PE firm Advent to invest $297 million in India's Apollo Hospitals unit

An airplane flies past an Apollo Hospital building in New Delhi

By Kashish Tandon

BENGALURU (Reuters) -PE firm Advent International will invest 24.75 billion rupees (nearly $297 million) in Apollo Hospitals unit Apollo HealthCo and merge its online pharmacy business with pharmacy distributor Keimed, the hospital chain operator said on Friday.

Advent will invest in compulsory convertible instruments in two tranches for a 12.1% stake in the merged pharmacy business entity, which will have an enterprise value of 224.81 billion rupees.

"This valuation surpasses that of peers such as MedPlus Health, underlining the market's recognition of the combined entity's value and growth prospects," Dhara Patwa, an analyst at SMIFS Institutional Research, said.

Apollo HealthCo, the digital health and services business of Apollo Hospitals, has been pressuring the hospital operator's bottom line, hurt by its cash-guzzling pharmacy business Apollo 24/7.

Apollo HealthCo posted a loss for the sixth straight quarter in February. However, the hospital operator previously said it hopes to make the unit profitable by the end of fiscal 2024.

"With Advent's investment and the merger of Keimed, the resulting combined entity is poised to emerge as a frontrunner in the retail health sector within the country," Patwa added.

Apollo HealthCo will have an enterprise value of 144.78 billion rupees, while Keimed is valued at 80.03 billion rupees, Apollo Hospitals said.

The merged entity is expected to deliver revenue worth 250 billion rupees in the next three years, Apollo Hospitals Managing Director Suneeta Reddy said.

Apollo Hospitals will have a 59.2% stake in the combined entity and Keimed 25.7%.

($1 = 83.3510 Indian rupees)

(Reporting by Kashish Tandon in Bengaluru; Editing by Sonia Cheema, Sohini Goswami and Shounak Dasgupta)