 "Aster DM Healthcare sells stake in Gulf business for $1.01 billion")
Hospital and pharmacy chain operator Aster DM Healthcare announced on Tuesday that its subsidiary would sell its stake in Aster DM Healthcare FZC to Alpha GCC for $1.01 billion. This move is part of Aster’s strategy to separate its India and Gulf businesses to unlock value.
According to a regulatory filing, the board of directors approved the sale of shares held by Affinity in Aster DM Healthcare FZC to Alpha GCC Holdings for $1.01 billion. Of this amount, $903 million is payable at closing (subject to customary adjustments), and $98.8 million may be received subsequently, subject to contingent events.
The stock exchange notification read, “This includes an earnout of up to $70 million based on earnings before interest, tax, depreciation, and amortisation (Ebitda) achieved by the GCC business for the financial year ending March 31, 2024.”
The stock price of Aster DM Healthcare was down 1.4 per cent in the day’s trade on the BSE on Tuesday.
The buyer, Aster DM Healthcare FZC, will be owned by the promoters of Aster India and funds managed by Fajr Capital in a shareholding ratio of 35:65, respectively, at the closing of the transaction.
The hospital chain, led by Azad Moopen, derives 73 per cent of its overall business from Gulf Cooperation Council (GCC) operations as of the first half (H1) of 2023-24 (FY24), with 27 per cent coming from India. The India business holds a 36 per cent share in Ebitda, according to the company’s investor presentation after the second-quarter results.
As part of the separation plan, a consortium led by Fajr Capital has entered into a definitive agreement to acquire a 65 per cent stake in the ownership of the GCC business, Aster DM Healthcare FZC. The Moopen family will continue to manage and operate the GCC business, retaining a 35 per cent stake.
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“We are committed to our India business, and there is no plan for any sell-out. We have, in fact, recently increased our stake in the India business by 4 per cent or so. Any rumour around us wanting to sell the India business is completely wrong,” clarified Azad Moopen.
The current market capitalisation of the combined India and GCC business stands at $2 billion. The transaction values the GCC business at an enterprise value of $1.7 billion (Rs 13,540 crore) and an equity value of $1 billion (Rs 8,215 crore).
Existing shareholders will remain with the listed Indian entity, Aster DM Healthcare.
Upon successful completion of the proposed transaction, the company aims to declare dividends to the shareholders of Aster DM Healthcare from the proceeds, subject to required approvals.
Azad Moopen will continue in his role as the founder and chairman, overseeing both India and GCC businesses. Alisha Moopen will be promoted to the position of managing director and group chief executive officer (CEO) of the GCC business, while Nitish Shetty will continue as CEO of the Aster business in India.
Azad Moopen said, “The strategic decision to segregate the India and GCC operations was based on the rationale to establish fair value for both entities, creating two pure-play geographically focused entities that can leverage the growth opportunities in their respective markets. We wanted to separate the two businesses in GCC and in India primarily because we realised that the dynamics are very different. In the GCC, the focus is more on primary and secondary care, while in India, it is more on tertiary and quaternary health care. Therefore, the investor outlook and expectations are also different. This would help us to unlock value.”
He added, “For the GCC, Fajr Capital has been selected by the board of Affinity as our trusted private equity partner to lead a consortium of investors to invest in the GCC business. We are confident given their demonstrated expertise and are excited by their commitment to empowering our expansion plans within the GCC’s dynamic health care landscape, especially in Saudi Arabia. We selected this consortium (Fajr Capital-led) from a prospective 42 investors who had shown interest. We are happy with the valuation we got.”
The promoters have expressed their “deep commitment” to both India and the GCC geographies, and they will continue to have a meaningful role in both regions following the completion of the transaction.
After the completion of the transaction contemplated under the share purchase agreement, the buyer will qualify as a member of the promoter group, as the promoters of the company intend to acquire over 20 per cent shareholding in the buyer, according to the announcement.
The Fajr Capital-led consortium also includes Emirates Investment Authority, Al Dhow Holding Company (the investment arm of AlSayer Group), Hana Investment Company (a subsidiary of Olayan Financing Company), and Wafra International Investment Company.
Aster DM operates 34 hospitals in GCC and India, 131 clinics, and 276 pharmacies in GCC, with 226 pharmacies in India as of H1FY24. It has an overall capacity of 6,304 beds across both geographies — 4,855 beds in India and 1,449 beds in the GCC region. Total operational beds are 4,656 as of the September quarter.
It operates 19 hospitals in India and plans to add 1,500 beds in India by the end of 2026-27 and 245 beds in GCC. It is also open to making inorganic acquisitions in India, besides growing organically and making brownfield expansion. It posted a 26 per cent growth in India revenues in H1FY24 to Rs 1,772 crore, while GCC revenues grew by 17 per cent to Rs 4,760 crore. Consolidated H1 turnover was Rs 6,532 crore, up 19 per cent.