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An Analyat's Diary
By Ashok Kumar

Dear Diary,

I have often repeated that the job of the FM in India is a fairly thankless one. Given the adverse domestic as well as global backdrop, my personal assessment is that Jaswant Singh did a satisfactory, albeit unexceptional job. Of course, it is no patch on Chidambaram's 'dream budget' of the late nineties, which of course, got derailed by his leftist coalition partners. As always, the left parties gravely objected to the Budget proposals, but then, what's new ? What was surprising is that the principal opposition party, while criticizing the Budget, has failed to suggest any suitable alternatives.The bottomline here is, if we have to live with the Budget, why make such a hue and cry about opinions and counter-opinions of persons, who are little more than arm-chair critics, if anything at all. My team and I were fairly pleased to note that Apollo Hospitals, a scrip that we track and back strongly has been one of the major Budget beneficiaries. Let us zero in then, on its enhanced prospects.

Since starting the first corporate hospital in India at Chennai in 1984, Apollo Hospitals Enterprises (AHEL) has come a long way.

Today, the company offers a full range of healthcare services. Broadly, its services can be classified as follows: Owned hospitals, Managed Hospitals, Pharmacy sales and Project consultancy. AHEL has the largest hospital chain in the country comprising of primary, secondary and tertiary care hospitals. Apollo has a network of 26 hospitals and 17 clinics and employs over 10,000 employees. Apollo's Pharmacy network stands at 100. Beds under owned hospitals increased to 3193 and beds under management increased to 1902 taking the total beds to 5095. Besides, recognising the prospects of the growing health insurance sector, the company has diversified into providing health insurance services also. The company acts as facilitator for insurance services by offering services like third party administration, claims processing etc for Mediclaim policyholders. Furthermore, the group provides diploma courses to nurses and students.

The company also undertakes research in the form of clinical trials. Apollo is also targeting the $250 billion global medical BPO services market.

Traditionally, hospital businesses have enjoyed low returns on investment owing to the technology obsolescence and recurring capital expenditure in the business. For years, Apollo bore from the reputation of raising capital at frequent intervals and the ownership of a number of subsidiaries which made it difficult for shareholders and analysts to understand the company with clarity. So even though the company performed better than most global peers, it suffered from a low discounting on the bourses.

However, with fund managers belatedly realizing the value and potential of this company, it does seem that better days lie ahead at the bourses for this company. The boost provided to it by the Budget proposals could well be the trigger that the those having invested in this stock were awaiting. So, what makes this company tick and what is there in the Budget that has provided it a boost ? Let's take that up next week.

Yours truly,
THE ANALYST

(ASHOK KUMAR heads LOTUS STRATEGIC CONSULTANTS, Mumbai and may be contacted at : [email protected] )