Apollo Hospital Enerprise shared its restructuring plan today and as part of the restructuring process will divest the retail pharmacy into a separate company. “It was decided to segregate the front-end retail pharmacy business carried out in the standalone pharmacy segment into a separate company Apollo Pharmacies Limited (APL) as part of the proposed reorganization and the Board has accordingly approved the same,” said the company. The company said that the re-organised structure should follow existing regulatory framework while allowing the company to maximise shareholder value and set the platform for “Value Discovery” of the pharmacy business at a later stage.
Shareholding pattern
APL will be a wholly owned subsidiary of Apollo Medicals Pvt. Ltd (AMPL). “Entire shareholding of AMPL will be held by Apollo Hospital Enterprise Limited (AHEL) and certain identified investors viz. Jhelum Investment Fund 1, Mr. Hemendra Kothari, and ENAM Securities Private Limited,” said the company. AHEL would hold 25.5 % of the total share capital of AMPL with other Investors collectively holding the remaining share capital of AMPL. Specifically, Jhelum Investment Fund 1 would hold 19.9 %, Mr. Hemendra Kothari would hold 9.9 % and ENAM Securities Private Limited would hold 44.7 % of the total share capital of AMPL. The parties are entering into definitive agreements.
Deal Size
For the purposes of effectuating the restructuring, AHEL will transfer the business of the front-end retail pharmacy business carried out in the standalone pharmacy segment to APL by way of slump sale under a scheme of arrangement to be duly approved by stock exchanges, shareholders, National Company Law Tribunal and all other requisite regulatory authorities, with such transfer being effective from 1st April 2019. “The slump sale consideration would be INR 527.8 crores. The funding plan at APL for the reorganization will enable sufficient funds to be retained for new business expansion apart from discharging the slump sale consideration,” the company said.
Apollo’s standalone pharmacy business has been growing at a rapid pace and the business has matured and is today at an inflection point requiring greater focus and attention, independent of the hospital business, given the growth opportunity that India’s domestic pharma market has over the medium term. Apollo Pharmacy today has grown from ~ 170 outlets in FY05 to 3167 outlets as of September 30, 2018, in ~ 400 cities/towns spread over 20 states and 4 Union territories and is currently serving about 300,000 customers daily through a dedicated employee strength of about 21,000 plus.
Organised pharmacy retail accounts for less than 5% of India’s ~ USD 15 bn domestic pharmaceutical market which is estimated to grow 10-12% CAGR over the next decade, driven predominantly by volume growth. The key growth drivers for domestic pharmaceutical industry include increasing disposable incomes, demand for quality products, higher incidence of chronic diseases, growing awareness of diagnostics and preventive care, and greater accessibility through generics. Organised pharmacy retail is expected to grow at a much faster rate within this.
