Apollo Hospitals’ Stock Plunges: Here’s What Spooked Investors
India’s largest hospital chain’s stock fell the most in more than seven years as a rise in shares pledged by the promoters with lenders spooked investors.
Shares of Apollo Hospitals Enterprise Ltd. tumbled as much as 13.3 percent, the most since December 2011, according to Bloomberg data.
“The additional pledged shares were created due to the unwinding of the deal with KKR and Co.,” Suneeta Reddy, managing director of Apollo Hospitals Enterprise Ltd., told BloombergQuint over the phone.
KKR had invested Rs 550 crore in PCR Investments Ltd.—the holding company of Apollo Hospitals—in October 2013. The investment was in the form of debentures that had an option to be converted into equity shares in the Chennai-based hospital chain at the end of five years. Instead, the promoters via borrowings through pledged shares repaid KKR’s debentures. The promoters of Apollo Hospitals own 34.4 percent in the company, and they have 74.81 percent of their holding pledged, according to exchange filing. Hence, the company in a conference call said it increased the pledged shares by nearly 5 percent in January due to unwinding of the deal.
To be sure, the promoter’s pledge has been rising for the past six quarters, and is higher by 6.95 percentage points during the period, as per the company filings.
Yet, Reddy is confident of being able to bring down the pledged shares by half in the next six months. She said Apollo Hospitals has two assets that can be sold to lower the debt.
“The company has a majority stake in Apollo Munich Health Insurance Company Ltd. which can be liquidated,” the management reiterated in the conference call after the announcement of the third quarter results. While the company did not disclose the other asset that can be liquidated, it assured that the company is not considering taking more pledge.
The hospital chain’s top line increased 17 percent in the quarter ended December, while its operating profit rose 21 percent, it said in a separate exchange filing.
Watch the interaction with the management here: