Apollo Hospitals plans to sell assets, seek investment to reduce debt

The Reddy family that controls Apollo Hospitals Enterprise and owns about 34% in the hospital chain, is looking to sell assets or induct an outside investor to reduce debt.

"The aim is to reduce the Apollo shares pledged by the family as collateral to lenders, to 20% of their total holding in the company from about 78% now," Suneeta Reddy, Apollo's Managing Director, said in an interview with Bloomberg.

"The family has given itself about a year to get the pledge ratio of its Apollo holding down further to 20%t," Suneeta Reddy said.

Apollo Hospitals had a debt of Rs 3,430 crore, according to a Bloomberg report in February.

Last month, the Reddy family sold 50.8% stake in Apollo Hospital Group's health insurance venture with Munich Re Group, namely Apollo Munich Health Insurance Company to Housing Development Finance Corp (HDFC) for Rs 1,336 crore. HDFC will pay Rs 10.84 crore to employees of Apollo Munich Health Insurance to buy  their 0.4% stake in the company.

That brought the total deal size to Rs 1,347 crore for the entire 51.2% stake in the health insurer.

The Reddy family is likely to sell a chain of 13 nursing colleges and two medical colleges. The family has spent about Rs 300 crore building the education venture which is expected to turn profitable by 2020.

In another fundraising tactic, the family also plans to induct an investor directly into its holding company, namely PCR Investments Ltd, which may help replacing Rs 550 crore in debt securities lent by a global investment firm and private-equity giant, KKR & Co that has matured recently, Reddy said.  

"People are talking to us", Reddy said but declined to specify what kind of investor they were looking for, other than that it will be someone who has an understanding of health care or wants to get into the business.

"It will be long term," she added.

Additionally, to bring long-term debt down from about Rs 3000 crore to Rs 2500 crore by the end of FY19, the Reddys also plan to cut debt in Apollo itself, with proceeds from the insurance sales and a plan to spin off its chain of retail pharmacies.

Declining to further specifying details, Reddy said the Indian hospital chain expects to announce another deal to raise cash and repay debt by July.

She further said "The idea is to do something that's good for all shareholders of Apollo. If it means reducing our pledge, we are committed to doing that," adding that "We will see what the family can do".

The stock price of Apollo Hospitals Enterprise on Wednesday rose 2.62% from the previous close of Rs 1390.50 to touch a fresh 52-week high of Rs 1,427.05. The stock trades above its 50, 100 and 200-day moving average, however, it trades below the 30-day SMA. The Apollo Hospitals stock closed at Rs 1383.80 on BSE and NSE, respectively.

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