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Aster DM Healthcare splits India, Gulf businesses in $1 billion deal

Deal sees a battery of new Gulf investors, including Kuwait’s Al Sayer and Saudi Arabia’s Olayan, enter business

Aster DM Healthcare splits India, Gulf businesses in $1 billion deal
[Source photo: Chetan Jha/Press Insider]

The board of Aster DM Healthcare has approved the sale of its business in the Gulf Cooperation Council (GCC) countries to Alpha GCC Holdings for $1.01 billion, or about ₹8,400 crore, the hospital chain said.

Alpha GCC Holdings will be owned by promoters Aster India (the Moopen family) and a consortium led by the United Arab Emirates government-backed Fajr Capital in the ratio of 35:65.

Alpha is a wholly owned arm of Aster DM Healthcare that houses the hospital chain’s business in the GCC countries. Currently, the Moopen family and its associate firms own a 42% stake in Aster DM, with the rest being held by institutional investors and retail shareholders.

The consortium of private equity and sovereign wealth funds in the Middle East led by Fajr include the Emirates Investment Authority; Al Dhow Holding Co., the investment arm of Kuwait’s Al Sayer Group; Hana Investment Co, a subsidiary of Saudi Arabia’s Olayan Financing Co.; and Wafra International Investment Co.

Aster DM Healthcare shares soared 20% on BSE in intraday trading on Wednesday.

Dr. Azad Moopen, founder and chairman of Aster DM Healthcare, said: “The decision to segregate the India and GCC operations was based on the rationale to establish fair value for both entities, creating two pure-play geographically focused entities. In India, we remain committed to our growth plans and hence had increased our stake to 42% earlier this year.”

“For the GCC, Fajr has been selected by the board of Affinity (an Aster subsidiary) as our trusted private equity partner to lead a consortium of investors to invest in the GCC business. The Moopen family will retain a 35% stake in the GCC business,” Moopen added.

The company said the payout receivable from the deal includes $903 million upfront, and up to $98.8 million subsequently, subject to certain contingent events.

The deal includes an earnout of about $70 million based on earnings before interest, taxes, depreciation and amortization (Ebitda) from the GCC business for the current fiscal year to March, the company said.

Aster DM Healthcare was set up in 1987 as a single clinic in Dubai. The company has since grown to become a leading integrated private healthcare provider, offering a full spectrum of primary, secondary, tertiary and quaternary healthcare services.

In India, Aster operates 19 hospitals, 13 clinics, 226 pharmacies and 251 patient experience centres across five southern states.

In the Gulf, Aster runs 15 hospitals, 118 clinics and 276 pharmacies across the UAE, Saudi Arabia, Qatar, Oman, Bahrain and Jordan.

Revenues from Aster’s Gulf business in FY23 were about ₹9,000 crore, constituting about 75% of overall revenues.

Post the deal, Aster DM plans to distribute dividends to shareholders, while retaining the remaining transaction proceeds to pursue growth opportunities, the company said in an investor presentation.

Nitish Shetty, CEO of Aster DM Healthcare Ltd in India, said: “The company is investing heavily in new-age technologies such as artificial intelligence and machine learning to bring innovative medical solutions to the forefront, addressing critical healthcare challenges. Our five-year topline and bottom-line growth is a testament to the robustness of this business model. The restructuring provides the Indian balance sheet with the flexibility to align its capital allocation policies to emerging growth opportunities.”

EY and PwC provided independent valuation advice and ICICI Securities provided fairness opinion for the valuation guidance. While Baker and McKenzie LLP was Affinity’s lawyer, Cyril Amarchand Mangaldas was Aster’s lawyer on the transaction. AZB & Partners were advisors to independent directors. Moelis and Co. and Credit Suisse acted as sell-side advisors. HSBC Bank Middle East Ltd, Allen and Overy LLP and PwC acted on behalf of the Fajr consortium.

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