INITIATING

COVERAGE REPORT
Aster DM Healthcare Ltd
20 September 2024

Akshaya Shinde
Pharma & Healthcare
9664200928 / 022 42005518
[email protected]

Awanish Chandra
Executive Director
8693822293 / 022 4200 5508
[email protected]
 INSTITUTIONAL RESEARCH

Initiating Coverage | Healthcare l 20 September 2024

Aster DM Healthcare Ltd

DivingName:
Report deepQ2FY20
in India business:
Update Expanding
l Sector Name: Auto l 20Horizons
September 2024

Aster DM Healthcare is a leading private multi-speciality tertiary care hospital chain in South
India, with 19 hospitals, 13 clinics, 217 pharmacies, and 243 labs and PEC’s across five southern Rating: Accumulate Return: 9%
states. It is one of the emerging hospital chains in India. Established in 1987, Aster DM started Current Price: 418 Target Price: 457
with a single clinic and expanded to multiple clinics, hospitals, labs, and pharmacies across
several Gulf countries, before launching its India operations in 2021. In April 2024, the company |Market data
separated its India and GCC businesses to focus on India and unlock value. Currently, Aster DM
Bloomberg: ASTERDM:IN
has 4,867 beds and plans to double capacity to 10,000 beds within five to six years. We like Aster
52-week H/L (Rs): 558/309
DM due to 1) addition of 1,677 beds by FY27, 2) 57% of the capex to be brownfield, 3) expanding
therapies like oncology for a better case mix, and 4) cost optimization efforts to boost EBITDA Mcap (Rs bn/USD bn): 209 /2.5
margins. Expansions in existing markets also reduce execution risks. Going ahead, due to Shares outstanding (mn): 500
capacity expansion, the revenue will increase significantly. We forecast EBITDA CAGR of 26% over Free float: 45.%
FY24-FY27E. We assign 22x EV/EBITDA on Sept’26E EBITDA and arrive at a target price of Rs 457 Daily vol. (3M Avg.): 3.0 Mn
per share, translating into an upside of 9% and hence, we assign Accumulate rating on the stock. Face Value (Rs): 10.0
Source: Bloomberg, SMIFS Research
Second largest player in South India and largest in Kerala- Aster DM, the second-largest hospital chain
in South India boasts 4,867 beds, just behind Apollo Hospitals' 5,255 beds. The southern states—Tamil |Shareholding pattern (%)
Nadu, Andhra Pradesh, Kerala, Telangana, and Karnataka—boast a high per capita income of over Rs. Jun-24 Mar-24 Dec-23 Sep-23
150,000, compared to the national average of Rs. 94,000. Despite a high bed density of 3.5 hospital
Promoter 41.9 41.9 41.9 41.9
beds per 1,000 people, these states offer great opportunities due to their large elderly population of
FIIs 27.1 33.5 41.0 40.2
4 Cr, driving the demand for robust healthcare services, where Aster DM plays a key role.
DIIs 16.3 13.7 7.2 7.6
Expansion of beds by 34% in FY27: The company plans to add beds capacity of 1677 beds over a span Public/others 14.4 10.6 9.6 9.8
of 3 years which will increase the number of beds by 34% from 4,867 beds in FY24 to 6,544 beds in
FY27E with total capex spend of Rs. 11 Bn. Aster DM will be adding 959 beds through brownfield |Pro. Pledging
expansion across its hospitals in Kerala, Karnataka, and Andhra Pradesh hospitals with capex of Rs Pledging 98.8 98.8 98.8 98.8
4.8n over FY24-27E. Further company is looking to add additional 718 beds through greenfield in Source: BSE
Kasaragod and Trivandrum (Kerala) with expected capex spend of Rs. 5.7 Bn. Since, Aster already has
strong presence in all three regions it won’t be difficult for them to attract patients due to strong |Price performance (%)*
regional connect. This will help to boost revenue growth going forward. The capex will largely be 1M 3M 12M 36M
funded by internal accruals as the company has healthy cash flows. Despite large capex cycle, the NIFTY 50 3.4 8.0 26.2 M
44.5
returns ratios are expected to improve for the company with ROE and ROCE of 12% and 13% NIFTY 500 3.0 7.3 35.4 58.7
respectively in FY27E.
ASTERDM 6.6 17.9 23.6 92.8
*as on 19th Sep 2024; Source: AceEquity, SMIFS Research
Value unlocking due to demerger of GCC business: In Nov 2023, Aster DM announced the complete
sale of its GCC business for USD 1.0 Bn (USD 1.7 Bn EV; approx. 14.7x FY24 EV/EBITDA) to Alpha GCC |Price Performance Chart
Holdings, which is owned by a consortium led by Fajr (65%) and Aster promoters (35%). Aster received 450
USD 907.6 Mn in Q4FY24, with the balance to be paid upon certain contingent events. The received 400
funds have been utilized for dividend payouts and partially for expansion. Each business now has its 350
dedicated management team; Ms. Alisha Moopen has been promoted to MD and Group CEO of the
300
GCC business, while Dr. Azad Moopen will oversee both operations. The segregation of the GCC
250
business has unlocked value for the India business, making it easier for investors to understand and
evaluate its performance in the market. 200
150
EBITDA margins to improve going forward: The EBITDA margins of the company is expected to improve 100
by 364 bps over the next three years. Some hospitals in Kerala clusters (60% EBITDA contribution) Apr-22 Nov-22 Jun-23 Jan-24 Aug-24
such as Aster Medicity, Aster CMI and Aster Calicut has 30%+ margins whereas the Karnataka and Source: NSE
Andhra cluster have margins of 23% and 11% respectively with scope to improve the margins further.
Margins will expand due to 1) 65% of the beds expansion is justifiably in Kerala which has highest
margins as occupancies there have surpassed 80% 2) Enhanced performance in Andhra-Telangana
region will contribute significantly to overall growth, and early signs are visible (Ramesh hospital
margin has improved to 10% in FY24 from 9% FY23 3) Aster Pharmacy is expected to witness margin
improvements in FY26, albeit gradually. Akshaya Shinde
Sector Lead – Pharma & Healthcare
Valuation is in comfort zone: Currently, the stock is trading at comforting valuation on Sept’26 9664200928/022 42005518
EV/EBITDA of 19.3x. We like Aster as 1) major expansion is brownfield where growth could be [email protected]
Beat estimates
achieved without dilutingon
theall counts;
margins 2) O&Mmaintain Accumulate
hospital additions will add incremental revenue; (3) Awanish Chandra
Aster Labs is EBITDA positive from Q4 FY24; and (4) strong ARPOB growth. We value the stock at 22x Executive Director
on Sept’26 EV/EBITDA (in line with KIMS) and arrive at target price of Rs. 457 per share which offers 8693822293
upside of 9% from current valuations. Therefore, we assign Accumulate rating on the stock. [email protected]

Y/E Mar (Rs mn) Revenue YoY (%) EBITDA EBITDA (%) Adj PAT YoY (%) Adj EPS RoE (%) RoCE (%) Adj P/E (x) EV/EBITDA (x)
FY23 29,941 25.6 4,491 15.0 1,090 60.3 2.8 5.9 8.2 100.0 26.6
FY24 36,989 23.5 5,780 15.6 1,224 12.3 3.6 6.1 8.9 140.6 32.0
FY25E 43,225 16.9 7,384 17.1 2,467 101.6 4.9 6.4 8.2 84.6 27.8
FY26E 51,270 18.6 9,286 18.1 4,059 64.5 8.1 9.6 10.6 51.4 21.7
Update
FY27E 60,626 25.8 11,680 19.3 SMIFS
5,824 Limited
43.5 11.7 12.1 12.6 35.8 17.0 1
Source: Company, SMIFS Research Estimates *ROCE is calculated on post tax profit
esult Update SMIFS Limited 1
SMIFS Research is also available on Bloomberg
Initiating Coverage 1
 Index
Index ................................................................................................................ 2
Mapping India’s Hospital Bed Capacity .............................................................. 3
Investment Rationale ....................................................................................... 4
One of the largest players in South India ........................................................................... 4
How Aster DM stands out from its peers? ......................................................................... 4
Expansion of beds by 34% in next three years to drive growth ......................................... 5
Dominance in Domestic Market with Limited Peer Competition ....................................... 6
What makes Kerala a popular medical tourism destination? ............................................ 6
Strong brand equity in GCC but lower international patients mix in India why so? .......... 7
Value unlocked due to demerger of GCC business ............................................................ 8
Higher ARPOB than peers in Tier II and III cities ................................................................. 9
ARPOB to grow at CAGR of 8% over FY24-FY27 ............................................................... 10
Revenue will increase due to new beds addition ............................................................. 12
EBITDA to grow at CAGR of 26% from FY24-27E .............................................................. 12
Why the EBITDA margins are lower than peers? ............................................................. 13
Strong cash generation going ahead ................................................................................ 15
Return ratios are expected to improve going forward ..................................................... 15
Cluster Wise Business ..................................................................................... 16
Kerala cluster contributes 54% to the company’s revenue in FY24 ................................. 16
Karnataka and Maharashtra cluster contribute 30% to the company’s revenue ............ 17
Andhra and Telangana contribute 11% to the revenue ................................................... 18
Industry Overview .......................................................................................... 19
Key Risks ........................................................................................................ 22
Corporate Governance.................................................................................... 23
Promoters’ Shareholding ................................................................................ 23
Board Composition ......................................................................................... 23
Key management personnel ........................................................................... 25
Auditors of the company ................................................................................ 26
CSR Activities .................................................................................................................... 26
Company Background ..................................................................................... 27
What is Aster DM Hospital all about? .............................................................................. 27
Peer Comparison ............................................................................................ 27
Valuation and Recommendations ................................................................... 30
Key Performance Indicators ............................................................................ 31
Financial Statements ...................................................................................... 32

Aster DM Healthcare Ltd

Initiating Coverage 2
 Mapping India’s Hospital Bed Capacity
Fig 1: India Total Beds : 19 Lacs (Pvt + Public) Fig 2: Private and Public Beds In India

Public
North
West
25% Hospital
25% Beds
38%

Private
East
13%
Hospital
Beds
South 62%
37%
Source :GOI Source :GOI

Fig 3: North India total beds : 4.7 Lacs Fig 4: South India total beds: 7.0 Lacs
Himachal Chandigarh Puducherry
Pradesh 1% Andhra 1%
Jammu &
3% Kashmir Pradesh
Uttrakhand 12%
2% Karnataka
5%
Kerala 37%
14%
Haryana
8%
Uttar
Delhi Pradesh
8% 60% Telangana
14%

Punjab Tamil Nadu

13% 22%
Source :GOI Source :GOI

Fig 5: East India total beds : 2.4 Lacs Fig 6: West india total beds: 4.7 Lacs
Bihar
13% Chhattisgar Goa
Gujarat h 1%
Jharkhand 14% 4%
11%
West Bengal
Maharashtr
47% Madhya
a
Odisha Pradesh
48%
10% 14%

Nagaland Tripura Rajasthan

Meghalaya Assam
1% 19%
2% 2% 10%
Source :GOI Source :GOI

Fig 7: Kerala total beds 99.2K Fig 8: Aster DM Beds Distribution (4,867 beds)

Andhra and
Aster DM , 2.4% Telangana,
1047, 22%

Public Beds,
38.3%
Private Beds, Kerala, 2396,
59.3% 49%

Karnataka and
maharashtra,
1424, 29%

Source :GOI Source :GOI

Aster DM Healthcare Ltd

Initiating Coverage 3
 Investment Rationale
One of the largest players in South India
 Aster DM healthcare is a hospital chain having 19 hospitals in South India and is the
largest healthcare provider in Kerala. As of Mar 24, the total bed capacity of Aster
hospitals is 4,867 beds spread across 5 states (Kerala, Andhra Pradesh, Telangana,
Karnataka, and Maharashtra). It offers healthcare services across various specialities
and 58% of the company’s revenue is from niche specialties (Cardiac Sciences,
Neurology, Oncology, Liver care, Nephrology, and Orthopaedics).
 South India has huge supply of beds i.e., 7 lacs hospital beds against population of
31.5 Cr which is bed density of 3.5 beds per 1000 population which is higher than the
national average of 1.3 beds. However, the region also has the one of the highest
populations of 60+ (ageing people) i.e. 4 Cr which helps Aster DM to enjoy its
favourable position in the region with a higher share of operational beds, and strong
brand equity. Kerala where Aster DM has significant presence has total of 99K beds,
out of which 2.4% share is captured by Aster DM hospitals.

Fig 9: Aster is the second largest player in South India after

Fig 10: And is the largest player in Kerala
Apollo in terms of beds capacity
6000 3000
5000 2500
4000
2000
3000
1500
2000
5255

4867

4000

3641

2769

2333

1990

1691

1000
1000
2396

1378
500

720

470

300
0
Aster DM

Manipal Hospitals
Apollo Hospitals

Narayana Hrudalaya

Kovai Medical
KIMS Hospitals

Gleneagles Global
Kauvery Hospitals

0
Aster DM

Lakeshore

Apollo Hospitals
KIMS Kerala

Lourdes Hospital
Hospitals

Source: Company, SMIFS Research Source: Company, SMIFS Research

How Aster DM stands out among its peers?

 Aster DM hospital has major focus in providing services in the tertiary and quaternary
care. But unlike its large peers which has major presence in metro cities, Aster DM’s
70% of the business is in tier II, tier III cities like Kochi, Calicut, Vijayawada, and
Kolhapur and despite significance presence in Tier II cities it has high ARPOB of Rs. 40K
which is higher than the peers such as KIMS due more revenue (70%) from quaternary
care.
Fig 11: Aster Medicity – Kochi, Kerala

Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 4
 Fig 12: Kerala cluster have the dominant revenue share Fig 13: And the highest beds contribution as well
FY24 FY24
Andhra and
Telangana Andhra and
11% Telangana,
1047, 22%

Kerala, 2396,
Karnataka
49%
and Kerala
maharashtra 54%
30%
Karnataka
and
maharashtra,
1424, 29%
Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 14: Aster DM Hospitals Network

FY24 Kerala Karnataka & Maharashtra Andhra and Telangana
Bed capacity 2,396 1,424 1,047
Operational beds 1,827 946 779
Revenues (In Rs mn) 20,070 11,000 4,120
EBITDA (In Rs mn) 4,300 2,170 412
EBITDA Margin (%) 21.4% 20% 10%
Occupancy (%) 79% 61% 50%
ARPOB (Rs/ day) 38,100 53,600 28,100
Revenue/Bed (Rs Mn) 11.0 11.6 5.3
EBITDA/Bed (Rs Mn) 2.4 2.3 0.5
Source: Company, SMIFS Research

Expansion of beds by 34% over next three years to drive growth

Aster’s 57% of the capex is allocated to brownfield projects, enhancing top-line growth
while maintaining EBITDA integrity. Typically, in such expansions, the breakeven point for
EBITDA is reached within 3-6 months. This approach ensures growth without compromising
margins or ROCE.
The expansion details are as follows:
1) Kerala Cluster: This cluster has six hospitals situated across Kochi, Kannur, Areekode,
Calicut, Kottakkal, and Kollam. Notably, 65% of the total bed expansion is earmarked
for Kerala, the home area. Over FY24- 27, a total of 1,093 beds will be added, utilizing
both brownfield (375 beds) and greenfield (718 beds) approaches. The expansion
extends to new cities within Kerala such as Trivandrum (454 beds) and Kasorgod (264
beds). Additionally, brownfield expansions are planned for existing hospitals by adding
375 beds. The expected capex for the Kerala cluster may range from Rs. 6-7 Bn.
2) Karnataka cluster (Bengaluru): These include three hospitals located in New Airport
Road, JP Nagar, and Whitefield. It is planning to add 350 beds in New Airport Road,
Aster CMI hospital and 159 beds in Whitefield hospital (Oncology block) which is
expected to be completed in the next 3 years and will be operational in FY27 and FY25
respectively. Both these expansions are brownfield expansions.
3) Andhra Pradesh and Telangana cluster: It includes Seven hospitals in Andhra Pradesh
spread across Guntur, Vijayawada, Ongole and Tirupati and one hospital in Hyderabad,
Telangana region. It is planning to expand in existing hospital of Ongole by adding 75
beds which is expected to be completed by FY25.
Aster DM will be adding total 1,677 beds through brownfield (959 beds) and greenfield (718
beds) expansion across its hospitals in Kerala, Karnataka and Andhra Pradesh hospitals with
total capex of Rs 10.5 bn over FY24-27E (Rs. 6.5 Mn per bed)
This includes the greenfield projects where the company plans to add 454 beds in
Trivandrum and 264 beds in Kasaragod (Kerala) for capex spend of Rs.5.7 Bn (Rs. 8 Mn per
bed). Since, Aster already has strong presence in all three regions it won’t be difficult for
them to attract patients due to strong regional connect.

Aster DM Healthcare Ltd

Initiating Coverage 5
 Fig 15: Planned bed capacity
FY23 FY24 FY25E FY26E FY27E
Kerala 2,236 2,396 2,596 2,935 3,489
Karnataka and Maharashtra 1,034 1,424 1,583 1,583 1,933
Andhra and Telangana 1,047 1,047 1,122 1,122 1,122
Total Beds 4,317 4,867 5,301 5,640 6,544
Source: Company, SMIFS research

The company is also looking for O&M Models and small bolt on acquisitions to expand the
capacity in South India. The company aims to concentrate on key markets such as
Coimbatore, Chennai etc.

Dominance in Southern Markets with Limited Peer Competition

Aster DM holds a strong brand positioning in Kerala and Andhra Pradesh. By leveraging its
brand, it can achieve higher sales merely by improving its occupancy and expanding in
current market only. However, since the occupancy level in its core market has already
reached 80% it is planning to add new capacities in this market to cater the rising demand.

Fig 16: Bed capacities in major cities

Bengaluru Hyderabad Kerala Andhra
Bed density (per '000 people) 4.0 2.9 2.8 1.5
Share of beds
Aster DM 25% 3% 49% 18%
KIMS (Krishna Institute of Medical Science) 0% 25% 0% 16%
Apollo 10% 17% 4% NA
Fortis 7% 0% 0% 0%
NH 28% 0% 0% 0%
Rainbow 20% 46% 0% 14%
Medanta 0% 0% 0% 0%
Yatharth 0% 0% 0% 0%
Max 0% 0% 0% 0%
Jupiter Lifeline Hospitals 0% 0% 0% 0%
Source: Company, SMIFS Research

What makes Kerala a popular medical tourism destination?

In 2023, India welcomed 72.3 Lacs foreign tourists, with a noteworthy 5 Lacs individuals
seeking medical care. Among these medical tourists, a significant 40%—amounting to 2 Lacs
patients—chose Chennai as their destination for treatment. This surge in medical tourism
not only highlights India's growing prominence in healthcare but also sets a promising
precedent for neighbouring states like Kerala, which are anticipated to witness a parallel
rise in medical tourism soon.
Kerala has positioned itself as a leading hub for international medical tourism, capitalizing
on its renowned Ayurvedic therapies, excellent air connectivity, and favourable climate
conducive to swift recovery. With an anticipated influx of over 1 Lac tourists in the next
three years, the therapeutic tourism sector is going to thrive.
The healthcare sector in South India is set for growth, and Aster DM, with its strong brand
presence in Kerala, is well-positioned to lead. The company is poised to attract a larger
patient base, benefiting from expanding medical tourism and increasing demand for quality
healthcare services in the region.

Aster DM Healthcare Ltd

Initiating Coverage 6
 Fig 18: However, 40% of the medical tourist travel to
Fig 17: Delhi had the highest FTA in India in FY23
Chennai for their treatment
Others
13%
Kolkata
Kochi 3%
4% Chennai
Delhi 40%
Hyderabad
39%
5%
Bangalore Others
7% 60%
Chennai
8%
Haridaspur Mumbai
8% 13%
Source: Ministry of Tourism, SMIFS Research Source: Ministry of Tourism, SMIFS Research

According to the Ministry of Tourism in India, besides Chennai, major metropolitan areas
such as Delhi, Mumbai, Bangalore, Hyderabad, and Kolkata have also observed significant
footfalls of Foreign Tourist Arrivals (FTAs) seeking medical treatment. Renowned for their
advancements and enriched pool of knowledge, talent, and expertise, these cities serve as
major Medical Value Tourism (MVT) hubs.
Additionally, Tier-2 MVT destinations like Cochin, Trivandrum, Coimbatore,
Vishakhapatnam, Ahmedabad, Jaipur, Chandigarh, Pune, among others, hold substantial
potential for further growth and development in the medical tourism sector.

Fig 19: Percentage of Medical FTAs with respect to total Fig 20: International patients mix of peers – Apollo wins the
FTAs race

25.0% 16%
14%
19.9%
20.0% 12%
10%
15.0% 8%
6%
10.0% 4%
7.4% 15%
6.1% 6.4% 6.7% 2%
5%
8%

6%

8%

6%
4.9% 5.0%
0%
5.0% 2.4% 2.9%
Aster DM

Fortis
Medanta

Max Healthcare
NH

Apollo

0.0%
CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22
Percentage of Medical FTAs wrt Total FTAs
Source: Ministry of Tourism, SMIFS Research Source: Ministry of Tourism, SMIFS Research

Strong brand equity in GCC but lower international patients mix in India
why so?
International patients contribute 5% to the company’s revenues and major patients comes
from countries like Maldives. However, despite having significant brand equity in GCC
countries, the international patients mix is still lower as compared to its peers such as Max,
Apollo, Fortis as major facilities of Aster are in Tier II and Tier III where the flight connectivity
is low. However, In Kochi and Bangalore hospitals of Aster the international revenue
contributes 10-12% to the respective hospitals which is higher than those of the peers in
the same market.

Aster DM Healthcare Ltd

Initiating Coverage 7
 Value unlocked due to demerger of GCC business
GCC used to account for 75% of Aster DM’S revenue in FY24 but it was a drag on the overall
business because of lower margins. Since, both these markets were different, the
investment community was not giving a fair valuation to Aster’s India business as it was
difficult to understand GCC business and the market dynamics.
In November 2023, Aster DM announced the complete sale of its GCC business for USD 1
billion (USD 1.65 billion EV; approximately 8.5x FY25 EV/EBITDA) to Alpha GCC Holdings,
which is owned by a consortium led by Fajr (65%) and Aster promoters (35%). Aster received
USD 903 Mn in Q4FY24, with the remaining balance to be paid upon certain contingent
events. The received funds have been utilized for dividend payouts and partially for
expansion. The transaction was completed in April 2024.
The promoter’s stake for the India business remains unchanged, however, for GCC it is now
35% from 41.4% earlier.

Fig 21: Post Segregation Structure

Source: Company

The demerger has sparked a notable rerating of Aster DM's India business, resulting in a
gradual narrowing of the valuation gap. As a result, the company's worth is now aligning
more closely with that of its Indian counterparts, marking a positive trend in its valuation
trajectory.

Fig 22: India business’s management team

Source: Company

Each business now has its dedicated management team; Ms. Alisha Moopen has been
promoted to MD and Group CEO of the GCC business, while Dr. Azad Moopen will oversee
both operations. Mr. Ramesh Kumar, previously the Regional Chief Executive Officer for
Karnataka and Maharashtra, has been elevated to the position of Chief Operating Officer
(COO) of Aster DM Healthcare, India

Aster DM Healthcare Ltd

Initiating Coverage 8
 The demerger of the GCC business has unlocked value for the India business, making it
easier for investors to understand and evaluate its performance in the market.

Fig 23: Financials to improve post demerger

Better performance across key metric post-segregation

Pre-segregation Post-segregation
Financial Metrics (9M FY24)
(GCC + India) (India)

Revenue YoY Growth 18% 25% 

EBITDA Margins 13% 16% 

EBITDA YoY Growth 25% 31% 

PAT YoY Growth -40% 54% 

ROCE 9.2% 14.7% 

Net Debt and Lease Liabilities / Equity (x) 1.1x 0.7x 

Net Debt and Lease Liabilities / EBITDA (x) 3.0x 2.3x 

Net Debt (excl Lease Liabilities) / EBITDA3 (x) 1.4x 1.3x 

Source: Company AR, Note: GCC got demerged w.e.f. 4th April, 2024

Higher ARPOB than peers in Tier II and III cities

Tier 2 and Tier 3 cities of South India have ARPOB range of Rs. 25-30K due to lower pricing
power and low inpatient volume. The ARPOB of Aster DM in tier II and Tier III cities are in-
line with its listed South Indian peers such as KIMS and Narayana but lower than that of
Apollo. It is due to significant presence in Tier II and Tier III cities.

Fig 24: Metro cities presence of peers

90%

80%

70%

60%

50%

40%

30%

20%

10%
34%

61%

75%

66%

40%

54%

85%

73%

30%

0%
KIMS Apollo Fortis Narayana HCG Medanta Max Rainbow Aster DM

Source: Company

Aster DM Healthcare Ltd

Initiating Coverage 9
 Fig 25: ARPOB of peers in Karnataka cluster
70,000

60,000

50,000

40,000

30,000

20,000

54,000
46,600

60,000

57,600
10,000

-
KIMS Rainbow Aster DM Apollo

Source: Company

In Karnataka, Aster is only present in Bangalore, a Tier I city. The ARPOB is notably higher
compared to peers, indicating that a significant portion of Aster’s revenue is derived from
quaternary care services, leading to a higher ARPOB in this Tier I city. Since, large metro
has had inherent advantages like high per capita income, high insurance penetration and
propensity to pay for high end quaternary care facilities and more health awareness.

Also, Tier-1 cities have higher proportion of international patients which results in more
profitability for the hospital chains operating in these regions. For complex procedures,
usually patient in India travel to Tier-1 cities which lead to better case mix (high end
procedures) for the hospital chains. Since, Aster is also further expanding its operations in
Tier-1 cities like Bangalore it will help the company to increase its ARPOB further.

ARPOB to grow at CAGR of 8.5% over FY24-FY27

While the ARPOB increase over FY21-24 (CAGR of 10%) was driven primarily by the Kerala
and Bangaluru (Karnataka) clusters (11% and 13% ARPOB CAGR over FY21-24) partially
offset by -1% APROB CAGR for Andhra cluster due to lower occupancy. We expect overall
ARPOB growth will be driven by price hike in mature hospitals of Kerala and Bengaluru along
with case mix improvement (inclusion of oncology block in Bangaluru Whitefield). As the
maturity of the Kerala and Bangaluru hospitals goes up, the ARPOB would improve for these
hospitals. Management expects that with commencement of all multi specialties Karnataka
cluster will reach to Rs 70,000 ARPOB at Bangalore in FY25E from Rs 60,0000 in Q1FY25.
The company is adding a dedicated block of oncology to its Bangaluru Whitefield hospital
which will improve the revenue mix for the company. Going forward, as the company
prepares to offer a comprehensive range of oncology services encompassing
chemotherapy, medical, surgical, and radiation oncology, there's a strategic expectation for
an increase in ARPOB.
We expect ARPOB to grow at a CAGR of 8.5% from 40.1K in FY24 to 51.1K in FY27E.
Fig 26: Overall ARPOB of Aster is catching up with peers…! (FY24)
80,000
70,000
60,000
50,000
40,000
30,000
31,916

57,488

60,887

38,356

46,506

61,890

39,101

76,000

55,853

28,571

40,100

20,000
10,000
-
KIMS

Aster DM
Apollo

Fortis

Narayana

Yatharth
HCG

Rainbow
Medanta

Shalby

Max

Source: Company

Aster DM Healthcare Ltd

Initiating Coverage 10
 Occupancy Levels to be flattish going forward despite new bed addition
Aster DM is well-established in its home market of Kerala. The newer hospitals in cities of
Kerala Kochi, Kannur, Kollam, and Calicut will drag the overall occupancies of the cluster.
We expect Kerala cluster’s occupancies to fall from 79% in FY24 to 72% in FY27. At company
level the overall occupancies are expected to remain between 67% and 68% during FY24 to
FY27E due to addition of 1,677 beds over FY24-FY27E.
Fig 27: ARPOB to increase going forward Fig 28: New bed addition will lead to decline in occupancy
80%
60,000
70%
50,000
60%
40,000 50%

30,000 40%

30%
20,000
20%
26,100

27,700

30,100

33,500

36,500

40,100

43,450

47,143

51,150
10,000
10%

63%

61%

56%

66%

68%

68%

66%

70%

67%
- 0%
FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

OPD to IPD conversion to improve going forward

At the company level, the conversion rate from OPD to IPD for Aster has consistently ranged
between 8.5% and 9%. However, in the Karnataka and Andhra clusters, this rate has been
slightly elevated, ranging from 10% to 11%. In simpler terms, this indicates that out of the
individuals consulting the doctors, approximately 9% of them are admitted to the hospital
for further treatment. The conversion rate is expected to enhance because of the more
effective utilization of the 13 clinics and reducing ALOS.
Fig 29: Apollo hospitals’ conversion rate is highest…. Fig 30: The ratio for Aster is expected to improve gradually
35% 10.0%
30%
9.5%
25%
20% 9.0%
15%
8.5%
10%
8.4%

8.0%
15%

30%

11%

9.8%

9.0%

8.4%

8.4%

9.1%

9.5%

9.9%

5%
6%

7%

9%

0% 7.5%
KIMS
Aster DM

NH
Yatharth

Medanta

Apollo
Rainbow

FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 11
 Revenue will increase due to new beds addition
Over the 3-year period (FY21- FY24), the company has significantly improved its revenue
mix by expanding its beds capacity by adding 1100 beds in regions Kerala (502 beds) and
Karnataka (457 beds) and rest in AP which resulted in revenue CAGR of 31%. This growth
was further supported by 10% CAGR increase in ARPOB, high inpatient growth (CAGR of
22%) and favourable case mix in the same period. The company plans to add total of 1,677
beds over FY24-27 in all three clusters which will further improve the revenue.
Going ahead, we expect revenue to deliver CAGR growth of 18% from FY24 to FY27E on
the back of more revenues from new hospitals, and improvement in APROB led by
addition of high-end specialities such as oncology.

Fig 31: Revenue to grow at CAGR of 18% from FY24-FY27E Fig 32: Led by higher contribution from Kerala hospitals
70,000 50% 100%

11%
12%

10%
11%
16%

9%
17%
45% 90%
60,000
40% 80%
50,000 35% 70%

27%

30%
26%

27%

29%
33%

33%
30% 60%
40,000
25% 50%
30,000
20% 40%

20,000 15% 30%

10% 20%
16,540

23,840

29,941

36,989

43,225

51,270

60,626

10,000
5% 10%
57%

55%

57%

54%

52%

50%

49%
0 0% 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Revenues (In Rs. Mn) Growth % Kerala Karnataka and Maharashtra Andhra and Telangana

Source: Company, SMIFS Research Source: Company, SMIFS Research

EBITDA to grow at CAGR of 26% from FY24-27E

 Over FY21-FY24, EBITDA has grown at a CAGR of 54% from Rs 1.6 Bn in FY21 to Rs 5.8
Bn in FY24. This was majorly led by significant improvement in EBITDA of Kerala due to
more matured hospitals and Karnataka clusters which has witnessed almost 6-7x jump
in its EBITDA in the past three years. Over FY21-24, the EBITDA per bed posted 35%
CAGR to reach over Rs1.7mn. We expect EBITDA per bed to exhibit 11% CAGR
reaching ~Rs2.4mn over FY24-27E.
 Moving forward, the increased contribution from the Andhra cluster and the addition
of oncology services at Bengaluru Whitefield Hospital, we anticipate significant benefits
from operating leverage. EBITDA is expected to grow at a 26% CAGR, reaching Rs
11.6Bn, while margins are projected to expand by 364bps, reaching at 19.3% by FY27E.
Fig 33: EBITDA/operating bed to grow at ~11% CAGR Fig 34: EBITDA to grow at CAGR of 26% from FY24-27E
14,000 25%
2.5 19%
12,000
18% 20%
2.0 10,000

8,000 17% 15%

1.5
In Rs mn

10% 15% 15% 16%

6,000 10%
1.0
4,000
11,680

5%
1,590

3,550

4,491

5,780

7,385

9,286

0.5 2,000
0.7

1.4

1.6

1.7

1.9

2.1

2.4

0.0 0 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E
EBITDA (In mn) EBITDA Margin %
Source: Company, SMIFS Research Estimates Source: Company, SMIFS Research Estimates

Aster DM Healthcare Ltd

Initiating Coverage 12
  Some hospitals in Kerala clusters (60% EBITDA contribution) such as Aster Medicity, and
Aster Calicut has 30%+ margins whereas the Karnataka and Andhra cluster have
margins of 20% and 10% respectively with scope to improve the margins further.
 Margins will expand due to:
1) 65% of the bed’s expansion is justifiably in Kerala which has highest margins
as occupancies in Kerala is already at 80%
2) Enhanced performance in Andhra-Telangana region will contribute
significantly to overall growth, and early signs are visible (Ramesh hospitals
margin has improved to 10% in FY24 from 9% FY23 which was dragging the
overall cluster margins). Going ahead, the cluster is expected to witness
margin expansion of 590 bps to ~16% in FY27.
3) Aster Pharmacy is expected to witness margin improvements in FY26, albeit
gradually.

Why the EBITDA margins are lower than peers?

Despite a decent ARPOB of Rs. ~40K in FY24, Aster’s EBITDA Margins are lower than the
peers such as KIMS, Narayana and Medanta. This is on account of higher consumable cost
and spend towards Pharma and Labs business, which leads to the lower margins. But going
ahead the EBITDA margins are expected to witness expansion of 364 bps and it will at par
with peers such as Narayana and Fortis but still lower than KIMS, Apollo and Medanta.
Material cost and employee cost are two of the largest cost components for all the players.
For most players compared hereby, material cost is in the range of 13-25%. This cost of
Aster is high, that’s why despite decent ARPOB, the EBITDA margins are lower than its peers.
Going forward EBITDA margins are likely to improve faster mainly on EBITDA positive
pharmacy biz., increasing revenue on bed addition and therapy expansion in Bangalore.
Aster DM’s 7% revenue comes from Labs and Pharmacy business which usually has higher
consumable cost. Adjusted for this, the consumable cost for hospital business is in-line with
the peers (21%).

Fig 35: The consumable cost of Aster is higher than its peers due to labs and pharmacy
business
60%
52%
52%
51%

50%

40%
28%
26%
25%

25%
25%
25%

25%
25%
24%
23%

23%
23%
23%
23%

30%
22%
22%
22%

21%
21%

21%

20%
20%

20%

20%
18%
13%

20%
13%

10%

0%
KIMS

Aster DM
Fortis

Narayana
Apollo

Yatharth
Rainbow
HCG

Medanta

Max

FY22 FY23 FY24

Source: Company, SMIFS Research Estimates

*For Apollo hospitals, Consol. Numbers are taken and not just for hospital only.

Aster DM Healthcare Ltd

Initiating Coverage 13
 Fig 36: Employee cost for Aster DM is in-line with its peers but higher than KIMS

26%
30%

25%

24%
22%
21%
25%

20%
19%

19%

19%
18%
18%
18%

18%
18%

17%
17%
17%
17%

17%
17%
16%

16%
16%
16%
16%
20%

14%
13%

12%
12%

12%
15%

10%

5%

0%

KIMS

Aster DM
Apollo

Fortis

Narayana

Yatharth
HCG

Rainbow
Medanta

Max
FY22 FY23 FY24

Source: Company, SMIFS Research Estimates

Fig 37: Other Expenses including doctor fees for Aster DM are moderate vis-à-vis most
of its large peers, however doctor’s cost is in-line with all the peers at 22%
44%

43%

50%
42%

42%

41%
41%

41%
41%

41%
41%

40%

39%

39%
45% 38%
37%
37%

37%
36%

36%
35%
35%

35%
34%
40%

32%
31%

30%
29%
28%
35%
23%

30%
21%

25%
20%
15%
10%
5%
0%
KIMS

Aster DM
Narayana
Apollo

Fortis

Rainbow

Yatharth
HCG

Medanta

Max

FY22 FY23 FY24

Source: Company, SMIFS Research Estimates

Fig 38: EBITDA Margin of Aster is lower than its peers but will catch up in coming years

40%
34%
33%
31%
31%

35%
28%
28%

28%
27%

27%
27%

26%
26%

25%

24%

30%
24%
24%

23%

23%
21%

21%

21%
19%

25%
19%

19%
18%

18%

18%
18%

17%
17%

16%
15%
15%

20%
15%
10%
5%
0%
KIMS

Narayana

Aster DM
Apollo

Fortis

Yatharth
Max
HCG

Rainbow
Medanta

Shalby

FY22 FY23 FY24

Source: Company, SMIFS Research Estimates

Aster DM Healthcare Ltd

Initiating Coverage 14
 Strong cash generation going ahead
 Due to increased profitability, the FCF generation will remain robust. Additionally, a
significant portion (57%) of the Capex will be brownfield, allowing for growth in existing
hospitals and leading to improved FCF. As higher EBITDA from new and mature
hospitals starts to materialize, it will drive profits, and consequently, the operating cash
flow (OCF) and FCF of the company will improve. Higher working capital needs in FY24
resulted in a Rs 6Bn negative FCF. However, we expect ASTERDM to generate ~ Rs 12Bn
FCF over FY25E-27E.
Fig 39: OCF to remain robust from FY24-26E Fig 40: Lower FCF generation due to high capex
15,000
20,000
10,000

4,468
15,000

11,171

2,305
5,000

5,608
Rs Mn
Rs Mn

10,000
0
FY23 FY24 FY25E FY26E FY27E
1,578

5,000
18,340

10,103
6,685

8,016

-5,000

-6,391
0
-10,000
FY23 FY24 FY25E FY26E FY27E
FCF
OCF
Source: Company, SMIFS Research Estimates Source: Company, SMIFS Research Estimates

Return ratios are expected to improve going forward

Return ratios started picking up from FY23 and is expected to improve further. Investment
over the next three years is likely to be in existing hospitals, to add brownfield bed capacity
as well as roll-out of oncology initiatives. Due to higher profitability and improved capital
allocation the ROE and ROCE is going to improve significantly.

Fig 41: ROCE to improve going forward

14%

11% 13%
12%

10% 12%
10% 9%

8% 8% 8%

6%
6%
6% 6%
4%

2%

0%
FY23 FY24 FY25E FY26E FY27E

ROE ROCE

Source: Company, SMIFS Research Estimates *Return ratios computed on Post Tax

Aster DM Healthcare Ltd

Initiating Coverage 15
 Cluster Wise Business
Aster DM Healthcare business is divided among 3 clusters namely (Kerala,
Karnataka and Maharashtra, Andhra and Telangana).
Kerala cluster contributes 54% to the company’s revenue in FY24
Kerala cluster currently having 6 hospitals and total bed capacity of 2,396 beds with 1,827
operational beds. The first hospital in Kerala was built in Kozhikode in 2002 in partnership
with Malabar Institute of Medical Sciences (MIMS) (where Aster DM increased its share
from minority to majority in 2013), with a bed capacity of 695 beds. Kerala cluster
contributes highest EBITDA of 60% and have EBITDA Margins of 21%. It has ARPOB of ~38K
and occupancy levels of 79 % as of FY24. The company plans to add 1,093 beds by FY27E.
We expect revenue and EBITDA CAGR growth of 14% and 20% respectively from FY24 FY27E
for Kerala cluster due to increase in ARPOB and new beds addition.

Fig 42: Kerala Revenue Fig 43: Kerala Margins (In %)

16%
35,000 50% 8,000 25% 50%
14%
41% 45% 24% 45%
30,000 12% 7,000
28% 40%
19% 40%
6,000 23%
25,000 35% 35%
5,000 21%
20,000 30% 21% 30%
25% 4,000 25%
15,000 19%
20% 3,000 20%
10,000 15% 13% 15%
2,000
13,180

16,910

20,070

22,394

25,453

29,541

10% 10%

6,109
1,240

2,550

3,560

4,300

5,083

7,385
9,350

5,000 1,000
5% 5%
- 0% - 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Revenues (In Rs. Mn) Growth % EBITDA (In Rs. Mn) Margin %

Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 44: Kerala ARPOB (In Rs) Fig 45: Kerala Bed Occupancy (%)
50,000 90%
45,000 80%
40,000 70%
35,000
60%
30,000
50%
25,000
40%
20,000
15,000 30%
20%
28,000

32,000

34,400

38,100

40,386

42,809

45,378

10,000
65%

75%

79%

79%

76%

75%

72%

5,000 10%
- 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 46: Kerala Bed Capacity Fig 47: Kerala Operational Beds
4,000 3,000
3,500
2,500
3,000
2,500 2,000
2,000 1,500
1,500
1,000
1,000
1,395

1,575

1,734

1,827

1,999

2,172

2,477
1,894

2,027

2,236

2,396

2,596

2,935

3,489

500
500
0 0
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 16
 Karnataka and Maharashtra cluster contribute 30% to the company’s
revenue
Aster CMI was the first hospital built in 2013 in Bengaluru with bed capacity of 508 beds
whereas Aster Aadhar was the first hospital built in 2008 in Kolhapur, Maharashtra cluster.
This cluster comprises of 4 hospitals (3 in Bangaluru and one in Kolhapur) with a combined
bed capacity of 1,424 out of which 946 beds are currently operational. It has highest ARPOB
of 53.6K and occupancy of around 61%. The EBITDA margins of this facility is 20% in FY24.
The company plans to add 509 beds to this cluster by FY27E. We expect revenue and EBITDA
CAGR of 20.7% and 31.8% over FY24-FY27E. We expect the margins to increase for this
cluster significantly from 20% in FY24 to 25% in FY27E due to addition of beds in Bengaluru
Whitefield where a new block of oncology will be added which will improve profitability.

Fig 48: Karnataka & Maharashtra revenue Fig 49: Karnataka & Maharashtra EBITDA Margins (In %)

25,000 50% 6,000 50%

25%
45% 45%
35% 5,000 24%
20,000 40% 40%
35% 23%
35% 35%
25% 31% 4,000
15,000 30% 20% 30%
25% 3,000 25%
10,000 20% 16% 20%
15% 2,000 13%
15%
11,000

14,363

14,723

19,868

8%
4,330

6,550

8,170

5,000 10%

1,280

2,170

3,361

3,534

4,967
1,000 10%
330

830
5% 5%
3%
- 0% - 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Revenues (In Rs. Mn) Growth % EBITDA (In Rs. Mn) Margin %
Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 50: Karnataka & Maharashtra ARPOB (In Rs) Fig 51: Karnataka & Maharashtra Occupancy (%)
80,000 70%
70,000 60%
60,000
50%
50,000
40%
40,000
30%
30,000
20%
20,000
43,850
37,100

48,800

53,600

58,960

64,266

68,765

53%

60%

59%

61%

62%

65%

65%
10,000 10%

- 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 52: Karnataka & Maharashtra Bed Capacity Fig 53: Karnataka & Maharashtra Operational Beds
2,500 1,400

1,200
2,000
1,000
1,500 800

600
1,000
400
500
1,076

1,218
1,034
1,007

1,424

1,583

1,583

1,933

200
966
644

722

790

946
967

0 0
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 17
 Andhra and Telangana contribute 11% to the revenue
The Andhra and Telangana contribute 11% to the revenue and has bed capacity of 1,047
beds as of FY24. The company has established a strong presence in Andhra Pradesh and
Telangana with hospitals and clinics in cities like Hyderabad, Vijayawada, and Guntur.
It has 7 hospitals in AP/Telangana region and the first hospital in this cluster was built in
2014 in Hyderabad with bed capacity of 158 beds.
The cluster is having ARPOB of ~28K with the EBITDA margins of 10% as of FY24 and the
company is planning for bed expansion by adding 75 beds from 1,047 beds to 1,122 beds
by FY25E. We expect revenue and EBITDA CAGR of 12.6% and 30.2% respectively over FY24-
FY27E with ARPOB CAGR growth of 4%.

Fig 54: Andhra and Telangana revenue Fig 55: Andhra and Telangana EBITDA
33% 10%
6,000 35% 16%
13% 12% 1,000 14% 50%
30% 900 45%
5,000 19%
20% 25% 800 40%
-7% 13%
4,000 20% 700 35%
15% 600 16% 30%
3,000 10%
10% 500 25%
9%
400 20%
2,000 5%
300 15%
0%
2,790

3,700

3,440

4,120

4,652

5,190

5,710

1,000 200 10%

450

690

320

412

587

748

909
-5% 100 5%
- -10% - 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Revenues (In Rs. Mn) Growth % EBITDA (In Rs. Mn) Margin %

Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 56: Andhra and Telangana ARPOB (In Rs) Fig 57: Andhra and Telangana Occupancy Level (%)
32,000
60%
31,000
50%
30,000
40%
29,000 30%
28,000 20%
28,800

31,300

27,900

28,100

29,295

30,467

31,685

27,000 10%
40%

52%

50%

50%

51%

52%

55%

26,000 0%
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Fig 58: Andhra and Telangana Bed capacity Fig 59: Andhra and Telangana Operational Beds
1,200
1,000
900
1,000
800
800 700
600
600 500
400
400
300
200
1,047

1,047

1,122

1,122

1,122

200
896

871

647

602

780

779

853

898

898

100
0 0
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, SMIFS Research Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 18
 Industry Overview
Healthcare Delivery Market: A snapshot
 As per global estimates, the Indian healthcare delivery market is Rs 5.5-5.7 trln in value
terms by FY23, with growth being contributed by stabilisation of regular treatments,
surgeries and OPD amid minimisation of disruption due to the pandemic and expansion
of Average revenue per occupied bed (“ARPOB”) for the sector. A potential upside is
also expected from picking up of high realisation medical tourism as international travel
restrictions are relaxed delivery market is expected to reach a market size of
approximately INR 6.4 - 6.6trln in FY24 on the back of the fundamental strengths of the
sector an. Within the overall healthcare delivery market, the IPD is expected to account
for nearly 70% (in value terms), while the balance is to be catered by the OPD. Though
in terms of volumes, OPD volumes outweigh IPD volumes, with the latter contributing
the bulk of the revenues to healthcare facilities. The healthcare d inherent structural
strengths of the sector in India.
 As per CRISIL Research estimates, the Indian healthcare delivery industry to post a
healthy 13-15% CAGR between FY23 and FY26, driven by long-term structural factors,
strong fundamentals, and increasing affordability and potential of the Ayushman
Bharat scheme (the national health insurance scheme launched in 2018 to provide
access to healthcare for low income earners in India).

Fig 60: Healthcare delivery market poised to grow 13-15% over FY22-26
100%

1.6 1.7 2.2

80% 1
Rs. Trillion

60%

40% 6.1
1.9 3.5 3.9
20%

0%
FY15 FY22 FY23E FY26E
IPD OPD
Source: Crisil Report, SMIFS Research Estimates

 The Indian healthcare industry for FY22 is estimated at USD 372 billion of which
hospitals carve out the majority share, i.e., about 35%, contributing about USD 132
billion. This is followed by domestic pharmaceuticals contributing about 15% i.e. USD
54 billion and the remaining is shared by diagnostics, medical equipment and insurance.
Fig 61: Number of Public Beds per 1000 people Fig 62: Healthcare industry demand breakup
14 100%
90%
12 31% 30% 27%
80% 35%
10 70%
8 60%
50%
6
40%
69% 70% 73%
4 30% 65%
20%
2
2.9 2.5 4.3 13 2.6 0.5 10%
0 0%
US UK China Japan Vietnam India FY16 FY21E FY22E FY25E
IPD OPD
Source: Company, SMIFS Research Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 19
 The demand supply mismatch is huge which will benefit the players….
 Number of Beds per 1000’s people – India has one of the lowest beds to population
ratio of 0.5 public hospital bed and mere 1.3 beds, including public and private hospital
beds per 1,000 persons. When compared to peers such as China, has 4.3 public beds.
 As per research conducted by Princeton University, India has approximately 1.9 Mn
hospital beds in its public and private sector facilities.
 By 2030, India would require 2.9 Mn (29 Lacs) additional hospital beds to reach the
current global average of 3.2 beds per 1,000 persons.
Fig 63: State wise beds distribution

Source: Industry, SMIFS Research Estimates

Fig 64: Total bed capacity in India

Public Private Total Public Hosp. Private Hosp. Beds Total Hosp. Beds
hospitals hospitals Hospitals Beds (Estimated) (Estimated)

25,778 43,487 69,265 713,986 1,185,242 1,899,228

Source: SMIFS Research, Crisil Report

Fly to India for medical treatment– Medical tourism Industry!

 The healthcare costs in developed countries is relatively higher than in India. India is
also an attractive destination due to the presence of technologically advanced hospitals
with specialised doctors and facilities, such as e-medical visa. Treatments mostly sought
after in India are for heart surgery, knee implant, cosmetic surgery and dental care, due
to the low costs of these treatments in India. Medical tourism in India is driven by the
private sector.
 Of the total foreign tourist arrivals in India, the proportion of medical tourists grew
from 2.2% (0.11mn tourists) in 2009 to 6.4% (0.6mn tourists) in 2019. The government
has constituted a National Medical and Wellness Tourism Board along with providing
financial assistance of INR 6 lakh to medical tourism service providers under market
development assistance (MDA) to develop medical tourism in India. More than 94% of
medical tourists are from countries in Africa, west and south Asia.
 Medical tourists from countries like United Kingdom and Canada are also seeing an
increase, given long waiting periods for availing of treatments in these regions.

Fig 65: Cost of Ailments (In USD)

Ailments US Korea Singapore Thailand India
Hip replacement 50,000 14,120 12,000 7,879 7,000
Knee replacement 50,000 19,800 13,000 12,297 6,200
Heart bypass 144,000 28,900 18,500 15,121 5,200
Angioplasty 57,000 15,200 13,000 3,788 3,300
Heart valve replacement 170,000 43,500 12,500 21,212 5,500
Dental implant 2,800 4,200 1,500 3,636 1,000
Source: Industry, SMIFS Research Estimates

Aster DM Healthcare Ltd

Initiating Coverage 20
 Fig 66: Bangladeshi are the major tourists visiting India for medical reasons

Others, 14%
Sudan, 1%
Yemen, 2%
Oman, 3%

Afghanistan, 6%

Maldives, 8%
Bangladesh, 61%

Iraq, 5%

Bangladesh Iraq Maldives Afghanistan Oman Yemen Sudan Others

Source: Niti.gov

The number of Foreign Tourist Arrivals (FTAs) in India on medical visa grew to an estimated
697,000 in 2019 from 495,056 in 2017.33 India’s medical visitors have historically come
primarily from Afghanistan, Pakistan, Oman, Bangladesh, Maldives, Nigeria, Kenya and Iraq.
Popular specialities for MVT in India include cardiac care, orthopaedics, organ
transplantation, neurosciences, oncology and bariatrics.
Increasingly, the focus on strong branding of alternative medicine and rejuvenation
therapies, along with an emphasis on wellness and prevention, is drawing patients to India
from across the globe. Wellness tourism that builds on India’s strengths in Ayurveda and
Yoga, in particular, is a fast-emerging and growing segment within India’s MVT sector.
Several major players like Apollo and the Manipal Group are setting up wellness centres,
with traditional healthcare remedies as a key focus of their offerings. Many hotels/resorts
in the country, especially in the southern States, are establishing Ayurveda Centres. Leading
tour operators have also included Ayurveda in their brochures.

Aster DM Healthcare Ltd

Initiating Coverage 21
 Key Risks
Promoter Pledging:
As of March 24, the promoter has pledged 98.87% of their shareholding as collateral to
secure a $ 61 Mn offshore term loan facility from Deutsche Bank. This loan was utilized to
acquire a 35% stake in GCC. Promoter aims to reduce this loan by end of FY25.

Retention of key talent is a key risk:

Aster DM Healthcare's ability to attract talent is influenced not only by commercial
agreements but also by the strong reputation of its centers and hospitals, along with access
to cutting-edge technology and research opportunities, which can be even more appealing
to physicians. However, growing competition in talent acquisition could lead to tighter
margins and higher staff turnover.

Impact of regulatory challenges

The regulations with respect to pricing cap on services/patient charges might impact the
business adversely.

General Risks
Competition from healthcare players
Aster DM operates in a competitive landscape with various multi-specialty chains vying for
market share. Notable competitors include Narayana, Apollo Hospitals, KIMS etc. The
presence of these competitors poses potential implications for Aster's business
performance.

Others
Potential factors that could lead to such adverse impacts include a decrease in patient
footfall, reputational harm, liabilities arising from medical negligence, natural calamities, or
any political unrest, disruption, disturbance, or prolonged economic downturn specifically
in the mentioned regions.

Aster DM Healthcare Ltd

Initiating Coverage 22
 Corporate Governance
We believe that good corporate governance is necessary for enhancing the trust of the
shareholders. Hereby, we present a detailed framework on corporate governance for the
comfort of the investors of Aster DM Healthcare considering board of directors,
remuneration of key managerial personnel, contingent liability etc.

Promoters’ Shareholding
The promoters currently hold ~41.9% of the equity capital Union Investments Private
Limited holds the highest equity of 37.9%. The details of the shareholding and its movement
are indicated in the following table and chart:
Fig 67: Latest Promoter Shareholding
Particulars % Holding
Union Investments Private Limited, Mauritius 37.4
Union (Mauritius) Holdings Limited, Mauritius 4.0
Dr. Azad Moopen 0.4
Alisha Moopen 0.0
Ziham Moopen 0.0
Naseera Azad 0.0
Zeba Azad Moopen 0.0
Total 41.9
Source: Company Annual Report, SMIFS Research

Fig 68: Promoter Shareholding

43.0%

42.0%

41.0%

40.0%

39.0%

41.9%
41.9%
38.0%

37.0%
37.9%

37.9%
37.9%
37.8%

36.0%

35.0%
FY19 FY20 FY21 FY22 FY23 FY24

Source: Company Annual Report, SMIFS Research

Board Composition
Independent directors constitute 50% of the board composition.
Fig 69: Board Composition (Rs in mn)
Name FY23 FY24
Independent director 6 5
Non-Executive Directors 4 3
Chairman & Managing Director, CEO 2 2
Source: Company Annual Report, SMIFS Research

Independent directors and their compensation

The details are given below:
Fig 70: Independent directors & their compensation
Name FY 24 Compensation (Rs Mn) FY24
Mr. Chenayappillil John George 2.30 0.1%
Dr. James Mathew 3.00 0.1%
Mr. Wayne Earl Keathley 0.60 0.0%
Mr. Emmanuel David Gootam 2.60 0.1%
Ms. Purana Housdurgamvijaya Deepti 2.20 0.1%
Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 23
 Contingent Liabilities
Fig 71: Contingent Liability (Rs in mn)
FY23 FY24
Claims against the Group not acknowledged as debts 747 1340
Value Added Tax 2 2
KVAT related matters 0 0
Disputed provident fund demand pending before appellate authorities 14 14
Other matters including claims relating to employees/ ex-employees etc 16 16
Customer claims 0 0
Salary payable under minimum wages act 171 171
Export commitments under EPCG scheme 282 400
Letter of Credit 448 54
Guarantees:
Bank guarantee 344 391
Commitments:
Estimated amount of contracts remaining to be executed on capital account 1,630 2,414
Total 3,655 4,802
As a % of Net Worth 19.9% 23.8%
Source: Company Annual Report, SMIFS Research

Related Party Transactions

While investigating the related party transactions we found that there is nothing major
related party transactions of Aster DM with its subsidiaries.
Fig 72: Related Party Transactions (Rs in mn)
FY23 FY24
DM Education and Research Foundation
Collection on behalf of Group 49.8 102.8
Income from consultancy services 22.2 22.1
Interest income under the effective interest method on lease deposit 8.1 8.6
Purchase of consumables 0.0 0.2
Operating lease- Hospital operation and management expense 7.4 7.4
Other expenses 8.7 150.0

Alfaone Medicals Private Limited

Interest on loan from related parties 96.9 34.8
Short-term loans and advances given 730.0 804.0

Aries Holdings FZC

(Advance given)/ received during the year (net) 67.8 -46.3
Lease rental expense for the year 263.1 271.3
Dividend received during the year 22.0 29.3

AAQ Healthcare Investment LLC

(Advance given)/ received during the year (net) (58.3) -324.1
Lease rental expense for the year 163.9 169.1

Short-term employee benefits

Salaries and allowances 370.9 416.7
Share based Payments - 1.9

DM Education and Research Foundation

Other non current assets - deferred lease expenses 14.2 6.8
Other current assets - deferred lease expenses 7.4 7.4
Other financial assets (Non current) 157.6 113.3
Other financial assets- (non current) Rent and other deposits 123.1 18.3

Aries Holdings FZC - Other receivables 223.7 270.0

AAQ Healthcare Investment LLC - Other receivables - 324.1

Alfaone Medicals Private Limited - Financial assets - loans (Non current) 1,106.4 1669.0

Alfaone Retail Pharmacies Private Limited

Financial assets - Other financial assets (non current) 17.2 37.6
Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 24
 Key management personnel
Fig 73: Details of promoter and director
Name Designation Profile
Dr. Azad Moopen is the Founder Chairman of Aster DM Healthcare, overseeing its global
expansion from a single clinic in Dubai to over 534 facilities across seven countries. With
accolades including the Padma Shri Award and Pravasi Bharatiya Samman, he's
Managing Director and recognized for his significant contributions to healthcare. Honored with a fellowship from
Dr. Azad Moopen
Founder Chairman the Royal College of Physicians, UK, and multiple awards for his visionary leadership,
including the 'Lifetime Achievement Award' at FICCI Healthcare Excellence Awards, Dr.
Moopen continues to drive innovation and excellence in the healthcare sector.

Ms. Alisha Moopen is the Managing Director of Aster Group since February 2012, with
a distinguished career including roles as CEO of Aster Hospitals and Medcare & Medical
Centres – GCC and Deputy Managing Director for India business and overseeing the
strategic direction and development of the Company. A Chartered Accountant from ICAS
Deputy Managing
Ms. Alisha Moopen and a graduate of the University of Michigan and Harvard University, she's been
Director
recognized as a Young Global Leader by the World Economic Forum and has extensive
involvement in healthcare and global leadership organizations. Notable accolades
include being named among the Most Influential Women in the Arab World and the Top
100 World’s Greatest Leaders in Asia and GCC.
Mr. T. J. Wilson is a director of company & the group head–governance & corporate
affairs of AsterDM Healthcare. He holds a bachelor’s degree in commerce from the
university of Calicut, Kerala, India. He is also a member of the institute of chartered
Mr. T J Wilson Non-Executive Director accountants of India. In the past, he has worked with Koyenco Feeds Private Limited &
Parle (Exports) limited. He is responsible for overseeing the legal, secretarial &
governance function, internal audit & large portfolio of new hospital projects. He has
been a director of our company since April 20, 2009.

Mr. Anoop Moopen is Non-executive and Non-Independent director of the company. He

was formerly a Director at Malabar Institute of Medical Sciences Ltd. and a Non-
Executive Director at Aster DM Healthcare Ltd. Mr. Moopen holds a graduate degree
Non-Executive and Non- from the University of Leeds and an undergraduate degree from the University of
Mr. Anoop Moopen
Independent Director Madras. He is currently a Managing Director of twelve companies. Mr. Anoop single
handedly established a definitive construction firm in the Gulf. His skills includes
Operations management, Acquisition and Integration, Engineering and Manufacturing,
Strategic partnership and ensuring Customer satisfaction and Allegiance.
Dr. Zeba Azad Moopen is Non-executive and Non-Independent director of the company.
She began her premedical studies at the prestigious University of Pennsylvania before
earning her MBBS from KMC Manipal in 2015. Her medical expertise and understanding
of healthcare operations were further refined through an internship at St. John’s
Non-Executive and Non-
Dr. Zeba Azad Moopen Hospital in 2016. Dr. Zeba Moopen’s achievements not only perpetuate the esteemed
Independent Director
legacy of her family but also affirm her stature as a distinguished global leader in
healthcare. Her professional journey at Aster DM Healthcare Limited commenced in
2017, where she oversaw Orthopedic operations at Medcare, UAE, and played a crucial
role in establishing Aster Volunteers, the Organisation’s esteemed CSR initiative.
Mr. Maniedath Madhavan Nambiar is Non-executive and Independent director of the
company. He is specialized in the policy and practice of infrastructure development
innovation ecosystems for emerging technologies and industries and the design and
Mr. Maniedath Madhavan Non - Executive
management of Government-Industry partnerships. His 36 years record of Public Service
Nambiar Independent Director
as an Officer of the Indian Administrative Service. Mr. Nambiar's work in the private
sector has focused on strengthening enterprise governance in technology finance
healthcare and aviation sectors.
Mr. Sunil Theckath Vasudevan is Non-executive and Independent director of the
company. He has over 33 years of work experience, of which 30 years has been in
private equity. He is a is a graduate in Mechanical Engineering from the University of
Kerala and a post-graduate in management from the Indian Institute of Management,
Mr. Sunil Theckath Non - Executive
Bangalore. Mr. Sunil Theckath Vasudevan was a co-founding General Partner at True
Vasudevan Independent Director
North between 2000 and 2013, a pioneering firm in mid-market buy-outs in India. He
served on the Board of directors of several companies including Trinethra Superretail
Private Limited, Robo Silicon Private Limited and Music Broadcast Limited (Radio City)
and RDC Concrete (India) Private Limited.
Mr. Shamsudheen Bin Mohideen Mammu Haji is a Director of our company. He has been
Mr. Shamsudheen Bin
Non-executive Director a director of our company since September 16, 2015. He is an entrepreneur & also the
Mohideen Mammu Haji
Chairman of Regency Group for corporate management in the UAE.

Aster DM Healthcare Ltd

Initiating Coverage 25
 Mr. C. J. George is the Founder & Managing Director of Geojit Financial Services Ltd., with
a master’s degree in commerce and a CFPCM certification. He holds directorships in V-
Guard Industries Ltd. and Kerala Infrastructure Fund Management Ltd., alongside
Mr. Chenayappillil John memberships in professional bodies like Assocham and advisory roles in ICCL. His past
Independent Director
George engagements include executive roles at NSE and NSDL, chairmanship at Kerala State
Council of CII, and advisory positions at BNP Paribas India and Cortal Consors SA, among
others. He's a recipient of the Management Leadership Award from the Kerala
Management Association.
Mr. James Mathew, CEO & Managing Partner of Uhy, is a trusted financial leader with
nearly three decades of experience. His expertise in audit and advisory services, coupled
with a keen business acumen, has earned him immense credibility in the industry. With
Mr. James Mathew Independent Director roots in auditing and a successful entrepreneurial journey, James became the first person
from the MENA region to be elected twice to the global board of the 8th largest
accounting firm. In 2019, he founded Uhy James, an independent member firm of UHY
International, further solidifying his entrepreneurial legacy.
Mr. Emmanuel David Gootam is a seasoned Senior Management professional with
extensive experience spanning various sectors including Executive Education, Hospitality,
Financial Services, and more. With an MBA from Xavier Labour Relations Institute and a
Mr. Emmanuel David background in Zoology from Madras Christian College, he brings a diverse skill set to the
Independent Director
Gootam table. Currently serving as Managing Director of Grid International India, he leverages his
expertise in culture and transformation, previously directing Tata Management Training
Centre. Additionally, he mentors at Columbia University's MS Program on Technology
Management, guiding students towards actionable project ideas.
Ms. P H Vijaya Deepti is a seasoned professional with over three decades of experience,
notably with Tata Consultancy Services (TCS) and Tata Industries Ltd. Her expertise spans
various leadership roles, including CEO of Tata Insights and Quants, and Head of Global
Insurance Product Business at TCS. With a track record of delivering large-scale
Ms. P H Vijaya Deepti Independent Director transformations and winning strategic deals, she is a respected advisor to global CXOs.
Recognized for her contributions to the insurance industry, she received the "Leading
Businesswoman of The Year" award in 2009. Beyond her professional accomplishments,
she actively supports reforestation efforts and education initiatives for underprivileged
students.
Source: Company, SMIFS Research

Auditors of the company

Deloitte Haskins & Sells LLP are the auditors of the company.
Auditor Name Type Auditor Fees - (Rs mn) As a % of PBT

Deloitte Haskins & Sells LLP Statutory Auditors 16.2 0.6%

Source: Annual Report, SMIFS Research

CSR Activities
In FY24 the company has spent (65.3 Mn) on Disaster management, rehabilitation, and
reconstruction along with Promoting education and livelihood Enhancement projects.
Prescribed
Avg Net Profit in Total Spends Spend as % of prescribed
Year Expenditure
Rs Mn (In Rs. Mn) limit
(In Rs. Mn)
FY24 677.3 13.5 14.0 103.7
FY23 277.8 5.7 7.2 126.3
Source: Annual Report 2023

Aster DM Healthcare Ltd

Initiating Coverage 26
 Company Background
What is Aster DM Hospital all about?
Aster DM Healthcare was founded in 1987 in Dubai, UAE by Dr Azad Moopen who started
operations as a single-doctor clinic in Dubai. The company in its current form was
incorporated in January 2008 at Kochi, India. The company operates in multiple segments,
including hospitals, clinics and pharmacies and provides healthcare services to patients
across economic segments in several GCC states through various brands ‘Aster’, ‘Medcare’
and ‘Access’.
GCC maintained its presence until 2024 and on April 4th, 2024, Aster finalized the
separation between its Gulf business (GCC) and its operations in India. Aster has expanded
to 19 hospitals with a total of 3,552 operational census beds as of March 2024 in India.
Dr Moopen currently is one of the promoters of the company and promoters currently hold
~41.9% of the equity capital Union Investments Private Limited, Mauritius holds the highest
equity of 37.4%. Aster DM Healthcare has a diversified portfolio of healthcare facilities,
consisting of 19 multi-specialty hospitals, 13 clinics and 223 pharmacies.
Fig 74: Revenue mix by specialty FY24
Others
Muti speciality
13%
18%
Child and
Adolscent Health
6%

Women's
health
Cardiac sciences
6%
14%
Orthopaedics
7%

Nephro and Neuro

7% Neuro sciences
Oncology 11%
Gastro
9% 9%
Source: Company, SMIFS Research

AsterDM Hospaital Network June’24

Hospital/Cluster Inception Location Ownership Capacity Beds Operating Beds
Kerala 2,399 1,816
Aster Medcity 2014 Kochi Owned 762 625
Aster MIMS 2013 Calicut Owned 696 468
Aster MIMS 2013 Kottakal Owned 340 263
Aster MIMS 2019 Kannur Owned 312 249
Aster Mother 2022 Areekode O&M 140 101
Aster PMF 2023 Kollam O&M 149 110
Karnataka & Maharashtra 1,423 985
Aster CMI 2014 Bangalore O&M 509 368
Aster RV 2019 Bangalore O&M 236 168
Aster Whitefield 2021 Bangalore Leased 347 213
Aster G Madegowda 2023 Mandya O&M 100 40
Aster Aadhar 2008 Kolhapur Owned 231 196
Andhra Telangana 1,047 779
Aster Prime 2014 Hyderabad Leased 158 98
Ramesh Main Centre 2016 Vijaywada Leased 135 125
Ramesh Sanghamitra 2018 Ongole Owned 150 130
Ramesh Guntur 2016 Guntur Leased 350 225
Ramesh Labbipet 2016 Vijaywada Leased 54 47
Ramesh Adhiran (IB) 2023 Vijaywada Leased 50 42
Aster Narayanadri 2023 Tirupati O&M 150 112
Grand total 4,869 3,580
Source: Company, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 27
 Peer Comparison
Company Net Sales EBITDA PAT EBITDA Margin %
Name FY23 FY24 FY25E FY26E FY23 FY24 FY25E FY26E FY23 FY24 FY25E FY26E FY23 FY24 FY25E FY26E
ASTER DM 29,941 36,989 43,225 51,270 4,491 5,780 7,384 9,286 1,090 1,224 2,467 4,059 15.0 15.6 17.1 18.1
Yatharth 5,203 6,705 9,076 11,327 1,338 1,799 2,347 2,974 658 1,145 1,319 1,614 25.7 26.8 25.9 26.3
Rainbow 11,736 12,969 15,019 18,440 3,964 4,289 4,615 5,869 2,108 2,170 2,147 3,010 33.8 33.1 30.7 31.8
KIMS 21,977 24,981 33,062 36,896 5,281 6,404 9,275 9,673 2,604 3,101 4,712 4,684 24.0 25.6 28.1 26.2
Apollo 166,125 190,592 216,270 248,611 20,496 23,907 32,429 43,245 8,191 8,986 17,164 25,362 12.3 12.5 15.0 17.4
Fortis 62,976 68,929 81,809 98,435 11,013 12,676 15,685 21,819 5,335 5,881 8,110 11,746 17.5 18.4 19.2 22.2
Narayana 45,248 50,182 56,621 64,961 9,658 11,524 13,532 15,850 6,062 7,893 8,562 9,887 21.3 23.0 23.9 24.4
HCG 16,944 19,121 21,737 23,157 2,987 3,296 4,329 4,493 293 452 712 734 17.6 17.2 19.9 19.4
Medanta 27,099 32,751 38,486 43,608 6,278 7,991 10,519 12,268 3,261 4,782 6,426 7,774 23.2 24.4 27.3 28.1
Max 45,626 54,060 80,152 101,369 12,405 14,921 21,921 28,027 11,035 10,576 14,646 19,157 27.2 27.6 27.3 27.6
Shalby Ltd 8,049 9,337 11,081 12,913 1,367 1,770 1,921 2,395 677 841 759 1,147 17.0 19.0 17.3 18.5

CAGR FY23-26E ROE (%) P/E EV/EBITDA

Company Name
1 2 3 FY23 FY24 FY25E FY26E FY23 FY24 FY25E FY26E FY23 FY24 FY25E FY26E
ASTER DM 19.6 27.4 55.0 5.9 6.1 6.4 9.6 100.0 140.6 84.6 51.4 26.6 32.0 27.8 21.7
Yatharth 29.6 30.5 34.9 43.9 21.7 14.0 14.8 NA 29.2 37.3 30.5 NA 17.8 20.8 15.8
Rainbow 16.3 14.0 12.6 19.8 17.2 14.8 17.6 30.8 49.8 61.9 44.2 16.2 25.8 29.6 23.6
KIMS 18.9 22.4 21.6 15.6 15.4 20.2 16.7 43.6 53.1 42.1 42.3 21.7 27.8 22.6 22.3
Apollo 14.4 28.3 45.8 13.2 13.0 21.4 26.0 81.1 84.9 58.8 39.8 33.4 32.8 31.5 23.1
Fortis 16.1 25.6 30.1 7.1 7.1 9.0 11.6 46.0 46.2 54.3 37.5 22.8 21.9 28.4 20.4
Narayana 12.8 18.0 17.7 33.5 31.5 26.0 23.6 24.0 27.8 31.2 27.0 15.6 20.1 20.8 17.6
HCG 11.0 14.6 35.8 3.3 5.6 7.9 7.5 133.8 98.4 82.7 80.1 15.5 16.9 16.3 15.8
Medanta 17.2 25.0 33.6 16.1 17.9 19.9 19.7 43.7 74.3 45.3 37.5 20.4 42.5 26.1 21.8
Max 30.5 31.2 20.2 16.1 13.3 15.0 16.5 38.8 63.0 61.0 47.2 30.4 43.0 41.3 32.3
Shalby Ltd 17.1 20.6 19.2 7.5 8.7 7.5 10.7 21.3 35.5 41.0 27.1 9.8 19.2 17.6 14.1
Source: Bloomberg, SMIFS Research

Fig 75: Max has the highest occupancy amongst peers whereas Aster has more headroom to grow

75%
76%
75%
80%
68%

68%
68%
66%

66%
66%
65%
65%
64%

64%
63%

62%
61%

70%
59%
59%

58%

55%
54%

54%
53%

51%
50%

50%
60%

48%
46%
46%
46%

46%
45%

45%
50%
40%
30%
20%
10%
0%
KIMS Apollo Fortis Narayana HCG Medanta Shalby Max Rainbow Yatharth Aster DM
FY22 FY23 FY24

Source: Bloomberg, SMIFS Research

Fig 76: Max has highest ARPOB amongst peers, Aster DM has long way to go…
76,000
61,890

80,000
60,887

60,431
59,000
57,488

57,274

55,853
55,101

54,547

70,000
51,668

51,056
49,315

48,932
46,506
45,327

60,000
40,100
39,101
38,356

38,042
36,697

36,500
34,842
34,795

33,500
33,329
31,916

50,000
31,347
29,946

28,571
26,538
25,323

24,000

40,000
30,000
20,000
10,000
-
KIMS Apollo Fortis Narayana HCG Medanta Shalby Max Rainbow Yatharth Aster DM

FY22 FY23 FY24

Source: Bloomberg, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 28
 Fig 77: Apollo has the highest revenue amongst peers, Aster is still a sizeable peer
1,20,000

98,690
86,769
1,00,000

79,891

68,929
62,976
80,000

57,176

54,060
50,182

45,626
45,248
60,000

39,315
37,013

36,989
32,751

28,190
26,942
24,981

23,430
21,977

21,666
40,000

19,121
16,944
16,508

13,978

12,969
11,736
9,738
9,340
8,049
6,989

6,705
5,203
20,000

4,009
0
KIMS Apollo Fortis Narayana HCG Medanta Shalby Max Rainbow Yatharth Aster DM

FY22 FY23 FY24

Source: Bloomberg, SMIFS Research Only Hospital revenues considered

Fig 78: EBITDA Margin of Aster DM is lower than its peers but expected to catchup soon
40%

34%
33%
31%
31%

35%

28%
28%

28%
27%

27%
27%

26%
26%

25%

30%
24%
24%

24%

23%

23%
21%

21%

21%

25%
19%
19%

19%
18%

18%

18%
18%

17%
17%

16%
15%
15%
20%
15%
10%
5%
0%
KIMS Apollo Fortis Narayana HCG Medanta Shalby Max Rainbow Yatharth Aster DM

FY22 FY23 FY24

Source: Bloomberg, SMIFS Research *For Apollo hospitals, only hospital business is compared with its peers

Fig 79: Bed capacity of Apollo is the highest amongst the peers, the rest are catching up…
14,000
12,142
12,408
12,500

12,000

10,000
6,186
6,074

8,000
5,433

4,867
4,317
4,100
4,100
4,100

4,000
3,975
3,940

3,905

6,000
3,412
3,400
3,064

2,823
2,571
2,571
2,200
2,036
2,036

2,012
2,012
2,012

1,935

4,000
1,655
1,500

1,405
1,405
1,100

2,000

-
KIMS Apollo Fortis Narayana HCG Medanta Shalby Max Rainbow Yatharth Aster DM
FY22 FY23 FY24

Source: Bloomberg, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 29
 Valuation and Recommendations
Currently, the stock is trading at comforting valuation on Sept’26E EV/EBITDA of 19.3x. We
like Aster as 1) major expansion is brownfield where growth could be achieved without
diluting the margins 2) O&M hospital additions will add incremental revenue; (3) Aster Labs
is EBITDA positive in Q4 FY24; and (4) strong ARPOB growth. We value the stock at 22x (in
line with KIMS) and arrive at target price of Rs. 457 per share which offers upside of 9%
from current valuations. Therefore, we assign Accumulate rating on the stock.
Fig 80: EV/EBITDA Valuation
Particulars Sep’26 Rs Mn
EBITDA 10,483
Applied EV / EBITDA 22
Computed EV 2,30,622
Less: Debt 12,365
Add: Cash 10,178
Computed Equity Value (Rs. mn) 2,28,435

No. of shares 500

Intrinsic Value per share 457

Fig 81: 1-year forward P/E Fig 82: 1-year forward EV/EBITDA
100.0

36.0
90.0
32.0
80.0
28.0

70.0 24.0

20.0
60.0
16.0
50.0
12.0

40.0 8.0
Apr-22 Nov-22 Jun-23 Jan-24 Aug-24 Apr-22 Nov-22 Jun-23 Jan-24 Aug-24

P/E Mean SD + 1 SD - 1 EV/EBITDA Mean SD + 1 SD - 1

Source: AceEquity, SMIFS Research Source: AceEquity, SMIFS Research

Aster DM Healthcare Ltd

Initiating Coverage 30
 Key Performance Indicators
Overall FY23 FY24 FY25E FY26E FY27E
Bed capacity 4,317 4,867 5,301 5,640 6,544
Operational beds 3,304 3,552 3,928 4,035 4,593
Occupancy rate % 68% 68% 66% 70% 67%
ARPOB (Rs/day) 36,500 40,100 43,450 47,143 51,150
ALOS 3.4 3.4 3.2 3.1 3.0
Net Revenues 28,510 35,190 41,119 48,604 57,448
Hospital EBITDA margin % 18.9% 19.6% 21.8% 22.9% 24.3%
Kerala
Bed capacity 2,236 2,396 2,596 2,935 3,489
Operational beds 1,734 1,827 1,999 2,172 2,477
Occupancy rate % 79% 79% 76% 75% 72%
ARPOB (Rs/day) 34,400 38,100 40,386 42,809 45,378
ALOS 3.4 3.4 3.3 3.2 3.1
Net Revenues 17,200 20,070 22,394 25,453 29,541
EBITDA margin % 20.7% 21.4% 22.7% 24.0% 25.0%
Karnataka and Maharashtra
Bed capacity 1,034 1,424 1,583 1,583 1,933
Operational beds 790 946 1,076 966 1,218
Occupancy rate % 59% 61% 62% 65% 65%
ARPOB (Rs/day) 48,800 53,600 58,960 64,266 68,765
ALOS 3.1 3.2 3.1 3.1 3.1
Net Revenues 8,170 11,000 14,363 14,723 19,868
EBITDA margin % 15.7% 19.7% 23.4% 24.0% 25.0%
Andhra and Telangana
Bed capacity 1,047 1,047 1,122 1,122 1,122
Operational beds 780 779 853 898 898
Occupancy rate % 50% 50% 51% 52% 55%
ARPOB (Rs/day) 27,900 28,100 29,295 30,467 31,685
ALOS 3.8 3.8 3.7 3.5 3.5
Net Revenues 3,440 4,120 4,652 5,190 5,710
EBITDA margin % 9.3% 10.0% 12.6% 14.4% 15.9%
Source: Company, SMIFS Research Estimates

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Initiating Coverage 31
 Financial Statements
Income Statement Balance Sheet
YE March (Rs mn) FY23 FY24 FY25E FY26E FY27E YE March (Rs mn) FY23 FY24 FY25E FY26E FY27E
Source of funds
Revenues 29,941 36,989 43,225 51,270 60,626
Raw Materials 7,792 9,159 10,454 11,895 14,065 Capital 4,995 4,995 4,995 4,995 4,995
% of sales 26.0 24.8 24.2 23.2 23.2 Reserves & Surplus 11,796 13,570 31,666 35,724 41,548
Personnel 5,419 6,759 7,824 9,741 11,034 Minority Interest 1,574 1,583 1,668 1,709 1,731
% of sales 18.1 18.3 18.1 19.0 18.2 Shareholders’ Funds 18,366 20,148 38,329 42,428 48,274
Professional fees 6,473 8,156 9,553 11,279 13,338
Total Loan Funds 11,299 13,838 16,388 14,938 13,288
% of sales 21.6 22.1 22.1 22.0 22.0
Other liabilities 4,139 4,294 4,625 5,486 6,487
Other Expenses 5,766 7,135 8,011 9,069 10,509
% of sales 19.3 19.3 18.5 17.7 17.3 Total Liabilities 33,565 38,280 59,341 62,850 68,048
EBITDA 4,491 5,780 7,384 9,286 11,680 Application of funds
Other Income 369 249 519 615 728 Gross Block 82,947 41,133 44,613 48,104 51,515
Depreciation & Amortization 1,920 2,200 2,269 2,323 2,704 Net Block 24,735 29,111 31,222 31,306 34,237
EBIT 2,939 3,828 5,633 7,578 9,704 Capital WIP 1,078 1,701 1,726 1,870 2,202
Finance cost 873 1,103 1,306 1,191 1,059
Quasi cash Investments - - - - -
Core PBT 1,698 2,477 3,808 5,772 7,917
Exceptional items - - - - - Other Investments -48 137 173 205 243
PBT 2,067 2,725 4,327 6,387 8,645 Other non-current assets 5,612 8,036 8,735 9,610 10,688
Tax-Total 359 565 865 1,277 1,729 Inventories 991 1,105 1,303 1,545 1,827
Effective tax rate (%) 17.4 20.7 20.0 20.0 20.0 Sundry Debtors 2,380 2,334 2,724 3,231 3,820
PAT 1,708 2,160 3,461 5,110 6,916 Current Investments 113 33 43 51 61
Share of Associates -112 -113 -86 -103 -121
Cash & Bank Balances 758 1,127 19,838 22,650 23,978
Non-controlling interest 506 823 908 948 970
Adjusted PAT 1,090 1,224 2,467 4,059 5,824 Other current Assets 3,015 1,052 1,254 1,487 1,758
Source: Company, SMIFS Research Estimates Total Current Assets 7,256 5,650 25,162 28,964 31,444
Sundry Creditors 3,961 4,587 5,329 6,321 7,474
Key Ratios Other Current Liabilities 1,106 1,769 2,347 2,784 3,292
YE March FY23 FY24 FY25E FY26E FY27E Total Current Liabilities 5,068 6,356 7,676 9,105 10,766
Growth Ratio (%) Net Current Assets 2,189 -706 17,485 19,859 20,678
Revenue 25.6 23.5 16.9 18.6 18.2
Total Assets 33,565 38,280 59,341 62,850 68,048
EBITDA 26.5 28.7 27.8 25.8 25.8
Source: Company, SMIFS Research Estimates
Adjusted PAT 60.3 12.3 101.6 64.5 43.5
* In FY24, 'Asset Held from Sale of Rs 136Bn,' is excluded for proper representation,
Margin Ratios (%)
the proceed from this sales is getting utilized for dividend in FY25.
Gross Profit 74.0 75.2 75.8 76.8 76.8
EBITDA 15.0 15.6 17.1 18.1 19.3
Cash Flow
EBIT 9.8 10.3 13.0 14.8 16.0
Core PBT 5.7 6.7 8.8 11.3 13.1 YE March (Rs mn) FY23 FY24 FY25E FY26E FY27E
Adjusted PAT 3.6 3.3 5.7 7.9 9.6 Operating profit before WC
18,051 19,003 6,908 8,850 11,316
Return Ratios (%) changes
ROE 5.9 6.1 6.4 9.6 12.1 Net changes in working capital 879 (16,713) 642 444 516
ROCE 8.2 8.9 8.2 10.6 12.6 Tax Paid (590) (713) (865) (1,277) (1,729)
Turnover Ratios (days) Cash flow from operating
18,340 1,578 6,685 8,016 10,103
Gross Block Turnover (x) 0.4 1.2 1.3 1.4 1.5 activities
Adj OCF/Adj PAT (%) 1380.4 -206.7 218.0 168.2 155.3 Adj OCF 15,048 (2,530) 5,379 6,825 9,044
Inventory 12.1 10.9 11.0 11.0 11.0 Capital expenditure (7,169) (7,969) (4,380) (2,408) (5,635)
Debtors 29.0 23.0 23.0 23.0 23.0
Adj FCF 11,171 -6,391 2,305 5,608 4,468
Creditors 48.3 45.3 45.0 45.0 45.0
Cash conversion cycle -7.2 -11.3 -11.0 -11.0 -11.0 Cash flow from investing
(9,719) (8,847) 69,422 (3,467) (7,091)
activities
Solvency Ratio (x)
Debt-equity 0.6 0.7 0.4 0.4 0.3 Debt (550) 18,107 1,500 (500) (500)
Net debt-equity 0.6 0.6 -0.1 -0.2 -0.2 Dividend - - (58,943) - -
Gross Debt/EBITDA 2.5 2.4 2.2 1.6 1.1 Interest and Lease (5,943) (6,912) (256) (2,141) (2,209)
Current Ratio 0.9 0.6 2.4 2.3 2.1 Cash flow from financing
Interest coverage ratio 3.4 3.5 4.3 6.4 9.2 (8,174) 10,528 (57,480) (1,777) (1,705)
activities
Dividend Net change in cash 447 3,260 18,627 2,771 1,306
DPS 0.0 0.0 118.0 0.0 0.0 Source: Company, SMIFS Research Estimates
Dividend Yield (%) 0.0 0.0 0.3 0.0 0.0
Dividend Payout (%) 0.0 0.0 23.9 0.0 0.0
Per share Ratios (Rs)
Basic EPS (reported) 2.8 3.6 4.9 8.1 11.7
Adjusted EPS 2.8 3.6 4.9 8.1 11.7
CEPS 6.0 6.9 9.5 12.8 17.1
BV 36.8 40.3 76.7 84.9 96.6
Valuation (x)*
Adj P/E 100.0 140.6 84.6 51.4 35.8
P/BV 5.9 8.5 5.4 4.9 4.3
EV/EBITDA 26.6 32.0 27.8 21.7 17.0
EV/Sales 4.0 5.0 4.8 3.9 3.3
Adjusted Market Cap /Core PBT 63.7 69.0 49.6 32.2 23.3
Adjusted Market Cap /Adj OCF 7.2 -67.6 35.1 27.3 20.4
Source: Company, SMIFS Research Estimates

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Initiating Coverage 32
 Disclaimer
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Aster DM Healthcare Ltd

Initiating Coverage 33
 out of the use of this Research Report. Past performance is not necessarily a guide to future performance. Investors are
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Aster DM Healthcare Ltd

Initiating Coverage 34
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Initiating Coverage 35
 Specific Disclosures
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Key to SMIFS Investment Rankings
Buy: Return >15%, Accumulate: Return between 5% to 15%, Reduce: Return between -5% to +5%, Sell: Return < -5%

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Aster DM Healthcare Ltd

Initiating Coverage 36