Aster DM Healthcare undergoes a transformative $1 billion divestment of its Gulf business, aiming to unlock shareholder value and bolster investor appeal. The separation from the Indian promoters and a Dubai consortium signifies a strategic move to navigate distinct markets, emphasizing the Gulf’s lower margins. This strategic shift intends to eliminate debt, empower India’s growth potential, and attract private equity partnerships for future expansion.
Aster DM Healthcare’s recent $1 billion divestment marks a pivotal moment as it separates its Gulf business from its Indian stronghold. This strategic move, led by UAE-backed Fajr Capital, aims to optimize shareholder value and attract institutional investors. Founder Azad Moopen’s decision to detach the Gulf entity addresses its lower margins and distinct market dynamics, allowing independent growth trajectories for both regions.
A significant strategic move unfolded as Aster DM Healthcare Ltd announced the divestment of its core Gulf business, a deal valued at $1.001 billion. This decision aims to enhance shareholder value and attract more institutional investors, marking a pivotal moment for the leading hospital chain.
The separation of its Gulf business involves the sale to Indian promoters, the Moopen family, and a Dubai-based consortium, with the UAE government-backed Fajr Capital at the helm. Once finalized, this transaction will result in 65% ownership for the Fajr Capital-led consortium in the Gulf entity, while the Aster promoter, Azad Moopen, will hold the remaining 35%.
The Gulf business, presently under Alpha GCC Holdings Ltd—a wholly-owned subsidiary of Aster DM Healthcare—accounts for 70% of Aster’s revenues. However, its comparatively lower margins have been a drag on the overall India-centric operations, according to Azad Moopen.
Recognizing the disparate potential and distinct market dynamics between India and the Gulf Cooperation Council (GCC) region, the company aimed to untether these geographies for independent growth trajectories. Azad Moopen, emphasizing this point, stated that the Indian market wasn’t acknowledging the true value of the GCC business.
Upon conclusion of the deal, Azad Moopen will retain his role as founder and chairman, overseeing both Indian and GCC businesses. His daughter, Alisha Moopen, will ascend to the position of managing director and Group CEO of the GCC business. Nitish Shetty will continue as CEO of the India business.
The financial aspects of the deal include an enterprise value of $1.7 billion for the GCC business, with Aster DM Healthcare receiving $903 million. The bulk of this will be distributed as dividends to investors, pending board approval. Additional payouts contingent on specific business performance, such as an earnout of up to $70 million based on FY24’s EBITDA, are also outlined.
The proceeds will be instrumental in clearing the Gulf company’s debt, while the Moopen family plans to fund its share of the transaction through dividends sourced from the listed India business. This strategic move also aims to address the pledge of the promoters’ 42% stake against a debt of $80 million in the listed entity.
The decision to divest the Gulf business was made following requests from bidders during the process, ensuring sustained operations post-restructuring, as disclosed by Aster DM Healthcare in a statement.
Highlighting the rationale behind the split, Azad Moopen emphasized the lower profitability of the Gulf business due to hyper-competitive dynamics within a smaller population base. In contrast, the Indian market remains underserved, witnessing a higher compounded annual growth rate (CAGR) compared to the GCC region.
The unlocked potential in India anticipates accelerated growth for Aster DM Healthcare, with plans to organically expand its bed count by adding 1,500 beds within the next few years. Funding for this expansion will primarily stem from internal accruals, with potential collaboration with private equity partners on the cards.
This strategic divestment has piqued interest from private equity investors, elevating the company’s status in the Indian market. The Fajr Capital consortium, which includes Emirates Investment Authority and other entities, stands as a testament to the attractiveness Aster DM Healthcare holds in the market.
Founded by Azad Moopen in 1987 as a single clinic, Aster DM Healthcare has witnessed exponential growth. Presently, its portfolio includes a multitude of healthcare facilities in India and the Gulf, spanning hospitals, clinics, and pharmacies across various geographies.
From its modest beginnings, Aster DM Healthcare has evolved into a prominent player in healthcare, and this strategic divestment marks a pivotal chapter in its growth trajectory.
The divestment of Aster DM Healthcare’s Gulf business heralds a new era, aligning with market demands and unlocking potential growth avenues. With plans to clear debts and empower India’s expansion, the company anticipates robust organic growth and potential collaborations with private equity partners. This strategic shift, overseen by Azad Moopen, positions Aster DM Healthcare as an attractive prospect in healthcare, leveraging its distinct market strengths for sustained growth.