Nikita Bhoota
2nd December 2018
IPO Note: Aster DM Healthcare Ltd - Not Rated
Issue Opens: February 12, 2018
Issue Closes: February 15, 2018
Face Value: Rs10
Price Band: Rs180-190
Issue Size: ~Rs980cr
Public Issue: 5.16-5.37 crore shares
Bid Lot: 78 Equity shares
Issue Type: 100% Book Building
| % Shareholding | Pre IPO | Post IPO |
| Promoter | 43.0 | 37.0 |
| Public | 57.0 | 63.0 |
Source: RHP
Company Background
Aster DM Healthcare (Aster) is one of the largest private healthcare service providers in multiple GCC countries (Gulf Cooperation Council). Company also has operations in India and Philippines. It has a diversified portfolio of healthcare facilities, consisting of 9 hospitals, 90 clinics and 206 retail pharmacies in the GCC countries, 10 multi-specialty hospitals and 7 clinics in India and 1 clinic in Philippines. Domestic business generated 18% of H1FY18 revenue, while rest came from GCC region and Philippines. Aster is planning to add 1,658 beds over the next 2-4 years through 4 new multi-specialty hospitals in the UAE and 5 new hospitals in India.
Objective of the Offer
The Initial Public Offer consists of an Offer for Sale for 1.34cr equity shares amounting to `255cr (on the upper price band) by promoter group company, Union Investments Private Ltd. The IPO also includes fresh issue of Rs725cr, which comprises of issuance of 3.82cr new shares on the upper price band. Company proposes to use the fresh issue proceeds to repay debt (Rs564.2cr) and to purchase medical equipment (Rs110.3cr).
Financials
| Consolidated Rs Cr. | FY15 | FY16 | FY17 | H1FY18 |
| Revenue | 3,876 | 5,250 | 5,931 | 3,123 |
| Adj. EBITDA | 506.0 | 445.6 | 332.1 | 178.2 |
| Adj. EBITDA Margin % | 13.1 | 8.5 | 5.6 | 5.7 |
| Adj. PAT | 272.1 | 8.2 | -329.3 | -82.7 |
| Adj. EPS* (Rs) | 5.4 | 0.2 | -6.5 | -1.6 |
| P/E* | 35.3 | 1,169.1 | -- | -- |
| P/BV* | 4.3 | 16.1 | 4.3 | -- |
| EV/EBITDA* | 20.2 | 28.0 | 36.6 | -- |
| EV/Sales* | 2.6 | 2.4 | 2.1 | -- |
| RONW (%) | 12.1 | 1.5 | 11.9 | -- |
| ROCE (%) | 11.5 | 5.4 | 0.2 | -- |
Source: Company, 5 Paisa Research; *EPS & Ratios at higher end of the price band.
Key Points
During the Union Budget 2018-19, Indian government announced National Health Protection Scheme (NHPS) to cover ~10cr poor and vulnerable families (up to Rs5 lakh cover per family/ year) for secondary and tertiary hospitalization. This brings ~50cr people under health insurance coverage, boosting domestic healthcare industry, including hospital sector. Aster operates in India with 10 hospitals (3,887 bed capacity) and plans to expand by adding 5 new hospitals (1,372 beds) over the next 4 years. Aster, with its presence in the tier 2/ 3 cities is likely to emerge as one of the beneficiaries of NHPS in India.
The Emirate of Abu Dhabi introduced mandatory health insurance for locals and expatriates in 2006, which increased number of insured people in Abu Dhabi at a CAGR of 7.4% over FY08-13 and covered 3.43 million people in 2015. The mandatory health insurance was also implemented in Dubai in March 2017, which is likely to have brought 1.5-2 million additional people under health insurance coverage by 2017. Aster is well placed in the GCC countries due to its early mover advantage, deep understanding of the region and strong presence.
Key Risk
Profitability has been inconsistent over the past and is likely to remain weak due to cost associated with new hospital additions and lower occupancy in the existing hospitals.
Tanushree Jaiswal