Aster DM Healthcare Ltd.’s initial public offering opens on Monday as hospital chain looks to raise funds to repay debt and buy assets.
The healthcare services provider will sell 5.15 crore shares at Rs 180-190 apiece in the three-day offer to raise Rs 980 crore. Promoter Union Investments Pvt. Ltd. is diluting its stake and the company will issue new stock to raise Rs 725 crore.
Aster DM, one of the largest hospital chains, provides services in the Gulf nations of the United Arab Emirates, Oman, Saudi Arabia, Qatar, Kuwait, Bahrain and Jordan, besides India and the Philippines.
The company runs hospitals, clinics, pharmacies and provides healthcare services to patients.
Aster DM has 323 operating facilities in nine nations, including 19 hospitals with 4,754 beds, of which 3,584 were operational as of Sept. 30. It’s building or expanding 10 hospitals to add about 727 beds.
It employs 17,408 people, including 1,417 full-time doctors, 5,797 nurses, 1,752 paramedics and 8,442 other employees. In addition, it has 891 ‘fee for service’ doctors working across various specialities.
- The net worth of the company as of Sept. 30 was close to Rs 1,813 crore, translating into a book value of Rs 36 a share after issuing new stock.
- Revenue rose at an annualised rate of 32.5 percent and new profit grew at 21.3 percent in five years to March 2017. The company had an exceptional gain of Rs 596 crore in the last financial year, helping it post profit.
- In the half year ended September, revenue and net profit stood at Rs 3,122.5 crore and Rs 76 crore, respectively.
- Earnings before interest, tax and depreciation and amortisation grew at an annualised rate of 6.8 percent, while Ebitda margin contracted by 770 basis points in the last five years to 5.6 percent.
- For the first half, Ebitda and Ebitda margin stood at Rs 178 crore and 5.7 percent, respectively.
- Aster DM has a high total debt of close to Rs 3,661 crore, which would fall as the company is looking to repay Rs 564 crore from its IPO proceeds.
Aster DM competes with the likes of Apollo Hospitals Enterprise Ltd. and Fortis Healthcare Ltd.
Aster DM’s debt-to-equity ratio would come down to close to 1.7 times after the IPO.
Aster DM has offered a good return on equity compared to peers, but lags on the return on capital employed and return on assets.
Its occupancy rate and average revenue per occupied bed per day was lower than peers in the year ended March 2017.
Earnings per share, after issuing new shares, for the year ended March 2017 works out to Rs 3.9. At the upper end of the price band, shares prices is 48.3 times its earnings, according to BloombergQuint’s calculations.
After selling shares and fresh issue, the promoter holding will fall to 37 percent from 43 percent.
- The pre-issue enterprise value to Ebitda is higher than peers like Apollo Hospitals.
- Last three years’ financial performance, including the numbers for the first half ended September, doesn’t provide confidence.
- Recommends ‘neutral’ rating on the issue.