Apollo’s Strategic Healthcare Demerger and Digital Listing

Last year, Apollo Hospitals Enterprise Limited announced its plan to consolidate its omnichannel medicine distribution business under itself; however, in a revised scheme, the group will also pave the way for its separate listing through a complex scheme of arrangement.

Apollo Hospital Enterprise Limited (“AHEL” or “Demerged Company”), with its subsidiaries, provides healthcare services in India and internationally and operates through Healthcare Services, Retail Health & Diagnostics, Digital Health & Pharmacy Distribution, and Other segments. AHEL was incorporated in 1979 and is based in Chennai, India. The equity shares of AHEL are listed on nationwide bourses.

Keimed Private Limited (“KPL” or “Transferor Company 2”) is one of India’s largest pharma distributors engaged in the business of distribution and trading of pharmaceutical products, medical goods, consumables, and personal care products, through its branches and wholly owned subsidiaries across India. Circa ~44% of Keimed is directly owned by promoters of AHEL. Apart from AHEL promoter, AHEL also owns stake in KPL through joint venture entity, Family Health Plan Insurance TPA Limited (holding 16.1% in KPL) & through Apollo Healthco Limited (holding 11.2% in KPL). In addition to this, certain shares are also held by outsiders (circa ~29%).

In 2024, Keimed also completed the merger of 19 subsidiary companies with itself.

Apollo Healthtech Limited (“Apollo Healthtech” or “Resultant Company”) is incorporated to facilitate the proposed demerger. Currently, Apollo Healthtech is a wholly owned subsidiary of Apollo Hospital Enterprise Limited.

Apollo Healthco Limited (“Apollo Healthco” or “AHL” or “Transferor Company 1”) is in the business of – Procurement of pharmaceutical and other wellness products including private label products and wholesaling and supply of such products to pharmacies and, Development, operation and management of the online platform for digital healthcare under the branding of “Apollo 24/7”.

AHL also holds an investment of 25.5% in Apollo Medicals Private Limited (“AMPL”) which further holds 100% in both Apollo Pharmacies Limited (“APL”) and Apollo Pharmalogistics Private Limited (“APPL”). APL manages the frontend offline and online pharmacy retailing. APPL provides online pharmacy logistics support services to APL. The remaining 74.5% of AMPL has been held by certain investors like Enam Group, etc. AHEL had entered into definitive agreements, in terms of which it had the right to acquire these shares from investors.

Transaction in 2024-25:

In 2024, Advent International (“Advent”) infused circa ₹2475 crore into AHL for circa 16.9% stake. The investment was also aiming to integrate Keimed with AHL. Pursuant to the transaction, AHL acquired an 11.2% stake in Keimed. As on date, AHL is a subsidiary of AHEL holding 79% (on a diluted basis). The remaining shareholding is held by employees of AHL and Advent.

Tranche 2 was completed in March 2025. Earlier, it was decided to merge AHL with Keimed so as to consolidate the pharmacy business under AHEL. However, a new scheme is being proposed by AHEL, which would pave the way for direct holding by shareholders of AHEL and separate listing.

The Proposed Transaction

The proposed transaction inter-alia will be executed in the following chronological order: 

• Demerger of “identified business undertaking” from AHEL to Apollo Healthtech;
• Merger of AHL with Apollo Healthtech;
• Merger of Keimed with Apollo Healthtech

“Identified Business Undertaking” of AHEL includes omnichannel pharmacy distribution and integrated healthcare delivery to provide services such as tele consultations, and tele emergency services among others. It is clarified that the Identified Business Undertaking includes the equity shares held by AHEL in AHL. As per the press release, the turnover of the Identified Business Undertaking for the year ended March 31, 2025 was ₹70.13 Crores, representing 0.86% of the total standalone turnover of AHEL.

Accordingly, the investment in AHL will primarily constitute the undertaking proposed to be demerged. Maybe to ensure the demerger complies with the provisions of the Income Tax Act, 1961, this investment will be combined with certain operating businesses of AHEL. The sequencing of the transactions under the scheme is also crucial. The demerger must be implemented first so that the investment in AHL is transferred to the resulting company, followed by the subsequent merger.

The appointed date for all three transactions will be the effective date. However, the scheme will have three different record dates so that consideration will be issued in accordance with the chronological order of giving effect to three transactions.

Rationale

The intention of the proposed transaction is to create India’s largest listed Omni-channel Pharmacy (OCP) distribution and Digital health platform with a scale of ~ ₹25k Cr in revenues by the end of FY27. The transaction will enable AHEL shareholders to gain direct shareholding to India’s largest Omni-channel Pharmacy (OCP) distribution business and the Digital health platform of Apollo, enabling full value discovery, and eliminate any hold-co discount in valuation. Overall, the scheme will create an exciting new consumer-facing retail entity with a very strong starting position of strength. Over 150 million lifetime consumers, 65 million annual customers, 6,626 physical format pharmacies, serving 900,000 transactions every day, over 75,000 served pharmacies offering 360-degree coverage of digital healthcare needs with over 40 million subscribers and an early adopter and mover in artificial intelligence. Some of the rationale as envisaged in the scheme:

• Enabling both AHEL and Resultant Company to focus on their respective businesses, and to exploit business opportunities more efficiently and effectively;
• Creation of a separate vehicle, thereby enabling exclusive focus on sector-specific opportunities, operational efficiency, cost rationalisation, streamlining statutory compliances, and optimal allocation and utilisation of resources for all stakeholders;

Consideration for Transaction:

Consideration for Demerger:

• Apollo Healthtech shall issue 195.2 equity shares of itself for every 100 shares of AHEL.

Currently, Apollo HealthTech is a wholly owned subsidiary of Apollo Hospitals Enterprise Limited. However, AHEL intends to retain a strategic equity 15% direct stake in Apollo HealthTech post-transaction. To achieve the desired post-demerger shareholding and capital structure, AHEL will subscribe to additional equity shares in Apollo HealthTech, resulting in its holding aggregating to 100,000,000 equity shares immediately prior to the demerger.

Retaining a stake in Apollo HealthTech will enable AHEL to:

• Establishes an independent, focused yet Integrated healthcare platform offering curated solutions, spanning across the entire patient journey.
• Allows AHEL to focus on accelerating its growth in Healthcare Services, by retaining its Pan-India leadership position while Apollo Healthtech focuses on deepening customer penetration and experience through an Omni Channel integrated approach.
• Continued access to cross synergies between AHEL and Apollo Healthtech

Apart from the above, AHEL will also achieve

• Maintain promoter-control in Apollo HealthTech despite reduced economic ownership;
• Preserve the potential for future value unlocking through partial or full monetisation of its stake.

Consideration of merger of AHL with Apollo Healthtech:

• Apollo Healthtech shall issue 89.5 equity shares of itself for every 100 equity shares of AHL and  
• Apollo Healthtech shall issue 32.6 equity shares of itself for every 100 compulsorily convertible preference shares of AHL.

Consideration for merger of Keimed with Apollo Healthtech:

Apollo Healthtech shall issue 3045.2 equity shares for every 3045.2 equity shares of Keimed.

Post-scheme Shareholding Pattern:

Due to complex restructuring, Apollo Healthtech will have a significant equity share capital in comparison with AHEL. Further, AHEL will end up having around 15% direct stake in Apollo Healthtech. Advent will own 12% equity stake, which will be classified as a public shareholder.

Other Important Aspects of the Scheme

An agreement dated June 30, 2025 has been executed between Rasmeli Limited (an Advent company) (“Rasmeli”) and Ms. Shobana Kamineni (“AHEL Promoter”), in terms of which Rasmeli has agreed to share an agreed portion of the upside received by it pursuant to its investment into AHL  with the AHEL Promoter and designated employees, in order to incentivise the management of such companies. Upon the effectiveness of the Scheme, the obligation of Rasmeli to provide upside as described above would stand automatically linked to the shareholding of Rasmeli in Apollo Healthtech. The scheme provides for an agreed formula to share the upside by Rasmeli with AHEL Promoters.

In addition, the Business Framework Agreement has been entered between AHEL & AHL to establish a framework of rights and restrictions pursuant to which each of them shall: (i) pursue their respective businesses, and (ii) collaborate and cooperate with each other to their mutual benefit.

• AHEL is fundamentally engaged in the business of delivery of healthcare services, including hospitals, clinics, diagnostics and ambulatory care centres. AHEL shall not undertake any e-commerce pharmacy business, retail or wholesale pharmacy business, with the exception of hospital-based pharmacies.
• AHL is fundamentally engaged in wholesale pharmacy distribution, investing in subsidiaries and associate companies that operate retail pharmacies, and the Apollo 24/7 online platform (“Platform”). AHL’s other digital offerings will be limited to the DocVerse platform (i.e. a doctor engagement platform for local doctors and physicians to enhance pharmacy prescription and business). Docverse will act as an exclusive secondary funnel for AHEL. AHL shall not undertake any physical delivery of healthcare services, other than outreach camps.
• AHL can facilitate virtual delivery of healthcare services including telehealth, provided all doctors and medical professionals involved in such delivery are AHEL-approved.
• The Platform shall always remain the primary digital, consumer-facing application of AHL for providing healthcare services, health insurance and lead generation for pharmacy

Apart from the above, there are certain additional frameworks which are covered under the agreement.

Financials

The listed entity will be one of India’s leading omnichannel pharmacy and digital health powerhouses. With continued strong captive support from AHEL, Apollo Healthtech will likely to be stronger.

Advent Strategy

In 2024, Advent International infused circa ₹2475 crore into AHL for circa 16.9% stake. Pursuant to the arrangement, AHL also invested in Keimad to have 11.2% stake. The investment was with the intention of consolidating AHL & Keimed soon. However, with the change of structure, Advent will get liquidity as the merged entity will be listed. There seems to be not much change in relative valuation, as in the prior scheme, Advent was supposed to hold 12.13% vis-à-vis holding 12.1% stake now. The dilution could be on account of the additional Tele-clinic business which will be transferred from AHEL as a part of the demerger.

Conclusion

The proposed restructuring marks a pivotal shift in Apollo’s approach to its pharmacy distribution and digital health business. By demerging the identified undertaking into Apollo Healthtech and merging Apollo Healthco and Keimed into it, the group creates a stand-alone,  listed platform with scale, focus, and a strong market position. For AHEL shareholders, this unlocks value as they will be able to directly participate in India’s largest omnichannel pharmacy and digital health platform, while AHEL retains a strategic stake to preserve synergies and influence. For Advent, the structure ensures liquidity through listing without materially altering its economic position.