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Apollo Hospitals slows down new bed addition, to add 765 beds in 5 years

Gireesh Babu/Chennai 12 Sep 18 | 12:07 PM

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Apollo Hospitals Enterprise Ltd (AHEL) is expected to add 765 beds through brownfield and green field in next five years across three hospitals, with an investment of Rs 6.2 billion. This step will help expand its overall network to 73 hospitals. The hospital chain, which added over thousand bed a year in the past, has last year announced that it would bring down the speed of building up infrastructure and look at consolidation and profitability.

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The new beds that are to be added come as part of its expansion plan which has been executed in the last few years. This addition of new beds would add to the already existing 10,000 beds it has across 70 hospitals, reported as on March 31, 2018. The company has added 13 new hospitals with over 2,400 beds in the last more few years with a capital investment of Rs 19.30 billion.

"Towards this expansion, we have an additional capital expenditure commitment of Rs 6,210 million. Additionally, we are also planning to add oncology facilities at the group’s already existing hospitals at places like Vizag and Bhubaneshwar. We hope to become a national leader in this field both in terms of clinical differentiation and volumes," said the company management in the latest annual report.

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As part of the expansion plans, the company is coming up with a Proton Therapy Centre as part of a Comprehensive Oncology Referral Campus at South Chennai which is expected to be operational by the end of FY 2018-2019. This project is planned in two phases--where the first gantry is scheduled to be installed by December 2018 while the second and the third gantry will take another six months before getting commissioned.

This treatment facility is claimed to be available only in two countries in the whole Asia-Pacific region, i.e in China and Japan. It will provide treatment to a population segment of around three billion people across the globe. The company has been marking a 12 per cent compound annual growth rate in terms of bed count addition from the financial year 1995.

The strategy for the future growth include strengthening its presence in the key strategic markets (such as Chennai, Hyderabad, Kolkata, Bengaluru, New Delhi, Ahmedabad, Mumbai and others), geographic expansion by setting up hospitals in Tier II and III cities through its smaller hospital model reach, increasing patient touch points by way of multiple formats including primary and speciality clinics, optimisation of asset utilisation in mature facilities, compressing time-to-maturity of new facilities and increase in capital efficiency, among others.

In order to improve profitability, the company is also looking at improving average revenue per occupied bed per day through investment in latest medical technologies and skilled physicians and surgeons, while reducing the Average Length of Stay (ALOS) using technologies like minimally invasive surgeries and maximising efficiencies through better supply chain management and human resources development.

ALSO READ: Apollo Hospitals to expand footprint with local tie-ups, bets on Modicare

Its new hospitals, launched in the last around three years, is to grow at 20 per cent in revenue and 15 per cent in Earnings before interest, tax, depreciation and amortization (EBITDA) margins for the next three years. The matured hospitals, which have been established prior to that, would grow at 10 per cent in terms of revenue.

It has 13 hospitals in Tier I and Tier II cities and 2,443 beds including 1,749 operation beds with 58 per cent occupancy in the new hospitals, which has posted a 2 per cent EBITDA and 33 per cent revenue growth year over year. The matured hospitals constitute 30 hospitals including units in the tier I cities with around 5,910 bed capacity-- of which 5,427 are operational with 67 per cent occupancy. The matured hospitals posted a Rs 35.28 billion consolidated revenue, with six per cent year over year revenue growth and around 20 per cent EBITDA margins.

Commenting on the threats the sector has, the hospital management said that the hospital may face competition from both domestic healthcare chains and international healthcare majors, which may further increase the costs.

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