Apollo Hospitals Group plans to raise around $200 million from selling of two more subsidiaries; fund to be used to reduce promoter debt

A day after mortgage major HDFC agreed to acquire Apollo Hospitals Group's entire 50.8 percent stake in Apollo Munich Health Insurance, the promoters of hospital chain are reportedly looking to sell its stake in two more subsidiaries to raise up to $200 million, a media report said.

According to Mint, Apollo group is in discussions to sell stake in Apollo Health And Lifestyle Ltd (AHLL) and Apollo Proton Therapy Cancer Centre Pvt. Ltd. The report added that the proceeds from the transactions will be used to reduce promoter debt.

AHLL is one of the largest players in the retail healthcare segment in India. It runs the largest chain of standardised primary healthcare models  in India and the Middle East.

According to The Economic Times, HDFC's decision to acquire Apollo Hospitals Group's stake in Apollo Munich Health Insurance will boost the general insurer’s market share.

Representational image. Reuters.

On Wednesday, HDFC agreed to acquire Apollo Hospitals Group's entire 50.8 percent stake in Apollo Munich Health Insurance for Rs 1,336 crore and also the 0.4 percent stake held by a few employees for Rs 10.84 crore.

The deal, valued at Rs 1,347 crore, and subject to regulatory and shareholder approvals, is likely to be closed over the next nine months. The merged entity (with HDFC Ergo General Insurance) will be a Rs 10,807-crore business as of today's individual business, making it the second largest.

At Rs 1,336 crore or Rs 73 a share, the deal gives over the four-times premium to the Reddys, the promoters of the Apollo Hospitals group which had invested Rs 300 crore into the joint venture since 2006.

In Apollo Munich Health, Munich Health, the health business arm of Munich Re, owns 49 percent and Ergo International AG, another subsidiary of the German major, owns 49 percent in HDFC Ergo since 2008, the general insurance arm of the mortgage major.

HDFC chairman Deepak Parekh told reporters that the deal has two steps-HDFC first acquiring 51.2 percent in Apollo Munich Health and then merging it with HDFC Ergo. Post-acquisition, Munich group's stake in HDFC Ergo will continue to be at 49 percent, Parekh added. Explaining the deal structure, he said, "if HDFC Ergo
had taken directly the shares of Apollo Group then the combined holding of Munich Re will exceed 49 percent as they already own 49 percent in HDFC Ergo, and a similar quantum in Apollo Munich Health as well.

"So, that structure was not possible because of the 49 percent FDI cap, and so we had to do this acquisition in this manner that we first take 51.2 percent and then merge the two," Parekh told reporters.

He said based on the acquisition price of Rs 1,347 crore for 51.2 percent equity stake, the combined entity will have a value multiple of 1.2 times the gross written premium
in FY19 of both the entities.

With PTI inputs