Aster DM Healthcare shares skid 4% on plan to divest Gulf biz; analysts bullish

After hitting 20% upper circuit in the previous session, shares of Aster DM Healthcare tumbled over 4% intraday today as investors resorted to profit booking at higher levels. The stock touched its 52-week high of ₹399.15 on Wednesday, a day after the hospital and pharmacy chain operator informed exchanges that its board approved the separation of India and GCC (Gulf Cooperation Council) businesses to unlock value for the shareholders of the company. It also announced a 100% sale of its GCC business for $1 billion (₹8,215 crore) to Alpha GCC Holdings, owned by Fajr-led consortium, a sovereign-owned private equity firm headquartered in the UAE.

Early today, Aster DM Healthcare shares opened a tad higher at ₹396.25 against the previous closing price of ₹396.15 on the BSE. Paring opening gains, the midcap stock declined as much 4.4% to hit an intraday low of ₹378.35, while the market capitalisation slipped to ₹19,160 crore. On the volume front, 1.9 lakh shares changed hands over the counter as compared to the two-week average of 1.03 lakh stocks.

Aster DM Healthcare shares have seen a strong rally in the calendar year 2023, with the share price nearly doubling from its 52-week low of 201.45 touched on February 2, 2023, to a record high of ₹399.15 on November 29. On year-to-date (YTD), the stock has risen 67%, while it gained 62% in a year. The stock has climbed 42% in six months and 16% in a month.

Gulf business to be sold for $1.01 billion

In an exchange filing on November 28, Aster DM Healthcare said that the company will separate the India and GCC businesses into two distinct and standalone entities which will unlock value for the shareholders by allowing both businesses to adopt a market-focused strategy and create sustained long-term growth.

Under the separation plan, a consortium led by UAE-based private-equity firm Fajr Capital will acquire a 65% stake in the ownership of the GCC business, Aster DM Healthcare FZC. The Moopen family, the promoter entity, will continue to manage and operate the GCC business by retaining a 35% stake.

As per the regulatory filing, Aster’s subsidiary Affinity would sell its stake in Aster DM Healthcare FZC to Alpha GCC Holdings for $1.01 billion. Of this amount, $903 million will be paid at closing (subject to customary adjustments), and $98.8 million to be received subsequently, subject to contingent events.

The current market cap of the combined India and GCC business stands at around $2 billion. The transaction values the GCC business at an enterprise value of $1.7 billion (₹13,540 crore), and an equity value of $1 billion (₹8,215 crore).

“Existing shareholders to remain with the listed Indian entity, Aster DM Healthcare Ltd. Upon successful completion of the proposed transaction, the Company is desirous of declaring dividends to the shareholders of Aster DM Healthcare Ltd from the proceeds, subject to approvals required under law,” Aster DM Healthcare say in the release.

The release notes that Dr. Azad Moopen will continue in his role as the founder & chairman and will oversee both India and GCC businesses, while Alisha Moopen will be promoted to the position of Managing Director and Group CEO of the GCC business. Dr. Nitish Shetty will continue as the CEO of the Aster business in India.

As per the company, the GCC and India healthcare markets are distinct and have different growth dynamics, warranting different business strategies. With a population strength of 1.4 billion, India will remain a priority market in Aster DM Healthcare’s growth journey. The company plans to ramp up bed capacity in India by almost one-thirds, by adding more than 1,500 beds by FY27. In the GCC, Aster DM Healthcare FZC will bolster its expansion plans in key markets, such as the UAE and Saudi Arabia, while enabling greater access to quality and comprehensive healthcare across physical and digital channels.

Brokerages remain bullish  

Following the GCC deal, domestic brokerages JM Financial and Prabhudas Lilladher retained ‘Buy’ rating on Aster DM Healthcare. While JM Financial has raised target price to ₹410 from ₹335, Prabhudas Lilladher revised to ₹430 from ₹345 projected earlier, an upside potential of up to 8.5% from Wednesday’s closing price.

“We maintain ‘Buy’ rating with revised TP of Rs.430 (earlier Rs. 345) valuing India hospital segment at 20x (18x earlier) EV/EBITDA on Sept 2025E EBITDA. Timely closure of GCC divestment and utilization of proceeds will be key monitorable in the near term,” Prabhudas Lilladher says in its report.

JM Financial in its report says that the deal is positive and unlocks value, but the quantum of dividend payout, promoter exit and capital allocation remain key uncertainties. “Aster has performed well in its India hospitals segment and plans to add 1,500 beds (30%) by FY27. Aster labs, pharmacies and O&M hospitals have dragged India margins but are expected to turn around gradually,” it says.

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