Apollo Hospitals-Advent International deal to enhance profitability

Apollo Hospitals Enterprises (AHEL) has proposed to infuse equity capital (INR 24.8b) from Advent international at Apollo healthco level (AHL) and integrate Keimed private ltd (distribution arm of Apollo group) with AHL. The deal values AHL at INR 145b (USD 1.8b) at an expected valuation of EV/sales of 1.9x. Keimed is valued at INR 80b (23x FY24E EBITDA of INR 3.5b). The deal establishes a strong pharmacy franchise that spans the entire value chain from distribution to direct and online customer engagement. This expansion not only increases scale but also boosts efficiency throughout the value chain, leading to enhanced profitability.

Outlook
We value AHEL on an SOTP basis (26x EV/EBITDA for hospitals, 12x EV/EBITDA for retained pharmacy, 20x EV/EBITDA for front-end pharmacy, 25x EV/EBITDA for AHLL, and 2x EV/sales for Apollo 24/7) to arrive at a PT of INR 7,280. Maintain BUY.

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