Apollo Hospitals Enterprise Limited · NSE:APOLLOHOSP
Apollo Hospitals Enterprise — Merger or Acquisition (July 2024)
40 slides from Apollo Hospitals Enterprise's merger presentation, Jul 12, 2024
Slide 1: Apollo Healthco Ltd: Transaction Rationale, Valuation and Governance
Apollo Healthco Ltd India’s Largest Integrated pharmacy distribution and Digital health platform Transaction Rationale, Valuation and Governance 12 July 2024 Website : https://www.apollohospitals.com/corporate/corporate-actions/ Email : companysecretary@apollohospitals.com
Slide 2: Disclaimer
Disclaimer The information contained in this presentation is provided by Apollo Hospitals Enterprise Limited (the “Company”) to you solely for your reference. This document is being given solely for your information and for your use and may not be retained by you and neither this presentation nor an
Slide 3: Contents
Contents Largest Omni-Channel Digital 01 Executive Summary 5 Health Offering 02 Parties to Transaction 8-10 03 The Transaction 12-14 04 Strategic Rationale 16-19 Transaction Governance and 05 Process 22-25 Combined Entity – Valuation, Value 06 Creation & Financial outlook 27-36 07 Next Steps 38-39 3
Slide 4: Executive Summary
01 Executive Summary 4
Slide 5: Executive Summary
Executive Summary • Apollo Healthco Limited (“AHL”) proposes to raise equity capital of INR 2,475 Cr (USD 300 Mn) from Advent International (“Advent”)1, one of the largest Overview global private equity investors with an AUM of over USD 94 Bn • Proposes integration of Keimed Private Limited (“Keimed
Slide 6: Executive Chair message on mission
Executive Summary Our mission has been to deliver high quality healthcare to all Indians, at an affordable cost, and with a high degree of reliability and trust. Apollo 24/7 has delivered on this promise and has reached over 33 million Indians in a short span of time. With Advent's investment and th
Slide 7: Parties to Transaction
02 Parties to Transaction 7
Slide 8: Apollo HealthCo | India's Largest Omni-channel Healthcare Platform
Apollo HealthCo | India’s Largest Omni-channel Healthcare Platform Offline Pharmacy Distribution Apollo 24|7 Unmatched Size • 33 Mn.+ Registered Users - 609,000 Daily Active Users • Serving consumers through network of 6,000+ pharmacies • India’s largest Organized Pharmacy Industry-leading Growth at
Slide 9: Keimed | India's Largest Pharma Distributor
Keimed | India’s Largest Pharma Distributor Keimed has >2x the scale of its nearest competitor in a Sound Financial Performance with 10-year revenue CAGR of highly fragmented industry with 70,000+ distributors 18+% with industry leading EBITDA Margins Consistent Revenue Growth Unmatched Scale High Q
Slide 10: Advent International | Long-Term Partner for Success and Value Creation
Advent International | Long-Term Partner for Success and Value Creation One of the largest and most experienced global private equity firms globally and in India with a long-term value-creation orientation to investments and partnership Advent is one of the largest PE And Is India’s most active and
Slide 11: The Transaction
03 The Transaction 11
Slide 12: Key Terms of The Transaction
Key Terms of The Transaction • Advent to invest INR 2,475 Cr (USD 0.30 Bn) in 2 tranches Investment o 70% at first close – INR 1,732 Cr (USD 0.21 Bn) Amount o Balance 30% at 12 months of the first close – INR 743 Cr (USD 0.09 Bn) • Growth capital for AHL of INR 860 Cr (USD 0.10 Bn) – to provide AHL
Slide 13: Proposed Transaction Structure and Steps (1/2)
Proposed Transaction Structure and Steps (1/2) Pre-Transaction Post Advent Tranche 1 Investment Post Advent Tranche 2 Investment (As of date) (T) (T+12 Months) AHEL ESOP AHEL Advent ESOP AHEL Advent ESOP 95% 5*% 83.1% 12.5%1 4.4% 79.0% 16.9% 4.1% 2% 11.2% AHL AHL Keimed AHL Keimed Tranche 1 Tranche
Slide 14: Proposed Transaction Structure and Steps (2/2)
Proposed Transaction Structure and Steps (2/2) Launch of Merger Process Post Merger (T+15 Months) (T+30 Months) Keimed AHEL Promoters Keimed AHEL 79.0% 61.5% Shareholders Other Advent ESOP FHPL minority 59.2%** 25.7%# partners Min Max 16.9% 4.1% 16.1% 11.2% Advent ESOP 11.2%* 12.1%+ 3.0% AHL Keimed
Slide 15: Strategic Rationale
04 Strategic Rationale 15
Slide 16: Synergetic Benefit of the Keimed Merger
Synergetic Benefit of the Keimed Merger 1 Becoming India’s Leading Healthcare Provider 4 “In-houses” related party transactions (RPT) 1 Leading Pharma End-to-end, Patient retention Keimed’s extensive scale and cost-efficiency, being the largest Distributor seamless, omnichannel in India, were levera
Slide 17: CAPEX Flexibility with Advent's Timely Capital Injection
CAPEX Flexibility with Advent’s Timely Capital Injection To capture a leading position in Traditional and Digital Healthcare Profitable growth opportunities in India’s digitalization CAPITAL INJECTION: Capital injection provides 1 CAPEX flexibility to front-run competition in capturing worthwhile Tr
Slide 18: Collective Impact on Our Equity Story
Collective Impact on Our Equity Story Merger with Keimed Advent International India’s leading integrated healthcare Timely capital to capture growth… provider Allows front-running of increasing competition to secure a leading market position. End-to-end supply chain, with omni-channel digital busine
Slide 19: Market's Strong Belief in Transaction's Value Creation
Market’s Strong Belief in Transaction’s Value Creation 2 … further evidenced by Analyst’s view that the Transactions will create long-term value… “We think the margin expansion of the integrated business does provide 1 Initial market correction owing to expected meaningful upside over the medium-ter
Slide 20: A New Milestone
A New Milestone Today marks a new milestone and gives us the ability to double down on what we do best. The size of the merged supply chain will allow 1.4 billion Indians access to genuine medicines within 24 minutes to 24 hours, 7 days a week! The platform will continue to strengthen and evolve to
Slide 21: Transaction Governance and Process
Transaction Governance 05 and Process 21
Slide 22: AHEL: Led by a Board that Represents All Stakeholders
AHEL : Led by a Board that Represents All Stakeholders… Board Composition as at 2023 AGM Dr.Prathap Dr.Preetha Shobana Dr.Suneeta Dr.Sangita MBN Kavitha Som Dr. Murali Vinayak Rama C. Reddy Reddy Kamineni Reddy Reddy Rao Dutt Mittal Doraiswamy Chatterjee Bijapurkar Joint Executive Executive Managing
Slide 23: … and Creates Long-Term Value
… and Creates Long-Term Value Return on Capital Employed Healthcare Services Offline Pharmacy Distribution excl. CWIP excl. 24/7 operating cost Improving ROCE, demonstrating Apollo Hospitals’ Our Capital Allocation Success Factors prudent and effective use of capital 31% • Early communication and 26
Slide 24: Transaction Overseen by Robust Governance
Transaction Overseen by Robust Governance… Transaction Governance that is Aligned with Shareholders’ Expectations Arm’s length process Approved by the 10% independent Audit Committee Unanimously supported by Independent Directors Independent Audit Independent valuation for transactions, FEMA complia
Slide 25: Transaction Process undertaken
Transaction Process undertaken A Outreach to marquee investors by our Investment Bankers (VedaCorp) Detailed Commercial, Financial, Tax, Legal and ESG due diligence on AHL & Keimed by incoming B investor C Financial due diligence (Deloitte) on Keimed AHL retained Shardul Amarchand as its legal advis
Slide 26: Combined Entity – Valuation, Value Creation & Financial Outlook
Combined Entity – Valuation, Value 06 Creation & Financial Outlook 26
Slide 27: Fair Valuation and Unique Combination of Digital Health with Pharmacy Distribution
Fair Valuation and Unique Combination of Consumer-driven Digital Health with Integrated Pharmacy Distribution Swap Ratio Basis : AHL Keimed Enterprise Value ₹ 14,478 Cr ₹ 8,003 Cr Equity Value ₹ 11,780 Cr ₹ 6,383 Cr # of Shares Outstanding1 10,120,000 6,766,930 Price Per Share1 11,640 9,433 Swap Rat
Slide 28: Combined Financial Metrics | Snapshot (FY24)
Combined Financial Metrics | Snapshot (FY24) INR Cr + = + = 6,927 900 7,827 10,578 13,770 506 103 609 352 961 7.3% 11.4% 7.8% 3.3% 7.0% - -619 -619 - -619 - -89 -89 - -89 506 -605 -99 352 253 7.3% - - 3.3% 1.8% *Adjusted F or Inter Com pa ny Sa les (Keim ed & AH L) 1P re 24/7 Opera ting Cost a nd ES
Slide 29: Balance Sheet position – Mar'24 | Stronger post the transaction
Balance Sheet position – Mar’24 | Stronger post the transaction # INR Cr AHL Keimed * AHL + Keimed - Debt to Equity is expected to improve to (649) 793 3,119 0.4 times on a pro forma basis, primarily on account of reduction in the 1,843 1,668 1,261 consolidated net debt post the proposed fund raise.
Slide 30: Merged Entity | Financial Outlook (Proforma)
Merged Entity | Financial Outlook (Proforma) FY24 Year 3 Target Target to achieve EBITDA breakeven for digital business in 6-8 quarters Total INR 13,770 Cr ~ INR 25,000 Cr Revenues Proposed integration to enable higher to enable higher margin realisation through supply chain efficiencies EBITDA 1.8%
Slide 31: AHL: Offline Pharma Distribution – Growth & Margin Levers
AHL: Offline Pharma Distribution – Growth & Margin Levers FY24 FY27 Growth Levers: Revenue • Increased contribution from Private Label (PL) & Generics segments 6,927 ~11,600 (INR Cr) • PL & Generics will continue to grow at their historical growth rate of 25-30% leading to an increase in share of re
Slide 32: AHL: Online Pharma Distribution + Apollo 24|7 - Growth & Margin Levers
AHL: Online Pharma Distribution + Apollo 24|7 - Growth & Margin Levers Growth Levers: (INR Cr) FY24 FY27 • Pharmacy GMV has historically grown at 5x in the last 2 years and is expected to grow 3x in the next 7-8 quarters. Primary factors: 900 ~4,000 Revenue • AOV has increased from 650 to 1,000 (55%
Slide 33: Keimed - Growth & Margin Levers
Keimed - Growth & Margin Levers FY24 FY27 Growth Levers: Revenue • 3-year historical growth of Keimed is 20% and is expected to grow at a 10,600 10,578 ~18,300 18,000 (INR Cr) similar rate through a combination of: − Existing business organics growth; 3 Yr Rev 20.0% 20.0% 19.3% − Entry into new mark
Slide 34: Merged Entity Proforma
Merged Entity Proforma Proforma AHL + Keimed [FY27] AHL Offline PD Digital Keimed Consol Revenue (INR Cr) ~11,600 ~4,000 ~18,300 ~25,000* 3-Year Growth 18.8% CAGR 4.4x growth 20.0% CAGR 24.3% CAGR Largely in line with Largely in line Last 2 years market growth & with historical 10x growth historical
Slide 35: Driven by a Highly Experienced Team
Driven by a Highly Experienced Team… Ms. Shobana Kamineni (Executive Chairperson, Apollo Health Co Ltd) spearheaded significant initiatives, including the development of three of the largest verticals within the Apollo Group. She oversees the omni-channel Apollo Pharmacy platform, comprising over 60
Slide 36: … Who Have Delivered on Past Promises
… Who Have Delivered on Past Promises Our Commitment in November 2018 during APL Reorganization….. FY24 Delivered 1 Build a multi-year growth platform to achieve 5000 pharmacy outlets in 5 years and INR 10,000 Crores in Revenues. 1Rs.9,800crs 6,000 + Outlets Revenue Enhance Private Label Business sh
Slide 37: Next Steps
07 Next Steps 37
Slide 38: Proposals for Shareholders Approval
Proposals for Shareholders Approval Agenda Items Requesting your Support At the 2024 EGM, Apollo Hospitals will request shareholder support for the below items, which each are subject to different vote thresholds. Given the related nature, execution of one transaction is contingent on the other pass
Slide 39: Steps and Timelines
Steps and Timelines Day 0 CCI 12 Months from Month ~24-30 T2 Signing Approval Tranche 1 Completion of Tranche 2 Closing Merger Process Tranche 1 Tranche 2 Shareholder Tranche 1 Closing < 15 Months T1 Approval from Tranche 1 Launch of Merger Process 39
Slide 40: Thank You.
Thank You.
Apollo Hospitals Enterprise — Merger or Acquisition (July 2024) on 6ix