Advent to infuse Rs 2,475 crore into Apollo Hospitals' subsidiary

The merger will happen in a phased manner over the next 24-30 months. The combined entity is expected to deliver Rs 25,000 crore of revenue in three years with 7-8 per cent EBITDA

Apollo HealthCo Ltd (AHL), a subsidiary of Apollo Hospitals Enterprise (AHEL), on Friday entered into a binding agreement to raise equity capital of Rs 2,475 crore from Advent International (Advent), one of the world’s largest private equity (PE) players.

The transaction will also see the merger of two units under Apollo Healthco — its wholesale pharma distribution unit Keimed Pvt Ltd and online healthcare business Apollo 24|7.

The merger will take place in a phased manner over the next 24-30 months.

The combined entity is expected to deliver Rs 25,000 crore of revenue in three years with 7-8 per cent earnings before interest, taxes, depreciation and amortisation (Ebitda).

 

“It will now be a unified company which will have all the pharmacy distribution. This will include 6,000 Apollo Pharmacy stores and 64,000 non-Apollo pharmacy stores as well. Apollo 24|7 will also continue to do the digital healthcare services,” said Krishnan Akhileswaran, chief financial officer (CFO) of the company.

Advent will invest in compulsory convertible instruments over two tranches to secure a 12.1 per cent stake in the merged entity, by valuing the combined entity at an enterprise value of Rs 22,481 crore.

Apollo 24|7 is valued at an enterprise value of Rs 14,478 crore. Keimed is valued at Rs 8,003 crore.

Pursuant to the merger, Keimed shareholders would hold a maximum of 25.7 per cent stake in the combined entity. AHEL will continue to remain the largest shareholder with at least 59.2 per cent stake.

“Our mission has been to deliver high quality healthcare to all, at an affordable cost, and with a high degree of reliability and trust. Apollo 24|7 has delivered on this promise and reached over 33 million Indians in a short span of time.

With Advent’s investment and the merger of Keimed, the combined entity will be one of the country’s leading retail health companies,” said Prathap C Reddy, chairman, Apollo Hospitals Group.

The merger is subject to further corporate approvals to be obtained at the relevant time.

Keimed is a wholesale pharma distribution firm with major operating metrics. The merged entity will have a pan Indian presence and potential to unlock significant business synergies.

The merger with Keimed is estimated to be earnings per share (EPS) accretive from the first year.

“Leveraging the Apollo brand, a multi-dimensional team and state-of-the-art tech and products, Apollo 24|7 has scaled faster than its peers in a third of the time. Today marks a new milestone and gives us the ability to double down on what we do best. The size of the merged supply chain will allow 1.4 billion Indians access to genuine medicines within 24 minutes to 24 hours, seven days a week! The platform will evolve to deliver market-leading and curated omni-channel health offerings, and make high quality care accessible to all,” said Shobana Kamineni, executive vice-chairperson, Apollo Hospitals Enterprise.

“The merger of Keimed is a significant step in the integration of the comprehensive supply chain. This deal brings together a formidable partnership of capabilities and strengths and will deliver exponential value for AHEL and its shareholders,” said Suneeta Reddy, managing director, AHEL.

Advent will invest Rs 2,475 crore in two tranches — 70 per cent or Rs 1,732 crore at the first close and the balance 30 per cent or Rs 743 crore within 12 months of the first close.

“This investment demonstrates Advent’s commitment to investing in the fast-growing healthcare sector in India, backing high-quality market leading players and working creatively with promoter-founders to drive value for all stakeholders. We can’t wait to partner with the Apollo franchise, a household brand, built with over 40 years of hard work by the Reddy family,” said Shweta Jalan, managing partner and head of Advent India. 

Booster shot

Apollo 24|7 has entered into a framework agreement to integrate 100% of Keimed Private Limited in a phased manner over the next 24-30 months

Advent will invest in compulsory convertible instruments over 2 tranches to secure 12.1% stake in the merged entity, by valuing the combined entity at an enterprise value of Rs 22,481 crore