Apollo Hospitals Group plans to hive off its retail pharmacy business into a separate entity and then rope in a strategic foreign investor or go for an initial share sale, according to Group Executive Director Shobana Kamineni.
“Last quarter, we turned positive in terms of cash flow. So, the business is large and stable at present and we are now looking at what the next trajectory is. We are definitely working on hiving this business off into a separate subsidiary and enable it to grow on its own,” she told Business Standard on the sidelines of the Auto Show South 2010 that kicked off here today.
“We will first make it a subsidiary and then keep options open like looking for a strategic foreign investor or going in for an initial public offer (IPO), for the shareholders to decide. We have the luxury of time ... but I hope one of these plans will materialise within a year.”
Apollo Hospitals was looking at divesting at least 50 per cent of Apollo Pharmacy, the retail pharmacy network, for Rs 1,000 crore, she said. The group’s internal auditors and investors had put the valuation of Apollo Pharmacy at Rs 2,000 crore, which she believed was a good deal, as it had created a size, integrity of supply chain, brand and the ability to make it profitable, Kamineni said.
According to Kamineni, the retail division is self-sufficient and can easily add 150 more stores this year with its internal resources.
The company would invest Rs 25 crore from internal accruals to fund the expansion. Apollo Pharmacy has around 1,200 stores.
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Commenting on the competition in the over Rs 40,000-crore pharma retail market in India, of which organised players account for close to 3 per cent, she said there was no point sitting and fighting on discounts when medicines in India were cheaper than anywhere in the world.
“Discounting is not the way as our margins are not huge. I want to see one or two competitors getting to the service level,” Kamineni said, adding the company’s outlook for this financial year was Rs 600 crore, as against Rs 500 crore in the previous one.