Aster DM Healthcare: Information Analysis

Note: This article has no recommendation to either buy or avoid this IPO. Instead, we have presented all the relevant information based on which you can make your own decision. About the company Aster DM Healthcare runs hospitals, retail pharmacies and clinics. Hospitals usually provide four types of services: primary, secondary, tertiary and quaternary. Primary and secondary services are basic healthcare services, whereas tertiary and quaternary are advanced services, with the latter being a premium service. Aster, through its network of hospitals, mostly provides secondary and tertiary healthcare services. Aster DM Healthcare was founded and promoted by Dr Azad Moopen as a single doctor clinic in 1987. It is a leading healthcare provider with its 19 hospitals, 98 clinics and 206 retail pharmacies as on September 30, 2017. Hospitals accounts for 49 per cent of revenue, followed by clinics accounting for 26 per and retail pharmacies accounting for 25 per cent. Region-wise, Gulf countries contributed 81 percent to its revenues, while the Indian operations made up the remaining 19 per cent. Concerns Aster's operations in the UAE have been overly dependent on government authorities and formed 56 per cent of the total trade receivables outstanding (as on March 31, 2016). In FY17, the company wrote off part of its receivables by entering into a one-time settlement with the authorities, which resulted in a Rs 180 crore loss. Over the past three years, it has made provisions on a part of receivables totalling Rs 502 crore. Though the company has reduced its reliance on government departments in FY17, this issue in recoverability of receivables has led to downgrading of its ratings of bank facilities. The company also relies on insurance companies for the bulk of its revenues. For the six months ending September 30, 2017, the insurance companies contributed 51 per cent to its revenues. The company gets the bulk of its customers from partnerships with insurance companies, which makes it vulnerable to pricing pressure if the insurance companies also faces the same. It also operates through a complex corporate structure, with its international operations being carried of by a Mauritius-based company. Any change in the laws related to the foreign ownership of assets in Arab and Gulf countries m