Apollo Hosp signs Rs 400 cr deal with IBA for cancer cure

Below is an edited transcript of Prathap Reddy's interview on CNBC-TV18

Q: What have you announced today?

A:  Today, CEO of IBA, Olivier Legrain flew down for a milestone event to bring the ultimate cure for cancer, a modality, not available for over 3 billion people. There are about 40 odd facilities in the world but most of them are in Europe, US and other parts of the countries but the Sub-Saharan, Indian sub continent, absolutely none for our 3 billion people. So, it is a major step taken by Apollo to bring the care for cancer and is one of the greatest concerns and a big challenge for India as well as other parts of the world where this facility is unavailable.

We have been treating cancers very successfully in majority of large cases but when we were talking about treating children without any side effects the only treatment that is available today is proton and that proton just locks up with the tumor, with the cancer and kills the cancer cells and does not effect the normal tissue.

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Q: Could you focus on the economics of the business? What does it mean in terms of the profit and loss (P&L) account and what can it mean to your balance sheet?

A: It is going to cost us around Rs 400 crore and is included in our budget for the next two years. We are putting up 15 hospitals in various stages of completion for approximately Rs 2,000 crore. So our budget is going to increase to Rs 2004 crore, but we have a good debt equity ratio and that will help us with no difficulty in funding this. We are putting 50 percent as our equity, 50 percent debt.

The return on investment will be minimum 20 percent and is going to be sought after by a number of countries around us and will be much better. It is going to be a very good business proposition, but more importantly, it will be the choice treatment for cancer, mostly cancer in children. So, I don’t believe that it is going to challenge our business economics of Apollo Hospitals. It will only add on to the value.

Q: The street is focused on the value unlocking, what is the leverage position and how do you expect to proceed on the value unlocking front?

A: Point five (0.5) is the debt equity ratio. We can comfortably draw another Rs 750 crore of debt without any problem and are also going to get another Rs 200 crore by disposing off the Apollo Health Street. So, finance is not a problem. It is an important tool to make a significant difference. In India we have the total comprehensive healthcare for cancer and this time we completed 500 bone marrow transplant in Chennai alone, one of the major achievements of our cancer specialty.