'If we get like-minded investors, will induct for India biz post GCC,' says Dr Azad Moopen

Dr Azad Moopen

In yet another big-bang deal in the domestic healthcare sector, Aster DM Healthcare has approved the sale of its Middle East or GCC (Gulf Co-Operation Council) business to Alpha GCC Holdings Ltd for an equity value of a billion dollars.

Interestingly, the buyer, Alpha GCC Holdings, will be owned by the promoter/ promoter group of Aster India and funds managed by Middle East private equity firm Fajr Capital Advisors Limited in the shareholding ratio of 35:65, respectively, at the closing of the transaction.

On September 20, 2022, Moneycontrol was the first to report that Aster DM Healthcare had launched a big-bang internal rejig exercise to unlock value and had tapped Gulf funds and sovereign funds to sell stake in its carved-out Middle East business.

Moneycontrol's Ashwin Mohan caught up exclusively with the man of the moment, Dr Azad Moopen, Chairman, Aster DM Healthcare post the deal announcement on the rationale of the sale and the road ahead. Moopen says incoming investor Fajr Capital was picked up from a list of 42 suitors due to its strong local connects, justifies why the promoter group did not make a full exit and hopes the board will use the deal proceeds for a large dividend payout.

Edited Excerpts:

What was the key trigger for Aster DM Healthcare to conduct an internal restructuring exercise, separate the Middle East business from the India business and then induct an external  investor?
A: Most importantly, we realized after getting listed in India and looking at the two markets, that these markets have got separate dynamics, have to be addressed in different ways, require focused attention by management teams who are experts there, as well as even the investors should have the option of being Gulf focused as well as India focused.  In terms of capital allocation, once we got listed, the India-focused investors wanted this money to be invested in India or board wanted the money to be invested in India, so that was one reason.

Also Read | Aster DM shares scale 52-week high on sale of Gulf business for $1 billion

The second thing is that thesis was found to be right because the GCC part of our business was not valued the way in which India is valued when we spoke to the investors and the analysts.  They were saying that we give good value for India, India is growing, has a large population, demand-supply gap, whereas that wasn't the case when it came to GCC and it's a small market,  and that's the reason why we decided to segregate.

Alright,  Point taken. What were the factors that worked in you picking Fajr Capital as the chosen external investor?

A: Fajr Capital is thickly presented in GCC. They have done many deals and they have got significant inroads into the local sovereign funds as well as large families who have got a significant presence in many of the countries. So these people are there in all the six GCC countries and they have a good presence. If you want real estate, if you want an entry into a government-related business or if you want contacts with anybody, they have those contacts. So we looked at various people. There were other private equity firms who were having significant other benefits, but in terms of local contacts, we thought Fajr Capital is the best possible option. We conducted this process over a period of one year, and there were 42 people initially, came down to 16, came down to 4, came down to 2, and final selection we went with Fajr Capital because they were found to be very supportive as well as having local contacts.

The deal has a very interesting structure.  So, the GCC business has been sold to the buyer, which according to the stock exchange disclosure is named Alpha GCC Holdings Limited. And the announcement says that the buyer will be owned by the promoter group of Aster India and Fajr Capital in the ratio of 35:65 at closing of the transaction. What is the reason why this is not a 100% sale to Fajr? And why is it that the promoters are staying back?

A: Yeah, it's a related party transaction and we are on both sides. So the reason why this has happened is that, one, we have started this business long back in GCC and then came to India. So we have that emotional attachment and we want to continue with that. The second reason - when we were discussing with various investors who are coming into GCC, other than strategic players, there was this requirement from them for us to continue because we know the business best and they want us to continue, and they want to come and invest because we are there. So one of the most important conditions of many of these firms were that the promoters, who are the strategic experts should continue in this business, and that's why we are with them.

Also Read | Aster DM Healthcare seals deal for sale of GCC Business for $1 bn; Fajr Capital roped in

The announcement says that the promoters have expressed their deep commitment to both the India and GCC geographies, and that the promoters will continue to have a meaningful role both in GCC and India, following the completion of the transaction. Now that the GCC leg is over, can we expect Aster DM Healthcare to perhaps induct an investor similarly in the India part of the business, and continue to maintain a minority there as well?

A: Yeah. In fact, you have thought far ahead. And that's also what is there in our mind.  We thought let us finish one thing at a time. There has been a challenge when it is a joint business for many of the investors who are India-focused or Asia-focused to invest in the Middle East. Now that this is a pure play India entity, we hope that we'll have many of the large investors or the PE firms as well as other people who are ready to invest into us. We also have a lot of approaches from many people. But at this point, we are focused on this transaction and how to complete it. Post that, we'll be discussing with people and if we get like-minded people like what we got in GCC, we will definitely look at that and it will be one of our aims for future expansion in India.

If you get a like-minded partner like you've got in the case of Fajr Capital, would you be open to selling a majority in India business as well?

A: See, we already don't have a majority here. We have only 42 percent stake here. We increased our India stake in the last one year to 42 percent. If it's a very good partner who comes in and we have the strategic benefit of having a team and we have the knowledge,  then we are okay to go with not a majority stake, but we can go with a joint control and things like that. We can definitely discuss about that.

Mr. Moopen, the consideration receivable from this transaction is around a billion dollars. What will the proceeds be used for?

A: So the Board hasn't decided, but our desire is that a large part of it is being dividended out to the shareholders including us. And there is a reason for that also, because for us to consummate this transaction, we have to have money. Of course, we have some money which can be utilized within GCC, but we also are bringing down our stake from 42 percent to 35 percent in GCC. But beyond that, there is money requirement. So, this dividend which is received in India, we have to take it back because it's FDI investment, we have to take it back to GCC. So, we hope that a significant part of this will be dividended out, but also there will be, for the growth in India, there will be funds which will be kept in the company. But the Board has to decide that depending on how much of money is required for growth and what are the other requirements. But we hope sincerely for our own interest, as well as most importantly for the investors/shareholders interest that a large dividend is paid out.

My final question, could you give us an overview of some of the key features of the non-compete pact and intellectual property aspects as a result of this deal, which could impact the relation between the India and GCC business going ahead?

A: So, the non-compete aspect is something which has been very intensely discussed between the Board here because as we had conflict. This was guided by the independent directors and lawyers and they discussed with Fajr and what has been discussed is that the GCC region, it will be having Aster GCC as a brand which will be used by the buyer there, including us, the buyers, whereas when it comes to India, it will be Aster India, that will be India's territory. So, there won't be an entry into these markets for either side. Whereas when it comes to other geographies, which are not included in this, both India as well as GCC can go there, but the brand has to be segregated and there is a name which has been suggested on both sides, with Aster, of course, with something as a postfix they have to go there. So, the existing markets will be protected.  Now, apart from that, there are certain things like the medical value travel where people come from outside to India for treatment and there will be naturally patients coming from GCC countries, there are patients coming from GCC countries and how this can be treated and we have come to an agreement that there'll be a fee being paid for GCC units whenever patients come from the GCC unit into India. So those things are taken into consideration.