Apollo Hospitals Enterprise Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Steady quarter, expansion-led investment phase: Healthcare Services revenue grew 9% YoY, but EBITDA margin held flat at 24.6% as ₹67 crore in pre-opening doctor hiring and other costs landed ahead of new hospital commissioning.
• Medical admissions dip is seasonal, not structural: A 15% medical volume drop in Karnataka and a broader medical admissions decline reflect last year's severe dengue season, not a demand problem; surgical and CONGO specialty volumes grew 3% and 14% respectively.
• Digital business turns the corner on unit economics: All three digital lines (pharmacy, diagnostics, consult) turned CM1 positive individually, and overall digital losses narrowed to ₹71 crore from ₹101 crore.
• New hospital pipeline is fully loaded: Four hospitals commission over the next three quarters (Pune, Defense Colony, Sarjapur, Calcutta), with Hyderabad and Gurugram following; management expects total new-hospital EBITDA losses of around ₹150 crore next year.
• What to watch next quarter: Whether the 60% recovery in Bangladesh patient flow holds, the pace of occupancy ramp-up in Pune and Defense Colony from day one of Q3 reporting, and any further progress on the remaining ₹60 crore of the cost-cutting plan.

Revenue Drivers & Volume Dynamics

• Case mix, not tariffs, drove ARPP: ARPP rose 9% to ₹1,73,380, with almost all improvement coming from a shift toward higher-complexity specialties (cardiac, oncology, neurosciences, gastro, orthopaedics) rather than tariff revisions.
• Surgical and CONGO strength offset medical softness: Cardiac, oncology, neurosciences, gastro and orthopaedics together delivered 6% volume growth and 14% revenue growth YoY, while overall surgical volumes grew 3%.
• ALOS fell 7% on technology adoption: Minimally invasive cardiac procedures, robotics, and digital command centers that reduce variability in patient flow all contributed to faster discharges.
• Bangladesh patient flow dented the top line by 1%: Management says at least 60% of that flow has started returning in October, and new international markets (Uzbekistan, surrounding regions, Africa, Indonesia, Iraq) are being explored to diversify.
• Karnataka medical volumes tell the dengue story: Medical admissions dropped 15% in the region because last year's very bad dengue season created a high base; surgical volume was up 2% and cath procedures up 13%, with ARPP up 14% on mix shift.

Madhu Sasidhar: "And if you trace those medical admissions back to last year, it was almost entirely a very bad dengue season, which we have not seen this year."

Margin Walk & Cost Structure

• Pre-opening costs held margins flat despite revenue growth: EBITDA margin stayed at 24.6% because ₹67 crore was spent on doctor hiring ahead of new hospital openings, plus costs for sales and marketing teams, projects division strengthening, and recruitment, all landing before the associated revenue.
• Cost-cutting plan is half-done: A ₹120 crore cost-reduction program has delivered ₹60 crore so far, spanning materials management and supplies, HR efficiency through digital technology redeployment, and IT and other costs.
• Keimed margin compression was one-time: A 30-40 bps YoY decline in Keimed's EBITDA margin came from integration and scheme-related expenses in Q2 and is not expected to recur.
• Occupancy is above 70% in metros and rising: October saw higher occupancy from metro hospitals; management sees potential to drive elective and semi-elective occupancy to 80% and higher in some hospitals.

Expansion Pipeline & New Hospital Economics

• Four hospitals commission in the next two quarters: Pune and Defense Colony (Asia's first dedicated women's cancer center) start reporting from Q3; Sarjapur Bangalore and Calcutta follow in Q4. Hyderabad (with an added oncology program) comes at end-Q4 or early Q1, and Gurugram around Q1.
• Brownfield work has begun: Expansion projects are underway at Jubilee Hills, Secunderabad, Malleswaram and Mysore, with all census beds expected to be fully operational by end of next year.
• New hospitals to carry ~₹150 crore in EBITDA losses next year: Management expects to start each at 50% bed capacity and ramp up; the internal target is breakeven within 12 months for each.
• Established hospitals are the margin engine: Management has an internal target to take established hospital margins 500 bps higher, with overall margins crossing 25% next year.

Apollo HealthCo & Digital Business

• HealthCo revenue grew 17% YoY: Pharmacy distribution EBITDA rose 19%, and overall HealthCo EBITDA improved to ₹110 crore from ₹52 crore.
• Digital losses narrowed meaningfully: Losses fell to ₹71 crore from ₹101 crore, and all three digital business lines (pharmacy, diagnostics, consult) turned CM1 positive at the individual level.
• 24/7 cost breakeven is on track, with one caveat: Management is on course for breakeven by end of this fiscal, but flagged a possible hiccup from investment in the insurance side. The current cost level is described as the "new normal," with further synergies from Keimed, Apollo Pharmacy and PD alignment expected from next financial year.
• HealthCo margin target is 7% EBITDA on ₹25,000 crore revenue by Q4 FY27: Excluding digital losses, the business is already at about 6.2%; after digital breakeven near Q4, overall EBITDA should be in the 6%-plus range.
• Pharmacy is the biggest GMV constituent at 55-60%: Management declined to give an exact GMV breakup between pharmacy, insurance and new businesses, but confirmed pharmacy is the largest layer.

Madhivanan B: "As we speak, just to give some confidence back to how our path to profitability is growing along, all the three lines of businesses that I spoke about, pharmacy, diagnostics and consult business at a CM1 level, has turned positive, in each one of them at an individual level."

AHLL, Insurance & New Initiatives

• AHLL EBITDA grew 21% YoY to ₹50 crore: Margins improved to 11% from 10%, with focus on primary care, diagnostics and clinics that act as a funnel to Apollo Hospitals. Dialysis continues to dwell.
• Insurance business is in early build-out: Operations have started in NCR and Hyderabad, with new businesses picking up from Q4. A 300-seater call center is being scaled toward 500 seats, and POSP-model insurance products are expected around next financial year.
• CGHS rate hike is welcome but marginal: Management noted cardiac, oncology and orthopaedics pricing is "reasonably better," but CGHS still represents a 65% discount to overall insurance and cash tariff realization, so it does not change the strategic view on government business.

A. Krishnan: "It is not something that we have been doing in the past either. So, then when you look at the overall average realization and compare it to the insurance business or even the cash tariff it is still a good 65% discount to the overall realization that we have."

AI & Operational Efficiency

• AI agent on the website drove 318% YoY growth: The agent connects patients with complex medical conditions to the right doctor and enables appointment booking, scaling a business that previously required human intervention.
• Digital command centers now layer in agentic technology: Real-time intelligence on patient flows is being augmented with autonomous capabilities that anticipate and proactively solve patient issues.

Madhu Sasidhar: "I think today, if you go on our website, there is an artificial intelligence agent that connects patients with complex medical conditions to the right doctor and allows them to book appointments. That business, which is from the website grew from last year to the year by 318%, mostly due to the adoption of a very scalable AI technology."

Guidance & Commitments

Key Metrics