Shares of Apollo Hospitals declined as much as 8.3% to hit an intraday low of ₹5,738 apiece on the BSE after brokerages and investors expressed concerns regarding a decrease in the company’s valuation. The valuation of the Healthcare major dropped to $1.7 billion from the expected $2.7 billion, following its plans to raise ₹2,475 crore for its subsidiary Apollo HealthCo through private equity firm Advent International. Apollo HealthCo manages the company’s Apollo 24/7 vertical. The company also plans to merge Keimed, a promoter-owned wholesale pharma distribution business, with Apollo HealthCo over the next 24 to 30 months. 

Weighed down by this development, the scrip opened lower at ₹6,258.55, as against the previous closing price of ₹6,257.90. At 1:03 pm, the share price of the company was trading 4.08% lower at ₹6,003. This was in contrast to the broader BSE Sensex, which was trading 681 points or 0.92% higher at 74,409.31. The company’s market capitalisation stood at ₹86,043.61 crore with 41,610 shares exchanging hands on the BSE, as against the two-week average of 8,297 shares. The company hit a 52-week high of ₹6,871.30 on February 22 this year, whereas a 52-week low of ₹4,410 on May 19 last year.

In the past one month, and three months, the counter has declined by 5.83% and 5.55%, respectively. In the year-to-date period, the counter has given 4.06% in returns.

Apollo Hospitals says that the “merged entity will have pan-India presence-target consolidated year 3 revenues of ₹25,000 crore with operating margins of 7-8%.” According to the company, the aggregate enterprise value of Apollo Hospitals Limited and Keimed is ₹22,481 crore or $2.725 billion.  AHL is valued at ₹14,478 crore, whereas Keimed is valued at ₹8,003 crore. 

“The agreed swap ratio for the proposed merger is capped at 0.81 shares of AHL for every 1 share of Keimed. Post-merger, Advent will hold 12.1% in the combined entity; Keimed shareholders will own a maximum of 25.7% while AHEL will continue to be the largest controlling shareholder with at least 59.2%+; ESOPs of 3%,” says Apollo Hospitals.

Following this, most brokerage firms have revised the target price with a BUY rating, expressing concerns regarding the company's valuation.

Analysts at Nuvama Institutional Equities called the $1.7 billion valuation of Apollo 24/7 compared to the estimated $2.7 billion a “negative surprise” and a “huge letdown.” The brokerage has also raised concerns regarding Keimed’s valuation after one year, calling it "aggressive." “While the deal was long overdue, AHL’s valuation is a let-down (USD1.7bn versus USD2.7bn expected) and doubling of Keimed’s valuation in a year is aggressive. That said, fund-raise shall minimize 24/7 cash burn, support future expansion and enable integrated pharmacy distribution. AHL could leverage Keimed’s 70,000+ store network to push private label sales and unlock synergies," says the brokerage firm.

Meanwhile, analysts at brokerage firm Jefferies have given a BUY rating with a target price of ₹7,500. The brokerage firm says that the Apollo HealthCo would require a stronger executive to manage the merger entity while noting that the company is prioritizing accelerated growth.

Notably, analysts at Prabhudas Lilladher maintained a BUY rating with a target price of ₹7,050. According to the brokerage firm, the stake sale of Apollo HealthCo is being carried out at a discounted valuation.

(DISCLAIMER: The views and opinions expressed by investment experts on are either their own or of their organisations, but not necessarily that of and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.