Shareholder Shenanigans ~ Hey Mister Aster whose Healthcare are you after !

Shareholder Shenanigans ~ Hey Mister Aster whose Healthcare are you after !

Invariably the Construction of  the Pre IPO Equity Capital of a Company  reveals the Fairness & Character & Mindset of Promoters & other Equity Stakeholders in it & extent of any obscene premium seduction if any 

What can we infer from a Company  :

  • that issues further shares end December 2011 at Rs 10,000 to an existing Private Equity (PE) Stakeholder Player 1   from 2008 which takes their total Equity Investment in the Company to just over Rs 22 crs & just 20 days later in January 2012 ,this PE Player 1 sells just @ 30.8% of  it’s Equity stake for Rs 110 crs ! to a new incoming PE Equity Player 2 at Rs 1,58,918 per share ~that’s 1500% & 15 times over latest unit share cost of Rs 10000 ! Thus it recovers 4 times it’s aggregate Investment in literally no time  & yet continues to hold a good stake in the Company which it has just sold for Rs 120 to get a huge Rs 554 crs    
  • that issues two liberal back to back Bonus issues of 1000:1  in 2012 & 2: 1 in 2013 from the Share Premium paid by incoming PE Player 2 in 2012 when it invested Rs 504 crs in the Company through Rs 394 crs new issue by the company & Rs 110 crs purchase from PE Player 1 as stated above  
  • where Promoters transfer shares in December 2017 at just Rs 22.14 per share just two months before February 2018 IPO at Rs 190 to PE Player 2 referring to a costing methodology of a Shareholder Purchase Agreement (SPA) of May 2014 when this PE Player 2 had invested further in May 2014 itself directly in a fresh issue by the Company at Rs 102.85 & on same day as per same SPA even picked up shares from Promoters at Rs 189.46.Even CCCP’s issued were converted at Rs 111.65 in November 2017,three months before the Rs 190 IPO.An SPA that spells out a costing method that works out to a much lower throwaway price of just Rs 22.14 per share three & a half years down the road in December 2017 will indeed raise an eyebrow.A lower price would imply growth parameters have not resulted as envisaged.Why  price the IPO at Rs 190 ? Should have been at Rs 22,I daresay !        

If Memory serves me right,the Financial Year 2011-12 was perhaps the last year before Income Tax & Company Act restrictions came into force on the issue of Shares at unjustified & obscene premiums….nevertheless

Such Modus Operandi was quite prevalent in Companies to infuse huge funds into Equity at bizarre premiums not in sync with Valuation which would facilitate insignificant Equity Dilution which otherwise would have impacted Promoter & Other existing  Shareholders Stakes.This invariably was followed up with bizarre Bonus Issues which while maintaining the Equity Stakes of all served largely to considerably lower per share holding cost of Shareholders that had infused such Equity Capital at obscene Premiums….daresay some indulged in this even for laundering or accepting white bribes

Two recent events drew me to  checking out Aster DM Healthcare @ Rs 127

1~ First when observed huge Market Deals being executed end of last month on June 26 & 27, 2019 at Rs 120 with Private Equity Shareholder True North Fund III A  ( earlier called India Value Fund (IVF) ) offloading it’s full 9.15% stake of 4.62 cr shares to a host of Big names that included Fidelity,Tata AIG Insurance A/c Wholelife Midcap Equity,HDFC Small Cap Fund,Ontario Pension & Steinberg

2 ~Was not impressed at this first quick look on performance & prospects & was letting go when a Stock Channel carried an interview of it’s Promoter & ED & Chairperson Mr Azad Moopen on July 12,2019.

Intrigued me to have a re-look as Mr Moopen stated verbatim these two threads  :

  • “we think  that this is a very low price for this stock “ ~ on Share Price of @ Rs 121/122 as on July 12,2019 & on bulk deal price of Rs 120 end June 2019 when PE Player True North Fund III exited ~ is not there some restriction on Company promoters and management making such views public on Share Price ?
  • “extremely useful in the initial phase” ” significant value addition to the company”  ” True North has been a great strength ” ” no way they could hold on beyond 9 to 10 years” ~ on Private Equity Player, True North Fund III A who had initiated a stake in 2008 in Aster & who exited last month in June 2019

I looked at the IPO Prospectus that announced Aster DM Healthcare’s February 2018  IPO eighteen months ago at Rs 190,a pricing that’s 33% higher than today’s Rs 127

While I appreciate Mr Moopen’s honourable healthcare venture in the last three decades what caught my attention,as it usually does,was the not so honourable Construction of the pre IPO Equity Capital

Here are some interesting extracts & derived data  on the constructions of holdings of PE Player 1  True North &  PE Player 2 Olympus Capital Asia Investments in Aster DM Healthcare Limited.The Post IPO Equity Issue stands at Rs 505.23 crs with  50,52,27,345 shares of FV Rs 10 .

Equity share transactions of PE Player 2 Olympus Capital Asia Investments in Aster DM Healthcare Ltd.

Date No. of Shares FV Price/ Share Total Value Source Cumulative No. of Shares
18/01/2012 24,843 10 1,58,918 394,79,99,874 New Preferential Issue 24,843
6,917 10 1,58,918 109,92,35,806 Purchased from IVF 31,760
09/07/2012 3,17,60,000 10 Bonus 1000:1 3,17,91,760
20/11/2013 6,35,83,520 10 Bonus 2:1 9,53,75,280
06/05/2014 63,69,878 10 102.85 65,51,41,952 New Preferential Issue 10,17,45,158
38,30,400 10 189.46 72,57,07,584 From Promoters under SPA of May 6,2014 10,55,75,558
20/11/2017 85,76,344 10 111.65 95,75,48,808 Conversion of 9309822 CCPs issued on May 6,2014 at Rs 102.85 11,41,51,902
29/12/2017 36,42,711 10 22.14 8,06,49,621 From Promoters under SPA of May 6,2014 11,77,94,613

Shareholding as on June 30,2019 continues to show Olympus holding equity stakes of 2.66% at 13463462 shares & 20.36%  at 10,28,48,391 shares aggregating 23.02% equity stake of the above aggregate of 11,77,94,613  shares at an investment of @ Rs 746 crs ,up from the original Rs 504 crs in 2012 giving an average holding cost of just over Rs 63 per share

Equity share transactions of PE Player 1 True North ( earlier called IVF Advisors Pvt. Ltd.) in Aster DM Healthcare Ltd.

Date No. of Shares FV Price/ Share Total Value Source/Remarks Cumulative No. of Shares
28/08/2008 100 10 10 1,000 New Preferential Issue 100
29/12/2008 10,565 10 10000 10,56,50,000 New Preferential Issue 10,665
29/12/2011 11,749 10 10000 11,74,90,000 New Preferential Issue 22,414
18/01/2012 (6,917) 10 158918 (109,92,35,806) Sold to PE 2 Olympus Capital Asia Investments 15,497
09/07/2012 1,54,97,000 10 Bonus Issue 1000:1 1,55,12,497
20/11/2013 3,10,24,994 10 Bonus Issue 2:1 4,65,37,491

Shareholding at December 31,2018 shows the above 9.21% equity stake holding of 4,65,37,491 shares under True North Trusteeship Pvt Ltd.The March 31,2019 Shareholding shows 4,16,02,849 shares under True North Fund III A while June 30,2019 shareholding shows no True North Holding as True North Fund III A had exited full 9.15 % holding of 4,62,02,849  on June 26 & June 27,2019 although media reports some stake yet left under True North Fund IV & V

You can observe that True North (called IVF earlier) had already recovered it’s Full Equity Investment in Aster of Rs 22 crs + inside no time by selling only part equity stake to Olympus in 2012 for Rs 110 crs.Last month end in June 2019 it has got another Rs 554 crs for exiting 4.62 cr shares it held under True North Fund III A….that’s an outflow of Rs 22 crs  & inflow of Rs 664 crs + further assumed inflow of @ Rs 4 crs for remaining @ three lakh shares if these too have been sold ( 4.65 cr shares held – 4.62 cr shares sold)

True North is an India PE based in Bengaluru with a Mumbai office too. In context of how True North played out it’s Holdings in Aster as outlined above ,one can read Mr Moopen’s going ‘gaga’ over them in his recent interview linked above in more light than just how he reads them ~ did True North add value or take value !?

Olympus’s 23.02% Holding too at Rs 746 crs  and just over Rs 63 a share is worth twice as much today when Aster’s Market Cap at Rs 127 is just shy of a Billion Dollars

Interestingly ,perhaps due to overall waning market sentiment,no of shareholders show a drop from 95000+ to 90700+ to under 89000 from December 2018 to March 2019 to June 2019 respectively

After observing ,in my view,such Pre IPO  Shareholder Shenanigans ,which I’ve angrily frowned on & even commented before in Suzlon,Just Dial &  SKS Microfinance IPOs , I’m not inclined to go further into the Aster Financials & it’s 83%  Revenue dependence on GCC Region  & the stated intention by Mr Moopen of reducing Debt of over Rs 2300 crs  by reducing Capex & monetising Assets like the surplus 22 acres at the 42 acres Kochi Hospital Complex

I tend to get put off big time with outlandish & obscene share pricing & bonus issues to build equity capital that inevitably favours one or few private beneficiaries going forward.I view such scenarios as a pre meditated gameplan & nexus between Promoters & Private Equity Players ~Public be damned !

The FPIs & Indian Entities that have just invested in Aster at Rs 120 (33% below Feb 2018 IPO Pricing of Rs 190) are seeing Aster afresh as a promising future more than just future promises & living what I would simply put it as did Amitabh Bachchan’s father ,late Harivansh Rai Bachchan, poignantly did ” Joh beet gayi woh baat gayi !” 

Cheers !

PS ~ Why did True North not exit at Rs 190 in the Feb 2018 IPO Offering & has done so now at a lower Rs 120 ? ~ In fact why did Olympus too not part exit in the IPO ? ~ Roll back time to the euphoric ,extremely bullish end 2017 & beginning 2018 & the answer will be obvious ~ Expectations were that the fabulous Market Momentum & Sentiment will continue into 2018 & Aster may rocket beyond Rs 300 post IPO on listing ~ Sadly for True North & Olympus the Price dropped True South to Rs 120

8 thoughts on “Shareholder Shenanigans ~ Hey Mister Aster whose Healthcare are you after !

  1. Thanks for the analysis, but one question:

    According to you, “that’s an outflow of Rs 22 cr & inflow of Rs 664 cr” for True North (IVF). But on page 102 of the prospectus (2 pages below the ‘Share Capital History’), there is the ‘History of Preference Share Capital’. And according to that table, True North made a Rs. 40 cr investment in preference shares in 2008, which was redeemed in 2012.

    So, isn’t that an outflow of Rs. 62 cr for True North (and not Rs. 22 cr as you have mentioned)?

    1. Hey Harith thanks for visiting my blog & yes,you are right in your observation that True North did invest Rs 40 crs in Aster in 2008 in optionally convertible cumulative redeemable preference shares which were not converted but redeemed in 2012.I have not included this as Equity Shares have not been created by conversion.The Equity Construction of True North included in my post is for the Rs 22.31 crs investment by them in 22414 Equity Shares till end December 2011. Therefore the Outflow in Equity Shares by True North is Rs 22.31 crs for which they have received Rs 664 crs + assumed more as stated for sales.Interestingly the Preference Capital you are referring too was redeemed by Aster on the same day January 18,2012 when True North sold 6917 Aster shares to Olympus at an astronomical Rs 158918 per share to receive Rs 110 crs ,Cheers,Gaurav

  2. Pls look at multiples and comps and not absolute amounts. Check for Revenue growth and EBITDA growth. Also analyse where the monies have been spent. Capacity expansion etc.

    1. Hey AK,as have stated ,was put off by Pre IPO Shareholder Shenanigans in the build up of Equity Capital & Share Transactions in-between Promoters & Private Equity Players in context of bizarre Pricing & overly liberal bonus issues , & thus have not ventured into operational & financial scenarios of Aster & what it’s done with it’s Total Capital,Equity & Debt, to assess Value Vs Price…my experience in such scenarios has always been that there’s always more to it than it looks,Cheers,Gaurav

      1. Absolutely rubbish! Did you even look at the subscription figures at the IPO before making the claim of IPO investors wanting to hold for Rs300 post listing? The issue got hardly subscribed (that is a different story), so how could have True North exited in the IPO? Also, what is wrong in Olympus receiving stake at Rs63/share? After all, if you add the gross block addition, it is clear that the growth would not have been possible without PE infusion. And a lot of it is post facto, saying that Olympus received at Rs63/share, but the fact is that the agreement was signed in CY2012, when you were probably passing your so-called CA exam, and FY2019 numbers were just projections on a piece of paper

        1. Wow! Mr Ponga Pandit/Prof Pyarelal ~ Apologise if I’ve not been able to get across my point in the post more clearly than I should have ~ don’t doubt PE Infusion of Olympus into Aster has been huge & benefited Aster immensely & don’t even challenge Olympus’average price holding which has been provide as a computation that reveals how it picked up it’s shares ~ the point is the low quantum of PE Infusion in Aster by True North & the multiple times recovery on just part sale to incoming PE Olympus in 2012 at a share price of Rs 1.58 lakhs when just 20 days before True North was allotted shares in Aster at just Rs 10000 per share ~ how did you miss that ! ~ As for the IPO time Offer & sentiment & for how you view the Shareholding Build Up & Transactions in Aster,you are certainly entitled to your view….thanks for visiting the blog & commenting….& yes, let’s not get personal ,Cheers,Gaurav

  3. Perfectly articulated. Hats off to you, for such in depth analysis . You might be aware, but just in case you are interested to grill the management in person 🙂 , they are hosting Analyst Meet on 22nd Aug at Golconda Ball Room Trident BKC @ 3.30 PM Cheers..

    1. Thanks Hemant~not enamoured by Aster or else would have send an analyst from my team to attend & pose questions…wish Aster well though…the need for humane,top class healthcare services is always paramount

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