Apollo Hospitals Enterprise shares took a big hit on Monday, plummeting more than 8% during intraday trade.
This was after the hospital chain’s sale of a stake in its digital unit, which was deemed undervalued by brokerages.
The stock initially dropped 8.4%, but has since recovered slightly. At 1.15 pm, Apollo Hospitals shares were down 4.29% at Rs 5,990. It was one of the top losers on the Nifty50 index.
On Friday, Apollo Hospitals announced that Advent International would invest nearly $297 million in its digital unit, Apollo HealthCo.
Additionally, the hospital chain revealed plans to merge its online pharmacy business with pharmacy distributor Keimed, with Advent holding a 12.1% stake in the combined entity.
However, brokerages including Nuvama Institutional Equities, Jefferies, CLSA, and Prabhudas Lilladher expressed disappointment over the valuation of Apollo HealthCo from the investment.
“HealthCo’s $1.7 billion valuation came as a negative surprise since $2.7 billion was expected, and management also accepted that (Apollo’s pharmacy business) 24/7 did not receive the valuation it deserved,” analysts at Nuvama said in a note.
Apollo HealthCo, encompassing offline and online pharmacies along with a telemedicine business, has been weighing on the hospital operator’s financial performance due to the cash-intensive nature of its Apollo 24/7 business.
Despite these challenges, analysts viewed the fundraise and merger with Keimed positively, as they will allow Apollo HealthCo to expand as an integrated pharmacy player without the burden of cash burn.
Maintaining their positive outlook, Nuvama, Jefferies, and Prabhudas Lilladher reiterated their “Buy” rating on Apollo Hospitals’ stock, while CLSA retained its “Outperform” rating.
According to LSEG data, the stock’s overall rating remains “buy,” with an average price target of Rs 6,953.5.
