Aster DM Healthcare Plans Expansion with up to INR 900 Cr Investment

The proposed expansion is set to boost Aster DM Healthcare's bed capacity in India, reaching over 6,000.

Aster DM Healthcare, a leading provider of multispecialty healthcare services in India, has outlined expansion plans, intending to add 1,500 beds over the next 2 to 3 years.

The company's CEO, Dr Nitish Shetty, shared insights into the expansion strategy, highlighting the allocated capital of around INR 850-900 Cr for this initiative. The expansion aims to enhance healthcare accessibility and cater to the growing demand for quality medical services.

Shetty said, “The expansion is part of the company's commitment to meeting the growing healthcare demands and an objective to become one of the top three players in the country. We intend to add to increase its capacity by adding 1500 beds over the next three years.”

Market Expansion & Seizing New Opportunities

The proposed expansion is set to boost Aster DM Healthcare's bed capacity in India, reaching over 6,000 beds. This includes the upcoming Aster Capital in Thiruvananthapuram, which is expected to have more than 350 beds in the first phase by FY26, and Aster MIMS Kasargod, which is planning to add around 200 beds.

The expansion plan also involves increasing capacity in existing hospitals. Medcity and MIMS Kannur will each receive an additional 100 beds, while Aster Whitefield is set to expand with an additional 159 beds.

Besides expanding existing facilities, Aster DM Healthcare is exploring opportunities in new markets, including Maharashtra, Tamil Nadu, and Uttar Pradesh.

The company aims to establish a presence among the top three healthcare providers in these regions and is particularly interested in cities with a population of 3 million or more.

Dr Nitish Shetty emphasized the company's strategic approach, stating, “We find Maharashtra highly attractive, drawing parallels with our experience in Bengaluru. Our aim is to replicate the success achieved in Bengaluru and expand our presence in promising markets with similar demographics and potential. While we have a modest presence in Hyderabad, there’s a desire to expand.”

He further underscored the company's regional approach, stating that with 70% of its business thriving in Tier-I, Tier-II, and beyond cities, it is positioned to roll out its model across more locations, offering sustainable healthcare solutions beyond metro areas.

Aster DM Healthcare's financial position remains robust, with a low debt-to-EBITDA ratio. Shetty expressed confidence in leveraging further and relying on internal cash accruals to finance the expansion. As of September 30, 2023, the net debt for the India region business stood at INR 617 Cr, with a net debt/EBITDA ratio of 3.2 during H1 FY24.

International Operations & Business Sale

The company had previously approved the sale of its business in the Gulf Cooperation Council (GCC) region for $1.01 billion to Alpha GCC Holdings Ltd. The board is considering the distribution of 70–80% of the upfront consideration from this transaction as a dividend to shareholders, amounting to INR 110 to INR 120 per share.

In the labs and pharmacies business, Aster DM Healthcare will prioritise achieving profitability over expansion. "Lab is going to break even in the final quarter and we expect by next year-end pharmacy also should break even," Dr Shetty said.

Talking about the healthcare organisation’s international patients, this segment currently contributes around 5% of the group's revenues. The company has devised clauses in the separation agreement to ensure the continued flow of international patients from GCC countries.

Dr Shetty assured that post-segregation, the channel would remain open, with no significant implications in terms of size and numbers.

The promoter family holds a 41.88% stake in the Indian listed company and a 35% stake in the GCC entity. The company's stock has witnessed a 30% surge in the last three months and has received 'buy' calls from all seven analysts tracking the company.

In another development, Aster DM Healthcare planned to seek private equity investment for its Indian operations after completing the sale of its business in the Gulf Cooperation Council (GCC) countries.

Reportedly, the business has been getting inbound interest from investors for the last six months, which saw a significant rise after the recent sale announcement of its Gulf business.