Apollo Hospitals Enterprise Ltd (AHEL) is planning to expand its pharmacy retail network to over 2,000 outlets in next three to four years from the current around 1,300 outlets . While it was focusing on growth in terms of number of outlets earlier, the company has also started focusing on EBITDA growth, said a senior executive in the firm.
The number of pharmacies run by AHEL as on March 31, 2012, was 1,364. While earlier the company was aggressive on adding number of outlets, focusing on growth with a target of one pharmacy a day, it is reviewing the business annually and has also started focusing on EBITDA growth along with calibrating growth, according to K Padmanabhan, group president, Apollo Hospitals.
“We think that around 5,000 to 10,000 outlets would be a critical mass, but we are aiming at 2,000 plus pharmacy outlets in next three to four years,” he said in a recent earnings call with analysts. He added that considering that there are around 6,00,000 pharmacies existing across the country, aiming at 5,000 pharmacies is not that ambitious.
The pharmacy chain is in the process of closing down the non-performing outlets along with opening new stores in the potential areas.
In the operational performance of the standalone pharmacies, the batch of stores opened upto financial year 2007 has posted an EBITDA margin of 5.7 per cent in the fiscal year ended March 31, 2012. This was an increase of 50 basis points from 5.2 per cent margin posted during the previous year.
The EBITDA margin for the batch of stores opened in fiscal year 2008 has grown 228 basis points from 0.3 per cent in fiscal year 2011 to 2.5 per cent during the fiscal 2012. The stores opened earlier has been reporting increase in margin and for the stores opened upto financial year 2007, the margin could go up to seven to eight per cent in next four to five years, he added.
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The margin for the private label business is also expected to see higher growth in future. It has posted a growth to four per cent of the total pharmacy business, at present, from earlier one per cent. When the EBITDA margins is expected to grow 7-8 per cent in future, the private label business has to grow at 12-15 per cent by that time, he added.
The total revenue from standalone pharmacy business increased 30.12 per cent at Rs 860.58 crore for the financial year 2011-12 as against Rs 661.39 crore for previous fiscal.