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Aster DM Healthcare announces the sale of GCC business

Segregating GCC and India business to unlock value

Aster DM Healthcare sells its GCC business to Alpha GCC

Aster DM Healthcare has announced a complete sale of its GCC business to Alpha GCC holdings at an enterprise value of Rs 13,540 crore. Aster DM Healthcare is one of the largest hospital chains in GCC (Gulf Cooperation Council) countries and an emerging player in India.

Here are some key points of the merger that investors must be aware of:

  • Alpha GCC, the purchasing company, will be controlled by two parties: The Fajr Capital (a private equity company in the Middle East and Southeast Asia) and the promoter group (Moopen Family) in a 65:35 ratio.
  • The company's current chairman and managing director will continue to oversee both India and GCC divisions. Alisha Moopen, the Deputy Managing Director, will be promoted to managing director and group CEO of the GCC business unit.
  • After completing the transaction, the company plans to distribute part of the proceeds as dividends to shareholders and retain the remaining proceeds for growth opportunities.

What does Aster DM do?

Established in 1987, Aster is one of the emerging hospital chains in the country. It has 19 hospitals, 13 clinics, and 226 pharmacies in five southern states in India. It is also present in Gulf countries, where it has 15 hospitals, 118 clinics, and 276 pharmacies.

Its business in Gulf countries is its primary revenue generator, as it contributed to 75 per cent of the company's revenue in FY23. It has been investing in capex in India to increase its bed capacity by 31 per cent to 6,334 by FY27. The expansion will be done in the states of Kerala and Karnataka primarily.

Aster's performance pre- and post-transaction

Financial metrics Pre-sale (GCC+India) Post-sale (India)
5Y revenue growth (%) 12.2 20.6
5Y EBITDA growth (%) 20.6 35.5
5Y median EBITDA margin (%) 12.7 10.4
ROCE (%) (H1FY24) 8.6 14.1
Net Debt to Equity (FY23) 1.1 0.6

The rationale behind the move

The separation of the Indian business and GCC business will help the company focus on its India operations and improve its capital allocation accordingly. It will also be able to establish a distinct board/governance structure. This will enable businesses to pursue growth plans organically and inorganically independently.

The strategic segregation will enhance transparency, aiding investors in a better understanding of the Indian operations. It will also open avenues for expanding the institutional investor base, attracting those mandated to invest primarily in India. Ultimately, this initiative aims to unlock value for shareholders.

Also read: UltraTech Cement acquires Kesoram Industries' cement business


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