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Apollo Hospitals to focus on asset utilisation, margins and debt reduction

PB Jayakumar     September 25, 2019

India's leading healthcare provider Apollo Hospitals is currently focussed on leveraging the investments made in the past with better asset utilisation to reduce its debt and increase profits margins.

Dr Pratap C Reddy, chairman and Suneeta Reddy, managing director said the company has made an investment of over Rs 3,000 crore over the past 13 months in 13 hospitals, which include three acquisitions.  "We have been consistently investing in the past to reach about 12,000 beds and now the  focus is to improve asset utilisation and EBITDA (earnings before interest, tax, depreciation and amortisation) margins," said Suneeta Reddy, while talking to media today in Mumbai.

A couple of weeks ago, the promoter family of Apollo Hospitals represented by Suneeta Reddy had sold a 3.6 per cent stake in bulk deals to raise Rs 741 crore. Apollo Hospitals Enterprise Ltd (AHEL) had said the deal was to bring down debt and associated pledges. Apollo Hospitals had a total debt of Rs 3,450.29 crore. After the dilution, the promoter's stake in the company stands at 30.8 per cent.

In June, the Housing Development Finance Corporation (HDFC) had acquired 51.2 per cent stake in Apollo Munich Health Insurance to raise about Rs 1,334 crore.

The Competition Commission of India (CCI) had this week given green signal to the company's plans of restructuring and sale of its pharmacy operations under Apollo Pharmacies to a consortium for Rs. 527.8 crore. As per the plan, the pharmacy business will be restructured and transferred to Apollo Pharmacies, a wholly-owned subsidiary of Apollo Medicals. Apollo would own 25.5 per cent stake in the pharmacy operations, with Jhelum Investment Fund (19.9 per cent), Hemant Kothari (9.9 per cent) and ENAM Securities (44.7 per cent) owning significant stake. "The pharmacy business grew 19 per cent to 3500 stores and had an EBITDA margin of 8.3 per cent. It has scope for improvement and unlocking the value," said Suneeta.  She said the focus will be on three main verticals of the business - hospitals, standalone pharmacies and retail health.

She said the company has not slowed down its expansion plan and recently started a hospital in Lucknow and is developing a hospital in Kochi with a light-asset model. Over 70 per cent of the 72 hospitals in the Apollo network are matured hospitals. They contribute more than 80 per cent to the overall revenues, which are growing at over 14 per cent with an EBITDA margin of 22.1 per cent. Apollo had consolidated revenues of Rs 9648 crore in 2018/19, with a profit of Rs 200 crore.

"We are not desperate to grow fast as we have created over the years one of the best and comprehensive healthcare infrastructures in the country," said Dr Pratap Reddy. He said Apollo has launched ProHealth, an artificial intelligence-based predictive, proactive and comprehensive health management programme with a view to prevent non-communicable diseases such as stroke, cardiac ailments, diabetes and obesity. The country has huge potential in medical tourism and currently about 10 per cent of its revenues are from overseas patients. Plans are to improve this 15 per cent within two years and 20 per cent by 2022.

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