Apollo Hospitals’ Restructuring Plan: A Prescription for India’s Pharma Industry?

India’s pharmaceutical industry is a global powerhouse, often called the “Pharmacy of the World.” It ranks among the top drug producers globally – well, the 3rd largest by volume, and supplies 20% of the world’s generic drugs exports, according to the International Society for Pharmaceutical Engineering (ISPE).

Valued at around $50 billion in 2024, this market is poised for further growth, almost doubling in size by 2030, according to reports. The sector produces over 60,000 generic brands across all major therapeutic categories and meets a large share of global vaccine demand. 

Pharma’s Market Pulse

This ambition isn’t just on paper. Market performance reflects this optimism: The Nifty Pharma index, which comprises 20 companies listed on the National Stock Exchange of India (NSE), has delivered 17.16% returns (as of June 30, 2025) over the past five years, compared to the Nifty 50’s 19.89% returns during the same period. 

Since its inception in 2005, the pharmaceutical index has generated total CAGR returns of 13.45%. As of June 2025, Sun Pharmaceutical Industries holds the highest market weightage at 22.86%, followed by Divi’s Laboratories (10.94%) and Cipla (10.72%).

Want to know more about the sector? Here’s a list of top pharma stocks to invest in.

Nifty Pharma Index 5Y Returns

Apollo Hospitals’ Power Move at a Glance

Against this backdrop, a significant development has captured the pharma market’s attention: Apollo Hospitals’ strategic reconstruction of its omnichannel pharmacy and digital health businesses. 

Announced recently, this move aims to unlock value and sharpen operational focus by spinning off Apollo’s pharmacy distribution, Apollo 24/7 digital platform, telehealth services, and wholesale distribution (Keimed) into a new listed entity, tentatively called “NewCo”. 

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The move is expected to positively impact the valuation of its core hospital business by unlocking substantial shareholder value.

Notably, Apollo had been preparing for this move for a while. In 2022, Apollo brought in external investment for its pharmacy unit: Advent International, a global private equity firm, agreed to invest ₹2,475 crore (about $300 million) for a 12.1% stake in Apollo’s pharmacy/digital business, valuing Apollo HealthCo at around ₹14,500 crore, as per company data.

Reshaping Pharma Industry Dynamics

Apollo Hospitals’ restructuring can potentially attract more investment and bring innovation within the pharma and digital health space from a broader perspective. Here’s more:

Positive Points:

Increased Focus and Specialisation: Separating the pharmacy and digital health businesses allows for dedicated management and strategic focus, potentially leading to faster growth and innovation in these areas.

Attracting Investment: A new separate entity with a clear growth trajectory is likely to attract both domestic and international investors.

More Transparency and Valuation: The direct listing of the new entity on stock exchanges will bring greater transparency and allow for a clearer valuation of the pharmacy and digital health businesses, which may bump up investor confidence, according to news reports.

Expansion of Digital Health: The focus on digital health, including telehealth and diagnostics, aligns with the growing trend of digital healthcare adoption in India, which can consequently improve healthcare outcomes.

Pharmacy Business: The acquisition of the remaining stake in Apollo Pharmacies Ltd (APL) will strengthen the retail pharmacy business, in turn enhancing market share and driving revenue growth. 

Pain Points:

Competition: The reorganised entity will face competition from established players in the pharmacy and digital health markets. 

Regulatory Approvals: The restructuring plan is subject to regulatory and shareholder approvals, which may take time to finalise. 

Recent Major Demergers in Indian Healthcare and Pharma

Pharmaceutical companies frequently undergo demergers. This is often done to unlock value, allow for focused management, and streamline operations, which may attract different investors. Some noted examples:

Piramal Enterprises: The demerger resulted in Piramal Pharma Ltd (PPL) becoming a separate listed entity, focused on the pharmaceutical business, while Piramal Enterprises continued as a financial services company. 

Glenmark Pharma & Glenmark Life Sciences: Glenmark spun off its API unit into Glenmark Life Sciences to focus on finished formulations. The demerger unlocked value, with Glenmark later exploring stake sales to reduce debt. 

Max India & Max Healthcare: Max India restructured by merging its hospital business with Radiant Life to form Max Healthcare (now a listed hospital chain), while demerging other verticals like senior care. The move created two focused entities, attracted private equity (KKR), and unlocked shareholder value.

Aarti Industries: The demerger involved transferring the pharma and related businesses to Aarti Pharmalabs, allowing Aarti Industries to focus on its core speciality chemicals business. 

Strides Pharma: The demerger involved separating the Identified CDMO Business and Soft Gelatin Business into Onesource Specialty Pharma Limited, allowing Strides Pharma to focus on other areas of its business. 

What Should Investors Look Out For?

While demergers can unlock value, investors should also keep an eye on these key factors:

1. Management Quality: The success of a demerged entity depends on the strength and vision of its leadership.
2. Market Position: Assess whether the new entity holds a competitive edge in its segment.
3. Growth Prospects: Look for clear strategies on expansion, innovation, and market penetration.
4. Financial Health: Examine balance sheets, profitability, and capital allocation plans following the spin-off.
5. Regulatory Environment: Stay updated on government policies that could impact the sector, such as pricing controls or incentives.

To Wrap Up

The Indian pharmaceutical industry is definitely going through a transformation, driven by robust growth, innovation, and government policies. Events like Apollo’s pharmacy split are set to reshape industry dynamics and push up competitiveness. 

As India continues its journey to become a global healthcare leader, strategic demergers will play a crucial role in defining the next chapter of the country’s pharma story.

Disclaimer:

This article is for informational purposes only and should not be considered as any investment advice. Readers are advised to do their own research or consult a financial advisor before making any investment decisions. The companies and examples mentioned are purely for illustrative purposes.