Aster DM Healthcare IPO for Rs 980 crore opens today; 4 key things to know

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Updated: February 12, 2018 11:49:11 AM

Private healthcare service provider, Aster DM Healthcare IPO (Initial Public Offer) to raise up to Rs 980 crore opens for subscription today. We take a look at key details of Aster DM Healthcare IPO, and what brokerages have to say about its valuation.

ncd, non-convertible debentures, indian companies, equity market, ipo, initial public offering, fund raising, institutional investorsAster DM Healthcare IPO will remain open for subscription from 12th February 2018 to 15th February 2018. The company has fixed a price band of Rs 180-190 per share with a face value of Rs 10 each. (Image: Reuters)

Private healthcare service provider, Aster DM Healthcare IPO (Initial Public Offer) to raise up to Rs 980 crore opens for subscription today. Aster DM Healthcare is operates in multiple GCC (Cooperation Council for the Arab States of the Gulf) states based on numbers of hospitals and clinics. Aster DM Healthcare operates in various segments of the healthcare industry, including hospitals, clinics and retail pharmacies and provides healthcare services in several GCC states through various brands ‘Aster’, ‘Medcare’ and ‘Access’. The GCC operations are headquartered in Dubai, United Arab Emirates and its Indian operations are headquartered in Kochi, Kerala. While investors maybe mulling whether to subscribe to the issue, we take a look at key details of Aster DM Healthcare IPO, and what brokerages have to say about the issue-

IPO Details

Aster DM Healthcare IPO will remain open for subscription from 12th February 2018 to 15th February 2018. The company has fixed a price band of Rs 180-190 per share with a face value of Rs 10 each. The public offer consists of sale of of a total of 51,586,146 equity shares, which includes a fresh issue of 38,157,895 shares and offer for sale of 13,428,251 shares. At the higher end of the price band, the public offer looks to raise up to Rs 980.13 crore. Bids can be made in lots of 78 shares, and in multiples of 78 thereafter. According to the company’s prospectus,  the Net Proceeds from the Fresh Issue will be utilised towards Repayment and/or pre-payment of debt;  Purchase of medical equipment; and  General corporate purposes. Th company will not receive any proceeds from offer for sale.

Strengths

Pointing to the strengths of the company, HDFC Securities says that Aster DM Healthcare has a long standing presence across GCC states and India with strong brand equity;  Well diversified portfolio of service offerings to leverage multiple market opportunities;  Provision of high quality healthcare service;  Ability to attract and retain high quality medical professionals and the ability to identify, adapt to and capitalise on market developments, conditions, trends and opportunities. 

Concerns

Taking note of the concerns in Aster DM Healthcare HDFC Securities says that Since Aster’s ownership structure is in most of the GCC States, it is is susceptible to risks associated with foreign ownership restrictions. Further, HDFC Securities notes the risk pertaining to certain licenses that are required to operate Aster’s businesses in the GCC being held to contravene legal requirements. The company also has risks associated with potential acquisitions and expansion strategy; and  the ability to maintain relationships with partners following strategic acquisitions.

Valuation

Angel Broking has a neutral rating on the issue given lacklustre financial performance. “In terms of valuations, the pre-issue EV/EBITDA works out to 32.5x its 1HFY2018 annualized EBITDA (at the upper end of the issue price band), which is higher compared to its peers like Apollo Hospitals Enterprise (trading at PE 22.3x -1HFY2018 annualized EBITDA). On EV/ Bed basis, ADHL is Rs 2.4 crore vs Apollo Hospitals Enterprise’s Rs 1.7 crore. Further, last three years’ financial performance including 1HFY18 numbers doesn’t provides confidence. Hence, we recommend Neutral rating on the issue,” the firm said in its report. On similar lines, HEM Securities noted, “Although company business looks attractive but losses in H1FY18 with weak financial performance in FY17 & high valuation at current level fails to infuse optimism in company , hence we recommend “Avoid” on issue.”

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