Ladies and gentlemen, good day, and Welcome to Q4 FY22 Earnings Conference Call of Apollo Hospitals Enterprise Limited. 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 touchtone 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, Margaret. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for Q4 and FY22, which we announced yesterday. We have with us on the call today the senior management team represented by Mrs. Suneeta Reddy, Managing Director, Dr. K. Hari Prasad, President of the Hospitals Division, Mr. A. Krishnan, Group CFO, Mr. C. Chandra Sekhar, CEO of Apollo Health and Lifestyle, Mr. Obul Reddy, CFO of the Pharmacy Division, 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 with all of you earlier. Documents relating to our financial performance have been circulated 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. Good afternoon, everyone. Thank you for taking time to join our earnings call. I trust that you've received the documents which we shared yesterday. Q4 FY22 revenue volumes and occupancy within the healthcare services business were disrupted in January and February 2022 due to COVID-19 Omicron third wave. Planned and high-end surgeries were deferred and medical travel within the country was adversely impacted. Sequential performance was therefore muted, while year-on-year traction continued to be strong. Q4 FY22 occupancy across the group was close to 60% compared to 65% in Q3 FY22. IP volumes across the group grew 30% year-on-year, however decreased 9% on a quarter-on-quarter basis. Operating indicators in the healthcare business continued to be robust. Overall, Q4 ARPB improved from INR 43,329 in Q4 FY21 to INR 48,510. This was achieved through a sustained focus on ALOs, Centers of Excellence focus, and payer mix optimization. Mature hospitals ARPB improved from INR 44,024 in Q4 FY21 to INR 49,232 in Q4 FY22. We executed a planned reduction in lower-paying patients in the network, especially the mature hospitals. We see this trend as positive and sustainable. In market segments that are expected to grow from current levels, new hospitals ARPB improved to INR 46,715 compared to INR 41,154 in Q4 FY21. Volumes grew by 17% over Q4 FY20. Revenues grew 46%. Inpatient revenues in key specialties grew at very strong rates compared to pre-COVID levels. Cardiac sciences revenue growth was 33%, oncology was at 36%, neurosciences was at 11%, orthopedics at 27%, gastro at 19%, and transplants at 23%. This has been the result of our efforts within the centers of excellence of offering differentiating clinical products. Over the last three quarters, we have been consciously pruning low-paying patients and customers and have been actively substituting this with cash and insurance patients. These efforts are showing good results, with these segments growing by 25% in revenue compared to pre-COVID quarters. Performance in March 2022 improved in comparison to January and February, and we believe that the reduction in COVID cases across the country and opening up of travel and easing of restrictions has restored consumer confidence, and we will see traction in the healthcare business. The transfer of the back-end pharmacy business and the Apollo 24/7 digital platform to Apollo HealthCo was completed with effect from March 16, 2022. Accordingly, the pharmacy distribution business, which used to be reported as a segment in standalone financials, now gets reported within Apollo HealthCo. Consequently, standalone financials are no longer representative of the depth, breadth of our performance in this business. We will, going forward, focus on consolidated financials, while we believe they represent the full spectrum of our work, including healthcare subsidiaries, Apollo HealthCo, Apollo Health and Lifestyle, and other businesses. Against this backdrop, let me walk you through the consolidated financials for the quarter. Consolidated revenues grew 24% on a year-on-year basis to INR 3,546 crores. Healthcare services grew by 21% to INR 1,863 crores. Mature healthcare services grew by 21% to INR 1,283 crores, while new hospitals grew by 19% to INR 532 crores. Consolidated EBITDA stood at INR 463 crores, registering a growth of 12% on a year-on-year basis. Within this, healthcare services EBITDA grew by 25%, and healthcare services margins were at 21.9%. Mature healthcare services EBITDA margin was at 24.3%, and new healthcare services EBITDA margin was at 15.5%. Pharmacy distribution revenue grew by 22% year-on-year to INR 1,375 crores. Pharmacy distribution EBITDA post Ind AS 116 grew 60% year-on-year to INR 19 crores. This is after considering a charge of INR 84 crores on account of marketing costs of Apollo 24/7. Without that charge, EBITDA was at INR 103 crores. A growth of 27% year-on-year, and margins were at 7.5% against 7.3% in Q4 FY21. AHLL recorded a net revenue of INR 309 crores, year-on-year growth of 47%, and EBITDA post Ind AS 116 of INR 38 crores, a year-on-year growth of 41%. The consolidated PAT is at INR 178 crores as against INR 168 crores in Q4 FY21. However, a non-cash tax impact arising out of pharmacy transfer to Apollo HealthCo to the extent of INR 88 crores had to be considered for reporting purposes. Therefore, reported booked PAT for this quarter is INR 90 crores. It may be noted that the tax impact has been fully set off against available MAT credits, and the accumulated MAT credit available to AHEL has been fully exhausted. Therefore, AHEL will move to the 25% corporate tax regime from Q1 FY23 onwards. I would like to recap the consolidated financials for the full year FY22. We closed FY22 with consolidated revenue of INR 14,663 crores, a growth of 39% over FY21. Closing full year EBITDA is at INR 2,185 crores, representing a 92% growth over FY21. Closing consolidated PAT for FY22 is at INR 1,056 crores, representing a growth of 602% over FY21. Over FY 2022 as well as the prior year, we have encountered unprecedented challenges and have been compelled to respond with agility while transforming and redesigning the healthcare services delivery model. This, we believe, has strengthened our business across all aspects, ranging from infrastructure, medical teams, protocols and processes. Our rapidly growing digital platform is strongly complementing our extensive physical presence across the country, enabling us to provide an omni-channel seamless customer engagement model that is highly differentiated by the speed of response capabilities, depth of resources, and breadth of offerings for the customers. We enter this new FY excited about the opportunities before us, yet cautiously optimistic because of the challenges and headwinds presented to us by the highly volatile global and national macroeconomic backdrop. For FY23, we believe that healthcare services growth will definitely be in the mid-teens. Margin expansion, however, will outpace revenue growth and improve by 150-200 basis points given our ongoing efforts on payer mix, case mix, and cost optimization. The offline pharmacy business will continue to grow at around 20% with our focus on private label products, same store growth, and an accelerated store expansion of over INR 500 crore over the next FY compared to 400 stores in FY22. We expect Apollo 24/7, which includes online pharmacy, consultations, and diagnostics, to grow rapidly. In the last FY, we had a GMV of INR 450 crore in Apollo 24/7, with Q4 being around INR 150 crore. We are currently at a run rate of INR 200 crore of GMV per quarter, which we expect to double as we exit FY23. Our diagnostic business with AHLL will continue to be our focus, and we are confident of achieving a INR 1,000 crore top line within the next three years. On that note, I would like to hand it over to the moderator and open the line for questions. I have Dr. Hari Prasad, Krishnan, Oberoi, Chandra, and Sanjiv from 24/7 here with me to take your questions. Thank you. Thank you very much. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on the 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. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Anubhav Aggarwal from Credit Suisse Group AG. Please go ahead. Hi. Just checking. Am I audible properly? Yes, sir, you are. Oh, great. Good afternoon, team. First question is a clarification on the pharmacy segment, and this is on the combined margins, which is only 6.1% in this quarter. I recall in the last quarter you had some INR 10 crore costs taken up in the front end. Is there any one-off in this quarter which is impacting this margin? No. Overall, there is an increase in the customer discounts, and we would be able to absorb that with the higher margin, and that is just. There is no other reason. No, but the overall margin. It is now 6.4. The margin impact is only 6.1% against 5.8% in the last quarter. There is an online cost coming into the numbers, so there is too much significance to compression on the margin. So- It's mainly due to the increase in the discount and online cost, which will be shown as a separate segment going forward. Just for clarity, customer discount increased. What was the average discount earlier and versus now? You know, earlier, last year it's about 10.5% overall and moved to 12%, 12.5% this year, and we could compensate largely that through the margin expansion. This is, you're talking only offline customer discount, is that it? As of current year, it is a blend of both online and offline, and that segmentation will happen going forward for the next year. The portion that you're recording in the, let's say, backend pharmacy, that percentage of the EBITDA has increased dramatically. Is that going to be the norm going forward? Like, almost like in this quarter, 93% of the EBITDA or 90%+ of the EBITDA has been captured in the backend. That will be about 80%, because this year there is, you know, a demerger coming into certain liabilities moving and there's an accounting issue. Otherwise, we'll capture about 80% of the margins in the backend, and that stays broadly in that range, and 80%-85%. Thank you. Second question is on the 24/7. This quarter, spend has increased to about INR 85 crore, quarter level. Now, the question here is, whether we get the funding or do not get the funding. In both scenarios, what do you think can be annual spend in FY23 on the 24/7? Sanjeev, you want to answer that? I think we are looking at around INR 400 crores of, you know, overall expenditure for the current FY, as against INR 84 crore that you saw in Q4. Sanjeev, that is irrespective of whether you get funding in this AHL or you do not get funding. Yeah. Is there any update on that, let's say, process that you were having? Process. You know, right now, yeah, you know, there is no update except that, keeping in mind the existing environment where the digital healthcare has been undervalued, we have delayed the process. We're keeping it on hold for another six months. Thank you. Just last clarity on hospital RPOPS. You gave the guidance, but just on RPOPS, do you expect them to increase from quarter four level this year or moderate in FY 2023? No, there will be an increase, and like I said earlier, the increase will come from payer mix, it'll come from cost reduction, and the third, which we're also seeing, is case mix. Any headline increase that, ma'am, you have taken in cash, insurance patients, and insurance segments? 25% increase. 25% has been the increase that we have seen in the past, you know, and going forward, we will expect that, you know, the momentum should continue for the next year as well. Any headwinds or increase you've taken in cash. Headline price increase for the coming year will be around 4%-5%. Have you already taken that? No, not as yet. Thank you. Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services Limited. Please go ahead. Yeah, thanks for the opportunity. Just again, on Apollo 24/7, if you could also share online orders per day and average realization per order as in month of May. Sanjeev. Yeah. Sanjeev. Currently we are running at about INR 70 crore of GMV. As far as the number of orders are concerned, we are closing at around 30,000 orders per day. Essentially, about a majority of them in pharmacy, but we do have diagnostic and consultations to the tune of about 2,000 to 5,000. Those are the numbers we're tracking as of now. Right. This was like 20 compared to 21,000 a quarter back. Correct. Yeah. Got you. Secondly, on the hospital side, there has been sharp drop in occupancy in new hospitals. Maybe it is due to COVID in January, February. Again, coming back to like in April, May if you could share what is the occupancy we are running at in new hospitals? It's picking up in the new hospitals. Mostly surgical work is picking up. Unlike last year, where we had a lot of medical admissions, this year is looking better. Hari, you want to add to that? Yeah, actually, the March itself has shown a increase in the occupancies in Tier 2, in the newer hospitals and Tier 2 also. The increased occupancy is mainly on the surgical front, which has actually contributed to the improved RPOP as elucidated by Madam this now in her opening remarks. Got you. That's it from me. Thank you. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Good afternoon. Thank you for taking my question. First one is on the pharmacy step up in terms of the store rollout. I think you said 400 we did in FY22, and we are targeting 500. This has been a slight step change to how we have managed the store rollouts in the pharmacy business. What's driving? What's the logic? You know, does it entail higher CapEx? I know it comes on the front end, but just want to understand the logic and which are the geographies we would likely to look at. Largely, you know, we are there, as you rightly said, about 400 stores every year. We increased the number because now we have certain states where our presence is low in the central India. We are increasing the number of stores in that geography so that we will better serve the online customers as well. On the CapEx per store, we remain the same more or less. We are also opening dark stores in some key cities. We just started that, and we will be closing in the next three months about 30-40 dark stores so that we will serve better for the online customers. In total the 20% growth for pharmacy, part of it is coming from this store expansion. The rest is the same store growth. That's how we. Correct. Any other color in terms of either, you know, volume growth or how should we look at the 20% growth if we break it down? If you break it down in the new stores this year is, you know, given about 2% growth and 18% from the entire basket of existing stores. Like, as usual, you know, like earlier years, there is no big difference except that we are getting a normalized quarter against uneven growth rates in the last 7- quarters we have seen due to COVID changes. Got it. That's helpful. Last question is on Apollo 24/7. I think we have seen weekly active users, which were, I think, 26 lakh in December. Now it's come to 38 lakh. If I were to look QOQ, there has been an acceleration in the March quarter. Can you just walk us through some of the dynamics, what's happening? If I look at overall registrations also 12.5 has gone to 14 million, right? But the percentage change in active is much higher. Is there something that we have been doing that is leading to higher activation? I think you know, Shyam, this is a continuation you know, with respect to what we discussed last time. You know, many of the users come to the platform to understand and consume content. We would continue to work on the content side and continue to enrich our customers and users with more information and more supplementary things you know, which help them towards their continuum of care. I think you know, some of the things that the company is working upon is to have better content. We are also working to enhance our UI UX things. Plus, there are many new features which are coming into the app and the website that also helps. Apart from the fact that the organic traffic is also inching up very fast as compared to the competitors, you know, the previous quarters or the months. I think all this put together piece by piece and coupled with the fact that in January we had some kind of a benefit coming in from COVID variant. There was a lot of traffic into our website and app to, you know, get those medicines which were not there elsewhere. I think all these factors, some internal, some external, is helping us to grow our traffic and continue to see, you know, positive side as far as the traction is concerned. Got it. Would you attribute anything to discounting in the sense that we have been upping our discounts? Do you think that's a hook for online customers? I think on the discount side, we would continue to maintain our position that has been discussed over a period of last 2 quarters, 3 quarters, that we are not going to be the leaders or challengers in the market. What we strongly believe is that customer is looking at a wholesome experience of omni channel. Apollo is the only company which can provide that omni channel play. Probably that is the reason that our discounts are also not as high as the competitors give it. Our discounts are pretty low in comparison to the competitors. I don't see that discount is the reason for us to increase the traffic. The traffic is increasing because of variety of reasons. I think discount is not the card out here that we are playing. Last question, just to zero in, Sanjeev. The 12.5%, would our online discounts be higher, say 13%, 14% and maybe competition is at 18%-20%? Would that be fair numbers anecdotally? You are almost on the right direction. Our discounts would be in the range of about 15%-16%, which is the online side. As far as the competition is concerned, what I gather from the primary and secondary sources is that at times they are upwards of 20%. To that extent, the gap will continue to be there. Got it. Yeah. Thank you and all the best. Yeah, thank you. Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Hi. Thank you so much, and good afternoon, everyone. Can you talk about the capital allocation for FY 20 23? In a sense, what would be the surplus from operations and then how do you plan to deploy that in CapEx, acquisition and deleverage it? Let me start with the surplus. We had INR 600 crore of cash surplus. We have INR 800 crore invested in mutual funds. Definitely, you know, we have cash available for growth. In terms of deployment, INR 350 crore will be used for normalized expense CapEx. The balance will be used to. One is to, we have acquired a brownfield hospital in OMR, which is part of Chennai. We will strengthen our Chennai offering and create a world-class tertiary care hospital there. The second part, that will take over a period of time. It will consume another INR 500 crore of capital over the next two years. The balance will go to Bangalore where we're adding another 300 beds. Clearly another. And this is brownfield. Another 300 crore will be deployed in Bangalore. Over the next two years we're looking at INR 800 crore of capital deployed. This is what we see now. Maybe over the next quarter if there are any acquisition opportunities for brownfield expansion, we will come back to you at that time. Yeah. Thanks a lot for this. Do you think you would be left with surplus to continue leveraging or you think here on it would largely go into growth? It has to go into growth. Sameer, we're at a very comfortable position with debt and equity, 0.45 debt to equity. Even debt to EBITDA wise, if you look at it, you know, even for just if you look at healthcare services, you know, given that our gross, if you drop AHLL, we are at INR 2,300 crore of gross debt without AHLL. Clearly we will get to that EBITDA in the next two years. It'll be a 1:1 debt to EBITDA. We have comfortable levels of gearing, and we definitely would look at growth. Okay, great. Thanks. On the last call, remember you also talked about Mumbai and NCR. Any capital you want to put over there? Well, I think, you know, we have INR 500-600 crores of free cash flow. I believe that when those opportunities come, we will have no problem investing and completing those two projects. Right now there's nothing confirmed that we can share with the investors. Okay, great. Got it. And just on the new project that you have highlighted, it's just 7-acre plot versus 1.5 million sq ft development. I mean, I would think that this would be probably one of the largest single location and probably the most densest, you know, healthcare services, you know, assets. So just your thoughts on this. Of the 650 rooms, you know, what would be the split between, you know, the ICUs, private and the general ward? I mean, is there something, you know, dramatically different that you're planning over there? Sameer, it's a little bit early because we are right now looking at hospitals abroad. Healthcare has changed. While, you know, 30% of our beds have always been allocated for ICU, we are looking at strengthening the centers of excellence. You know, we will have the whole gamut, robotic, cardio work. You know, just very high-end clinically differentiated work in each of the COEs. Plus we will have the mother and child, you know, which I think, you know, is a segment that's wholly underserved. The intent is that this area is really growing that part of Chennai, and we need a strong presence there. We only have a 100-bed hospital in that area. That 100-bed is insufficient. You know, we're noticing that connectivity to Chennai is improving. We do believe there's a huge opportunity to attract foreign patients into this facility. It will be truly best in class. Like we've done for Proton, it will be best in class in all the other specialties, including transplants that we're planning to set up in the next two years. Sameer, just so that, you know, we are on the same page, you know, it is also including the basement area which is there also, which includes the car parks, which is where if you look at it, this will clearly have one of the best car parks available for pre-patient flow into the hospital and out. In, you know, outpatients, rehab, all of that it can enable, and because it clearly allows 1,500 to even 2,000 car parks. Clearly that's one challenge that we will never have in this facility once the outpatient comes in. Okay, got it. Just with your permission, one or two more. You know, this is kind of moving out of the city more towards away from city center towards suburban. Do you think that this is a template that you can use for other metros? And I ask this because then that brings down your land costs dramatically, and then you can have more of such hospitals. No. You know, I think that the heart of the city is really moving, and this is going to be the Gurgaon of Chennai. You know, I'm not looking at it as a suburb. This is where all the IT is, you know, all in OMR. All the high-end schools are in OMR. High-end housing, and it's time that high-end hospitals are also present in this area. We're not looking at it as suburban. Also proximity to the airport and, you know, the fact that, you know, foreign patients reach here much faster. Okay, got it. I have a few more. I'll get back in touch with you. Thank you. Thank you. Please connect the other line. The next question is from the line of Neha Manpuria from Bank of America Corporation. Please go ahead. Taking my question. Ma'am, in your press release, you've mentioned about, you know, growing your diagnostic business to about, you know, INR 1,000 crore in the next three years. Historically, we've always looked at diagnostic, you know, expansion organically. Is that still the case? Are you open to accelerating growth through inorganic acquisitions in diagnostics? I think we're open to all options. Chandrasekhar, why don't you answer that? Yes, ma'am, I will. I think the primary emphasis will be on organic growth. The inorganic option, as ma'am correctly pointed out, is a very different option, and we are open to it, but we have certain contours and rules of how we want to do it. We would not like to do it at the current levels of valuations on which the transactions over the last 12 months have happened. I believe that doesn't leave much of arbitrage for growth after post-acquisition. We are going to look at probably valuations which softening a little better. Second, size-wise also, and the way we are looking at strategic expansion is our core markets being South and East. Our organic acquisition appetite will be in markets that we are getting into, especially in the West and North. We will grow organically South and East and strengthen further, opportunistic expansion in North and West, but at a size and a valuation which allows upside post-acquisition. Understood, sir. That is helpful. My second question is on AHLL. You know, we've also previously talked about, you know, potentially looking at value unlocking in AHLL also, given we have investors there. Any timeline on that? Have we thought about how we want to scale that up? Currently we have closed the year with a reasonable amount of cash balance, and we also are generating cash in the way we are hoping to grow the business this year. I think this opportunistic acquisition will call for certain additional cash to come in, which we will seek at that point of time. As far as unlocking value is concerned, I personally believe that the last two years have not been exactly, you know, favorable to some of the formats which potentially could be considered for such unlock. Mm-hmm. Especially the ones which have been deeply impacted by elective and, you know, some of the outpatient footfall kind reducing, et cetera. At this point of time, I think FY23, we start with a very clear perspective of growing the business in sustainable basis. We are not looking at unlocking value at this point of time within these formats because they may not justify because of the serious headwinds they have received over the last two years. We would like to have one sustained year when we can revisit that thinking. Understood. Sir, has Spectra recovered or gone back to its pre-COVID levels in terms of occupancy? Yes, to that, we've had two waves of COVID last year, as you're aware. Mm-hmm. The most impacted one obviously is Spectra. From a year-on-year basis, actually we have a growth. If you look at the- Yes. Spectra. We have reached on a year-on-year, we actually grew volumes by 42% despite two waves of COVID that impacted. We are in the right trajectory. We've been. The one thing is that there's some backlogs also to come in after post the wave. A cumulative effect of organic growth, plus some revival of backlog, we have a 42% volume growth when it comes to surgery from FY21 to FY22. Got it. Thank you so much, sir. Thank you. The next question is from the line of Ranvir Singh from Sunidhi Securities & Finance Ltd. Please go ahead. Thanks for taking my question. My question relates to Apollo 24/7. Earlier, we aimed to get some 10 crore patients registered in next 4-5 years. Given the competition emerging, you know, around this business. Still, we hold this possibility? I think there are two, three things which we need to think about. One is that Apollo being a very strong brand and there's a lot of footfall which happens across the Apollo ecosystem, be it the hospital, clinics, diagnostic centers, so on and so forth, even Apollo Pharmacy. One is that we have the sourcing from that channel. Secondly, as more and more people are adopting e-commerce, more and more people are transacting into the platform, so that pool is also increasing. I think both these two pools put together, we still believe that, you know, we should hit a target of what you rightly talked about. Obviously, our aim is to get the right set of chronic customers rather than just the numbers. At appropriate time, in case, you know, we think that, you know, this number is to be lower down, I will come back to you. But at this stage, we are looking at 10 crore and we are looking at more of chronic. At what level of revenue or that breakeven would be reached? What we anticipate is that, FY25, FY26 should be the year where the, you know, the B2B business should get breakeven, and the combined entity should, you know, do the backend should be, one year in advance. Those are the years that we are looking at it at this time. Okay. What is your ticket size currently in this quarter, per order? Our ticket size. Currently we are running at about in the range of about INR 900-INR 1,000 as the average order value across the system. This was lower in earlier quarter, right? Slightly lower. The average order value has gone up by about 6% versus the previous months. I think the current, you know, the working that the team are doing is to see that, you know, we are always on the four-digit. Let's hope that in the current quarter we move, you know, plus, you know, consistently on the four-digit number. Okay. One more, if I could. On AHLL side, the footfall has been significantly lower on Q-on-Q basis. Despite that, the number of clinics in the network has increased from 136 to, you know, 254. Was that related to only that in January, the disturbance due to Omicron, or do you see any other reason for that? No, that's the only reason. January and till mid-February, I think we have had the impact. It's one and a half month of the whole 3-month quarter. Okay. It seems we are doubling number of network and revenue. You know, the kind of revenue shows that probably the few clinics were completely dry during this quarter. Is that the correct assessment? Yes, that is. We also had, if you have to look at one other thing that, completely subsided was vaccination. There was near to zero vaccination in Q4. Okay. Okay, thank you. That's it from my side. Thank you. The next question is from the line of Shaleen Kumar from UBS. Please go ahead. Yeah. Hi. Thanks for the opportunity. One thing which I like to understand- Sorry to interrupt you, Mr. Kumar. Your audio is quite low. Is it any better? Yes, slightly better. If you can speak louder, I think it will help. Thanks for the opportunity. One thing, ma'am, when I look at your hospital number, obviously Omicron has an impact. You know, when I look at new hospital, the margin compression is on a higher side compared to a mature hospital. Similar is visible on AHL, which probably because of you know, new centers, et cetera. What specifically is it because of the COVID revenue was higher in new hospital, and then that's the reason for margin compression? See, the margin on surgeries is always much higher. Because of Omicron, we had to cancel surgeries and therefore, you know, the margins got impacted. Also patients couldn't come, so you know, occupancies were low. It's a combination of these two. Yeah. No, but mature versus new, the margin compression is relatively higher in new. That's the only thing, you know, I was trying to understand, like. It's just because of the fixed cost which is there in the business and the operating leverage which is there. You know, the reverse happens when you have a bit of a lower, you know, revenue. We will get back to the 17% levels soon. We were at 14%, you know, this quarter, and we will get back. Sure, sir. Possible to get any update on Amazon bit? You know, what kind of a traction you are getting? Sanjeev. Yeah. Let me just take this question over, sir. Is that okay? Amazon, Sanjeev. Yeah. I'm just requesting, can I take this question? Yes. Yes, yes. We're asking you to take. On Amazon, I think, you know, what is happening at this stage is that we've got people from their tech and product side from Seattle, you know, out here in Hyderabad as well as in Mumbai. What Amazon is looking at is to have the entire tech side stood up before, you know, they kind of get into, you know, marketing on both B2B, B2C, and then, you know, start moving more and more customers as well as the transactions. We expect that the entire technology side to get integrated between the two companies to be over by September or it may slip by a month or so, depending upon, you know, how it happens. Somewhere October end, we expect this to happen. Then from November onwards, I think, the momentum will start happening. At this stage, only couple of pin codes and things have been opened up to look at the flow of the transactions to test the simulations which are being worked upon. As such, the backend work has started in full swing. We'll see more numbers appearing in Q3. Right, sir. Sir, the pricing on Amazon will be independent of the pricing on 24/7 platform? Or will there be a kind of a floor to it like you know going below or they they'll operate completely independently? These are independent platforms, so it will be independent. Absolutely. Just one question which, or rather one thing which we're trying to understand, admittedly that competitive intensity has increased. Now, just trying to understand, is it because consumer behavior is changing, that's the reason that you know, some of the e-pharmacy players are forced to do higher discounting? Or is there, you know, some players are seeing a land grab opportunity, so you know, trying to push right at this point of time. What exactly is happening? Any idea on? It's a good question. I think, to my best knowledge, I think, there are two key things, you know. One is that if you look at the pattern in the top maybe 15-20 cities of the country, you see a lot of adoption of e-commerce happening over there. COVID particularly, you know, last two years, you know, many of the customers have started moving. I mean, they started in general dealing with e-commerce, whether it is the healthcare needs or the grocery or the, you know, a variety of other things, that they normally shop for. One is that there is a consumer pattern or a consumer behavior to look out for convenience, to look out for speed, to look out for, you know, comfort. This is one area which is supporting the increase in the momentum as far as the health tech e-commerce players are concerned. I think second, as far as the discount side, in case you're hinting that some of the competitors are giving more discount to get the land grab initially and then, you know, get the valuation so on and so forth. I think the current times are good times. You know, it is kind of a cautionary tale to everyone out there, you know, who gives discounts if you are about 25%, 30% to get the customers. At the end of the day, you know, that does not make sense. Eventually what is right for the business will happen. I think as far as the second leg is concerned, second leg which is, you know, kind of grabbing with high discounts, this would also start coming down quickly. I expect in a quarter from now, you would start seeing the discounts offered by the competitors, you know, under 20%, which is today at times it is about 25% plus. Agree, sir. Sir, just last bit, I missed on your order numbers, like what kind of order you're seeing. If you don't mind, can you please repeat it? It's around 30,000 per day. That's online order or omnichannel you're talking about? No, this is just the platform driven. Sorry, I should have said that. It is just the platform. This includes pharmacy consultations plus diagnostics. Yes, absolutely. All right, sir. All right. Thank you so much, sir. Thank you. Thank you. Thank you. The next question is from the line of Bismit Naik from RW Advisory Pte Ltd. Please go ahead. Hello? Hello, am I audible? Yes, sir. Yeah, yeah. Ma'am, just one clarification. Healthcare, overall you said you're targeting mid-teens% growth for FY23, and margins can go from 22.6% to around 24%-25%. Is that correct? Correct. Okay. Online pharmacy, you're targeting 20% growth next year as well. Uh- Offline pharmacy, sorry. Yes. Okay, that's all. Thank you. Hello, can you hear us? We can hear you now, sir. Any next questions? Mr. Naik, do you have any other questions? No, no. I'm good. Thank you. The next question is from the line of Tarang Agrawal from Old Bridge Asset Management Pvt Ltd. Please go ahead. Hello, ma'am. Hello, sirs. Good afternoon. Just a question on looking at these three businesses together, AHL, AHEL, and AHLL. Just wanted to get a sense on how transfer pricing is happening across the platforms. For instance, if INR 1,000 is spent on medicines through the AHL platform, or INR 1,000 is spent through diagnostics through the AHL platform, or INR 1,000 is spent through for consultation through the AHL platform, if you could give us how is it gonna be captured across the different businesses? There is a transfer fee which has been agreed upon, you know, for new customers from, you know, being funneled into the hospital services business, which is, you know, depending on, you know, the existing customers which are serviced through Apollo 24/7, there is a transfer fee which has been agreed of 2%. Whereas if you look at the existing, for the new customers which are coming into the healthcare services, we will typically pay them approximately 10% of the outpatient revenues which is generated in the at the hospital level for one year. After one year, they become an existing customer and go back to that 2%. This is because there is a customer acquisition cost which 24/7 also has to incur to bring in customers into the healthcare services. That's the same 10% that we will be paying even for, health checks, et cetera, that is funneled through twenty-four seven. As of now, you know, 80% of the business is self-generated by the hospitals. It's only 20% that is getting generated by twenty-four seven. Of course, you know, our hope is that with time, twenty-four seven will generate lot more revenues to us. Similarly, even on the diagnostic side, you know, there is a sharing of approximately 10%-15% of the revenues which happens between AHLL and twenty-four seven. Got it. In terms and so far as, would it be fair to presume that the tie-up with Amazon would actually be, you know, serviced by the AHEL business and would have nothing to do with the 24/7 business. Would that be the right way to look at it? The metrics of AHEL with 24/7 would probably be similar to AHEL with Amazon in so far as the pharmacy piece of the business is concerned. Yeah, it will be in AHL. You are right. It will be in AHL, which will be the Apollo HealthCo, which is going to be servicing Amazon as well as a back-end. Okay. Got it. Thank you. Yeah. With one more leg into it, you know, for the Amazon Prime customers, you know, we would also be offering them the diagnostic and the consultation and re-consultation services through Apollo 24/7 platform. So to that extent, while pharmacy business of Amazon will get captured through front-end and back-end for the fulfillment side, the entire diagnostic and consultation both ends, re-consultation and a fresh consultation will be through the platform, Apollo 24/7. Okay. Thank you. Yes. Thank you. Thank you. The next question is from the line of Anubhav Aggarwal from Credit Suisse Group AG. Please go ahead. Yes. Thank you. Just looking for a very rough split of the $3 billion GMV that you talked about into these three components, offline, 24/7, and the Amazon partnership. Sanjeev, you have the broad number between offline and online at least. Broadly what we can think at this stage, you know, this is a number that we're targeting in 3-4 years from here upon. I think it'll be about $2 billion as far as the pharmacy line is concerned, which is our own stores, which are 4,500 at this stage and growing by 350-400 year-on-year basis. We also expect about, you know, $500 million to come from the Amazon side. Apart from that, another $500 million-$700 million would be the GMV, you know, coming in from 24/7, which would be around the consultations, the The condition management and many other things. That would be the rough estimate, or very broad number for the $3 billion, you know, by application. Okay. That's helpful, Sanjiv. Second, just clarity again on the pharmacy segment. The first question I asked on the call, I'm still not clear with that. The total combined pharmacy margin marked about 6.1% this quarter, when initially you mentioned that customer discounts have increased from 10.5%, 12.5%. I'm little confused. When you record 24/7 loss, online pharmacy losses, are they captured in the 6.1% or they captured in INR 88 crore, which is, or INR 85 crore which you record below? Where are those captured? The 6.1 is a combined EBITDA, as you rightly said. Our online pharmacy expenses is captured as a part of that. Apart from that, you know, the discount cost is mostly compensated through the margin expansion, and we could see that impact. No, I- Apart from. No. Sorry, sir, but I still have the confusion. I'm not sure that, so the 6.1% includes the 24/7 losses. Not Apollo 24/7 losses, Apollo 24/7 expenses because the delivery to the, you know, customer is happening from the Apollo pharmacies, which is front-end entity. The cost incurred there is almost about 1% of the revenues. That has to be, you know, factored into this. Okay. You have delivery costs coming into the revenue side of the pharmacy business, which doesn't include that INR 85 crore. Technically it could be, it could have been included as part of 85. As of now, that is part of the 6.1% which is being reported now, the logistics cost. Just to clarify, the online delivery is happening through the front end business where the delivery costs are captured, which was not there last year. To that extent, there is a margin compression both on account of the expenses as well as the increased, you know, customer discount. We could largely compensate that with the margin increases. This quarter, how much would have been roughly online sales which have been recording that revenue? Say about this quarter alone, about INR 70 crore. You're saying roughly about INR 7 crore kind of number is impacting the margin? Yes. Even more than that. It will be about INR 10-12 crore complete delivery costs and, you know, attributable to that segment of the business. When you talk about INR 84 crores, this is largely the non-transaction expense. This is just a fixed cost, let's say the personnel cost, which is, let's say, the corporate headquarters kind of costs is attributed that and the promotion marketing costs. Look, the online delivery cost, which will be, you know, fixed, you know, irrespective of the deliveries, you'll have a fixed online delivery cost which account for almost, you know, 6% of the revenues, online revenues. Apart from the fixed cost, if you add up that is coming to about INR 10 crore-INR 12 crore, which has impacted my margins for the quarter. A similar number in the last quarter is very insignificant. That's clear. Corresponding Q4 is very insignificant. That's why if you see that Q3 versus Q4, there is a margin expansion. While Q4 versus Q4 there is a margin compression. Okay, thank you. Thank you. We'll take one last question, which is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Hi, thanks for the follow-up. Just a couple of questions on 24/7. How many of your offline stores are really, you know, integrated into online, you know, business? And second is, what's your fill rate for online, you know, prescriptions? And I ask this, because, you know, you're not operating on a super pharmacy or a warehouse-based model. If you can answer these two. Sanjeev. Yeah. At this stage, you know, we have lit up around 1,500 stores out of 4,500 stores of the network that we have it on the, on the AHL. 1,500 stores are based on the pin codes, based on the transactions flow. This is all the algorithm-based, you know, placement of stores against the orders that we're generating in various geographies. About 1,500 have been already lit up. That is the answer to the first question. If you could repeat the second question, sir. Yeah. Second question is the fill rate. I think fill rate is to the tune of about 90% plus. We do have support other than stores. We do have support of LUDC, CUDC, and these are the, you know, kind of mini DCs which we have placed at appropriate locations to just ensure that in case at the store level we have about 90% of fill rate for any order. And one or two SKUs is missing, then obviously immediately the nearest DC, you know, ships that particular SKU to the store and the entire order gets to the customers on an immediate basis. It's a network of 1,500 stores being lit up, plus CUDC, LUDC to ensure that you know the fill rate is very high. As far as SLA side are concerned, more or less we are 95% plus side on the SLA promise to the customer versus the delivery time. Okay, great. Thanks. This is very helpful. How do you see this rollout over the next 1-2 years? Again, this all will be algo driven. What happens is that as and when you get you know more and more orders. Everything runs on a pin code basis. Nineteen thousand pin codes. System keeps looking at the pin codes and pin codes orders versus the fill rate versus delivery time. All these three things on a continuous basis, they keep looking at it. You know, we periodically review it something like 15 days cycle we review it. Depending upon this algo, we get to know that you know where we are getting more traffic and where we need to increase, we need to strengthen and accordingly we take a call. I guess next 3-4 years, maybe 30%-40% more capacity will build up and then we light up more stores. That should be good enough at this stage. Okay, thank you so much. Just one final on equity raise for AHL. So the question here is, you know, can we, you know, continue if it doesn't happen over the next six months, you know, how critical it is, you know, for the build-out of this business. No, I think we surely can, because the pharmacy division itself has cash. I think the parent company also has enough to support this. Definitely, I think not just for six months, but even if it takes nine, I think we're there to support. Suneeta, is there a big gap between bid and ask, or, you know, how should we think about it? Are you talking to new people? I mean, what's really, you know, gone astray? Just to say that there is very good interest in 24/7. It's just that, you know, the environment was not the right environment, and we believe that in this current environment that we would not get the valuation we deserved. We decided to postpone it by 6 months. There is sustained interest in 24/7. Okay, great. And- Thank you, Suneeta. Yeah. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Ladies and gentlemen, thank you for taking time out for this call. As you can see, in spite of two waves of COVID, I think, you know, the whole entity, Apollo Hospitals, the hospital division, the pharmacy, Apollo 24/7, and Apollo Health and Lifestyle have really recovered. Beyond that, just looking at the future and this year, which is really, we're already present in the future, we are looking at a very strong trajectory of growth, and we hope to deliver on our promise. Thank you again. Thank you. On behalf of Apollo Hospitals Enterprise Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.