| Apollo Hospitals Enterprise Limited | ||||||
| Ratings reaffirmed at 'Crisil AA+/Stable/Crisil A1+' | ||||||
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| The common independent director on Crisil Ratings Limited and Apollo Hospitals Enterprise Limited boards did not participate in the rating process or in the meeting of the rating committee, when the rating for securities of Apollo Hospitals Enterprise Limited was discussed. This rating was also not discussed in the meeting of Crisil Ratings’ Board of Directors. | ||||||
| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities and non convertible debentures of Apollo Hospitals Enterprise Limited (AHEL)
The ratings continue to reflect the strong market position of AHEL as the largest private healthcare provider in the domestic market, pan India geographical presence, diverse business mix including established presence in pharmacy distribution business, solid operating efficiencies and the company’s healthy financial risk profile, as well as robust liquidity position. These strengths are partially offset by exposure to risks posed by any change in regulations and high expenditure on the flagship Apollo 24*7 digital platform of the Apollo group.
Consolidated revenue grew by 15% on-year in fiscal 2025, driven by healthy growth across its healthcare services segment, back-end pharmacy business (housed in Apollo Healthco Ltd, AHL), diagnostics and retail health businesses. Occupancy improved to 68% (65% in fiscal 2024) and average revenue per occupied bed (ARPOB) grew by 5% y-o-y in fiscal 2025. Crisil Ratings expects that the revenues of AHEL will grow at mid-teens over the medium term , driven by bed additions, steady occupancy levels and moderate increase in ARPOB, supported by better case mix and regular tariff revisions.
Operating margins improved by 120 bps to 13.9% (12.7% in fiscal 2024) supported by robust operating profitability in healthcare business (over 24%) and better operating profits at AHL, following lower losses in its digital platform (Apollo 24*7). The operating margins are likely to be sustain at similar levels despite the pre-operative expenses associated with bed expansion, supported by better performance of the existing hospitals leading to continuous improvement in AHL’s operating profits over the medium term.
Global private equity fund, Advent International (Advent) infused Rs 2475 crores into AHL in two tranches in fiscal 2025 for a 16% stake in AHL. The equity infusion, along with healthy improvement in net profits bolstered AHEL’s net worth (~Rs.9800 crores at March 31, 2025 compared to Rs. 6165 crores at March 31, 2024), and bettered its leverage ratios, despite ongoing sizeable capital spend. Further, the cash surplus at AHEL increased to Rs 2,793 crores (Rs 1,658 crores as on March 31,2024). With the completion of the equity infusion, AHL acquired 11.2% stake in Keimed Pvt Ltd (KPL), a leading pharmacy distribution company in India. The amalgamation of KPL with AHL is expected to be completed in 12-15 months, subject to necessary approvals. The combined entity is targeting to grow its revenues to around Rs 25,000 crores run-rate by end fiscal 2027 (Rs 16400 crores in fiscal 2025) with operating margins of around around 7% (3.2% in fiscal 2025). Post amalgamation, the revenue mix will change at AHEL, resulting in operating margins moderating to around 11-13%; albeit operating profits will continue to remain healthy.
Supported by improvement in net worth, and debt levels largely remaining flat at Rs.5389 crores (including lease liabilities), gearing improved to 0.55 times (post Ind-AS 116) at March 31, 2025, from 0.88 times at March 31, 2024. Debt protection metrics also remained healthy with interest cover at 6.59 times, while the ratio of debt to earnings before interest, taxes, depreciation and amortization (debt/EBITDA) improved to 1.78 times (2.2 times in fiscal 2024).
AHEL plans to incur capital expenditure (capex) of ~Rs 5,500 crore towards addition of ~3,600 beds in the next 3-4 years over and above maintenance capex of Rs 400-500 crores per annum. This will entail spends of Rs 1,300-1,500 crore per annum in the near to medium term towards these projects. Liquidity is robust with cash and cash surplus of Rs 2,793 crore as on March 31, 2025, and un-utilized fund-based limit of Rs 630 crore.
Crisil Ratings notes that AHEL, along with its 68.84% subsidiary, Apollo Health and Lifestyle Ltd (AHLL)m, has written put options to International Finance Corporation (IFC), which holds the remaining 30.6% stake in AHLL. As per the terms of shareholders’ agreement, IFC has the right to exercise the option on shares from the end of the 8th year (October 2024) till the 12th year from the date of first investment, either on AHLL or on AHEL. IFC made its first investment in AHLL in October 2016, and invested Rs 581 crore till fiscal 2025 . If the option is exercised, AHEL is expected to buyback the stake from IFC using its cash surplus. Nevertheless, sizeable cash surplus of over Rs.1500 crore will still remain, which along with annual accruals estimated at over Rs.2000 crores will limit material reliance on debt for capital spend, keeping debt metrics at healthy levels. For instance, debt/EBITDA is expected to decline below 1.5 times over the medium term. |
Analytical Approach Crisil Ratings has used a combination of full, proportionate and moderate consolidation of the Apollo Hospitals group companies.
Crisil Ratings has combined the business and financial risk profiles of AHEL and its subsidiaries (fully consolidated) and joint ventures (JVs; proportionately consolidated) considering their strong operational and financial linkages. The entities are collectively referred to as AHEL.
Crisil Ratings has considered Class A and Class B Compulsorily Convertible Preference shares of Rs 2475 crores from Advent as equity.
Please refer Annexure - List of entities consolidated, which highlights entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Dominant position in the healthcare sector AHEL is the market leader in the private healthcare segment in India. It operates the largest chain of healthcare facilities, with 51 hospitals (45 owned and six managed), with total capacity of 9,500 beds, and 22 daycare/cradle centres with 643 beds, as on March 31, 2025. The operational facilities are spread across the country, with particularly Tamil Nadu at 25%, Andhra Pradesh and Telangana (16%) and the eastern region (23%). Market position is driven by strong brand equity and superior quality of service. AHEL should sustain its leadership position over the medium term, backed by its wide geographical footprint and diverse specialty mix. The company is also expected to add nearly 3,700 beds in the next 3-4 years. ARPOB of the Apollo group is among the highest in the industry. It has recorded a steady compound annual growth rate (CAGR) of 9% between fiscals 2015 and 2025 and stood at Rs 60,588 (Rs 57,668 in fiscal 2024 and Rs 51,668 in fiscal 2023), driven by strong pricing power and the improving surgical and payer mix. Also, several hospitals of the Apollo group are centres of excellence and have JCI (Joint Commission International) accreditation.
Diverse business mix, with strong pharmacy distribution business In addition to the healthcare business which contributed revenues of Rs.11148 crores in fiscal 2025, AHEL also operates diagnostic and retail health business (Rs.1554 crore) and digital health and pharma business (Rs.9093 crores), rendering significant diversity to revenue streams.
With a strong distribution network, AHEL, through AHL, is the exclusive supplier for over 6,600 standalone pharmacy stores of Apollo Pharmacies Ltd (APL, rated ‘Crisil A/Negative/Crisil A1’), spread across the country. Furthermore, steady addition of stores has helped the pharmacy business revenues register a healthy CAGR of 17% since fiscal 2021, and cross Rs 9,000 crore in fiscal 2025. Revenue from the pharmacy segment is likely to grow at healthy double digit over the medium term supported by expansion of pharmacy stores and offtake in Apollo 24*7. The pharmacy distribution business will further strengthen with the proposed amalgamation of Kiemed Pvt Ltd (KPL) with AHL, over the next 15-18 months. KPL is the largest pharmacy distribution company in India with nearly 4% market share and serves more than 70,000 pharmacies, across 18 states. The merged entity (AHL and KPL) aims to achieve revenue of Rs 25,000 crore by fiscal 2027 with operating margins of 6-7%.
Superior operating capabilities AHEL’s operating margin improved to 13.9% in fiscal 2025 compared to 12.5% in fiscal 2023 and 2024. Expenses towards the online digital platform -- Apollo 24*7 – have been reducing translating to improvement in operating profits. Going forward, the operating margin is expected to sustain at 13.5-14% in fiscal 2026 considering the existing businesses, driven by the healthcare segment, which contributes to over 80% of the total profit of AHEL, and reducing losses in AHL. Albeit post amalgamation of KPL with AHL, consolidated operating margins will moderate to 11-13% due to change in revenue mix in favour of the pharma distribution business. However, higher operating leverage and lower losses at the online digital business will ensure absolute operating profits remains healthy.
AHEL’s healthcare services business generated operating margins of just over 24% in the last two fiscals, and is expected to largely sustain these margins despite sizeable bed addition going forward. AHL’s operating margin, which was in the range of 3-6% in the past, turned negative in fiscal 2023 and continued to remain negative in fiscal 2024 , due to elevated investment in the Apollo 24*7 platform, the online digital platform of AHEL. Apollo 24*7 has integrated all the services offered by AHEL (healthcare, pharmacy and diagnostic) at one place. AHL’s operating margin improved to 1.8% in fiscal 2025 with steady moderation in investments towards Apollo 24*7 platform, and is expected at 3-5% over the medium term. The diagnostic and retail health business is expected to sustain its average operating margin of ~10% over the medium term.
Healthy financial risk profile and robust financial flexibility Supported by improvement in net worth, and debt levels largely remaining flat at Rs.5389 crores (including lease liabilities), gearing improved to 0.55 times (post Ind-AS 116) at March 31, 2025, from 0.88 times at March 31, 2024. Debt protection metrics also remained healthy with interest cover at 6.59 times, while the ratio of debt to earnings before interest, taxes, depreciation and amortization (debt/EBITDA) improved to 1.78 times (2.2 times in fiscal 2024). AHEL plans to incur capex of ~Rs 5,500 crore towards addition of ~3,600 beds in the next 3-4 years over and above maintenance capex of Rs 400-500 crores per annum. This will entail spend of Rs 1,300-1,500 crore per annum in the near to medium term towards these projects. Liquidity is robust with cash and cash surplus of Rs 2,793 crore as on March 31, 2025, and un-utilized fund-based limit of Rs 630 crore. Crisil Ratings notes that AHEL, along with its 68.84% subsidiary, AHEL may purchase IFC’s 30.6% stake in AHLL should IFC exercise its option. Nevertheless, sizeable cash surplus of over Rs.1500 crore will still remain, which along with annual accruals estimated at over Rs.2000 crores will limit material reliance on debt for capital spend, keeping debt metrics at healthy levels. For instance, debt/EBITDA is expected to decline below 1.5 times over the medium term.
Supported by improvement in net worth, gearing improved to 0.55 times at March 31, 2025 (0.88 times at March 31, 2024). Debt protection metrics also remained healthy with interest cover at 6.59 times, while the ratio of debt to earnings before interest, taxes, depreciation and amortization (debt/EBITDA) improved to 1.78 times (2.2 times in fiscal 2024).
AHEL plans to incur capital expenditure (capex) of ~Rs 5,500 crore towards addition of ~3,600 beds in the next 3-4 years over and above maintenance capex of ~Rs 400-500 crores per annum. This will entail spends of Rs 1,300-1,500 crore per annum in the near to medium term towards these projects. The debt addition will be limited as the capex will be funded by healthy cash accruals of over Rs 2000 crores per annum. Supported by progressive debt reduction and improvement in performance, debt/EBITDA is expected to decline below 1.5 times.
Weaknesses: Exposure to regulatory risks Government policy on capping of prices for medical procedures and devices (such as cardiac stents and knee implants) impacted revenue and profitability in fiscals 2017 and 2018. Further, during 2020, various state governments put a cap on covid related treatment charges during the pandemic. Any material regulatory action and its impact will a remain monitorable.
Cash burn on the Apollo 24*7 digital platform The company incurred spends of Rs 600 crore per annum in fiscal 2023 and 2024, towards strengthening the Apollo 24*7 platform, which resulted in the consolidated pharmaceutical business registering losses at the operating level in fiscal 2023 and 2024. AHL recorded operating profits in fiscal 2025, though investments continued to be sizeable at Rs.480 crores. Apollo 24*7 will continue to incur spends around Rs 350-400 crores per annum and will continue to report operational losses over the medium term as well. However, the investments made are expected to strengthen service offerings as well as reach of the platform, benefits of which will be realisable over the medium to long term. |
Liquidity: Strong Cash and cash surpluses stood at Rs 2,793 crore as on March 31, 2025, while unutilized fund-based limit was Rs 630 crore. While the company is expected to maintain cash and bank balance of over Rs 2,000 crore on a steady-state basis, annual net cash accrual of over Rs 2,000 crore, along with available liquidity, will suffice to meet yearly debt of Rs 290-330 crore and capex (around Rs 5,500 crore over the next three to four years). If the put option is exercised by AHL, AHEL is expected to buyback the stake from IFC using its cash surplus. Nevertheless, the cash surplus of over Rs.1500 crore will still be maintained.
ESG profile of AHEL Crisil Ratings believes that the environment, social, and governance (ESG) profile of AHEL supports its credit risk profile.
The hospital sector has low-to-moderate impact on the environment as energy-efficient operations ensure low emissions. Additionally, it exhibits comparatively lower water consumption and waste generation, but higher biomedical waste. However, the sector has a moderate social impact, given the nature of its operations and their influence on the surrounding community.
Key highlights
There is growing importance of ESG among investors and lenders. AHEL’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of shareholding by foreign portfolio investors and moderate share of market borrowing in its overall debt |
Outlook: Stable AHEL will continue to benefit from its strong market position in the healthcare space, diverse business mix, and solid operating efficiency over the medium term. The restructuring exercise, with amalgamation of KPL with AHL, will further strengthen the market position of AHEL in the pharmacy distribution domain. Besides, its financial risk profile will also remain healthy, supported by strong cash generation, amid sizeable capital spending. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company AHEL started operations in 1983, with Apollo Chennai, its first corporate hospital in India. As on March 31, 2024, the company had 51 hospitals with 9,500 beds. Of these, 45 hospitals are owned, including subsidiaries, JVs and associates, while six hospitals are managed. It also has 22 daycare or cradles with 634 beds.
Besides its hospital-based pharmacies, AHEL runs a wholesale pharmacy distribution business (exclusive supplier to APL), operating a retail pharmacy chain of above 6,000 stores as on March 31, 2024. As of May 2024, Dr P C Reddy (the promoter) and his family members collectively owned 29.33% of the equity shares of AHEL. |
Key Financial Indicators (Consolidated; Crisil Ratings-adjusted numbers)
*As per IND AS 116 |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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Criteria Details
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