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Aster DM Healthcare IPO Review (May apply)

Review By Dilip Davda on February 5, 2018

Aster DM Healthcare Ltd. (Aster) is one of the largest private healthcare service providers which operate in multiple GCC states based on number of hospitals and clinics and an emerging healthcare player in India. GCC states that comprise the United Arab Emirates, Oman, Saudi Arabia, Qatar, Kuwait and Bahrain. It also operates in Jordan and Philippines. Aster is having operations in different verticals and geographies. It has already started work for 10 new hospitals, 5 in GCC states and 5 in India. Although it has larger portion of revenues coming from GCC states, due to India based company, it has registered office in southern region and is mulling listing in India. Asters hospitals in India are located in Kochi, Kolhapur, Kottakkal, Bengaluru, Vijaywada, Guntur, Wayanad and Hyderabad. These are operated under 'Aster', 'MIMS', 'Ramesh' or 'Prime', 'Aster Aaadhar' and 'Aster CMI' brands. Its clinics are located at Kozhikode, Eluru and Bengaluru. As of 30.09.17 the company had 17408 employees including 1417 full time doctors, 5797 nurses, 1752 paramedics and 8442 other employees. In addition it had 891 'fee for service' doctors. Aster has a diversified portfolio of healthcare facilities, consisting of 9 hospitals, 90 clinics and 206 retail pharmacies in the GCC states, 10 multi-specialty hospitals and 7 clinics in India, and 1 clinic in the Philippines as of September 30, 2017. Overall currently it has total 323 operating facilities.

Majority of Aster hospitals and clinics provide secondary and tertiary healthcare services to patients. In addition to providing core medical, surgical and emergency services, some of its hospitals provide complex and advanced quaternary healthcare in various specialties, including cardiology, oncology, radiology, ophthalmology, neurosciences, pediatrics, gastroenterology, orthopedics and critical care services. Aster had plans on table for more large hospitals in metros of India before budget, but now it mulls affordable hospitals in tier –II and tier- III cities and in rural areas. No plans have been firmed up so far in this regard.

Aster DM
To part finance its debt repayment and/or prepayment, purchase of medical equipments, general corpus fund needs and listing of shares, Aster is coming out with a maiden IPO of approx. 51586145 equity shares comprising of fresh equity issue of approx. 38157894 shares (based on upper price) and offer for sale of 13428251 shares. Issue is done by way of book building process in a price band of Rs. 180 – Rs. 190 per share to mobilize Rs. 928.55 – Rs. 980.14 crore (based on lower and upper price bands). Minimum application is to be made for 78 shares and in multiples thereon, thereafter. Issue opens for subscription on 12.02.18 and will close on 15.02.18. Post allotment, shares will be listed on BSE/NSE. BRLMs to the issue are Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd., Goldman Sachs (India) Securities Pvt. Ltd., ICICI Securities Ltd., JM Financial Ltd. and Yes Securities (India) Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 10.21% of the post issue paid up capital of the company. Having issued initial equity at par in 2008, it raised further equity in the price range of Rs. 102.85 to Rs. 158918 per share between May 2008 and November 2017. It has also issued bonus shares in the ratio of 1000 for 1 (July 2012), 2 for 1 (Nov. 2013). Average cost of acquisition of shares by the promoter is Rs. 2.84 per share. Post issue, its current paid up equity capital of Rs. 467.07 cr. will stand enhanced to Rs. 505.23 cr.

On performance front, Aster has (on a consolidated basis) posted revenue/net profits of Rs. 3899.05 cr., / Rs. 272.11 cr. (FY15-on proforma basis), Rs. 5275.16 cr. / Rs. 8.21 cr. (FY16) and Rs. 5967.90 cr. / Rs. 266.75 cr. (FY17). For first half of current fiscal, it has earned loss of Rs. -82.71 cr. on revenue of Rs. 3141.37 cr. Thus it suffered severe setback in FY 16 and incurred loss for first half of current year. According to management, due to expansion of its outlets, it had to take hit in FY16 and loss in first half of current fiscal is due to take over of Government Hospital and settling its deal at hair cut rates that resulted in loss. This hospital that was doing maximum business from Government is now shifting its focus for private sector business and thus will start rewarding well going forward. As clarified by the management, it generates revenue/net profits in the range of 45% / 25% basis in first half and while for second half, its revenue/ net generation comes to 55%/75%. First half always turns a lean period for its business in GCC countries. For last three fiscals it has posted an average EPS of Rs. 2.25 and average RoNW of 2.10% on an equity base of Rs. 403.22 cr. For first half it has posted negative EPS of Rs. -1.65 per share. Due to this its current P/E calculations are not done. However, even if we take FY 17 earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 36 against listed peers trading at Apollo Hospital (75), Fortis Healthcare (17), Narayana Hrudayalaya (72) and Healthcare Global (103) with an industry composite of 67 P/E. Based on NAV of Rs. 39.13 as on 30.09.17, issue is priced at a P/BV of 4.86. Although its price is below industry composite, based on latest earnings, it appears to have been fully priced.

On BRLM's front, six book running lead managers associated with the offer have handled 66 public issues in the past three years out of which 18 public issues closed below the issue price on the listing date.

Conclusion / Investment Strategy

As healthcare sector is poised for better prospects considering announcements in the recent finance budget, one may consider moderate investment for long term in this fully priced offer.

Review By Dilip Davda on February 5, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Aster DM Healthcare IPO FAQs

  1. 1. Why Aster DM Healthcare IPO?

    The initial public offer (IPO) of Aster DM Healthcare Ltd offers an early investment opportunity in Aster DM Healthcare Ltd. A stock market investor can buy Aster DM Healthcare IPO shares by applying in IPO before Aster DM Healthcare Ltd shares get listed at the stock exchanges. An investor could invest in Aster DM Healthcare IPO for short term listing gain or a long term.

  2. 2. How is Aster DM Healthcare IPO?

    Read the Aster DM Healthcare IPO recommendations by the leading analyst and leading stock brokers.

    • Dilip Davda - May apply
    • Hem Securities - Avoid
    • SMC Global - Apply
    • SPA Financial Advisor Ltd - Apply
    • SSJ Finance - Avoid
  3. 3. Aster DM Healthcare IPO what should investors do?

    Aster DM Healthcare IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Aster DM Healthcare IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Aster DM Healthcare IPO good?

    Our recommendation for Aster DM Healthcare IPO is to subscribe for long term.

  5. 5. Is Aster DM Healthcare IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Aster DM Healthcare IPO.

  6. 6. When will Aster DM Healthcare IPO allotment status?

    The Aster DM Healthcare IPO allotment status will be available on or around February 22, 2018. The allotted shares will be credited in demat account by February 23, 2018. Visit Aster DM Healthcare IPO allotment status to check.

  7. 7. When will Aster DM Healthcare IPO list?

    The Aster DM Healthcare IPO will list on Monday, February 26, 2018, at BSE, NSE.