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Aster DM trims IPO size, eyes $1.5 bn valuation; PE backer Olympus to stay put

05 February, 2018

Hospital operator Aster DM Healthcare has trimmed the issue size of its initial public offering slightly and has set a price band of Rs 180 to Rs 190 per share.

The company is now raising primary capital of Rs 725 crore against Rs 775 crore when it filed its draft red herring prospectus in August last year.

The proceeds will be used to repay debt and buy medical equipment, the company said.

At the upper end of the price band, the company is seeking a valuation of approximately Rs 9,600 crore ($1.5 billion).

It will become second most valued hospital firm in India behind Apollo Hospitals and ahead of Fortis Healthcare and Narayana Hrudayalaya.

The firm’s private equity backer Olympus Capital which was earlier planning on selling some of its shares during the listing has now decided to stay put. The other private equity investor True North too will not be selling its shares in the IPO.

The company’s promoters, which include the Moopen family and Union Investment Pvt Ltd (UPIL), will be offering 13.428 million shares for sale.

After the listing, the company would continue its strategy to expand its operations in India through organic and inorganic means, Azad Moopen, chairman and MD, Aster DM Healthcare, told reporters.

The plan announced in the recent Union Budget to provide free health insurance cover to poor families has encouraged Aster DM Healthcare to consider expansion to tier 2 or 3 cities, Moopen said.

So far, the company has been eyeing inorganic opportunities in metro cities only, but it will now look for inorganic strategies in other smaller cities and towns as well, Moopen said.

The firm said it would spend close to $130 million to complete construction of 10 hospitals this year across India and GCC.

Aster DM gets a far better return on capital through its hospitals in the GCC region, which currently provides 80% of its revenues, Moopen said.

Currently, Aster DM’s average revenue per user (ARPU) is a little over Rs 22,000 in India compared with around Rs 1.45 lakh in GCC, the company said.

However, the firm will expand in India as it is a growing market and has a great future potential. GCC has limited opportunities for expansion, Moopen said.

Kotak Mahindra Capital, Axis Capital, Goldman Sachs, ICICI Securities, JM Financial and Yes Securities are financial advisers to the issue.

Aster DM will join a clutch of pharmaceutical and healthcare companies that recently successfully listed on the bourses.

These include Biocon Ltd’s contract research services arm Syngene International Ltd that went public in July 2015. Alkem Laboratories Ltd, India’s fifth-largest drugmaker as per domestic sales, tapped primary markets in December 2015 with a Rs 1,350-crore IPO followed by Warburg Pincus-backed Laurus Labs in November 2016.

The most recent pharmaceutical company to go public was Eris Lifesciences with a Rs 1,741 crore IPO in June this year.

A clutch of companies in the broader healthcare sector has also gone public in the past 18 months. These include diagnostics companies Dr Lal PathLabs Ltd and Thyrocare Technologies Ltd, and hospital chains Narayana Hrudayalaya Ltd and Healthcare Global Enterprises Ltd.

Moopen started the hospital chain as a single-doctor clinic in Dubai in 1987. The company was incorporated in 2008 and operations were consolidated under the Aster DM brand.

Aster DM Healthcare is one of the largest private healthcare service providers in Asia with operations in India, the UAE, Oman, Saudi Arabia, Qatar, Kuwait, Bahrain, Jordan and the Philippines.

As of 31 March 2017, it had a diversified portfolio of healthcare facilities, consisting of seven hospitals, 89 clinics and 202 retail pharmacies in the GCC states, 11 multi-specialty hospitals and six clinics in India , and one clinic in the Philippines, with a total of 4,651 beds.

The company recently acquired a 29.97% stake in Dr Ramesh Hospitals that owns and operates three hospitals in Andhra Pradesh.

Its hospitals in India are located in Kochi, Kolhapur, Kozhikode, Kottakkal, Bengaluru and Hyderabad and are operated under the ‘Aster’, ‘MIMS’ and ‘Prime’ brands. Its clinics in India are located at Kozhikode and Bengaluru.

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Aster DM trims IPO size, eyes $1.5 bn valuation; PE backer Olympus to stay put

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