Mumbai: Aster DM Healthcare Ltd, which runs hospitals in India and West Asia, is looking to refile its draft share sale documents because of concerns over the valuation of its overseas operations, from which the company derives a large part of its revenue, two people aware of the development said.
Aster DM had filed its draft red herring prospectus (DRHP) for an initial public offering (IPO) in June and received approval from the Securities and Exchange Board of India (Sebi) in November.
“They (Aster) are looking to refile their DRHP with Sebi again sometime in this quarter. The move has been prompted by the current market condition of its overseas business, especially in Saudi Arabia, which has been impacted by the fall of oil prices," said one of the two people cited above, requesting anonymity.
Mint had reported on 3 February that Aster DM had asked the investment banks involved in its IPO to go slow because of concerns regarding its West Asia business. (bit.ly/2ostLhy)
In its DRHP, Aster DM disclosed that in Saudi Arabia, where a substantial portion of its revenue is derived from patients referred and funded by the ministry of health, a decline in oil prices and the overall economic conditions have had a direct impact, resulting in an increase in receivables from the ministry of health.
In order to counter this, the company said it was exploring other business opportunities in Saudi Arabia, including increasing its share of private insurance and walk-in patients.
“However, there can be no assurance that we will be able to successfully secure alternative sources of revenue in Saudi Arabia, or at all," the company said in the draft prospectus.
According to the people cited above, the company was looking to raise close to $300 million (a mix of primary and secondary share sale) from the IPO, valuing the company at around $2.5 billion.
However, the refiling of DRHP will happen with a reduced valuation and a likely reduced offer size, the second person cited above said, also requesting anonymity.
“Under Sebi norms, one has to refile their DRHP if the valuation of the offering changes by more than 20%. With a reduced valuation, they are also likely to look at a reduced offer size. The company is waiting for the March quarter numbers, after which it will take a call whether to file the new DRHP on March or December-quarter numbers," he said.
“There is no change in IPO plans. The company continues to evaluate various fund raising options, in line with changing business environment and will tap the markets at (an) appropriate time, depending on various factors including market conditions," a spokesperson for Aster DM Healthcare said in an email response.
Aster DM had a diversified portfolio of healthcare facilities, consisting of six hospitals, 83 clinics and 180 retail pharmacies in the Gulf Cooperation Council (GCC) states; seven multi-speciality hospitals and three clinics in India; and one clinic in the Philippines as of 31 March 2016. Aster’s hospitals in India are located in Kochi, Kolhapur, Kozhikode, Kottakkal, Bengaluru and Hyderabad and are operated under the Aster, MIMS or Prime brands. Its clinics in India are located in Kozhikode and Bengaluru.
Aster DM’s operations in India, which primarily consist of hospitals, accounted for only 12.52% of the company’s total revenues in the nine months ended 31 December 2015, according to the draft prospectus.
For the nine months ended 31 December 2015, GCC countries contributed Rs3,264.4 crore to revenue, compared with a contribution of Rs467 crore by the Indian operations.
The company has received investments from private equity (PE) funds Olympus Capital Asia Investments Ltd and True North (Managers), previously known as India Value Fund Advisors. Both PE funds were expected to dilute a part of their stake along with the promoters in the IPO.