Apollo Hospitals Enterprise Ltd, country’s largest healthcare services provider by market capitalisation and the top pharmacy chain operator under Apollo Pharmacy banner, is acquiring pharmacy stores operated by Hyderabad-based Hetero Med Solutions Ltd (HMSL), for up to Rs 146 crore ($23.8 million), as per a stock market disclosure.
HMSL's retail pharmacy business comprises 320 stores and currently operate in Telengana, Andhra Pradesh and Tamil Nadu states in the southern region of the country. The acquisition would be on slump sale basis and is subject to completion of due diligence and other statutory formalities.
HMSL is exiting its pharma retail business in order to focus on its core pharma and bulk drugs businesses.
Incorporated in 2007, HMSL is a member of Hetero Group which manufactures and markets pharmaceutical products and intermediate chemicals used in the pharma industry.
The deal will boost Apollo's market leadership in the organised pharmacy business and will also create an opportunity to increase the sales of its private label products. Pharmacy business in India is highly fragmented and dominated by standalone mom and pop chemist outlets across the country.
Apollo is the largest player in the organised sector with over 1,600 outlets followed by Religare Wellness and HMSL among others.
The proposed deal may face scrutiny by CCI given the spread of Apollo's chain and an acquisition of the third largest organised pharmacy retail chain.
Shobana Kamineni, executive vice-chairperson of Apollo said, "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 choke given its significant presence in the relevant territories. 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."
HMSL, currently the third largest pharma retail chain in India, recorded revenues of Rs 160 crore with negative EBITDA of Rs 3.9 crore for FY14. The firm recorded a break even at the store level last year while its EBITDA loss was mainly on account of backend expenses.
Shares of Apollo were trading at Rs 1,117.50 each, up 0.89 per cent on BSE in a strong Mumbai market on Wednesday at 12.32 PM.
Apollo's promoter holding arm had recently raised funding from KKR and the PE firm holds rights to convert its investment into equity ownership in the listed firm in the future.