Aster DM Enterprises Initial Public Offerings (IPOs) is open for subscription and will be available till 15th, February 2018. Price range for this IPO is ₹ 180 – 190 per share. Given the volatile market conditions, the company has reduced the IPO size and it now involves a fresh issue of only ₹ 725 crore instead of ₹ 775 crore.

Should you invest in this IPO and see if you get it or should you wait till it comes to the market? Here are some insights that will help you to make an informed decision about Aster DM IPO.

Aster DM IPO Details

Here’s the brief about IPO :

Issue Open Dates 12th Feb – 15th Feb, 2018
Issue Size Equity Shares of ₹10
Issue Price ₹ 180 – ₹ 190
Market Lot 13,428,251 Shares
Listing at BSE, NSE
Minimum Bid 78 shares
Retail Allocation 35%

The initial public offering of Aster DM consists of a fresh issue of up to ₹ 725 crore and an offer for sale of up to 1,34,28,251 equity shares by the promoter, Union Investments Private Limited (UIPL) and Dr. Azad Moopen.

The company will issue a total number of 51,586,146 equity shares (including fresh issue of 38,157,895 shares and offer for sale of 13,428,251 shares).  Proceeds of the issue will be used towards repayment of debt ( around ₹ 564 crore ), purchase of medical equipment ( around ₹ 110 crore ), and for other general corporate purposes. The issue closes on 15th February and the company will be listed on both BSE and NSE.

Experts vs First Time Investors

If you are a first-time investor, it’s better to research in depth about the company and then go ahead, but we are saving your time by giving you a background of what all should be considered while purchasing shares in IPO.

Aster DM Enterprises Information

The Kochi-based company is one of the leading private healthcare service providers in the Gulf Cooperation Council (GCC) region. It was incorporated in 1987 and currently operates in India and GCC (Gulf Cooperation Council) countries.

Aster started its operation as a single doctor clinic in Dubai established by founder Dr Azad Moopen and it operates in multiple segments of the healthcare industry, such as hospitals, clinics and retail pharmacies.

It currently operates in all of the GCC states, which comprise Saudi Arabia, Jordan, United Arab Emirates, Oman, Qatar, Kuwait and Bahrain, Jordan, India and the Philippines. Its Indian operations are headquartered in Kochi.

The company operates in multiple segments of the healthcare industry, including hospitals, clinics and retail pharmacies and provide healthcare services through various brands ‘Aster’, ‘Medcare’ and ‘Access’. As of March 2017, it operates the largest chain of retail pharmacies in the UAE based on number of centres.

According to its press release, the company 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). Dr Azad Moopen and UIPL are the promoters of the company.

It has grown from 149 operating facilities in 5 countries, including 10 hospitals, as of March 2013 to 323 operating facilities in 9 countries, including 19 hospitals, as of September 2017. In same period, it has increased the bed capacity of its hospitals from 1,419 beds to 4,754.

Performance of Aster DM Enterprises

The company’s total revenue from operations were ₹ 3,875 crore, ₹ 5,249 crore, ₹ 5,931 crore and ₹ 3,122 crore for fiscal years 2015, 2016 and 2017 and the six months ended September 30, 2017, respectively.

EBITDA was ₹ 514 crore, ₹ 473 crore, ₹ 364 crore and ₹ 193 crore for fiscal 2015, 2016 and 2017 and the six months ended September 30, 2017, respectively.

Aster DM Healthcare has three revenue streams of hospital, clinic and retail pharmacy but it is the first one which accounts for majority of top line. In the six months ended 30 September 2017, the hospital segment contributed 49% of revenues, while the clinic segment accounted for 26% and retail pharmacy segment accounted for 25% of the top line.

The company has not declared any dividends in the last 5 fiscal years other than the interim dividend of 10 percent and 20 percent declared by the board in March 26, 2014 and September 11, 2013, respectively. The company has no formal dividend policy.

Strengths of Aster DM Enterprises

Aster DM Enterprise has long standing presence across GCC states and India with strong brand value and equity. It has well diversified portfolio of service offerings to leverage multiple market opportunities along with experienced core management team. It has a track record of operating and financial performance and growth.

Since the first clinic commenced operations in 1987, it has been focused on providing high quality healthcare service and has ability to attract and retain high quality medical professionals.

It believes that its ability to identify, adapt to and capitalise on market developments, as well as flexible business model have enabled it to stay at the forefront of market trends and develop a strong track record of achieving profitability and growth.

Should you Invest?

So far in this analysis, Aster DM Healthcare looks like a solid play in the healthcare industry, except the uneven profitability. There are reasons for this low margin profile and this has roots in the aggressive network expansion in the recent years.

The company increased its capacity from 1,419 beds as of 31 March 2013 to 4,754 beds as of 30 September 2017. This includes 670 beds at the Aster Medcity multi-speciality hospital in Kochi, Kerala. Out of its 9 hospitals in the GCC region, at least 4 have operational history of less than five years. The situation is a bit better in India where its strategy has revolved around acquisition of existing hospitals instead of greenfield investments.

Biggest concern for Aster is its dependency on Aster’s operations in the GCC States and the effect of foreign ownership restrictions, financial, economic and political developments in or affecting the GCC States. This high geographical concentration in GCC countries can increase risks for company in long run.

Mutual Funds for 2018

Large Cap Fund:

Large cap are big, well established companies of the equity market. These companies are strong, reputable and trustworthy. Large cap companies generally are top 100 companies in a market. There is no consensus on the capitalization as such. With large cap funds adopt a long-term perspective, be patient and remain invested to get good returns over the long term. These are the best large cap funds of 2018:

Mid Cap Fund:

  • Mid cap are compact companies of the equity market, falling somewhere between small and large cap companies and are 100-250 companies in a market after large cap companies. Mid cap fundscan be great investment instruments for investors looking for funds with high return possibilities, without the volatility of small cap funds and index-related returns like those of large cap funds. These are the best Mid cap funds of 2018 :
  • Aditya Birla Small & Midcap Fund
  • L&T Midcap Fund
  • Mirae Asset Emerging Bluechip Fund

Small Cap Fund:

Small cap are small companies of stock market and are all the companies apart from large and mid cap companies in a market. Small cap funds have exponential growth potential and give investors high returns on investment. Best part of small caps funds is that they are under followed in stock market and usually untapped by institutional investors, giving a huge opportunity to prudent investors to grow their investment quickly. These are the best Small cap funds of 2018:

If you want to see more funds to invest in 2018, check out: 30 best funds to invest in 2018. 

Happy investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.