Aster DM Healthcare, the multi-specialty healthcare chain, has said it is evaluating the possibility of monetising its land parcels in Kerala to pare debt.
"We hold significant land in some of our hospitals, we thought that we will liquidate some of that, especially in Kochi, Kozhikode and Perinthalmanna. These (land parcels) were bought with the expectation of doing some projects. With those projects not materializing, we are planning to liquidate those assets, and use if for reducing debt and for capital expansion plans so there are no additional loans," said Dr Azad Moopen, Chairman of Aster, told Moneycontrol.
Moopen added that the valuation of these land parcels will be undertaken soon.
Aster has a consolidated net debt of Rs 2,791 crores. The debt equity ratio of the company is close to 0.8x.
"We think our debt equity ratio is at reasonable level. We have lower debt in India compared to Gulf Cooperation Council (GCC) region. The average cost of borrowing in GCC region is 6 percent, while in India is around 9.5 percent," said Sreenath Reddy. Group CFO, Aster.
The company's India debt is around Rs 350 crore.
But Reddy said the company is looking at ways to reduce borrowing.
"We are looking to control capex so that it will enable us to have additional cash from operations to repay the debt," Reddy said.
The company has spent Rs 761 crore as capex until December 2019, which was higher than the guidance of Rs 580 crore it provided at the beginning of the year. The company said the capex shot up due to acquisitions.
However Aster said it will be lowering its capex to around Rs 450 in FY21.
Aster also said it has turned more conservative with taking up new projects and acquiring hospitals.
"So one important decision that we have taken looking at the market expectations is that in the next three years we will be very very selective on new projects, and only take up projects that are EPS accretive," said Moopen.
Aster said the cost optimisation initiatives across the group had helped it to save around Rs 25-30 crore in FY20. But the costs savings will fully reflected from FY21 onwards. The company is expecting to save around Rs 50 crore in FY31.
Around 81 percent of Aster's revenue comes from the GCC countries, of which UAE accounts for a major chunk. The rest comes from hospitals in India. In terms of EBITDA, GCC contributes 80 percent, and India 20 percent.
Aster had 920 operational beds in GCC and 2,608 operational beds in India as of December 31.
The GCC region had traditionally does well in the second half ofThe average revenue per occupied bed (ARPOB) in the third quarter of FY20, at Rs 59,700. The average length of stay, a measure of the hospital's ability to efficiently monetise assets stood at 1.9 days for GCC compared to 3.5 days for Indian hospitals. To be sure, most of the GCC assets of Aster are mature ones, compared to India.
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