Apollo rejects pharmacy demerger doing rounds on social media

Apollo Hospitals has rejected the misconceptions and incorrect conclusions behind the pharmacy demerger doing rounds on social media. In a statement, the hospital said, “We fully and categorically reject the misconceptions and incorrect conclusions about the intent behind the pharmacy demerger, circulating on social media. We would like to clarify our position as below:

On pharmacy restructuring, we believe the report arrives at an incorrect conclusion as to the intent of the demerger.

(a) The structure is targeted at creating a platform for us to execute on an omni-channel strategy for our pharmacy business.

(b) It was the first step in a multi-year journey of unlocking value for the AHEL shareholders.

(c) The restructuring allows the stand-alone pharmacies to be housed in a regulatorily-compliant structure.

(d) A full demerger or any other structure different from this would not have enabled us to achieve the regulatory compliance.”

The statement also said, “Our strategic intent is clear – we are focussed on growing to 5,000 stores, achieving Rs 10,000 crores in revenue, and increasing sales from private label products, improving EBITDA & ROI, while simultaneously building our digital play.

“We have moved ahead with our plans to build a strong digital platform, simultaneously bolstering our offline delivery capabilities. We are confident that this strategy will create significant value for AHEL shareholders.

We reiterate that value accretion from the growth in SAP business will be fully to all of AHEL’s shareholders.We can confirm that the eventual merger of Keimed and APL was never envisaged.”

Regarding Keimed, the statement read:

▪ Keimed’s distribution business was set up with a view to ensure a high- quality, dependable supply chain of drugs and consumables for hospitals in India.

▪ In its strategic partnership with Mitsui, Keimed has been pursuing its stated strategy of expanding its supply-chain network and distribution capabilities.

▪ Keimed’s dependence on Apollo Hospitals for its business is less than 50 per cent.

▪ Keimed transactions have been subject to related party review and testing by PwC, who have reaffirmed the arms’ length nature of the transactions.

Mentioning about the business benefits to AHEL, the statement said, “Because of Keimed’s scale, they are able to achieve two to three per cent incremental margins, which they are passing on to AHEL, along with favourable supply, logistics and credit terms.”