Dr. Agarwal's Eye Hospital merger with parent to be EPS-accretive, say brokerages

Dr. Agarwal's Eye Hospital

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26 Aug, 2025 12:21

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Brokerages gave the proposed merger between Dr. Agarwal's Eye Hospital (AEHL) with Dr. Agarwal's
Health Care (AHCL) a thumbs up, believing that the merger will be EPS-accretive.

Dr. Agarwal's Eye Hospital's board of directors had approved a scheme of amalgamation with its listed parent Dr. Agarwal's Health Care by way of a merger (by absorption). As per latest exchange data, AHCL, which made its Dalal Street debut in February, holds 71.90 percent stake in AEHL.

Motilal Oswal noted that the merger would drive better operational and financial efficiency, enhancing the value of overall business through unified capital allocation.

The brokerage added that with this merger, on pro forma basis, the minority interest related to a 28 percent stake of public shareholding in AEHL will be eliminated. "The total number of equity shares of AHCL would increase due to the issuance of new shares to AEHL. This transaction would be EPS-accretive for AHCL by 5-7 percent for FY27."

AHCL is enhancing its services at the existing centers to cater to increased requirements of patient pool. Additionally, it is making in-roads to new micro markets to further intensify the growth prospects. As a result, Motilal Oswal maintained its 'buy' tag, with a price target of Rs 530 per share.

International broking house Morgan Stanley concurred. The brokerage had an 'overweight' rating on AHCL, with a price target of Rs 494 per share. Morgan Stanley noted that AEHL contributed around 23 percent to AHCL's net profit in the June quarter of the current financial year.

The merger is expected to be EPS accretive from the first year of implementation, that is FY27. The trailing acquisition EV/EBITDA for AEHL is 22x, which is currently at a 14 percent discount to the average players in the hospital sector presently. Further, a single listed entity structure will improve transparency and reduce complexity.

Going ahead, AHCL remains on track to expand its pan-India presence, enhance its hub-spoke model network, provide superior technology service in eyecare, and gain market share in the fragmented eye-care industry.

However, the Street was not too impressed with the merger announcement. In the previous session, shares of Dr. Agarwal's Health Care settled lower by 4.6 percent, while Dr. Agarwal's Eye Hospital's stock sank nearly 14 percent in trade.

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