India’s largest healthcare services provider by market cap, Apollo Hospitals Enterprise Ltd, on Wednesday said it agreed to acquire 320 retail pharmacy stores of Hetero Med Solutions Ltd (HMSL) for Rs146 crore. The pharmacy stores currently operate in Telengana, Andhra Pradesh and Tamil Nadu.
In a filing, Apollo Hospitals said the transaction does not include any equity acquisition in HMSL. The acquisition is in the form of the business undertaking on a slump sale basis. It is subject to completion of due diligence and other statutory formalities.
The acquisition from Apollo comes nearly a year after private equity biggie KKR and Co. invested Rs550 crore in PCR Investments, the holding company of Apollo Hospitals Enterprise. The investment was in the form of debentures which could be converted into equity shares in the hospital chain at the end of a five year period.
HMSL, which was incorporated in 2007, is exiting its pharma retail business in order to focus on its core pharma and bulk drugs businesses. Hetero Group manufactures and markets pharmaceutical products and intermediate chemicals used in the pharma industry.
The deal will strengthen Apollo Pharmacy’s position in the organised pharmacy market and will help increase the sales of Apollo’s private label products. Currently, Apollo has over 1,600 outlets and is the largest player in this segment.
"In order to drive the standalone pharmacy business segment's growth to the next stage, Apollo was on the look out for acquisitions to grow inorganically and considers the Hetero Pharmacy chain as the right choice given its significant presence in the relevant territories,” said Shobana Kamineni, executive vice-chairperson of Apollo, in the filing. “We expect to leverage on our proven track record of performance and operational capabilities to drive growth and profitability of the combined network and create long term value for our shareholders."
For the fiscal year 2014, HMSL had clocked in revenues of Rs160 crore with loss of Rs3.9 crore. HMSL stores recorded a break even at the store level in FY14 while its EBITDA loss was mainly on account of backend expenses, Apollo said. pp