Proxy advisory firm IiAS revises voting recommendation on Aster DM to ‘for’

In reaction to the recent disclosure by Aster DM Healthcare and its commitment to allot 70-80% of the revenue generated from the sale of its Gulf Cooperation Council (GCC) business to Alpha GCC Holdings for distribution to shareholders, Institutional Investor Advisory Services India (IiAS), a proxy advisory firm, has revised its voting recommendation from “against” to “for.”

Amidst the controversy surrounding the proceeds’ distribution, Aster DM announced on January 15 that it intends to distribute a significant portion of the proceeds from its stake sale in the Gulf business, leading to shareholders receiving a dividend of up to Rs 120 per share.

Shares of Aster DM Healthcare surged as much as 13%. The stock, which hit a 52-week high of Rs 449.75 on Tuesday, ended 6.7%, highest at Rs 425.55.

“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 Rs 110 to Rs 120 per share,” the company announced on Monday.

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 segments through the divestment of ownership in its subsidiary, Affinity Holdings, 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 U.S.-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%.