Speciality centres 'way of the future': Apollo on Nova deal

Healthcare major Apollo Hospitals  acquired Nova Speciality Hospitals in a deal pegged at up to Rs 145 crore, it said in a BSE filing today.

Explaining the rationale behind the move, Apollo Joint MD Sangeeta Reddy told CNBC-TV18's Nigel D'Souza and Sumaira Abidi that such short-stay surgery clinics were the "way of the future".

"Developed countries have about 60 percent to 70 percent of all surgeries can be done in a day surgery or a short-stay surgery format," Reddy said.

Below is the transcript of the interview on CNBC-TV18.

Sumaira: Could you take us through what is the rationale for this acquisition?

A: Nova Specialty had a very good set of assets over 40 operating theatres, 11 locations, multiple consult homes, it is a high quality asset and includes 300 beds. So we looked at this as a very good asset.

The second thing is that it is in a space that the consumer is moving towards, which is a convenient, smaller environment for short stay or day surgery. As we have been saying, developed countries have about 60 percent to 70 percent of all surgeries can be done in a day surgery or a short-stay surgery format.

So this is a complimentary acquisition for the overall Apollo Hospital chain, which has always believed in giving the consumer or a customer what they want and what is good for good medicine and good scientific practice. This fits right in there.

Nigel: When do you expect to breakeven on the EBITDA as well as on the bottomline front?

A: Definitely in the next financial year, we will breakeven on EBITDA as well as bottomline or even become slightly profitable.

Sumaira: How are you planning to fund this deal?

A: We have funded this by a combination of debt as well as equity.

Nigel: Give us the breakup of the debt and equity, how much of debt is being put in?

A: This is something that is being worked out right now. We have a bridge loan but we will finalise in the next one and a half months.

Sumaira: You have also recently announced the acquisition of Hetero Pharmacy as well, what will these recent acquisition and capex take your debt levels to?

A: Our debt levels are at a comfortable gearing ratio and the overall debt is under Rs 700 crore.

Nigel: Can we see further increase in debt levels?

A: I don't think that will be necessary. Post this we are in a consolidation phase and we also have the appropriate ability to raise debt or equity whenever we need it but right now in the immediate future, there is no other acquisition on the anvil.

Sumaira: Can we expect any more such smaller deals from Apollo Hospitals in secondary care pharmacy or perhaps even bigger?

A: It depends on the asset. As you know Apollo has primarily built our own asset. Here we see a good asset, we are not shy to go over and take it over and include it and integrate it within the network and the primary driver is always appropriateness of care for the customer. Anything that fits into that strategy, we will find a way to do.

Nigel: Talking about inorganic opportunities, would it be limited to the domestic market or even are you looking at international markets as well?

A: Like I said, good asset, right numbers, appropriate strategic fit will find a way to do it.

Sumaira: What is the opportunity if you could tell us in secondary care that your company sees?

A: I would first like to state is that this is very much core because Apollo Hospitals is in the healthcare business as our core and we do high-end tertiary care hospital but even in the secondary care space, we have a significant presence with the Apollo Reach Hospitals which do secondary as well as tertiary but in new markets or geographies which is tier III and tier IV cities.

So basically what we are in is we are in the service of bringing appropriate healthcare to the people in the right format of high quality, in the most affordable way. So when you do a day surgery centre and appropriately man it, staff it and plan the sequencing, you will be doing cost effective care for the community and this is the type of format that people are asking for that I don't need to go in to a large high-end infrastructure for a small ear surgery or an ophthalmology surgery. So specialty formats are the way of the future and Apollo will always listen to what the customer wants.

Nigel: What is your outlook on the insurance business? Any deal we can expect there?

A: The insurance company is doing well but I am not privy to any information on the deal in the offing in that area.

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