The decision comes as the Foreign Investment Promotion Board (FIPB) has been holding back its approval for the hospital chain to raise Rs 750 crore from foreign investors. The FIPB had passed on AHEL's proposal to raise Rs 750 crore through rights issue to the Cabinet Committee on Economic Affairs (CCEA) for its consideration in a the meeting held on February 21, according to a latest announcement.

The company has asked for reasonable time to finalise and implement the proposed transfer of the retail part of its pharmacy business in compliance with FDI policy, according to an FIPB announcement.

Foreign investors hold 55 per cent in AHEL because of its hospital business. The authorities consider the pharmacy business, which is part of AHEL's books, to be multibrand retail, in which the foreign holding has to be less than 51 per cent. The company says that the foreign holding in the company is through both, FDI and FII. However, it has agreed to restructure the retail business, to make it an Indian company in which Indian shareholers are in majority.

It can be restructured as a subsidiary of the company, where the foreign holding will be less than 51 per cent, said a senior company official. This will not be a hive off. If it is a hive off, cash flows are expected to come in. The company expects that the economics and the back end of the pharmacy will still be it, while only the front end will be restructured or made a subsidiary. The company has asked the authorities time to implement this and it is expected to take 12-18 months.

AHEL received the approval of its board of directors to raise around Rs 750 crore through rights issue in May, 2015. It had then planned to used the funds for its proposed expansion plan and to repay part of its debt, which was around Rs 1,600 crore at the time. Later the plans were changed and the company expects to repay the entire amount towards reducing its current debt. According to analyst reports and company officials, it has a total debt of around Rs 2,700 crore in FY2016, which is expected to go to Rs 3,152 crore by the end of current fiscal year. With the rights issue, it will directly repay Rs 750 crore in order to reduce the pressure on margins.

The hospital chain, with 71 hospitals and a total bed capacity of 10,143 beds, has a total of 2,506 pharmacies as on December 31, 2016. The company is creating a One Apollo concept where the clinics and pharmacy will act as a gateway for patients. The pharmacy touches one million lives, said Suneeta Reddy, managing director of AHEL in a recent analyst call. It has been adding around 200 retail outlets every year in the recent past.