Apollo Hospitals is likely to finalise a partner for its proton-therapy centre, a first-of-its-kind advanced radiation therapy unit in this part of the world. The expected equity infusion is said to be about Rs 350 crore. The facility in Chennai is being developed with a capex of around Rs 1,000 crore and the entire business will be transferred to a separate vehicle, senior management of the company said.
The process had been delayed due to the lockdown in Chennai and the management would be able to get back to shareholders on the development by the end of June or first week of July, Suneeta Reddy, managing director, Apollo Hospitals Enterprises Ltd, told analysts in the latest earnings call. She said the partnership arrangement is still on.
A Krishnan, chief financial officer, Apollo Hospitals, said the firm plans to transfer the Capex already incurred on the project entirely to a Special Purpose Vehicle (SPV), and is looking at equal stakes for the two partners.
"So we are talking of a business transfer agreement, which should take the whole Proton project completely out of the Apollo book into another book. And we are talking of an equity infusion of at least Rs 350 crore," he told analysts. The facility was launched in January 2019 and the company is capitalising on phases.
The third gantry has still not been capitalised and around Rs 200 crore of balance capex capitalisation is yet to be done, which is part of the capital work-in-progress, It has been already incurred, Krishnan added, confirming that the capex for the Proton Therapy Centre for all three gantries is around Rs 1,000 crore.
The Proton business was close to breakeven in the third quarter of financial year 2019-20, with almost 20 patients a month, which shows that it is a high-Ebitda business
Proton's pencil-beam therapy, a specialised radiation protocol, claims clinical advantages over conventional radiation as it fights cancer with increased precision and greater dose delivery at the precise site of the tumour. In essence, the theraly minimises damage to healthy tissue, improves quality of life and has a higher cure rate. While it is effective against many cancers, it is particularly effective in tumours affecting the eye and brain, and those close to the brain stem, spinal cord or other vital organs, head and neck cancers, deep-seated abdominal and pelvic cancers, recurrent cancers and paediatric cancers where children and young adults are at a particular risk of lasting damage to organs that are still growing, the company said earlier at the launch.
Speaking to the analysts, Reddy also said Apollo Hospitals is working on initiatives to reduce cost by 15 per cent in a medium to long term. The company is looking at digital platforms and home healthcare to move closer to the consumer, and plans to deepen its presence in key markets in West and East, penetrating the micro markets apart from its strong hold in South. Its pharmacy business also has a strategic road map with specific goals to achieve in five years and it is on its ways to achieve those goals.
The company has 1000 beds dedicated to Covid-19 and the prices are capped in Chennai and Delhi. The consolidated revenue was down by Rs 100 crore because of Covid impact on the healthcare services segment and this had an impact on the Ebitda. Overall occupancies in April, May and June were at 28 per cent, 35 per cent and 45 per cent respectively. However, standalone pharmacies witnessed increased buying in the quarter ended March 31, 2020, aided by the general tendency to stock up on medicines and consumables prior to the nationwide lockdown.
"We expect business and operations to get back to normalcy by the end of quarter two of FY 21," said Reddy. While it has no plans to hike the tariff, it is repackaging the cost of its 70 packages, especially surgical packages, in the wake of the costs going up by three to four per cent because of all the protections and rostering it has to do in the wake of Covid-19.