Aster, Blackstone eye inorganic growth in North India: Alisha Moopen

Aster coming together with Blackstone-backed Quality CARE will become one of the top three platforms in India, said Alisha Moopen, Deputy Managing Director of Aster DM Healthcare

The deal between Aster DM Healthcare and Blackstone-backed Quality Care India Ltd -- which have announced a merger -- is one of the largest health-care deals in the country, with a combined enterprise value of Rs 43,000 crore. Alisha Moopen, deputy managing director of Aster DM Healthcare, speaks with Shine Jacob and Sohini Das in a virtual interview about the way forward for the merged entity and its expansion plans. Edited excerpts:

 

What does this merger mean for the health-care industry and you?

 

We believe this is one of the biggest transactions — monumental for Aster and the Indian health-care sector. Aster’s amalgamation with Blackstone-backed Quality CARE will become one of the top three platforms in India. For us, it doubles our platform and size. We’ve had a strong presence in South India, and now we’re expanding into Central India. Combined, we have around 10,150 beds and more than 3,000 additional beds in the pipeline.

 

In two to three years, we expect to have 13,500 beds. We are talking about a valuation of Rs 43,500 crore now. Our focus will be on merging these entities and leveraging the combined benefits. From a business point of view, there are economies of scale, purchasing power, advantages in buying capex, and much more. From a patient’s point of view, it will help improve doctor assets and clinical outcomes. Definitely, a lot of synergies exist in terms of business and consumers.

 

You are predominantly South India-focused. Will this open door to North India?

 

This merger significantly enhances our presence in Central India, especially in Madhya Pradesh and Chhattisgarh. As for North India, we’re looking at inorganic growth opportunities. Over the past year, our focus has been on this transaction. Along with Blackstone, we would be keen to look at opportunities in the North. This will be inorganic growth; we have more organic plans in the pipeline.

 

The merged entity will be led by Aster founder Azad Moopen as executive chairman. CARE Hospitals' Varun Khanna will be managing director and group chief executive officer of the new entity. That is the reason why we have not hired anyone for the past few months. We believe that Khanna is a terrific leader; he has led such huge ventures in the past. Several members of the promoter family have also come into the business.

 

How do you see the revenue and Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin of the combined entity going ahead?

 

As a combined entity, Aster’s margin will increase by 200 basis points. We will be able to manage Ebitda margins at a healthy level. The average revenue per occupied bed (ARPOB) will also rise with our expansion and new beds coming online. Aster plans to invest around Rs 2,000 crore over the next few years to add 1,800 beds. When including Quality CARE’s expansion plans, the overall investment could reach Rs 4,000 crore. The margin growth of the combined entity will almost be the same. Once we unlock the synergies, further growth will happen in Ebitda.

 

What will be the future of your labs and pharmacy business?

 

Our core focus remains multi-specialty hospitals. When it comes to pharmacies and labs, it is more of a cluster approach, and not an independent vertical, to improve the patient’s journey. Our focus is building the core competency of hospital beds. We have micro-market leadership in 28 cities. We believe this is the real distinguishing factor for us. The metros you are talking about are Bengaluru and Hyderabad. We are not looking at increasing our share in terms of metros. We want to focus on micro-markets.

 

Recently, you experimented with an asset-light model for operating and managing. Will you continue with this approach?

 

We have a few assets in the O&M model, which we think is a great strategy in India to expand in Tier-III cities. So far our hospitals have been owned or leased. O&M is a new model that we tested last year. It is still a model that we are testing. Our main model of owning our assets will continue.