The Aryavarth Express
Agency (New Delhi): Shares of Apollo Hospitals Enterprise experienced a significant drop, decreasing by up to 8.4% after the company announced the sale of a stake in its digital unit, Apollo HealthCo, to Advent International. This deal, valued at nearly $297 million, was perceived by market analysts as underwhelming, sparking a negative reaction in the stock market.
The transaction involved merging Apollo’s online pharmacy business with pharmacy distributor Keimed, with Advent taking a 12.1% stake in the combined entity. However, the valuation of Apollo HealthCo at $1.7 billion fell short of expectations, with analysts anticipating around $2.7 billion. This lower-than-expected valuation, especially for Apollo’s 24/7 pharmacy service, has been a point of concern among investors.
Despite the initial fall, Apollo Hospitals’ shares slightly recovered but were still down 4.5%, marking its most substantial single-day loss since June 2022. This decline made it one of the biggest losers on India’s bluechip Nifty 50 index, which was otherwise up by 0.65%.
Analysts from Nuvama Institutional Equities and others have commented on the challenges faced by Apollo HealthCo, including its high cash consumption through the Apollo 24/7 venture. Nonetheless, they view the recent fundraise and merger as strategic moves that could strengthen Apollo HealthCo’s position as an integrated pharmacy entity, potentially easing the financial pressures associated with its expansion.
Despite the setback, major brokerage firms like Nuvama, Jefferies, and Prabhudas Lilladher maintained a “buy” rating on Apollo Hospitals, reflecting a continued positive long-term outlook. CLSA also sustained its “outperform” rating, indicating confidence in the stock’s future performance. According to LSEG data, the average target price for Apollo Hospitals’ stock remains at 6,953.5 rupees, suggesting a potential 14% increase from its current trading price.