Apollo Hospitals looking at inorganic growth in smaller cities

Company is expecting atleast one of these facilities by FY15

Healthcare service provider Apollo Hospitals Enterprise Ltd (AHEL) is looking at opportunities for inorganic expansion in the tier II cities, in order to increase its presence in these markets. The company is expecting at least one of such facilities - planned in Indore in FY15 - to be an acquisition, said company officials.

 

Speaking to analysts in an earnings call following the announcement of the second quarter results of the financial year, Suneeta Reddy, joint managing director, AHEL, said, “We are looking at some opportunities of acquisition of facilities in the tier II locations”. 

 

She added that while the company's priority in tier I cities is of consolidation with a cluster approach, it has a team to look at the expansion in tier II locations, including identifying locations to start operations in.

 

Elaborating on the strategy of the company in this, Krishnan Akhileswaran, chief financial officer of AHEL said that the opportunities it is looking at in inorganic growth could of various models. 

 

“We are managing several hospitals and some of them might be interested in making us a partner offering a majority or complete ownership. In some other cases there might be a one or two hospitals set up by somebody recently and they might be looking for a partner,” he said. He added that in the pipeline of future launches, the facility it is planning in Indore in FY 15 could be an acquisition.

 

However, the targets might be small hospitals and the company do not see major level of capital requirement for this. The company has plans to add 1000 beds in the tier II cities in near future.

 

The hospital chain is adding around 1000 beds this year, with a total of around 525 beds in the three Reach hospitals, its rural and semi urban hospital initiative, along with 180 beds in North Bangalore and the rest in three facilities in Chennai. The expansion is to be funded through debt and internal accruals.

 

In addition to expanding its network of Reach hospitals, AHEL is also setting up a network of Retail Healthcare Centres (RHCs) such as Lifestyle Birthing Centres, Dental Speciality Centres and Primary and Diagnostic Clinics focused on ailments such as hypertension and diabetes. 

 

The company has 51 hospitals with total bed capacity of 8,438 beds as on September 30, 2013,of which 38 are company owned hospitals including joint ventures and subsidiaries and associates with 6,400 beds and 13 are managed hospitals with 2,038 beds. Of the 6,400 owned beds, 5659 beds were operational and had an occupancy of 72%, according to a company presentation.