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Until the markets dialled down earlier this year, shaving thousands of crores off the values of newly-listed tech stocks, Indian investors were curious about the largest health tech IPO on the anvil. API Holdings now has the regulator’s nod for its Rs 6,250 crore ($817 million) public issue. The parent of the e-pharmacy brand PharmEasy, API is the highest (privately) valued health “tech” company in India. Its meteoric valuation rise, many believe, has inspired the largest public healthcare company, Apollo Hospitals, to shoot for the moon as well.

It started with a new company. In June 2021, Apollo Hospitals created Apollo HealthCo Ltd to house three existing entities:

  • The front-end pharmacy retail business of ~4,200 stores under Apollo Pharmacies Ltd
  • The back-end pharmacy business supplying to these stores
  • The digital business under the rubric Apollo 24|7

Together, the three seemingly make for a digital play akin to PharmEasy’s—buy drugs online through Apollo 24|7, fulfilled by offline stores, or book doctor consultations and diagnostic tests, fulfilled by the Apollo Group’s healthcare network.

Anyone following the Apollo Group knows it’s a complex mesh of 37 subsidiaries where related party transactions and cross-business synergies form the core.

Three years ago, Apollo Hospitals demerged its front-end pharmacy business from the parent. But it transferred only 15% of the business economics to it. It kept the remaining 85%, which resides in the high-margin business-to-business (B2B) back-end distribution, with itself.

The decision made little economic sense then. It was more a warehousing deal to raise domestic capital in multi-brand retail, where India does not allow Foreign Direct Investment (FDI). (We wrote about it in 2019 2019 The Ken Apollo Pharmacy demerger: More than what meets the eye Read more .) With the new corporate restructuring in Apollo HealthCo, that pharmacy story moves forward.

As you read this, the Apollo Group is trying to raise money for HealthCo, valuing it at “north of $2.5 billion”. It intends to divest 20% for ~$500 million. For the last two quarters, the company has been telling analysts on the Street that a financial and/or strategic investment is on the cards. For a while, it was reportedly Amazon Amazon Moneycontrol Amazon in talks with Apollo Hospitals for partnership in pharmacy business: Sources Read more that was likely to invest in Apollo Pharmacy. Several sources confirmed to The Ken that talks were indeed underway. Yet, in late January, Apollo Pharmacy announced only a listing of its products on Amazon.

On its analyst call last month, Apollo reiterated that a financial deal was still in the works, and that it would close by the end of this financial year, i.e., 31 March 2022.

AUTHOR

Seema Singh

Seema has over two decades of experience in journalism. Before starting The Ken, Seema wrote “Myth Breaker: Kiran Mazumdar-Shaw and the Story of Indian Biotech”, published by HarperCollins in May 2016. Prior to that, she was a senior editor and bureau chief for Bangalore with Forbes India, and before that she wrote for Mint. Seema has written for numerous international publications like IEEE-Spectrum, New Scientist, Cell and Newsweek. Seema is a Knight Science Journalism Fellow from the Massachusetts Institute of Technology and a MacArthur Foundation Research Grantee.

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