Apollo Hospitals to divest front-end pharmacy biz

Apollo Hospitals Enterprise said Wednesday it is divesting its front-end pharmacy business to Apollo Pharmacy Ltd for a lump sum cash consideration of Rs 527.8 crore as part of a restructuring exercise.

The board of directors of the company at its meeting held Wednesday decided "to segregate the front-end retail pharmacy business carried out in the standalone pharmacy segment into a separate company Apollo Pharmacies Ltd (APL)," Apollo Hospitals Enterprise Ltd (AHEL) said in a regulatory filing.

Apollo Pharmacy Ltd (APL) will be a wholly-owned subsidiary of Apollo Medicals Pvt Ltd (AMPL) in which Apollo Hospitals Enterprise Ltd (AHEL) will have a 25.5 per cent stake.

The other three investors in AMPL, are Jhelum Investment Fund 1 with 19.9 per cent stake, Hemendra Kothari (9.9 per cent) and ENAM Securities Pvt Ltd (44.7 per cent).

The move followed a review of long-term strategy for both healthcare services and standalone pharmacies of the 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 Ltd ('APL') as part of the proposed reorganisation," it added.

The company further said APL will "focus on building a multi-year growth platform for the stand-alone pharmacies business to get to a medium-term target of over 5,000 pharmacy outlets over five years with a goal of over Rs 10,000 crore in revenues".

The step would enable foray into digital commerce as part of the company's omni-channel strategy to "provide consumers increased convenience and ability to choose between online and physical stores", it added.

Apollo Pharmacy currently has 3,167 outlets in about 400 cities and towns spread over 20 states and four union territories. Its employee strength is over 21,000.

The company said currently it is serving about 3 lakh customers daily.

"With a well-established track record of growth, a proven ability to expand our pharmacy network and a strong brand salience, the Board recognised that it was now -appropriate for this business to be a separate business entity with a clear strategy and vision for itself," the company said.

Under the new structure, AHEL will be the exclusive supplier for APL under a long-term supplier agreement, and AHEL will enter into a brand licencing agreement with APL to licence the "Apollo Pharmacy" brand to the front-end stores and online pharmacy operations.

The proposed reorganisation would not have a material impact on the financials of AHEL as the backend business related to the standalone pharmacies which represents 85 per cent of the business economics will continue to be held by AHEL, Apollo Hospitals Enterprise Executive Vice Chairperson Shobana Kamineni said.

"This will take AHEL one step closer to a potential unlocking of value in the standalone pharmacy segment," she added.