Apollo Hospitals in talks to sell stake in multispecialty clinics chain, IFC to exit

AHLL reported a drop in revenue to Rs 1,233 crore in FY23 from a revenue of Rs 1,314 crore in FY22

Apollo Hospitals Enterprise Ltd is looking to sell a significant stake in Apollo Health & Lifestyle Ltd (AHLL), which runs clinics and diagnostic centres, people aware of the development said.

The stake sale would also facilitate an exit for International Finance Corp (IFC), the World Bank's private investment arm, after an eight-year investment in Apollo Hospitals.

Founded in 2000, AHLL runs India's biggest chain of multispecialty clinics under the Apollo Clinics brand in India and the Middle East, diabetes management clinic Apollo Sugar, and diagnostic facilities Apollo Diagnostics. The company also operates in specialty formats such as Apollo Cradle for women and children and Apollo Spectra for planned surgeries.

IFC owns around 31 percent of the company and first invested in the Apollo subsidiary in 2016. Since then, it has pumped in a little over Rs 500 crore in the business.

“The fundraising at AHLL is aimed primarily at providing an exit to IFC, which has been invested in the company for a long time. Along with the secondary by IFC, AHLL will also raise some primary capital to fund the growth of its clinics and diagnostic centres and other retail formats,” one of the people said, requesting anonymity.

Apollo is only looking to dilute a minority stake in the business and will continue to run the operations of the unit, according to the people cited above.

A spokesperson for IFC declined to comment on the development. An email sent to Apollo Hospitals did not elicit a response.

As of December 31, 2023, AHLL operated 286 clinics, 2,142 diagnostic centres, 70 sugar clinics, 152 dental centres, 129 dialysis centres, 17 IVF centres, and 11 hospitals under the Apollo Spectra and 11 centres under the Apollo Cradle brands, says a June 11 report by credit rating agency Crisil.

The report added that in the nine months to December 31, AHLL’s revenue grew by 9.4 percent, with continuous expansion of its clinics, diagnostic and specialty network.

“For the full fiscal 2024, revenue is estimated to grow 13-14 percent, driven by healthy footfall at the AHLL centres. Over the medium term, revenue is expected to expand 10-12 percent as AHLL continues to expand its network and footfalls remain healthy,” the rating agency noted.

It added that AHLL is expected to incur a sizable capex of Rs 280-320 crore, which includes two more cradle centres in Mumbai and Hyderabad and further expansion of its diagnostic and clinic centres (sugar, dialysis, clinics and dental) and inorganic expansions.

“Capex is expected at approximately Rs 100 crore per annum from fiscal 2026, which too will necessitate part debt-funding,” the report said.

AHLL reported a drop in revenue to Rs 1,233 crore in FY23 from a revenue of Rs 1,314 crore in FY22. It reported a loss of Rs 40 crore in FY23, as against a profit of Rs 43 crore in the previous fiscal.

Crisil noted that the financial risk profile of AHLL is expected to remain moderate, with net-worth turning negative in fiscal 2024, due to losses at the net level, and impact of accumulated losses since fiscal 2017.