Apollo Hospitals - Deal With Advent A Step Towards Integration Of Retail, Distribution Biz: ICICI Securities

ICICI Securities Report

Advent International is investing Rs 24.75 billion for 16.8% stake (12% post-merger) in the pharmacy retail business of Apollo HealthCo Ltd. The deal values Apollo HealthCo at an enterprise value of Rs 145 billion, 1.9 times on 9 months FY24 annualised sales.

Apollo Hospitals Enterprise Ltd. would merge its privately held pharmaceutical distribution business under Keimed with Apollo HealthCo over the next two - 2.5 years, valuing Keimed at Rs 80 billion or 0.8 times/22.9 times nine months FY24 annualised sales/Ebitda.

As per management, over the next three years, sales of combined business may grow at 22% compound annual growth rate to Rs 250 billion and Ebitda between Rs 17.5-20 billion. We believe the deal valued Apollo HealthCo at a significant discount as compared to our expectations (of Rs 215 billion), and hence, we lower our rating to 'Hold' ('Add' earlier) with a revised target price of Rs 6,275 (Rs 6,800).

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