Good News! Thanks To 1:2 Split, Pharma Co Plans Expansion; To Pay Special Rs 118/Sh Dividend, Record Date Set

Hospital services provider, Aster DM Healthcare has announced a special dividend worth Rs 118 per share on account of the receipt of proceeds from the sale of the GCC business. It said this event will result in a significant distribution of ~80% of the consideration of USD 907.6 million as dividends to its shareholders. Accordingly, the company fixed a record date for the said payout.

In a statement, Aster DM said that the special dividend will be paid within 30 (thirty) days from the date of the declaration i.e. April 23, 2024.

Accordingly, the record date is April 23 for the special dividend. The company will identify eligible shareholders for the payout.

Dr. Azad Moopen, Founder Chairman, of Aster DM Healthcare said, "The current Indian healthcare market looks promising and post segregation now, our efforts will be to dynamically increase our footprint in India. We are making the right investments in our people, innovation and infrastructure to differentiate ourselves and create long-term value for all our stakeholders."

Moopen added, "The dividend to be paid is proof of our commitment to all shareholders. As the company progresses, it will continue to prioritize shareholder interests and make decisions in their best interest towards creating sustained long-term value."

Recently, Aster DM concluded the separation of its India and GCC businesses, under which Affinity Holdings Limited (a wholly subsidiary of the Company) received a cash consideration of $907.6M.

Aster DM also aids that despite this large special dividend, the company will still retain Rs 1500 crore from the sale of GCC business in the reserves under its balance sheet.

Nonetheless, the open family continues to hold the 41.88% stake in the listed entity. Dr. Azad Moopen will remain the Founder Chairman and Ms. Alisha Moopen will remain a director on the board of the Company. The listed entity will be led by Dr Nitish Shetty as Chief Executive Officer, who will focus on the growth of the India business, aimed at creating value for its shareholders.

Shetty said, "The last quarter saw us make significant progress in many aspects, demonstrating our execution strength. We aim to balance shareholder returns with future investments for sustained long-term growth. The dividend distribution plan aims to reward shareholders for their long-held trust and investment in the company. Aster DM Healthcare remains committed to transparency and regulatory compliance throughout the process."

Aster split its India and GCC businesses into two separate entities. The reason behind the 1:2 split of business was to unlock value for the shareholders by allowing both the India and GCC businesses to adopt a market-focused strategy and create sustained long-term growth. Existing shareholders to remain with the listed Indian entity, Aster DM Healthcare Ltd.

As the Indian entity is now separate from its GCC counterpart, the Company plans to add 1700 beds by FY27 through the organic route and will further look for expansion through the inorganic route as well.

Aster in the statement said, "Through both greenfield and brownfield opportunities, the company aim to take its total bed tally in India to 6600+ in the next 3 years and scale up its labs and pharmacy business to emerge as the top 3 integrated healthcare providers in India. The plan will encompass a mix of brownfield and greenfield projects, including the upcoming Aster Capital in Trivandrum, and Aster MIMS Kasargod and adding bed capacity to the existing hospitals. The Company will also be looking at potential markets such as Maharashtra and Uttar Pradesh. The capital allocation for this expansion is in the range of 1000cr."

At the latest, Prabhudas Lilladher has suggested buying Aster DM Healthcare. In its research note, the brokerage said, "Our ASTER DM Healthcare (ASTERDM) India EBITDA stands increased by 4-5% for FY25 and FY26 as we factor in higher operating margins. This has been aided by gross margin expansion, occupancy scale-up and faster ramp-up in its Whitefield new unit. ASTERDM India's EBITDA increased sharply over the last 3 years (30% CAGR over FY20-23) and growth momentum continued in FY24 with ~30% YoY growth. We estimate 29% pre-IND AS EBITDA CAGR from India business over FY24-26E aided by scale-up in margins, healthy ARPOB and bed additions."

Further, Prabhuda notes, "adjusted for GCC and minority stake, the India business is trading at 17x EV/EBITDA on FY26E respectively which is at 15- 40% discount to listed peers. We believe such a steep discount is unwarranted given a similar growth profile. We maintain a 'BUY' rating with a revised TP of Rs515 (earlier Rs. 500) valuing the Indian hospital segment at 22x EV/EBITDA on FY26E EBITDA. Timely closure of GCC divestment and utilization of proceeds will be key monitorable in the near term."

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