Apollo Hospitals sees older hospitals' Ebitda growing to 25% in 3-4 years

Promoters say the plan to reduce pledged shares in the firm to 50% in a few months is on track

Apollo Hospitals Enterprise (AHEL) has said it expects to achieve a target of 23 per cent earnings before interest, tax, depreciation, and amortisation (Ebitda) margin from its older hospitals in the next 12 months. It hopes margins would go up to 25 per cent in the next 3-4 years. 

The promoters said the plan to reduce pledged shares in the firm to 50 per cent in a few months is on track.

At present, Ebitda margin from its 22 older hospitals, which are older, is around 22.1 per cent while the margins from the 10 new hospitals is around 8.4 per cent.  The firm is planning to focus on centres of excellence for specific therapeutic sectors to drive margins.  It also hopes focus on a case mix in hospitals would help it bring higher profitability. 

Cost savings, which it is expected to deliver this year, will take the margin to the aimed 23 per cent, said Suneeta Reddy, managing director, AHEL, in an earnings call with the analysts.  

“We are focused on achieving 23 per cent Ebitda margin from our matured health care services and driving margin from our new hospitals into the team. We are hopeful that continued momentum in our performance will help in achieving higher profitability and improvement in cash flows,” she said.

A Krishnan, chief financial officer of AHEL, said there was headroom for growth within each of the facilities. The occupancy is around 66 per cent in the matured hospitals. Secondly, the average length of stay is coming down, which means the company can still take more patients to increase the overall capacity of hospitals.

Also, even in the busy hospitals like Chennai Main, around 35 per cent admissions are for day-care surgeries. 

The company has been on an expansion spree for a couple of years and said that the period of high capex has been completed. Its focus is on increasing the occupancy and bringing in more revenues and margins. 

AHEL has 70 hospitals with a total bed capacity of 10,167 as on June 30, 2019, of which 44 are owned hospitals, including joint ventures and subsidiaries and associates with 8,683 beds.

There are 11 day-care or short surgical stay centres with 267 beds and 10 cradles with 283 beds. It has five managed hospitals with 934 beds. 

Of the 8,683 owned hospital bed capacity, around 7,348 beds were operational and had an occupancy of 66 per cent in the quarter ended June 30.