Will create the largest & finest healthcare facility, India has ever seen: Alisha of Aster DM

Alisha Moopen, deputy managing director, Aster DM Healthcare says the merger of India business with Blackstone-led Quality Care India (QCIL) will create the largest and finest healthcare facility India has ever seen before, with a visibility of over 14,000 beds in the next three years. She says the ₹43,000 crore enterprise-valued merger deal is among the biggest healthcare transactions this year in the world in the space of healthcare delivery. The merged entity will have a micro market leadership in almost 27 cities and close to 14,000 beds within the next three years.

Here are selected excerpts from their interview with Fortune India.

What was the rationale behind the decision to merge with a private equity player, for a business that has a successful history of over 40 years in GCC and for the past few years in India?

We were thinking of unlocking value for the last 3-4 years. Post-COVID-19, Aster in India and GCC were not getting the right value. So, we demerged GCC and saw a huge unlocking of value. We wanted to make sure we create two distinct companies — one that focuses entirely on India, and one that focuses entirely on GCC. We have private equity working with us for more than 20 years and this is our third round of private equity. Earlier it was for a combined entity, now it is a curated consortium of partners in GCC and for India, we have partnered with Blackstone in this merger.

After this segregation, we realised that in India, we have a decent size and great asset base and have become one of the top healthcare providers from a service provider's point of view in the last five years. After setting up the MediCity in Kochi and the large facility in Bangalore has brought us national recognition. India is a big country, and you should be able to attract talent and pass on benefits to people. To do this we have several options to expand. We are organically growing and have about 2000 beds in the pipeline. To become India's largest healthcare provider, we realised we needed a like-minded partner who has a great platform which we must jointly explore. We realised QCIL is the right platform to become one of the top three healthcare providers in India; backed by Blackstone which is one of the largest private equities in the world and a powerful combination with them can help us to become one of the top three healthcare providers with more than 10 000 beds creating the finest healthcare institution India has ever seen. Blackstone people were telling me this $5 billion deal is also the biggest healthcare transaction this year in the world.

It's not just about merging equals; it's really about combining best practices. And we believe that this could be very transformative for India as a whole. It is about unlocking synergies, unlocking value.

We believe from a patient perspective, the outcomes will be better as you merge these two entities with more than 5000 doctors. We are also going to enable much better digital interventions. We will be able to optimize and leverage economies of scale in terms of a cost perspective, unlock significant value for all our stakeholders from our doctors to our patients to our financial shareholders as well.

How will this transaction benefit your shareholders?

At this point in time, when you look at Aster India's performance, we've been doing very well. But we still have a lot of margin expansion as expected because we've got young assets, which are still in various stages of ramp-up. So, if you look at it in the short term, we have a 17% EBITDA margin.

With this merged entity, we improved by 200 basis points to 19%. Our (Return on Capital) ROC also goes up to 18%. So, it's immediately EPS accredited. On top of it, once we start unlocking the synergies of cost, we believe that there are a lot of savings from the material cost side of a capex investment. All of that will enable us to improve the profitability of the business further and make it much more sustainable and much better in class in terms of some of the financial metrics. So that will unlock value. For the shareholders, I think the size and scale and being in the top leadership in India will make a difference. Once we create that scale and the clinical outcomes, we're going to make will make us one of the top two in India we will be trading at a much better level in comparison to the top two peers.

How will this merger help expand your existing hospital business and incubating businesses like pharmacies and diagnostics in India?

In the case of hospitals, now as a combined entity, we will have micro-market leadership in almost 27 cities. We have around 1900 beds in the pipeline over the next three years. And if you combine that with what CARE has as well, we will have close to 4000 beds in the pipeline over the next three years. So, at almost 14,000 beds, we will be one of the biggest platforms in the private healthcare sector in India. The whole idea of doing that is economies of scale and a sort of optimization that will be available within the system. But beyond that, it makes us very attractive when it comes to medical talent when it comes to assets and opportunities as well. There will be a lot more assets that we would love to evaluate for inorganic expansion also going forward. We have money that is still left over from the GCC transaction that is sitting in the entity of Aster. Plus, we are not leveraged as an entity. And even when it comes to the quality care platform, they've got zero leverage on their balance sheet. So, there is a bandwidth in the balance sheet for us to scale up if there are assets and opportunities that come up. Now we've got a visibility of 14,000 beds in the next three years.

In the case of other businesses, we rejigged the strategy over the last couple of years. We do not want to become a pan-India player when it comes to labs or pharmacies. In regions and markets that we operate, we want to make sure we're creating a holistic service delivery model for our patients — in the case of pharmacies, blood tests, or labs at home, we wish to have the full coverage of primary care to quaternary care. We want to create that patient ecosystem where you're not coming in only for the surgical aspect or for the quaternary care work, but the entire circle of care is taken care of within the Aster network.