in the Northeast, which again, I think we are adequately funded to do that without having to add on more debt. Sorry to interrupt you. To complete that point. These acquisitions or these target markets now that you're looking at are largely what, tier 2 towns, tier 1 metro? No. tier 1. One which is tier 2. Okay. A quick squeeze in a last one. On the pharmacy business, we've had a pretty large increase in the private label contribution in the current quarter. It hasn't quite reflected in the improvement in the EBITDA margin for the business. How do we go on? Is there anything specific? Some of this private label business or not really contributing enough immediately to the margins? No. I think we said in our opening remarks that while the margins have actually improved to 7.6%, there was INR 37 crores that was used for 24 by 7 for its customer acquisition and marketing costs. Which is why you are not seeing the margin improvements. Clearly, if you add back this amount to the INR 79 crores that we said, I think you will see that there is definitely an EBITDA margin improvement of at least 40 basis points. Okay. Thank you. Thank you. The next question is on the line of Anubhav Agarwal from Credit Suisse. Please go ahead. Yes. Thank you. Just one clarity on the pharmacy business. I appreciate you just started this generic medicine business, but how large it is today? Is it 1%-2% of the business, 3%-4% of the business? How large is it today? Shobana, We just started this. It's not significant enough for us. It's like in the region of INR 90 crores. How do you see this? At some point of time, will it become 10% of the business, let's say, if it takes three, four years down the line? It should. I think that this is our counter to this rampant discounts that are actually not right. I think that this is a much more intelligent way of customer play, is to be able to give them a better product at the right price. One more question on the pharmacy business. If we look at this total business, how much is the portion which is coming from non-medicine? For example, the private label of 13.5% plus FMCG put together, how much is that to the non-medicine business? FMCG was about 30%. 30 plus this 13 is 43%. Okay. Sure. Thanks for that. The second question is on the bed capacity. This quarter we added about 90 beds in Tamil Nadu and 76 in Karnataka. These 90 beds which have been added, have they been added to the Greams Road Hospital or which hospital has this been added? Same question for Karnataka as well. We've operationalized new beds in our existing facilities. Which facilities? Is there any large hospital, like 60, 70 beds has been added to one particular hospital? That's what I'm asking. Vizag, Trichy, and also in New Bombay. Okay. 90 beds you have added in Tamil Nadu. Is that basically- That's Trichy. In Trichy. Understood. Last question is on the AHLL. In the Cradle and Spectra business, our revenues are higher sequentially, but our EBITDA is significantly lower. What led there? Because last two quarters we've taken out so much cost from the system. What happened in this quarter? Chandra Sekhar? Yeah, I couldn't get that first part. Can you just repeat? Yes. On the Cradle and Spectra business, revenues are okay in this quarter, which are higher compared to the March quarter, but the EBITDA has significantly gone down. We have fixed doctor payouts. But- We could not completely do. The EBITDA margins are little lower. If you're comparing it to Q4, Apollo Cradle had INR 3.6 crore, that is INR 36 million of EBITDA. Q1 at INR 22, it's above 30. There are some year-end adjustments that benefited the Q4, but primarily it is static. On Apollo Spectra, we had a lower elective surgery. The numbers you are seeing is also including the vaccines. They were also doing oral vaccines. At AHLL, we did about INR 6 lakh, 80% of that number came from clinics, 20% was Apollo Spectra. That revenue is what has benefited the Apollo Spectra overall number. We have guaranteed payouts on fixed doctors, which is hence reduced the EBITDA. One doubt, Chandra Sekhar, on this is that our revenues are higher sequentially. Even if we had a fixed payout doctor, that would not have changed so dramatically from the March quarter. No. Allow me to just lay that out. Yeah. Our revenues minus vaccine, actually in Spectra has gone down. Okay. That's the reason. INR 620 million-INR 630 million down to INR 500 million. It looks like similar because of the vaccine addition. Okay. Doctors that I'm talking about are fixed of the payouts that being even out once we have resumption of elective surgery. I think the perspective that you should take in this is that AHLL is now focusing on diagnostics. Therefore, the increase that has come from RT-PCR test is part of our focus on diagnostics. Going forward, you will see a huge increase in the diagnostic business as well as in the clinics business. Yes. Just last clarity on that. On the diagnostic business, we have about 847 as part of our network right now, and we added about 200 odd centers in last one year. In next one or two y ears, how do we see that 847 as a number? Do we see this, like almost 2,000 as a number in next two to three years? I'm just trying to understand this. Yes. You're talking about the collection center network? Yes, correct. That's right. The whole diagnostic piece, Chand, why don't you explain the whole diagnostic piece? Yes. We are doing two things on the diagnostic piece. One is we are also ramping up our home collection capability. In Q1 FY 2022, we added over 350 clubs across seven to eight target cities. Plus, the collection center network we've added, we continue to add there about 200 to 300 per quarter is our run rate that we are hoping to do till we saturate markets. Per quarter. That's a lot actually, because last full year we added only 200. Yeah, this quarter we are adding further, we have pipeline of further addition. We would reach in about a two-year timeframe, as you rightly said, upward of 2,000 collection centers. Thank you, sir. There will be a netting off. There will be some drop off, so that's why the addition to gross addition. Overall, from the 847, we should be about 2,000 in the next less than two years. Okay, thank you. Thank you. The next question is on the line of Prakash Agarwal from Axis Capital. Please go ahead. Yeah, thanks for the opportunity. Just a couple of them. One is understanding on the new CapEx requirement, and the growth potential going forward. What I understood was currently, with the occupancy of 67%, within that there is 26% COVID. You still have a long runway to have the non-COVID patients till 67%, 70%. Are there any plans for Greenfield in the next couple of years? Or what do you think about Greenfield expansion, versus the two acquisitions that you spoke about in tier 1 and tier 2? We're not really looking at Greenfield at this point of time. We are looking at, like I said, strengthening our presence in the north, which will be through brownfield. Okay. Fair enough. In terms of your margin journey, I mean, the new hospitals have picked up quite a bit. What I am trying to understand is you also mentioned, the ARPOB of non-COVID is INR 44 and COVID is INR 21,700. Yes, sir. Hello? Yeah. Am I audible? Prakash, your line is not clear. We can't hear you. Am I audible now? Hello? Yes, we're able to hear you now. Lizann, can you hear us? Yes, ma'am, we're able to hear you. Everyone- Can you hear me? Yes, sir. Very difficult to hear you. Yes. Hello? Go ahead. Ma'am, we are able to hear you. Am I audible now? Call didn't come. I am able to hear you. It is okay. I can hear the management. Okay. This is through. Fine. What was the question? Can someone repeat it? Can the others hear? Can the others hear? Can you hear me? I am going to repeat it. Yeah. Yes, please repeat. Okay. I'm trying to understand the outlook on the margins, on the backdrop of you mentioned ARPOB for non-COVID is INR 44, and COVID is INR 21,700, and you've already seen a good improvement in the new hospitals. Yeah. How do we see with obviously non-COVID patients share increasing, we would have an upward trend. How do you see this panning out over 2022, 2023, 2024 for your margins? I mean, some of the competitors are reporting 25%-29%, so I just wanted to know your journey in that growth path. I think what is realizable is you will see the mature hospitals moving into that territory of 24%-25%. New hospitals will move up to about 20%. You will see a blended margin of about 21% in the next one year. This will come from higher asset utilization, focus on centers of excellence, which I think I spoke about earlier, where the ARPOBs are higher and the margins are higher, and also from cost cutting. These three initiatives we believe will help us increase our margins. We have an asset utilization. If you look at us, we have added new hospitals. Potentially as some of those assets keep getting mature and we take it to a much higher utilization, you will realize that we can also achieve higher margins. If you look at competitor margins, of course, I understand what you're saying. If you look at our most mature assets like Chennai, we all know that we also are at 27% or 28%. It's just that we have added capacity. There is headroom for growth. As some of that starts coming up, as Mrs. Suneeta Reddy said, we have seen a very good uptake in our tier 2 hospitals, in our new hospitals. All of this we believe will aid us well over the next couple of years. Including Proton has started doing well. Okay, got it. Lastly, on Apollo HealthCo. You have talked about new pool of investor capital. Any rough timelines, A, and, B, in terms of whether you are looking at strategic or financial partner here? Shobana? Hello? Shobana? Yeah, hi. It's imperative that one of the reasons for hiving this off also was to be able to chart a course that would create this competitive intensity to work in this environment. At that stage, on one side while we have strong partnerships with Airtel and HDFC Bank, and they're not financial partners. On the other, we're creating a pool of capital that will help us grow. For that, in the next 60 days, we should come out with an announcement. Mr. Agarwal, are you done with your question? No, I asked whether it would be more strategic or it would be more financial investor that you're looking at? It will be a combination. Okay, perfect. Great. Thank you and all the best. Thank you. Thank you. The next question is on the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Thank you for the follow-up. Just talking of HealthCo, a 24|7 platform. Sameer, can you hear us? I can hear you. Can you hear me? Hello, Sameer? Yeah, we can hear. Sameer, can you hear the question? Shobana, can you hear us? Yes, Krishnan, I can hear you. Yes, Shobana, we can hear you. Okay. The last question. Sorry, question. We haven't got any question. Operator, looks like management can't hear me, but I can hear them. Okay. What is the question? We can hear you now. Okay, great. The question is for the HealthCo 24|7 platform, that your current doctors and the connect with the pharmacies is maybe under 1% of India's total. It just shows that it's a very light sort of underlying coverage that you have. How will you fulfill the demand and it's a digital platform, at some point in time you will have Project Kavach sort of people, patients coming on board. Related to that is the competitive intensity. One or two of large pharma companies have also launched their platform, and they have a natural connect with lakhs of doctors and pharmacies. Just your thoughts on this. Thank you. Shobana? Yes. Yeah. A, is we believe that customers are discerning. For a pharma company to launch their app, one is that I think that just as we don't manufacture medicine because we don't understand that realm. I think that the pharma companies do need companies like ours to be able to retail. To become competitors, I do not understand their logic. Many more pharma companies are now coming to us and asking us to align with them to be able to help in patient engagement. Those are interesting models that have existed in the West, and that can only be done through a technology-heavy platform like ours. You'll see more of those partnerships. I believe in those. The next question you asked is the capability or the ability to be able to ramp to India's demand. I can tell you that the very fact that we went from doing 5,000 pharmacy deliveries to 30,000 pharmacy deliveries within 35 days, clearly demonstrates the fact that we have the right supply chain. In these challenged times, people without supply chains are the ones that will really create a lot of that customer disconnect. Apollo has the strongest supply chain available in the market today. There are certain markets that we have a huge market share, in the major cities of NCR, Bangalore, Hyderabad, Vizag, Chennai. Apart from that, we also have the capability to be able to deliver with our 4,500 stores. We continue to ramp up and open more than a store a day nowadays. I think that this gives us the ability. If we do require, we have connections through our supply chain company with over 35,000 pharmacies, and this is available for us to use another light model to be able to do supply. With regard to doctors, 7,000 of Apollo doctors being available. We believe that it's important to offer people the right quality. The other doctors, again, we're investing heavily into technology. We'll have the best clinical decision support system, which is currently being tested. Once we do that, you will find that the efficiency also will ramp up. I believe that we have a lot of the answers. I don't claim that we have all the answers, but as we get better and bigger, we will solve for these in a sustainable way without forgoing quality. Just to add to what Shobana said, I think that 1% perspective is a very macro perspective. What we do is to look at relevant market share. If you look at the tier 1 cities and the tier 2 cities and the tier 3 cities where we're present, I think this is what we're, especially in tier 1 where we've created a whole ecosystem of hospitals, clinics, delivery centers, et cetera. We look at relevant market share. I believe that 24|7 and the pharmacy in particular, they had mapped out 10,000 PIN codes. If you look at the first quarter, they've already moved that to 16,000. Like Shobana said, with the physical pharmacy format, plus the logistics chain, the supply chain that we have, I think we will be the strongest player. It's a strong combination of having an omni-channel presence. Okay, great. Thanks. Just finally, if I can, I know we are up on one hour. Suneeta, how do you think about the bed capacity? Sorry, we are not able to hear you again. Hello? Operator? Sorry to interrupt. Can you try? Hello, hello. Yeah. Can you try? We are not able to hear you. Krishnan, can you hear me now? Yeah, now we can hear you. Okay, I don't know. Okay. Suneeta, how are you thinking about your bed capacity? I say that because at 67%-69% utilization occupancy, how much further can you go? Is this the time to press a panic button to say that, "Now, look, we need to add 1,000, 1,500 beds for the next three year, four year journey ahead? If you look at 67% occupancy, I think the first cut is that we've not operationalized all the beds. We have 8,000 beds operationalized. We have the potential to operationalize another 2,000 beds at very little cost. The second part of it is that you must see us, that we will have a calibrated expansion plan in place because this company must. We will continue to show growth. To show growth and to strengthen our market share in certain cities, there will be some Brownfield acquisitions that we will make, which will increase bed capacity. Having said that, the second cut that you should look at is a decrease in ALOS, which means, it gives us the potential to increase volume. This, we will actually show post-COVID, because during COVID, we had an ALOS of seven against the normal 3.5. Okay, great. Thank you so much. Very clear. Thank you. The next question is from the line of Alok Dalal from CLSA India Private Limited. Please go ahead. Yeah. Hi. Guys, can you hear me? Yes, we can hear you. Yeah. Krishnan, just one clarification. What was the contribution of RT-PCR tests for the diagnostic business for the first quarter? Chandra? Yeah, I'll answer that. In terms of volume, we did INR 6.6 lakh RT-PCR tests in the quarter, up from about INR 2 lakh in the previous quarter. In terms of an absolute revenue contribution, we had a non-COVID of INR 60 crore and the COVID revenue was INR 45 crore. Okay. Sir, last quarter you had given a guidance that diagnostics will be around INR 500 crore sales by FY 2023. Just to clarify, is this all organic or there'll be a component of inorganic or acquisition business? We have a largely organic growth because we have market to saturate and some more penetration. Can we hear you? Hello? Yeah. Hello? We seem to be losing you. Sorry to interrupt, but we're losing the audio from the management side. I'll be disconnecting and reconnecting. Yeah. Hello? Hello? Sorry to interrupt. We are losing audio from the management line. I will be disconnecting and reconnecting. Please stay connected. Thank you. One- Ladies and gentlemen, thank you for patiently holding. We now have the line to the management reconnected. Over to you. Yeah. I was answering the question on the component of inorganic. The way we look at it, there are large organic growth. We look at an opportunity, inorganic acquisitions in markets where we are not as strong, and we will enter markets that we are continuing. Our primary focus will be on organic growth. There will be some component of inorganic, but that will be at obviously the right pricing and the right sizes that we will look at, and especially the new markets. Sure. Thank you. One last question. Suneeta, you had mentioned that you will look to bring down the pledge share component below 20% by March 2021. Any fresh timelines on that? I think COVID has delayed it, but like I said, by the end of the year, we hope to bring it down by 50%. Okay. pledge share will be down by 50% from- Yes by end of the year. Yes. Cool. It's currently at 24%. We've already brought it down, but it will come down further. Thank you for taking my question. Thank you. The next question is on the line of Harith Ahamed from Spark Capital Advisors. Please go ahead. Good afternoon. Thanks for the opportunity. My question is on the pharmacy distribution business. You've had a very strong quarter-on-quarter growth, which we think the growth is a contingent as well. You mentioned some stocking and the patients and some additional demand that you saw during the quarter. Going forward, how should we think of this current run rate of around INR 1,500 crores for the business? Will there be some softening as the stocking aligns? 18%-20% growth is what we have said. We are guided on that, and we will continue to maintain that growth, which is how you should look at it. Understood. One question on this back-end pharmacy that we have moved to Apollo HealthCo. Does this entity currently procure for our hospitals as well? Just trying to understand what happens to the procurement of drugs for the hospitals once this entity moves to Apollo HealthCo. It doesn't include the hospital procurement. It is part of healthcare services business completely, and this is just the procurement for the standalone pharmacy business. The hospital procurement is integrated with healthcare services completely. Understood. Thank you. Thank you. The next question is on the line of Nitin Agarwal from DAM Capital. Please go ahead. Hello. Just a follow-up on the diagnostic business. Currently, the margins are on the lower side as you're looking to ramp up the growth. The peer set is around 25% EBITDA margins in this business. By when do we see ourselves getting into that sort of 20%-25% bracket of margin range? I'll answer that question. Yes. The current on a standalone diagnostics business, our margins currently are at 25%, abated by somewhat of additional business from the COVID. On a steady state, the numbers are reaching there about the 20%. I'm expecting us to expand and go up to 25% in the next 12 months. Okay, the INR 500 crore, even despite the revenue targets which are being about INR 500 crore revenues for next year, we should be able to maintain a 25% margins on that account. Yeah. We are aiming to expand 25% as we reach that revenue objective without compromising. We are in a position to do about nearer to 20% now. And Chandra, where do we go from there? At INR 500 crore, we still are sort of a smaller than lot of the larger peers. From the business, as you see the dynamics of the business, how big a business can it really get to, say, over the next three to five years? It definitely has a potential, and there is also a need. As you still say, while we look at the size of the overall market, I think the size of the unorganized piece consistent is pretty high. It's already 80% thereabouts. I can see going ahead the time for organized businesses to continue to ramp up and the space is available. We have two spaces. One is also to start also looking at gaining on clinical leadership, which is what Apollo as a brand stands for. We'll pursue that as an objective. In terms of overall number, I think the headroom to grow to the size of four figures and above in terms of INR 1,000 crore plus kind of revenue is an opportunity that we do have. I guess that organic growth is our first lever. Inorganic will be opportunistic. We'll use these two to consistently look at growth. From a geography perspective, as when we get to say INR 500 crore number, it's going to be south-dominated or it's going to be a very evenly spread out mix for us from a revenue perspective? We didn't have a mix in the INR 500 crore objective. We have a mix which is skewed higher on south and east. I think we are making entry into the other markets in the west and the north. There'll be some component, but they'll be in their early days. The percentage contribution from these new markets would be not more than 20% of overall. Got it. If I get Shobana, on the 24|7 platform, how important do you think is our ability to get partner doctors on board? In terms of what role will they play going forward? Two, versus the other competing platforms, I think what incremental proposition do we offer to potential partner doctors? The Apollo experience for partner doctors isn't just about Apollo 24|7. Even though we're able to bring them more customers in their community. For instance, the vicinity of our pharmacies, it becomes easier for us to connect the doctor partners who are close by. We've seen, especially during the pandemic, that's working well. More than that, the reason that doctors would choose a premium platform like ours is the ability to hook into the Apollo ecosystem, gives them higher access to CMEs, to learning, to second opinions, our superior CDSS that would help their technology and their clinical decisions. It's a 360 degree package that we offer doctors. Right. In your assessment, in this whole outpatient ecosystem that multiple players are looking to develop, I think the most critical piece is what our ability to generate the online prescription or there are multiple pieces in that, but is there a fair assessment that our ability to generate the online prescription essentially is the core of this proposition? Online what? Getting online consult done. Don't get me started on that. I think that getting a doctor on board for a free consult to generate the prescription is actually unethical, and I don't think that's the way that it should be done. A doctor's service should be valued and should be paid for. Unless we get that straight in India, then all else, I think Apollo stands for bringing the highest standards. We do not give away free consults to generate prescriptions. If we wanted to do that, we're not going to go down that road. I decline from answering that. Sure. Okay. Thank you, Shobana. Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mrs. Suneeta Reddy for closing comments. Ladies and gentlemen, thank you for joining us on this Saturday afternoon call. This has really been a defining quarter for all of us. We were able to live up to our ESG commitment where we demonstrated purpose at heart by serving societies and our communities. This has truly been Apollo's purpose, the ability to serve our patients and our communities. I believe we did so this time. We did so by putting weight of our infrastructure, our doctors, our nurses, and our management towards looking after patients. In the process, we looked after over 18,000 COVID patients. While we remain prepared for the third wave of COVID, we continue to be focused on innovation, on clinical efficiency, and the agility of our institution to serve larger communities and our consumers. Thank you again for joining this call. Have a wonderful weekend. Stay safe, stay happy. Thank you. Ladies and gentlemen, on behalf of Apollo Hospitals, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.