Aster DM Healthcare – the UAE-headquartered hospital and pharmacy conglomerate – is all set to sell a controlling stake in its mainstay Gulf business. The Gulf business will be separated and sold by its Indian promoters (the Moopen family) to a Dubai consortium for $1 billion. The move is part of a strategy to split the operation from its Indian entity unlock shareholder value and attract more institutional investors. The deal is also expected to help erase the Gulf company’s debt.

While the UAE government backed private-equity firm Fajr Capital will own 65% of the Gulf entity, Azad Moopen, founder and promoter of Aster, will own 35%, once the transaction is concluded next year. Of the $1 billion, $903 million will be paid at the closing of the transaction to Aster DM Healthcare, with up to $98.8 million to be received subsequently, “subject to certain contingent events”, a bourse filing said on Tuesday.

According to Dr Azad Moopen, the Gulf business generates 70% of Aster’s revenues, but it was a drag on the India business because of lower margins.
Profitability of the Gulf business was lower because the GCC region is hyper-competitive with a smaller population, while the India market is still under-served, he added.

“We realised that these two markets are different, we have to have a separate set of investors as well as a separate set of strategies and management
teams for both strategies." Moopen will continue in his role as founder and chairman, and will oversee both India and GCC businesses. His daughter Alisha Moopen who is currently deputy managing director will be promoted to the position of managing director and Group CEO of the GCC business, while Nitish Shetty will continue as CEO of the India business.

Moopen expects the GCC sale to help the Indian business grow at over 25-30%. He added that 1,500 beds will be added in the next two or three years, which will take the total bed count in India to 6,000 beds. The stake sale gives the company more flexibility to pursue growth, added Alisha Moopen. Founded by Azad Moopen in 1987 as a single clinic, Aster DM’s portfolio has vastly expanded since then. In India, it is present in five South Indian states through 19 hospitals, 13 clinics, 226 pharmacies and 251 patient experience centres. In the Gulf, it has 15 hospitals, 118 clinics and 276 pharmacies across the UAE, Saudi Arabia, Qatar, Oman, Bahrain and Jordan.

The Fajr Capital consortium includes Emirates Investment Authority, Al Dhow Holding Co., Hana Investment Co., and Wafra International Investment Co. – Roopa Kurian is Associate Editor of Nrifocus.com