Apollo pins hopes on affordable healthcare

Wednesday, September 18, 2013

Apollo Hospitals will bank on its own revenues for its rural healthcare drive under the brand Apollo Reach, with an aim at faster return on capital expenditure. “We have 10 Reach hospitals in operation. In the next three years, we’ll have 1,300 beds set up in Tier I cities, and another 1,100 in Tier II cities,” said Joint Managing Director Suneeta Reddy. Setting up a Reach hospital in a Tier II city will cost about Rs 50 lakh, which is less than half of what it takes for a healthcare centre in a city, she said. Each Reach hospital has about 120 beds.

Apollo’s Return on the Capital Employed in the setting up of hospitals in non-metro cities is 14 per cent, which it hopes will go up to 19 per cent in five years. Reddy says a Tier II hospital can return positive EBIDTA within 18 months of operations, which she says indicates the profitability of rural healthcare.

“Rural healthcare is capex light. Once we finish with this wave of expansion, by 2016, nearly 30 per cent of our revenues will come from Tier II cities. With a debt-to-equity ratio of 0.3, there is enough room to leverage, but right now we’ll fund the expansion mostly on internal accruals.”

Apollo will set up a department for minimally invasive robotic surgery in oncology.

Founder and Chairman Prathap C. Reddy said the talks with New York-based Kohlberg Kravis Roberts & Co for a fund infusion of about $ 100 million (Rs 630 crore) are still under way. Suneeta Reddy said shareholders need not worry as the deal is of a non-stake dilutive nature. Reddy said 40 per cent of overall stake in Apollo is with foreign institutional investors.

Source: The Hindu Business Line (link opens in a new window)

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