Aster DM Health Care Limited

Started in 2008, Aster DM Health Care Limited is one of the largest private healthcare service providers which operate in multiple GCC states based on numbers of hospitals and clinics and an emerging healthcare player in India. Company operates in multiple segments of the healthcare industry, including hospitals, clinics and retail pharmacies. Company has various brands named 'Aster', 'Medcare' and 'Access'. Company 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 one clinic in the Philippines as of September 30, 2017. A majority of their hospitals and clinics provide secondary and tertiary healthcare services to patients. In addition to providing core medical, surgical and emergency services, some of their hospitals provide complex and advanced quaternary healthcare in various specialties, including cardiology, oncology, radiology, ophthalmology, neurosciences, paediatrics, gastroenterology, orthopaedics and critical care services.  Company's hospitals in India are located in Kochi, Kolhapur, Kozhikode, Kottakkal, Bengaluru, Vijayawada, Guntur, Wayanad and Hyderabad and are generally operated under the 'Aster', 'MIMS', 'Ramesh' or 'Prime' brands. Our clinics in India are located at Kozhikode,Eluru and Bengaluru. We had 17,408 employees as of September 30, 2017, including 1,417 full time doctors, 5,797 nurses,1,752 paramedics and 8,442 other employees (including pharmacists). In addition, we had 891 “fee for service” doctorsworking across various specialities in our hospitals in India as of September 30, 2017. On performance front, Aster DM has posted turnover/net profits of Rs. 3899.05 cr. / Rs. 323.47 cr. (FY15), Rs. 5275.16 cr. / Rs. 76.36 cr. (FY16) and Rs. 5967.9 cr. / Rs. 234.39 cr. (FY17). For H1 of FY18, it has reported net loss of Rs. 71.80 cr. on a turnover of Rs. 3141.37 cr. Thus company has posted consistent  growth over last couple of years in top-line, but bottom line remains zig-zag. Company has posted an average EPS of Rs. 2.25 and average RoNW of 2.1% for last three fiscals. Issue is priced at a P/BV of 4.86 as per NAV on 30.09.17. Listed peers as per DRHP are trading in range of 17 to 103 P/E ratio. As for H1 of 2018, company has posted loss, so If we attribute 2017 earnings on fully diluted equity post issue, then asking price is at a P/E of around 41, which looks fully priced when comparing with peers. 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. As per financials, company's growth is very good, RoNW is 2.1% for last three fiscals, but bottom line growth not consistent and company has shown loss in H1 of FY18. Company is in Healthcare sector and future of this sector is good, but companies of this sector didn't give listing gains as per past records. So we give NEUTRAL rating to this IPO.

• 1 Dr. Azad Moopen
• 2 Union Investments Private Limited ('UIPL')