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Aster DM Healthcare initiates rejig to unlock value, eyes global funds for Middle East unit

“We are continuously evaluating avenues for growing and expanding our business and uncovering new opportunities for forging strategic ties in the Gulf Cooperation Council (GCC) countries and in India,” said the founder, chairman and managing director Azad Moopen in his address to shareholders in the FY22 annual report.

September 20, 2022 / 12:13 PM IST
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Five months after setting up a committee of independent directors to review its corporate structure, Dr Azad Moopen-led healthcare conglomerate Aster DM Healthcare has on boarded advisors and initiated a big-bang internal restructuring exercise to unlock value for shareholders, multiple industry sources with knowledge of the matter told Moneycontrol.

“ As part of this key rejig process, Aster DM Healthcare plans to carve out its Middle East business out of the listed entity trading on the Indian bourses and then induct a financial sponsor, sell a minority stake and raise funds,” said one of the persons above.

Aster DM Healthcare, which chiefly operates in India and the Middle East region, made its domestic market debut in February, 2018.

A second person told Moneycontrol that investment banks Credit Suisse and Moelis had been roped in for the proposed transaction.

He added: “Initial feelers have been sent to financial sponsors, including Middle East funds and sovereign wealth funds. The sense is that the Middle East business part of the operations should get a better valuation.”

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A third person also confirmed the above adding that the separation of the two businesses would lead to greater focus and that the Indian business of Aster DM healthcare had grown well in recent times and reached a healthy size and scale.

All the three persons above spoke to Moneycontrol on the condition of anonymity.

At their meeting held on March 28, 2022,the Board of Directors of Aster DM Healthcare had constituted a Committee of Independent Directors of the Board to review the corporate structure of the Company and explore options for enhancing value. In an exchange filing dated March 28, 2022, the firm said, “ the Committee has not made any conclusions during the year and appropriate intimations and adjustments, if any, would be made in the year when the committee makes its conclusions and the same are approved by the Board of Directors.”

In response to an email query from Moneycontrol, Aster DM Healthcare said: “In the last few quarters of earnings calls, Aster has stated that it is working on a group re-organization for shareholder value maximisation. The company is evaluating certain strategies to unlock the value through investors refresh for its GCC business.  This is in line with its strategy for expansion in GCC through fresh funds and investor appetite to grow its foot print in this region. GCC and India have their unique dynamics and growth potential. This shall allow us to have a cohesive growth strategy and management attention."

The firm added, “In our Stock Exchange filing, we had indicated we shall be engaging with Investments Bankers to take the process forward.  GCC continues to have strong growth potential for Healthcare vertical and the ecosystem has multiple investment opportunities that we are actively evaluating. We are working on both service and geographical investments which have strong growth potential.”  To be sure, GCC refers to Gulf Co-Operation Council.

Credit Suisse declined to comment while Moneycontrol could not elicit an immediate comment from Moelis.

ASTER DM HEALTHCARE: THE MIDDLE EAST VS INDIA SPLIT

According to its 2022 annual report, Aster DM Healthcare has a network of 27 hospitals, 120 clinics and 370 pharmacies with a bed capacity of around 5,065 in the MENA (Middle East/North Africa) and South Asia regions. The healthcare conglomerate offers a diverse portfolio of specialised brands that serve patients in Primary, Secondary, Tertiary, and Quaternary Care, Healthcare Retailing, Diagnostic Laboratories, Digital Health, and Medical Education. The GCC region has 14 hospitals, 109 clinics and 240 pharmacies.

For FY22, Aster DM Healthcare’s revenues were pegged at Rs 10,253 crore, a growth of 19% over the previous year. Revenue from India operations was at Rs 2,384 crore, an increase of 44% from Rs 1,654 crore in FY21. Revenue from GCC operations was at Rs 7,870 crore from Rs 6,954 crore in FY21, an increase of 13%.

The firm also recorded EBITDA of Rs 1,483 crore, with healthy margins of 14.5% in FY22 as compared to EBITDA of Rs 1,063 crore, an increase of 40% YoY with margins of 12.3% in FY21. EBITDA for India operations increased significantly from Rs 144 crore in FY21 to Rs 353 crore, a significant increase of 145%. GCC EBITDA had increased 23% from Rs 919 crore in FY21 to Rs 1,130 crore in FY22.

“We are continuously evaluating avenues for growing and expanding our business and uncovering new opportunities for forging strategic ties in the Gulf Cooperation Council (GCC) countries and in India,” said the founder , chairman and managing director Azad Moopen in his address to shareholders in the FY 22 annual report.

His eldest daughter Alisha Moopen, Deputy MD, Aster DM Healthcare said, “To further our growth in the pharmacy business in GCC, we are exploring the franchise model for the pharmacies as well as looking at expansion feasibility in Jordan and Bahrain. With regards to UAE specifically, we are actively investing into widening our range of offerings by setting up clinics, which are focused on wellness, where we shall provide a wide range of services, including functional medicine, cosmetics, aesthetics, IV drip therapy. There is also going to be increased focus on growing other cash-related business like dental and mental health. We are also planning to add 1000 additional doors in UAE for Aster Brands through Modern Trade channels.”

HOSPITAL M&A IN THE PINK OF HEALTH AND CHEER!

The domestic hospital space has been buzzing with deal activity as the economy gradually recovers from the impact of Covid-19.

Here’s a snapshot of all the m&a action in the segment since the beginning of the year which has been closely tracked by Moneycontrol -

In a recent landmark transaction which was the largest single sell down by a PE investor in the secondary market, private equity firm KKR sold shares in excess of Rs 9,000 crores in Max Healthcare, marking a full exit from the firm.

On September 3, Moneycontrol broke the story of private equity firm True North looking to exit Kerala’s KIMSHEALTH after listing plans were put on hold

Last month, Canadian pension fund Ontario Teachers Pension Plan Board ( OTPPB) announced that it had picked up a significant majority stake in Sahyadri Hospitals from the Everstone Group.

On 12th July, Moneycontrol was the first to report that OTPPB was the lead suitor in the sale process of Sahyadri Hospitals.

Recently, Arpwood Capital announced the acquisition of the largest hospital chain in Gujarat , Sterling Hospitals.

On April 4, Moneycontrol reported that private equity investors were looking to exit north–focused super speciality hospital chain Asian Institute of Medical Sciences.

Earlier on March 15, Moneycontrol reported that the promoters of Manipal Hospitals were in talks to buy part stake from existing investor TPG ahead of an eventual IPO.

Moneycontrol also broke the news of Barings PE Asia emerging as the front-runner to pick up a significant minority stake in AIG Hospitals.

Back in January, Moneycontrol was also the first to report that TPG-backed Evercare was looking to exit Hyderabad-based Care Hospitals.
Ashwin Mohan
first published: Sep 20, 2022 11:55 am
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