Dr. Agarwal’s Health Care, Eye Hospital's Merger Synergies To Drive EPS Accretion; Motilal Oswal Maintains Buy

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Motilal Oswal Report

The proposed merger of Dr. Agarwal Eye Hospital Ltd. with Dr. Agarwal Health Care Ltd. would consolidate the businesses of AHCL and AEHL into a single entity.

This merger would drive better operational and financial efficiency, enhancing the value of overall business through unified capital allocation.

With this merger, on pro forma basis, the minority interest related to a 28% stake of public shareholding in Dr. Agarwal Eye Hospital will be eliminated. The total number of equity shares of Dr. Agarwal Healthcare would increase due to the issuance of new shares to Dr. Agarwal Eye Hospital. This transaction would be EPS-accretive for Dr. Agarwal Healthcare by 5-7% for FY27.

Dr. Agarwal Healthcare remains on track to-

1. expand its pan-India presence,

2. enhance its hub-spoke model network,

3. provide superior technology service in eyecare, and

4. gain market share in the fragmented eye-care industry.

We value Dr. Agarwal Healthcare on an SOTP basis (25x EV/Ebitda for the surgery business, 15x EV/Ebitda for the opticals business, 13x EV/Ebitda for the pharmacy business, adj for a stake in Dr. Agarwal Eye Hospital/Thind hospital) and arrive at a target price of Rs 530. Maintain Buy.

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