Aster DM wins over Street with a big payout plan

Mumbai: Shares of Aster DM Healthcare surged as much as 13% Tuesday following the company’s announcement that it intends to allocate 70-80% of the revenue generated from the sale of its business in the GCC (Gulf Cooperation Council) region for distribution to shareholders. This move was prompted by the recent controversy surrounding the distribution of proceeds.

“Following deliberations regarding future expansion plans, capex requirements, and cash reserves, the board is desirous to consider the distribution of 70%-80% of the upfront consideration of $ 903 million, as dividend to its shareholders, i.e. in the range of 110 to 120 per share,” the company announced on Monday.

The stock, which hit a 52-week high of 449.75 on Tuesday closed at its highest-ever level of 425.55, up 6.7% over its previous close.

In reaction to the disclosure by Aster DM, Mumbai-based proxy advisory firm Institutional Investor Advisory Services India (IiAS) revised its voting recommendation from “against” to “for”.

Earlier, IiAS advised institutional investors to vote against the company’s two resolutions seeking shareholder approval for the $1 billion deal, citing a lack of transparency regarding the specific proportion of receipts slated for distribution.

Aster DM Healthcare has put forth a proposal to segregate its India and GCC businesses through the divestment of ownership in its subsidiary, Affinity Holdings, which is responsible for operations in the GCC region. The envisaged sale is slated to be executed to Alpha GCC Holdings, with Aster DM promoters retaining a 35% stake and a consortium of private equity investors, spearheaded by Fajr Capital, securing a 65% stake in the venture.

In revising its recommendation, IiAS stated that the company has declared its intention to distribute 70% to 80% of the initial proceeds (amounting to $903 million) to shareholders, thereby addressing a significant concern.

The e-voting, which started on December 24 last year, will end on January 24. In a related party transaction, obtaining the majority consent of minority shareholders is imperative for the resolution to go through.

Two other proxy advisory agencies, Mumbai-based Stakeholders Empowerment Services and US-based Glass, Lewis & Co., have recommended voting in favour of the resolutions.

As of September 30, 2023, foreign portfolio investors held a 40.22% stake in the company. Promoters owned 41.88%.