Well, it is important to see the correlation between hour-loss and occupancy. We are at 68% occupancy, but hour-loss has reduced to 3.26, which is a 5% drop. If we did not have the 5% drop, we would be at 70% occupancy. With this current loss trending as it is now, we should be able to maintain the 67% because of reduced number of days, unlike other hospitals where the hour-loss is higher.
Now on the HealthCo business, what is the target GMV that you have in mind for FY24 and what is the internal estimate when it comes to breaking even?
Currently we are at GMV of Rs 725 crore and this has been growing very strongly by 147%. So our target is Rs 3,000 crore of GMV and we will definitely achieve this. Breakeven for Apollo HealthCo in totality will happen in the fourth quarter of this year and breakeven will happen four quarter later for the digital. So, it will become profitable in 2026. Since we are talking about HealthCo, third quarter was the intended timeline for the fundraise. Given how things are today, do you see it happening soon and at what valuation then?
We have always maintained that we would only dilute at the right valuation and as we have looked at the progress made by 24/7 this year, it has been very good. So, the entire loss was only Rs 39 crore, out of which Rs 34 crore was attributable to ESOPs. So, technically only a Rs 4 crore EBITDA loss and with this trend we believe that the valuations that we get should reflect the quality of growth in the company. Having said that, this year, there is no need for immediate cash infusion. It is being supported by Rs 130 crore of EBITDA coming from the backend pharmacy. So, there is cash for growth existing within the company and at the right valuation, we will look at a 10% dilution.
What I am inferring from what you are saying is that as of now you are not in a hurry. So most likely not this year, right?
At this current rate, there is no pressure to really sell. We are introducing some products next year, so at that time we have people who are interested to take a stake and we want to be able to launch those products before we really do take in capital.
The reason we asked you about this fundraise was to get a sense of how you are going to be funding this Rs 3400 crore capex that you have lined up. Should we expect then more debt on the books?
We are adding 1,100 beds this year and we are deploying about Rs 1,300 crore of cash. We have balanced with mutual funds, etc, and have Rs 600 crore of cash flow. So we are good for this year. It is a very calibrated expansion plan. We have headroom for debt because our debt to equity is now below 0.4. There is room for us to take debt, but it is not required this year.
Will it be organic or inorganic because hospitals have been one of the hottest M&A sectors this year. There were talks as well of HCG, Aster, etc, being on the block as well?
We continue to look at acquisitions and we have done some bolt-on acquisitions. Last quarter in Kolkata, we did Future Hospital. We are adding 330 beds there and this quarter, we finalised a hospital in Pune with 670 beds. First in 2024-25, we will have 250 operating beds in Pune and it is scalable to 450 beds.What about the capex? What would it do to the ROCE and it is currently at 28% for hospitals, as we understand?
Currently it is at 28% for hospitals and this is really what we are tracking because a big capex will happen in the hospital space. We believe that 20% is a hurdle rate. It will not drop beyond that.
What about diagnostics growth because the target there was Rs 500 crore this year. Are you sticking with that and what about margins then?
Yes, we are on track for that. We have done about Rs 150 crore of revenue in the diagnostics and margins have also improved to 12%. So, there is an investment being made into the diagnostics of Rs 150 crore over the next few months and with that we should be able to grow it significantly.
How much has been the growth in ARPOB this quarter and what is the outlook in terms of how the payer mix really helped the number?
So, ARPOB improved by 14% to Rs 57,380 and the payer mix is seeing a change to insurance. We have a very healthy payer mix currently. We have about 40% walk-ins and 40% insurance and then we have about 7% international patients and this has grown by 18%. We continue to see growth in that and the rest we work with state governments and Ayushman Bharat.