Plan to add 10,000 beds in 2016-17: Apollo Hospital

For FY16, Apollo has budgeted Rs 1,700 crore to add 600 beds in the second and third quarters. It expects them to make operating profits by 2018.

By 2016-17, it plans to have 10,000 beds, she said.

Below is the transcript of Suneeta Reddy’s interview with CNBC-TV18's Sonia Shenoy and Anuj Singhal

Sonia: You have completed the year FY15 with a handsome 20 percent top line growth at somewhere around Rs 4,600 crore of revenues. Can you give us an indication of what FY16 is looking like? Do you think you will be able to replicate this growth?

A: I cannot give your forward looking statements but we have a track record of being able to maintain and sustain this growth.

Sonia: Segment-wise how are things looking?

A: Segment wise they are looking good. Healthcare services grew by 13 percent, it was clearly a 10 percent increase in volumes which is substantial. We opened seven new hospitals this year out of which two turned EBITDA positive and we are on track to creating 10,000 beds in the year 2016-17. So our expansion plans are in place. Our capital commitment is already in place and I believe that we will achieve the market share that we set out to achieve.

With regard to pharmacy we grew close to 30 percent. There our margin was 3.1 percent and there was a 0.5 percent impact because of the DPCO. So this really helped contribute to the overall EBITDA margins within the group.

Anuj: You may not want to give us the forward looking statements but in terms of qualitative performance do you think the kind of growth rate that you have seen would it be better than that or would it be at the same level, if you could give us a qualitative analysis of that?

A: Qualitative if you look at the macro picture Gross Domestic Product (GDP) is growing at seven percent. We are showing you close to 20 percent. So qualitatively you should infer that we have set the foundation for a really strong growth ahead of us. We have invested in creating infrastructure for the future and I believe that Apollo Hospitals is well positioned not only to capture market share but to balance out this period of growth versus profitability which people will begin to see from the year 2017-18 that the growth will be reflected in the bottomline.

Sonia: You did say that in the fiscal gone by you started seven new hospitals. What is the plan for this next fiscal for FY16, how many beds would you add in FY16 itself and when would you expect them to turn EBITDA positive?

A: We will add it either in the second quarter or third. Some will come up in the third quarter but it will be phased. We will do 600 beds and our capital commitment for that will be Rs 1,700 crore. They will become EBITDA positive by 2018.

Sonia: This time around your margins have slightly come off compared to what you did same time last year. Is there any pressure on your blended margins? It is at about 14.5 percent this quarter and what can we expect on the margins front in the first half of the fiscal? Will there be more pressure?

A: I don’t think it is pressure but it is like I said it is managing the growth versus profitability. while having this growth on our books we do have a certain amount of fixed cost that we had to absorb and this has to do with first of all the fixed overheads, the second is there has been a slight change in our consultant engagement model where we do have more salaried doctors in our new units and this has a slight impact on the margin.

The third reason for the margin of course is that pharmacy grew at 30 percent; healthcare services grew at 13 percent. So the margins reflect the growth of each.