BR-3 Increasing competition (High Likelihood, Low Impact)

The intensity of competition in health care services has been increasing. Existing players are increasing
capacities and unorganized private players pose a risk. Increase in quality of services by the government
hospitals and subsidies by the government is leading to attrition of patients from the private healthcare
providers and changing the business sustainability.

Focus on various sectors and its diversified business model gives low concentration risk and
hence impact of this risk is reduced

MR-1 External Risks (High Probability, High Impact)

There can be many external risks that Apollo Hospitals may face due to uncontrollable factors beyond the
purview of management. Some of them can be unprecedented COVID- 19 pandemic, regulatory
environment, unfavourable trends in the macroeconomic environment including currency fluctuations,
Country-specific risks, economic and political environment, technology disruptions etc.

Consolidation in the industry.

Potential management and decades of experience will help to tackle this risks

SR-1 Cannibalizations (High Likelihood, Moderate Impact)

In the coming decade, we expect the healthcare sector to undergo radical changes in form of telemedicine,
wearable devices, preventive healthcare, adoption of natural lifestyle and usage of AI, robotics, and
digitization. We expect that many of the existing technologies will become obsolete, and hospitals will
suffer cannibalization and competition in out-patient revenues because of telemedicine and other omni
channels. Adapting to technology thus becomes crucial during these rapid transformation phase of
business activities. The company can suffer loss of revenues if they don't create a significant digital
presence and superior technological abilities over competitors

Regularly updating to technological prowess and being an industry leader can reduce impact
of this risk
Healthcare sector disruptions
We feel that the in the future healthcare industry is fraught with various challenges, including but not limited
to changing technology, changing Indian socio-economic conditions, the rise of public spending, consolidation,
and digitalization. Accordingly, we feel the company's out-patient revenue mix will shift from hospitals to
clinics and telemedicine. Also, the inpatient revenue will be majorly through medical tourism and non-
communicable diseases (NCD) treatment.

Apollo Hospitals in the Healthcare Ecosystem

The large scale of operations helps it minimize costs and yet maintain pricing power. The company has also
targeted informal specialized clinics, such as dental care, diabetes, dialysis centres and women and child care
with its AHLL business segment. The presence of these facilities near to customers with affordability and
quality assurance will be a significant revenue source for Apollo Hospitals in the long term. Apollo Hospitals is
also trying to improve its share of medical tourism revenues by using state of the art technologies. The latest
proton therapy centre for cancer patients is expected to improve patient outcomes and strengthen the Apollo
brand.

Management Acumen
The key success factors in healthcare are quality assurance, latest technology, affordability, regulatory
compliance, expert professionals, and social capital development. Demonstrating the same, most of the Apollo
hospitals are JCI accredited, have the latest technologies and are adept at handling critical and complex cases
with their centre of excellence. According to our secondary research, this professional integrity is from top to
bottom in the organizational hierarchy.

Valuation:

We have used sum of the parts valuation model to separate the risk and growth potential of different business
segments. Our investment recommendations key risks are technological obsolesce, legal risks, IT infrastructure
malfunctions, and quality risks. Apollo Hospitals also has a contingent claim of around 4000 crores.
Unfavourable resolution may affect the valuation of the company. We also feel that these risks are reduced in
intensity because of defensive mechanisms already adopted by Apollo Hospitals.

https://economictimes.indiatimes.com/markets/expert-view/we-have-revamped-organisation-
and-should-do-better-in-fy19-suneeta-reddy-apollo-hospitals/articleshow/65354706.cms?
from=mdr

https://www.thehindu.com/news/cities/Hyderabad/apollo-hospitals-launches-project-
kavach/article31172439.ece

https://cio.economictimes.indiatimes.com/news/strategy-and-management/covid-19-heroes-
digitization-is-creating-new-revenue-models-for-apollo-hospitals/75441567

https://cio.economictimes.indiatimes.com/news/enterprise-services-and-applications/airtel-
apollo-hospital-join-forces-to-help-india-tackle-this-pandemic/75121189
https://www.livemint.com/companies/news/hdfc-bank-partners-with-apollo-hospitals-for-
holistic-healthcare-solution-11602057303315.html

https://hospitality.economictimes.indiatimes.com/news/hotels/oyo-partners-with-apollo-
hospitals-to-offer-support-for-quarantine-facilities/74893091

1st one is market risks:

Which includes external risks which can be due to uncontrollable factors like covid, nascent
tech disruptions which are not under purview of management. 

Another one is regulatory risks which binds company to adhere to legal practices and also
compliant with the price caps for the treatment. 

2nd one is strategy risk:

 Cannibalization is happening due to existing health care practices becoming obsolete by

after radical changes is happening in prevention of diseases and providing health care by
using digitization 

 Concentration risk like Apollo being present in the southern part of the country and this risk
can be handled by entering into new states. 

3rd is business risk 

Which is inherent in the healthcare business in dealing with the lack of skilled professionals
including doctors, healthcare providers in providing the quality and healthy treatment to
patients. Also operational control risk which can arise due to fraudulent practices and breach
of obligations which impact the reputation of the company. 

 Important risk to consider is increase in competition from unorganized private players,

increasing quality of govt hospitals and evolvement of new age digitalised healthcare
business models. 

 Other risks include being compliant to changing healthcare regulations to avoid fines,
penalties and and stay afloat with the changing landscape of IT security and should avoid
cybersecurity risks and data breaches.
We expect the COVID-19 pandemic to continue to materially affect our financial performance in fiscal 2021,
and, potentially, in future periods, and such pandemic may otherwise have material adverse effects on our
results of operations, financial condition, and/or our cash flows.

We have incurred, and may continue to incur, certain increased expenses arising from the COVID-19 pandemic,
including additional labour, supply chain, capital and other expenditures. Furthermore, unfavorable government
orders or directives may mandate price caps and/or require private hospitals such as ours to treat COVID-19
patients on a pro bono or non-profit basis. For instance, a public interest litigation suit has been filed by Mr.
Sachin
Jain against the Union of India and others before the Supreme Court of India directing the Central Government
to
regulate the cost of treatment of COVID-19 at private hospitals across the country and mandate private hospitals
operating on public land or as a charitable institutions to treat COVID-19 patients either on a pro-bono or
nonprofit basis and to direct the Central Government to combat the commercialization of the health care by the
private
health sector. For details, see “Legal Proceedings” on page 221. In light of the foregoing, there can be no
assurance that directives mandating us to reserve beds for COVID-19 patients or to regulate the cost of
treatment
of COVID-19, will not be enacted in the future.
We have been implementing considerable safety measures at our hospitals and healthcare facilities.
Nevertheless,
exposure to COVID-19 patients has increased risks to our physicians, nurses and other medical staff, which may
further reduce our operating capacity. All of these developments could result in reduced employee morale,
labour
unrest, work stoppages or other workforce disruptions. The COVID-19 pandemic and resulting government
actions may also affect our business, results of operations and financial condition, in the future, in a number of
ways such as requiring a complete or partial closure of our operations, disruptions or restrictions on our ability
to
conduct our business, pursue partnerships and other business opportunities, result in an inability to source key
medical equipment as a result of the temporary or permanent closure of the facilities of suppliers of our medical
equipment, and lead to non-availability of labour that could result in a slowdown in our operations. Moreover, it
could also result in delay in expansions being currently pursued or delay or postponement in projects or
engagement in new projects, if any, to be implemented or executed by us in the near future, which can adversely
impact our ability comply with the financial covenants with respect to our borrowings which may in the short or
medium term lead to event of defaults under our Company’s or Subsidiaries’ arrangements or adversely impact
our ability to access debt and equity capital on acceptable terms, or at all. Further, the effects of the COVID-19
pandemic on our future results of operations, cash flows and financial condition could adversely impact our
compliance with the covenants in our credit facilities and other financing agreements and could result in events
of default and acceleration of indebtedness, the COVID-19 pandemic could also increase vulnerability to
cybersecurity threats and potential breaches (including phishing attacks, malware and impersonation tactics
resulting
from the increase in numbers of employees working from home), and cause uncertainty as to what conditions
must be satisfied before government authorities completely lift lockdown orders.
Broad economic factors resulting from the current COVID-19 pandemic, including increased unemployment
and
underemployment levels and reduced consumer spending and confidence, may also adversely affect our service
mix, revenue mix, payor mix and patient volumes, as well as our ability to collect outstanding receivables.
Business closures and layoffs in the geographic areas in which we operate may lead to increases in the
uninsured
and underinsured populations, which may continue to adversely affect demand for our services, as well as the
ability of patients and other payors to pay for services rendered. Moreover, there may be deterioration in the
collectability of patient accounts receivable which, if sustained, may continue to adversely affect our financial
results and require an increased level of working capital. International patient flows, or the medical value travel
segment, has been adversely impacted due to international travel related restrictions which are still in place and
may take time to recover to volumes before COVID-19. We may also be subject to lawsuits from patients,
34
employees and others exposed to COVID-19 at our facilities. Such actions may involve large demands, as well
as
substantial defense costs. Our professional and general liability insurance may not cover all claims against us.
Developments related to COVID-19 have materially affected our financial performance during the six months
ended September 30, 2020. Additionally, while we are not able to fully quantify the impact that the COVID-19
pandemic will have on our future financial results, we expect developments related to COVID-19 to materially
affect our financial performance during the remainder of fiscal 2021, and, potentially, in future periods.
Moreover,
the COVID-19 pandemic may have material adverse effects on our results of operations, financial position,
and/or
our cash flows. The ultimate impact of the pandemic on our financial results will depend on, among other
factors,
the duration and severity of the pandemic and negative economic conditions arising from the pandemic, the
volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for
across
our health systems, the timing and availability of effective medical treatments and vaccines, and the impact of
government actions and administrative regulation on the hospital industry and broader economy. COVID-19
developments continue to evolve quickly, and additional developments including any mutation, further outbreak
and delay in availability of vaccines may occur which we are unable to predict. Furthermore, the COVID-19
pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which
could reduce our ability to access capital and negatively affect our liquidity in the future.

We are highly dependent on our doctors, nurses and other healthcare professionals and our business and
financial results could be harmed if we are not able to attract and retain such doctors, nurses and other
healthcare professionals

Our Pharmacy Platform business had historically been contributing to our profit and we have divested the
front-end stores of our Pharmacy Platform business in 2020. We may not be able to maintain the same
operating margin as a result of such divestment which may have an adverse effect on the Company’s results
of operations and financial condition.

As part of the reorganization which became effective as of September 1, 2020, we have divested our interest in
the front-end stores of our Pharmacy Platform business to APL and we retain the back-end pharmacy
distribution
business. As a result of the reorganization, we own a 25.5% equity interest in APL, which operates the 3,975
stand-alone pharmacies as of November 30, 2020. We are also the exclusive supplier for APL under a long term
35
supply agreement and we have also entered into a brand licensing agreement with APL to license (i) our
“Apollo
Pharmacy” brand to APL for use in its front-end retail stores and (ii) our online pharmacy domain name
“www.apollopharmacy.in” to APL for its undertaking and fulfilling of retail sale orders online. Each of these
agreements is valid for a term of 10 years from September 1, 2020. Historically, our Pharmacy Platform
business
was represented by the retail pharmacy segment in AHEL until August 31, 2020, and it included both front-end
retail pharmacy business and the back-end pharmacy distribution business under one segment. Our retail
pharmacy segment historically contributed to 39.7%, 40.4% and 42.9% of total revenues from operations in
fiscals
2018, 2019 and 2020. After the reorganization, from September 1, 2020 onward, we reported the pharmacy
distribution business as a new segment, which may not be comparable to our historical results in fiscals 2018,
2019 and 2020. In the six months ended September 30, 2020, the revenues from retail pharmacy segment
contributed to 46% of our total revenues from operations, and the revenues from pharmacy distribution as a new
segment contributed to 7.3% of our total revenues from operations. We do not have control over the front-end
retail stand-alone pharmacy business after the reorganization. There is no assurance that the intended benefits
from the reorganization of our Pharmacy Platform business can be achieved or the reorganization will be or will
continue to be profitable to our business. If the Pharmacy Platform business after the reorganization is not
successfully managed, our operating costs may increase and our results of operations and financial condition
may be adversely affected.

Rapid technological obsolescence, technological failures, inability to identify and understand evolving
technological advancements and other challenges related to our medical equipment could adversely affect
our
business.
We use sophisticated and expensive medical equipment in our hospitals to provide our services. The healthcare
services industry is characterized by frequent product improvements and evolving technology, which could, at
times, lead to earlier than planned redundancy of our medical equipment and result in asset impairment charges.
The purchase and replacement of some of these equipment may involve significant costs, and may expose us to
currency fluctuation risk, as such equipment are imported from other countries. As industry standards evolve,
we may be required to enhance and develop our internal processes, procedures and training, as well as medical
equipment, from time to time, in order to comply with the standards required for operating in this industry, and
in order to maintain the accreditations that our healthcare facilities have received. In addition, because of the
high costs of such medical equipment, we may not maintain back-up equipment, and, therefore, even though we
generally obtain warranties for our equipment, if such equipment is damaged or breaks down, our ability to
provide services to our patients may be impaired, which could adversely affect our business. Our success in the
future will depend significantly on our ability to take advantage of and adapt to technological developments to
compete with other healthcare services providers. Our failure to understand, anticipate or respond adequately to
evolving medical technologies, market demands or client healthcare requirements may cause adverse effects on
our business and reduce our competitiveness and market share.

We face competition from other hospitals, pharmacies, pharmacy distributors and healthcare services
providers. Any adverse effects on our competitive position could result in a decline in our revenues,
profitability
and market share.
The healthcare services business, including the hospital, pharmacies, pharmacy distributors and clinics, faces a
challenge in providing quality patient care in a competitive environment and managing costs at the same time.
The competition for patients and customers among hospitals, pharmacies, clinics and other healthcare services
providers has intensified in recent years. In some cases, competing hospitals are more established than our
hospitals. Some of the hospitals that we compete with are owned or operated by tax-supported governmental
bodies or by private not-for-profit entities supported by endowments and charitable contributions which can
finance capital expenditures on a tax-exempt basis, or are hospitals affiliated with medical colleges. We will
also
have to compete with any future healthcare facilities located in the regions in which we operate. Some of these
competitors may be more established and have greater financial, personnel and other resources than our
healthcare
facilities. In some of the markets that we operate in, we also face competition from other healthcare services
providers such as stand-alone laboratories, orthopedic, oncology, radiology and imaging centers. We also face
competition from international healthcare chains which have begun providing services in India. New or existing
competitors, including smaller hospitals, stand-alone clinics and other hospitals, may price their services at a
significant discount to our prices or offer better services or amenities than us, exert pricing pressure on some or
all of our services and also compete with us for doctors and other medical professionals. Some of our
competitors
may also have plans to expand their hospital networks, which may exert further pricing and recruiting pressure
on
us. If we are forced to reduce the price of our services or are unable to attract patients, doctors or other
healthcare
professionals, our business, revenues, profitability and market share may be adversely affected.
36
In our Pharmacy Platform business, we compete with other hospital-based pharmacies and stand-alone
pharmacies
for customers. We also compete with other pharmacy distributors and suppliers. The competition we face from
other healthcare services providers, stand-alone pharmacies, pharmacy distributors and other firms may result in
a decline in our revenues, profitability and market share.

Our arrangements with some of our doctors may give rise to conflicts of interest and time-allocation
constraints, adversely affecting our operations.

We rely on financing from banks or financial institutions to carry on our business operations, and inability
to
obtain additional financing at all or on terms favorable to us could have an adverse effect on our results of
operations and financial condition. If we are unable to raise additional capital, our business, results of
operations, financial condition and cash flows could be adversely affected. Furthermore, a downgrade in
credit rating could adversely impact interest costs or access to future borrowings.

While we have recently restructured our operations for our standalone pharmacy business to comply with the
directions of the Foreign Investment Promotion Board (“FIPB”) in relation to foreign investment norms for
multi-brand retail trading, we could be subject to fines and penalties for any past purported non-compliance
with such norms

Our operations are affected by the geographic concentration of our hospital beds

If we are unable to increase our hospital occupancy rates, we may not be able to generate adequate returns
on our capital expenditures, which could materially adversely affect our operating efficiencies and our
profitability.

We depend heavily on our senior management team, and loss of the services of one or more of our key
executives or a significant portion of our local management personnel could weaken our management team
and adversely affect our financial condition and prospects.

We are subject to risks associated with expansion into new geographic regions

If we fail to effectively manage the businesses of our subsidiaries, joint ventures and associates, our business,
financial position and prospects could be adversely affected.
If we are unable to identify expansion opportunities or experience delays or other problems in managing
these opportunities, our growth, financial condition, cash flows and results of operations may be adversely
affected.

We may have difficulty in effectively integrating future acquisitions and joint ventures into our ongoing
operations.

Land title in India can be uncertain and we may not be able to identify or correct defects or irregularities in
title to the land which we own, lease or intend to acquire in connection with the development of our hospitals.

Certain lands on which our hospital buildings or other healthcare facilities are operating are not owned by
us, which could affect our operations. If the owner of premises does not renew the lease agreement, our
business
operations may suffer disruptions.

We may need to find suitable locations to open and operate greenfield hospitals and other healthcare
facilities and a failure to do so could have a material adverse impact on the Company’s results of operations
and financial condition.

We and our subsidiaries, joint ventures and associates are exposed to legal claims and regulatory actions
arising from the provision of healthcare services that, if adversely determined against us or our subsidiaries,
joint ventures or associates, could have a material adverse effect on our liquidity, financial position or results
of operations.

n the auditor’s report to the Company’s audited consolidated financial statements for each of the fiscal years
2015, 2016, 2017, 2018, 2019 and 2020, the respective statutory auditors have provided a matter of emphasis
relating to proceedings initiated against our subsidiary, Imperial Hospital and Research Centre Limited, by
the
Government of Karnataka

We may be subject to liabilities arising from the risks of hospital management, including liabilities from
claims of medical negligence against our doctors and other healthcare professionals, which may adversely
affect our business, financial position, results of operations or cash flow

We have in the past ceased operations at certain facilities and may do so in the future.

If we are exposed to claims exceeding the scope of our insurance coverage or that are not covered by our
insurance policies or if our insurance costs increase, and if our doctors are unable to obtain appropriate
insurance coverage, our liquidity, financial condition and results of operations may be adversely affected.
If we are unable to establish and maintain an effective system of internal controls and compliances, our
business and reputation may be adversely affected.

We operate in a highly regulated industry, and compliance with applicable safety, health, environmental and
other governmental regulations and any violations of existing regulations may be costly and adversely affect
our business and results of operations. We may not be able to obtain certain clearances, licenses,
registrations
and other approvals and renewals thereof required in the ordinary course of our business, and the failure to
obtain these approvals in a timely manner or at all may materially adversely affect our operations.

Our operations could be impaired by a failure of our information technology systems. Further, any
inadequacy
or security breach in our information technology systems may adversely impact our business, results of
operations and reputation.

Challenges that affect the healthcare industry and other external factors also have an effect on our
operations.

Some of the secretarial forms filed by our Company with the Registrar of Companies are not traceable.

We have limited protection of our intellectual property

Actions of our Promoters and the Promoter Group, as substantial shareholders and Directors, could conflict
with the interests of other shareholders.

Certain of our subsidiaries, joint ventures and associates have been or are currently incurring losses. If the
business and operations of these subsidiaries, joint ventures and associates deteriorate, our investments may
be required to be written down or written off

A portion of our Equity Shares held by the Promoters and the Promoter Group has been pledged in favor of
lenders, who may exercise their rights under the respective pledge agreements in events of default.

Our income may decrease if our operations and management contracts and franchisee agreement are not
renewed or are renewed on terms that are not favorable to us.

We have entered into various related party transactions

  If we lose or fail to renew our accreditation from the Joint Commission International, USA (“JCI”)
it could adversely affect our reputation and business operations

 There can be no assurance that we will not be a passive foreign investment company for U.S. federal
income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S.
holders of the Equity Shares.

 Failure or malfunction of our medical or other equipment could adversely affect our ability to
conduct our operations.

 We experience delays in receiving payment of outstanding dues from third parties, and any extended
delays may affect our financial condition and results of operations.

 We have high fixed costs, which can adversely impact our profitability

 We have commissioned an industry report from CRISIL Research, a division of CRISIL Limited,
which has been used for industry related data in this Preliminary Placement Document and such
data has not been independently verified by us. Accordingly, prospective investors are advised not to
place undue reliance on such information.

We are dependent on third-party suppliers and sub-contractors.

We may be subject to labour unrest, slowdowns and increased wage costs.

External Risks
A slowdown in economic growth in India or political instability or changes in the Government in India could
adversely affect our business could cause our businesses to suffer.

Changing regulations in India, including in relation to finance and taxation laws, could lead to new
compliance requirements that are uncertain.

Our business and activities may be affected by competition laws in India

Natural disasters could have a negative impact on the Indian economy and harm our business.
Force majeure events, particularly those affecting the states where our hospitals are located, could adversely
affect our business.

Any downgrading of India’s debt rating by an international rating agency could have a negative impact on
our
business.

If inflation were to rise in India, we might not be able to increase the prices of our services at a proportional
rate in order to pass costs on to our customers and our profits might decline.

Our profitability will decrease if the Indian Government reduces or withdraws tax benefits and other
incentives
that it currently provides.

Our profitability is linked to changes in Governmental regulations impacting the healthcare sector.

Significant differences exist between Ind AS and other accounting principles, such as US GAAP and IFRS,
which may be material to investors’ assessments of our financial condition.

Risks Relating to the Equity Shares

Fluctuations in operating results and other factors may cause the market prices of the Equity Shares to
decline.

Any future issuance of equity securities may dilute your shareholding

You may be restricted in your ability to transfer the Equity Shares.

We may decide to retain all of our earnings to finance the development and expansion of our business and,
therefore, may not declare dividends on our Equity Shares.

Investors may not be able to enforce a judgment of a foreign court against us.

Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions

We cannot guarantee that the Equity Shares will be listed on the Stock Exchanges in a timely manner or at
all,
and any trading closure at the BSE or the NSE may adversely affect the trading price of the Equity Shares.
Pharmacy:
In our pharmacy platform business, we compete with other hospital-based pharmacies, stand-alone pharmacies
and online pharmacies for customers. Some of our main competitors in the pharmacy platform business is
Medplus Health Services Private Limited.
We believe our position as one of the leading healthcare services providers in India, commitment to clinical
excellence and technology innovation, strong brand value, strong relationships with doctors and other medical
professionals, and an experienced and professional management team with their domain expertise and strong
execution track record give us a competitive edge in the healthcare services industry.

Our Pharmacy Platform includes a 25.5% equity interest in APL, which operates a retail pharmacy business, and
our own pharmacy distribution business.
Retail pharmacy
We have a 25.5% equity interest in APL, which operates India’s largest stand-alone pharmacy chain according
to
the CRISIL Report, with 3,975 outlets in key locations as of November 30, 2020. We are the exclusive supplier
for APL under a long term supply agreement and we have also entered into a brand licensing agreement with
APL
to license (i) our “Apollo Pharmacy” brand to APL for use in its front-end stores and (ii) our online pharmacy
domain name “www.apollopharmacy.in” to APL for its undertaking and fulfilling of online retail sale orders.
Each agreement is valid for a term of 10 years from September 1, 2020.

We believe the reorganization will enhance our Pharmacy Platform business as we

continue to strengthen the business and its sustainability as we leverage our strong distribution supply chain,
expand our private label products and build an integrated customer loyalty platform.

We attribute the success of our Pharmacy Platform largely to the brand value and recognition of the “Apollo
Pharmacy” brand and the large network of stand-alone pharmacies. The stand-alone pharmacies under APL
offer
a wide range of medicines, hospital consumables, surgical and health products and general “over-the-counter”
products, wellness products and also offer services such as prescription refilling and distribution of free health
newsletters. APL also undertakes the fulfillment of orders for medicines and other products placed by customers
on the Apollo 24/7 mobile application.
Our network of stand-alone pharmacies is operated in various locations with high visibility and revenue
potential.
Some of such stand-alone pharmacies also offer free home delivery to customers.
Revenues from retail pharmacy segment increased 1.8% to ₹ 22,698 million in the six months ended September
30, 2020 from ₹ 22,295 million in the six months ended September 30, 2019, and 24.1% to ₹ 48,206 million in
fiscal 2020 from ₹ 38,860 million in fiscal 2019.
Pharmacy Distribution Business:

Our Pharmacy Platform also includes the pharmacy distribution business which is owned by us. Our pharmacy
distribution channel has a robust supply chain and procurement capability and teams, strong nation-wide
distribution channel which provides a competitive advantage on purchase-price and quality over the mom-
andpop shops and other regional chains. In the six months ended September 30, 2020, the revenues from
pharmacy distribution was ₹ 3,612 million, which represented 7.3% of our total revenues from operations for
such period.

We also have enhanced our private label business through broadening and
deepening the product portfolio. In fiscal 2020, our private label sales contributed to 8% of the total revenues
from
the Pharmacy Platform. With the front-end retail pharmacy business through our interest in APL and our own
pharmacy distribution business both experiencing steady growth, our Pharmacy Platform will continue to be a
strong pillar of our diversified business model and contribute to our financial resilience and diversity.

In fiscal 2020, we also launched a comprehensive mobile application, “Apollo 24/7,” which
provides patients with a broad suite of services including virtual consultation with doctors, medical records and
online pharmacy. Fulfilment of online pharmacy orders is done through APL.

The retail pharmacy segment in India is fragmented across the country and it is also highly unorganised.
Organised players changed scenario of sector where they allowed the
customer to shop not only medicines but also across different lines products which include body care like soaps,
shampoos and also baby care products. The retail pharmacy comprises over 8 lakh outlets with a majority of
them having small, independent businesses.

Pharmacy Divided into Hospital pharmacy and Community Pharmacy.

Organised pharmacies are witnessing an increased number of players due stores also provide an assortment of
wellness and personal care products in areas such as baby care, nutritional
supplement and foods, home care devices, diabetes management and beauty and personal care products. Along
with allopathic medicines the stores sell a variety of ayurvedic and homeopathic medicines as well.

Organised
chained pharmacies are growing at an impressive rate of 15-20%, thanks to the enhanced quality, services and
ready availability of drugs provided by them.

Industry characteristics

Mostly fragmented

Intense competition

Seasonality (June to September) viral infections in monsoon season

Mostly present in busy areas

Retail pharmacy’s gross merchandise value (“GMV”) projected to grow at a CAGR of 10-12% between
fiscals
2021 and 2025

According to CRISIL Research, the retail pharmacy’s GMV is estimated at around ₹ 1,295 billion as of FY20
registering a 10% CAGR from ₹ 972 billion during fiscal 2017. The recent COVID-19 pandemic, which started
spreading across the world since early 2020, had necessitated lockdown all over the country in the first quarter
of
FY21. With this, the domestic pharmaceutical sales were hit in the first quarter. Thus, CRISIL Research projects
the retail pharmacy market to grow by a CAGR of 10-12% between fiscal FY21 and FY25 to clock a GMV of
1,900-2,100 billion.

Key growth drivers:

Key growth drivers include: Rising ageing population and improving life expectancy; Growing incidences of
lifestyle diseases in India; increasing health-conscious population; and rising affordability.
Rising lifestyle diseases and growth in insurance penetration (mainly because of Ayushman Bharat) would aid
demand for the sector in the long term.

Challenges
Key challenges include: intensifying competitive landscape within organised players and from e-retailers;
susceptibility to economic down-cycles; and API availabilty and dependence on China.

India's retail industry is highly fragmented and faces intense competition from unorganised retailers. Also,
physical format retailers are increasingly facing stiff competition from online format players.
Rise in disposable incomes, inflation, and growth rate of the gross domestic product affect consumer sentiments
and, thereby, performance of the sector especially consumer spending towards drugs like immunity boosting and
OTC which fetch higher margins.
India imports ~68% of intermediaries required for active pharmaceutical ingredients from China. Over the past
few years, many chemical based companies have been shut down in China due to failure to meet environment
norms. Further, COVID-19 led disruptions during February and March in China disrupted supplies. Further, the
Chinese bulk drug industry receives extensive support from the government in the form of subsidies. Any
change in policy in this front will also lead to pressure on margins for the Indian players implicating higher drug
prices and impact on margins across the supply chain.
overview of the E-pharmacy market in India
E-pharmacy is also a major addition to the pharmacy industry. According to with increase in use of technology,
penetration of e-pharmacy segment is higher in tier-1 and tier-2 cities of India as compared to that of tier-3 and
tier-4 cities posing as a scope for opportunity.

the e-pharmacy market in India has seen investments of about $700 million
in FY20.

Why e-pharmacy is next big thing:

Due to sudden outbreak caused by the attack of COVID-19 many consumers have moved towards the e-
pharmacy
segment during the current financial year. According to sources, e-pharmacy companies have witnessed a
customer base increase of nearly 2.5-3 times during the first few months of lockdown i.e from March to June
2020. Realising the use of e-pharmacy due the COVID-19 pandemic, government of India declared e-pharmacy
as one of the essential services. Apart from the fundamental growth drivers
- like rising ageing population and improving life expectancy, growing incidences of lifestyle diseases in India,
increasing internet & smartphone penetration, rising urbanization and nuclearisations - changing consumer
behavior will push the e-pharmacy segment further.

E-Pharmacy GMV projected to grow 1.7 times in fiscal 2021 on account of a surge in demand due to
COVID-
19
The e-pharmacy GMV has grown at a whooping CAGR of 195% over fiscals 2017 and 2020 on account of a
low
base to clock a size of ₹ ~60 billion during fiscal 2020 from ₹ 2.4 billion during fiscal 2017. COVID-19 has
boosted the order volumes by nearly 40-50% during the months of April to June 2020. Customer base also grew
2.5-3 times during the months of March to June 2020 as per sources in the industry. The current fiscal 2021
fared
well for the e-pharma players such as Pharmeasy, Medlife, Netmeds, 1mg on account of rising demand.
Companies also revved up average order values during high demand period by cutting discounts and charging
delivery costs to customers. CRISIL Research expects the e-pharmacy market to clock a GMV of ₹ 100-110
billion during the fiscal 2021, a whopping 70% up from the figures as of FY20. Over the next five fiscals,
CRISIL
Research projects the e-pharmacy market to reach GMV of ₹ 325-375 billion, clocking a CAGR of 30-40%
between FY21 and FY25. This rise is expected to be aided by a boost in penetration owing to entry of
newplayers/e-commerce giants and consolidation in the industry.

Strengths of e-Pharmacy over traditional retail pharmacy includes:

 Lower overheads and selling prices
 Efficient inventory management
 Increased reach
 Offering value added services such as telemedicine and diagnostic facilities offering higher margins
 Ability to record and track transactions

Recent deals in the e-Pharmacy industry includes:

 Amazon India rolled out ‘Amazon Pharmacy’ in Bengaluru in August 2020
 PharmEasy and MedLife apply for merger to Competition Commission of India (CCI)
 Reliance industries acquired 60% equity stake in Vitalic Health pvt. Ltd and its subsidiaries (collectively
known as ‘NetMeds’)
 Flipkart also planning to enter e-pharmacy business
AHLL:

Retail healthcare services through Apollo Health and Lifestyle

Through Apollo Health and Lifestyle, our Subsidiary, we provide (i) primary healthcare, (ii) diagnostics
services such as clinical, diagnostic and dental services, and (iii) specialty care services, such as day care or
short say surgical centers, women and child care and fertility centers. The clinics services are provided through
self-owned or franchised clinics in which we charge our franchisees a one-time fixed license fee and a periodic
royalty fee.

In fiscal 2020, Apollo Health and Lifestyle recorded revenue of ₹ 6,964 million, of which primary healthcare,
diagnostics services and specialty care services represented 33%, 11% and 57% of the revenue, respectively.
As of November 30, 2020, we had a total of 1,078 retail touchpoints in India compared to 956 retail touchpoints
as of March 31, 2020, which included 161 Apollo Clinics, 23 Apollo Sugar Clinics for diabetics patients, 744
Apollo Diagnostics Centers, 62 Apollo Dental Centers, 58 Apollo Dialysis Clinics, 11 Apollo Spectra Centers
for specialty surgeries, 14 Apollo Cradles and Apollo Fertility Centers and five other centers. Through our retail
network, we aim to make quality healthcare services accessible to a larger cross-section of the Indian
population.

Our network is equipped to provide a wide range of healthcare services, from basic to advanced consultation,
diagnostic tests, specialty clinics, specialized birthing centers, dental and daycare services. All of our clinics are
equipped with a pharmacy and some of our clinics also offer telemedicine facilities to provide medical exp
through second opinions from specialist doctors.