Apollo Hospitals Enterprise’s losses from its digital business reached rock bottom in the third quarter of FY23, managing director Suneeta Reddy said, predicting an improvement in blended operating margins from Q4 well into the next financial year on expectations of improved revenue from the vertical.
A 100 basis point expansion in the consolidated EBIDTA margin has been projected for the January-March quarter, Reddy said on an earnings call.
Apollo Hospitals’ diagnostics and retail health and the digital health and pharmacy distribution verticals reported a combined loss of Rs 107.3 crore in the third quarter, mainly due to discounts offered to onboard customers.
In addition to the impact of investments made in the digital business, a higher base effect and a weak seasonality effect due to holidays in the quarter resulted in a decline in the company's overall EBIDTA margin.
The company’s consolidated EBIDTA margin narrowed to 11.9 percent in the October-December quarter from 16.1 percent a year earlier.
Optimistic of turnaround
Nonetheless, the management remains optimistic about a turnaround for unit Apollo HealthCo, the subsidiary that runs the online and offline pharmacies and telemedicine businesses.
Sanjiv Gupta, chief financial officer of Apollo 24/7, said he expects Apollo HealthCo to break even by the second half of the next financial year as investments made in the business begin to yield results.
Apollo 24/7 is an online platform which is a part of the Apollo HealthCo umbrella and offers access to services such as online pharmacy, online doctor consultations, and diagnostic lab tests at home.
Reddy put to rest speculation over fundraising for Apollo HealthCo, saying that Apollo Hospitals, the parent company, has strong cashflows that will cover the subsidiary’s expenses for the next six months.
“We believe in this current environment investors are looking towards profitability. Keeping in mind the value proposition for Apollo 24/7, there is not much investor interest at the current juncture. With that being said, we believe valuations will improve for the vertical in the coming quarters and we plan on raising capital after six months for Apollo 24/7,” Reddy said.
Also Read: Apollo Hospitals Q3 result: Net profit declines 33.3%; misses Street's estimate
The management is also optimistic about the company's core healthcare business and expects to deliver better results in terms of revenue, volumes and EBIDTA. Key factors such as the return of international patients, better occupancy rates, bed additions, and improved revenue mix are likely to aid earnings for the core healthcare business.
Reddy pegged an occupancy target of 70 percent for January-March and as much as 75 percent in the next 18 months. Occupancy across all group hospitals was at 65 percent in the third quarter, a seasonally weak period.
The contribution from international patients to healthcare revenue is expected to reach 10 percent in the current financial year.
Apollo Hospitals plans to add 2,000 beds in the next four years, some of which will be funded through debt.
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