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Below are Views On One-stop solution for Healthcare services By Ms. Suneeta Reddy, MD, Apollo Hospitals, - Motilal Oswal

Increase in government spending to improve Healthcare infrastructure in India

The Government of India intends to double Healthcare spends to 2.5% of GDP from ~1.2%. It is looking at a PPP model, where the government will provide land and some initial funding for three years to expand Healthcare infrastructure, especially in smaller cities. It has allocated ~INR500b to be lent at the repo rate of 4.5%.

Apollo 24/7 platform – Integrated service offerings creating huge value for all stakeholders

Apollo has ~4,100 physical Pharmacies covering 18k pin-codes. It is the only player with a presence in Tier II and beyond cities. Around 40% of India is within 40 minutes of reach of an Apollo Pharmacy. Apollo offers tele-consultations with up to 8,000 doctors, enhancing the service level of patients. Tele-consultations have a huge opportunity in primary care consultations. There are groups of people who want to avoid physical consultations, who can leverage online platforms. Given its integrated presence across the value chain through tele-consultation, diagnostics, availability of both online/offline Pharmacies as well as Hospitals (IPDs/OPDs), Apollo has a much better understanding of Healthcare services. Offline enablers are the differentiators for Apollo. It is the only unique omni-channel player in India, with infrastructure already in place. An omni-channel presence is essential to grow market share in Tier II and III cities. Competitors are using deep discounts and Chronic therapies for customer retention. However, Apollo is focused on overall patient service and not just on Chronic therapies. Offline is equally important to Apollo as is online modality.

Digitization: The way forward

Apollo has digitized up to 20m health records, which can be used to for early identification and treatment of patients, leveraging AI, and digital tools. Unique patient ID will help doctors use one’s medical history for better diagnosis. Wellness companion is another attractive offering, delivering better value to patients. In this space, it has: a) a JV with Sanofi for monitoring blood glucose level in diabetes patients, and b) worked with Microsoft to build a cardiac risk assessment tool.Apollo will use the pull-model rather than a push model given its access to patient data, its presence across the ecosystem, and artificial intelligence (AI).

Hospital segment on track to improve overall profitability

New hospitals (around four-years old) have an EBITDA margin of ~16.5%, with mature hospitals at 24% margin and blended at 20% levels. There is scope to improve EBITDA margin by 200bp. Cost cutting measures will further expand EBITDA margin by 100bp. End-to-end offerings in Oncology through Proton is one such unique offering delivering high-end care. Proton is the gold standard in Oncology treatment, with international patients contributing 60% of revenue. High-end clinical outcomes at affordable prices will drive uptake of international patients from developed countries.

Diagnostics another area of investment for Apollo

Large players are strong in North India, and hence Apollo will consolidate in the South first. A centralized lab model, focus on genomics, and very high-end tests in Diagnostics are on offer. Apollo has a much greater comprehensive offering than its competitors. It has allocated INR2b for investment in the Diagnostics segment in FY22.

Other highlights

Private labels account for 12% of total Pharmacy sales at present. Gross margin in branded Pharmacies/private labels stand at 20%/~40% in. Apollo has a long-term plan to achieve 20% of Pharmacy sales from private labels. There is potential to raise USD200m to enable customer acquisition and to complete its suite of offering at Apollo HealthCo. Apollo will continue to remain the major shareholder in Apollo HealthCo.

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