Suneeta Reddy, Managing Director of Apollo Hospitals Enterprise Ltd, said that the primary goal of the proposed spin-off and listing of its pharmacy and digital health businesses into a new entity, Apollo Health Technologies, is to unlock value for its shareholders. Reddy expects Apollo's core hospital services segment, which constitutes a little over half of the group’s revenue, to grow "mid-teens" in the next few years as new capacity comes online.
She said the market has failed to recognise the value of the fast-growing retail and digital segments within the broader hospital conglomerate.
"If you look at the sum of the parts, we were not getting much value for this," Reddy said in an exclusive interview with Moneycontrol. "We wanted Apollo shareholders to get value from this transaction," she added.
Apollo earlier this month announced the demerger and listing of Apollo Health Technologies within the next 18 to 24 months. The new entity will consolidate the company's pharmacy business, both online and offline, with its digital health platform Apollo 24/7 and the back-end supply chain of KeyMed.
Reddy said the demerged company is on a path to a significant operational turnaround, aiming to nearly double its EBITDA margin from the current 3.5 percent to 7 percent and become a Rs 25,000 crore ($3 billion) revenue business by 2027.
A critical element of this strategy is the digital platform, Apollo 24/7, which is expected to stop incurring losses and achieve profitability by the end of this year.
“Currently... the combined entity would have Rs 16,000 crore of revenue," she noted. "If you apply 20 percent CAGR, you would get close to 25,000 minimum with a margin of 7 percent," by FY27. This margin improvement is expected as Apollo 24/7 turns profitable by the end of this year, and higher-margin private label products grow, she said.
Private equity firm Advent holds a 12.1 percent stake, and Reddy confirmed the business is “fully capitalised” with no immediate plans for further fundraising.
The new company — Apollo Health Technologies — will include online and offline pharmacies, telehealth, and backend supply chain (KeyMed).
Indraprastha Apollo Hospital lease
Reddy shared that the company is currently awaiting a court judgment concerning a long-standing land lease matter for its flagship Indraprastha Apollo Hospital in Delhi. The case is being heard in the Delhi High Court, with a verdict anticipated by the next quarter.
Of the 1,202 operational beds in the Northern region under the Apollo network, Indraprastha Apollo alone accounts for 710 beds and plays a pivotal role in revenue contribution. It stands as one of the largest private hospitals in India and is widely recognized as Apollo’s flagship facility.
Mumbai expansion
Reddy said Apollo is planning to add a third large hospital in Mumbai and will likely announce the location in the next quarter.
When asked if this new project would be a greenfield or a takeover, Reddy indicated it would be more of a partnership, citing the high cost of real estate in Mumbai and the difficulty of acquiring existing hospitals, which are often owned by trusts.
"In terms of buying over hospitals, we've really studied that (Mumbai) market. Very difficult to buy over because they're mostly owned by trusts," Reddy said.
Apollo, which is strong in South and East, has been steadily increasing its presence in the Western region with hospitals in Pune, Nasik, and Ahmedabad. The hospital chain owns a hospital in Navi Mumbai and has acquired land in Worli to build a 500-bed greenfield hospital.
M&A and growth
The company is targeting mid-teen revenue growth for its core hospital services, driven by both existing facilities and a pipeline of new beds, Reddy said. She anticipates this momentum to build, forecasting "mid-teens for definitely 15 percent to 16 percent" year-on-year growth over the next few years as new capacity comes online, along with a focus on high-margin oncology, neurosciences, and cardiac care, which are key drivers and payer mix optimisation.
Oncology alone is growing at 15–18 percent annually, supported by Apollo’s early investment in proton therapy and specialised cancer hospitals. Commenting on the profile of patients, she said that Apollo has reduced its revenue dependence on government schemes from 7–8 percent to 3–4 percent.
Apollo Hospitals reported consolidated revenue of Rs 21,794 crore for FY25, marking a 14 percent year-on-year growth. The company’s consolidated EBITDA stood at Rs 3,021.9 crore, reflecting a 26 percent increase over the previous year, with an EBITDA margin of 13.9 percent. Hospitals segment, which forms the core of Apollo’s business, contributed Rs 11,147.5 crore to the total revenue — accounting for approximately 51 percent of the overall revenue. This segment also delivered EBITDA margin of 24.2 percent.
A cornerstone of this growth strategy is the addition of 4,000 new beds, a move Reddy believes will supplement the 13-14 percent growth from existing hospitals. "With the addition of these 4,000 beds that we're planning... over a three-year period, this should add another 10 percent to our revenue," she explained.
While committed to organic expansion, Apollo is not averse to acquisitions, provided they meet stringent financial criteria. "We have to make sure that return on capital employed currently in our older hospitals is 26 percent," Reddy said. "We want to make sure that in a five-year term, it is around 19 percent post the new hospitals coming on the street".
This disciplined approach has led to strategic acquisitions, such as a hospital in Pune and brownfield projects in Kolkata and Gurgaon, Reddy said.
On PE driven consolidation
On the topic of private equity companies aggressively entering the Indian hospital industry, Reddy said acquiring existing hospitals is not the only way to gain market share. Reddy said Apollo has adopted a differentiated strategy aimed at leveraging synergies across its healthcare ecosystem and move closer to customers through digital platforms, pharmacies, clinics, diagnostics, and hospitals.
"We are looking at different formats of care, like daycare procedures ...the clinics where people can go for outpatient services and, of course, the tertiary portmanteau care hospitals, with our current ALOS (average length of stay) of 3-3.2 days, should mean that a 450-bed hospital is what you require in some of the micro-markets rather than moving to a 1,000-bed hospital," Reddy said.
"So, this strategy has given us a market share of over 30 percent in Chennai. And we believe that this is the way forward. We are looking at this in Hyderabad, Bengaluru, and Kolkata," Reddy said.
Established in 1983 by Dr Prathap C Reddy with a single hospital in Chennai, Apollo Hospitals has grown to become India’s largest integrated healthcare services provider. Today, the company operates 51 hospitals, 267 clinics, and over 6,600 pharmacies, with a growing presence in diagnostics and distribution across India.
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