Apollo Hospitals Enterprise Limited — Q3 FY25 earnings call

Call held 11 Feb 2025

Management summary

Apollo Hospitals reported a strong Q3 FY25, with consolidated revenue growing 14% and EBITDA up 24% year-on-year, driven by robust performance across all segments. Apollo HealthCo achieved its first-ever quarterly profit, signaling progress towards digital business breakeven. Despite headwinds from reduced Bangladesh footfalls and a seasonally muted quarter, the company maintained strong margins in Healthcare Services and outlined clear expansion and profitability targets for its various verticals.

Highlights

  • Consolidated revenue grew 14% YoY to INR 5,527 crore, with all three business segments reporting mid-teen revenue growth.

  • Consolidated EBITDA increased 24% YoY to INR 762 crore, demonstrating a sharp rise in profitability.

  • Apollo HealthCo achieved its first-ever quarterly PAT of INR 32 crore, a significant improvement from a loss of INR 28 crore in the prior year.

  • Healthcare Services maintained robust EBITDA margins at 24.1% and saw ARPOB grow 8% YoY to INR 60,839.

  • Specialty segments (CONGO) drove strong growth, with Oncology revenue up 25%, Neurosciences up 23%, and Gastro up 20%.

Concerns

  • A decline in footfalls from Bangladesh resulted in an overall 1.5% drop in revenues, impacting the Tamil Nadu cluster by over 3%.

  • The quarter was seasonally muted, which partially offset operational progress.

  • Online Pharmacy Distribution and Digital business still incurred INR 141 crore in operating costs, despite reporting a positive EBITDA of INR 38 crore excluding these costs.

Key financials

  1. Consolidated Revenue ₹5,527 Cr +14%YoY
  2. Consolidated EBITDA ₹762 Cr +24%YoY
  3. Consolidated PAT ₹372 Cr +52%YoY
  4. Healthcare Services Revenue ₹2,785 Cr +13%YoY
  5. Healthcare Services EBITDA ₹671 Cr +14%YoY
  6. Healthcare Services EBITDA Margin 24.1%
  7. Apollo HealthCo Revenue ₹2,352 Cr +15%YoY
  8. Apollo HealthCo PAT ₹32 Cr
  9. Apollo HealthCo EBITDA ₹57 Cr
  10. AHLL Revenue ₹390 Cr +15%YoY
  11. AHLL EBITDA ₹34 Cr +32%YoY
  12. AHLL EBITDA Margin 8.8%
  13. ARPOB ₹60,839 +8%YoY
  14. Group-wide Occupancy 68%
  15. 24/7 Digital Platform GMV ₹760 Cr +11%YoY
  16. Offline Pharmacy Distribution EBITDA ₹159 Cr +19%YoY
  17. Online Pharmacy & Digital EBITDA (excl. 24/7 costs) ₹38 Cr +51%YoY
  18. 24/7 Operating Costs ₹141 Cr

What they filed

Q1 FY27: revenue up 20.6%, net profit up 38.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue5,589 5,527 5,592 5,842 6,304 +13%6,477 +17%6,606 +18%7,044 +21%
EBITDA816 762 770 852 941 +15%965 +27%1,011 +31%1,092 +28%
Net profit396 379 414 441 494 +25%516 +36%551 +33%610 +38%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentEBITDARevenue
Healthcare Services₹671 Cr₹2,785 Cr
Apollo HealthCo₹57 Cr₹2,352 Cr
Apollo Health & Lifestyle (AHLL)₹34 Cr₹390 Cr
Offline Pharmacy Distribution (HealthCo)₹159 Cr—
Online Pharmacy Distribution and Digital (HealthCo)——

Capital allocation

medium confidence
  • Capex Capex disclosed
    • New beds for hospital expansion ₹1,700 Cr
    Okay. So, on that, so for INR 1,700 crore the CAPEX that we are doing, does that also include the working capital for the hospitals that we are talking about? A. Krishnan: No, not so much. It has got the pre-op expenses in that, but...

Guidance & targets

Capacity

  • New Beds Commissioning Capacity · FY25-FY26 · High confidence 3 facilities in FY25/26 H2, Gurgaon and Hyderabad by end of FY26
    With regards to the hospital expansion, we are on track to open 3 facilities in FY25, '26, second half. By the end of FY26, we will open Gurgaon and Hyderabad.

    — Suneeta Reddy

  • New Beds Commissioning (50% of 1737 beds) Capacity · FY26-FY27 · High confidence 50% in FY26, 50% in FY27
    At a broad level, you can expect 50% of it to come into next year and other 50% to come into FY27.

    — A. Krishnan

Occupancy

  • Hospital Occupancy Rate Occupancy · Before new beds open · Medium confidence 72-73%

    From 68% today

    Currently, we are at 68%, but we are hopeful that we should improve to 72%, 73% before the new beds open out.

    — Suneeta Reddy

Margin

  • Healthcare Services EBITDA Margin Margin · Next year · Medium confidence around 24%

    From 24.1% today

    I think moving on next year, we should only be able to improve our margin... So, net-net, we should be at around 24%.

    — Suneeta Reddy

  • AHLL EBITDA Margin Improvement Margin · Over a longer-term view · High confidence 2 percentage point per year

    From 9.2% today

    Currently, we are at a 9.2% EBITDA this year. And we definitely, over a longer-term view, we should expect a 2-percentage point in a year, at least to come in

    — Sriram Iyer

  • Apollo HealthCo EBITDA Margin Margin · Q2 end FY26 or Q3 FY26 · High confidence 18-20%

    From 13.8% today

    we should be hitting anything between 18% to 20% as a margin during that quarter to support the breakeven intent of the organization. So, that is where I would see that steadily, we'll be increasing our margin quarter-on-quarter, and you can expect anything around 18% in next 3 to 4 quarters.

    — Sanjiv Gupta

  • Apollo HealthCo EBITDA Margin Margin · FY27 · High confidence 6-7%
    So, we are looking at about INR 25,000 crore of revenue and about 6% to 7% of EBITDA in FY27.

    — Sanjiv Gupta

ARPOB

  • ARPOB Growth ARPOB · Going forward · High confidence 6-7%
    Yes, Shyam, I think that's correct. You should consider it to be around 6% to 7%. I think that's a fair number to consider going forward.

    — A. Krishnan

Profitability

  • 24/7 Digital Business Breakeven Profitability · Q2 end FY26 or Q3 FY26 · High confidence EBITDA positive
    by end of Q2 of the next year or positively in Q3, we will be able to break even on the digital side.

    — M. Balakrishnan

  • Greenfield Projects EBITDA Breakeven Profitability · Less than 12 months · High confidence EBITDA positive
    Calcutta and Delhi, both we would expect that we should be able to EBITDA breakeven in less than 12 months.

    — A. Krishnan

GMV

  • 24/7 Breakeven GMV GMV · For breakeven · High confidence INR 900-1,000 crore
    I would still say you can take around INR 900 crore, INR 950 crore as my primary GMV number, if that is what the benchmark that you want to drive.

    — M. Balakrishnan

Growth

  • AHLL Revenue Growth Growth · Next couple of years · High confidence 15-18%
    We look to keep the growth rate between 15% to 18% for the next couple of years, primarily driven by the momentum in diagnostics.

    — Sriram Iyer

  • Digital Business Growth Rate Growth · Medium confidence 20% plus
    On the Digital, our aspiration is to grow at an average of 20 plus kind of growth rate.

    — M. Balakrishnan

Market Expansion

  • Digital Business Market Reach Market Expansion · Next 2 years · High confidence 25-odd markets

    From 6 cities today

    So, over the next 2 years, we intend to move that 6 to at least around 25-odd markets.

    — M. Balakrishnan

Revenue

  • Apollo HealthCo Revenue Revenue · FY27 · High confidence INR 25,000 crore
    So, we are looking at about INR 25,000 crore of revenue and about 6% to 7% of EBITDA in FY27.

    — Sanjiv Gupta

What to watch in Q4 FY25

24/7 Digital Business Breakeven

Q2 end FY26 or Q3 FY26
Current EBITDA loss (net of 24/7 operating costs)
Target EBITDA positive

Why it matters

Achievement of profitability in the digital segment is crucial for Apollo HealthCo's overall financial health and valuation.

by end of Q2 of the next year or positively in Q3, we will be able to break even on the digital side.

Risks & concerns

  • Bangladesh Footfall Decline

    medium

    A 1.5% overall revenue impact, and over 3% in Chennai/Tamil Nadu, due to reduced patient flow from Bangladesh.

    Management acknowledged

  • Online Pharmacy Profitability Challenges

    medium

    Concerns raised by an investor regarding the bleeding nature of the online pharmacy business and high ESOP costs, despite management's focus on breakeven.

    Analyst acknowledged

  • Seasonally Muted Quarter

    low

    The Q3 performance was achieved despite the seasonally muted nature of the quarter, indicating underlying strength.

    Management acknowledged

Q&A highlights

7 direct
24/7 insurance foray, hospital commissioning, Microsoft partnership Direct
As of now, our GMV is around INR 3.5 crore for the full quarter, because we have been focusing purely as a marketing setup, and the product is only group health insurance. In this quarter, we will be having at least 3 life insurance companies and 3 health insurance companies, which will get enabled on our Apollo 24/7 platform. And from April 1 onwards, we expect the numbers to start building up.

Provides initial scale and timeline for the new insurance offering on the 24/7 platform, and clarifies the scope of the Microsoft partnership.

Asked by Binay Singh

Moderation in Tamil Nadu and West cluster inpatient volume growth Direct
in Chennai, one of the important things that you should remember is this Bangladesh effect, right. We have said that as an overall, as a Company, we have seen a 1.5% revenue impact because of Bangladesh. And most of Bangladesh was coming into Chennai and Tamil Nadu. So, which is why if you look at it, at the Chennai level, it's almost a 3-plus % impact, which is there, and which is showing up in that region that you're seeing.

Explains the specific external factors (Bangladesh patient decline, CGHS cases) impacting regional hospital volumes and management's strategy to counter it.

Asked by Neha Manpuria

24/7 breakeven timeline and target GMV Direct
by end of Q2 of the next year or positively in Q3, we will be able to break even on the digital side. And if the insurance scales up much faster than we anticipated, maybe we'll be able to give you a positive surprise. So, growth will come back. But I would say maybe this quarter, you will see Q4 of this year slowly building up. But again, let me also highlight it will not be on par with the quick commerce kind of growth. We will be much more sedate, but consistent and it will be profitable and sustainable growth.

Clarifies the specific timeline (Q2/Q3 FY26) and GMV target (INR 900-1000 crore) for the digital business to achieve profitability, emphasizing sustainable growth.

Asked by Neha Manpuria

Hospital margin trajectory given new facilities and Bangladesh impact Direct
No. So, for the current period, we're at 24.1%. I think moving on next year, we should only be able to improve our margin. When we open these hospitals, because of the calibrated opening of operating beds, I think the margin impact will not be more than 100 basis points. So, net-net, we should be at around 24%.

Provides forward-looking guidance on the core hospital business's EBITDA margin, indicating stability despite new capacity additions.

Asked by Damayanti Kerai

Overall occupancy trends and ARPOB dynamics Direct
Currently, we are at 68%, but we are hopeful that we should improve to 72%, 73% before the new beds open out... Overall, ARPOB grew by 8% year-on-year, reaching INR 60,839. We believe key levers such as high surgical volumes, and enhanced clinical case mix and improved payer mix will continue to drive ARPOB growth in the future.

Offers specific targets for occupancy rate and reaffirms the ARPOB growth trajectory, highlighting key drivers for future performance.

Asked by Shyam Srinivasan

Medium-term plan for Retail Health & Diagnostics (AHLL) and Digital Health (HealthCo) Direct
We look to keep the growth rate between 15% to 18% for the next couple of years... Currently, we are at a 9.2% EBITDA this year. And we definitely, over a longer-term view, we should expect a 2-percentage point in a year, at least to come in... On the Digital, our aspiration is to grow at an average of 20 plus kind of growth rate.

Outlines specific growth and margin targets for the non-hospital segments, providing a comprehensive long-term outlook.

Asked by Rajit Aggarwal

Online Pharmacy ESOPs and profitability concerns Partial
This business is a very technology-driven business... from our best way to retain very good tech people at this point of time in the onslaught of quick commerce... And we have given our first ESOP around 4 years back when the Company had started. At the end of the 4-year period, there was a small increase that we've put, because if I lose my employees, that's a big drain.

Addresses investor concerns about the high ESOP costs in the digital business, explaining the rationale for talent retention while reiterating the commitment to breakeven.

Asked by Marsal

EBITDA breakeven timeline for new greenfield projects (Pune, Calcutta, Delhi) Direct
Calcutta and Delhi, both we would expect that we should be able to EBITDA breakeven in less than 12 months. In fact, both of them are existing markets, and the Calcutta Hospital is already full at over 80% occupancy.

Provides a clear and aggressive timeline for the new hospital projects to achieve EBITDA breakeven, indicating confidence in their ramp-up.

Asked by Harsh Dubey

2 min read 6 chapters

Detailed narrative

Q3 FY25 Consolidated Performance Overview

Apollo Hospitals reported a robust Q3 FY25, with consolidated revenue growing 14% year-on-year to INR 5,527 crore. This growth was accompanied by a significant 24% year-on-year increase in consolidated EBITDA, reaching INR 762 crore. The company's consolidated PAT also saw a strong rise of 52% year-on-year, totaling INR 372 crore, reflecting a sharp improvement in overall profitability across all three business segments.

Healthcare Services Segment Strength

The Healthcare Services business delivered a strong 13% year-on-year revenue growth, reaching INR 2,785 crore. Its EBITDA grew 14% year-on-year to INR 671 crore, maintaining a robust margin of 24.1%. Group-wide occupancy improved to 68% in Q3 FY25 from 66% in Q3 FY24, and ARPOB increased 8% year-on-year to INR 60,839. The focus on high-end specialties like Oncology (25% revenue growth) and Neurosciences (23% revenue growth) contributed to a 17% overall revenue growth in the specialty segment.

Apollo HealthCo's Path to Profitability

Apollo HealthCo marked a significant milestone by reporting its first-ever quarterly PAT of INR 32 crore in Q3 FY25, a turnaround from a loss of INR 28 crore in the same quarter last year. Its total EBITDA for the quarter was INR 57 crore, a strong improvement from INR 2 crore in Q3 FY24. The Offline Pharmacy Distribution business contributed INR 159 crore in EBITDA (up 19% YoY), while the Online Pharmacy Distribution and Digital business reported INR 38 crore in EBITDA, excluding INR 141 crore in 24/7 operating costs.

AHLL's Consistent Growth and Margin Expansion

Apollo Health & Lifestyle (AHLL) continued its strong performance, with revenues growing 15% year-on-year to INR 390 crore in Q3 FY25. The segment's EBITDA increased 32% year-on-year to INR 34 crore, leading to an improved margin of 8.8% compared to 7.7% in Q3 last year. Management expects AHLL to maintain a growth rate of 15-18% for the next couple of years and anticipates a 2-percentage point improvement in EBITDA margin annually.

Strategic Expansion and Digital Initiatives

The company is actively pursuing capacity expansion, with plans to open three new hospital facilities in the second half of FY25 and FY26, including Gurgaon and Hyderabad by the end of FY26. Approximately 50% of the planned 1,737 new beds are expected to be operational in FY26, with the remainder in FY27. The digital platform, Apollo 24/7, added 2 million new users, and its GMV grew 11% year-on-year to INR 760 crore. Management aims for the digital business to achieve breakeven by Q2/Q3 FY26 with a GMV of INR 900-1,000 crore.

Payer Mix Optimization and Regional Headwinds

Apollo Hospitals successfully optimized its payer mix, with revenue from cash and insurance patients increasing 15% year-on-year and accounting for 83% of inpatient total revenue. However, the company faced headwinds from a decline in footfalls from Bangladesh, which resulted in an overall 1.5% revenue drop and a more significant impact of over 3% in the Chennai/Tamil Nadu region. Management is focusing on complex cases and exploring new international markets to mitigate these regional challenges.

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