Apollo Hospitals is getting attention in the healthcare space for the possibility that the company could finally monetise its new vertical, omnichannel platform Apollo Healthco, after past delays.
The business includes back-end pharmacies, primarily its digital interface Apollo 24/7, which requires online bookings for online pharmacies, remote consultations and diagnostic tests. The company said it would consider raising capital by the end of FY23.
The platform has 20 million registered users and claims to complete 50,000 drug deliveries and 5,000 virtual consultations, and diagnostic sample collections daily.
Apollo spent about Rs 300 crore on Apollo Healthco in the first half, and it is estimated that they will spend about Rs 600 crore in FY24 to support it further.
According to the company, Apollo Healthco is ahead of schedule regarding guidance. It is expected to remain EBITDA neutral next year.
The company is looking to raise $200 million and is open to dilution of up to 20%. The company is targeting a valuation of at least $2.5 billion. Street talk suggests that the choice is between a strategic and a financial advisor.
The e-pharma market is expected to grow from about $360 million in 2019 to $2.7 billion in 2023. With today’s internet penetration in the country, a successful e-pharmaceutical business will ease the cash drain from the core business.
Some of the risks to keep in mind is the intensity of competition from other well-funded omnichannel players such as Tata 1mg, Netmeds, etc.
The delay in obtaining the required valuation will translate into further cash burn for the combined entity.
Most brokerages are optimistic about Apollo Hospitals. For instance, Jefferies, Motilal Oswal, BNP Paribas and Kotak Securities have buy ratings and price targets of Rs 5,110, Rs 5,600, Rs 4,864 and Rs 5,470, respectively.
They reasoned that they were optimistic about the outlook for healthcare delivery. Still, they did acknowledge investor concerns about Apollo Healthco’s funding delay and increased competition in the healthcare space as a whole.