Apollo Hospitals expects healthy rivalry from IHH's Fortis Healthcare bid

Apollo Hospitals Enterprise (AHEL) has said Malaysian group IHH Healthcare’s acquisition of Fortis Healthcare would create a healthy competition, clarifying it is very early to say whether it would end the 50: 50 Apollo Gleneagles Hospitals (Kolkata) joint venture with IHH Healthcare.

Commenting on the Rs 40 billion acquisition of Fortis Healthcare, A Krishnan, chief financial officer of AHEL, said, “I would term it a healthy competition because IHH is a player of repute and is focused on return on investments.” IHH Healthcare has sold its entire stake in AHEL last year, through several block deals in the exchanges and made a return of around $290 million, according to earlier reports.

AHEL has posted a growth of 70.86 per cent in net profit at Rs 601.6 million during the quarter ended June 30, 2018, compared to Rs 352.1 million during the same period last year. The company saw a growth of 12 per cent in health care services and 20 per cent in standalone pharmacies.

Revenue grew 16.16 per cent to Rs 19.12 billion during the quarter compared to Rs 16.46 billion during the same period last year.

Last year’s June quarter also saw price regulations on stents and knee implants, affecting the overall performance.

Prathap C Reddy, chairman of Apollo Hospitals, said, “The first quarter of this fiscal year has got off to a good start. We continue to strengthen our health care portfolio to benefit our patients and arm our doctors with the latest in artificial intelligence and medical technology.”

The company is looking at a revenue growth of around 16 per cent this year, with a focus on profitability and higher earnings before interest, tax, depreciation and amortisation or Ebitda margins, and not on adding new capacity.

The impact on Ebitda margins from commissioning of new facilities, GST implementation, regulations on stent pricing and knee implants as well as investments in medical teams has bottomed out.

Krishnan said the company was focusing on improving margins and capacity expansion projects it had carried out in the past would bring in more growth in the near future.

“Our pace of expansion is behind us and we have said our focus now is to grow on the back of new beds, over 2,000 in number, all of which can start to contribute to the topline and Ebitda. There is a potential of almost Rs 20 billion in topline, which is what we are focusing on over the next two years,” he said.

Of the over 7,000 operating beds across the network, excluding Apollo Health and Lifestyle Ltd and managed beds, 13 hospitals with 1,650 operating beds are new and the progressive increase in volume and utilisation in the quarters ahead will aid Ebitda growth and sustain margin expansion through the rest of the financial year and beyond.