Apollo makes Rs 245 cr capital deployment plan

To create new healthcare infrastructure, upgrade assets

Apollo Hospitals will deploy Rs 245 crore of the Rs 305-crore raised through issue of equity abroad in creating new healthcare infrastructure and upgrading existing assets, thereby signalling a move away from its strategy of growing by managing healthcare assets created by others.

Apollo had recently completed a $70-million (Rs 305 crore) global depository receipts (GDR) issue that was listed on the Luxembourg Stock Exchange.

The main aim of the issue was to raise resources to fuel the hospital's expansion plan after a couple of years during which it tried to re-orient its growth plans towards leasing its hospital management expertise.

According to Suneeta Reddy, director (finance), Apollo, the move to manage others' hospitals has cannibalised Apollo's growth. Apollo gets a return of about 20 per cent on the capital deployed in its business, while returns that came through managing hospitals for others were significantly lower, she added.

Addressing a press conference on Monday, Suneeta Reddy said that the biggest portion of the money ie Rs 105 crore, would go in for creating 120-bed hospitals in seven mini-metros that would cost Rs 15 crore each. Apollo has commissioned IMRB to identify the appropriate destinations for these hospitals.

The other areas that would see investments are two cardiac centres which would cost Rs 40 crore each, and an investment of Rs 60 crore to upgrade its existing facilities to meet the norms stipulated by overseas quality accreditation agencies.

Apollo derives about 40 per cent of its revenues from cardiac-related services. The hospital is looking at Bangalore, and Vijaywada in Andhra Pradesh as two possible locations for its cardiac centres.

Apollo intends to use some of the residual money from the GDR issue to join hands with America's Johns Hopkins University to establish an institute of minimal invasive surgery. Apollo and Johns Hopkins are expected to have even stakes in the institute.

Another area of the hospital's operations where an expansion is planned is the pharmacy business. The pharmacy business gives Apollo 39 per cent of its revenue. The hospital has 169 stand-alone pharmacies, and Suneeta Reddy identified this segment as an area for expansion.

Shareholding

Following the GDR issue, the foreign shareholding in Apollo Hospitals stands at 55.86 per cent. The promoters' holding is now at 28.9 per cent, but they have the option to convert warrants issued to them earlier into equity shares.

One of Apollo's biggest shareholders, the private equity outfit Schroders, is believed to have sold a 12 per cent stake in the company to a Malaysian fund. Schroders held about 15 per cent of Apollo's equity before the GDR issue and had a board-level representation. The Malaysian fund is also expected to have a nominee on the board.