Analysis of Apollo Hospitals Enterprise – April 2025

As the income levels of average Indians rise and their standard of living improves, the demand for services provided by private healthcare providers is expected to increase. Apollo Enterprises and Narayana Hrudayalaya are among the largest healthcare providers in India. Both companies are highly regarded for the quality of care they deliver to their patients. This article will provide an in-depth analysis of Apollo Hospitals Enterprise and Narayana Hrudayalaya.

Apollo Hospitals Enterprise

Apollo Hospitals, based in Chennai, Tamil Nadu, was established in 1983 by Dr. Pratap C. Reddy. The initial hospital, which began operations with 150 beds on Greams Road, Chennai, remains the flagship facility. Dr. Reddy is widely recognized for revolutionizing healthcare in India.

The hospital group is credited as a pioneer in the field of cutting-edge treatment. Apollo has many firsts in its credit such as:

• The first liver transplant conducted in India
• The first combined liver and kidney transplant in India
• The first simultaneous pancreas and kidney transplant
• First bilateral minimally invasive knee replacement surgery in India

Business of Apollo Hospitals Enterprise

Apollo Hospitals Enterprises operates India’s largest integrated healthcare system, providing a range of services under the “Apollo” brand. The company manages the most extensive network of hospitals in the country.

Apollo oversees 73 hospitals, of which the company owns 45. The group has a total capacity of 10,169 hospital beds, with 9,429 currently operational. Additionally, the hospital group employs over 10,000 empaneled doctors.

The company oversees the management of one hospital each in Bahrain and Bangladesh. As of 31st December 2024, the Average Revenue Per Occupied Bed (ARPOB) amounted to ₹59,634 per day. The occupancy rate was recorded at 69% for the period from 1st April 2024 to 31st December 2024.

Apollo Pharmacy is the largest offline pharmacy chain in India, with over 6,360 stores located across more than 1,200 cities and towns. Additionally, the company administers several medical colleges and nursing schools. Apollo also owns Medvarsity, which is the largest Ed-Tech company in Asia.

Apollo Hospitals Enterprise has a subsidiary, Apollo Health & Lifestyle Limited (AHLL), which operates in the retail healthcare segment. AHLL has over 1200 doctors in its network spread across more than 50 cities.

A few of the services provided by Apollo under AHLL are:

The company also has an arm, Apollo HeathCo Limited (AHL), which offers digital healthcare and operates omni-channel pharmacy. AHL offers services like online consultations, online pharmacy and diagnostic solutions through “Apollo 24/7” platform.

Management and Shareholding Pattern of Apollo Hospitals Enterprise

The leadership team of the company comprises the following distinguished individuals: Dr. Pradap C. Reddy, serving as Chairman; Smt. Preetha Reddy, Executive Vice Chairperson; Smt. Suneeta Reddy, Managing Director; Smt. Shobhana Kamineni, Non-Executive Non-Independent Director; and Smt. Sangita Reddy, Joint Managing Director. Additionally, Smt. Shobhana Kamineni holds the position of Executive Chairperson at Apollo HealthCo Limited.

The management team comprises Dr. Madhu Sasidhar, President and CEO – Hospitals division, Shri. Krishnan Akhileswaran, Group Chief Financial Officer; Shri. S.M. Krishnan, Senior Vice President – Finance & Company Secretary; Dr. Anupam Sibal, Group Medical Director; and Shri. Dinesh Madhavan, President – Group Oncology & International.

The promoters of the company hold 29.33% of the shares, with 13.47% of those pledged. The majority of promoter shares are held by the family members of Dr. Pratap C. Reddy and PCR Investments Ltd (PCRIL), a public limited company registered as an NBFC with RBI and managed by Dr. Reddy. Half of the board members belong to the promoter family, with 5 out of 10 members.

The promoters and promoter group have reduced the pledged shares from 78% in March 2019 to 13.47% in December 2024. The promoters had pledged their shares to secure loans which were invested in the hospital business, Apollo Munich, and educational institutions.

Among the public shareholders of the company, 12.77% of shares are owned by mutual funds, and 6.02% of shares are owned by insurance companies. Foreign Portfolio Investors (FPIs) owned 45.27% of the outstanding shares.

Financials of Apollo Hospitals Enterprise Limited (AHEL)

The company’s financial performance appears strong. The consolidated revenue has grown at a compound annual growth rate (CAGR) of 16% from FY12-13 to FY23-24. During this period, the revenue for the Healthcare Services and Apollo Health & Lifestyle Limited (AHLL) segments grew at a CAGR of 14%, while the Pharmacy segment experienced a CAGR of 20%.

The revenue of the company has jumped from ₹5,215.21 crore in FY14-15 to ₹19,165.50 crore in FY23-24. During the same period, the PAT has jumped from ₹297.23 crore to ₹917 crore.

The gross margin of AHEL ranged from 46% to 52% over the 10 years between FY14-15 and FY23-24. The net margin was approximately 5% in the past three financial years, which is a concern for the company. The net margin is influenced by the competitive nature of the online pharmacy sector.

Heavy discounts in the online pharmacy segment impact net margins. In the first 9 months of FY24-25 (ending December 2024), Apollo HealthCo’s revenue rose by 16% (YoY), but PAT increased by only 0.6%. Despite being EBITDA positive, AHLL is still consuming cash resources. Both Apollo HealthCo and AHLL are in their nascent stages, but the company perceives significant potential in both segments.

The company’s ROE increased after the decline during the COVID years, reaching 13.22% at the end of FY23-24. The trailing-twelve-month ROE based on TTM PAT as of 31 December 2024 was 18%. The stock of AHEL traded at a PE multiple of 73.20. The ROCE of the HCS segment has remained above 20% over the last three years.

Highlights of financials of Apollo Hospitals:

• As of 31st March 2025, the market capitalization of AHEL was ₹95.22 thousand crore.
• The company had reserves of ₹7,430 crore and cash and cash equivalents of ₹934 crore as of Q4FY24.
• PB ratio of AHEL is 13.02 The stock has given good returns to the investors of AHEL.
• In the last five years, the stock has given a return of 460%.

Listed Peers of Apollo Hospitals Enterprise Limited (AHEL)

Apollo Hospitals is the second-largest listed hospital group by market capitalization, following Max Healthcare Institute. The market typically assigns high price-to-earnings (PE) ratios to hospital stocks. Max Healthcare’s stock trades at a trailing twelve months (TTM) PE multiple of 108. Max Healthcare operates hospitals in the Delhi NCR region, Maharashtra, Punjab, Uttar Pradesh, and Uttarakhand.

Fortis Healthcare is another prominent hospital chain. Fortis Healthcare’s network spans across the Delhi NCR region, Punjab, Rajasthan, Karnataka, Haryana, and West Bengal. The company experienced a 49% increase in Q3FY25 compared to Q3FY24. The stock trades at a PE multiple of 65, with a return on equity (ROE) of 10.51% as of December 2024.

Narayana Hrudayalaya, founded by Dr. Devi Shetty in 2000, has an extensive network of hospitals. The first hospital, Rabindranath Tagore International Institute of Cardiac Sciences, was established in Kolkata, followed by Narayana Health City in Bangalore. The network includes facilities in Karnataka, Tamil Nadu, West Bengal, Gujarat, Rajasthan, Chhattisgarh, Jharkhand, and the Delhi region. Narayana Hrudayalaya’s stock trades at a TTM PE multiple of 43, with an ROE of 24% as of 31st December 2024.

Global Health Limited, known as Medanta, was founded by renowned cardiovascular surgeon Dr. Naresh Trehan in 2009. It is among the largest multi-speciality tertiary healthcare providers in India. Medanta operates hospitals in the Delhi NCR region, Uttar Pradesh, Bihar, Jharkhand, and Madhya Pradesh. Medanta’s stock trades at a TTM PE multiple of 66, and the company’s profit after tax (PAT) grew by 16% in Q3FY25 compared to Q3FY24.

Conclusion

Apollo Hospitals Enterprise Limited has experienced significant growth. The company is known for its innovative work in India over the past four decades. It has consistently explored new areas of growth, including a successful venture into the health insurance business. The company is utilizing digital technologies to expand its online pharmacy and retail healthcare consultancy businesses.

After expanding the healthcare services through hospitals, it is now focusing on the retail healthcare business. The offline pharmacy business has become the largest chain in the country. The company may re-enter the health insurance business soon. Apollo Hospitals is preparing to take advantage of the opportunities provided by Medical Tourism, which is growing rapidly in the country. The market has generally valued the company highly. The future prospects for the company appear positive, although it will need to navigate regulatory and systemic challenges continually.

References

• Apollo Hospitals website
• Apollo Hospitals investor presentation, December 2024
• Narayana Hrudayalaya website
• Global Health Limited website
• Healthcare System in India, IndiaOne Finance