Focus on restructuring to ensure growth of all verticals: Apollo

Apollo Hospital's healthcare business margins stood at 23-24 percent in the June quarter this fiscal year. Speaking to CNBC-TV18, Suneeta Reddy, MD of the company, said Apollo's focus on restructuring is to ensure growth of all verticals. Also, the company has incubated many businesses and its Chennai cluster saw 2 percent growth this quarter, she added.

"The fixed cost has already been captured and that should reflect in the bottomline going forward," she said.

Apollo saw much higher occupancy in July-August, Reddy said, adding, existing operating beds are around 7000 and additional 1,600 beds cost Rs 1,300 crore.

Below is the verbatim transcript of Suneeta Reddy\\'s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Sonia: It’s about a 12.5 percent growth that you did on the top line I wanted to understand what the remaining 3 quarters hold for the company in terms of a top line growth?A: I think the remaining 3 quarters will be much better, consolidated we did do 15 percent. The reason for the tepid growth was, if you look at region wise Bangalore we did 24 percent, in Hyderabad we did over 10 percent, Calcutta over 10 percent and it was only in Chennai because of the elections, where most of our patients are coming from West Bengal, where the growth was only around 2 percent, so it was that region which contributes to a major part of the growth, that had slowed down, but the next quarter has started off really well.Anuj: The board is considering an evaluating options to restructure and reorganised businesses. Could you tell us some more details on that does it have to anything with diagnostics or anything else, if you could give some more details?A: Well, we constituted a committee for restructuring and till the committee comes up with the recommendation it would be difficult for me to comment on it, but as you know we incubated many businesses and I believe that we can do something that is value accretive for the company.Sonia: When you say value accretive or improving operational efficiencies. Can you give us any indication of what this would do to your blended margins, because as of now your margins are still stuck in that range of around 13-13.5 percent? With this restructuring, do you plan to sort of augment your margins to higher than these levels?A: It’s very difficult to state what emphasis the committee will place on margins. I think what they would like to see is to see that all our verticals grow well and that they do all of them show better margins, because if you do look at the margin profile, there is definitely the healthcare space, where we are doing 23-24 percent and the pharmacy space where we are moving towards 6 percent. Currently, we are at 3.9 percent. So definitely if you have to think of what we are doing and what the future will look like.Anuj: Would it be suffice to say that you in this reorganisation these two businesses will be separated because they have completely different margin profile, the healthcare services and pharmacy. Top line wise not much different, but earnings before interest, taxes, depreciation, and amortization (EBITDA) wise clearly there is a gulf of difference?A: It would be difficult to comment at this stage, let’s wait for the restructuring committee to come out with the recommendation, but I like said, I think it will be good for Apollo, it will be good for the shareholders.Sonia: You did mentioned that the remainder of the fiscal that is the rest of the 3 quarters, the revenue growth will be much better than what you did in this quarter. Can you give us a sense of what the overall run rate could be and by the end of the year, where do you see the revenues of Apollo Hospitals?A: Well, it very hard to give forward looking statements, but I can tell you that we are seeing much higher occupancy in July and August and that should flow down to the bottom line, because all our fixed costs have already been captured in the firsts quarter, so definitely when the top line improves considerably, you will see a much better bottom line.Sonia: What is your bed strength currently and how much do you plan to grow it by, say over the next 6-12 months?A: Currently, we have about 7,000 operating beds and the challenge for us has been that we have added 1,600 beds at a cost of Rs 1,300 crore and we have to fill up these beds, but we are seeing a positive trend here, where we have moved from a loss of Rs 8 crore to a profit situation where we are now showing Rs 4 crore profit. We have really shown some traction in the new facilities and I believe that in the next quarter it can only get better as more move towards becoming EBITDA positive.