Apollo Hospitals' family mulls stake, asset sales to cut debt

The family that controls Apollo Hospitals Enterprise Ltd is looking to sell assets or bring an outside investor into their holding company to pay down debt.

“The aim is to reduce the Apollo shares pledged by the family as collateral to lenders, to 20 per cent of their total holding in the company from about 78 per cent now,” said Suneeta Reddy, Apollos managing director and one of the four daughters of founder Prathap Reddy. The Reddy family owns about 34 per cent of Apollo’s stock.

She added that the idea is to do something that is good for all shareholders of Apollo. If it means reducing our pledge, we are committed to doing that. We will see what the family can do

In February, Apollo saw its share price plummet as a credit crunch across India’s financial sector spurred fears that companies whose controlling shareholders had pledged a large proportion of their holdings could be in danger of bulk selling if those large shareholders defaulted. Subhash Chandras Essel Group and Anil Ambani-controlled firms also faced investor concerns.

Apollo’s stock has recovered since then, gaining more than 10 per cent this year. The Reddy family has sold off its share in a health insurance venture with Munich Re Group that it says will bring its pledged ratio down to between 35 per cent and 40 per cent by September. The family has given itself about a year to get the pledge ratio of its Apollo holding down further to 20 per cent, Suneeta Reddy said.

Among the assets the family could sell are a chain of 13 nursing colleges and two medical colleges it owns. The family has spent Rs 300 crore building the education venture and it is expected to turn profitable next year, Reddy said.

Another fundraising avenue the family is exploring is bringing an investor directly into its holding company, PCR Investments Ltd, which may replace the Rs 550 crore in debt securities lent by private-equity giant KKR & Co that recently matured, she said.

“People are talking to us, Reddy said. She declined to specify what kind of investor they are looking for, other than that it will be someone who has an understanding of health care or wants to get into the business. It will be long term,” she added.

The Reddys are also working to reduce debt at Apollo itself, with proceeds from the insurance sale and a plan to spin off its chain of retail pharmacies expected to bring long-term debt down to Rs 2500 by the end of the year from about Rs 3000 crore currently. Reddy said the company expects to announce another deal to raise cash and pay down the debt further sometime this month, declining to specify details.