Hyderabad based Apollo Hospitals has signed a Memorandum of Understanding (MoU) with Hetero med solutions Ltd for acquisition of its 320 retail pharmacy stores across south India.
Disclosing this, sources at Apollo Hospitals said that a deal of Rs.146 crore has been finalised to buy hetero retail pharmacy stores across the 3 states of Telangana, Andhra Pradesh and Tamil Nadu.
Wit this deal, Apollo hospital is aiming to fast track its growth and strengthens its hold as a leading retail pharmacy in the country. Currently Apollo has 1,632 pharmacy stores across the country.
"Due to drug price regulations by the government, the profit margins have drastically gone down. Around 400 drug prices have come down and this has exerted a lot of pressure on the profits,” informed a senior executive at Hetero group.
While on the other hand agreeing that the drug price control of essential drugs by the government is having a big impact on the pharmacy profit margins, its impact on the bigger enterprises is negligible and in fact it gives them an opportunity to grow in the long run, pointed out a source from Apollo.
This deal is expected to help Apollo to grow at about 23 per cent per annum. At this rate, the Apollo group is expecting to push up its revenues from Rs.1364 crore in 2014 to Rs.1670 crore by the year 2015.
Apollo hospital group is in the pharmacy business since past 3 decades. It has established over 1600 stores across the country and has earned a successful brand image. Majority of Apollo stores are run at the hospital premises and at major centers in various states. The Hetero Pharmacy which is also based from Hyderabad was established in the year 2007 by Hetero drugs group. Though Hetero pharmacy could earn an income Rs.160 crore for the financial year 2013-14, it had incurred Rs.3.90 crore loss during the same year.
Sources revealed that though the individual stores of Hetero pharmacy were earning profits but the firm was recording losses due to other operational costs. As the parent company is more focussing on the bulk drug production and wants to concentrate more on the core business, it has decided to withdraw from the retail pharmacy business.