Apollo Hospitals eyes inorganic growth, looking for acquisitions in east and north

Chennai-based corporate hospital network, Apollo Hospitals is planning to expand its reach in the east and north geographies of the country by acquiring small and mid-sized hospitals, further adding to its portfolio of healthcare facilities.

The move comes close on the heels of the buyout of 50% equity stake held by IHH Healthcare (IHH), in Apollo Gleneagles Hospital, Kolkata (AGHL), a joint venture (JV) in which Apollo Hospitals group was holding a 50% equity stake, for a cash consideration of Rs 410 crore.

Apollo has 70 hospitals with a total bed capacity of 10,197 beds as on September 30, 2020. Around 44 are owned hospitals including JVs, subsidiaries and associates with 8,816 beds. There are five managed hospitals with 851 beds. Besides, there are 11-day care and short surgical stay centres with 270 beds and 10 cradles with 260 beds.

The board had also recently approved the proposal to raise funds by way of issue of securities through preferential allotment and or qualified institutional placement (QIP) route for an amount of Rs 1,500 crore, and the proposed acquisitions will be funded from a portion of the fundraising.

Participating in an earning call, Suneeta Reddy, MD, Apollo Hospitals told analysts that the company has plans to drive deeper into eastern geographies especially in places such as West Bengal and Assam. “We may not look for greenfield projects for the time being, but are looking at a few small-sized acquisitions, around 300-beds in larger cities and 200 beds in smaller ones. We believe that good properties with right prices are available in those geographies,” she said.

The funds from the proposed QIP will also be used for investment in 24/7 digital app and towards reducing the debt which will then enhance the profitability of the group. The management of the Apollo said that occupancy levels of its hospitals had surpassed 65% in October and it would increase to 70% in November. In the first quarter, it had reported an occupancy of 38% and the company said that for break-even around 50 to 55% would be enough. It had registered a Covid-19 occupancy of 30% out of the total occupancy. Post the NCLT approval, the demerger of the front-end of the pharmacy business came into effect from September

1. However, Apollo Hospitals continues to handle the back-end pharma distribution, within a vertical called pharmacy distribution. The company has crossed the 5 million registered user mark for digital platform Apollo 24/7, undertaking more than 2,600 teleconsultations every day. It has plans to further increase emphasis on digitisation, automation and robotics in line with global best care practices and expands capabilities in Artificial Intelligence in preventive health and clinical decision support.

The company’s standalone revenues de-grew by 2% to Rs 2,414 crore in Q2 of FY’21 as compared to Rs 2,463 crore in the corresponding quarter last fiscal on the back of health care services de-growth of 18%. The PAT for the second quarter de-grew by 64% to Rs 32 crore as compared to Rs 91 crore.