India’s Apollo Hospitals Enterprise Limited (AHEL) has plans to invest approximately $360m in the next three years, reported Business Standard.

The investment will be channelled towards both organic and inorganic expansion, with a significant portion originating from a deal with private equity firm Advent International.

AHEL chief financial officer Krishnan Akhileswaran highlighted the partnership with Advent as a potential ‘change agent’ for the company.

AHEL plans to increase its capacity by around 700 beds annually.

The collaboration with Advent announced last week involves an Rs24.75bn ($300m) investment into Apollo HealthCo, a fully owned subsidiary of AHEL. This move will also see Keimed, a wholesale distribution company linked to the Apollo Group’s promoters, merge into Apollo HealthCo.

Out of the total investment, Rs8.90bn will be allocated for Apollo HealthCo’s expansion while Rs8.60bn will revert to AHEL.

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Advent’s investment will be made in compulsory convertible instruments across two tranches, securing it a 12.1% stake in the merged pharmacy entity, which will carry an enterprise value of approximately Rs224.81bn.

Akhileswaran stated: “If you look at the fund of $24.75bn that is coming into the company, Rs8.9bn comes back to AHEL. Clearly, there is an opportunity for us to use some of this money for the growth of Apollo itself. It should be organic and inorganic growth in our core strategic markets.”

Apollo HealthCo, which operates in digital healthcare and pharma distribution, is projected to generate revenues of Rs250bn within three years, with EBITDA margins increasing from the current 1.5% to 7%-8%. This growth is anticipated through the breakeven of Apollo 24/7 within six to eight quarters, improved margins from supply chain efficiencies, and expansion of the private label business.

“The Keimed merger is a huge positive for the group. The merger will raise the number of pharmacies to 70,000. This will be a good value for accretion when it comes to Apollo shareholders,” Akhileswaran added, noting that post-merger, Apollo Hospitals will hold 59.7% and Keimed promoters 25.7%.

In Chennai, AHEL plans to establish a 500-bed Med City with an investment of around $9.5bn, focusing on cardiac, oncology, neuroscience, and orthopaedics, as well as targeting international medical tourism.

With the pharmacy sector in India growing at 12%, Apollo aims to outpace this by targeting over 20%-25% long-term growth.

Akhileswaran said: “Large players like us would like to believe that with the combination of Apollo Pharmacy which itself is growing at a rapid pace, we can easily grow this business at over 20%-25% for the long term.”