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Apollo Hospitals: Redefining healthcare - Views on News from Equitymaster
 
 
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  • Aug 3, 2002

    Apollo Hospitals: Redefining healthcare

    Apollo Hospitals Enterprises Limited (AHEL) the Rs 3 bn (US $ 63 m) integrated healthcare major has transformed the face of the Indian healthcare industry. AHEL has the largest hospital chain in the country comprising of primary, secondary and tertiary care hospitals. The company also has one of the largest chain of pharmacies totaling nearly 90 retail outlets spread across the country.

    AHEL offers its hospital services through a chain of owned as well as managed hospitals. The company owns 15 hospitals including the newly started hospital in Sri Lanka. The total bed strength of owned hospitals is close to 1,700. Additionally, the company also manages 22 hospitals with a total bed capacity of another 1,700. The company offers hospital services for different specialties like Cardiac, Neurology, Orthopedic, Nephrology and Cancer. Hitherto, the Apollo chain of hospitals is concentrated mainly in the south. However, the company is slowly shifting its focus towards other regions in the country as well as foraying in to projects in the Asian region.

    Apart from the hospital and pharmacy businesses the company is also engaged in hospital consultancy services, health clinics, hospital procurement services and telemedicine services. Recognising the prospects of the growing health insurance sector the company has diversified into providing health insurance services also. The company acts as facilitator for insurance services by offering services like third party administration, claims processing etc for Mediclaim policyholders. The group also provides diploma courses to nurses and students. The company also undertakes research in the form of clinical trials.

    While hospital services contribute 62% to the total revenues of the company, the pharmacy division contributes another 33%. The company has slowly shifted its focus from owned hospitals to managed hospitals. Being a capital-intensive industry the company slowly plans to increase its beds under management rather than building high cost hospitals on its own. Going forward, it plans to change the proportion of owned beds to managed beds from the current 1:1 level to 1:1.5 levels in the coming years.

    AHEL has over the years continually improved on its topline, recording a CAGR of 34% over the last five years. The phenomenal growth in topline is in part the consequence of the company venturing in to the pharmacy business. Though the low margin pharmacy business has helped boost the top line, operating margins are on a downward spiral. Operating margins have dropped to 21% in FY02 compared to a high of 31% seen in FY98. Though over a five-year period, the company has been able to achieve a respectable CAGR of 24%, a closer look reveals that net profits in FY02 have dropped by 19%.

    AHEL has been able to exploit the latent need for professional and quality healthcare services in the country. A yearly short fall of nearly 80,000 beds for the next five years indicates a huge domestic market that is still not exploited. The company with its vast infrastructure of hospitals is in a good position to further consolidate its position in the domestic market. Growth prospects aside drop in operational efficiencies remain a concern. Going forward profitability will depend to a great deal on the ability of the company to improve upon its operating efficiencies and increase fee-based revenues.

     

     

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