IPO NOTE Aster DM Healthcare Limited Subscribe Issue Details Listing NSE & BSE Open Date 12/2/2018 Close Date 15/2/2018 Price Band 180-190 Capital Structure (In Cr) Sh. pre-ipo 46.7 Fresh issue 3.8 Offer for Sale 1.3 Shareholding Pattern (%) Pre Post Promoters 43.3 37.4 Public 55.9 61.9 Others 0.8 0.7 Total 100.0 100.0 Aster DM Healthcare Ltd, a player in the healthcare industry, provides services to patients across multiple geographies through its network of hospitals, clinics and pharmacies. As of 30 th September 2017, Aster operates a total of 323 operating facilities including 19 Hospitals, 98 Clinics and 206 retail pharmacies in GCC States (UAE, Oman, Saudi Arabia, Qatar, Kuwait, Bahrain and Jordan), India and Philippines. Incorporated in 2008, the company commenced operations in 1987 as a single doctor clinic in Dubai established by its Founder, Dr. Azad Moopen. As of Sep 30, 2017, Aster s network of healthcare facilities has 17,408 employees including 1,417 full time doctors, 5,797 nurses, 1,752 paramedics, and 8,442 other employees (including pharmacists) in addition to 891 fee-forservice doctors. Aster functions across different verticals of the healthcare industry and provides services through its facilities which are classified as follows: 1. Hospitals: Spread across India and GCC States, hospitals are centers for tertiary and quaternary healthcare treatment. A major portion of Aster s revenues is derived from its hospitals. 2. Clinics: Located in India, GCC States and Philippines, clinics are positioned mainly as outpatient medical facilities and provide primary and secondary healthcare services. 3. Retail Pharmacies: Located in GCC States (except Saudi Arabia and Bahrain), retail pharmacies offer prescription drugs, over the counter medications, and a range of nutritional, lifestyle and beauty products. For FY17, around 46% of revenue was generated from the hospital business, while approx. 27% was generated from Clinics and Retail Pharmacies each. Key Investment Highlights: Multiple brands targeted at different economic sections To cater to multiple economic sections of the society, Aster in GCC States has set up different brands. These differentiated healthcare brands ensure that Aster s services are not limited to any section of the society. The brands are as follows: Medcare: Positioned as the most premium brand, hospitals and clinics under Medcare are frequented by patients from the high income segment. - 1 - Monday, 12 th February, 2018
Aster: Aster is placed as the brand for middle income segment. The company operates clinics and hospitals under this brand. Access: Blue collar workers seeking affordable healthcare services visit Access clinics which are targeted at the lowest economic section of the society. Healthcare Verticals and Brands offered by Aster in different geographies Source: Company, Ventura Research Presence across high revenue and high growth markets Aster has hospitals and clinics across both India and GCC States. For the GCC states, average revenue per occupied bed (ARPOB) is much higher than that for India, but the Indian market represents better growth potential. Going forward, the company has plans of expanding its presence in India and increasing the share of revenues coming from its India operations. As of FY17, 84% of Aster s revenues were from GCC States while around 16% were from India. Revenue contributions from Philippines were less than 0.1%. Expansion to benefit in the Long term Due to the aggressive expansion undertaken by the company post FY13, Aster as on 30 th September 2017 had 323 Operating facilities, consisting of 19 hospitals compared to 149 operating facilities consisting of 10 hospitals, on 31 st March 2013. The company doesn t have plans of relenting from its expansion spree and in the next 4 years plans to add 1727 beds of which 355 would be in GCC States and - 2 - Monday, 12 th February, 2018
1372 in India. Established brand with experienced management Aster has, over the last few decades, established a brand which is recognized and associated with quality healthcare services. It s management team is composed of doctors with clinical and administrative experiences, and other experienced industry veterans. Some of these management team members have been with the organization for over 10 years which inspires confidence. Initiatives to improve operational efficiencies As a part of its strategy to improve operational efficiency and hence, its profitability, Aster is investing in the following: Integrated healthcare network: To minimize costs and leverage economies of scale, Aster is focusing on standardizing the type of medical and other consumables used across its network, optimizing procurement costs, consolidating suppliers and optimizing the use of medical consumables. Integrated IT platform: To facilitate better management of patient s medical reports and better deployment of services, Aster is using Electronic Medical Records. The system has already been implemented at Aster Medcity, Kochi; Aster CMI, Bengaluru; and Aster Hospital, Dubai. Medical technology: Aster is investing in the latest medical technologies and innovations, attracting skilled physicians and surgeons to serve the increasing demand for advanced clinical procedures. A few of the advanced medical equipment in use at its facilities include the Da Vinci Surgical Robot and Cyber Knife. - 3 - Monday, 12 th February, 2018
Issue Structure & Valuation: The proposed Aster DM Healthcare Ltd issue is for an aggregate amount of Rs 980.1 crores (on upper price band; 5,15,86,146 shares) by way of an Offer for Sale of 1,34,28,251 shares (Rs 255 crore on upper price band) by existing shareholders and a Fresh issue of Rs 725 crores (3,81,57,895 shares on upper price band). This is being offered to the public at a price range of Rs 180 per share (lower price band) to Rs 190 per share (upper price band). Proceeds from the issue would be used for repayment of debt, purchase of medical equipment and general corporate purposes. Category QIB Non institutional Bidders Retail Total No. of shares Offered (at upper band) % of Shares Offered 25793073 50% 7737922 15% 18055151 35% 51586146 100% The valuation on a trailing basis works out to 42.0x and 44.3x FY17 P/E at the lower and upper band of Rs 180 and Rs 190 respectively. - 4 - Monday, 12 th February, 2018
SWOT ANALYSIS: STRENGTH WEAKNESS Presence across multiple healthcare businesses in diverse geographies Different brands targeted at different economic segments Large Exposure to Foreign Exchange Operates in markets with scarcity of quality doctor Provides full spectrum of healthcare services ranging from primary healthcare to quaternary healthcare in multiple specialties OPPORTUNITY THREAT Huge Demand-Supply Gap for Healthcare services Rising instances of lifestyle diseases Growth in Private Insurance Penetration Regulations governing the business are stringent Price Capping on Medical Implants in India may be an indication of likely restrictions in future - 5 - Monday, 12 th February, 2018
Profit and Loss (Rs. In crore) Particulars FY13 FY14 FY15 FY16 FY17 Revenue Net Revenue from Operations 1921.7 2871.1 3875.8 5249.9 5931.3 Other Income 17.0 18.4 23.2 25.3 36.6 Total Revenue 1938.8 2889.6 3899.0 5275.2 5967.9 Expenses Purchase of medicines & consumables 701.9 1047.7 1337.8 1723.0 2002.2 Changes in inventories -38.2-42.3-115.6-99.9-114.8 Employee benefits expense 513.8 791.1 1153.6 1629.0 2054.5 Other Expenses 488.99 623.80 994.09 1552.20 1657.34 Total 1666.5 2420.3 3369.8 4804.3 5599.2 EBITDA (Incl. OI) 272.2 469.2 529.2 470.8 368.7 Depreciation & Amortisation 76.5 111.1 144.0 243.0 322.4 EBIT 195.8 358.1 385.2 227.8 46.3 Finance Cost 44.9 47.8 79.1 189.4 353.6 Exceptional Items 0.00 0.00 0.00 0.00 596.07 PBT 150.9 310.3 306.3 37.6 288.5 Provision for Tax 5.5 26.7 34.2 29.4 21.8 Net Income 145.3 283.6 272.1 8.2 266.7 Non-controlling interests 57.2 105.9 139.4 67.2 68.0 Owners of the Company 91.8 177.8 132.7-59.0 198.7-6 - Monday, 12 th February, 2018
Balance Sheet (Rs. In crore) Particulars FY13 FY14 FY15 FY16 FY17 EQUITY AND LIABILITIES Shareholder's Funds Share Capital 124.8 374.5 388.6 403.1 403.2 Reserves & Surplus 654.5 536.0 1095.8 16.6 1472.2 Sub-Total 779.3 910.5 1484.4 419.6 1875.4 Minority Interest 363.0 460.0 761.7 177.0 375.3 Non Current Liabilities Long Term Borrowings 240.8 526.3 611.8 2577.4 1890.5 Other Financial Liabilities 0.00 0.00 61.64 304.02 101.99 Deferred Tax Liabilities 11.4 11.6 131.4 132.0 143.7 Other Long Term Liabilities - 3.3 16.8 31.7 44.4 Long Term Provisions 56.6 72.3 105.3 147.4 174.8 Sub-Total 308.8 613.6 927.0 3192.6 2355.4 Current Liabilities Short Term Borrowings 142.1 204.2 289.4 584.1 830.4 Trade Payables 299.37 313.11 432.42 697.03 782.50 Other Financial Liabilities 0.0 0.0 450.4 583.6 500.3 Income Tax Liabilities 0.0 0.0 3.5 23.9 25.3 Other Current Liabilities 236.6 366.2 24.7 37.5 33.0 Short Term Provisions 10.8 26.0 38.5 40.4 29.7 Total Current Liabilities 688.8 909.6 1238.9 1966.5 2201.2 Total Liabilities 2140.0 2893.7 4412.0 5755.8 6807.3 ASSETS Property, Plant & Equipment 631.5 707.3 1785.2 2037.4 2766.8 Capital Work in Progress 184.7 357.5 197.4 358.1 289.8 Goodwill 240.6 378.3 432.9 441.9 674.0 Other Intangible Assets 0.2 1.8 18.8 28.2 78.9 Equity Accounted Investees 0.0 0.0 11.6 11.1 10.8 Financial Assets 26.9 79.6 84.1 99.5 222.0 Deferred Tax Assets 0.00 0.00 2.68 12.78 3.03 Other Non-Current Assets 0.2 13.3 70.9 244.4 252.3 Income Tax Assets 0.0 0.0 7.6 16.8 37.3 Sub-Total 1084.0 1537.6 2611.3 3250.2 4334.8 Current Assets Inventories 153.0 196.2 310.8 410.7 525.5 Sundry Debtors 500.0 677.5 884.3 1342.3 1287.6 Cash and Bank 200.9 324.7 304.2 266.7 152.1 Current Investments 0.00 0.00 2.72 37.74 21.56 Short Term Loans and Advances 189.1 115.0 0.0 0.0 0.0 Other Current Assets 13.0 42.7 172.6 275.5 252.8 Other Financial Assets 0.0 0.0 126.1 172.7 232.9 Total Current Assets 1056.0 1356.1 1800.7 2505.6 2472.5 Total Assets 2140.0 2893.7 4412.0 5755.8 6807.3 Disclosures and Disclaimer - 7 - Monday, 12 th February, 2018
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