Apollo Hospitals (APOLLOHOSP) Transaction Rationale, Valuation and Governance Presentation summary

Executive summary and transaction overview

• Equity capital of INR 2,475 Cr (USD 300 Mn) to be raised from Advent International, with phased integration of Keimed Private Limited to create a leading integrated pharmacy distribution and digital health business in India.

• Merged entity targets consolidated Year 3 revenues of ~INR 25,000 Cr (USD 3.03 Bn) and operating margins of 7-8%, leveraging Keimed's 70,000+ store network and AHL's digital platform.

• Aggregate enterprise value for AHL and Keimed is INR 22,481 Cr (USD 2.72 Bn); AHL valued at a 15% premium to peers, Keimed at a 20% discount.

• Advent to hold 12.1% post-merger, Keimed shareholders up to 25.7%, and Apollo Hospitals Enterprise Ltd at least 59.2%.

• Merger is expected to be EPS accretive from Year 1, with independent valuation and unanimous approval by independent directors.

Parties to the transaction

• Apollo HealthCo operates India's largest organized pharmacy platform with 6,030 stores, 33 million+ users, and FY24 revenues of INR 6,927 Cr at 7.3% EBITDA margin.

• Keimed is India's largest pharma distributor, servicing 70,000+ pharmacies, with FY24 revenues of INR 10,578 Cr and 3.3% EBITDA margin.

• Advent International, a global private equity firm with $94bn AUM, brings deep healthcare and consumer sector experience and has invested $2.1bn+ in Indian healthcare.

Transaction structure and steps

• Advent's investment of INR 2,475 Cr will be in two tranches: 70% at first close, 30% after 12 months.

• Funds will be used for Keimed acquisition, growth capital for AHL, and partial retirement of AHL debt.

• AHL to acquire up to 11.2% equity in Keimed, with merger filing within 15 months and completion targeted in 24-30 months.

• Post-merger, AHEL will hold at least 59.2%, Advent 12.1%, Keimed shareholders up to 25.7%, and ESOPs 3%.