Apollo HealthCo Ltd (Apollo 24|7 or 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 investors. The transaction will also see the merger of two units under Apollo HealthCo, its wholesale pharma distribution unit Keimed Private Ltd, and online healthcare business Apollo 24/7.
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, from around Rs 13,600 crore and 1.5 per cent now. “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, where we will distribute into. Apollo 24/7 will also continue to do the digital healthcare services,” said Krishnan Akhileswaran, Chief Financial Officer of the company.
Advent will invest in compulsory convertible instruments over two tranches to secure 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 an enterprise value of Rs 8,003 crore and pursuant to the merger, Keimed shareholders would hold a maximum of 25.7 per cent stake in the combined entity, while AHEL would continue to remain the largest controlling shareholder with at least 59.2 per cent stake.
The merger is subject to further corporate approvals to be obtained at the relevant time. Keimed is a leading wholesale pharma distribution with industry-leading operating metrics. The merged entity will have an industry-defining business model with Pan-India presence and potential to unlock significant business synergies. The merger with Keimed is estimated to be EPS accretive from the first year. This marks a pivotal moment in Apollo 24|7’s journey and will strengthen the company’s commitment to build and scale one of India’s largest integrated, omni-channel healthcare ecosystems.
“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, 7 days a week! The platform will continue to strengthen and 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, to 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 first close and balance 30 per cent or Rs 743 crore at 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 creation for all stakeholders. We can’t wait to partner with the Apollo franchise, a household brand, built with 40+ years of hard work by the Reddy family. Leveraging our deep understanding of the industry in India and globally, we are looking forward to helping accelerate this journey,” said Shweta Jalan, Managing Partner and Head of Advent India.
First Published: Apr 26 2024 | 8:18 PM IST
