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, Rutuja. Good afternoon, everyone, and thank you for joining us on this call to discuss the financial results of Apollo Hospitals for the second quarter and H1 of FY 2023, which were announced yesterday. We have with us today the senior management team represented by Mrs. Suneeta Reddy, Managing Director, Mr. A. Krishnan, Group CFO, Mr. C. Chandra Sekhar, CEO of AHLL, 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 are 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. Thank you. Thank you, Mayank. Good afternoon, everyone, and thank you for taking time out for this call. I hope you have received the documents which were shared yesterday. We have reported a strong all-round performance in quarter two FY 2023, with each of our distinct verticals building on the momentum of quarter one and demonstrating a very healthy growth and trajectory. Healthcare services IP volumes were 19% higher year-on-year and 13% quarter-on-quarter. While medical discharges increased during the quarter, reflecting the seasonal nature of the business, surgical volumes also grew. In H1 FY 2023, IP volumes registered a growth of 24% year-on-year. Overall, quarter two FY 2023 occupancy across the group was at 68% compared to 60% in quarter one FY 2023. The occupancy in mature hospitals was at 70%. In new hospitals, at 64%. Our pay mix continued to improve, with cash and insurance segments registering a quarter-on-quarter improvement of 16% and a year-on-year improvement of 10% in revenue. Overall, ARPOP was stable at 50,353, versus quarter two 51,999. ALOS was at 3.44 days. Against this backdrop, let me walk you through the consolidated financials for the quarter. Consolidated revenues grew by 22% on a year-on-year basis to INR 4,251 crore after normalizing for COVID vaccination revenue in quarter two FY 2022. Healthcare services grew by 12% year-on-year and quarter-on-quarter to INR 2,264 crore. Mature healthcare services grew by 15% and 10% quarter-on-quarter to INR 1,592 crore, while new hospitals grew by 4% year-on-year and 17% quarter-on-quarter to INR 673 crore. Revenue for Apollo Health and Lifestyle was INR 318 crore for the quarter. A 12% growth year-on-year after normalizing for COVID-related revenue and 9% growth quarter-on-quarter. Apollo Diagnostics recorded its highest ever revenues this quarter and crossed the landmark of INR 100 crore. Q2 FY 2023 revenues at INR 104 crore. 52% year-on-year growth after normalizing for COVID-related revenue and 28% growth quarter-on-quarter. Apollo HealthCo core revenue grew by 43% year-on-year and 13% quarter-on-quarter to INR 1,668 crore. Private label sales co-contributed to 11% of the revenue in the pharmacy distribution business. We opened 241 net new stores this quarter, taking the total number of stores to 5,004. The GMV of our digital platform, Apollo 24/7, was at INR 294 crore, a growth of 38% quarter-on-quarter. EBITDA. Q2 consolidated EBITDA, post Ind AS, excluding Apollo 24/7 operating costs, stood at INR 740 crore. This is a 12% year-on-year and 17% quarter-on-quarter improvement. Healthcare services EBITDA, post Ind AS, was at INR 571 crore, a year-on-year growth of 13% and quarter-on-quarter growth of 18%. Healthcare services EBITDA margins were at 25.2%, a year-on-year expansion of 190 basis points and a quarter-on-quarter expansion of 129 basis points. Mature healthcare services margins are at 28.1%, an improvement of 312 basis points year-on-year. New healthcare services margins were at 18.4%. Apollo Health and Lifestyle EBITDA was at INR 38 crore, a 28% growth on quarter-over-quarter. Pharmacy distribution EBITDA, post Ind AS 116, was at INR 131 crore and margins at 7.84%. Apollo 24/7 operating cost was at INR 174 crore for quarter two FY 2023. This includes a non-cash ESOP charge of INR 22 for the quarter. Consolidated reported EBITDA was at INR 565 crore due to an impact of Apollo 24/7 operating costs as compared to the EBITDA post Ind AS of INR 615 crore in quarter two FY 2022, and INR 491 crore in quarter one FY 2023. PAT. Consolidated PAT is at INR 220 crore prior to adjustment of a one-time tax gains charge of INR 16 crore. Operating metrics for Apollo 24/7. Our digital health platform, Apollo 24/7, continues to witness strong momentum. It now has 20 million registered users and completes over 50,000 omnichannel medicine deliveries per day. In addition to the 5,000 virtual consults and diagnostic sample collections. The GMV run rate is firmly on track to deliver INR 1,500 crore for this fiscal, and we will be the number two digital player in the country. We continue to see steady rationalization in loyalty costs and discounts, and expect them to trend lower going forward. Looking ahead on our healthcare services business, there is headroom for growth in occupancy, and we hope to see occupancy closer to 70% over the next 12 months. This will unlock operating leverage and will further strengthen margins. We expect payer mix to consolidate, international business to grow with our focus on our centers of excellence, which will drive high-end clinical work. Our cost and productivity initiative will improve margins by 100-150 basis points over the next 18 months. On retail health, our specific focus is on primary care and diagnostics. We expect the diagnostics business to reach INR 500 crore of revenue by the next fiscal and achieve INR 1,000 crore of top line over the next 3 years. We believe we have the depth of clinical understanding to deliver the high-end diagnostic testing and will therefore be a reference unit for hospitals from around the country. Our pharmacy distribution business will sustain its momentum and margins. Apollo 24/7 is already the fastest-growing healthcare platform in this part of the world and is poised to break new ground in terms of a seamless continuum of clinical care that it will offer to the consumers. In our view, we have created four robust pillars, each one with an independent value proposition and positive forward trajectory. Most importantly, we are a 360-degree healthcare ecosystem, and the pillars are interconnected in a way that offers limitless potential for synergies and to integrate the healthcare offering holistically for the consumer. We believe strongly in their network effect and that our work on touching so many lives in our hospitals, pharmacies, retail and digital health business will create a strong understanding of our consumers and help forge deep relationships with all. Above all, we have an unparalleled track record on being clinical, clinically oriented at our core, and we believe that this is what differentiates us significantly and sets up a positive outlook. On that note, I would like to hand over to the moderator. I have our CFO, A. Krishnan, with me. Obul Reddy from the pharmacy, Chandra Sekhar from Apollo Health and Lifestyle, and Sanjiv from Apollo 24/7 with me to take your questions. Thank you. Thank you very much. We will now begin the question and answer 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead. Hi. Good afternoon. My first question is on Apollo 24/7. Can you also share the revenue number booked as per the GMV that has been recorded in this particular quarter? Sanjiv, you have the number? Sanjiv? Yeah. For quarter two, INR 294 crore was the GMV that we did, and the revenue which got recorded is INR 158 crore. This is a part of those two things. You know, one is the online pharmacy distribution and plus the service revenue that we earn on the consultation and the diagnostic side. INR 158 crore versus INR 294 crore of GMV for the quarter. This 158 is what we recorded in Apollo HealthCo. If you look at the overall, if you look at APL, that would be a higher number. Because what we record in is only the distribution part of it, which is around 80% of what we typically record in Apollo Pharmacies Limited. This INR 158 crore revenue, that includes a take rate on the direct sales scope, plus also the distribution in association with those revenues. Am I reading it right? That's right. Yes. Can you share what is the broad breakup of the INR 150 crore of operating costs with regards to Apollo 24/7 in this particular quarter? Yeah, sure. Typically, I mean, the scale that we have today, which is an INR 1,500 crore run rate, you know, annualized run rate, primarily we are spending on two important elements. You know, one is the product and tech development, and I think this will continue for another two to three quarters, which is about 25%-30% of the cost, which goes into building up the product and tech. Secondly, you know, we are also building up the operations network or let me put it this way, capacity. Something like, you know, Mumbai, we are putting up our dark stores, and so this operations capacity takes around 20%-25% of the cost today. Apart from that, we are also putting money into clinical engine support systems and various other, you know, the new verticals, the new revenue segments which are going to come, it could be in the range of about 10%-15%. Apart from that, another 10% goes into the support costs, and the balance gets into the user acquisition and the branding. Right. What is the difference in discounting between online and offline for you? As far as the online discounting is concerned, we maintain, you know, what we discussed in the previous call also, that today we are at about 18% as far as the online discount is concerned, although in the market you've got very high numbers, you know, which are being, you know, pushed by various competitors. We continue to maintain our position of providing service and, you know, continue our care versus playing the discount card. As far as the offline is concerned, the discounts are in the range of about 13%-13.5%. The difference between the two discounts, if sales is booked on an online channel, that is also part of this operating cost of 24/7, right? Which is basically the customer acquisition cost in some sense. Yeah. The entire customer acquisition cost is part of the expenses that we're talking about. Sure. Understood. One final question, if I may please. What's the timeline on the Gurgaon hospital acquisition that has been done? I mean, how far are we from commercialization of that facility? It will take 18 months. We have started work. Okay. Got it. Very clear. Thank you. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Yeah, good afternoon, and thank you for taking my question. Just the first one on the new hospitals. Just in terms of the YoY performance, excluding vaccination also around 4% when otherwise it's 12% for the group. So what's happening there? Is it just occupancy seem to be down, but just wanted to get your color on the slower growth rate. When will this likely start inching towards more corporate level? In terms of the new hospitals, I think some of them witnessed a slowdown, but they are actually, if you look at October, they're back on track. We have put more clinical specialties there. Initially, you know, we did not have the type of offerings that we would have in a Tier-One city. We've added this, and this will take a little bit more time to pick up. In the prior year we did have COVID occupancy, which is why, you know, if you remove the COVID occupancy, there is growth. And we, you know, we are quite hopeful that with the pickup of insurance, that more people now have access into Tier 2 hospitals. We firmly believe that, you know, the 18% margin the new hospitals delivered will improve significantly by another 200 basis points in the next 12 months. In the base also, you know, what happens in the new hospitals is because there was this COVID, we didn't exclude COVID revenues at all, right? We only excluded the vaccination to show you the like-for-like growth. COVID revenues also had a lot of inbuilt hospital-based pharmacy component. If you look at the volumes that these hospitals are doing now, we are quite. We know that the volumes are doing well and, you know, even the surgical volumes are picking up, as Ms. Suneeta said. You have to rebase that for that, you know, in the base year. The base year had this hospital-based pharmacy element in the COVID because COVID had more medications on, even on medical discharges than some of the others. Which is why, you know, it looks like 4%, but as you go forward, you will see that it will start doing better. Yeah, Krishnan, just the guidance of 70%. We also expect new hospitals to kind of reach that number over time, right? Yes, yes. Yes, yes. Okay. Got it. Second question, and I can get back in the queue after that, is in the diagnostic services. Non-COVID revenues have grown 52%. So if you see some of the other listed peers have been struggling at 6%, 7% for them organically. So can you also comment about the general chat around competitive intensity in the diagnostic services space? Where are you able to grow? Is it network expansion that's helping you? Is there any sense of same-store growth for you as well? Would be helpful. Thank you. Mr. Sekhar? Yes, ma'am. I'll answer that. As you rightly pointed out, I think we are growing from a slightly lower base, so hence we continue to have network expansion-led growth. On a same-store basis, while it may not be exactly accurate, but thereabouts, the growth is over 15% at this point of time, 15%-20% kind of range at this point of time. We continue to keep growing our network, which we'll add because we are in the mode of market saturation. On competition intensity, I guess the competition intensity does affect us in the routine testing box, where we are seeing. Our own journey has clearly been on moving across the curve in terms of specialized and semi-specialized testing. Towards that, we have made arrangements to move our testing menu upward from the routine basket. It does affect us, but we are adding other strategies to influence that. This 15% same-store growth, would it be volume, price, any color there? Volume. We are holding prices. We are not dropping prices, but we are also not increasing prices. Got it. Yeah. Thank you and all the best. Thank you. Thank you. The next question is from the line of Harith Ahamed from Spark Capital. Please go ahead. Hi. Thanks for the opportunity. For the combined pharmacy business, you've disclosed posting the EBITDA of INR 167 crore. Will you be able to share the pre-EBITDA for the business, for the combined pharmacy business? Sorry. Pre-EBITDA. We'll come back to you. We don't have it with us now. We will share it with you offline. Yeah, sure. On the Amazon partnership, can you provide an update of the current number of orders per day of the GMV from that alliance? The revenue share with Amazon, where exactly does this sit? Is it entirely in the front end, or is there an impact of this on the back end, HealthCo numbers as well? Essentially, right. Amazon, I think, you know, we are on the path, you know, of building up the entire tech integration between, you know, their systems and our systems. We are still hoping to complete this by December, so I don't see that, you know, any challenge with respect to any delay over there. I think once the entire customer journey is integrated between the two platforms, you know, then probably the numbers will also or the orders will also start going up because Amazon will also start doing a little bit of ATL, BTL and the other digital initiatives. At this stage, you know, we approximately get about 1,200-1,500 orders per day, and this is essentially in, you know, places like Mumbai and Kolkata, where we are doing the pilots. These pilots have to just ensure that the integration has happened well, and the experience on, you know, end-to-end, you know, from booking to delivery is, as per the standard. This is a pilot stage, number one. Number two, yes, as far as the sales is concerned or the revenue side is concerned, revenue gets booked into front end, which is Apollo Pharmacy Limited, and to the extent 80% of that gets booked into pharmacy distribution in Apollo HealthCo. The revenue share with Amazon, that is entirely at APL or is there a component of that in Apollo HealthCo as well? The revenue share is only between Apollo Pharmacy Limited and Amazon. Okay. Understood. Last one from my side on the AHLL. The INR 100 crore revenues that we have in the diagnostics business for the quarter, is this reported net of revenue share with Apollo 24/7? Yes. Okay. There's a decline in margins on the primary care side. The quarter-on-quarter decline is just quite sharp. We used to have mid- to high-teens% margin run rate in that segment, and this quarter it's at 8%. Any particular reason that you would wanna call out? No, there are some one-offs and this particular fixed cost enhancement is not going to remain. We will revert back to the earlier trends. All right. Got it. Thank you. It's unique only to this quarter, but we have the visibility on getting that correct. Got it. Thanks. Thank you. The next question is from the line of Kunal Randeria from Nuvama Wealth. Please go ahead. Hi. Good afternoon. Last quarter, your surgical revenue I think was around 68% of the total revenue, and I think it was around 60% during COVID time. Could you share what would it be in this quarter and what is the headroom that you see? It would be in the same range. It would be a bit lower this time because, you know, we had some medical volumes also. There was a surge in some medical percentage overall, but, you know, it will be around the 65% range. Right. Should we, maybe the next one or two years, expect it to be around this level? Yes, yes. It will continue to be at this level. There could be an upward bias also on this as, especially when the new hospitals, in particular, the surgical mix goes up, which is the focus. Because in our most mature clusters, if you look at places like Chennai, they would be closer to 75%. Right. Okay. As far as your payment goes, has there been any sort of material improvement from pre-COVID days? It's been from pre-COVID days. Yes, it has definitely been. It has improved significantly because both the, you know, the retail, which is the cash payment as well as insurance has seen a good uplift. Insurance is over 42% of our revenues now, which was closer to 35%. That is a good uplift on that. The, you know, overall institutional business has also come down. This is what is visible from the pre-COVID days. Now we are, it's stable versus Q1. Sure. Just lastly, you know, I think you did mention what the online discounts, you know, for medicine are currently. We have seen their online players discount levels at around 18%-20%. Maybe let's assume 6 months or 12 months down the line, this is the norm for the industry. Should we also expect your discounting to go up? No. I think, more than discount, the customer is also looking at the other aspects of the order, which is to do with no split, which is to do with, you know, getting the entire SKUs in one go and the right quantity, and at the right time. We Apollo 24/7 has been a pioneer in delivering the entire order in two hours, and that is what got copy-pasted by competitors out there. We strongly believe, and this is what customer retention ratios and the data also suggests is that, while we are low on the discounts, you know, the competition gives 22%. We are managing between 17.5%-18%. Customers are not walking away from our platform. I think, you know, we do not believe that our discounts will go up. In fact, given that our service levels are extremely well, and customers are, you know, loving it, there is a very high repeat. There is a possibility to maintain or lower the guard by maybe another 50 basis points. That is how we look at as well as a discounts are concerned. That's interesting. Okay. Thank you, and all the best. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead. Hi. Thank you for the opportunity. My first question is, can you update us on the international patient segment? How has been the pickup, where it has come back, compared to pre-COVID level, et cetera, and how do you see it moving ahead? It has not yet reached the levels of pre-COVID. What has happened is that in some cities, you know, it's back. Having said that, I have to say that connectivity has just about opened up, and we hope to see quarter three and quarter four much better. Currently, it's at 6% of revenues, and our target was 10% of revenues for this year, moving on to 15% the next year. In terms of revenues, it is, you know, ahead by 27%. Oh, sorry, 27% compared to what level? Pre-COVID in terms of revenue. Okay. Got it. My second question is on your AP and Telangana cluster. There, what we have seen in past two quarters, performance has been depleted. This quarter revenue declined 15% and ARPO around 20%, whereas the IP volume continued to grow at 15% and occupancy also improved. Can you just elaborate, like, what is happening on that particular segment? There has been a pruning of some of the institutional cases there in that segment because in that region is where we have more bulk of the you know state government cases, et cetera, there. We have been you know pruning it down to improve on the profitability overall. That has been part of our plan also, which is why you're seeing that come off. Okay. When, like, you are likely completing this pruning process and then coming back on track? It's already done now. If you look at Q2 overall net revenues, net revenues have gone up versus the Q1. In this sector it was INR 315 crore in Q1, now it's INR 356 crore in Q2. Clearly, now it's well behind. Even the losses is back at the company level of 3.6% approximately. Okay. My final question is on your cost trajectory for Apollo 24/7. Did you mention you will continue at around INR 1.5 billion for next two quarters? Earlier you mentioned this quarter the cost will be INR 5.4 billion, so it will likely exceed, right? Then if you can comment on the ESOP also, like what are these charges related to? Okay. Sanjiv? So I think as far as the expense side is concerned, you know, let me just refresh what we discussed last time. Last quarter we had INR 1,000 crore of outflow for the year, which we increased to INR 1,500 crore of GMV. We marginally increased our expenses by about 15%-20%. We thought that. This is a time to build these teams, this is a time to invest a little bit more behind people as well as the technology. I think we strongly believe that we should be able to close the year with less than INR 600 crore. As far as the overall expense line is concerned. I think between INR 575-600 crore that should be the number for the expenses as far as 24/7 operating cost is concerned. Checking on the ESOP. This is a phenomenon with all the startups where you know the leadership team as well as some of the key resources in the company have got ESOPs. You know the team was approved and we gave ESOPs on thirty-first of July. This cost is putting into the two months. This is as per the accounting standard. It's a non-cash expense. Twenty-two crore is a charge for the last quarter. Will similar level continue or this is something one-off? This will continue. This is a charge over a period of the vesting period. I think this will continue quarter on quarter. Okay. Thank you. I'll get back in touch. All the best. Thank you. The next question is from the line of Lavanya from UBS. Please go ahead. Lavanya, please go ahead with the question. Your line is unmuted. Oh, sorry. I was on mute. Can you hear me now? Yes, we can. Please go ahead. Thank you. Thank you so for the opportunity and thanks, ma'am, for the good set of numbers. My question is on Apollo 24/7 and overall GMV. Can you help us understand what is the split of pharma and diagnostics and consultation in the overall GMV for the. For the quarter? Yeah, yeah. That's okay. Out of INR 300 crore or INR 294 crore, we have INR 240 crore for the pharma and diagnostic and consultation is about INR 25 crore and INR 30 crore separately. Okay. Here, the revenue of INR 158 crore, it includes online distribution for pharma and the take rate for all the segments or only pharma for Apollo 24/7? Yeah. The first one. It includes the take rate for all the sectors, plus the online pharmacy distribution. Okay. Got it. On the employee cost, there is a sharp hike in employee cost. Is there any one-off in this particular quarter or is it something like the same levels which is going to sustain on the upcoming quarters also? Looking at the consolidated numbers, is it? Right. For the consolidated numbers. Consolidated numbers, two things, right? One is we have the increment setting in the current quarter from July across the company. Typically that is when the increments get factored in. The results that we are given is after factoring in the impact of the increments, et cetera. Also the 24/7 ESOP charge is part of the employee cost, which is a INR 22 crore, which is a non-cash charge, which we have already told you, which will continue to be there beyond this quarter's for at least a couple of years. This ESOP related cost, that will be there for how many quarters? Any guidance there? It will continue for three years. Okay. For three years. At the vesting period. Okay. Employee cost will sustain at this level, overall for the consolidated level, right? There's no one-off, any one-off. Yes. Okay. Got it. AHLL, you mentioned there is some one-off related to the primary care business. Can you quantify that? Any broad number and how do you see the margins moving for the overall AHLL segment in the coming quarters? Chandra? Chandra Sekhar? Yes, ma'am. I'm answering that. The current aggregate AHLL level, we are seeing the margin at above 12%. If you look at it and break it across the various segments, diagnostics is in the 12%-14% mark. Primary care would be around the 4%-5% mark at this point of time if you exclude those one-off additional expenses that we've incurred. These are on account of primarily a ramp-up of network. We have set up a very robust network growth, which resulted in some additional hiring and additional costs which will even out in the coming quarters. We will get back to the 5%-6% mark and hopefully increase it up to the 10% mark in the primary care level. Specialty care is delivering in the region of 11%-15% and will continue to do so. At an aggregate level, we are open to inch up to the 12%-15% mark and onward. Our margins in the diagnostics are slated to continue to be at this level for a while as we keep growing and investing. We will aspire to reach the industry benchmarks in the 20%+ in the years to come. We are currently in the next 2-3 years will be consistently growing our network and hence there will be some evening out on our EBITDA margins. Okay. If I understand right, at the overall AHLL level, the margin's likely to remain at the same? Yeah. Up to 12% maybe will improve a little bit to the 15% mark. We are hoping to improve it to the 15% mark. Okay. Got it. On the healthcare business, how are you seeing this current ongoing quarter going on? Do you see any seasonal weakness or how is it going like overall hospital business? The trend generally is, you know, that the holidays, the four holidays that were in October, I mean four days. October was somewhat muted, but we're getting back on track, and November and December should do really well. Okay. Okay. Got it. My last question is on institutional patients. You mentioned that you're consistently reducing that with like in Telangana and AP. Is it completely done or you are still working on reducing institutional patient proportion on the overall base? Anywhere else is any work going on or reducing? It's an ongoing process across the company. We will keep looking at those options of, you know, across because especially with some of these newer perspectives from CGHS, where, you know, even pharmacies are getting discounted. It may be difficult for us to sustain that in some of the places where we give CGHS prices even for some of the PSUs. We keep looking at it and seeing whether there is opportunities to prune that. In AP and Telangana, bulk of this behind us is what I meant. There's only 1% of our revenue that is coming from CGHS currently. The overall institutional, what is the percentage of revenue at this point of time? CGHS is 1%. State government schemes is 2%, which is also, you know, like Ayushman Bharat. Public sector, 7%. Okay. Got it. Thank you. Thank you so much. I'll come back in case. All the best. Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Yeah, thanks for taking my question. Ma'am, one on the mature hospitals margin. You were already at, you know, 27%-28% margin, if I look at the first half numbers. Is this number sustainable? You know, we've managed to grow it, you know, year-on-year, quite well. Incrementally, how much of this is dependent on ARPB improving, given where capacity utilization already is for the mature hospitals? I think there are three factors that come into play. The first is case mix. As we move to a higher end case mix, ARPOB improves. The second, I mean, if you're thinking about in ARPOB and margins improve. The second is that, when you look at margins, when we increase international patients, we will continue to see an improvement in margins. The third, of course, is cost. We are looking at 100 to 150 basis points improvement coming from cost over the next 18 months. There will be a structural improvement. All this will contribute to, definitely a growth in 150 basis points growth in margins over the next 18 months. Of course, you know, occupancy matters because it certainly leads to better margins and better revenue and better profits. Understood. And second question on the ARPOB, you know, our metro ARPOB of over 60,000. Is there, other than case mix, does this improvement include any price adjustments that we have taken during the year? Is that done for the year? Yes. Yes, it's taken and done. Understood. That's factored into the numbers that we are seeing in the quarter. Yes. Yes. Okay. My last question on Apollo HealthCo. Ma'am, in your interview this morning, you mentioned about, you know, fundraising in Apollo HealthCo by the end of this calendar year. If you could give us an update on that. Sure. The financial year. Not the calendar year, but it would be more of the calendar year, which is March 31st, we will be able to do it. There would be fundraising in the digital business by the end of this fiscal year. Yeah, fiscal year. Understood. That would mean our ability to increase the spend, you know, in the digital business in FY 2024. Would that understanding be right? SanjIv? No, I don't think that the fundraise would mean that, you know, we need to spend more. I think, you know, we have our own, you know, path to profitability, and I think we are on that course. By no means, the fundraising is going to, you know, increase our expenses. With the fundraise, we might look into some kind of an acquisition, because that is what we have been thinking through to speed up the process. Yes, no increase in the expenses, ma'am. Understood, sir. Thank you so much. 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. Just taking from the previous participant, any change in the earlier planned fundraise, which was roughly $500 million, you know, kind of a inflow? Yes, Sameer. I mean, I think across the world, no one is raising that much money at the current market price, which does not factor in the true value of the assets or the revenues. We're only looking at INR 200 million right now. Oh, I see. Okay. What happens to the slump sale INR 1,200 crore flow back into the parent company? That will be in the next tranche at a better valuation. Okay. Okay, got it. The second round would be, you know, anytime in the foreseeable future or that's something for the later? You know, if I give you a number now, you'll hold me to it. A number and a date. Let's cross this first threshold, and then you'll see value build up in Apollo 24/7 because it is the fastest growing health digital platform. Okay, got it. Very clear. We have a lot of interest. Having said that, I do have to say we have a lot of interest. It's for us to take it at the right valuation and at the right time. Okay. Okay, that's fine. The second is on the brick-and-mortar expansion in pharmacies. There I think you've already done 450+ kind of store adds in first half. I think a full year target was 500. If you can just talk about it. Thanks for the math that you provided. Looks like the Central India is something that you have not tapped at all. Your thoughts on that. No, we don't. We are now planning about 800 stores expansion for the current year, and part of the new stores will move into Central India. Except in two states, we are there everywhere. You know, Madhya Pradesh is the only place where we don't have presence. In other state we just started, and we will ramp up in the next two years. Okay, that's great. Just on the hospital side, I mean, good to see ALOS now stabilizing around 3.4. That's really commendable. Do you think you're gonna maintain at this level? Second is on occupancy. Practically speaking, at a hospital level, what's the sort of upper limit to where you can take it? First on ALOS, I think 3.4 is a reasonable ALOS. But because we've introduced robotic surgery, we're seeing ALOS come down. In 25% of our business, it's only about, you know, less than two days. As this grows, as the segment grows, we do believe there will be a further reduction in ALOS. But this will take another two years to see significant improvement or anything that we can really talk about. Occupancy. I think, you know, Apollo is probably the only one that has headroom to grow. You can easily take it up to 82%-83%. We believe that we are working towards this. We have, you know, 2,000 beds that we can fill. Like I said earlier, whatever we do is margin accretive, profit, you know, good for EBITDA, good for revenue and profitability. Our target this year is 70% on a group-wide basis. I think we're moving close to achieving that target. Okay, great. Thank you so much. Thank you. The next question is from the line of Shaleen Kumar from UBS. Please go ahead. Yeah. Thanks for the opportunity. Most of my questions have been answered. Thank you so much. Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead. Yeah, thanks for the opportunity and good afternoon. First question is on, you know, there was a news flow on the CCI probe for few of the hospital names. Could you confirm that Apollo also received that? If yes, what is our, you know, course correction here? If not, I just wanted to understand, how should we build ARPOB? You gave a good clarification on case mix, you know, payer mix, et cetera. How should we build in ARPOB for the next two years? On the CCI thing, it's only relevant for Indraprastha, where Apollo Hospitals holds 25% shareholding. With regard to ARPOB, definitely the way that we look at it is, it's a function of case mix, it's a function of payer mix, and we've shown an improvement in payer mix, and the third is ALOS. You know, I think these three levers are what we use. International patients coming back will definitely show an improvement in ARPOB. In line with inflation, what is the price hike? We have taken a matter of 7% in that over the past. I think, you know, with the inflation and this, broadly around the 7% is fine to go with. Okay. No, but I was trying to understand on the price hike that we annually take it, so inflation is now high single digits%. Do we take it in line with inflation or ours is a gradual 3%-4% kind of annual hike on the pricing part? On healthcare, inflation is 5%, and we've absorbed that in the price. Okay. Got it. Fair enough. Secondly, some more color on, you know, the brownfield and greenfield. You talked about Gurgaon, which is 24 months out. What are the, you know, mid to near-term kind of opportunities we are looking at, especially on the brownfield side, if any? For us, you know, unlike some of the others, we clearly have headroom for growth in our existing businesses itself. With the creation that we have already done of the assets and 68% occupancy that we have, we can clearly take that to the 72%-75%. You know, Proton is a big opportunity. It's doing well. We can take it, you know, we can double the revenues in Proton over the next couple of years. You know, we still have high potential in taking New Bombay higher. All of that itself is significantly higher. While Brownfield is one that, you know, we are looking in Bangalore in particular, but with that and in Mysore, we also have Bhubaneswar. Some of those are opportunities which will come earlier. With that, more than that, you know, our focus is to increase the revenues in the existing hospitals, look at seeing how we can grow oncology further. You know, we are the largest oncology revenue in the country today. We would like to further grow that. We are focusing on some of those specialties to see how growth can come within the healthcare services revenues itself at a faster pace. Just in addition to that, we are adding, I mean, if you look at Gurgaon, Bangalore, what we're doing in Chennai and, you know, what we plan to do in Kolkata, we are adding 2,000 beds over the next 3-4 years at a cost of INR 3,000 crore. Okay, lovely. Some more color on this Apollo 24/7 kind of funding, et cetera. You talked about, you know, plans for around $200 million now. Is it that, you know, the stake sale on that entity would be around 10% or it is now reducing? It would be roughly around that or lower, right? Because if you look at it, we continue to be focused on the INR 2.5+ billion valuation that we have been talking of. Even though you know, valuations across have come down, here our delivery has far outperformed what we had in our plan. Okay. Yeah, that's what I was trying to get. It should be, it would be around ± 2.5, right? Yeah, that's the plan. Oh, okay. Lovely. Okay, great. Thank you. All the best. Thank you. Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thanks for taking the question. On the offline pharmacy business, since we've upped the, you know, the expansion target now, how should we look at the network size, say, in another two, say by FY 2025? We should continue to add at least 500 stores per annum, and we'll see that, you know, we'll be about 6,500 stores by 2025. Sandy, by that time, what kind of EBITDA margin should be there for the offline business? See that makes, you know, as long as the expansion is, you know, continues, we will have some impact on the cost impact on the profits. We expect to be around 6% on the combined business. 6%-6.5%. Just pure on the offline piece itself? That's what I'm talking about offline. We are currently at about 7.9%. That is on the back end, what you are talking. What I said is about combined business. If you compare it continues to be at the same margin. Okay. Whatever impact we will have on account of expansion will be on the front-end side. Right. Likewise, on the online business, the GMV target that we have for this year, about INR 5,000 crore, which we are well set to exceed. How should we look at this number, you know, over the next couple of years? Yeah. I think you know what we're targeting is that the next year should be in the range of about you know something like 3,000 to I mean at least we should do 2x if not 2.5x-3x of the you know current year numbers. Idea is to get to about $1 billion in 2-3 years' time. Okay. Sanjiv, what does it mean for the EBITDA of the Apollo 24/7, the whole, the piece on online pharmacy distribution in 24/7, when you start hitting a billion-dollar number in say 2 to 3 years? I think 2-3 years, you know, once we hit this. Okay, let me just give you a little broad sense. You know, one is that, you know, at this scale, you know, when you hit about INR 7,000 crore-INR 8,000 crore, you know, you are able to make the digital business, which is, you know, one section of Apollo HealthCo. This business becomes breakeven or in fact it starts giving you a little bit of profit. While the back-end business, you know, which could be roughly INR 4,000 crore, you know, in the Apollo HealthCo, that should give you about 8%-9% as, or maybe 10% at best, as the EBITDA. That is the mental model in which we are working that you know next year we should make Apollo HealthCo as near breakeven. FY 2024/2025 should be the year when we should strive to hit a scale of about INR 7,000 crore-INR 8,000 crore of GMV and make the digital segment also breakeven. The pharmacy distribution business continues to grow and continues to show a healthy EBITDA margins of somewhere 9%-10%. Okay, thanks. Sanjiv, on the hospital piece, what kind of CapEx are we looking at the healthcare services business? From a greenfield perspective, the only project we've shared, discussed so far has been the Gurgaon project. What are the other projects, and the kind of investments we're looking at, you know, on the healthcare services part of it? You know, the recurring CapEx that we have, which is already known to you, is around INR 350 crore a year. That is what we will continue to work on. This is the recurring CapEx. You know, this is the 2,000 beds and the INR 3,000 crore that we are saying, broadly it will be split across 3 years. Sir, in that barring Gurgaon, which are the other projects we're talking about? We are looking at OMR, which is in Chennai. We are looking at, you know, hopefully we will come soon to you on a couple of other projects that we are working on. Okay. We are looking at Bangalore, as we have said. We are looking at Bombay. We will come back on some of those, soon. Okay. If I can squeeze in one last one. On the diagnostics, what is the geographical spread for a diagnostic business? When it goes to INR 1,000 crore number in next couple of years that we talked about, 2-3 years, what is it gonna be a very South India-focused business, predominantly South India-focused business from a geographical footprint perspective or a broadly pan-India? Yeah. I will answer that. The current revenues are largely between South and East and getting into other zones minutely. We have made entries into the Mumbai and the Delhi markets over the last 12-18 months only. So their contribution to the overall current revenues are minuscule in small single-digit percentages. We expect South and East to be a large contributor. South and East should be up around the 70% mark, with 30% coming from other markets, including some Central India, West in terms of Mumbai and North India. That will be the mix in the next couple of years. Okay. Thank you. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity. Sir, if you could share EBITDA for Proton. EBITDA for Proton, we don't have it offhand now, but it will cross over INR 60 crore, INR 65 crore in this year. If I kind of do some back of the envelope calculation. The new hospitals EBITDA margin has been pretty stable for past three quarters while there has been a good improvement on the mature hospitals. That is where I'm coming from, that the new hospitals margin, how do we see the improvement, you know, in that segment? You're right, you know, and Proton will be one of the big contributors there, too, because, you know, clearly Proton can. The potential of EBITDA is almost INR 200 crore, which is why I did say that, you know, over the next couple of years you will see good fillip coming from Proton itself. Apart from some of the other hospitals that we are working on in New Bombay and Vizag. These are two hospitals that have good potential compared to where they are delivering today. Okay. On the pharmacy side, the private label share has also been pretty stable at about 10.5%, 11%. How do we plan to ramp up there or scale up there? We will see that scaling up because this is coming on the background of COVID. You know, at the COVID time, there are a lot of products which were contributing with higher sales, and it was about 12.5%. We are at now 11%. We could see now growth coming back in the normal volume. At least in a year's time we should be back to pre-COVID level and then subsequently the further improvements. Definitely, yes. In the next 12 months you will see that, you know, we'll be at about 12%-13%. Okay, thank you. That's it from me. Thank you. The next question is from the line of Naushad Chaudhary from Aditya Birla Sun Life. Please go ahead. Thanks for the opportunity. Most are answered. Some clarification, sir. Firstly, on the discount trajectory last quarter, if I remember it correctly, we had indicated that in last quarter it was around 18%. We had indicated that we had taken 1% cut in July month, and we were expecting some 0.5% cut. Eventually we had guided around 16.5%-17% in 2Q 2023. As you said, in some of the question that it was at 18%. We see this number in next coming quarters or can you comment on this, sir? Yeah. See, discount has a factor of not many things in the. You know, and obviously you understand well, you know, there is an external environment, you know, which is kind of decide at some point of time, you know, what should be offered. I think yes, we wanted to. We brought it down for some period. You know, to be honest with you, we brought it down for some period to the level that we mentioned the last earnings call. See, whatever is best for the organization and for the consumer side, I think we all should do, you know, all the time, right? While lowering it down, you know, for some time we realized that at least, you know, from the chronic patients, you know, a chronic patient is something which is a valuable asset to the organization. Half a percent here and there does not, you know, kind of, I mean, if it's that chronic customer moves out of the system is much more harmful to us versus a half percent, you know, here and there. You've got the opportunities for cross-pollination and various other channels which are coming into the company. While we lower it down a little bit, we further increased it to maintain at 18%. As I said earlier, half a percent we can still pay, but we'll be mindful of you know the external environment, and we'll take call which is good for the customer. You may expect that you know we retain 18% for another 2 months. At this stage we are still doing 18%. Yes, I mean, it is something which is a moving needle. You know, we don't know what or how exactly you know the cohorts and the various other things you know behave. It's 18% or at best 0.5% down. Yeah, understood. Thanks for the clarification. Secondly, just a suggestion, sir. This time we have, you know, though we have given the 24/7 numbers in the presentation, but as last quarter we reported in our segmental reporting, we had given the separate line for 24/7. Just wanted to understand what is the rationale this time we have not given and we have clubbed it into pharmacy distribution segment. This is what we have given now is the full online pharmacy distribution and the Apollo 24/7. This is the correct representation of the 24/7 business because the 24/7 business is getting INR 294 crore GMV. What we have now represented as INR 158 crore is what gets reported under the Apollo HealthCo for the businesses generated by 24/7. This would be a combination of the pharmacy back-end, and it will have the service lead gen fees also, which is part of this. That is how it will keep increasing. This is the right representation of the 24/7 business to see how the profitability moves. This is what clearly even Sanjiv guided as to how this will over a period of time the GMV can go from INR 294 crore to just an annualized INR 1,500 crore to INR 1 billion, and how that will be of 65% pharmacy and services, etc. All right. Lastly, sir, if I'm reading it correctly, if I see sequentially in pharmacy distribution, we have seen some margin decline on a, because last quarter we had indicated around INR 20 crore. We had some one-time cost in some infra building for Amazon deal, which I'm assuming would not be in this quarter in that, and we removed Apollo 24/7 losses. Net-net only, core business, we have some sequential margin decline. If I'm reading it correctly, can you explain on that part, sir? If you see that, you know, Q2 EBITDA level versus Q1 is just about 10-15 basis points. As Mr. Krishnan Akhileswaran, CFO, said, we also have the employee costs coming in slightly additional in Q2 being the where we give increments. Then we have about 10-15 basis points, which is negligible, and we will be back with improvement in the volume. Yeah, all right. That's it for my side. Thank you so much. Thank you. The next question is from the line of Yash Shah from Investec India. Please go ahead. Hi, ma'am. Thank you for the opportunity. So my first question was regarding the GMV. In first half, we've done approximately INR 5 billion of GMV. We are targeting about 15 billion, 1,500 crore for the whole year. The rest, 1,000 crore in second half, can you give me some idea of like, how are we targeting double of what we've done in H1? Yeah. As we mentioned in the earnings call, you know, there are new business lines, you know, that we have created, which is around the, you know, consultation led to hospital IPOP services. The entire integration of, you know, software and, you know, tech and that Apollo 24/7 with the hospital-based management system was done during Q2 and then some part of Q1. Now, IPOP is one particular service which we have started seeing that, you know, as part of the continuous care, the customers do require that. The current funding that's happening in October and some part of November suggests that I think you know this particular vertical it will give about INR 400-500 crore of additional GMV for the balance part of the year. I think the current set of three verticals which is the e-pharmacy, diagnostic and consultation they would continue to grow. They grew about 5x in Q2 versus Q2 of previous year and at about 36% versus the previous quarter. There are lot many levers you know that that we've still not you know checked. You know we've got hyperlocal delivery in top six cities which we are increasing to 17 cities. That would fuel the growth. There's a lot of work that is happening on the other value segment. I guess the October run rate as well as October's GMV as well as the current run rate suggests is that, you know, we'll easily hit INR 1,500 crore mark. Okay. Thank you. Thank you for that, sir. Sir, my next question was regarding our take rate in pharmacy and diagnostics business. As our volumes have increased, have we been able to increase the take rates on both these, in both pharmacy and diagnostics as compared to previous quarter? Diagnostic take rate is based on the slab that we hit. This is any other, you know, commercial discussion that happens between the two organizations. You have a slab-based, you know, take rates. The minute you start in the upper slabs, you start getting more and more commission. Yes, you know, the diagnostic business is increasing, you know, quarter-over-quarter. It is governed by the HL performance. We already locked in the entire commercial rates, you know, till FY 2023. Based on, you know, the run rate in February 2023, you know, we will discuss the take rates for the next financial year. Okay. Okay, sir. Sir, one very small clarification question regarding the CapEx. As we've guided 2,000 beds in the next 3 years, of which 675 beds will be in Gurgaon and 500 beds will be in Chennai, the multi-specialty. Between Mumbai and Bangalore, which we are planning right now, it will be another 1,000 beds. Is the understanding correct, sir? 675 would not be Gurgaon. Gurgaon will be more like 500-550 beds. Okay. To begin with, 500 or more is broadly what we are looking at. Bangalore, you know, we have the brownfield Bangalore expansion, which should help us get another 200-250 beds. The one in the other hospital in Bangalore, we are looking at 400 beds. Okay. That leaves Mumbai with 400 beds. Mumbai would be another 400 beds in our plan. Perfect. Perfect, sir. Thank you for answering all the questions, sir. Thank you. All the best. Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Rishabh Tiwari from Allegro Capital Advisors. Please go ahead. Yeah. I had a clarification question regarding the Proton EBITDA. It was quoted around INR 60 crore. Is it for the quarter or for the half year? Because the last reported number that I can see for Q4 was around INR 14 crore. It would be for the full year, it would be almost around. The half year it is. I think it will be trending at around INR 65 crore, I said. That didn't include the pharmacy. Over INR 75 crore-INR 80 crore is what the overall target for the year will be. For the proton, right? That's correct. Can you give me a ballpark number for the current that we are trading around half year? Forty. It would be half of 70, so 35? INR 40 crore. That's correct. Okay. Thank you. Thanks. Thank you. Ladies and gentlemen, as this was the last question for today, I now hand the conference over to the management for closing comments. Thank you, ladies and gentlemen, for taking time out for this call. We hope that we have convinced you that Apollo is the only integrated healthcare player in this part of the world. Our hospital business is on a very strong growth trajectory and will continue to grow. We will improve not only in revenues, but margins, but most importantly, in the type of clinical offerings that we give to our patients. Apollo Health and Lifestyle, which is our primary care vertical, the focus on diagnostics and primary care clinics will continue, and this will give us it will enlarge our patient base. It will increase revenues and therefore margins. Apollo Pharmacies, which is our retail play, is something where we've demonstrated strong growth, and they're on track for an INR 10,000 crore revenue target. All of this comes together with Apollo 24/7, and I think that the losses that we made here, which are close to INR 170 crore, you must think of it as an investment into the future, because there can be no healthcare institution without a digital platform. I think that we have made the right decisions, and we have continued to be optimistic and hopeful in our mission to really move healthcare closer to the patient, to create accessible healthcare, and to be sustainable. Thank you very much for taking time out for this call. Good afternoon. Thank you. On behalf of Apollo Hospitals Enterprise Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.