Apollo's business model kept the healthcare group insulated from recession
Having tided over the crisis, Apollo has drawn up grand expansion plans. It has outlined capital expenditure of Rs 1,800 crore to add 2,500 beds over three years. But often such mammoth plans are fraught with challenges. Preetha says, "There is huge shortage of paramedics in tier 2 cities. Our in-house training programmes address this need. We have been constantly training new doctors in our flagship hospitals while also building a pipeline of doctors who wish to return to India from the West."
Preetha and her three sisters believe that investment needs to be directed towards preventive healthcare and better technology. "Rising consumer awareness and greater health insurance penetration are coaxing us to adopt this model," she says.
The mantra for ensuring that the organisation stayed afloat during the slowdown was simple. "Stagger investments, keep fixed costs in control, planinvestments with lower gestation and adopt patient-centric methods," she explains adding that "you've just got to get better at everything you do."
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According to Preetha Reddy, it was Apollo's business model that kept the healthcare group fairly insulated from the recession
The global financial meltdown has crippled many economies and liquidated even some well-managed businesses in the last four years. But, the healthcareindustry worldwide not only avoided a body blow, it actually emerged unhurt. This surprised many people. Some even labelled the industry to be recession proof. Their reasoning was that people may defer spending on luxury goods or holidays, but not on medical needs.
This sentiment seemed to be reflected in the stock market as well. During this phase, when stocks in general were being battered, investors were still buying into insurance, hospitals and drug makers. While there's no denying that, says Preetha Reddy, managing director at Chennai-based Apollo HospitalsBSE 0.42 %, there was more than just a pure play of demand and supply economics.
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According to Preetha, it was Apollo's business model that kept the healthcare group fairly insulated from the recession. "Our business model which deals with a variety of specialisations across different income groups in different town categories and across geographies makes us less vulnerable to slowdowns."
It is a model that many other corporate hospital chains too have adopted. Perhaps, Apollo has done better because it did not take its foot off the pedal when it came to expansion. The company continued investing in technology and trained manpower - two factors which have a direct bearing on clinical outcomes. Preetha says, "Our strategy of spreading to tier two towns, while at the same time building critical mass in terms of capacities in cities also meant that we didn't spread our resources too thin."
Buildings were leased where real estate costs were prohibitive to save capital. Apollo's finance teams were also told to slash fixed overheads without compromising on patient care.
It is a model that many other corporate hospital chains too have adopted. Perhaps, Apollo has done better because it did not take its foot off the pedal when it came to expansion. The company continued investing in technology and trained manpower - two factors which have a direct bearing on clinical outcomes. Preetha says, "Our strategy of spreading to tier two towns, while at the same time building critical mass in terms of capacities in cities also meant that we didn't spread our resources too thin."
Buildings were leased where real estate costs were prohibitive to save capital. Apollo's finance teams were also told to slash fixed overheads without compromising on patient care.
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Dr N Krishna Reddy, director and chief executive of Hyderabad-based Care Hospitals says of the industry, "Health care is like roti, kapda aur makaan. It's become an essential today. And catering to this demand is what gets us our bread and butter."
But Apollo had something else to fall back on - its retail business. The pharmacies and wellness stores were not impacted by the slowdown and reported a store growth of about 16%, while overall retail growth has been in excess of 30%. Preetha attributes this phenomenal growth to the group's emphasis on increasing FMCG products and a private label. Besides medicines, the pharmacies also stock branded wellness goods that act as a differentiator compared to other conventional drug stores.
But Apollo had something else to fall back on - its retail business. The pharmacies and wellness stores were not impacted by the slowdown and reported a store growth of about 16%, while overall retail growth has been in excess of 30%. Preetha attributes this phenomenal growth to the group's emphasis on increasing FMCG products and a private label. Besides medicines, the pharmacies also stock branded wellness goods that act as a differentiator compared to other conventional drug stores.
Having tided over the crisis, Apollo has drawn up grand expansion plans. It has outlined capital expenditure of Rs 1,800 crore to add 2,500 beds over three years. But often such mammoth plans are fraught with challenges. Preetha says, "There is huge shortage of paramedics in tier 2 cities. Our in-house training programmes address this need. We have been constantly training new doctors in our flagship hospitals while also building a pipeline of doctors who wish to return to India from the West."
Preetha and her three sisters believe that investment needs to be directed towards preventive healthcare and better technology. "Rising consumer awareness and greater health insurance penetration are coaxing us to adopt this model," she says.
The mantra for ensuring that the organisation stayed afloat during the slowdown was simple. "Stagger investments, keep fixed costs in control, planinvestments with lower gestation and adopt patient-centric methods," she explains adding that "you've just got to get better at everything you do."
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Prices|Financials|Company Info|Reports
Prices as on 19 Dec,2012
Source : DEEPIKA AMIRAPU,ET BUREAU
