Annual General Meeting

Document Summary

AΡΙ Holdings' annual general meeting in December 2023 discussed the large healthcare opportunity for API Holdings and its strategy and latest business updates for FY'23. API's vision is to build India's largest digital healthcare platform, with a mission to simplify healthcare and impact lives.

Addressing Structural Challenges & API's Platform The Indian healthcare system faces several structural challenges, including low expenditure on healthcare at 4.4% of GDP, high out-of-pocket healthcare expenditure (60%), low doctor-to-population ratio (0.9 per 1000), high industry fill-rates (65%), sub-standard drugs being sold (25%), lack of data capturing, and lack of integrated platforms. API's platform aims to address these challenges through cost-effective pricing, improved medicine affordability, end-to-end digitalized supply-chain, a pan-India platform for OPD services, prescription verification, authentic products from pharma companies, digitized prescription records, and valuable data insights. This contributes to affordability, availability, authenticity, and visibility.

Platforms & Profitability API Holdings focuses on high-wallet customers across product segments, leading to profitability. The company operates leading healthcare platforms with best-in-class service delivery, including PharmEasy. It also has a market-leading tech-led distribution platform, Retailio, with robust operations and a large, tech-enabled platform for hospital procurement & supply chain, Aknamed.

Growth Trajectory & Business Strategy API Diagnostics and Thyrocare are showing sustainable and integrated growth. API Diagnostics cross-sells diagnostics to PharmEasy customers. In September 2021, DocOn Technologies, a wholly-owned subsidiary of API Holdings, acquired 71.22% equity interest in Thyrocare Technologies Limited. The company has built a strong network for its products and services.

Scale & Reach API’s scale and platform strength include an INR 143.51 Bn Gross Merchandise Value and INR 66.44 Bn Revenue from Operations. They also have a 5.0% Contribution Margin, 105k Active Pharmacies on RetailIO 1P, 5k+ Active Wholesalers on RetailIO, 1,648 Hospitals Served, 2k+ Last Mile Delivery Agents, and 17k+ pin codes being serviced in PharmEasy Marketplace, 31 Diagnostics Labs, and 900+ Phlebotomists associated, 570+ Districts Served, and 141 mn Clinical Investigations performed. Pan-India logistics and infrastructure include 70+ warehouse cities and 100+ dispatch hub cities.

Revenue & Monetization API Holdings is leveraging its presence across products and services to build a leading outpatient healthcare business. They have built a large product business (pharmaceuticals, OTC, consumables) and are monetizing their network through integrated services like B2C/B2B2C diagnostics and surgeries, and SaaS tools. In terms of revenue and gross margin, products made up 91% and 90% of revenue in FY22 and FY23 respectively, while services were 9% and 10% of revenue in FY22 and FY23 respectively. The gross margin was 5% for products in FY22 and FY23, and 71% and 76% for services in FY22 and FY23.

FY'23 Strategy & Updates The company’s strategy focused on a 4-point agenda to improve overall profitability, drive operating leverage, and strengthen core businesses through sustainable growth along with quality and experience, margin enhancement, cost optimization, and cash conservation.

Consumer Engagement & PharmEasy Strong Consumer Engagement Metrics on PharmEasy lead to profitability, where Repeat User GMV improved from 64% in FY21 to 77% in FY23. The company has 39 million Total Registrations as of March 2023, servicing 19k+ Pin-codes, with an Avg. Delivery Time of ~20 hours for Metro cities.

Retailio Growth Retailio is growing its scale, expanding geographic presence, and leveraging its current retailer base. Along with this expansion comes a 14% revenue share of new cities in FY23, presence in 96 cities in March 2023, 30k pharmacies who purchased private label products in March 2023, and a 79% retention rate for pharmacies.

Aknamed Expansion Aknamed is expanding its scale and acquiring a higher wallet share across hospital clients. The current scale and reach include Revenue per Hospital of INR 6.9 million in FY22 and INR 8.9 million in FY23, as well as Aknamed Revenue of INR 8,961 million in FY22 and INR 11,411 million in FY23. The strategic focus includes expanding service portfolio, growing customer wallet share, and positioning as a full-stack service provider. Key initiatives include SmartBuy integration, SmartChain partnerships, warehouse integrations, and OEM partnerships.

Private Label & OTC The current private label business has scaled to ~INR 900 million ARR with 40%+ gross margin. It is focused on creating brands and penetrating both online and offline channels, seeing a 1.4% contribution to Overall Product Sales %. It has strategies for OTC (distribution channel expansion, category expansion, hyper-scaling) and Rx (improving store availability, leveraging Aknamed network for hospital IPD Rx business).

Diagnostics Diagnostics experience on PharmEasy Labs has improved, with successful integration with Thyrocare driving cross-sell expansion. Strong growth in Non COVID API Diagnostics includes Thyrocare. The revenue of the PharmEasy labs grew 3.5x on back of the initiatives. The customer cross sell has increased from 2.3% in FY21 to 13.8% in FY23.

Financial Overview The company's 4-point agenda has helped deliver profitability at a consolidated level through sustainable growth, margin enhancement, cost optimization, and cash conservation. Common-sized to net revenue, the indicative margin view shows that Adj. EBITDA Margins are projected to reach 1.5-2.5% today, with Gross Margins at 17-18%, and direct costs from 8-9%. API Holdings achieved positive Adjusted EBITDA in H1 FY2024.

Fiscal Performance The fiscal performance includes steady growth in GMV & revenue, with a focus on profitability.

P&L (INR Millions) highlights include Revenue From Operations increasing from 63,836 in Fiscal 2022 to 66,439 in Fiscal 2023, while Adjusted EBITDA improved from -8,208 to -6,134. FY'23 PAT was impacted by non-cash, one-time expenses & charges, with a Corporate EBITDA of -21,992 in FY22 and -13,562 in FY23. The balance sheet shows Assets decreasing from 1,13,983 in Fiscal 2022 to 82,564 in Fiscal 2023 and Liabilities decreasing from 1,13,983 to 82,564. Cash flow from operations has improved to -7,442, while total cashflow during the period shows the company in the green at 370.