September 03, 2008

Apollo plans to set up 250 speciality hospitals

In a move to reach out to smaller towns and cities in the country, Apollo Hospitals Group has chalked out a Rs 10,000 crore investment plan to set up 250 small and medium sized multi-specialty hospitals aggregating to 31,250 beds over the next seven years.

These hospitals will have a typical size of 100-150 beds each and will be set up under a new brand name ‘Apollo Reach’. These 250 hospitals will be set up in three phases with the first phase completed over the next 24 months, second phase in the next 36 months and the final phase in the 24 months.

The group plans to fund the Apollo Reach network with a combination of debt and equity. The first phase of 25 hospitals that will cost Rs 1000 crore will have infusion of promoters’ equity (through warrant conversions) to the extent of Rs 160 crore. The group will use its current cash reserve of Rs 400 crore to part fund the project and will depend on the year’s cash flow to the extent of Rs 150 crore. The balance Rs 290 crore to fund the first phase will be debt.

Land has been procured in 11 cities and towns most of which are in Andhra Pradesh and Tamil Nadu. The group has also identified land to be bought in 17 other locations all over India.

The group chairman, Pratap C Reddy said that finding qualified doctors to run these hospitals will be the biggest challenge, particularly since they will be working in small cities and towns. He said a separate team has been set up to identify and hire medical and non-medical professionals to run these hospitals. The union government had recently announced a five year tax holiday to hospitals set up in non-metro cities. Hospitals are free to choose the five years that it wants to claim tax holiday. “In smaller towns it will not be possible to make profit in the first five year,” Reddy said.

As part of this new plan the group also plans to set up India’s first health knowledge city in Chittoor in Andhra Pradesh, which is also Reddy’s home town. The group has acquired 100 acres for this.

The Apollo Reach hospitals have been conceived with a basic premise that each of these, on an average will bring in revenue of Rs 40 crore a year from the third or fourth year of operations with profits coming in beyond the fifth year.

To find a steady source of doctors and other medical professionals to run its hospitals Apollo Hospitals Group also plans to set up medical colleges in four or five cities. The group has narrowed on Chittoor, Ahmedabad, Kolkata, Madurai as possible town where these colleges will come. To start with, each of these will enroll 100 students and increase it later. The cost of setting up each of these colleges is estimated to Rs 110 crore and each will also have a 600-bed hospital.

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