HYDERABAD: Apollo Hospitals Enterprise Ltd said on Monday that it would hive off its pharmacy business and has convened shareholders meeting on October 21, in Chennai based on the orders from National Company Law Tribunal (NCLT).
The pharmacy business will be transferred to a separate entity called Apollo Pharmacies Ltd, targets to achieve Rs 10,000 crore revenue and 30 per cent return on capital in the next five years.
Apollo Hospitals, which will be the exclusive supplier for Apollo Pharmacy under a long-term supply agreement, will also enter into a brand licensing agreement to licence the Apollo Pharmacy brand to the front-end stores and online pharmacy operations.
The latter will pay a lump sum of Rs 528 crore in cash to the former once the scheme comes into effect.
The proceeds will help the corporate hospital chain to deploy funds for growth and enhancement of other existing businesses and have dedicated management focus on each businesses among others.
It will also help Apollo Pharmacy to acquire ready-to-use assets, including business undertakings and reducing the time to market, enhancing private label business from the current more than six per cent to over 12 per cent in next five years and enable foray into digital or online pharmacy, the company said.
Currently, Apollo Hospitals holds 100 per cent equity share capital of Apollo Medicals Pvt Ltd, which in turn holds all equity shares of the pharmacy unit. Once the scheme of arrangement is implemented, Apollo Hospitals’ shareholding in Apollo Medicals will be diluted to 25.5 per cent of the share capital, while the rest of the stake will be with other investors such as Jhelum Investment Fund, Hemandra Kothari, Enam Securities.
These investors will, in turn, hold 100 per cent equity share capital of Apollo Pharmacy. The proposed re-organisation would not have a material impact on the financials of Apollo Hospitals as the back end business related to the standalone pharmacies, which represents about 85 per cent of the business economics will continue to be held by Apollo Hospitals.
Apollo Pharmacy today has growth from 170 outlets in FY05 to 3,428 outlets as on March 2019 spread across 400 cities and towns in 20 states and four union territories.
It currently serves about three lakh customers daily and employs more than 21,000.
According to Apollo, organised pharmacy retail accounts for less than 5 per cent of India’s $15 billion domestic pharmaceutical market, which is estimated to grow 10-12 per cent CAGR in the next decade.