New 52-Week High: Aster DM's $1 Billion Stake Sale In GCC To Unlock Value, Brokerages Give Thumbs Up

Brokerages are optimistic about Aster DM Healthcare after it received approval for a 100% stake sale deal in GCC worth $1.001 billion. Investors showed robust buying in this pharma stock following the mega-deal. In the trading week that ended on December 1st, Aster DM shares zoomed nearly 19% on BSE. Brokerages believe that the much-awaited stake sale is likely to unlock values for Aster DM.

On BSE, Aster DM shares ended at Rs 401.05 apiece, up by Rs 5.04% last week on Friday. On this day, the stock also touched a new 52-week high.

As per the regulatory filing, Aster DM received board of directors approval last week under which the company will sell shares held by Affinity in Aster DM Healthcare FZC to Alpha GCC Holdings for a consideration of $1.001 billion.

However, of the total transaction value, up to $903 million is subject to customary adjustments, and will be payable at closing, while up to $98.8 million may be received subsequently subject to certain contingent events. This includes an earnout of up to $70 million based on EBITDA achieved by the GCC business for the Financial Year ending 31 March 2024.

Nevertheless, Aster DM's promoters have expressed their interest in continuing to participate in the GCC business. The Promoters have expressed their deep commitment to both the India and GCC geographies and shall continue to have a meaningful role both in GCC and India following the completion of the deal.

Should You Buy Aster DM share price?

In its research note, Prabhudas Lilladher said, "Aster DM Healthcare (ASTERDM) board has approved the much-awaited GCC stake sale at reasonable valuations, that will unlock value for shareholders. A proper capital allocation strategy will be a key to scaling up India operations. Conversely, ASTERDM India's EBITDA increased sharply over the last 3 years (30% CAGR over FY20-23). We estimate 23% EBITDA CAGR from India biz over FY23-26E aided by scale-up in margins, healthy ARPOB and bed additions. Our FY24E/25E India business EBITDA stand increased by 1-3%."

Further, PL's note said, "At current market price, adjusted for GCC stake the India business is trading at 19x and 15x EV/EBITDA on FY25E and FY26E respectively which is at 15- 30% discount to listed peers. We maintain a 'Buy' rating with a revised TP of Rs.430 (earlier Rs. 345) valuing the India hospital segment at 20x (18x earlier) EV/EBITDA on Sept 2025E EBITDA. Timely closure of GCC divestment and utilization of proceeds will be key monitorable in the near term."

Meanwhile, Kotak Institutional Equities said, "In line with the deal valuation, we raise the GCC EV in our SoTP from $1.1 bn earlier to ~US$1.3 bn. We assign an 18X September 2025E pre-Ind AS 116 EV/EBITDA multiple (16X earlier) to the India business due to the likelihood of
higher efficiencies, led by a more focused approach. In addition, there is a higher possibility of Aster DM partnering with strategic/financial investors in India owing to a cleaner structure. We keep our estimates unchanged (we will incorporate the GCC sale in our estimates after deal closure in March 2024) and raise our FV to Rs415 (Rs350 earlier). Maintain ADD.

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