Apollo Hospitals Enterprise Ltd (AHEL) has announced a restructuring plan aimed at unlocking value from its pharmacy and digital health businesses through a composite scheme of arrangement. The move will lead to the direct listing of a new entity (NewCo), projected to generate revenues of ₹25,000 crore by FY27.
Reorganisation to Unlock Value and Sharpen Business Focus
The reorganisation involves three stages: demerger of the omni-channel pharmacy and digital health businesses from AHEL into NewCo, amalgamation of Apollo HealthCo Ltd (AHL) with NewCo, and the merger of Keimed Private Ltd, a wholesale pharmaceutical distributor, with NewCo.
For every 100 shares of AHEL, shareholders will receive 195.2 shares of NewCo. The listing is expected within 18–21 months, subject to regulatory and shareholder approvals. Upon completion, NewCo will become an Indian Owned and Controlled Company (IOCC) and plans to acquire the remaining 74.5% stake in Apollo Pharmacies Ltd (APL) from Apollo Medicals Pvt Ltd (AMPL), making it a wholly owned subsidiary.
“The omnichannel pharmacy business and integrated digital healthcare ecosystem will be a unique model to enable access to high-quality healthcare for millions of Indians. What Apollo Hospitals achieved for the creation of the private healthcare industry in India, this new entity will create for the digitally forward generation of tomorrow,” said Dr Prathap C. Reddy, Chairman, Apollo Hospitals Group.
The new entity is expected to generate ₹16,300 crore in revenue in FY25, consolidating Apollo’s telehealth business (Apollo 24|7), pharmacy operations (both digital and offline), Keimed’s distribution network, and AHEL’s teleconsultation services. It aims to serve over 100 million people through its hybrid model combining physical and digital healthcare.
Shareholder Gains and Governance Structure
The proposal enables AHEL shareholders to directly participate in the value of the new platform, ensuring full price discovery without the typical holding company discount.
“AHEL will continue its focus on outstanding healthcare delivery, while the new entity will accelerate its efforts on deepening customer engagement and penetration, with clear capital allocation outlays, growth plans and management teams driving both,” said Suneeta Reddy, Managing Director, AHEL.
AHEL will retain a 15% stake in NewCo and will nominate one board member. The restructuring aligns with the group’s strategy to sharpen business focus and improve capital allocation clarity.
Shobana Kamineni, Executive Chairperson, Apollo HealthCo, said: “The new entity, once integrated, will be a truly customer-focused healthcare leader, with capabilities across the value chain. With strong growth expected across segments, we aim to strengthen our position in the sector.”
Apollo HealthCo’s digital platform, Apollo 24|7, has over 33 million users and is supported by 7,000+ doctors. Keimed serves over 70,000 pharmacies and 3,000 hospitals in 18 states through 96 distribution centres and 45,000+ SKUs (stock-keeping units).
Separate Listings Could Improve Valuation Transparency
The demerger and listing could enhance shareholder returns and allow each segment to realise its market potential, says healthcare analyst Salil Kallianpur. Calling it strategic, he said the move allows better price discovery, especially since the pharmacy and digital health units may command higher valuation multiples than the hospital business.
“What isn’t clear now is if Apollo will demerge the pharmacy and digital health divisions into separate legal entities, distributing shares to existing shareholders—or partially list them via an initial public offering (IPO),” he said.
Apollo Pharmacy, with nearly 5,000 outlets, could list independently. Apollo HealthCo—which includes Apollo 24|7 and the online pharmacy—may also go public, possibly attracting tech-focused investors and premium valuations.
“The hospital business, the core EBITDA contributor, trades at 25–30 times price-to-earnings (P/E). Pharmacy and digital health could fetch 40–50 times, in line with peers like Tata 1mg or PharmEasy,” Kallianpur noted. “Separate listings allow investors to assess each business independently.”
He added that the pharmacy arm is growing at 20% annually and could need capital for footprint expansion, while the digital unit could draw interest from technology and private equity players.
Apollo’s holding structure may have contributed to a “conglomerate discount,” he said. “Separation can eliminate this and improve market perception.”
Independent listings also pave the way for strategic tie-ups—with players like Amazon, Reliance, or global health-tech firms—and potential M&As in focused verticals. “Fortis Healthcare spun off its diagnostics arm; Tata Digital is scaling 1mg—validating this model,” he added. If executed well, the plan could unlock a 20–30% upside in shareholder value.
Hospital Operations Steady; Digital Break-even in Sight
Apollo reported a 10% year-on-year rise in hospital revenue in Q4 FY25, despite lower patient flow from Bangladesh amid bilateral tensions. BNP Paribas Securities India noted consolidated EBITDA margin at 13.8%, with hospitals posting 24.3%—aided by a 7% rise in ARPOB and 200 basis point gain in occupancy (now at 67%).
The digital and offline pharmacy business, under Apollo HealthCo, posted 17% revenue growth. EBITDA rose 22% with margins at 1.5%. Apollo 24|7 clocked a gross merchandise value (GMV) of ₹7.9 billion, up 5% sequentially. Break-even is expected by Q3 or Q4 FY26, supported by volume gains and new offerings like retail insurance.
“Apollo’s fourth-quarter EBITDA marginally missed consensus by 2%, but was in line with our estimates,” said Tausif Shaikh, analyst at BNP Paribas. “Hospitals, HealthCo, and Apollo Health and Lifestyle Ltd (AHLL) revenue rose 10%, 17%, and 11%, respectively.”
The group will add 1,500 beds in FY26, most in Q4. Over 4,300 beds are planned over three to four years, with a capital outlay of ₹80 billion—including expansion in Sarjapur, Karnataka.
AHLL, Apollo’s diagnostics and primary care arm, reported 11% revenue growth and 12% EBITDA margin.
“Despite the impact from Bangladesh, we remain constructive on the Indian hospital sector,” said Shaikh. BNP Paribas has retained its “Outperform” rating with a target price of ₹8,723, valuing the hospital business at 29x FY27 EV/EBITDA and the HealthCo–Keimed entity at 15x.
Apollo also expects improved cost-efficiency in digital operations, with conversion rates projected to rise from 37% to 45% by FY27. Employee stock ownership plan (ESOP) costs are set to decline by two-thirds from FY26, the BNP Paribas report said.
