In an interview to CNBC-TV18, Reddy says the new hospital clusters will take 18 months to break even and the company's additional 430 beds should help the healthcare major’s top-line grow significantly.
Our old hospital clusters are doing better because the EBITDA is growing.
Suneeta Reddy, joint managing director, Apollo Hospitals says the company has added 430 beds this year and says this strength will help the healthcare major's top-line grow significantly.
In an interview to CNBC-TV18, Reddy says the new hospital clusters will take 18 months to break even.
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“I think it is a very calibrated approach to growth and it will ensure strong top-line growth for atleast the next five years, the addition of totally 3,000 beds that we have planned,” adds Reddy
Below is the edited transcript of Reddy's interview to CNBC-TV18
Q: Just coming down on total income, can you just break up how exactly the healthcare business did, that is the hospitals as well as pharmacy this quarter?
A: The total healthcare revenues grew by about 15 percent. In that, the hospital business grew by about 12 percent. The pharmacies did really well. Their revenue grew at 23 percent.
Q: Just concentrating on the earnings before interest, taxes, depreciation and amortisation (EBITDA) then. How did you do in terms of the EBITDA breakup within this quarter within both the segments?
A: Total EBITDA growth was 12 percent. From our old hospital there was an EBITDA growth of 16 percent, but it averaged out to 12 percent. The standalone pharmacies’ EBITDA growth was 47 percent and it is EBITDA positive with Rs 9 crore of positive EBITDA.
Q: In terms of a couple of other parameters which I just wanted to get out of the way. Can you just explain to us in terms of the hospital clusters, how did you do in terms of clusters this time in terms of your old operations as well as your new operations and what would the guidance be on that?
A: Our old hospital clusters are doing better because the EBITDA is growing. There is a strong EBITDA growth with margins improving by 88 basis point (bps). The new ones will take 18 months to break even and since our strategy is to add new beds and to really consolidate our presence in the Indian market, we have added 430 beds this year and we will add another 700 beds in the next three quarters.
Keeping this in this mind, I think the 430 beds will start contributing to positive EBITDA and will contribute to growth, top-line growth as well when the new beds come on stream. So, I think it is a very calibrated approach to growth and it will ensure strong top-line growth for atleast the next five years, the addition of totally 3,000 beds that we have planned.
Q: Just wanted a couple of more parameters on the pharmacy business. You said that you have broken even on the EBITDA front. Would it then be fair to assume that you would possibly continue that trajectory going forward and any sort of divestment which would be on the cards for the pharmacy business?
A: Yes, I think the trajectory is very strong. Infact it is getting better and one of the reasons is that we are selling our branded products in the pharmacy where the margins are strong. Going forward, yes we continue to look at opportunities for not complete divestment, but atleast 49 percent, but we are waiting on some guidance on foreign direct investment (FDI) in retail, which we believe will be a huge benefit too.
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