Aster DM Healthcare-Quality Care India merger talks enter final lap

US-based private equity major Blackstone may hold a majority stake in merged entity

The merger negotiations between US-based private equity major Blackstone-owned Quality Care India and Bangalore-based listed hospital chain Aster DM Healthcare have reached the final stage with Blackstone expected to hold a majority stake in the merged entity.

 

According to the plan under negotiations, Quality Care is set to merge with the listed entity and will be renamed Aster DM Quality CARE. Private equity firm TPG, and the Aster promoters, the Moopen family will hold a minority stake in the merged entity. The Moopen family had earlier hived off its West Asia-based hospital chain into a separate entity.

 

According to sources, the merger is in its final stages, and the share swap deal is expected to be signed in the coming week.

 

“We don’t wish to comment on market speculation," said an Aster DM Healthcare spokesperson in response to questions from Business Standard. Blackstone declined to comment. 

 

Aster DM shares closed at Rs 437 a share on Friday, giving it a total market valuation of Rs 21,826 crore.

 

The merged entity will have around 9,900 beds, just behind Apollo Hospitals Enterprises and Manipal Health Enterprises. Aster DM promoter Azad Moopen is expected to be appointed as the executive chairman of the merged entity, said a source close to the development.

 

As of the second quarter of this financial year, Aster has around 19 hospitals with 4,994 beds, in addition to 13 clinics, 212 pharmacies (operated by Alfaone Retail Pharmacies Private Limited under brand licence from Aster), and 232 labs and patient experience centers across five states in India. Quality CARE has 17 healthcare facilities serving seven cities across six states in India. Both chains have expansion plans in place as well.

 

In October last year, Blackstone acquired a 72.5 per cent stake in Quality Care India, which operates Care Hospitals and Kerala's KIMS Health, for around $1 billion. Aster also separated its Gulf Cooperation Council (GCC) business last year and has plans to add 1,700 more beds by FY27.

 

India's healthcare space has seen increased private equity activity lately with reported investments of around $5.5 billion in 2023 by such companies. This includes deals with Manipal Hospitals, with Singapore’s Temasek taking a majority stake in Manipal Healthcare, Care Hospitals (US-based Blackstone), HealthCare Global (CVC Capital), and Sahyadri Hospitals (Ontario Teachers’ Pension Plan).

 

In the first half of the ongoing financial year (FY25), Aster DM's overall India business recorded revenue growth of 18 per cent  at Rs 2,088 crore, driven by 7 per cent increase in occupied beds and a 12 per cent year on year increase in Average Revenue Per Occupied Bed (ARPOB). Aster’s operating Ebitda also grew by 44 per cent, totaling Rs 410 crore, with Ebitda margins expanding to 19.6 per cent in H1FY25, up from 16.1 per cent a year ago, according to its September quarter results.