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Mumbai: The UAE-based Aster DM Healthcare Llc plans to raise 1,200-1,800 crore through an initial public offering (IPO) of shares in India that may offer a potential exit opportunity to private equity (PE) investors Olympus Capital Holdings Asia and India Value Fund Advisors (IVFA). The healthcare chain, which runs seven large hospitals in southern and western India, is planning rapid expansion by opening its own facilities and acquiring local ones.

Azad Moopen, chairman and managing director of Aster DM Healthcare, spoke about the company’s plans in an interview.

Edited excerpts:

Why did you finally choose India for fund raising and listing?

Indian equity market is doing very well, and we are sure that the response to the IPO in this market situation would be good.

We had initially considered other options like London Stock Exchange to raise funds and to list the shares. But due to many reasons, including the fact that we are an India-registered company and need to dilute only a 10% stake, we finally decided (on) the initial public offer in India.

When is the IPO scheduled and what is the offer size? Will it also offer an exit route for PE investors?

We have appointed Bank of America-Merrill Lynch, Goldman Sachs and Kotak Investment Banking as lead banks to manage the issue. We are planning to raise about $200 to $250 million, offering the minimum requirement for listing. We shall soon be filing the DRHP (draft red-herring prospectus) with Sebi (Securities and Exchange Board of India), and upon the clearance, the IPO could be sometime in the first or second quarter of 2015-16. Our PE partners Olympus Capital and IVFA are unlikely to offer a large portion of their stake in the IPO as they are very happy with the performance of the company.

We are glad that they have multiplied their investments several-fold in a short period, looking at the market value of the company.

Your business expansion programme is largely focused on India at present. Do you see the healthcare market in the country as challenging, unlike the Gulf, where you started?

We have been in the Indian market for more than a decade now, predominantly in the south. We don’t find the competition to be a big challenge in India, although there are issues like availability of well-trained manpower, quality control, insurance penetration, etc.

With our involvement actively in medical education and training within the existing Indian hospitals and associated educational institutions, we hope to address the human resource requirement to a great extent.

The medical and nursing colleges run under DM Education and Research Foundation and MIMS Academy—we are now actually providers of healthcare professionals to the industry.

Our 600 bed MIMS Hospital in Kerala was the first multi-speciality hospital in India accredited by NABH (National Accreditation Board for Hospitals and Healthcare Providers). We also have two JCI (Joint Commission International)-accredited hospitals abroad. As far as the quality is concerned, we have also introduced several innovative programmes to ensure quality care at all our facilities.

Just like the best-in-class technology and infrastructure, the involvement and dedication of medical and non-medical staff is also very crucial in this regard.

For instance, our recent campaign “We Treat You Well", which is meant for not only the patients but also our employees, in connection with the opening of our latest medical facility in Kochi—Aster Medcity—was a great success in attracting the best talent.

Why don’t you look at public-private-partnership (PPP) model that offers a large opportunity for healthcare companies in India?

Unless the government policies are properly defined and structured for public-private collaboration, it involves higher risk for the investor.

I agree that India offers a big opportunity for private players to make best use of the underutilized public healthcare infrastructure and improve them to provide quality healthcare in the country. But the uncertainties involved in the transfer process takes away the interest of the private investors. Since the healthcare services industry is capital-intensive with a long payback period, private investors will think twice if investment terms are not clear and transparent.

What in your view is the best solution to make the healthcare services industry stronger in a market like India, where affordability as well as return on investment remains an issue?

It is important to look at the bottom of the pyramid for inclusive healthcare, both by the government and private sector. The spending on healthcare ought to be increased multi-fold in the country as it has still earmarked less than 2% of GDP for healthcare, compared with 16% in the US and at least 6% even in many developing countries.

In India, healthcare access to the great majority of poor and BPL (below poverty line) population is almost zero at present. While private providers should come in with investments, there should be a roadmap ready with the government to build confidence in them. The private sector can work out innovative solutions to address this issue. For instance, we recently introduced a low-cost quality dialysis programme in Kerala under our CSR (corporate social responsibility) initiative, in which donors can actively participate in sponsoring the procedure cost, at least partially, for poor patients.

This has been a very successful project and thousands of poor patients are being benefited by it.

Government of India could even think about hiking taxes on fast food and other unhealthy products to utilize that income for providing quality healthcare to the poor. This will help in resolving the fund constraints for providing the healthcare to the poor and, at the same time, keeping the society healthy.

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