AHS to offload 15 per cent for USD 70 mn

Apollo Health Street (AHS), the healthcare business process outsourcing subsidiary of Apollo Group that runs India’s largest hospital chain, plans to raise USD 70 million from the capital market by offloading 15 per cent of its equity. The Hyderabad-based company has been valued at nearly USD 470 million. The company will come out with its initial public offer (IPO) in the first quarter of 2008. AHS is also looking to get outsourcing contracts worth several millions of dollars from private equity player Apax Partners, which runs 45 hospitals in Europe. Apax Partners picked 11 per cent stake in parent company Apollo Hospital Enterprises for USD 100 million last month. The company wants to reportedly pay off 50 per cent of its debt through the money raised from the capital market by early next year. They are looking at inorganic growth and the financial backlog might hinder the growth. They will dilute around 15 per cent for the funds. AHS had recently acquired US-based BPO Zavata for USD 170 million. It had raised USD 120 million as debt to part finance the acquisition. Post acquisition, AHS will have a turnover of around USD 100 million. After setting its foot in the US, AHS is looking at tapping the European market. They are also looking at doing the back office work for Apax Partners, which runs around 40-45 hospitals. AHS can reduce the cost of back office operations by 20% and increase the recovery rate to 50% from 40%. Private hospitals in UK spend about 5-7% of their revenues in back office operations. Apollo Hospital is also looking at expanding in the European market. On the domestic front, the company is planning to add 1,800 beds with an investment of INR 700 crore in the next 18 months. It is also in talks with infrastructure developer IVRCL to set up hospitals in the latter’s land.

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