There is a backend and front end (thats how they call it). Backend is the whole logistics, supply chain and procurement. Front end is the retail stores. On an expected 5% stable margins, approx 1% is kept by front end and 4% by backend. The 75% sell has been done for front end and as per management, 85% of profitability will be retained and after sell of 15% of profitability, they have raised 500 cr approx will which be used either to reduce debt or to expand pharmacy. Also, looks like deal is structured such a way that they can later buy after a certain IRR to current buyers. In terms of valuations, pharmacy overall business was valued around 5000-6000 crs which looks reasonable. Now, we must keep in mind the risks associated in terms of transfer pricing and all which has been existing from long time and we can only trust management.
Now coming to results, this is 3rd quarter of turnaround in profitability and company did 29% pat growth with both hospital and pharmacy doing well. Also, i think this is peak of debt and going forward debt reduction should help in further operating leverage playing out.
Disc : Booked partial profit recently